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I want to post for the benefit of the Board the DD I have done that supports my opinion that ECOS management would not be aligned with a merger transaction. here are some facts
1) Each of MS, Jeung Kwak and James Kwak are entitled to annual salaries of $150k. Their CFO Mr St Pierre earns a meager $48k. That is $500k off of the top that they get by keeping ECOS alive. They are also owed a fair amount in accrued, but unpaid salaries. This all comes out under State law before us the shareholders.
2) None of the officers or directors have an right to any options or restricted stock (except Michael St. Pierre) Based on their latest SEC filings the only grant OS should be Mr. St Pierre's (their CFO). Though they say no officer or director has any equity compensation. Normally you want management to have some skin in the game through performance based equity (like options so they will drive the share price). We don't have that in ECOS.
3) The same group of people owe 2.5bn shares out of 13bn OS. Their shareholdings have remained the same from year-end 2015 through year-end 2016. If you look at the 2014 filing you will see the same nice group of people had 27k shares (after the reverse split).
If the 2015 and 2016 filings are correct the insiders either received or purchased about 2.5bn in shares. The Securities laws require when a 5% or more holder acquires shares either through the market or from the Company a filing is required other than filed on Form 10-Q or 10-K. They appear to have never made that filing.
I am now providing you with one of the two SEC issues that they have still not corrected. They should have filed a Form 3, Form 4 or Form 5 to report these ownership moves. The fact these increases happened a few years ago and wasn't fixed doesn't mean it can't be cured by filing a Form 5 and paying a fine.
LRS would never buy or merge with a company that has an insider reporting deficiency likes this as it opens the new owners (as well as the old insiders) to shareholder derivative suits. You can't indemnify the SEC compliance issue and the related derivative issue away. Therefore, my thesis as much as they have tried to fix their reporting issues they missed one of the biggest from a liability perspective. No fix, no merger. They couldn't get a lawyer to provide them a legal opinion with this issue out there.
Maybe they will look into filing Form 5's for all of the insiders and approach the SEC. They do read this Board. They can always pose as an investor and I will be happy to explain how to fix this. If they ask with an acceptable please I might explain the other reporting issue they have which one would fix before a merger.
Adam
They are issuing shares and have been over the past year. Issuing incorrect SEC reports sets up management and directors for personal liability under the Securities Law. If I were the Kawks (the two ECOS directors who have money) I would not want to risk my personal assets for misstatements at ECOS. Some of these corrections have been very material (lie the derivative issue). I think most of what they are doing is protecting themselves.
I don't see a merger in the next couple of years if at all. I see this as a slow climb to profitability. I think ECOS has every reason to try and merge and LRS having every reason to wait.
I follow my rules to a T
I invest with in pennies like ECOS with money that I am quite comfortable losing and not fret about. It may mean I don't buy new beach towels for my winter home for another year or I don't order another side at the early bird.
I have been in this stock as long as anybody on this board. I am quite happy to wait for years.
I would have said that the last few times they pulled that out of their bag of tricks. FINRA tries to hold up their RS nut eventually relented. Nobody did anything with the OS increase. Never say never
not urgency to merge. Urgency to survive. They can always use their voting control to increase the AS or reduce the OS
LRS doesn't own 600m shares today. They have the right to acquire 600m shares (and that number adjusts based on then outstanding shares) under the warrants. They have not exercised any of the warrants to date and will not until the share price exceeds the warrant exercise price.
The three warrant issuances were an inducement for LRS to enter into the JV.
so then you just hire them to build you digesters. Better than taking on this public shell.
DS we will never agree on the thesis of a merger. I really can't see a merger here. If LRS is smart they might buy the digester rights and move on.
DS a monkey could have gotten the financials done much faster. That is my sense of urgency point. If they had a deal to do they could have done them much faster.
DS I don't see a sense of urgency here to get to a merger. They could have gone much faster to amend and get up to date. The ECOS financials are not all that hard to get right.
I have never believed that LRS needs to be public to achieve their goals. I also don't think GS and Maple Partners invested as part of a going public merger as both of their principal investment thesis are aimed at private companies. The investment by GS is not thru GS the Investment Bank but thru their quasi PE arm which invests in smaller public companies.
