COMPANY/SHAREHOLDER COMMUNICATIONS (1)From Yahoo
by: TOASTMAN_2001 (39/M/Costa Mesa, CA)
This presents our (Peter and Dave) summary findings and understanding of the discussions held with TT manangement on 4/9/99.
Overview:
During the past couple of months initiatives have been undertaken to create a mechanism intended to provide enhanced communication between the Management of Thermo Tech Technologies Inc. and it's shareholders who choose to follow the affairs of the company on a regular basis. We (Peter, Jim and I) take this opportunity to sincerely thank company management for their understanding, willingness and recent support given to increase company and shareholder communications.
To accommodate this process several questions were presented to the company. Some stemmed from difficult or controversial issues trying to be better understood, while most pertained to the current status of efforts and operations. The questions were divided into two groups. The first group addressed more general types of questions, while the second group addressed more detailed questions.
To address these questions a meeting was held on April 9, 1999, in Vancouver, BC, between ourselves (Peter and I) and Mr. Branconnier and Mr. Hansen. As a result of the frank discussions and responses received, Peter and I believe that this meeting proved to be very beneficial for all involved.
Background:
Many pressures exist on both shareholders and the company. This can be attributable to last year's dissident effort, the on-going Trooper situation, the recent appearance of the "Unauthorised InfoCenter", and the apparent difficulties encountered in completing Joint Venture and non-recourse debt financing deals. All this is appearing to be taking its toll on everyone involved. Management acknowledged the fact that Peter, Jim and I are shareholders who made a sincere effort (by writing letters and calling) to better understand what is going with the company. This is why we believe they offered to personally talk to us and respond to some of concerns and questions.
Disclaimer:
All information presented is to be used as personal information and should not be construed as buy or sell recommendations. Accordingly, make what you will of this information as it is intended to only portray our current understanding of what is going on with the company. We (Peter and I) acknowledge the fact that we are not investment advisers, we are not employees or representatives of the company, we have not been compensated for our time our efforts in gathering or presenting this information, and we are shareholders of the company currently holding long positions. Note: this has now been superseded to the extent that Jim just identified he recently sold his TTRIF holdings).
GENERAL QUESTIONS:
a) Opening statement.
i) Question: We would like to hear from TT that indeed we have now entered a new phase that every effort will be made to improve communications with the smaller shareholders. Are their any methods other than that presented that would better provide means, such as teleconferences, that the company would care to support?
Response: Company believes that adequate information has been and continues to be provided in accordance with SEC and CBCA reporting requirements. In regards to teleconferences, management apparently feels because of the spontaneity and large amount of subject matter typically being covered, it was exceeding difficult to provide an effective impromptu response. Accordingly, it looks like there are no plans for any future teleconferences. They acknowledged some shareholders made sincere efforts (by writing letters and calling) to better understand what is going on
with the company. In their view, they have made every effort to respond. This is probably why they offered to talk to Peter and me. Lastly, they expressed their view that they see no need for a shareholder representation to expedite a consolidation of shareholder concerns or questions. This is disappointing. We took this to mean any shareholder concerns should be handled individually on a case by case basis.
ii) Question: What is being done to assure that TT will endeavor to have future news releases identify more realistic timelines? Response: Due to lack of time this question was not specifically addressed. [OUR OBSERVATIONS: Management is aware that some schedules are optimistic. It's our understanding it is difficult to second guess where and to what extent design or construction problems may occur (especially when involving so many suppliers and sub-contractors). Likewise, time for acquiring process permits, landing waste contracts and negotiating finance deals cannot be estimated with much a degree of certainty. Based on the most recent news releases it appears time frames are being defined in larger ranges or not at all.]
b) Maximizing shareholder value.
i) Question: How does management plan to increase shareholder value in the near-term? Long-term?
Response: This question was not asked because information concerning this subject is identified in the Form 20-F (Annual Report, dated April 30, 1998). Also, an update should be furnished in the upcoming April 30, 1999, Annual Report. Additionally, there are other statements to the effect as indicated in the news release on 4/1/99.
c) Chino and other potential new plants.
i) Question: Can elaboration be provided on the current status of Chino negotiations, the total potential there, the timelines and projected profitability?
