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I was just wondering about this Detriot PR as well, Surfguy. It's frustrating, but unfortunately has been more the norm than the exception for ECOS to miss dates. I multiply all ECOS estimates by 3 in my head, i.e. 45 days, means 135 days ECOS time. But also unfortunately, sometimes, there is no follow-up at all. Deals that haven;t materialized in Chile, India (nano battery w/Spicejet execs), etc., continue to shake my confidence. I hope we here follow-up on PR like Ukraine, even if things don't work out.
Thanks. Like many, I have been frustrated as well in the waiting. When I bought over 3 years ago, I thought ECOS would either be ccompletely out of steam and business by now, or off an running, building market share. It's still somewhere inbetween. I usually take refuge from frustration by knowing that no well run ship leaks information before it is public, as there is really no upside in leaks for the company, and a huge downside. So, we speculate, knowing all along that speculation is why we bought into ECOS to start with. Cheers - HB
We know just a few things in trying to sort out and explain recent activity. Some thoughts for those in need of a sleep aid ...
One data point is that as a BOD of Capex Investments, Claude Pellerin provided or facilitated capital investments to ECOS over time, usually as convertible debt. We saw that Capex converted ECOS debt to 25M shares. I don't have any idea how many shares of the 25M that Capex stil holds or may have sold, but I presume Capex to still be a high volume shareholder of ECOS, and therefor continues to want to do whatever possible to raise the ECOS SP. Pellerin resigning from ECOS last summer helps clear any implied conflict of interest.
Secondly, ECOS has apparently had trouble in the past couple of years finding a) a willing buyer, b) who ALSO has the initial capital to invest in NPU units and drive additive sales. Several LOIs have emerged, and successful testing but no revenue.
Third data point is that ECOS doesn't yet have a producer looking to sell to the open market. I believe that Monar intends to be that producer, at least for Canada. Note that the Dec. 3 PR from Monar states that the agreement with ECOS is "to setup a production center in Canada for M-Fuel."
I suspect that Pellerin was brought in for Capex financing for one (or I hope) more NPUs for Monar (MNAI), even if it is convertible debt again, but this time with MNAI. Pellerin / Capex, wins on both sides of the deal with ECOS, as financing for MNAI to buy ECOS assets will help ECOS stock short term, and MNAI longer term after they can sell M-Fuel. Plus, Capex gets another convertible debt stream, and they seem to be working out well for them. Hopefully, ECOS stock price improves after selling NPU(s) to MNAI .. and Pellerin and Capex win again. The deal has an upside for many, and hopefully us small investors as well.
I also believe that I read something about EXIM working capital financing being based on a year or more of revenue, so maybe the Monar set up is another path to revenue and EXIM finance for ECOS. Montreal seems like a good home base for Monar, as they have access to shipping for maritime application of M-Fuel; added bonus of shipping direct of NPU (plural, I hope) from Korea.
Being optimistic and long, that's the best story I could come up with to make heads or tails of the recent activity ... and I'm stickin' to it )
If I don't start making shorter posts, you guys are going to have to kick me off the board. I re-read this, and am starting to even bore myself!
Not too worried about today's events and continue to see mini-crashes as buying ops when I am able. When I saw the news yesterday, my first reaction is that it wasn't very impactful either way. I also researched the company (Monar) right away, and thought, hmmmmm .. I have a company like that myself! (Basically going nowhere, I am only staff, etc.) I saw the Chinese furniture as well. Then, I do something that many of you may also do, which is connect the dots. I researched Clarke for an ECOS connection, and cannot recall seeing in past two days posts that Clarke used to be on the BOD of Ecolocap, in 2009, I believe. None of this worried me, because the news was a non-event. Not at all unusual for CEOs to sit on each other BOD if they have long standing relationships. Now, if Monar had placed a big order, I'd have concern over my long position, as I would have seen this this as a "pump". Today's mini-crash looks like market manipulators (MMs) to me. Easy to do with such a penny stock, and few buyers. The "dump" of around a million shares in the morning is always going to trigger other trades and speculation of a scam, so ... like many of you, I rode it out. I can't follow MMs, as by the time I figure them out, they have made their percentage. The very late (4:03 ET according to e-trade) 5M trade was a pretty good indicator.
My only real concern, is the timing, as in end of the calendar year. Many of us remember the we were floating between 0.015 and 0.01 this time last year, and saw some lower down SP months with no real news in 1Q ’12. So, here is a theory about today. Our toxic debtors friends holding millions of shares and also a convertible note that comes into play can create a mini-crash, and then convert at 61% of market at lows like they likely did last year. If that is the case, we can only ride it out and hope for good news, or buy at these lows, knowing that MM’s holding convertible debt are selling to drive down the SP .. or, hit the silks if you haven’t the stomach for it. It is a thrill ride, for sure. Best wishes to all.
KT: I just tried Ameritrade, and the DTC chill is still on for ECOS. I have been buying through e-Trade. HB
A quick revision to my logic in previous note. Asher made the loans sometime in 2012. So, the due date for their conversion of the $42K outstanding might be anywhere from January 1, 2013 to June 30, 2013. So, the earliest date of conversion woud be 1/1. Again, they will benefit from a low conversion price. I think our current SP issue are more the effect of the roughly 72M already converted, and whether those holders hold, or sell .. and when. Hoping the new and future 10Q avoids convertibles.
Flawless; I believe the answer is anytime before June 30, 2013. However, I think this only applies to Ahser's potential of 7M shares (today)of the roughly 80M in covertible we bounce around. The 10Q only says the loans were made before June 30, 2012. So I believe those can convert anytime before June 2013, as Asher can convert during a one year period.
More info ...
Per the Sept. 10Q, "In 2012, the Company received loans from Asher Enterprises Inc. The amount owed to Asher Enterprises Inc. at June 30, 2012, is ... in a balance of $42,252. The loans are convertible, over a one year period, into restricted common shares at a fixed price. The price of the shares is equal to 61% of the market price of the shares at the date of the execution of the conversion. This loan bears interest at 8% per annum and is payable on demand."
