eCare Solutions Inc (ECSL)

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Shares of EncounterCareSolutions Inc. (ECSL) tripled in November to $3.15, giving the healthcare technology company a market value of $155 million after its CyberFuels Inc. unit announced that its methanol-based flex fuel EcoFlex 96 had been "approved" as an alternative fuel in Florida and may soon be approved in California.

The stock has kept its high value over the past month, closing Friday at $3, giving EncounterCare a market capitalization of $147.75 million.

But a Florida official disputed EncounterCare's characterization of the communication it received from the state.

According to a spokeswoman for the Florida Department of Agriculture & Consumer Services, its Nov. 13 letter to the company merely offered background information on the standards required to sell fuel in Florida.

"This was in no way an 'approval' letter but simply a letter acknowledging if the product were sold what requirements it must meet," department press secretary Erin Gillespie said in an e-mail to The Deal.

At the same time, EncounterCare's rights to the technology underlying EcoFlex 96 appear to be in dispute and are the subject of a lawsuit CEO Ron Mills Sr. has filed against an inventor.

EncounterCare has called EcoFlex 96 "a complete game changer" and a potentially "disruptive" force in the oil and gas market. The Palm Beach Gardens, Fla.-based company spent the last two years and "tens if not hundreds of thousands of dollars" testing and perfecting the additive that gives EcoFlex 96 its promise, spokesman Bill Robertson said.

He said that the fuel provides more power and better mileage with less pollution than standard fuels.

Independent testing firms SGS and Olson-Ecologic Engine Testing Laboratories LLC have verified EcoFlex 96's benefits, Robertson said.

Representatives of SGS couldn't be reached for comment. Don Olson, CEO of Olson-Ecologic, confirmed that the firm completed testing for the company.

"We started the process of getting approvals in California and Florida months ago," Robertson said. "We think we're very close to getting approval in California. Those approvals are going to go a long way toward making EcoFlex 96 a global product. The rest of the states and the world will piggyback off those approvals."

While the U.S. is the first market CyberFuels is targeting, China is a big potential market as well, Robertson said.

"We're allowing you to double the BTUs you get from the fuel," he said. "It's a disruptive technology. The need is there and the technology is proven."

When told of Gillespie's comments, Robertson said it was his understanding that EcoFlex 96 met Florida's requirements and could now be sold, which essentially meant it had been approved.

Regardless, Robertson said EncounterCare's recent market run-up does not concern the company because it believes it is just the start.

"I've witnessed the growth from the ground up," he said. "We built it in house. We haven't been able to fast track it because we're not a large company."

EncounterCare plans to win approvals from more states, sign contracts with refiners and distributors and continuing to sell from its website before tapping the capital markets at a higher share price, he said.

The company has had some initial talks with Mayfair & Bond Ltd., a London-based fuel distributor, which may have some interest in selling EcoFlex 96 in Russia, China and other Asian countries, Robertson said.

Representatives of Mayfair & Bond couldn't be reached for comment.

EcoFlex 96 is comprised of 85% methanol, 14% gasoline and 1% a proprietary additive that boosts octane, according to EncounterCare.

The additive is based on technology that was patented in 2012 by inventor Mathew M. Zuckerman, who sold his rights to EncounterCare about two-and-a-half years ago, according to Robertson.

Zuckerman, 70, is currently in prison for federal tax evasion.

In the meantime, EncounterCare CEO Mills has been embroiled in a dispute with Zuckerman over who has title to the patents used to develop EcoFlex 96.

FuelTek Inc., a private company controlled by Mills, filed a lawsuit against Zuckerman in October 2013 in Palm Beach County, Fla., alleging breach of contract among other claims. FuelTek claims to have assigned patents bought from Zuckerman to CyberFuels.

FuelTek and Mills allege that Zuckerman formed a company called FuelTec Inc. to take back patents he agreed to sell to FuelTek, muddying CyberFuels' title to the patents and making it virtually impossible for it to arrange financing, blending or distribution of its product.

Mills testified that he arranged to pay $55,000 to cover the costs of filing an extension of patent rights on Zuckerman's invention which was then called Singular 96. The payment was actually made by Building Blocks Pediatric Home Services, a unit of EncounterCare.

Mills also claims that he agreed to loan $80,000 to Zuckerman; pay some of the legal bills related to his tax evasion case; and pay him $3,000 a week in consulting fees for helping CyberFuels test the product, raise money from investors and reach agreements with suppliers, fuel blenders and distributors. All told, CyberFuels paid Zuckerman about $193,000 in consulting fees, according to the lawsuit.

Zuckerman counters that he still owns the patents because he wasn't adequately compensated. He claims that Mills promised him compensation of $1.45 million, plus a running royalty of 5% of the revenue from Singular 96, although he conceded that that agreement was never put in writing.

