To all,
Here's a COMPLETE transcription of the 5-28-98 Continental Capital Conference Call (only mumbling and inaudible text were edited out). Thanks Lisa!
CONTINENTAL CAPITAL CONFERENCE CALL
The call started at 3:10 PM CDT.
Hello everyone, and welcome to the Continental Capital Conference Call. I would like to introduce your moderator, Mark Abernathy, Director of Marketing of Continental Capital. At the time of questions, please press 14 to enter your questions. To withdraw a questions please press 13. Mr. Abernathy:
Good afternoon, ladies and gentleman. My name is Mark Abernathy and I am the director of marketing here at Continental Capital and Equity Corporation. We would like to welcome all of you to today's conference call. On the line with me, I am very pleased to announce the CEO and President of Thermo Tech Technologies, Inc., Mr. Rene Branconnier. Good afternoon Rene.
Good afternoon, Mark.
Additionally, I am very pleased to announce that we have in attendance the Vice President and General Counsel for Thermo Tech, Mr. Laurence Liebowitz. Good afternoon, Laurence.
Hi Mark. How are you?
I am doing terrific, thank you. And, Laurence I believe we have a statement that you would like to make before we proceed.
I do Mark. My statement is simply a disclaimer statement that the statements which will be presented this afternoon at our conference call are forward-looking statements, may contain forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. And as most people here I am sure know, these statements are based upon the belief of company management as well as assumptions made beyond information currently available to the company's management. Because these forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied. Forward looking statements include, but may not be limited to, competitive factors, general economic conditions, customer relations, relationships with vendors, government supervision or regulation, product introductions and acceptance, technological changes and industry practices and other factors. that provide the company with Securities and Exchange Commission. That's my statement, Mark.
Well thank you very much. With that said, let's get on with our call, Rene. I have a few subjects which I am sure everyone has questions about, as Continental Capital received numerous calls on a daily basis, and I also know that your in-house IR does as well. So to possibly eliminate, or answer some of the questions that the audience may have, let me zero in on those that I feel are most relevant, and that I get called on most often. Now also Renee, I appreciate and understand and fully believe our audience will appreciate the toned-down fact-not-fiction approach that we are gearing towards. So ladies and gentleman remember, we are right now in the very midst of probably the most exciting dynamic and developmental phase that this company has ever experienced.
With that said, we will address the topics but would really like to try to work off of facts, and, it is a new day for Thermo Tech Technologies. For those of you who are new to Thermo Tech in a nutshell, and excuse me, last time we had a conference call there were some attendees who were not one hundred percent up to speed with what Thermo Tech offers - I want to give a brief synopsis that is that Thermo Tech Technologies is an international waste management and bioconversion enterprise based in Vancouver, British Columbia with additional offices in Toronto, Ontario; Atlanta, Georgia; and Bellingham, Washington. Thermo Tech was incorporated in 1983, went public in 1987. The companies mission is to help alleviate the global environmental crisis in waste management in a way that provides financial benefits to its shareholders, venture partners, and the communities in which the company's plants operate. Thermo Tech's patented Thermo Master process utilizes heat and oxygen loving bacteria to rapidly convert any biodegradable organic material generated by animals, humans or plants in to pasteurized odor-free end products. These include high-energy and high-protein animal feed supplements and high-nutrient organic fertilizers and soil conditioners. The uniqueness of the Thermo Master process is that it is complete in only 20 to 30 hours. Alternative biodegraditive processes take one or more months and resulting materials have no value in the end. The Thermo Master process is now widely recognized as the most innovative and economically attractive solution to the worlds growing organic waste disposal problems. Thermo Tech makes its award winning, cutting edge and proven technology available to local communities by way of an odor-free, non-intrusive turn key package called the Thermo Master Plant.
Rene, let me ask you as I know everyone is chomping at the bit for an announcement regarding the Oshawa/Niagara project financing.could you comment on that for me please?
Good afternoon. To say that we are waiting, minute by minute, for the last signed signature... Two weeks ago when we had our conference call, I was very optimistic on the timeframe and the turnaround, but realizing that a 30+ million dollar deal just doesn't happen overnight. It took us longer than we had anticipated to work it out. Never once was there any doubt because of the Dillon Report, the raw waste contracts that we have, the site, the partners, and everything else, that we would get it, but there were a lot of details that I have learned on the first non-recourse financing of 34 million dollars that we put together that had to be worked out. I was very optimistic of the time frame that we would have that, but now I know that we definitely will have it and minute by minute, we are waiting for the last comment and then we can disclose. One of the key things, a hurdle in the past, is that we are always getting comments that our news releases did not fully disclose all the facts on the type of financing and I want to disclose it all, exactly, because it is a very exciting term sheet.
