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Actually the elder Mr Kwak is impressive. He has built a good business. My reason for staying with this is knowing he has real coin in this and will make sure it pays him back
No I am proud to say I spent some time teaching (part time) at the same institution that President Obama’s taught at. I have also taught many years ago at Northwestern. I am not the guy behind the curtain in the wizard of oz
Depends on the day. I have an eclectic work arrangement which allows me to work when I want to , invest when I feel like it, own a real estate development business, teach young professionals a few times a year and otherwise head for warmer weather when it gets too cold in the Midwest. I even got to know MS and ECOS years ago when they though their world was nanotechnology, lithium and chicken coops, but I am not MS or a Kwak
I have been in this stock since 2010. I am now staying in the company because it is focused now. It will never be a $100m company but could be. $10m company in a couple of years
A point of speculation on this board is why did Young Kwak replace MS. The answer is right in the financials. Hanscom had loans and advances to ecos prior to 2017. To fund the LRS project they lent them another almost $500k. James is the insurance policy for his father that his $500k is spent on the LRS delivery and not other technologies and ventures The Hanscom loan was intended to be paid back with the proceeds of the LRS sale. The elder Kwak is really the puppet master pulling the strings. He will move heaven and earth to make sure the project is accepted and his loan repaid.
I meant Kim Reynolds. My spell check auto corrected her name. Sorry Kim
What Paritz got tagged for his not uncommon among firms that audit penny land companies. What is troubling is the two partners who were subject to sanctions and suspension are still listed as partners, and me doing public company work. Can’t do that when the SEC suspends you.
ecos getting current and their filings is not that big a deal to me. Audited financials in penny land often are not worth the paper they are written on.
I have a meeting with Kim Richards (Iowa Governor) next week. I will ask her about this issue and article and report back. I don’t think it is a big opportunity since Iowa is a large chemical fertilizer manufacturing and corn state. This would be more of a niche play going after residential and commercial markets. However the State has been good about seeding investments through their economic development fund and credit programs.
Difficult is safe to assume on the converts
As a matter of securities law I would not be selling shares to fund operating needs into the market or through an intermediary into the market. This is generally frowned on under the securities laws. I would advise my clients to sell restricted shares to accredited investors when you have unfiled financials. This is a little more than difficult
They can do an 8K on the LRS acceptance or rejection independent of this. Switching firms makes it messy to convert the debt or sell more shares in the market.
My guess is that Malone might getting more expensive because of the accounting complexities (derivatives, Bio Art consolidation and structure) and the restatements. There aren't a lot of options. I am betting we may see another 10KA before we see the Q's. Switching firms buys them a few more months in filing.
They went back to their old accounting’s firm that missed the derivative accounting and some disclosure issues. I guess this mean a delay in filing their 3 10q’s for 2017, as well as fixed nag the disclosure issue on the 2016 10K.
The expiration of the 110 day period should be an event requiring disclosure through an 8k. They should file an 8k within 4 business days of the date the 110 day period expires. Since they determined that the LTS deal was material they need to issue an 8k for this event.
Jabez
The 400 digesters operating in Korea were sold by Taechang and some other Korean suppliers. ECOS had noting to do with the 400 Korean digesters. The ECOS references to digesters in Korea never claims they built or were involved in their sale, only that 400 are operating in Korea.
ECOS is the interface in the commercial deal with LRS. They have the distribution agreement with Taechang to sell in the US. Taechang designed the LRS disgester.
The connection to Taechang is the elder Kwak who has been distributing Korean made equipment for years through his company Hanscom K International.
If people want to know what the distribution agreement says and what ECOS rights under the agreement are maybe they should call or write
Taechang Bio-Tech Co.,Ltd.
1230 Yeongam-Ro Gunseo-Myeon
Yeongam, Jeonnam, 58434 South Korea
+82-614714017
These are the nice people that developed (and own) the technology and have been responsible for the infamous 400 machines cited by ECOS. They are the counterparty to the ECOS distribution agreement.
