Mechanical Technology Incorporated
Shareholder and Investor Update Call
January 30, 2020
Summary of Recent Developments
MTI has formed a new business unit, initially named EcoChain Inc. The purpose of EcoChain is to develop and monetize crypto currency mining facilities that can be powered by renewable energy.
Simultaneous with the formation of EcoChain, MTI invested $500,000 in Soluna Technologies Ltd. and MTI also retains the ability to make ongoing investments in Soluna.
Why did MTI decide to start a new business unit in crypto currency and the Blockchain powered by renewable energy?
Extensive work has been performed by the MTI management team and Board of Directors over the last three years to improve existing operations and to review potential acquisition and investment opportunities that could grow MTI and, most importantly, increase shareholder value. These efforts have resulted in MTI recording three consecutive years of profitability for the first time in twenty-four years.
During this time, extensive work was also performed to source high quality acquisitions that would be accretive to earnings, at a reasonable price. Many target opportunities were investigated; however, MTI was not prepared to part with our disciplined approach by overpaying for a target company that was not accretive to earnings.
With no logical acquisition target in sight, and with MTI generating capital and accumulating cash on its balance sheet, MTI’s Board of Directors declared a special dividend for its shareholders in March 2019.
Since that time, MTI – through an independent Investment Committee consisting of MTI Board members – began an analysis of potential growing markets we might enter where we could leverage our historic strength in renewable energy and monetize our approximate $50,000,000 in net operating loss carryforwards, while not paying a premium for market entry. This led us to review the economics associated with cryptocurrency and cryptocurrency mining. It is here where we found a big problem worth solving – how to accelerate the adoption of crypto currencies by reducing the cost of mining.
How is MTI approaching this opportunity and who is involved in our efforts?
MTI’s first step into entering this industry was developing a strategic relationship with Soluna Technologies, a Brookstone Partners portfolio company and the parent company of the Soluna family of entities. Soluna will advise and help manage our new EcoChain subsidiary in exchange for payment of a one-time fee and revenue-based payments. Soluna will deliver an investment, operations and management plan, which EcoChain will evaluate, to build out a pilot mine and prove out the business model of renewable energy powered cryptocurrency mining. Upon approval of an initial budget, EcoChain will fund up to $750,000 for the development of this business unit.
As previously mentioned, MTI also invested $500,000 in Soluna Technologies. This investment is consistent with MTI’s history of investing in innovative energy technologies. Upon Soluna’s delivery of the investment, operations and management plan to EcoChain, MTI will invest another $250,000 in Soluna. MTI, at our own option, may also invest up to $3,250,000 following Soluna consummating a large project finance closing with respect to the first phase of its mining and energy facility being developed in Morocco. Our investment in Soluna also provides MTI with the right, subject to certain conditions, to commit capital directly to the first 100mw of wind turbine assets associated with Soluna’s projects, as well as to associated crypto mining assets. The MTI Board believes, relative to other opportunities reviewed by the Board, that this opportunity will provide a strong, risk-adjusted return with the ability to monetize MTI’s net operating loss carryforwards which approximate $50,000,000.
Provided the initial stages of EcoChain are successful, MTI will scale our commitment to mining with additional resources. This will depend upon a number of factors, including capital availability. MTI’s Board of Directors and management team are cautious on where future capital might come from as well as, most importantly, the cost of capital and its impact on total shareholder value. The MTI Board will continue to apply the same disciplined approach in reviewing any future capital needs if, and when, we are successful in our pilot mine project.
What can you expect from MTI and EcoChain and what is important for you to track?
MTI will continue to report our financial results, including updates on our MTI Instruments business, on a quarterly basis. Supplemental calls specifically focused on the development of EcoChain’s cryptocurrency business will be scheduled as we have news or developments to report which are worthy of your time.
Transparency is extremely important to us – initially our communications will center around key milestones and the development plan for the set up and operation of the EcoChain mine. We will then move progressively towards updates on our activity as we build direct operating experience. As we move into the operational phase of the EcoChain business, we plan to report the total number of coins mined and the average revenues per coin; as we plan to monetize all coins produced (since we will not be in the business of accumulating coins on our balance sheet for speculative gains). We will also be reporting on the key components and total cost of mining, as well as our break-even point.
The next EcoChain supplemental call will be focused on key decisions regarding the location of the EcoChain pilot mine and associated decisions necessary for its build out and operation. We currently expect this call to occur before the end of the first quarter 2020.
We will soon be releasing a website dedicated to our crypto currency activities. For further updates, please visit our website and sign up for our newsletter at https://www.mechtech.com.
MTI Investor Relations