That's fabulous, thank you Rene. Would somebody please comment on the trooper license termination.
Rene -- I will ask Laurence because he just prepared a. he has just been totally involved on that. Laurence, will you please bring us up to speed.
Sure, I will be happy to. We are actually going to be issuing an update to our shareholders later today, obviously British Columbia time, before the end of the business day that I prepared. It is going to end up being about 7 perhaps as much as 8 pages, 7 pages long which addresses 15 specific points and each of the 15 points is about as simple of a breakdown as you can make on what the issues are that need to be addressed for someone to have a complete understanding of the Trooper picture, and I think it has been everybody's experience, and part of everybody's frustration that the press release process, particularly the trooper press release process, has shone either half-truths or at least partial pictures of individual discrete parts of items. What we tried to do here is to take 15 points and provide an overview that is the sum of the 15 points, and to be very brief, and then to answer your question, the points addressed are: What it was exactly that Trooper licensed, what does the license agreement entitle Trooper to get? What is it that Justice Cohen here in the Superior Court of British Columbia ordered Thermo Tech to turn over to Trooper? What did Justice Cohen refuse to order Thermo Tech to turn over, which is a very significant part of the whole case and the whole situation. The fifth point in this memo will be which part of the lawsuit did Trooper lose on January 20th, 1998, something that no one has really addressed their attention to. What did Thermo Tech turn over, in fact, to Trooper. The seventh point is the design criteria manual, which has been turned over. What can be done with the design criteria manual by anyone serious about using it, which includes Mr. Lunney, who is the counsel for Trooper. How does the manual comply with the license agreement in particular. There has been some questions about what Dan Cumming of Thermo Tech testified to the court on May 21st and we will clarify that. What Dr. Dan Cumming did not testify to we are going to clarify because that is the subject of an erroneous press release by Trooper. The 11th point here is that what Mr. Ross and Mr. Kelly the two independent third-party engineering experts testified to the court on May 21st. Point 12, which is addressed to the specifics of your question, why Trooper is in violation of the license agreement. 13 why Thermo Tech's lawsuit for a ruling declaring that Thermo Tech has validly terminated Trooper's license agreement, why is that lawsuit a winner - I will come back to that in a minute. Why International Ecowaste Systems, the almost wholly-owned subsidiary of Trooper Operating of Poland. Why that entity has no rights whatsoever to build Thermo Master plants or otherwise to use our technology. Lastly, the last point, is why Thermo Tech's present initiative, which involved the litigation where we have now struck back and are taking a very aggressive stand, and why will our initiative will put an end to any disputes about any plans which Stan Lis, Trooper, or International Ecowaste purporting to build plants in Eastern Europe. But specifically, to give a status of the license termination is really very simple. The license agreement provides a detailed technological process to Trooper and a design manual that allows any engineer, as their own expert testified in court, to take that manual and to figure out and to plan how to construct plants that would create the environment in which that technology could be implemented and turned into a commercially feasible process.
The license agreement further provides that Trooper had a right to enter into the sub-license agreement in its designated territory, but in order to do so, it had to give notice to Thermo Tech and it had to require that the sub-licensee had to execute the same license agreement. The significance of that is that its a license agreement that gives to Thermo Tech a variety of rights, not the least of which is the ability to aggressively enforce its rights to its patents, its trademarks, its know-how, and its technology. What Trooper did was simply to give that process, without entering a sub-license agreement, to International Ecowaste Systems and to enable that company, to aid and to abet that company in taking that technology, which it had no right to do in writing, none whatsoever, and to seek to enter into a contract and submit permits, and permit applications, to seek construction financing, and seek to construct plants in Poland- it has absolutely no right to do that. International Ecowaste Systems has no right whatsoever, we have therefore commenced an action against them in Poland to enjoin them from taking any steps in the permitting, financing, marketing, or building processes. And, we've commenced an action here, as you know Mark, in the court in British Columbia after we have declared the license agreement to be terminated because Trooper gave these rights and aided and abetted an unlicensed company to exploit, to expropriate, our technology. That lawsuit has no defense to it. I hope that answers your question.
