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Of course if you look at Siegel's andEggers bios you will see that they ran C Line an Iowa strip club. Not w that she are guys you want to be associated with. I think those connections could bring interesting business opportunities. If this digester doesn't work this could transform into some form of adult entertainment
The $647k for the equipment is before ECOS pays their suppliers and installers. Net to ECOS likely $100k
In addition under the JV agreement ECOS is required to contribute their profit from the first 8 machines into the JV. So they don't actually keep the cash flow related to net income on machine sales.
ECOS will go forward with the debt conversion and issuance of shares since they have no way to repay the outstanding debt.
Thanks Cheetah man
Been in ecos for 4.5 years and have known Siegel longer. I think this company has potential to be a decent small $10m company in a few years. I spent a lot of years relying on Siegel to provide info and execute deals. The one thing that makes me hopeful is that someone else is running ecos now
All I posted is what I saw when I visited lsr. Not trying to confuse anyone. Sorry you don't appreciate facts
I don't see an RM when LSR can take control of the jv and get what they want without needing to touch ECOS. The reason to move next door is they need to develop an output channel for product (which LSR could help them with) and plan for new installs.
If I were advising LSR an RM would not be a play. They have 60% of the profits from the machines from the JV. They could dilute ECOS down by ramping up the JV. ECOS doesn't have the cash or balance sheet to sustain capital calls from the JV
No I think there is value here. Selling systems to the jv has value to ECOS shareholders at the rate of about $100k per pop.
The output sales are not as valuable as you would think. They are not selling fertilizer but compost (lower value product) ECOS also has to build supply chain to move output (which they have not done) or allow it to be sold they way LSR sells mulch and wood chips (which is a lower value add).
After living through with ECOS management the lithium business, chicken coops and all of their other ventures this has some tangible value, expecially if someone other than ECOS rnuns the jv.
I think this could be a ten million dollar company in a few years (3 to 5) if the systems can be distributed broader than in Chicago.
This was the voting power and share ownership based on the option shares, not actual ownership.
No the jv (ECOS Bio-Art) is separate from ECOS the public company. ECOS has a stake in Bio Art as does LSR
No read carefully they have the right to acquire shares in ECOS, not actual share ownership. If they owned actual shares their Form 4 would be incorrect. Since their outside lawyers did the Form 4 which only says they have options this is a more correct statement of their ownership.
They have an ownership stake in ECOS Bio-Art.
Info already posted.
The $650k is the price of the machine to joint venture between ECOS and LSR. Those funds will flow into ECOS and then on to the vendors who provided the equipment and installation.
The profit which will flow to ECOS Bio-Art from the first machine will likely be $50-100k.
Actually you are wrong. LSR's filing explains they have options to acquire ECOS shares. They didn't actually buy the ECOS shares.
Since they have not filed another Form 4 with actual ownership it is safe to assume they own zero shares.
When ECOS tried to do their reverse split, FINRA stepped in and refused to permit the split to go forward unless ECOS severed their relationship with the toxic debt holder. FINRA has a lot of authority and backing from the SEC to stop a corporate action. Not being current is something FINRA would use to stop a corporate action.
ECOS counsel would know that not heeding to FINRA's requirements would be suicide
Be careful, here,. LSR will only exercise their warrants if the ECOS share price exceeds their option strike price. it is just above the strike price on Option 1.
They actually get 60% of ECOS Bio-Art (where the economics are) without buying into ECOS.
My guess is that LSR's play is to get control of ECOS Bio-Art and leave ECOS alone. LSR's lawyers are very shrewd and have set up a deal for their client to control the technology without having to buy anything in ECOS.
Update on LSR/ECOS Field Trip
Was quiet yesterday (Saturday) at the California Avenue facility. With the residential routes not running on Saturday site had less than 25 people on site and mostly large trucks entering and leaving the site (not waste trucks). Interestingly the person at the gate asked if I could park my car outside the gate for safety reasons. No such requirement when I went before on a Friday. The site is a narrow strip of land in an industrial are just north of the Stevenson expressway. Most of the businesses are very light industrial or construction related.
There were some people over working by the digester. I was asked not to go in there as it was an active construction site. I was able to get about 25 feet from the equipment. They appeared to be observing. The organics aborting area was empty. This would appear to be a Monday to Friday operation.
The digester appears to be operating. The employee told me that they expect to complete testing in mid-November. This ties back to the acceptance period per the contract. I asked him whether it was operating on spec, He suggested I ask that question of corporate (which I will do on Monday).
I did get a chance to see the output. It is a brown powdery substance. asked the employee what the output of the system was and he said it was compost. It would not appear to be a fertilizer in a commercial sense. I based this conclusion on my 35 years working with an in the ag chem and fertilizer space. Based on the material and its smell and feel, it likely does not have the necessary nitrogen, phosphate and potassium content to be sold as fertilizer. My best guess is that they plan to wholesale this to landscaping companies. This is what they do with a lot of their wood chips from tree recycling.
