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Editors' Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Investing in "penny" stocks can be extremely harmful to your fiscal health. This article will detail the investment thesis behind Integrated Environmental (OTCQB:IEVM). While I believe this is a great opportunity, it is by no means a sure thing. Before you commit any funds to this idea, I encourage you to use prudence when determining the size of your investment. This is a high-risk/high-reward micro-cap story. Your funds could grow multiple times over, or they could decline dramatically.

As investors, we are all constantly looking for "the next big thing," the "home run," or the "10 bagger." We have all heard tales of people that owned great companies when they sold for pennies on the dollar. I remember well during the stock market bust of 2000-01 when the Internet stocks traded at tiny prices. Anyone remember single-digit Amazon (NASDAQ:AMZN) or Priceline (NASDAQ:PCLN)? Most prudent investors have learned well to avoid penny stocks as they are often companies that are priced that way for a reason. However, we have also all seen penny stocks that exploded to obscene valuations based on hype and momentum alone. Often times, these "story" stocks have promotion companies behind their rise and become "pump and dumps" as there are really no fundamentals behind the story.

The purpose of my article today is to introduce the investing public to Integrated Environmental. I consider IEVM to have the greatest potential upside of any penny stock that I have ever seen. The company is one of the most non-promotional that I have ever seen. Thus, the title of this piece.

Let's begin with management. IEVM's chairman and CEO is David R. Lavance Jr. LaVance is also the chairman of the board of Hologic, Inc. (NASDAQ:HOLX). Hologic is a $6 billion medical device company. When LaVance began his tenure with HOLX the company had a market capitalization of roughly $80 million. I would say that the company has been a home run under his chairmanship. I would challenge anyone to find a penny stock with a better management pedigree.

Now, let's discuss what IEVM does and the potential it has as a company to be an even bigger home run than HOLX. 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, sanatizing 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.

So now that we know what the company produces, let's investigate the potential market uses for these and how the company has succeeded thus far. IEVM recently issued a press release updating the market on its progress in the oil and gas market. Unfortunately for their shareholders, the company released this news in a way that made it difficult for the common investor to understand. This news was basically "game changing" for the future of this little company. I would equate it to a small biotech stock getting FDA approval to sell their experimental drug.

I believe that the company was deliberately cryptic in its descriptions due the competitiveness of the market and the desire to preserve customer confidentiality. The company announced that they had recently delivered an order into the multibillion-dollar market of biocide treatment of oil and gas production water. Think the clean up of fracking water. I am sure most of you have heard about the environmental concerns of fracking. IEVM has a solution that cleans the water used in the process as well as cleans the bacteria inside the well itself.

In their release, the company announced that for the past several months IEVM's product was being tested by an oil service company in conjunction with their water services company. These test results showed that the production water treated with Excelyte™ was bacteria-free and had a higher viscosity profile than production water treated with chlorine. The viscosity of the treated water is an important characteristic since it needs to be at a great enough level to initiate and propagate hydraulic fracture as well as to carry sand or other proponents into those fractures to enhance the production of oil and gas. Based on the test results, the water services company placed a sales order with IET to provide Excelyte™ to treat production water to be sold by the water services company to a producer for a for a specified frac. The company is scheduled to deliver Excelyte™ to the water services company over the next five month period, the estimated time required for the frac job to be completed. An order with a five-month delivery period will almost certainly be this company's largest to date in the industry.

Hydraulic fracturing is a multibillion-dollar industry and IET's products have proven to be superior to alternatives. I expect going forward that their revenues in the space should show outstanding growth rates that will solidify their position as a leader in this high-growth industry. Due to their initial success with this company, IEVM has received numerous inquiries from other major U.S. oil shale basins as the need for biocide is indeed great and the market opportunity huge.

In determining the proper valuation for a development stage company, the size of the market opportunity is almost as important as the financial metrics of the company itself. In setting my target prices for IEVM, I will use initially only the oil and gas opportunity for valuation. While the company's products have other commercial opportunities, I believe the oil and gas market opportunity can provide enough justification for a much higher valuation and it is the area that the company has seen the most success thus far.