It does, thank you Laurence, and again this information, these 15 points, are to be distributed today- is that correct?
Yes.
You are working on that now and shareholders will be receiving that?
By the end of the business day in British Columbia, absolutely.
Wonderful. Rene, also another subject that I am frequently bombarded with, will you please comment on the drawdown of shares - where we stand and the outlook for the future.
I can understand everyone's disappointment with the stock price, but one thing we all must do is face the facts, we are sitting on an awaking giant which we have to feed and nurture. If everyone will see that this is coming to light, then we will be able to show and present a bottom line and a cash flow that will work. The dilution fact is that we have suffered, or the dilution that we needed to get this company launched off, to get these Mark II plants running, and with the major joint venture that we are looking at doing or some of the offers that we have and everything else. We will be able to show a market in a very short period of time, why the dilution happened and what the return will be and the impact, what will be expected in the future. It is very good Mark, but unfortunately, even myself, I wish we did not have to do what we did. We did have to enter into last August, into a draw down, we do have a few more of the registration statements to draw down on. It is all pretty well done, and the company's in the process of, which I can't get into much detail of announcing over which we will have a conference call on Mark, definitely have, because this is a big bombshell we are working with, where finally we will not need to dilute Thermo Tech anymore, and how we are going to be financing the company for the future.
Excellent. We have one other subject and then we will open the floor to questions and answers. U.S. Filter.are there any communications that you would like to share with us?
I guess what I didn't mention to you, is that the bombshell that we are working with, and what we are working on, I think I did answer that question in a roundabout way. We are definitely working very aggressively with them. Laurence has spent about another hour on the phone with their legal counsel today. They are working with us very pro-actively, I have worked with them the last couple of days. We will be announcing, the real thing is, that Thermo Tech has something that it can announce today. U.S. Filter's point of view.they don't want it because it is no impact to them. If you look at it we are a junior company, they are a very senior company. They want us to adopt more their style. At the end of the day, the shareholders are being very well looked after with what we are working on.
That's great to hear. Rene that is all I have. I would like to thank you and Laurence. At this time lets open up the floor to questions from the audience.
Our first question comes from Barbara Mansel.
Yes, how many shares are now outstanding with Thermo Tech?
There was approximately 70 or 75 million shares out.
Our next question comes from Sam Paladino.
Rene, I'm confused as to what the purpose of this conference call was, or is.
Explain to me why your are confused, I can't answer if I don't know the question.
I guess you will be putting out a news article about Trooper here shortly, but it sounds like all other topics will be the subject of future events. Because we really did not have a whole lot to get into today.
Mark Abernathy: Well, Sam.this is Mark Abernathy. I think what we were looking to do here, was to address some questions that seem to consistently come up. Number 2, I think Laurence gave us a fabulous dissertation on what happened court wise and Thermo Tech's position. And, again, it's always good to get in touch with the shareholders and the brokers that have positions, and to let everyone know that things are happening in a positive light for the company and will continue to do so.
I guess I'm staying on top of it more than other people because I didn't have those questions.
I appreciate it.
The next question comes from Bill Stinnet.
Rene, I am looking for some information regarding the Hamilton plant. There have been some rumors circulating that you are cooking rather than using the thermophyllic process to process the waste there, and therefore, that there are no plants actually using that.
We have proven that we have been using the thermophyllic process all along. What we did teach new in our new patent Mark II process, is that the thermophyllic process combined with the know how of the air balance, the know- how of the engineer-designed building, and the know-how of the way we handle the materials- dry it, centrifuge it, and evaporate it. All of those things combined together makes us a brand new patent. When you are using the word cooking, how can MM Dillon, that wrote an arms-length report, come up with the report they did number 1, which is available for public information. Number 2, more importantly, we have been marketing all of the end product that we have processed since we have opened the plant. And we have a very high protein content, and we are getting a very high dollar. If you were just cooking it, whoever came up with that, does not know what they are talking about, because if you cook something, you only end up with about 6% protein in food and you can't sell it.
Rene, I think this is another classic example of the internet BS that I have seen from time to time - the suggestion that the process is not being utilized, another classic example. Next question please.
Our next question comes from Samuel Baclaque.
Could you give us the target date for the opening of the plant in Richmond?