That balance would amount to roughly 7 million shares if converted at 61% 0.01. I am not sure anyone short of ECOS and Asher know what the trade restrictions are for those shares.
Again, I am not 100% certain, but my review of the 10Q shows that as the only convertible debt outstanding. The next 10Q is due out tomorrow, but the company filed that they will be late with that release.
If I am not mistaken, the 80 million shares you are thinking of are those already converted this calendar year, and that they are unrestricted. On January 1, 2012, Capex convert loans into 25,582,129, and DT Crystal converted loans into 414,483 common shares. During 2012, Asher converted loans 45,679,017 common shares. I believe we got to 80M, by adding the additional Asher convertible loans mentioned above (7 million today).
Since many were converted sub 0.005, the converted shares are above water today. If I am correct, then it is all a big question mark as to when those unrestricted shares might enter the market. Some may have already been sold in some of the larger block trades we have seen in the past few months. But, it is a question of whether those holders of those converted shares take the money and run now while they are above water, or holdout for higher prices. Where toxicity comes into play today, is with Asher. Asher can dump millions of held shares, in order to drive down the SP, make a profit on converted shares, and then convert their remaining debt of $42K for the highest number of shares possible. In other words, Asher, being the last company on the 10Q with convertible debt, becomes a powerful MM.
The good from the last 10Q is that Asher was the last holder of toxic CD on the last 10Q. Hoping the same holds true for the next 10Q.
Anyone else, please add as my analyses is always suspect, even in my own mind! Thanks - HB
Great PR! For fun, hit the Cramer electronic soundboard at this address: http://sys17.cnbc.com/id/18724672/
I have been hitting "triple buy" and "all aboard" buttons this afternoon for ECOS. I am saving "HALLELUJAH" for when we get our first revenue, or the SP clears 0.10!
MD3 - I remember that "I knew/know Michael Siegel" poster as well. Interesting tactic of course, as the name like Michael Siegel is of course, not completely unique. All a shorter has to do is Google the name and come up with some outlandish story associated with "Michael Siegel" somewhere as "proof" of their claim. I believe that one poster said he went to HS with MS in the 80's, putting MS in his 40's today - all filings indicate that our MS is 60 or thereabouts. All short postings have nearly the same tone of "It's all true! I am just a good person trying to help out you poor people from getting scammed!" There is usually some semblance of truth in their claim, i.e. if you call EXIM, of course they will say they haven't heard of ECOS. Now, if I call ECOS or any bank and ask if they have heard of Apple (for example), they may say "yes". If I ask if Apple has applied for a loan with their bank, or if they are in funding negotiations with Apple, they are of course, going to tell me that is confidential. For all the bank knows, I may be an posing as an investor on the other line, and may be an Apple competitor, or even an agent of the SEC if the company is publically traded. As I have mentioned, I believe ECOS is for real, but just having trouble getting off the ground as almost every viable start up experiences.
Kuddos again to the board for responses to uhmmm. Those of us who are long and diligently following ECOS have known that the stock hasn't received any "pump" since announcing they are in discussions with EXIM. As I previously posted, and as reflected in the SP, "discussions" can mean anything. Maybe ECOS has had one or two conversations with EXIM, or maybe they are close to being approved. No one knows, or pretends to know. I thought the reply pointing out what uhmmm calls "due diligence" was arrogant, considering the experience level displayed by this board’s regular posters. Anyone close to banking might even find uhmmm’s posting humorous. Since uhmmm likes to give lessons, here is one in return for uhmmm: any savvy investor knows that true due diligence means not only knowing how to look for information, but also what information you can get and is publically available. Calling a bank is not due diligence, as the information you seek from the bank is not publically available to anyone who has the genius to look up the bank’s number. No bank I am aware of, discusses or shares who they are in negotiations with for lending. Anyone who doesn’t believe this - try calling your local bank, and asking for information on their client list, much less their prospect list, and see what kind of response you get. Now, take that result, and factor it by the fact that ECOS is publically traded. Now, factor that again by the fact that EXIM is a government organization. Even if the person uhmmm spoke to at EXIM (which is a huge organization) had access to a highly confidential prospect list, or happen to have heard of ECOS/Ecolocap, do you think they'd be able to tell you without risking losing their job or worse? As Flawless might say, post your short position elsewhere. Then again, posts like uhmmm might help me to increase my long position at lower levels ? HB
karltimber: I'll second what MD3 replied. I have been using e-Trade, and not having any issues with buying ECOS. I switched from Ameritrade, where I was having issues and where the DTC chill is still on. HB
karltimber: I was able to buy last week with e-trade. I also have an Ameritrade account, and connot yet buy with that account due to the chill. HB
Part of why I am optimistic about financing through EX-IM Bank is that as stated, they seem to be perfect for ECOS. It can solve our SP dilution issue caused by convertible debt, but also seems to be a good fit to the EX-IM profile for bank customers.
I thought this board might be interested in the following, that I clipped from the EX-IM Q&A page, labeled as "The Facts About Ex-Im Bank" available at this link: http://www.exim.gov/news/20120814thefacts.cfm
As a correction to my previous assumption about EX-Im financing Solyndra, that apparently was an incorrect assumption on my part and is debunked on this page of the site.
I am optimistic that ECOS can answer the two fundamental questions the bank poses (bolded below) for companies that approach them for financing.
From the Ex-IM site:
"Question: When Ex-Im Bank provides export financing for some companies and not others is it picking "winners" and losers?
Answer: No. Far from picking winners and losers, Ex-Im Bank loan guarantees simply ensure that the United States has a chance to have winners in the international marketplace.
The Bank is a demand-driven organization. U.S. exporters choose whether to request export financing from the Bank, not the other way around.
When a customer approaches us, we ask just two fundamental questions:
- One, will the loan be repaid? and
- Two, is our financing essential to make this sale happen?
If the answer is yes, the financing is approved.
There are no "losers" in an Ex-Im Bank transaction, and Ex-Im Bank does not favor or prioritize any parties."