I know but they could have gotten current much faster and more completely if there was a warm deal there to be had. The pace at which they amended and re-amended doesn't show the urgency of a looming deal.
Again I respectfully disagree.
I did a deal in 2010 (two public companies) we announced a $5bn deal in 5 days from the date the CEO's met for dinner and closed in less than 90 days thereafter.
I have also done public company deals which have gone from initial contact to definitive agreement in less than 30 days.
This is actually an easy deal to do (if it is going to happen). There really isn't much paperwork. A merger agreement and a proxy for the shareholders meeting. They could draft it in a matter of days.
DS that just isn't true. I have done many a multi-billion dollar merger which came together in days/weeks and closed within months.
ECOS-LRS would be an easy transaction to do quickly as there is no antitrust or other regulatory impediment.
It is the discussion about internal controls at the end. A couple of changes noting their controls are ineffective. When you have an outsourced CFO and a couple of employees you will fail controls over internal controls. Read pages 28 and 29. Nothing to get to excited about.
Just another restatement of the 2016 report. The biggest change is they needed to insert language hat they have a material weakness over financial control under Sarbanes Oxley. For a pinky I would expect nothing different.
The reason they don't own landfills is likely driven by a combination of Illinois regulation and who owns the existing landfills. Almost every landfill in Northern Illinois is controlled by two of their competitors (Waste and Republic). Permitting their own landfill would be costly and take years. When they put waste in one of the WM or Republic landfills they pay fees to their competitors.
Long term permitting more landfills in Northern Illinois is going to be harder and harder. The newer ones are further from the Chicago area (not in my backyard).
If they can avoid landfills in a cost friendly way they make more money for themselves and less for their competitors. If you went to the California Avenue site where the digester is you can see a number of things LRS already does to reduce waste sent to landfills. They have been reducing waste associated with metals, glass, construction materials and lawn/gardens for a number of years. Reducing organic waste is the next logic place for them to reduce the cost of materials transferred to landfills and their competitors.
maybe setting up for another Fife short and cover exercise.
.....
any maybe Kwak is another actor in the MS version of fake news.
While were at it maybe all of us posters are all actors posting fake news about ECOS.
T
You missed a true experience. I remember when;
- I could grow longer and curlier hair than my sisters (today I am happy to have some hair).
- My father used to try and tweak me by referring to me as his fifth daughter.
- You could get high at a Led Zeppelin concert without lighting up.
As to the clothing style. The benefit of rainbow and tie dye clothes was that you could spill food on yourself and it blended right into the pattern.
There is a not so subtle reason why cannabis waste is turned into water or other inert ingredients. Canada and most US states require that waste from cannabis production require that discharged material have no more than 50% cannabis related product (some States are more restrictive) and be tested for that level of compliance.
The problem with cannabis production is that you need to treat water and the plant material separately to comply with these requirements. You also can't mix cannabis waste with other organic waste.
Before anyone asks I might know this because I may have stretched a few laws in the 1970's.
A multi stream recycler (like LRS) would have both paper and composting materials. You would need to tweak the fermenting process if you add paper but long term might be a much more ecologically friendly solution
DS
Paper is used to provide dryness and absorb water from the manure based and other composts. Newspaper is the best source for this material as it easily absorbs the moisture from the manure mixture providing some consistency in the product.
You can't really use hard wood or a Christmas tree without first pulping the tree and reducing it to fiber. The wood fiber from a tree will not have the same absorbent qualities as paper. Turning trees into mulch is much more efficient than pulping. Pulping takes a fair amount of energy.
Caption should be
Four years of college and all I do is clean up others people's garbage. Certainly won't find a rich husband here.
you should announce the conversion and share issuance. The number of shares issued are material. Of course this is pennyland and the actual adherence to securities laws tends to be anecdotal.
I agree with DS. It can't be LRS or GS or one LRS other investors. If one of them bought shares it would be a clear violation of the US Securities laws. LRS lawyers are too smart to let them go there.
