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My guess this is driven by a combination of not setting priorities and they not having the money to pay Michael St. Pierre to respond. I don't think they would intentionally ignore a regulator. Since the SEC logs comment letters with required response dates in their system, you would be an idiot to think they would just go away.
Having represented people who have gotten these letters in the past you end up on a not so pleasant list at the SEC.
They mishandled this completely. The correct course of action when they knew the were going to miss the deadline in the comment letter was to ask for a two to three extension.
When you don't respond and get a more demanding letter (which they got) you make the list and draw the ire of the SEC Staff.
The strange thing is all of the questions were simple to answer.
These are not a big deal since they are technically comment letter points that ECOS corrected. Obviously they touched a nerve at the SEC by not responding to the original SEC comment letter on their 2016 filing. Not a good practice.
Hoping these are shares to settle note conversions
It is all in the order you do things.
If they do the debt conversion first the share count allocated to LRS is a function of the share count including new shares. Since the warrants are issued at much higher prices than current market they won;t fall out the way you think.
Here is a simple way to think about it
Current OS 12.3bn
Note Related Shares 9bn
Total New Count 21.3bn
LRS needs to own 16% (5/1/3 times 3 tranches) after giving effect to all other issuances
Take 21.3 divide by 84% or the inverse of 16% and you get 25.4bn or 4bn issuable to LRS.
Now we know that some Fife notes were converted (we don't know how many but it is likely between 400-600m shares worth. This would take the total OS after notes and warrants to just under 25bn. I view that as good as it means they can't dump shares into the market. It also may explain why the OS isn't changing (they don't have shares to issue).
Just woke up from my post Board meeting slumber so here are my thoughts on DS points.
Because of the mechanics of the the warrant agreement (measured by a percentage of outstanding rather than absolute shares), LRS shares purchased and the cash they pay for them increases with every increase in OS (including those related to note conversions). Not sure it is a desire to have more skin in the game just good lawyering by LRS lawyers to keep their stake at the same level if they exercise.
I would think you would never use the LLC to do anything regarding ECOS stock. If you used it to acquire or squeeze out the minority it becomes a registrant, needs a separate audit,a registration statement and can't relay on any prior 14C of ECOS. If they went that route they likely would need to structure as a tender, not a merger.
I really don't think they have much room to increase the OS of ECOS under their existing authorization. Most of the shares are reserved to satisfy their obligations on the note conversion and the LRS warrants. My best guess is they have less than 1bn shares they can issue into the market. Remember their latest disclosure was they though they owed 9bn to note holders on conversion which would take them to 22bn and they need 2.5bn to 3bn for LRS warrants.
It likely means there is less risk of them issuing more shares to dilute existing shareholders unless they do another increase in AS. It also means they need to either (i) start generating cash flow to fund operations or (ii) get more loans from HanscomK.
No I a not from the Company though I have spent a lot of time in the fertilizer space. My company holds hundreds of fertilizer licenses and a lot of California licenses. I am not speculating I live the wonder of California reporting
Kevin
They have a license but likely not for the products they just rolled out. California is one of those States that will require a producer/distributor to submit labels and testing data for each product they sell in California.
They are especially diligent on new producers and new products. The testing data allows the State to determine whether the chemical content meets the label on a consistent basis. Can take 4-6 months to be approved.
https://www.cdfa.ca.gov/is/ffldrs/pdfs/OIM-0047_LabelingGuide.pdf
They also need to report to the State Dept of Ag every six months on their California sales and pay a fee of 3 mills per $1,000. This applies whether they sell off the web or sell direct into the State.
FYI, the license they have can be gotten by submitting a check for $100 and a completed application. It doesn't mean you can actually sell anything in the State.
T
Your first official French lesson.
Ecos va planer aujourd'hui
T maybe when ECOS goes to the moon I will get you some French spelling classes.