Response: No details could be disclosed/confirmed. However, it was indicated that TT has a letter from a supplier identifying a $40/ton tipping fee.
ii) Question: What other potential projects can be discussed at this time?
Response: The company is in discussion and development with cooperators in Ireland, France and Korea. Other parties are in discussions regarding plants in Italy, China and Malaysia. Specific details of projects will be announced only when firm commitments have been made. These project discussions are identified in the latest Form 6-K (Report of Foreign Issuer, for period ending January 31, 1999).
d) Nathan Jacobson.
i) Question: Will he still be involved in the Chino project, Richmond project, or any other future projects? If not, why not?
Response: Talks are continuing, however, TT has alternative avenues now available, so whether or not NJ participates should be of no material consequence to TT's future.
ii) Question: What are the terms and conditions of the Baja loan?
Response: Details included in the Form 20-F (Annual Report, dated April 30, 1998). An update should be provided in the upcoming April 1999, Annual Report.
e) Profitability of TT.
i) Question: When will the Jan. 31, 1999, nine month ending financial statement be released?
Response: Provided in 4/1/99 news release.
ii) Question: Can any pro formas be provided so that a better understanding can be made regarding the ramp up to cashflow positive and then to profitability?
Response: This information is made available to financiers typically. Literature describing this is provided from company in the IR packet (in "The Thermo Master Solution" handout). The corporation is currently sized to support a large amount of subsidiary companies and plants. Therefore, the expenses to run corporate are considered relatively fixed. For each JV plant contracted, TT corporate will receive $1 million in a licensing fee, 5% gross proceeds from the tipping fees, and 50% of the profits obtained from the plants bottom line. This basically means that once a couple of JV plants can be signed, the revenue into TT will start exceeding the operations costs for running corporate.
iii) Question: What is the company doing to minimize operation and overhead costs?
Response: The empty Atlantis office lease was recently terminated, the Brampton office was shut down, and the Ontario office is being closed(with Ed Kroeker and Don Dryer moving to the Langley office).
iv) Question: What have been and what are the pro forma production levels of Hamilton I and Richmond from Oct 31 98 to Dec 31 99 and
beyond (i.e. how many tons have been/will be processed at these plants?)?
Response: Hamilton I plant is currently running around 300 tons per day (permitted for 400 tons currently and awaiting additional waste streams
and next incremental permit approval). Richmond plant is running at approx. 200 tons per day during this commissioning period and will ramp up
to around 400 tons after this period (possibly by next month). Cost for increasing Richmond plant processing capability from 400 tons to 600 tons
is expected to approximately $1.5 million. Timeframe for the increasing of Richmond capacity to 600 tons is as soon as raw material has been
secured and the US$200 million debt facility is in place.
v) Question: How much of the budget is typically being allocated to Investor Relations or Stock Promotion?
Response: Approximately $150,000.
vi) Question: What specific type of activities is the R&D budget being used for (plant processing efficiency, end product improvement, new products, other)?
Response: This budget is being used to develop more value added end products. Note: they couldn't disclose any specifics at this time.
vii) Question: Are tax breaks for R&D expenses being applied for and received?
Response: Yes, the company is requesting and obtaining as many tax advantages/benefits as are allowable.
f) Dilution of shares (equity financing).
i) Question: Why is equity financing still going on despite previous assurances from senior management that it would stop?
Response: Richmond needed to be developed and completed to present a state-of-art showcase plant and also to demonstrate the complete turn-key approach. This was essential to allow potential customers to see the technology for themselves and better increase the potential for obtaining debt financing for future plants. Also, see (iv) and (v) below.
ii) Question: How much money has been received to date from the dilution activity?
Response: Monies raised up to last year are shown in the Form 20-F (Annual Report, dated April 30, 1998). Current numbers aren't available but will be released in upcoming fiscal year end audited report 20-F for April 30, 1999.
iii) Question: What has/is the money being used for (capital expenditures, overhead expenses, other)?
Response: As indicated in latest financials released on 4/1/99, approx. 90% of the proceeds from the equity financing went to increasing company assets.
iv) Question: When is dilution expected to stop?
