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Should read
Issue 9.6bn shares to retire convertible debt
Looks like they are planning on another $400-500k of dilution from the issuance of 9.6. Illinois shares to retire exists no convertible debt.
Yes the 15 tos is per machine 120 tons is for 8 machines that produce 15 tons each.
I think that share buybacks are an illusion for ECOS. ECOS has no cash and has to contribute the net profit from each machine to the JV for the first 8 units. My guess is their profit per unit is somewhere near $100-150k.
Their cash flow will come from product sales for the next couple of years. They have not built out any sales staff With the exception of James Kwak and Mike Siegel all of their functions are virtual or contracted to a service provider. My guess is that they will need to ramp up cost to build out a sales function that can move the product.
As to dilution the only part they control is any shares they issue to pay for expenses. The toxic debt holders can dilute anytime they care to convert their debt to shares. In addition, at some LSR will exercise their options which will lead to more dilution.
As to getting current in the next week or so they will be 6 quarters behind on filings. I think that is going to take a while for their accountants to get this done and ECOS needs to find about $100k to pay their fees for these filings. My best guess is they get current in late Q3 or Q4.
Four things.
1) ECOS net income from the first sale is likely closer to $100k after they pay for the equipment and the people that installed the equipment. Most of the equipment is dumb steel, however there is a real cost to the control systems for the equipment.
2) ECOS has agreed to contribute the income they generate from the sale of the systems to the JV as their capital contribution. This means they will have a capital investment in ECOS Bio-Art but no cash.
3) The JV may make distributions to the partners in accordance with their capital account. ECOS needs to contribute profit to the JV to establish their capital account. If they pull their profit back out in distributions, they will get less of the cash and profit on future machine sales.
4) ECOS will likely need to issue more shares or take out more debt to finance the business. They have issued over a billion shares this year to toxic debt holders or into the market to pay for expenses. My best guess is they will likely issue another billion or so the rest of this year. At some point they will need to increase the A/S (7.7bn) to cover the O/S and the restricted stock (3.6bn).
As promised I stopped by the LRS facility which is using the ECOS digester system. I was told I could not enter the site where the digester was and could not take pictures.
I spoke with an employee who was quite open and forthcoming.
- ECOS has 110 days to prove out the system at the California Avenue site. He expected that LRS will use the entire 110 days to test the system before they pay for it (that was his opinion). That puts the date for the payment by LRS for Unit 1 at the very end of October or early November.
- the employee explained that LRS currently has 5 recycling sites and he believed the intention of the Company was to deploy this technology at each of the sites (assuming the system is acceptable at the California Avenue site). He said based on the timing of equipment delivery, installation and proving out of the system that LRS would do two more sites in 2018 and two more in 2019. I asked him why two and he noted that with the 110 day acceptance period for each, the construction process and the equipment ordering by ECOS he thought it would be difficult to do more than two per year.
- I asked him about why 8 systems if LRS only had 5 sites. He said he assumed the Company would open more sites as their recycling footprint grew. The company is working with more municipalities in the Chicago area each year. As that grows the need for more transfer stations and recycling centers. He said that was really a corporate issue and I should speak to corporate LRS for more information.
- I noticed some brownish material on the floor in the site. That would appear to be the output of the system. I asked him about the plans for the output material. He said that he thought LRS is not involved in the sale of the output. Again he didn't know and referred me to LRS corporate.
- I asked him about what it was like to work with ECOS. He said he really didn't work directly with them. ECOS had contractors on the site installing and testing out the equipment. I was not surprised they used contractors since they only 4 to 5 employees.
The upshot was that the system appeared to be operating at the California Avenue site. The deployment of units over multiple years seemed surprising. My guess is it in part is also driven by ECOS lack of capital to finance the acquisition of multiple units at once. I am going to put a call into LRS corporate next week to see what else I can find out about their plans and deployment.
I have a Board meeting in Chicago that will wrap up tomorrow am. I was planning n heading over to the LRS site on south California to see if I can get some sort of update on what is going on. Will try and post later tomorrow
All they to do is make the closing price work. They need the last trade be at their targeted price. At .0003 the conversion price is $.00024. If they buy at the conversion price and sell at .0004 they make a very nice return on top of the interest on the note. The 20% conversion discount at these prices is worth an additional ~80m shares to a holder of a $100K toxic note.