Super Flawless - I am really keeping my fingers crossed that discussions with EXIM result in project funding.
Reminds me of an old film on the Mercury project called The Right Stuff: "You boys know what makes this bird go up? FUNDING makes this bird go up. No bucks, no Buck Rogers."
Flawless - thanks for inquiring. I have as well. I hate acronyms, and also hate to assume. If this is THE EX-IM Bank, even being in discussions with them is a really good sign in my book.
SP dipped today, but the good news is that volume was relatively low. Seems none of the big owners were selling, so that is good. I am admittedly luke warm on the PR, as it was again mostly all "forward looking statements" and little about timing of the proposals, etc. Of course, I am hoping we have more tangible news, soon. I liked the financing mentioned today, as it makes really good sense with ECOS’ export strategy, as well as a way to potentially avoid the convertible debt that I harp on as diluting the SP. But, I was hoping for more of a direct line to revenue in this PR. ECOS has a lot of irons in the fire, but needs to pull one out and make their mark.
Surfguy/others: I agree. IMO, the best news in this PR MAY be "... and is in discussions with the EXIM Bank to finance the Ukrainian projects."
If that reference is indeed for the Export-Import Bank of the United States, ECOS is (IMO) going to the precisely the right place for financing. For those not aware, EX-IM Bank (http://www.exim.gov/) is a government financing bank that offers billions to large and small companies for US based companies with offshore projects.
Here is their posted mission statement: The Export-Import Bank of the United States (Ex-Im Bank) is the official export credit agency of the United States. Ex-Im Bank's mission is to assist in financing the export of U.S. goods and services to international markets. Ex-Im Bank enables U.S. companies — large and small — to turn export opportunities into real sales that help to maintain and create U.S. jobs and contribute to a stronger national economy. Ex-Im Bank does not compete with private sector lenders but provides export financing products that fill gaps in trade financing. We assume credit and country risks that the private sector is unable or unwilling to accept. We also help to level the playing field for U.S. exporters by matching the financing that other governments provide to their exporters.
On the very positive side, if ECOS secures EX-IM Bank financing, we are golden, IMO. EX-IM Bank is going to perform its due diligence on the viability of projects, and if they back ECOS ... I am having a garage sale to buy more shares True, EX-IM has backed companies like Solyndra, for all the good it did those investors in the very long term, but still ... a super option for us to see the ECOS launch we hope for. EX-IM Bank is literally just north of the White House in DC, and a couple of miles from the SEC HQ in DC. IMO, ECOS would be foolish to mention EXIM Bank by name in a PR if they wanted to avoid getting the attention of the SEC for any reason.
That said, and always the devil's advocate, these are only labeled "discussions" at this point, and could be meaningless.
Also, can anyone close to ECOS or MS confirm that this is indeed The Export-Import Bank of the United States they are referring to? That is an easy answer, and should get a response. Being ever cautious, I'd like to know. I don't imagine ECOS would be bold enough to throw around the EXIM Bank in a 8-K filed with the SEC, and not have this be the EX-IM Bank investors will assume that it is. Please post if you have heard for certain that this is the case, as their are other EXIM Banks in China, Malaysia, India ....
we should get a quick aconfirmation from ECOS on this one.
Right on, MD3 - I share the same sentiments. Tangible results will allow for ECOS to sell shares directly to the market when absolutely necessary to raise expense money, and will hopefully result in more capital raised for ECOS for company reserve shares than they realize from loans and debt conversion. I see this topic as “throwing the dead fish on the table.” I also know that there are tradeoffs that convertible/toxic debt provides. Number one may be keeping the company from becoming insolvent in the interim period until it reaches a revenue model. ECOS has not had to carry a ton of debt, or had notes coming due they may not be able to pay, which is a good trade off. The unfortunate reality is that the credit market is so tight right now, convertible debt is the only game in town for many penny stocks. Both penny stock scams and credible innovative start-up companies are using the convertible debt model out of necessity, and convertible debtors make high returns on both legitimate and scam penny stocks. Commercial banks are just not lending in the market, period, so I think raising capital only leaves two groups 1) us traditional stock buyers who are speculators, and 2) venture capital money. VC'er are looking for hedged bets, which is what convertible debt is in my opinion. Many VC’er have become part of groups that provide convertible debt, or fund those endeavors. A convertible debtor who converts at lows are essentially doing the same thing we investors hope to do - buy low, sell high. But, when an investor or convertible debtor also sits on the BOD, there can become an inference of collusion, which is a bad thing. Claude Pellerin's resignation was a good move, as it breaks a relationship that begs for questions. Other informal relationships exist, but my take is that those are what they are, and that the only real answer is to stay away from convertible debt and start to leverage tangible results.
Re: the recent 8K.
I agree that this resignation is a positive thing.
Following is posted public information. I almost hate to make this posting, but do so out of respect for the many intelligent and savvy investors on this board. Some of you may already have known this information. Pls form your own opinion. (I have bolded the notables.)
Here is Claude Pellerin's profile, clipped from Marketwatch:
Mr. Claude Pellerin is Secretary & Director at EcoloCap Solutions, Inc., Secretary at Gourmet Flash, Inc., Secretary at Karian Foods, Inc., President, Secretary, Treasurer & Director at Capex Investments (Canada) Ltd., and Attorney & Partner at Pellerin Attorneys. He is on the Board of Directors at EcoloCap Solutions, Inc. and Capex Investments (Canada) Ltd.
This is note 6 from the most recent 10K/A:
NOTE 6 – NOTE PAYABLE
On January 1, 2012, Capex Investments Limited elected to convert loans of $148,977 into 25,582,129 common shares of the Company. The price of the shares of the Company was computed to equal $0.0058 per common shares of the Company and the market price was equal to 0.0076 per common shares of the Company which results in an interest expense of $45,448. The amount owed to Capex Investments Limited at June 30, 2012 is $0.
As noted by Kennypoo, Mr. Pellerin appears to be the only ECOS insider trading in 2011. Most notable are the late 2011 sell trades made, prior to Capex conversion.