I will give you an estimate of one. We are in a meeting today, like Todd Depuis and Alec Cooper are in the process of coming in- working out the full details, the equipment has all been ordered, we will have the exact opening, it is going to be in August, we don't exactly know what time. We had a delay on some fans I believe it was, we had a delay on some stainless steel discs that we needed for our evaporator. There have been some delays, so from July, it is being delayed. I will have an exact date on there later today.
Thank you. A follow up question on another topic, where do you stand with the initiatives that were announced some time ago in Asia - both in Korea and in Japan?
Well, we have a group coming right now, I believe it is June 14th. I am not sure of the exact date. They have basically agreed to hire Stothert Engineering to complete the feasibility study that will put a Thermo plant in Korea. We are at that stage now. They are paying for it and we are advancing the funds. We are finalizing the feasibility study now.
Our next question comes from Barbara Mansel.
Yes, Rene, I was wondering when the splits are going to occur.
That is a question that I keep getting a run around on. I am dealing with two major situations on the dividend. I am dealing with security, which is lawyers, and I am dealing with CPAs. They tell me that "within six weeks we will have everything finalized for you. Six weeks goes by and I need another six weeks." We are totally pushing that forward to get completed. I don't have a time frame. I wanted it done, actually two months ago, and it seems like, by the time we get the security side resolved, then there are problems, not necessarily problems, but there's structuring. details that have to be done. We want to do it tax free to the shareholders. So that is the frustrations that I am having.
Our next questions comes from Hayes Histon.
I have a two part question. First, you mentioned that the shares outstanding were right around 75 million - how many shares are actually in the float. Second, what is your actual relationship with US Filter. Are they are looking to license the Thermo Master process, or they are looking to help you fund more openings of plants.
Our relationship with US Filter is exactly as we announced in our February news release. How we laid that out is exactly how it is coming together and exactly how it will be done.
The amount of the shares in the float is very difficult to answer. We know - we get a brokerage report so we know what we have internally- I would say we're looking at about a 15 to 20 million share float.
Our next question comes from David Pickering.
I have two questions, with the financing a go, it is just a matter of time for the two plants, Oshawa and Niagara. Can you give me an estimate of the start and completion dates for construction?
The permitting has been done, the building has been agreed to. West Mechanical is the one that is building the two plants. When we have done with Richmond, we have placed a lot of the orders and we have negotiated for all of it. We are looking at starting in June and we would like to have an opening of these two projects in November-December.
David Pickering: The second part is. are all existing license agreements that we have right now, being terminated across the board as the Trooper license agreement is being terminated?
I will answer that two-fold. Number one, the Trooper license was terminated because of faults, they did things wrong. The other license agreements are not being terminated, they are being given the right to come and negotiate with us for a new license.
Our next question comes from Brian Triplett.
Maybe you can clarify this for me. Of the 15-20 million shares that are out on the float, is there any institutional ownership, and how much would be insider ownership, and whether or not there is any reg-s ownership out there that has not come back in yet.
The definition of a float is in the hands of other others that we don't necessarily know. Out of 75 million, what I am saying is, we know where approximately 50 million are placed. There is some institution buying that has happened, Wayne Hanson, our CFO has spent some time with numerous ones, the Atlanta trip, the trip on Europe where I could not go, and we know there was actually purchasing and buying that had happened, so we know there are some institutions that are starting to purchase. And we know after this announcement on the debt financing that we have done, there will be major institutions getting involved because of the fact of who we are dealing with, and that endorsement. Number 2,The reg-s has all been converted. But you know, we've not done a reg-s for a long time. If you are talking about the registration statement - which is a reg-d, that's different than a reg-s.
No, I was just concerned about the reg-s.
Reg-s has been converted a long time ago.
So there isn't going to be anything that will bite us in the butt later on?
No.
Our next question comes from Tom Carter.
What is happening with the old Corinth plant that was our original model plant. Also, what is going on in Fort Devens with Jim Coull and the boys up there?
Well,you have been around for a long time Tom, because you were one of the first individuals that I met out in Corinth, even before it was built.
Correct.
The key is that we have got to get a long-term guaranteed raw materials supply contract, it looks like we can, around 45 to 50 dollars a ton. We will permanently get that location going again. But I want to make sure that we have a long-term contract in place. And with that, we are also negotiating for US Filter to be the operator of that plant. If not, that plant will be moved to another location.
Have we leased that area from Ralph Patruzzo at this point?