I have seen toxic holders do this in other stocks. I am sure Fife and the others know how to play this game.
We would know the answer as to whether this is happening with the toxic debt if they ever issued anther 10K or 10Q
The only problem with that thesis is the LRS would exercise their warrant against ECOS and ECOS would deliver the shares from their authorized but unissued shares. They would not go through the exchange so they are not in trading volume.
My guess is that some of this the toxic holders playing with the price to make their conversion more attractive. Most of the toxic debt is exercisable based on the previous days market close (times a discount of 15-20%). If you drive down the price you get more shares on conversion of the toxic debt to shares. You then let it run up a bit and sell. My guess is that this has been part of the play in the share price.
I will make this easy I have practiced law for 36 years and done hundreds of securities offerings. In an exercise of a warrant the holder of the warrant delivers cash to the company and the company delivers shares. The shares delivered must come from shares authorized but not issued. The shares issued can be restricted or unrestricted if done with an appropriate securities registration.
Since Ecolocap doesn't have a shelf offering the shares will be restricted until Ecolocap can do a securities registration. They wont file a securities registration until they bring their SEC filings delinquent.
I was looking at the volume over the past week. I would surmise that the dumper of shares could be Tonaquint (John Fife) or another toxic holder. Fife provided Ecolocap with another $50k in toxic debt on top of what he already had.
The Barrington office also houses the Kwak's import export business. It imports products from Korea and sells them in the US market. Most of the employees are of Korean decent.
The desk in the office for ECOS has been there for years. When MS ran ECOS he did it from his house ad went to Barrington occasionally.
I surprised James or his father weren't there as you usually could find them in the office.
A company in Korea which has manufactured them and deployed the 400 installations in Korea. This company is unrelated to ECOS but comes through a connection the Kwak's have. They are purchasing them from the Korean company and then reselling them to the JV. Some of the basic steel will likely be sourced in the US. ECOS has an agreement to acquire them for the US market.
Might have been nice if they did an 8-K on the agreement with the Korean company. Likely is a material agreement
No I think the LSR relationship and deal has value to the Company. Can't see ECOS being more than a million dollar company.
They gave LSR the right to get 51% of the value from the Bio-Art products which is their only source of revenue.
If I were LSR I would quickly exercise my right to get 51% of the JV as it makes their investment very accretive.
No what you are referring to is the option ECOS granted LSR to buy 5 1/3 percent of COS in addition to the purchase rights they were grante din the LLC
Effectively LSR can buy 16% of ECOS through the exercise of the options and 51% of the JV under the JV agreement. Two different sets of purchase rights
I am not bashing I have been in ECOS since the days of the power units and chicken eaters and their other projects.
The reality is the JV agreement controls over the language in the 8-K and the JV agreement vests the rights of LSR into the JV not ECOS.
I would like ECOS to be a $1 stock but I lived through many of the dreams of MS
but the JV agreement clearly states ECOS Bio Art not ECOS
Actually their option and purchase rights are to acquire 51% of ECOS Bio Art not ECOS. They get 5% each time the JV buys a unit up to 8 units or 40%. They own 5% from their initial investment. So they only need to lay out cash for 6% to get to 51%. Thy also have the ability to match an 3rd party offer for ECOS Bio Art.
They separately have options to acquire stock in ECOS at a pre-agreed price. They don't have a purchase right to obtain control of ECOS.
if you are right LSR can't by more than 340m shares of ECOS before they are obligated to file a 13D with the SEC. There would be no exemption for their purchase to avoid filing.
Scott's relies on bulk NPK to make their products. N is ammonia (nitrogen) is phosphate and k is potash. The ecosystem fertilizer zero won't work in miracle grow blends. I know a little about because I spent ten years in the fertilizer ondistry and a Scott's was a large client. Scott's won't change their manufacturing process for this fertility zer. This fertilizer will be a niche product
Look at these sites
http://www.mass.gov/eea/docs/dep/recycle/reduce/06-thru-l/fdcomlst.pdf. There a five anaerobic digestor entities accepting waster in Massachusetts
Herehttps://www.environmental-expert.com/companies/keyword-small-anaerobic-digester-45203/business-type-manufacturer This is a link to other smaller companies that play in the anaerobic space
http://www.biofermenergy.com/references/ a company in Madison Wisconsin that already has a number of anaerobic digester installations.
http://realestate.berkeley.edu/cal-zero-waste a link to the University of California Berkeley site which discusses their zero waste program. Thy have deployed anaerobic digester equipment to a number of sites. I saw the program in Berkeley and it isn't that different than Ecos Bio-Art. They are also working in their communities to handle local (non-University) waste.