As previously stated, pls draw your own conclusions from those data points and timing of events.
If these connections and timings concern you as investor, I share your concern. HOWEVER, I can also share as a long ECOS investor, that my research on convertible loans over the past few years has shown that these types of connections at the Board level to convertible debt are not that uncommon. Since funding for start-ups has dried up in the past few years, many good start-ups / penny stocks have had to leverage convertible debt to have liquidity and financial viability. As a prominent debtor, Asher debtor alone has over 800 companies like ECOS. You can also see why I and others here are so adamantly against convertible debt. That is part of the reason that we need ECOS leadership to get past reliance on convertible debt, and move to a revenue model ASAP. I am glad to see relatively little convertible debt in the last 10K, but I really don't want to see any more.
Unfortunately, we won't be able to see when Mr. Pellerin trades shares held going forward, as he is no longer an insider. However, we can see if ECOS continues to leverage convertible debt with Capex and any other debtors, and should make our awareness and concern known to MS and other ECOS executives and BOD.
No content here, but wanted to say thank you to Freakshow, Flawless and FN22 on your info and explaination of the DTC issue and recommendations. If I was new to ECOS (I have been long for almost 3 years) and just listened to Ameritrade reps, I'd have been scared away from buying the stock. I believe we will have more buyers once ECOS gets the DTC situation resolved.
Flawless or anyone who has bought in the past few days. Can you recommend a discount brokerage firm that doesn't restrict buying long on ECOS? Hate to be a pain, and no cause for any alarm, but TD Ameritrade is giving me the run around. They can't really explain why I am having an issue and I need to open a new account.
Thanks; looks like I am going to have to open an account elsewhere. I am ticked at Ameritrade. The rep can't provide a reason, not a timeframe for remediation. I may try e-trade. If I can ask, who do you use, and have you ever had any trouble buying with that Brokerage?
Right on Flawless - Anyone else have trouble buying the past couple of days? FYI, I tried to BUY more yesterday and this AM, and am getting blocked by Ameritrade as they are saying there is a "DTC Chill" on the stock. Previously I have had no problems buying ECOS with Ameritrade.
Thanks Flawless. I am trying to connect the dots and just don't have all the data points yet. What you have said makes sense. It also makes sense that ECOS knows what you and others stated some time ago on the board - that the shortest path to revenue lies in the additive sales for EcoFuel. The quandary, is how to get to additive sales when world economies and budgets are tight and few buyers want to take the risk of writing a check for over half a million dollars for a unit that they have heard will save them money. I believe you have provided some of these calcs in the past, so this may be a repeat for some. But, if the published data is accurate, an NPU-60 at 18,000 gallon per 24 hours needs 2% additive per gallon produced, or 360 gallons per day purchased from ECOS. If the unit runs 330 days a year (90% up time), that is 118,800 gallons of additive per year, per NPU unit. Per the July 24 PR, "Each NPU-60, with a production capacity of 60 metric tons of M-Fuel/day (18,000 gallons), sells for $850,000 and each of these NPUs consume $4,500 a day of additive when in full production." we can assume an additive cost of around $12.50 per gallon of additive. At 330 full production days (again a guess) that is $1.5M in annual additive sales per unit. I might be a little fuzzy on exact numbers and am making assumptions, but I assume that the increased volume in gallons is about 30%, so the NPU-60 can turn about 14,000 gallons of standard diesel fuel or HFO into 18,000 gallons of EcoFuel. At even $6 per gallon (cheap in most countries) that equals $24,000 for the unit owner in 24 hours of operation, with $4,500 in additive cost, and $0 cost for the water. Net, 19,500 SAVINGS to the owner, gross $4,500 to ECOS. With those kinds of amazing numbers, a $850,000 unit is cheap, no matter who buys it or owns it. A buyer could conceivably pay off the machine in a couple of months of savings. Likewise, if the unit doesn't perform as promised, they may be stuck with a $850K mistake. For those reasons, ECOS has good incentive to finance the machine for the buyer. This is why (and I am really guessing here) I think GFE was able to buy with an irrevocable letter of credit. The IROC allows ECOS to get better access to traditional (I hope) funding, in order to build ordered units. This has been a problem until now, as ECOS doesn't have cash on hand to build units, and has been going to convertible debt which most of us investors hate. Also, keep in mind that the unit is sold on the fact that it produces cost savings to customers, so the model can be paid off over time without an upfront capital investment from the buyer. So, for me, it is essentially owner financing of the upfront costs, although that may be a misunderstood lable as well. If the machines deliver as promised, ECOS makes money on additive, buyers make money on EcoFuel, and (I presume) the buyer pays off the letter of credit owed after installation and realized benefit/savings. In turn, ECOS pays off debt incurred to build a given machine, or possibly pays on the debt and uses the funds for costs to build the next machine(s). But, I am guessing again. The proof of the model will come in the next few months in installed units and more orders - I hope!
You are right - this isn't really a per gallon fee structure, but akin in my mind to something of a revenue model that isn't fed until gallons of EcoFuel are produced by paced units.
As an old boss of mine used say, "nothing happens until we sell something." I think this applies to ECOS, and if it means they essentially have found a way to curb upfront sales costs in order to get contracts signed and producing units in place, it will get them to market sooner by mitigating buyer's financial risks and get additive moving out the door. Cheers - HB
My best guess is that you are likely heading in the right direction for an answer to the FEI web changes. I believe the changes are a good solution to solving one of their problems. One big issue that ECOS and FEI face is barriers to entry. Presuming they (ECOS/FEI) can prove cost savings with EcoFuel installations, they still need to overcome the cost-outlay barrier early adopters / pioneers will face in paying upfront fees for the NPUs. It seems a no-brainer for us long investors to make that decision to go EcoFuel, but we aren't the ones that need to figure out how we are going to fund a big check for new NPU units. This is a risk / reward decion for a buyer. If a buyer made a good decision and EcoFuel is successful, it makes me the buyer hero. If the buyer loses money on the decision, they lose captial and maybe their job. If a buyer keeps their current solution and dosen't make the decision, it is usually safer. However, places like the Ukraine seem to be on burning platfors ... meaning, they have to act now, or they will have no safe place to jump due to soaring fuel costs.
