Tony is just screwing around. A broker friend came over and was all hyped about ERTH. I started reading up on them and the hair on the back of my neck started standing up. hehehe
DEBORA VRANA, EarthShell IPO: Will Investors Contain Their Enthusiasm?; Home Edition, Los Angeles Times, 13 Mar 1998.
EarthShell IPO: Will Investors Contain Their Enthusiasm?
By DEBORA VRANA, TIMES STAFF WRITER
Los Angeles Times Friday March 13, 1998
Home Edition
Business, Page 1
EarthShell Container Corp. is going to Wall Street with what could
be a revolutionary product--a biodegradable material that it claims will
replace polystyrene foam.
If the product does everything the Santa Barbara company says it
can--and some backers are already comparing its significance to the
invention of plastic--investors may be eager to get a piece of
EarthShell's $250-million initial public offering.
Expected to be sold by April, EarthShell's deal would be the largest
first-time sale of stock to the public by a California company so far
this year.
Made from biodegradable raw materials such as limestone, recycled
potato starch and water, EarthShell's new product could redefine the
$8-billion domestic market for disposable fast-food containers.
"It's a damn miracle," said Steve Andersen, a senior manager with the
Environmental Protection Agency who specializes in ozone protection and
served on a working group that analyzed EarthShell's new material.
"It shows great promise and has global potential," said Andersen, who
keeps an EarthShell cup on his desk and predicted it would create a
challenge other companies will scramble to match.
Fast-food giant McDonald's Corp. recently approved EarthShell for use.
However, some investors are on the fence, pointing to a high market
valuation of nearly $2 billion for a fledgling company with no revenue
that has lost almost $75 million since it was formed in 1991.
"It's very uncommon to see a developmental-stage company being valued
this highly. It's very speculative," said Ryan Jacob, director of
research for IPO Value Monitor in New York. "Still, if it all pans out,
it could be very promising."
Polystyrene foam has long been a target of environmentalists, not only
as a symbol of wasteful consumption and a source of litter, but as filler
in dumps.
Makers of the foam have adopted significant new recycling methods in
recent years.
"Today's polystyrene is made from a lot less material and is much more
environmentally friendly," said Mike Levy, executive director of the
Polystyrene Packaging Council, a trade group in Washington, D.C. Levy
said he couldn't comment on EarthShell's product.
Still, by contrast, EarthShell's product can be made with little
energy and with plentiful biodegradable resources, Andersen said.
"Finally, fast-food packaging that Mother Earth can love," said Essam
Khashoggi, chairman of the board, in the company's offering documents.
"It will biodegrade in an hour, just like they say," said Bob Sulnick,
co-founder of American Oceans Campaign, a nonprofit environmental group
that has been involved with the product for nearly four years.
The product isn't the only thing that's unusual about EarthShell.
Khashoggi, 58, who is both owner and chairman of the company, is the
younger brother of Adnan Khashoggi, a key middleman in secret White House
arms sales to Iran during 1985-86.
Adnan, once described as one of the world's richest men, has no
involvement with EarthShell, said those familiar with the company.
"Not directly; not indirectly. There is no involvement by Adnan," said
John Daoud, chief financial officer of E. Khashoggi Industries. "Not any
single business in 10 years. They are brothers, yes, but that's their
only relation."
During the 1980s, however, the brothers co-owned companies, shell
companies and offshore companies with ownership structures so complicated
that even an experienced Bankruptcy Court examiner found them hard to
unravel.
In 1988, the Salt Lake City holding company Triad America Corp., owned
about 80% indirectly by Adnan Khashoggi and the rest indirectly by Essam
Khashoggi, and eight affiliated companies filed for protection under
Chapter 11 of the U.S. Bankruptcy Code, listing liabilities of $197
million and assets of about $9 million.
At the time, bankruptcy examiner Leonard L. Gumport found more than 40
corporations affiliated with the Khashoggi brothers.
Essam Khashoggi, through his EKI, holds most of the patents on
EarthShell's products. Even after the public stock offering, Essam would
still own about 73% of EarthShell company documents state.
EarthShell plans to sell 13.2 million shares at $19 a share, and would
use $36.9 million to repay loans from EKI. Nearly $63 million of proceeds
would be used for development of new products, according to offering
documents.
EarthShell, behaving like many start-ups, hasn't posted a profit or
any sales since its creation six years ago. It won't even begin to post
any revenue for 15 more months, company documents say.
EarthShell executives and investment bankers at Salomon Smith Barney
and C.S. First Boston Corp. underwriting the offering could not talk
about the company because of securities laws against discussing a
company's stock before it's sold for the first time.
EarthShell first filed for permission to go public in October 1996,
but the company postponed its stock sale because of continued meetings
with environmentalists and potential buyers, such as McDonald's.
Typically, a company goes public within a few months of its filing date.
"They are striking with an iron that is quite cold," said David
Menlow, president of IPO Financial, an IPO data company in Springfield,
N.J. "It will need to develop over time--and hopefully over less time
than it took to get this deal on the board."
Part of the delay was simply negotiating with McDonald's to approve
EarthShell for its restaurants. One of the McDonald's suppliers has now
agreed to purchase 1.8 billion EarthShell Big Mac sandwich containers
during the next three years. Mass manufacturing hasn't begun yet, but
EarthShell has licensed Sweetheart Container Corp. to make the EarthShell
products.
"EarthShell seems to be cost-competitive. And it's solid, durable for
Big Mac and will keep our flagship sandwich hot," said Walt Riker,
spokesman for McDonald's. "Thirdly, we think it's intriguing
environmentally, so we'll just see."
EarthShell executives are currently on a roadshow pitching the deal to
investors. The deal is scheduled to be sold the week of March 23.
The Khashoggis also could not be reached for comment.
Although Essam Khashoggi has a much lower profile than his brother, he
moves in the same circles of the wealthy elite. He lives in an oceanfront
estate in Santa Barbara in the exclusive Hope Ranch area.
Adnan Khashoggi, who now lives in Saudi Arabia, was acquitted of
charges that he helped former Philippine First Lady Imelda Marcos hide
ownership of assets.
Copyright, The Times Mirror Company; Los Angeles Times, 1998.
Also cut from form for a sec filing for erth-
On February 16, 1998, EKI entered into a patent purchase agreement with a
third party for the purchase of certain technology that may be applicable to
starch-based disposable packaging. Pursuant to the terms of the Patent
Allocation Agreement, EKI will license such technology to the Company. In
connection with this purchase, the Company entered an agreement to pay to EKI
$3.5 million on or about December 31, 2003. The Company's obligation will be
reduced by 5% of the purchase price of any equipment purchased by EKI, the
Company or its licensees or joint ventures from the company which previously
owned the technology. In addition, the Company is required to pay $3 million
over the five year period commencing January 1, 2004 if EKI, the Company or the
Company's licensees or joint ventures have not purchased, by December 31, 2003,
at least $35 million of equipment from the company which previously owned the
technology and EKI, the Company or the Company's licensees or joint ventures use
the purchased technology. |