If you want more I have a lot more references to companies installing similar equipment across the country. I view Ecos Bio-Art as a niche play in the Chicago market.
This is not one of a kind. There are already in place similar technologies on the east coast and in California. The U of California system adopted an alternative technology that have been using in their schools system.
Correct. The $700k per machine is an illusory number as it doesn't include the cost to purchase (which goes to the Korean company) or install the equipment (the installation is all being done by 3rd party contractors).
The other point is that the $700k is the sales price to LRS. ECOS has to purchase the equipment from the Korean supplier. Their net is far below $700k.
The 400 working installs belong to the Korean company which is providing ECOS the products and technology. ECOS has no economic interest in those installs.
That was 2013/2014 news. They were trying to promote this product (produced by another Korean company) in the US. This dies a slow death a couple of years ago.
Actually not. They have the right to sell the product they purchase from the Korean manufacturer/licensor in the US. There are a number of other companies in the US selling similar technology and products.
Kenny
If LRS exercises their right to takeover ECOS-Bio Art they likely can do this while delinquent with the SEC. I am not sure I would ever advise a client to do that, but it wouldn't surprise me knowing the history of ECOS.
ECOS is not a South Korean company it is a good old American company run by a young man of South Korean descent. The company they license the Bio-Art technology from is South Korean.
For those that think there is proprietary technology at ECOS that will change the world read the article below. It appears a Boston firm already converting food waste to fertilizer and other products. They have 15 US locations set up including Disney. Their PE investors are substantial PE firms
There are also a number of other private equity backed firms trying to get into this same market.
Harvest Power Adds $20m to Series D for Expansion of Food Waste Business
DECEMBER 1, 2015 LOUISA BURWOOD-TAYLOR
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Organic food waste recycling and repurposing is still a relatively nascent industry in the US despite contributing to around 50 million tons of landfill a year, Christian Kasper, the newly-appointed CEO of Harvest Power, tells AgFunderNews.
“That’s a staggering amount,” he says pointing to estimates that just 5 percent of US organic waste is composted or used in anaerobic digestion compared with 75 percent in European countries such as Germany.
Anaerobic digesters take organic waste and convert it into energy — natural gas and electricity — and ‘digestate’, a byproduct used in fertilizer and other organic soil supplements.
Harvest Power, a Boston-headquartered organic food waste recycling and anaerobic digester construction company, is focused on changing those figures and has just raised $20 million in growth capital from existing investors to expand its business.
The funding round is an extension to the company’s $20 million Series D in October 2014 and involves the same investors: Chicago-based True North Venture Partners, San Francisco-based Industry Ventures and London-based Generational Investment Management.
The capital will be used to expand the company’s facilities and services — which include anaerobic digesters; green waste disposal, hauling and recycling; composting; and depackaging –, invest in the company’s energy development business, and continue the roll out the company’s growing line of consumer-facing fertilizer and soil supplement products.
The funding round takes Harvest Power’s total fundraising efforts to $244.5 million and also coincides with the appointment of Kasper as CEO. The company’s CFO since May 2014, Kasper has replaced Kathleen Ligocki.
“Organic food waste management is still a relatively early stage opportunity in the US, and one of the greatest challenges isn’t building the infrastructure, but getting a reliable stream of feedstock for the anaerobic digesters,” he said. “It’s a chicken and egg situation.”
One of the three anaerobic digesters designed and developed by Harvest Power is at Disney World in Florida, providing the resort with an efficient organic waste disposal system. For Harvest Power, there are several revenue streams from the anaerobic digestion process including the electricity produced and sold back to the district; the waste disposal fees from Disney; and the sale of its range of soil supplement and fertilizer products made using the digestate byproduct.
The company is currently selling 35 million bags a year of product through major retailers such as Home Depot and Lowes, according to Kasper.
Disney’s anaerobic digester use microbes to break down a mixture of 20 percent food waste, 20 percent fats, oils, and grease, and 60 percent treated sewage from Disney’s wastewater treatment plant nearby. Harvest Power is also active in the wastewater space and is currently working with a major municipality on building a treatment plant, according to Kasper.