I believe what FEI/ECOS are deploying is essentially what I call a "utility type" model, akin to software application "SaaS" (software as a service) models. In those types of go-to-market strategies, upfront cost are deferred and converted to per gallon fees. It may sound convoluted, but it works for software companies, as well as utilities. Consider that if we had to pay for a portion of the entire sewer pipe, water pipe, and water treatment plant infrastructure costs before having water connected to a new home, we'd probably look at alternatives and all have on property wells and sistern systems. I have a personal example; leased solar. Even with tax breaks, I was looking at a $20K investment to have my home solar powered. My ROI was about 10 years, so I couldn't afford to go solar, even though we wanted to go that route. A leasing company offered me a 20 year solar lease at slightly less than I was paying monthly to the electric company, for a system that provides around 100% of my power needs. There were no upfront costs. I jumped on it, and now have solar power. I agree that the go-to-market strategy appears to be strong for ECOS and FEI. Once they have reached a threshold of successful deployments, they can always change the strategy.
Regarding the rebrand to EcoFuel, I like it and think it is a great move. They don't really have a brand established with M-Fuel yet, so changing the brand now makes sense to me. EcoFuel is much catchier in my book, and ties the product name to FEI and ECOS. Plus, it sounds greener, and gets more attention. I believe both of these things (brand and strategy) are indicators that we have good people at the helm.
For those who haven't seen it and are interested, below is the relative section of the 9/11/2012 10Q/A (amended), on ECOS current dirivative liabilities. I am admittedly not very good at reading these, but it looks like ECOS has $145K potential covertible debt as of mid year. These being "drawdown" notes, I presume ECOS can use as needed. If those holding the notes were to covert full principle + interest amounts at a SP of 0.01, they convert to about 25 million shares of stock for 58% of SP or 0.0058 at some point in the future.
This is where I need help on this issue and get confused. If ECOS can bring some product to market and realize revenue, I venture that they could issue more company shares at market price as opposed to utilizing portions of the $145K in available credit. But, even if they do not realize revene, I don't understand why they utilize convertible credit when they have to discount SP at 58%. If anyone can answer, this, please do. Why use covertible credit for capital at a deep discount, as opposed to issuing and selling shares at full market price to raise capital? Is it because they are hedging against the SP going so low, they cannot raise needed capital to stay afloat?
This is starting to feel like the stuff that made up the sub-prime mortgage / asset backed collateralized debt obligation brew-haha
From page 11 of the 9/11 10Q/A:
NOTE 8 – DERIVATIVE LIABILITIES
On December 8, 2011, the Company issued a drawdown convertible promissory note (“the drawdown note”) to an investor, in the principal amount of $32,500, at an interest rate of eight percent (8%) per annum. The drawdown note can be prepaid upon five days notice, is payable nine months following its issuance on September 5, 2012, and all or a portion of the principal and interest is convertible upon demand into fully paid and non-assessable shares of the Company’s common stock at 58% of the average of the lowest three trading prices of the Company’s common stock during the ten trading day period ending on the latest complete trading day period to the conversion date. The Company requested $32,500 and received proceeds in the amount of $25,000 from the drawdown note on December 8, 2011. The conversion option was recorded as a discount on notes payable of $20,500 was valued using the Black- Scholes Method using a risk free rate of 2.00%, volatility rate of 230.36%, and a forfeiture rate of 0%.and expensed over the nine months life of the of the drawdown note. Interest expense of $33,396 was recorded in 2012 related to this conversion option. Additional interest expense of $604 was accrued as of June 30, 2012 related to the eight percent (8%) per annum payable under the drawdown note.
From April 2 to May 29, 2012, the Company issued a drawdown convertible promissory notes (“the drawdown notes”) to an investor, in the aggregate amount of $112,500, at an interest rate of eight percent (8%) per annum. The drawdown notes can be prepaid upon five days notice, is payable nine months following its issuance, and all or a portion of the principal and interest is convertible upon demand into fully paid and non-assessable shares of the Company’s common stock at 58% of the average of the lowest three trading prices of the Company’s common stock during the ten trading day period ending on the latest complete trading day period to the conversion date. The conversion options were recorded as a discount on notes payable of $112,500 were valued using the Black- Scholes Method using a risk free rate of 2.00%, volatility rate of 230.36%, and a forfeiture rate of 0%.and expensed over the nine months life of the of the drawdown notes. Interest expense of $140,755 was recorded in 2012 related to this conversion options. Additional interest expense of $1,589 was accrued as of June 30, 2012 related to the eight percent (8%) per annum payable under the drawdown note.
As some of you have also speculated, the big volume session Friday may have been due to the result of toxic debters cashing in on previously converted shares. See recent article: ECOS | EcoloCap Solutions Opens Doors For Asher Enterprises
that supports that sentiment.
http://www.aimhighprofits.com/ecos-ecolocap-solutions-opens-doors-for-asher-enterprises-18683
The good news is that there were enough buyers to bring the SP back to opening levels.
IMO, as long as any part of those 83.372 million in shares converted at 0.0058 or less are in the market, the stock price is going to continue to be at risk. That is, of course, unless something tangible like a contract and revenue are realized to change the staus quo.
As a shareholder, I intend to urge MS to not take on any more covertible debt, and to consider other alternatives to meet expenses. If ECOS and MS are truly interested in rewarding their long-term investors, they need to be true to that word and avoid any future converible debt. For a hypothetical perspective, please do your own math on the revenue that ECOS would have raised by issuing and selling 83,372 million shares at recent SP, vs. the $291,977 received in capital in the form of convertible loans for that same 83.372M in shares. My calc is that even at an average selling SP of 0.01, those shares would have raised $833,722 for ECOS, vs. the $291,977 raised. The math tells me that ECOS could have $541K+ more in capital today, than they do as a result of accepting convertible loans. Instead, that $500K+ is Asher's and Capex's.