TW
Going to take a break from posting and leave people to their devices for a while.
I will post one final thought on last night's exchange. Chemical fertilizers which are used in large scale farming do not impact whether a product can be labeled organic in most states. What impacts the certification as organic are the use of GMO seeds and certain pesticides, herbicides, fungicides and insecticides.
Not every state has the same definition of what is organic and therefore, what can be labeled in commerce as organic. Organic in Iowa is different than organic in California for the same crop.
Compost like ECOS produces is not an effective substitute for chemical fertilizer. The amount of compost a farmer would need to spread on his field to get the same nitrogen content and crop production would make the farm field unusable. You can't grow 90+m acres of corn in the US with compost. You can grow a small plot using compost. The market for ECOS compost is really small commercial and residential, not the commercial ag market.
For those who want to know the basis of my views, I have spent most of the last 35+ years working in and advising large companies in the agricultural chemicals, agricultural fertilizer and industrial chemical space. Some small scintilla of market knowledge has rubbed off over this period.
I do get that data every day.
But since you guys seem to now think I am a naysayer rather than someone actually trying to provide facts, I will let you all surmise what I do for yourselves.
Fertecon posts the prices daily I have access to them as part of my business. Urea which is granular form of nitrogen has been trading at about 200 per Ton recently. Urea is 46-0-0. The prices I quoted are gulf Nola which is the US market reference price for all product.
Blended is often sold as MAP Or DAP at wholesale. It is more phosphate laden.
These are chemical process manufactured. Urea comes from natural gas and is a combination of ammonia and carbon dioxide. MAP is a combination of phosphate (green phos acid) and ammonia. It is also interacted with sulphuric.
Farmers need high nitrogen content to grow corn , soy, wheat, cotton and canola. They generally want nitrogen content from 28% to 86%. Ammonia is 80% nitrogen and used pre planting and urea and uan used post planting.
The product produced by ecos is not useable in these farming applications. It works well in home gardening and some annual plant production.
Hope this helps.
There could be if ECOS actually filed an *K with the contract. This is a material contract that hsould have been disclosed in an 8K and should have been described in the 10K. Its omission is a\n obvious failure to meet disclosure rules.
Let's see if they actually file an 8K with the agreement or amend the 10K. If not they leave us with a disclosure claim against management.
DS
Not sure where you get your prices. They look like price for nitrogen fertilizers which this product is not. For example, urea which is a real fertilizer is selling close to $200 per ton and blended nitrogen phosphate is about $200.
Here is current pricing at retail per cubic yard for compost biosolids (which is what composted food material is categorized as). 2 cubic yards is one tom.
Composted biosolids Average High Low
Boston $32.50 $35.00 $30.00
Chesapeake $26.97 $35.00 $20.90
Florida $11.29 $15.00 $ 8.00
Cleveland $24.77 $30.00 $19.50
Iowa $15.00 $21.00 $ 9.00
Texas $22.47 $30.00 $10.00
Denver $ 7.00 $ 7.00 $ 7.00
Northwest $14.95 $14.95 $14.95
SoCal $22.00 $22.00 $22.00
Composted chicken manureAverage High Low
Chesapeake $25.00 $25.00 $25.00
Minneapolis $17.00 $17.00 $17.00
Texas $37.23 $47.50 $26.95
Denver $25.65 $28.00 $24.00
SF-Bay $16.00 $16.00 $16.00
SoCal $27.00 $27.00 $27.00
Composted cow manure Average High Low
Cleveland $24.00 $24.00 $24.00
Iowa $55.00 $60.00 $50.00
Minneapolis $29.00 $32.00 $26.00
Texas $27.50 $47.50 $15.00
Denver $20.75 $30.00 $12.00
Phoenix $20.00 $20.00 $20.00
Northwest $18.98 $20.50 $17.45
SF-Bay $26.00 $26.00 $26.00
SoCal $19.00 $24.00
The word days in the acceptance section of the contract has plain meaning.