The employee told me that they run their organics recycling business from early Spring to mid-November. This is consistent with how their contracts run with municipalities. LSR has suspended their organics recycling during winter months. It has nothing to do with the equipment as the number of moving parts exposed to the elements are not significant. The employee told me it is likely that they will cycle down the machine in winter as they will not be running the recycling business. He told me this is a corporate decision and the project is a corporate project.
Actually he didn't buy any shares. This is the filing that Lakeshore holds warrants in exercised
Actually the tax loss carry forward will disappear when they convert debt to equity which will happen in September.
FINRA has been getting more active on disapproving actions related to no-current filers and the SEC is more supportive of FINRA's actions. I would not test FINRA when getting current at this point is not that hard.
No the Pre 14-C was based on data as of the date of that filing. It is a bit different from the amount of the derivative liability shown in the 12-31-2016 filing. The difference should not be material.
The real issue with getting compliant is they technically need FINRA approval for the increase in A/S and the issuance of shares on debt conversion. FINRA's authority was affirmed by the SEC in two recent SEC administrative decisions.
FINRA won't approve unless an entity is compliant with SEC filings. ECOS learned that at the time of reverse split. This means that 9/1 is the magic day for all outstanding SEC filings (2 quarters of 2017) to be made.
The $14m deferred tax asset under the tax rules would normally take a long time to use. Some of their losses may be limited as they could have experienced multiple Section 382 changes in control over the past 5 years (including 2017).
They will likely see a 2017 income of between $0-50k (before debt refinancing/conversion). When they convert the debt to equity the derivative liability goes away and the discharge of debt will become income reducing the NOL and eliminating the deferred tax asset.
If you are running a valuation model on ECOS you would allocate zero value as it will be wiped out for the most part in the debt conversion.
Dutch
When i was at ECOS last month. I asked what they intend to o with the product. The person i talked to said they were going to market it as compost and not as fertilizer.
To sell "fertilizer" they need to register with the Illinois Dept of Agriculture, obtain a fertilizer license, be inspected annually by the Dept of Agriculture, do monthly reporting of sales of products any pay tonnage tax. There is a requirement to do laboratory analysis that delineates components of fertilizer (mostly NPK content measures). If you sell fertilizer in this State (or most States) this is a mandatory requirement. You cannot brand or hold yourself out as a fertilizer manufacture or as selling fertilizer unless you go through the license and reporting process. I know this quite well as I spent many years advising manufacturers and distributors in the fertilizer space.
The mulch produced by LSR is sold to landscapers and other customers (not retail). My gut tells me that in order to avoid entering into the regulatory web of fertilizer they will market this product as compost (unregulated) rather than fertilizer.
I am taking another field trip to LSR California Ave on Saturday morning. I plan to ask hat they plan to do with output. I have a mtg at the U of C so I will stop on my way down. Will post an update on Monday.
Dutch
Actually based on their SEC filings and the O/S it would appear that all 3 options are out there unexercised. So the next option is actually Option 1. I would surmise that LSR waits until te share price runs above .0003 before they exercise.
Joe
This will change on 9/2 when the new A/S and the new restricted shares from debt conversion appear.
I actually think the current O/S is closer to 9-10bn based on reading the 10-Q's. They note they have issued about 3.5bn common shares in 2017.
Two other thoughts
- in order to go effective with the increase in A/S on 9/2 to 20bn and allow the debt to convert they need to have all of their 2016 and 2017 filings filed with the SEC by 9/2. This likely means being current within a week to ten days.
- the 10-Q's make it clear that through q2 2017 LSR had not exercised their warrants. The only issued shares were to toxic debt holders and related parties (i.e. Siegel, Kwak's Hanscom, Egger). If LSR has exercised their warrant as of June 30, 2017 it would have been noted in the subsequent event footnote.
Update on A/S and O/S as of 8/11. Note O/S was 7.8bn
Good afternoon. Here is the structure as of today- 8/11/2017. For future requests, please send to email below.
Authorized: 10,000,000,000
Issued: 7,835,873,776
Restricted: 3,656,163,534
Have a good day.
Regards,
Johnnie
jzarecor@pacificstocktransfer.com
my guess is the toxic debt holders might be holding this back to make their conversion of debt into equity larger on 9/2. Lower the price they get more shares on conversion. If the stock ops after conversion they cash in.
They touted the Nations Waste JV and within 6 months it vaporized this deal issifferent as they are actually building something. Before Nations Waste it was chicken coops, power generation, lithium batteries, and algae into fuel. I think some long term shareholders have heard about a lot of deals which never get to the finish line. It is now time for the Kwak's to deliver a live deal. There is a credibility issue with management.
The increase in shares is to allow all of the existing debt to be converted into ECOS shares. They will need to do another share increase to allow LSR to exercise their options. Remember LSR has the right to buy 5 1/3% of the outstanding shares by acquiring shares directly from ECOS. ECOS won't have enough unissued shares post the debt recap to meet its obligation to LSR. My guess is another increase in A/S toward the end of the year.