According to Zuckerman, Mills informed him that CyberFuels couldn't afford to pay him until it had produced the fuel and made some money.

Mills also allegedly told Zuckerman that because CyberFuels' potential investors had balked at paying him in cash, CyberFuels' attorney Bruce Rosetto had devised a scheme to pay Zuckerman in stock, then trading at about 30 cents to 40 cents but discounted to 2 cents.

Rosetto, an attorney withGreenberg Traurig LLP in West Palm Beach, Fla., declined to comment.

FuelTek has denied that any such plan was ever put in writing.

Zuckerman, who claims to have a $13 million contract to produce Singular 96 for a Korean company, sought an injunction to prevent FuelTek and CyberFuels from producing EcoFlex 96.

Judge Jeffrey Dana Gillen of the 15th Judicial Circuit of Florida denied Zuckerman's injunction, but approved FuelTek's injunction against Zuckerman.

The case is still pending.

Zuckerman's attorney Paul DeCailly, of Indian Shores, Fla., said in an e-mail that Mills is "dishonest" and that EncounterCare "is a fraud."

Mills "has not sold one drop of fuel," DeCailly said.

However, there have been sales of the product by Zuckerman andJohn Stanton, DeCailly said. Zuckerman is an associate of Stanton through two companies Stanton owned, Alternafuels Inc. (ALTFD) and BulovaTech Labs.

Stanton also is a former chairman of EncounterCare, sold several businesses to EncounterCare and owns about 2.75 million shares of its stock.

He also is currently in prison for federal tax evasion.

In the litigation between Zuckerman and Mills, DeCailly has raised questions about claims EncounterCare has made in past press releases.

Those included an announcement in 2012 that CyberFuels was selling Singular 96 to large-volume customers in the U.S. and Canada.

"Is that a true statement?" DeCailly asked Mills in November 2013, according to a transcript of the exchange.

"Singular 96 is marketed and sold in bulk quantities. Is that what you're referring to?" Mills responded.

"Yes, is that a true statement?," DeCailly asked again.

"I believe it is, yes," Mills said.

"How much fuel has CyberFuels sold?" DeCailly asked.

"CyberFuels has sold very little fuel," Mills conceded. "We sold one packet of one truck of fuel that ended up not being fuel, but we sold it as fuel."

"You sold a truck load of methanol, didn't you?" DeCailly asked.

"Yes," Mills said.

DeCailly also cited a 2012 press release announcing EncounterCare's acquisition of assets from Alternafuels and a $150 million contract for conversion of gas stations to offer Singular 96.

The acquisition was later rescinded after Mills found out that the assets didn't include patents owned by Zuckerman.

And the $150 million contract was a purchase order from an Indian reservation in Canada, which was later cancelled because the fuel didn't meet expectations.

"So you're telling your investors, the stockholders here, that it had purchased this technology and it came along with it the acquisition of a contract worth $150 million?" DeCailly asked Mills.

"That is correct," Mills answered.

"So you never told the people that invested their money in your stock that the company never acquired Singular 96 from Alternafuels nor did it acquire the $150 million contract?" DeCailly asked.

"That is correct," Mills said.

"Did you ever announce to your investors that this went wrong?" DeCailly asked Mills.

"I have not announced that that contract was not valid, no," Mills said.

"In your opinion, is that an announcement that should be made?," DeCailly asked.

"I believe so," Mills said. "Actually, because I decided we would sell it through Mr. Zuckerman, which is exactly the kind of thing we were doing with this contract. I paid for the patents and therefore, I acquired exactly what I thought I acquired otherwise."

DeCailly said Zuckerman has tried to settle the case with FuelTek, to no avail.

Attorney Stephen Mendelsohn, who represents FuelTek and Mills, declined to comment. Mendelsohn is with Greenberg Traurig in Boca Raton, Fla.

Robertson said the judge's decision granting FuelTek the temporary injunction gives EncounterCare and CyberFuels full title to EcoFlex 96 and they are proceeding to line up contracts to produce the fuel.

"We're good to go," he said.

However, EncounterCare had no cash as of June 30, according to its most recent quarterly filing with OTC Markets Group Inc. (OTCM), which provides information about companies that trade over the counter. EncounterCare reported that it lost $945,000 in the first six months of 2014.

The company generated $193,000 in revenue in the first half of the year, entirely from its healthcare technology and services businesses. Those include CyberCare Health Network, which offers a device to remotely monitor patients' vital signs, and Building Blocks Pediatric Home Health Services, which offers home health care for children.

Mills has never previously run an energy company, but has more than 20 years senior management experience in the healthcare industry and owned a regional home care company.

Mills owns 5.37 million shares of EncounterCare, worth $16.1 million at recent prices.



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