They can't just say it is business days because that is what they want to say. There is a back story here that nobody is telling the shareholders about.
I would guess that at some point this contract was amended and ECOS didn't provide an 8K for the amendment (another disclosure issue). Changes in material contracts are automatic 8K items.
I was thinking about what you posted on the 110 days. The contract does not refer to 110 business days, it is calendar days. See language below.
They either (i) amended the contract to change calendar to business; (ii) the product was not actually complete on 6/30 or (iii) nobody knows what is in the contract. There are other sections regarding notices and payment which have business day triggers, but not the acceptance period.
The Buyer will have from the date installation commences to the date that is one hundred ten (110) days after the date that the Initial Product becomes Fully Operational (the "Rejection Period") to reject the Product if LRS rejects the Product, by written notice to Ecos. Failure of the Buyer to reject the Initial Product before the end of the Rejection Period shall constitute acceptance by Buyer of the Initial Product.
I think what Kenny says has a tinge of truth for most public companies, including ECOS.
Many Companies often spin in their PR's and their SEC filings their story and have a tendency to not always state all of the facts or disclose on a timely basis.
There is some truth to that end regarding ECOS. Here are some simple examples.
1) The 110 day period on the digester should have expired by now. Under the SEC disclosure rules (and their version of materiality), this is something they should have promptly disclosed. The fact that it hasn't been disclosed either means they haven't met the 110 day testing period (another issue requiring disclosure) or they failed to meet their disclosure items by not promptly disclosing.
2) The fact that they never filed or disclosed the terms of their distribution agreement with their Korean supplier. Would seem to be the most material agreement to ECOS since it is the backbone of the LRS deal and Canadian chicken farm.
3) Being delinquent in ones filings makes Rule 144 and other safe harbors for the issuance/sale of securities (including restricted shares) unavailable. Even an issuance under a 14C is questionable when delinquent. Yet they have clearly issued shares (restricted, preferred and regular common) during this period.
4) There is still an omission in their latest 10KA which is material. The fact that they can't figure it out tells me that they don't understand something basic about their business and the SEC disclosure rules.
Young Kwak is better than MS, but this company is still not very transparent.
The theory is as follows
1) debt converts into equity based on a discount off the current market price (40-60% discount)
2) The debt holder shorts the stock to keep the price as low as possible. The lower the market price the more shares the debt holder gets on conversion. A market price of $.0001 equates to a conversion price of $.00006 (using 40% discount)
3) The debt holder shorts and covers until the latter of the debt conversion date or the date that restrictions on the shares lapse.
4) Not uncommon for the debt holder to use two of its entities and two market makers to execute their short.
Debt Holder Entity 1 uses MM1 to sell shares to Debt Holder entity 2 who uses MM2. At the end of this Step Debt Holder Entity 1 is short ECOS shares and Debt Holder Entity 2 is long shares. A couple of days (or the next day) Debt Holder Entity 2 sells shares back to Debt Holder entity 1. This covers the short and eliminates the long. You then repeat the process to keep the market price low.
If the increase in AS is because of debt repayment they have repaid less than $75k of their debt. I think $50k is debt repayment and the rest is stock sold for operating cash needs.
Yes, the wastewater digester sucks sludge from the wasterwater plant and processes the sludge into compost. The process needs to handle much higher liquids content and some of the processing equipment sits on and below the water surface.
The ECOS system relies on a conveying line or hopper to process material. The material tends to be more solid.
You would need to have a different feeding system and processing approach to digest the material.
Others (who are better capitalized) already in this market with proven equipment makes an entry by ECOS unlikely.
The technology behind a wastewater aerobic digester is different than the one that ECOS sold to LRS. These actually sit in and on the wastewater. Ovivo and Aeration Industries make them and sell into this market.
ECOS would need to design/license a different model to enter this market.
It will not end until the convertible holderss get their shares and dump them. They will let it run when it is time for them to dump
No but my father went to Drake.