So what does the future hold for the company’s investors? “Like all investors, ultimately they will look for an exit, but that’s not imminent,” said Kasper. “We have an opportunity to grow the business in scale and profitability, and take advantage of what we see as a significantly increasing number of communities looking to deal with the challenges that organic food waste presents. So it will be ‘heads down’ for the next few years as we solve these challenges.”
Sorry for the delayed response but was spending my weekend playing golf
I would surmise that there are three reasons they have not filed
1) They are low on cash and need to pay the accountants for the audit of 2016 q's and k and the first quarter 2017 K. This will need to be cleared for LRS can exercise their right to purchase the first 5% stake. I would expect this gets cleared by July
2) The valuation of the derivatives on the converts is not easy under current accounting rules. This is likely taking some time. Each convertible note is different so you need to value the embedded derivative note by note.
3) With the restricted shares and the O/S they are at the edge of their share authorization. I would not be surprised that they will call a shareholders meeting to increase the authorized shares. They need to be current with their filings to do that.
Kenny is right the technology is owned by a Korean company which has done all of the Korean installations. ECOS is just a US licensee for th Korean company. Ask Mr. Kwak he can confirm that for you.
No they would hold 13.8% of the shares based on the exercise of warrants to purchase shares that were issued to them. The warrants were exercisable not exercised. The 13G is confusing as you are required to disclose related persons (both the parent and the subsidiary) even though the warrant is held by one of them. There is only one warrant for 538m shares they hold.
If you look at the balance sheet it is fairly straightforward that the $19m loss is a non cash item. When they did the stock split and the conversion of notes into equity they increased the outstanding capital stock by $19m. This was offset by a $19m loss booked to accumulated deficit. This loss is just geography on the financials though it does result in some dilution to the public shareholders.
The real economic loss is about $1m in 2015. About 40% of this is accrued salaries payable to management which they can't pay since they have no cash. I would bet at some point the accrued salaries are converted into equity since they will not be able to be cash settled. This is likely another source of dilution. It would take a lot of shares to satisfy this liability.
I would view as another oversight. Likely no thought given to the form just filed it since it was due by 3/31
Actually not even an NT 10-Q but rather an NT 10-K for the year ended 12/31/16. I do like that even this form is not correct. Mr Siegel certified on the filing that all SEC reports for the 12 months prior to 12/31/16 have been filed. However, none of the reports since 12/14 have been filed. Therefore, a false statement. You would think he could get that right.
You will see a slow parade of more old SEC reports until they catch up. they now need to do
1) 10-Q's for the first 3 quarters of 2015;
2) a 10-K for the year ended 12/31/2015;
3) 10-Q's for the first 3 quarters of 2016;
4) a 10-K for the year ended 12/31/2016; and
5) a 10-Q for the first quarter of 2017
You have to do this sequentially to bring yourself back into SEC compliance. I wouldn't be surprised to see the 2015 10-Q's yet this month (one after another separated by a day or so).
The hardest part of these filings is to go back and measure the derivative liabilities for all of the convertible (toxic) debt they have issued and then recompute the potential share issuance on conversion at each of these dates. It is a lot more shares that could be issued.
Once they get current wouldn't be surprised to see another reverse stock split
Kenny
Have we all become such doubting Thomases. He didn't say a unit of what. Could be a unit of almost anything. Also didn't really say who would be delivering the unit of whatever it is. I am guessing that the source of this is the MI-6 wiretaps of Trump Tower
by the way it is an agreement to issue over 200m more shares at $.0003 and over 150m shares at $.0004
Got to love that deal if you are Fife. ECOS gets $50k in cash and agrees to deliver $62.5k worth of shares. Nice dilution of the existing shareholders again. I assume they are using this cash to pay the accountants and lawyers to get the SEC filings up to date so it is value just pissed away. Shares had to be restricted since they can't sell registered shares when they are delinquent in their filings.
One wonders if this could be driven by Tonaquint and the other convertible note holders converting their notes and selling the shares. We will only know if ECOS actually files updated financials.
In 2014, Tonaquint had $270k of convertible notes. The conversion price is at a discount to the market price at the time of conversion. It would take a long time at the current stock price to liquidate that much convertible debt. There a few other companies that also had convertible debt at that time.
If this is in any way true there could be an unlimited supply of shares to find homes for.