Today's word is Adieu
Kenny actually the chemistry associated with producing the compost allows you to mix the material from the digester with water (or some other inert agent) and create a liquified form. The only difference you get is a lower nitrogen content. I don't see this as a fantasy product I just question the ability to grow sales quickly if the internet is their sales channel.
My guess another MM working for Fife.
My guess is we might be nearing another note conversion stock sale date.
Would you like me to post a Siegel family picture. No Dylan would be in the picture.
On my 3rd cup of coffee already. Going to get really cold here today. Four cups of coffee by 10 then switch to scotch.
Nope no Dylan's in the Michael circle of family. No relation to the great former leader of ECOS.
The trick is to create a range of product chemical values for each product. For example rather than claiming something is 6% Nitrogen (a likely output for organics) you label it as having between 2-12% nitrogen. It avoids mislabeling claims which can be bad and it avoids an issue a number of other organic fertilizer companies have. They will need to establish a testing and sampling organization to comply with State law.
It looks like they are trying to go direct to consumer with this (through a website). Clearly a low cost sales approach but a tougher slog.
If I were them I would try and pitch this to True Value or more likely Home Depot on a trial market basis. The would need to develop wholesale pricing and potentially a different label for these types of channels. It would crate a faster market traction and sales acceleration.
Two other avenues are Fertrell which distributes organic fertilizers and has a dealer network in place to push the product out or the Organics Wholesale Cub which is trying to diversify out of food and related products into other organics.
ECOS if you are listening ask me a question or two and I can get you in to talk to these organizations. I want this to work. I just think they are taking the long slow way to sales growth.
Let me know I can send you some. Still might have some left around from my days of youthful indiscretion.
Despite the fact that 14C said they were settling the notes with restricted they have settles at least one payment to Fife using freely tradable shares. That would lead to a reason why he might be behind the short. He has a lot of volume to go.
DS the other way this can happen ECOS due to their capital structure involves note transactions. Two ways:
1) Note holder knows it is coming into shares. it wants to hold the price at 1. it hires MM 1 to sell shares in a short to MM2 which has a buy from affiliate of note holder. The short is then unwound by reversing the first sale. You get multiple days of high volume with no real activity
2) Note holder is going to get shares on conversion. Under the note agreement they are acquiring shares at 40% to 60% of market. They can sell to MM at less than market and still make a profit. The MM now has shares 1 or slightly below which it can then sell into the market.
It looks like Fife (Tonaquint) has used approach 1 over the past 12 months.
T
The issue with going rail out of Chicago is that the CN is essentially a north south straight line from New Orleans up to Canada. They go west but only part way into Iowa. You need a switching agreement or two with the UP and BN to make the rail movement work. Can be expensive depending on where you are going. The more volume you move the better the swiiching agreements get.
It really doesn't say anything about LRS. The devil is in the details
Yes and maybe doing the marketing of the product as well. These are all duties that ECOS needs to arrange for under the JV agreement. We would all know the specifics if they filed the actual sales representative agreement, but I am guessing they won't.
The agreement says sales representative for ECOS Bio ART. This is why I think it has more to do with selling and moving product at LRS than another digester channel.
Jabez
I don't this deal has as much to do with more digester sales as it does with transporting and creating a sales channel for the product produced at LRS.
My guess is the *K will just be a copy of this PR. My further guess is that they will not file a copy of the agreement Based on their prior 8K filings this what I would expect ((whether it is right is another question).
I agree.
ECOS needs someone to market the product coming out of the LRS digester. Remember ECOS doesn't have a marketing arm for the sale of by product. They have four to five people a number of whom also work for HanscomK. All Source could actually fill the marketing and distribution role. Under the JV agreement they need to handle the logistics and sale of the product off of the LRS site. Exactly two of the roles that All Source does now.
The product coming out of the digester could be used in animal feed (like chickens and cows) if you combine it with another product. it happens to be a product that All Source actually sells and distributes.