Response: It will stop once the first US$50 million of debt financing is in place.
v) Question: What is chief reason that dilution has significantly ramped up (some 12 million plus shares issued just in the past few weeks) over the last few months?
Response: This was mainly needed to payoff bills coming due for Richmond (some ~$5 million in placements). This has been necessary due to the fact that the intended sale for 50% the plant hasn't been completed. If it had been sold in the Nov./Dec. 1998 timeframe, the dilution suffered over the past few months would have been avoided.
vi) Questions: Is the assertion true that a large number (approx. 18) of liens exist against the Richmond plant?
Response: Yes, TT paid a general contractor (GC) for the services rendered, but the GC did not pay a number of it's subcontractors. Arrangements have now been made through the GC to pay the subs direct out of monies owed to the GC for extras to the base contract. It was indicated that TT may possibly have had a liability of 10% (~$50,000 total) of the total lien amounts (~$500,000), however this should be extinguished by the direct payments being made as referred above.
vii) Question: What is the status of the $6 million convertible debenture for Jessup & Lamont Securities Corporation?
Response: A total of 200,000 common shares and warrants to purchase 919,716 common shares were issued. Warrants are exercisable at a price of US$0.5219 per share at anytime until August 14, 2001, at which time the warrants will expire. It was indicated that they have done lots of prior business with TT, appear to be understanding of TT's current situation, and are being quite cooperative. Status of this debenture and others are indicated in the Item 9, Part 2(g) and Item 12 of Form 20-F (Annual Report, dated April 30, 1998). An update should be provided in the
upcoming April 30, 1999, Annual Report.
g) $200 million debt facility from Thermo Tech Ventures/ISMH.
i) Question: Can debt facility be used to pay for construction costs of Ham II, and any bills outstanding on Ham I and Richmond?
Response: Construction costs or outstanding bills cannot be funded directly by a debt facility. However, it is intended that the first US$50 million be collaterally secured by the existing and future assets of TT and can then be used by management as it sees fit and as agreed to by it's lenders. These costs or bills could then be paid indirectly. Note: It was described as being similar to getting a second loan on a house, whereby once funded, the money can be used as is deemed necessary.
ii) Question: Can debt facility be used to pay for overhead costs until company is cash flow positive?
Response: Yes, see (i) above.
iii) Question: Can funds be used to fund Trooper lawsuit, including settlement if require to do so?
Response: Yes, see (i) above.
iv) Question: Can funds be used for buyback of shares?
Response: Yes, see (i) above.
v) Question: What is the cost of this money and exact terms?
Response: This information will be provided when an initial deal is completed.
h) Harvey Ambrose deals.
i) Question: Status of Niagara and Oshawa projects?
Response: Separation settlement expected to be completed and announced by end of April (with no cash output to be required).
ii) Question: What is status of Harvey's approx. 22,000,000 shares?
Response: Shares intended to be returned to treasury.
iii) Question: Status of $750,000 haulage fees in October financials? Can we please get a breakdown of these fees?
Response: No more excessive Transfer Station costs to be incurred (as of Jan. 31, 1999).
iv) Question: What revenue was generated by Transfer Stations to offset their cost of operations?
Response: Approx. $250,000 of the$3.44 million revenue for nine months ending Jan. 31, 1999. In the future, revenues and cost of Transfer Stations should be about equal.
i) Trooper lawsuit.
i) Question: What is status?
Response: Remains in litigation (could realistically expect this to go on a year or two before final settlement).
ii) Question: Do you expect a settlement before the April 1, 1999, scheduled court appearance?
Response: Date passed and there was no settlement.
iii) Question: Can you give us an estimate of what costs and damages may be?
Response: Could potentially be small depending on proof of damages (e.g., were waste streams already setup? Did the company start building once the design and operations documentation was subsequently provided? What actual costs were incurred during the process?).
j) B.C. provincial taxes for Richmond.
i) Question: What is status of the $600,000 equipment tax?
Response: As this tax is not required on environmental friendly equipment in any other jurisdiction in North America, the company has submitted a letter of appeal to the Ministry of Finance with full backing from the Ministry of Environment. Currently awaiting a response.
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