My fear is that as a result of conversion and probable recent profits made by the likes of Asher and Capex, those toxic debters now have non-speculative cash (via conversion and stock sale profits) to be offered for convertible loan back to ECOS. If nothing happens this Fall, and ECOS takes on more covertible debt, I will lose confidence in ECOS. I may have to change my strategy to start follow Asher and Capex, and buy in on conversions, sell on LOIs. I'd hate to have to do that, but like any investor, I am in this for a profit, not my hopes of viable green solutions (although, I want both).
Folks, keep me honest on this opinion. If you disagree, please let me and others know why. If you agree, you may want to also consider letting MS know that we are aware of the hazzards of convertible loans and request that as investors we urge ECOS to not take on any additional covertible debt.
Correction to typo in this post. Reference to shares outstanding was meant to be a range of 300M (my "M" = million) to 400M shares outstanding, not 3M to 4M as erroneously stated. The error was a result of my pulling an all-nighter for work. My apology to all, and thanks to Imperial for making me look twice at that posted number.
Hi Omapere: Good to know that folk outside the US are also on the board. Thanks! Re your comment, I wish the same! But, he's the kind of millionaire who only invests in endeavors he can directly control, so he doesn't invest in speculative stocks. He won't even take his own company public for same reasons - loss of direct control.
But, on the lighter side, I have a recurring dream that the Keebler elves slide ECOS information across a millionaire pennny stock investor's desk, or under Warren Buffet's pillow at night! One has Jim Cramer featuring ECOS on CNBC's Mad Money!! Part of the fun of being a penny stock investor is perchance, to dream. Now, if MS and the ECOS team can figure out if they are to be, or not to be... we'll all sleep better and I'll be quoting a financial analyst, instead of Shakespere! Cheers, from Colorado, US
Imperial:
I am using the 309.5M I see as outstanding shares as a minimum number, as it is the only number I have, today. But, I also believe that before we start seeing real revenenue in ECOS financials, that number is likely to be higher and could be more like like 4 million outstanding. But, I also assume that ECOS managment will want to retain shares for equity positions, etc. For all I know, a day may come when ECOS buys back shares and reduces the number outstanding in the future; I can only dream!
Also, at this point I am not trying to calculate diluted EPS or anything fancy, but more or less ballparking. I admitedly probably know just enough about financial analyses to be dangerous . However, I do like to see a small negative EPS number like ECOS's(-0.04 EPS) in a company that is in the development stage. To me, it means that realistic revenue numbers will create a quicker path to positive EPS as ECOS is IMO not creating a financial hole they cannot dig out of. I compare ECOS speculation to other favorite companies of mine that I am not invested in, like Tesla electric cars. Tesla has taken their product to market, but reaching profitability seems to be a long journey as the cost of going to market was enourmous.
I think the biggest negative factor in ESOS SP is investor confidence. As an investor, I am not at all interested in LOI's, unless the LOI leads to real contracts. ECOS needs a contract from the Ukraine, or their credibility around LOI's is going to continue to wane.
Hello Surfguy: Your statement regarding stock price is very true. Thanks! I wanted to add some thoughts around what I see as the value of covertibles relative to carried debt. We often don't think in terms of PE ratio (as PE is zero) when a company has no revenue. At a -0.04 EPS today due to little expense and debt expense on the books, ECOS is in precarious financial shape, but less than others IMO. When the revenue start to come in, it won't take much to make EPS positive for ECOS even at 3M - 4M shares outstanding. Once EPS is positive, in a vertical market were that is rarely the case, ECOS could really shine to investors. What made me think of this, was that as I have mentioned, I found ECOS in '09 in battery technology searches. Another battery company (A123) that went public in '09 has been spending millions in trying to get their battery technology to market at a profit. They have less shares outstanding at 170M, but an EPS of -2.60, and a market cap of 43.7M, compared to ECOS at -0.04 and 6.5M. I decided that A123 was not where I wanted to put my speculative money, and instead went with ECOS. A123 will need 2.6 times 170M or roughly $450 million in revenue before they can erase the negative EPS. ECOS won't even take a $1M by my calculations. Both ECOS and A123 SPs are getting hammered, but they are also both subject to most battery and green energy market trends. If ECOS can bring home revenue, I believe they (IMHO) will buck the trend, dramatcally.
Also, I don't mind that ECOS has the hands in several markets M-Fuel, betteries, bio-diesel, etc., as they have hedges. To 'make it real' and personal, I have only one 100 millionaire friend. When he was laid off 6 years ago, he started 4 companies, knowing three would likely fail, as he didn't want to put all the eggs in one basket. Turned out that 3 of 4 were wildly sucessful, and he made millions. He is the only of my friends that took that approach, and the only one who is in the stratosphere. I am long on ECOS because I believe they have also hedged their bets accordingly. They will take the shortest path to revenue, and that is M-Feul today ... maybe batteries in the future.
Cupcrazy - thanks for joining us! IMO - I share your concern about convertible debt. However, to light a candle on that issue, I believe that most holders of debt coverted shares are in this for short term gains, and are absorbed by and sell into any significant spike in price. That keeps the SP runs in check, but it also makes those sold shares available to longer term buyers/investors, who should be holding out for higher prices. I hope that many of the shares that sold this week on the spike, are now in the hands of longer term investors. In regards to a possible reverse split, I can't see a sound reason for doing so. I am not worried about a reverse, as I don't think ECOS leadership would go there without a really good reason for doing so. In the case of reverse splits, good reasons hardly ever exist for the decision, unless you need to get over $5 a share or something to bring in bigger investors ... and we just aren't there yet. A reverse would weaken investor confidence at this point, so I cannot see it happening, but just IMO.
FYI - I noticed yesterday that a poster on another board I am not a part of (Yahoo), mentioned that "a little birdie" told him that good news for ECOS was coming out this week. Always tough to have faith in pure rumor, but my take is same as anyone's guess, and that a) good news is coming b) MM's are working the stock and hope they can create a spike. Of course, hoping a) is the case.