Read Regulation FD and the Securities Act of 1933 and 1934 to understand the disclosure rules. I am not going to teach disclosure class on IH. People pay me a lot of money to teach this class.
As to the Whole Foods point see this link from WM site, Waste360.com and a nice youtube video posted on the Whole Foods organics recycling.
http://www.wm.com/thinkgreen/case-studies.jsp
http://www.waste360.com/food-waste/whole-foods-joins-waste-management-composting-chicago
The SEC rules govern what is material. The test is based on relative revenue and market cap. A single agreement with a City to company the size of WM is not material. It happens to be how the Securities Law works. This I know since I teach this class at a nice well regarded Law School every couple of years. It is actually very accurate.
FYI on my way to other things I found that WM actually is recycling organics for Whole Foods in Chicago. I came across this on their site. They are doing composting for 11 Whole Foods stores in Chicago per the note from the WM site.
Composting solution turns food scraps into fertilizer
Whole Foods Market® is a leader in natural and organic food. It was only natural that they turned to us when they were looking to introduce a large-scale composting solution in Illinois.
The concept was something everyone could agree on. Implementing it, however, had never been done. Working together, we developed a program for turning food waste into useful soil enrichment material. Starting with two stores in the Chicago area, the solution replaced trash compactors with composting containers, installed smaller containers for trash, trained all personnel, created appropriate signage and provided data on a monthly basis to track progress.
Within the first year, the program expanded to eight locations. Diversion rates rose from 10% to 80% and over 2,660 tons of food scraps were composted. Year two saw three more stores added to the program, with accompanying increases in diversion rates and composting volumes.
Didn't ask but it is a slurry system which there are a number in use (mostly in wastewater). I will see if i can find out when I am back in NYC late next week.
DS
Didn't remember seeing the article you mentioned. I don't read the NY Times every weekend.
The site came up at dinner on Friday night where we were discussing the City's environmental bent as it applies to new real estate development. The Mayor is trying to force new developments and new businesses to be more green.
The Varrick site is up and processing. There are NYC trucks going in. As to an agreement, I will try to get it from the City. The agreement is not material to WM so they likely never filed it (the benefit of having a large market cap). I will be back in NYC the end of next week and get it then. WM wouldn't have put the infrastructure into Varrick (which handles City waste)) without some agreement. So I think my assumption has some validity.
I am quite aware there are two types of digesters and that ECOS was not in the US when the WM Varrick site put in its anaerobic digestor system. However there were plenty of aerobic systems in place in Korea back then and you would think a company like WM which prides itself on environmental stewardship would have known about the existence of aerobic systems.
I was in Brooklyn and Manhattan this weekend. I learned something about what NYC is doing for organics recycling. NYC entered into a partnership agreement in 2015 with Waste Management to deploy anaerobic digestors at the Varrick Waste Transfer site (just east of the Williamsburg neihborhood). The site is fully operational and serves Brooklyn.
WM is adding additional sites in the NYC area or expanding the reach of Varrick.
The site produces energy (which goes back on the grid) and other salable by-products. Did not look like fertilizer.
WM has also entered into similar arrangements with Los Angeles, Boston and Northern New Jersey to roll out this technology.
Leads me to think WM may not need the ECOS solution. Seems they have picked a path already.
Kenny
By saying I decline to respond to your question they have technically responded to the question posed. Therefore, the posting is correct in that they answered all of the questions that were asked. Maybe not the answer that was hoped for, but an answer nonetheless.
DS your recitation of the quiet period is technically correct. However, the quiet period really covers two things (i) trading by insiders in company stock and (ii) the release of non-public financial information.
The way to think about a quiet period is that it should start right before the end of a financial reporting period and end on the date results for that period are publicly released.
In the case of ECOS the quiet period is driven by the release of earnings for the December 2017 period, not the amendments of prior filings. Their quiet period should technically continue until they release Q4 2017 earnings.
