Follow Up: Integrated Environmental Technologies, Ltd. (IEVMFollow Up: Integrated Environmental Technologies, Ltd. (OTCQB:IEVM)
INTEGRATED ENVIRONMENTAL: Latest CEO letterhttps://ietltd.net/IET_Letter_to_Stockholders_1_28_2014.pdfdetails the firm's progress from a development stage company to a potential growth juggernaut. This not only affirms my belief in the future success of the company, but also leads me to believe that my $1.50 12 month target might turn out to be conservative.
Late last year, I published a report (https://seekingalpha.com/article/1915271-integrated-environmental-the-greatest-story-never-told) on IEVM, a microcap company that I believe has enormous potential for success. The company sells Anolyte disinfecting solution under the EcaFlo™ and Excelyte™ brand names and sells a cleaning solution under the Catholyte Zero™ brand name.
Both solutions are produced by the Company's proprietary EcaFlo™ equipment which utilizes an electrolytic process known as electrochemical activation to reliably produce environmentally responsible solutions for cleaning, sanitizing and disinfecting.
EcaFlo™ Anolyte and Excelyte™ are EPA-registered hard surface disinfectants and sanitizers approved for hospital-level use and are also approved for use as a biocide in oil and gas drilling. The company believes that it is the only manufacturer of anolyte disinfecting solution with an EPA-approved label that includes kill claims for the two most common types of CRE's carbapenemase (KPC) and New Delhi Metallo-Beta Lactamase (NDM), as well as C. diff spores, Tuberculosis and HIV.
OIL and GAS
The Company's greatest success to date has come in the oil and gas fracking market. In 2013, they focused on pursuing sales relationships in that market and as a result began delivering their Excelyte™ product on a regular basis to customers in Utah.
In his letter, CEO David LaVance, who also serves as Chairman of the Board of Hologic (HOLX), discusses the extensive testing process the oil and gas producers put Excelyte™ through. He also states that the results were positive and confirmed the efficacy of the product. There is no evidence that Excelyte™ harms wells, drilling equipment, or other fracking chemicals. Mr. LaVance also confirms the potential market opportunity and states that it could easily exceed 72,000 gallons per day per basin.
In my previous report, I mentioned an article referenced in Huffington Post,https://www.environmentamerica.org/sites/environment/files/reports/EA_FrackingNumbers_scrn.pdfFracking By The Numbers, which details the size of the market as well as many of the risk factors associated with fracking. On page 21 of this report, we find the following data:
|
STATE
|
Fracking Wells Since 2005
|
|
Arkansas
|
4,910
|
|
Colorado
|
18,168
|
|
Kansas
|
407
|
|
Louisiana
|
2,327
|
|
Mississippi
|
9
|
|
Montana
|
264
|
|
New Mexico
|
1,353
|
|
North Dakota
|
5,166
|
|
Ohio
|
334
|
|
Oklahoma
|
2,694
|
|
Pennsylvania
|
6,651
|
|
Tennessee
|
30
|
|
Texas
|
33,753
|
|
Utah
|
1,336
|
|
Virginia
|
95
|
|
West Virginia
|
3,275
|
|
Wyoming
|
1,126
|
|
TOTAL
|
81,898
|
Mr. LaVance writes that IEVM has had ongoing discussions with several oil and gas producers who are now interested in becoming customers. If a basin in Utah has the potential market opportunity of in excess of 72,000 gallons of Excelyte™ daily, we can then apply those numbers to the above data and conservatively assume the following:
|
STATE
|
Potential Gallons Of Excelyte™
|
|
Arkansas
|
264,611
|
|
Colorado
|
979,114
|
|
Kansas
|
21,934
|
|
Louisiana
|
125,407
|
|
Mississippi
|
485
|
|
Montana
|
14,228
|
|
New Mexico
|
72,916
|
|
North Dakota
|
278,407
|
|
Ohio
|
18,000
|
|
Oklahoma
|
145,186
|
|
Pennsylvania
|
358,437
|
|
Tennessee
|
1,617
|
|
Texas
|
1,819,024
|
|
Utah
|
72,000
|
|
Virginia
|
5,120
|
|
West Virginia
|
176,497
|
|
Wyoming
|
60,683
|
|
TOTAL
|
4,413,665
|
The market price IEVM charges for Excelyte™ varies depending on usage volume. The company does not publish this rate data as the marketplace is highly competitive. However, if we assume that most current wells are using something like bleach, which is approximately $3/gallon, this market opportunity is conservatively $4.8 Billion annually.
Below, is an example of an Ecaflow™ manufacturing machine.
Each of these machines is a stand-alone manufacturing device capable of producing 1200 gallons of product daily. The only resources necessary to create a manufacturing facility are power and a clean water source. No special sewage or by product disposal services are needed. The company believes up to 30 units can be set up in approximately 2,500 square feet of space.
We know from previous press releaseshttps://biz.yahoo.com/e/130619/ievm8-k.html that the company purchased 19 of these machines last June from a former customer who bought them when IEVM was selling machines as a capital equipment company.
The company also manufactures these machines. Conservatively assuming these 19 machines are all they have, that is an annual capacity of 8.3MM gallons that we know about for sure. At $3 per gallon, that is just under $25MM per year of revenue potential.
In his shareholder letter, Mr. LaVance writes that the company expects that they will secure a customer in a second basin in 2014. Two basins that could easily exceed 72,000 gallons per day in demand when fully developed could have this company selling 52.5 million gallons per year. At any price per gallon, this would represent astounding growth.
HEALTHCARE UPDATE
The shareholder letter also provides some exciting updates in the healthcare vertical. The company has worked with the Carson-Tahoe Regional Medical Center, in Carson City, NV, to complete a field test demonstrating the efficacy of the product in actual hospital conditions. The company expects the hospital to publish a paper in the spring of 2014 indicating the findings in the study which thus far indicate that Excelyte™ is effective in reducing and eliminating labeled pathogens in hospital rooms.
I am also pleased to find out that the company has a system for application methods currently being reviewed by the EPA for use in healthcare settings. If approved, this system will allow users to apply the product by means other than spraying and wiping, producing a more efficient delivery system to "kill" the harmful germs responsible for the plague of hospital-borne deaths and diseases. In addition, the company indicates they are in active discussions with potential partners for distribution into hospitals.
CONCLUSION
While IEVM remains a microcap story that carries a great deal of risk, I eagerly await the company's next update and reiterate my strong buy on this stock.