No, we don't have to lease it, because we will always have a long-term lease where we have an option to buy it. On your other question on Fort Devens, I just got back from a two-day tour, Thermo Tech has purchased 4.8 acres of land, put an offer in, for one site. We are also in the process of negotiating another site, one in Leominster, and the other one in Carver. And we are 100% opening an office in the Fort Devens area. In 1994 and 1995, when I started the Ontario operations, we will repeat that operation in Fort Devens, we're going to get that going, we've got four or five people that are joining us, major, major credibility of the people that are going to working in marketing with us.
Our next question comes from Bill Scott.
Some time ago, there was some conversation about the DISCOVERY channel having a spot regarding Thermo Tech, could you shed any light as to when that might come about?
Ed Kroeker is handling that. I know it is being done. I know they came and toured the plants- I don't know exactly when, if we have an exact date. I can probably find out and the next conference call, I might have an answer.
Mark Abernathy: I have a gentleman here, Mr. Scott Gibson, who is the Vice President, Senior Producer for Madison and Wall, which is the sub of Continental Capital. We will be having a TV show this fall. We are very excited to include Thermo Tech on that TV show, and I wanted Scott to say a brief word here.
Scott Gibson: We are doing a premiere this September, it is a 30-minute show on CNBC - we will be Saturday at 10:30 or Sunday at 11:00 am. They are going to feature three different companies, a 13-week run. Each show is generally going to have an industry focus, on top of that you will have at least one analyst where he is going to be commenting on an overview on the industry without giving any particular recommendations of any of the featured companies - they are not competing companies. The reason I wanted to mention it is we are going to reach the minimum of 2 or 3 hundred thousand households with very qualified viewers. I think we all are confident that CNBC does attract the general investor. Thermo Tech is going to be one of the featured companies, and I look forward to that. Our focus is going to be companies that deserve to have the spotlight put on them, and they will be on national television and get that exposure. I look forward to it this fall.
Our next question comes from Peter Simpson.
It is my understanding that there would be a US Filter announcement, once the sites are jointly picked by you and US Filter, is that statement still true, and if so, how close are you to picking sites currently with them?
No, that statement is not true. If you go back to the February news release, and maybe I will embellish what we really are doing with US Filter. US Filter will supply us sludge, they will operate our facilities, they will get long-term operating facilities, they will put equity in on the long-term operating facilities, and we will purchase the equipment for our Thermo Master plants because they own a manufacturing plant that makes the equipment we need.
Will there be an announcement to spell out these details when it happens?
Yes. We go back to that February release that is in all our packages. it still stands. We will not be picking up, necessarily, adjoining sites. There could be a site, like Corinth, that I mentioned earlier, that we will own and US Filter will operate. They are in the business of operating plants.
So in the very near future, you will be making announcements to talk about these actions?
Right, correct. Very near.
Our next question comes from Thomas Latine.
What about the possibility of breaking in the black?
With the progress that we have been making in the Ontario market, we are definitely getting closer every day. One thing that everyone should be aware of, and this is an assumption, we will be shut down for probably two weeks, in June, when the new RGO for the expansion is being installed, so there will be two weeks of revenue that we will lose, but we are still looking at breaking in the black by our first quarter of the year with some license sales.
Our next question comes from Lars Bredal.
What can you tell us about the two transfer stations as far as which type of revenue they are contributing at this time or what type of revenue you foresee them contributing in the first or second quarters?
I don't have a breakdown on that, Lars, at this moment on the exact revenue that they have. We will have our financial statements off probably the second week of June, on there for the first month of May. These transfer stations just opened in May. We are looking at receiving around 70 dollars a ton. We are netting a very healthy profit. When our statements are consolidated, it's hard to get into, we will be getting separate news releases on the chart of Thermo Tech which will be a combination of the plants and the transfer stations.
Lars again: Do you have any idea as far as, I know in the original release it talked about the capacity, as far as how many tons you could accept at each of the two sites, do you know how much of that capacity is currently coming in the front door, and when do you expect them to reach full capacity?
You have already asked that question, and I have already answered it. We will be willing to release all that when the financial statements come out in the second week of June. You just asked it a different way.
Our next question comes from Paul Astrene.
Dr. Cumming was quoted as stating that we are not currently using the thermophyllic process, and that has created a lot of confusion in the minds of some of the investors. Could you elaborate on that statement?
Rene: I would like for Laurence, who was present at the hearing, to comment on that statement, because that is not accurate.
Laurence: The source of that statement was not the testimony that occurred in court. The source of that statement, as I understand it, was a Trooper press release.
Paul: That's correct.
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