I can say with virtual certainty that ECOS and LSR will not merge. If LSR acquires anything it will be ECOS BioArt JV.
What is interesting here is that while they are delinquent they have managed to issue over 1bn of freely tradeable shares (not restricted) to unidentified individuals or corporations. It appears that they don't have a registration statement (or a small issuer simplified registration statement on file with the SEC regarding the issuance of freely tradeable shares. I would have thought the transfer agent would have requested this to change the unrestricted shares outstanding. Of course this is pennyland and sometimes adherence to the rules is an afterthought.
Much Shelist is a very goodChicago firm. Dealt with them a lot but over the years. ECOS in the Siegel days used a solo practicioner. Talked to her during the ECOS lithium battery era. She was not of the same caliber as Much She is a decent lawyer for a small company and was cheap.
Dutch
I actually think warrant 1 is still unexercised. Here is the rationale
1) ECOS unrestricted shares grew by 1bn form the time they issued the warrant. However, ECOS can't deliver registered shares to LSR while they are delinquent. They can only offer restricted shares.
2) Restricted share count remains at same level before and after issuance of warrant so LSR hasn't received restricted shares. Which is what they would get from a delinquent filer
Since they can't get freely tradeable unrestricted shares and they haven't received restricted shares, my best guess is that the warrant 1 remains unexercised as of today.
By the way if they exercised and ECOS gave them shares there would be an SEC filing required for a new 5% shareholder. None has been filed by LSR or ECOS.
They aren't new. I am an LSR customer and have been for years. They just put an organics label on their 65 gal can. They approached my suburb over a year ago about organics recycling and it became part of the program this year (starting in May). Not a mandatory program. The start-up has been very slow on the consumer side, some commercial.
Realize they need to sort the waste before putting it into the digester. Sorting is an evil of this business until humans are more careful as to how they dispose of their waste. The truck size doesn't matter nor does the placement of the digester.
Remember the Koreans installed their own technology in Korea. ECOS wasn't involved in this process. ECOS is going through the learning curve on how to run and optimize the system. The start-up and prove up of the systems will get progressively better with each one they do.
Also remember ECOS doesn't have employees doing the install this is all done by 3rd parties.
My guess is we will learn that some of these shares were issued to pay expenses of ECOS.
Dutch my guess is that some of the toxic debt holders may be keeping the stock suppressed to make heir exercises more lucrative. Since they convert at 40-80% of the market price they have an interest in keeping the price low and then sell into an upward market.
Update on A/S and O/S
Good afternoon. Here is the structure as of today- 8/11/2017. For future requests, please send to email below.
Authorized: 10,000,000,000
Issued: 7,835,873,776
Restricted: 3,656,163,534
Have a good day.
Regards,
Johnnie
jzarecor@pacificstocktransfer.com
What this tells you is that most of the toxic debt holders are still unconverted since the O/S and Restricted Shares have not moved enough since 7/1 to account for them being cashed out.
They were in default of the terms of the toxic debt from Q1 2014 (10-Q mentions the default) through July 1, 2017 (the date of the shareholder vote). My guess is some of the holders of the toxic debt were in fact moving the volume on the stock. The default was likely based on the failure to have adequate authorized shares to facilitate conversion.
The convertible debt of $585k mentioned in the 14 C is only the principal amount of the debt. There is likely an equal amount of interest accrued but not paid which also factors into the conversion. If you go back to the 2015 SEC filings you can see that the derivative value of the debt was 40% greater than the face value.
The other peice of debt that is out there is $1.5m owed to the stockholders and Hanscom. The 14 C refers to all debt being converted. I would assume this goes into their conversion calculations since they say upon the conversion of the debt they will issue 9.6m additional shares.
Remember the toxic debt converts into stock based on the closing price with a discount applied (20%) to the closing price to determine conversion. The toxic debt holders conversion or the regular debt conversion likely explains why the OS went from 6.6bn to 7.6bn since July 1.
Here is their language from their 2014 10-K where ECOS notes they are in default of the convertible debt to Tonaquint and Ascher. They are the two principal debt holders other than management.
During the years ended December 31, 2014 and 2013, the Company received the proceeds of various loans which are convertible at amounts ranging from 40% to 60% of the market price of the common shares of the Company at the time of conversion and bear interest at 8% per annum. The amounts received during the years ended December 31, 2014 and 2013 are $86,500 in cash, $140,000 in non-cash borrowings related to the default on Tonaquint loans in 2014 and $668,983, respectively.
The convertible feature of these loans, due to their potential settlement in an indeterminable number of shares of the Company's common stock has been identified as a derivative. The derivative component is fair value at the date of issuance of the obligation and this amount is allocated between the derivative and the underlying obligation. The difference is recorded as a debt discount and amortized over the life of the debt. The Redwood Management, LLC, Asher Enterprises Inc. and Tonaquint notes are in default as of December 31, 2014.
If you read the sec filing they are setting aside 9.6bn of shares to retire $550k in debt. The shard will dilute the existing common since they are issued at a discount to market