Correction in my note: hypothetical "0.02 to 0.15" s/be "0.02 to 0.015"
Thanks for the key note comments Flawless, and others as well. As usual, I think your analyses and thoughts are well founded.
Here another blather (sorry!) as I wanted to add to my thoughts on the convertible debt issue in my original posting (what I call "toxic debt") in that it seems that ECOS is leveraging that type of debt as a necessary evil, ... but, in essence, any debt is a necessary evil for a start-up in development stage. Obviously, it has been working out well for the debtors, as they covert to shares when the price is low, and sell when the SP tries to break through periodic highs. I hope, they keep some shares for longer term potential, but assume they have to sell in short term to recoup their capital investment plus profit, before affording to speculate like the rest of us. This debt has a benefit for ECOS financials, as it has the potential to purge debt off the balance sheet. Some analysts state that when convertible debt is in play, it will always keep the SP relatively low until something changes the status quo. Hence, the toxicity. Once a debtor like Asher has converted at ... let's say 0.005, waits for a PR and spike, and sells millions of shares at .. let's say 0.02 to 0.15 as they flood the market, they have effectively tripled to quadrupled their investment. Then, the cycle starts again, as the debtor now permeably has capital and nice profit to make available back to ECOS in a note that typically includes a nominal interest rate, payable on demand, but the right to convert to shares at a discount (I have seen 40%) of SP. The risk the debtor takes in echange for huge ROI, is that if the SP tanks after conversion, and they are left with close to nothing from their investment. But, that seems rare and hasn't happened with ECOS. Plus, that debt provides a capital stream gives ECOS liquidity they desparately need. So, I think it is best to follow this ourselves, from 10Q to 10Q, and keep an eye on it. If I notice or thought ECOS was using funds to essentially line pockets, my take would be different. But, I don't see that. Sure, debtors have presumably been doing well on ECOS, but it is hundreds of thousands we are talking about in convertible loans per year, not millions. Therefore, I am not overly concerned about that type of debt.
One thing that I liked about the last 10Q, was that as others may have noted, the debt level with several of the debtors that had convertible debt was reduced to $0 in the last 10Q. But, it is also hard to follow that ebb and flow, as we won't see if they are continuing to have to leverage convertible debt until the next 10Q. When they borrow, I don't believe ECOS needs to make a public statement.
What I can see the cycle and what it does to the SP and dislike it for that fact. But, at the same time I believe ECOS use of such debt is a legitimate solution, even if it does keep the SP low, in effect. Conversely, if ECOS were to forego debtors and go directly to selling company owned shares in order to raise capital, they'd undoubtedly have to do so when the stock price spikes anyway, to raise the most capital at the time needed. Either way (ECOS selling, or ECOS debt conversion and debtors selling), it will result in a huge influx of millions shares in a market that has limited buyers. Add in the MMs who may be trying to time the "yo-yo" effect this creates, and the situation creates the market we are in with ECOS where the SP cannot seem to get to levels we might expect, even at this point in the development stage.
That said ... I am lighting a candle, continuing to have faith in the ECOS partners like FEI peeps, and believing that those of us who are long have a better than average chance that the risks we are taking in speculating today on the stock, will result in huge returns. I definitely want to be on board when if and when this rocket launches, and not one of those sitting on the beach going, "OMG, look at that thing go!"
Kakao! You are welcome, and thanks for your question. I think both the batteries and NPUs have huge potential. Like you, I came here via the battery technology, but found M-Fuel as a pleasant surprise. I should have chosen "Money Badger" as a Board alias, as I don't care which one takes the lead, as long as it helps ECOS and us who are long.
Also notable, but sustained high oil prices are a significant market driver for the demand for batteries for EVs and energy storage for solar and wind. Oil prices have played a role in ECOS strategy. When oil prices dropped below $50 a barrel about 4 years ago, it hurt interest in all alternatives. $80 - $90 a barrel seems more sustainable today, so naturally investing in alternatives for buyers seems more feasible.
The past year seems to be necessitated by NPU's being a shorter path to revenue with limited debt, through the re-occurring revenue of the additive. Just a dozen machines in place will help ECOS from having to take on more convertible debt.
Anecdotal, but I originally found ECOS because I have two fully converted electric (no gas at all!) SUVs. I quickly realized that batteries were the weakest link in the electric car equation on both cost and performance. Standard Lithium-ion batteries are just too expensive, slow to charge, and still too heavy for practical vehicle application due to number of cells required. I started researching battery companies like A123 Systems, and came to the conclusion through a lot of reading that the next leap in battery performance will be via nano technology and carbon nano tubes. I stumbled on ECOS via CNT research, as they reportedly has a proprietary method of application of CNT that they have applied to both lead acid and Li-on batteries. The results in the Exponent test speak volumes of credibility, but is only really impressive to battery geeks, and not at a business level. The real rocket sauce is getting those batteries to market, which equates to hard cost solutions like a production plant, supply chain, distribution channels, etc.
New to iHub and BBs, long on ECOS
I have been long on ECOS since late '09, and have been buying on dips whenever possible. I have periodically read the postings here since '10. I have traditionally not paid much attention to BB postings, in general, as there is so much garbage and short-sellers to wade thru. But, I thought it time to jump in the BB system and try to contribute something on ECOS, as there are several good, earnest, knowledgeable and consistent posters here like Surfguy, Flawless, Rookie, etc. Also, I have had a few calls and emails with Michael Siegel, but have given him high marks for: 1) returning a smallish investor's call, 2) not sharing much with me on those calls, emails, as he knows that sharing specific, non-public information can only get him in trouble.
I promise, future posts will be much shorter, but wanted to share my POV (ad naseum) in first post, as it has developed on ECOS over a couple of years. Sorry to all for the blather to follow!
In short, what I have liked about ECOS is:
1) None of the execs / principles appears to be getting rich off of the company's difficulty in penetrating the market. For that reason, they have never appeared to me to be a scam. If they are, they are truly bad at scamming. With few exceptions, the execs rarely sell any of their stock, as they know their fortunes are in moving into production and revenue. They keep sales expenses and salaries relative low, as they must in order to stay viable.