According to the company's most recent 10-Q, the company has roughly 228 million shares outstanding. At a recent quote of $0.10, that gives the company a market cap of $22.8 million. While doing my research, I came across this interesting article that discusses the size of the fracking market. This report gives us some great statistics to show the size of the market and also serves to remind us of the risk factors associated with an investment in a company that serves this market. Its main premise is to warn us of the environmental risks of fracking. In doing so, it tells us that there are currently 82,000 fracking wells operating in the U.S. alone. A typical fracked well will use as much as 500 gallons of biocide per week. Figure that as 26,000 gallons per year. If all 82,000 wells used 26,000 per year, you have a market opportunity for biocide alone of 2,132,000,000 gallons. The cheapest solution used now is bleach, which is roughly $3 per gallon. This gives you over a $6 billion market opportunity on an annual basis. If IEVM captures just 1% of this market, they are looking at $60 million a year in revenues.

The fracking by-the-numbers report also details 280 billion gallons of waste water produced by the wells in calendar 2012. I cannot imagine the size of the market opportunity for treating this, but I imagine it to be enormous as well. The company announced in their press release that they had expanded their production capacity in Utah alone to 100,000 gallons per month. While we do not know pricing and margins of yet, if we use a less expensive price than bleach of $2 per gallon, Utah alone could generate $200,000/month in revenues.

In June of this year, the company put out a press release that detailed their purchase of 19 Ecaflow™ machines for $190,000. IEVM essentially bought back an inventory of their machines from a customer who was not using them. This customer purchased them from IEVM years ago when the company was attempting to be a capital equipment company as opposed to their current business plan where they sell the consumable fluids that the machine's produce. Each of these machines has the capacity to produce over 1,000 gallons of Excelyte™ per day. So assuming they have no other inventory, they currently have roughly 5 million gallons of capacity per year. If they sold all they can make from these machines alone, they could show $10 million in revenues in 2014. I cannot imagine they would make this size of capital investment if they did not believe they would soon have orders for this capacity.

On Dec. 16, Environmental Leader released an article explaining the process of using the solution as a fracking disinfectant along with it's potential in the oil and gas industry. For 2014, I am forecasting the company to generate somewhere around $4-$10M in revenues. This will likely be 15-80x the amount of revenues generated in 2013. The company currently trades at 144x sales. If we choose a more conservative ratio of 50x, this would value the firm at $200-$500 million. While that may seem excessive, it would not be uncommon in today's market for development stage companies with this kind of potential. My 12-month target is $1.5, which would value the company at $342 million. I think this compares favorably to some of the other hot market development stage companies in both market opportunity and potential such as those in the 3D printing space.

Longer term, I see this company producing $200 million in revenues. Top consumable companies such as Procter & Gamble (NYSE:PG) operate with greater than 50% grows margins. As a consumables company, they likely could operate with 50% gross margins with a 17% net margin, which would produce roughly .15 per share in EPS. The stock could easily trade at 70x that figure, which would equate to at $10 stock. All these calculations are based on the oil and gas opportunity alone. As the company grows and becomes profitable they could expand their marketing to their other exciting opportunities.

IEVM's other major market is in the battle against the super viruses. As mentioned above, their EPA label is one of if not the most comprehensive in existence. Their product kills these deadly infections and viruses in a safe and effective manner. The uses of the product in the arena are extremely numerous. How many times have you heard about MRSA in hospitals? Just do an Internet search on news articles and you will be amazed how prevalent this super bug is. USA Today and CNBC both recently did big stories on super bugs. IEVM's product is an effective treatment on all these and more. The market potential for this vertical is obscenely high.

Ever hear about the norovirus on cruise ships? Yes, they kill that too. So for this market opportunity, according to AHA.org, there are 5,724 hospitals in the U.S. alone. Each of these would on average use approximately 500 gallons of Excelyte™ per day. That is over a billion gallons per year. Once again, another multibillion-dollar market opportunity. Other potential markets for this application would be 16,100 nursing homes in the U.S., the 5,000 ambulatory surgical centers, or the 230,000 medical practices.

Like many small development stage companies, IEVM has needed to raise capital. It recently completed several private placements that I believe, along with their recent successes in oil and gas, could propel this company to positive free cash flow as soon as calendar 2014. I encourage everyone to examine their website. While it's not the best and not updated as frequently as I would like, I assure you the product details are impressive. This link will take you to a corporate presentation that you will likely find useful (located on the right side of the page).

Source: Integrated Environmental: The Greatest Story Never Told