During a quiet period a registrant can issue press releases for new deals or activities. It is often done. I have seen it done plenty of times and I am aware of a case of a real public company that is intending to make an announcement of a large deal before their quiet period ends. The SEC is perfectly okay with these types of announcements.
no two of the people were real ECOS employees I have seen before. The Oakton office never has more than 2 or 3 people in it. What I saw today was the same as it has been the other times I did a drive by.
They are not sending food waste to China.
I think the play here is that US, Canada and Europe will have additional pressure on their landfills. If you can't ship to China you will need to either recycle at home or put in a landfill. My guess is that some smart person will come up with new ways to process more wood, paper and plastic.
Technologies which process waste streams away from landfills will become more important.
The anaerobic and aerobic technologies can process paper, but not paper and food waste together. The ECOS digester could be adapted to work on paper, but not wood. I would assume some smart person in Korea is working on this already
Just came back from Oakton office. Ecolocap logo on door. Lights are on. Three cars in parking lot and a few lads working away. The office is still sparsely furnished (I am happy they haven't invested in furniture and decor). The only somewhat alarming thing is that at least one of their employees is incapable of parking his car. Not even remotely close to parking between the lines. Appears change of address to quote our president is fake news.
I view this as a nicety and a detail that it would be nice to keep up to date. I don't view this as a giant oversight or problem.
This is not an ECOS specific issue. Lots of companies in pennyland have these wonderful technical foot faults
he is listed because they never updated their paperwork. They updated the SEC which is a little more important.
With the exception of MS and the Engineer all of the other ECOS people (including non-officers) also hold roles with HanscomK so they don't need a lot of space in Barrington.
I went to the plant when it was being constructed and right before it went live. It is there though mothballed until April. Next time I need to go to Hyde Park (mid April) I will go o the LRS site
I think this is old information. I am not sure it is correct. They had a short term lease on Oakton. I would have expected them to renew. They only had a couple of people working out of there part time. I am thinking of taking a field trip to go by the Morton Grove office later today and see if they are still there.
I got into this many years ago when they were focused at alternative power generation and lithium then chicken poop. Back then less shares, less debt and lithium looked promising.
All of those businesses vaporized. I was in at greater than $.0001 and lived through the RS. I have now managed to average down to $.0001.
The money I invested here is money I am prepared to lose. As has been said on this Board a hundred times never invest in pennies with money that is going to pay for your kids college, make mortgage payments or the like. This is like going to the casino. If I lose my investment it means I won't buy new beach towels this year for my winter home. No big deal.
I would be happy with a pop to $.0003 to $.0005. I thin getting MS out of the way and having Jeung Kwak effectively in control (james is doing his father's bidding helps). I have met him him and he is more of a businessman. MS is a visionary that is not a guy to run a company.
I think a merger is not viable. They have done enough things over the years to the ECOS shell that a buyer would view it as not worth touching from a Securities perspective. While they have tried to fix things they still have some big issues with their filings (see my post of yesterday). Much Shelist (LRS lawyers) did a good job protecting LRS by going the JV route and supply agreement. I think they are too good to let their client touch the ECOS shell. I make that comment from having done a number of deals with and against Much Shelist since the early 1980's.
While it is in the interest of the non-insider ECOS shareholders to merge it is not in LRS interest and likely not in the ECOS insiders.
- The ECOS insiders get paid $400k a year from ECOS in salaries. The Kwak's also draw salaries from HanscomK. They can live nice on that (especially since their equity position is not all that large.
- If I were advising LRS I would say continue to work through the JV, order new units for your own sites, keep expanding your protected territory in the Midwest and see how this plays out over the next 3 to 5 years.
- GS PE invested in mezzanine positions in LRS to refinance debt they took out to buy other waste firms. It isn't a prelude to an ECOS deal. I actually have spent a few days with GS in the past month on other things. It is not GS the Bank in LRS, it is their small capital markets finance arm.
Just my opinion.