2) Their prototype products exist. Some of you have wondered about the nano batteries. I have never personally seen one, but they were successfully tested by one of the most reputable testing services (Exponent, 30 years in the biz) around. I have read, and have had EE friends look at the report, and the nano X batteries are legit. The question on the nano batteries is weather they can be produced abroad (or in US on native American lands) at the $200 price point mentioned by MS. That report from Exponent loaned credibility to the testing done on NPU, as they have proven in both cases that they have something that works, pretty close to how they claimed it would work.
3) ECOS keeps up with SEC filings, Sarb-Ox, etc.
4) ECOS web site stinks. It is one of the worst I have ever seen, and looks like a teenager's first try. (That's right, I LIKE this.) If they were a scam, or typical pump and dump, they'd have a slick web site that many potential typical investors could look at, and think "they look professional .. they must be the real deal." Websites can be made to look professional for a couple of hundred a month. ECOS is obviously more concerned with getting their product to market, than impressing people by paying Go Daddy or a webmaster. Their presentations are also pretty bad. (Sorry ECOS!) But again, shows me marketing is not currently their focus, as they have limited resources and cannot focus on marketing, before they have one.
IMO, their biggest problem is how to get out of the development stage and into a market that appears ripe for their solutions. In '09, when I bought too many shares at much higher SP, I foolishly thought the world would beat a path to ECOS tiny office in IL. I incorrectly looked at ECOS as I would a retail start up like a Dell or Apple. Even those companies took years to get out of development stages and into profitable production. But, the big difference is number of buyers, and competitors. Millions of the modern world populations can afford to buy something like a PC or iPhone, but there are relatively few (hundreds or thousands) of NPU buyers. Even though the potential buyers for the batteries is enormous, first, you have to produce them and that cost millions in capital that ECOS just doesn't have. No one seems to want to front the money to make that happen for a company that may not be viable. As a result, in the past year or so, ECOS has focused on the NPUs, which have a much smaller initial outlay in production costs to ECOS than a battery production plant, and nice recurring revenues in NPU additive sales. In the absence of angel money for a battery plant, I think this focus on NPUs is a good move. It appears that if the data we are seeing is real as I am inclined to believe, their is a good ROI for buyers of the NPUs. But, again, that is still a large capital outlay in tough economies, and long term dependence on ECOS as a proprietary provider of additive. Good for us investors, but risky for a buyer. Buyers may not have the budget to buy the NPUs, which will return a ROI for them down the road. Tough for buyers to be early adopters / pioneers in that scenario ... Tough for a buyer to get a capital loan for a product that .. well, except maybe at EPC, no one has in place and producing. I think once the ball gets rolling past the pioneers like EPC in Chile, Ukraine, etc. M-Fuel will be huge. The emissions reduction alone is enough to adopt it .. if you can afford it and get someone to write the check, it is a golden solution. Once ECOS has more investors and the SP is hitting historical highs, ECOS can fund expenses with revenues as an alternative to toxic debtors. When ECOS needs funds for investments like a nano battery plant in the US -- they will presumably be able to raise millions from their own stock price instead of going hat in hand to debtors who can practically name their own terms today. This is assuming ECOS have shares left to issue that haven't been gobbled up by TD (please see 1) below) at that point in future. Also, if/when the SP rises consistently, TD'ers like Asher will be better served holding their shares for more profits, than dumping to make a few hundred thousand in the short term. With a high SP, we will THEN need to worry about big oil companies who'd rather not see efficiency created at the NPU pump. BUT, that is a worry I am all sure we look forward to having.
What has always had me concerned is:
1) ECOS leverage of "toxic debt" (TD) with covertable loans with debtors like Asher, DT, RCO and Capex. I almost bailed on ECOS two year ago when I saw TD in the financials. Even though TD has held back the SP, I realized that it appears TD was a way to keep the lights on and pay bills which are mostly sales expense. As mentioned above, true angel / VC money is hard to come by when you can't show revenue. That usually means you may never turn a profit. If I were a VC, I'd either buy 51% of ECOS stock at pennies, for a few million, or provide a loan that was convertible at a discount... exactly what the toxic debtors are doing. Once ECOS does become profitable, true (non-convertible) VC money may become more available - but they may not need it my then. Don't you LOVE finance? Anyway, no doubt that toxic debt is a vicious cycle, as those debtors do better converting at annual lows, and making much more than their 40% in conversion by dumping at highs and multiples of the lows at which they convert. But, I believe in ECOS leadership, and that they appear to be trying to break the TD cycle that is undermining the SP. ECOS must end TD cycle, as they have been at a clip of around 75M-100M additional shares issued per year the past 3 years, and only have about 200M more shares they are authorized to issue (500M, total) before they are "tango uniform" (teets up / belly up. Plus, I am speculating they want to be able to have some millions of shares not issued, in reserve to raise capital if needed down the road.
2) Issuance of shares to stay afloat / meet debt conversions ('nuff said, abobe)
3) Horrible track record of missing dates. I understand the necessary evils of 1) and 2) above, and have even understood missing dates to a degree, as it is likely based upon the strong desire to get the SP moving upward and keeping the lights on. IMO, when MS releases a date, it is based on best case scenario and only the things he can control. Not based on what other parties like EPC or Vijay Singh may decide. I am at the point that when I see a date in a PR from ECOS, I triple the time frame provided.
Also, on the matter of the SP - all should keep in mind, that due to the limited number of investors in ECOS, the SP is easily manipulated. At one point about a year ago, I recall that there are only a few dozen independent investors in this stock. Today, probably less than 100. We are the few, the brave, and are either incredibly smart and insightful (my preference), or unbelievable ignorant and naive. Regardless, due to the few fearless speculative investors like us and the low SP, a handful of MM can have their way, and easily make their margins off of created swings.
That's all (whew!) for now. Am interested in all of your feedback, thoughts, interpretations, questions, etc. Hosebag short-seller scumbags, need not reply! GO ECOS!