I go back to a thesis I posted long ago. The convertible note holder is on both sides of the 1 trade. Short and cover time after time to keep the price at 1. Their concerts are more valuable to them the lower the pps
If they make an offer for the assets they never go anywhere near the 16m in debt, the convertible notes and the history of ECOS. Much cleaner for them. In an asset deal ECOS cleans up its debt
The more I see of the ECOS she’ll the less I would ever let a client touch it.
I think if I were LRS I would I IPO thru existing LRS and then make an offer to ECOS for their assets. I wouldn’t want the ECOS public shell to go public through. Jmo
IMO this is similar to the approach used to place by Tonaquint with respect to their convertible notes in ECOS.
I would not be surprised that some of the recent volatility is a short position put on by a convertible debt holder since they are nearing cash out of their convertible notes. You just keep shorting since you have have a share delivery from ECOS coming. Since you are going to receive shares at a discount to current market (discount can be 40-60% off of trading price) there is limited downside in continuing to place and rerolling your short.
I have seen where noteholders getting restricted shares will short until the restriction lapses. Thought the longest I have seen is about 3 months.
If the OS is not going up and their is extremely large trading volume (like we have seen the last few weeks) in the stock it would not surprise me that this is just a short trade preparing to cover a cash out.
The one caveat at the bottom of the article is that the issuer should be current in their filings. That is to protect the company and its officers under the Securities laws when they deliver shares without a registration statement.
If done right this is perfectly legal, but it does dilute the value of the issuing company. Every share issued at a discount effectively takes value away from other shareholders. You do this financing because you can't get financing in the real market.
As I tell young lawyers letting your client tweet and post on other social media is now dangerous from a securities point of view. It is another way to create liability for the company.
Kenny
Tweets made by an employee acting on behalf of the Company are covered by Reg FD and the SEC disclosure rules. The SEC issued notices years ago that stated this.
So ECOS tweeting is as if they made a public disclosure. If it is wrong it carries the same penalties as if it were made in a PR or 8K
Maybe I should invite this Board to my Spring symposium on Reg FD I do for law students and young lawyers
I am saving it as an early Christmas present for the Board. I want to see if they can read and figure out themselves. It is kind of important so they should be able to figure it out.
No just a an old and grizzly accountant, lawyer and M&A guy. I have written a lot of SEC disclosure over the years so it helps when you read other people's stuff. A while back when they first noted they had to amend the 10-K I posted three other things they should think of fixing. Miraculously they were all fixed in the amended K.
Want to see if they find the mistake they just made in the amended K. If they don't note in a couple of weeks I will kindly post.
the warrant shares are not issued. Those restricted shares either went to debt conversion or insiders for capital.
If the warrant shares were in fact issued their SEC filings would be materially incorrect.
All the disclosure in the 10-K states was a projection of what LRS share would have been based on shares outstanding at that time. Another annoying SEC disclosure requirement of potential obligations of the issuer. The number of shares issuable for each 5 1/3% increases each time the O/S and Restricted goes up. When the dust settles my guess is LRS will be entitled to close to 3bn shares for all of their warrants.
By the way there is another error in the 10-K they just filed. I am going to hold this one for a couple of weeks to see if they found it.
Kind of a material omission from their filings. The preferred shares give the insiders the voting control over the company. It is how they were able to do the 14C without notice to shareholders. Not something new preferred issued to insiders in 2013. Their explanation is not entirely correct. It has zero gaap accounting value when issued but has substantial economic value as a result of voting control. Theee shares have the ability to block any corporate action and can cause an action to occur without common shareholder consent.
This is all driven by GAAP accounting and the SEC disclosure rules. They need to report constructive ownership (not actual ownership) when they issue derivative equity instruments. The intent of this disclosure is to tell a reader at YE 2016 how many additional shares would be issued as of that date if the warrants are exercised.
The amount of these shares potentially issuable will change at YE 2017. The number of shares that LRS has the right to acquire for each 5 1/3% goes up each time the OS increases.