I wish you were right since I have been in this stock for a lot longer than most of you. However, at this point I think .ooo5 is a lot more realistic than .05
LRS will not pay ECOS for the value it brings to ECOS and the deal. That is a good old fashioned buyer's synergy. They are not going to share it not should they with the ECOS shareholders.
Having done a few hundred billion in M&A transactions over the years i can not see the values you see. LRS couldn't get a fairness opinion that values ECOS anywhere near $200m.
And eureka you have come across our fundamental difference in view. LRS is never going to value ECOS at $200m. The sales and earnings multiple at those prices are nowhere near market.
I have believed for a long time that by the end of 2018, ECOS could be worth $5-10m if they can install a number of new systems and fix their balance sheet.
You are I share a very different view of the likelihood of a merger. In a merger, if you value LRS as a waste company and ECOS as a distribution company (or a waste company), LRS ends up owning more than 99% of the market cap of the combined firm.
here is a simple way to think about it. ECOS has no EBIT or EBITDA so a deal would not be valued that way. If you value ECOS on trailing sales (let's say $700k for the LRS sale), the market cap is $1m. If you value LRS at 1.3, you get a value of $200m.
If you give ECOS some credit for future sales you might double get to $2m.
This doesn't take into account the relative leverage of the two firms. ECOS has a much higher component of debt financing which will impact their equity valuation.
Not sure I would share your view that waste company multiples are that high. They trade like commodity or service companies.
EV/Revenue Multiple 1.5 to 3.3x
EV/EBITDA 10.2 to 11.8x
EV/EBIT 14.6 to 18.4
The high end of the range is Waste Management the lower end of the range is regional players.
EBITDA margins in wast run between 11-27%. 27% is Waste Management and the lower range numbers are regional players.
ECOS won't trade as a waste company. It is distribution company so its revenue multiple will be closer to 1 and its EBITDSA multiple will be closer to 8%.
By the way you can get this data from GS.
I find the description of Tonaquint and their parent interesting. They are hardly a real estate developer of any ilk. Their business is lending money and in making investments in debt of companies tied to their underlying stock (convertible debt).
The tax law has nothing to do with what ECOS is announcing or not.
Most of the material provisions of the new law don't impact them because they are too small. Small businesses actually are exempt from many of the new limitations in the tax bill.
DS
They didn’t pay anything for the warrants. They are all part of the initial jv and digester transaction
They will pay the .0003 per share to ecos when they exercise the warrants. They should be in no hurry to do that as it is like an option They have years to exercise the warrants. Most investor exercise the warrants when the share price is sustainably over the warrant price for at least 30 days or more ( in some cases much longer depending on exercise price).
DS you can file early. The filing date for s the last day to file. They should have their audited financials included in the filing. Otherwise filing early is generally not appreciated by regulators
The loss reported by the company is an accumulation of its life to date book losses. That is because SEC rules require financials to be reported under US GAAP
US GAAP requires companies to report book income or loss when they enter into an agreement which is derivative in nature. The convertible debt, the LRS warrants in Ecos and the LRS right to increase its equity in bio art are all derivative instruments or agreements.
In 2016 ecos reported derivative losses on these instruments. One of the reasons they restated the 2016 financials was to reflect these derivative losses. This increased their loss carryforward
In q2 2017 they reported a derivative gain of in excess of $7m which reduces the loss carryforward
Under SEC reporting rules they only need to update their tax loss carryforward annually in their 10k. Their is no requirement to provdie a tax footnote in a quarterly report. There is a requirement to provIde textual update if there is a material change in the tax position of a registrant. Very few small filers actually provaide a textual update
Anything else.
Look st the q2 10q. It shows a derivatives gain of over $7m. This income under GAAP accounting reduces the losses carried forward.
Ecos has reported over $7m of accounting income. This reduces the loss carry forwards on a dollar for dollar basis. The losses you cite are from the 2016 10k. You need to adjust them 2017 operating activity. Tribal accounting.
Nyou may be on something but I am not Kenny. Just pointing out some facts.
And based on the 3 10q’s the tax loss cf is now about$6m. The loss was primarily related to derivative losses which were reversed in 2017.