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  • OriginOil's Latest Tech Results Suggest Big Growth For 2014-2015

    Recently OriginOil (OTCQB:OOIL) announced that the company's GEN 2 Clean frac system landed in LA. After realizing major success from its smaller GEN 1 system, OOIL has stepped the game up in a BIG way! This new system can process more than 10,000 barrels of oil- and chemical-laden frack water each day showing that OriginOil's CLEAN FRAC system is not only scalable but still small enough in comparison to other frac treatment systems to actually fit into a 40ft container according to the company.

    Furthermore, the company recently reported that it had found even more favorable results from the demonstration of its CLEAN FRAC system and how its energy saving ability is far superior to what the market currently offers. "We knew from early internal lab tests that CLEAN-FRAC™ has outstanding capabilities. Now those results have been verified in a demonstration-scale system by Lizard Analytical Laboratories, an independent laboratory located in Grand Junction, Colorado. We are now scheduling multiple customer site trials and intend to continue to publish performance results and case studies from these test sites.," stated Lee Portillo, VP of Engineering for OriginOil.

    Of note, the CLEAN FRAC system was able to remove: 99.5% Turbidity 90.3% Suspended Solids 90.5% Oil & Grease EWS It wasn't that long ago when the company was just beginning to gain traction in the market for clean fracs technology and since then OriginOil has been increasingly growing by leaps and bounds. OOIL has created a system once capable of cleaning up to 1000bpd and successfully scaling it up to handle more than 10X the processing capacity and roughly half a million gallons of dirty, oily water per day! Bear in mind that it's not just how much the system can process but actually how it processes. OriginOil announced earlier this year that in company testing, EWS was found to efficiently generate chlorine dioxide (CLO2) an important pre-treatment step for frack flowback, produced water and other applications. The company intends to make this process part of its standard CLEAN-FRAC™ product offering.

    The huge advantage of this is that through OOIL's process, the system can actually help in the process of turning sour crude into sweet crude and in the case of the oil industry, sweet crude commands up to $15 more per barrel. This is an obvious advantage for fracking companies to utilize the OOIL CLEAN FRAC system before others and give a competitive edge to the company. Furthermore, OriginOil has stated that its Electro Water Separation™ technology can be utilized to continuously remove oils, suspended solids, insoluble organics and bacteria from produced or 'frack flowback' water and can save as much as $200,000 per frack job. As far as the overall EWS process is concerned, the main advantage for Origin is its ability to treat water using much less energy why also making it possible to re-use this water for future frack operations.

    A Wall St. Journal article cites that companies are racing to find ways to recycle the water used in hydraulic fracturing, chasing an emerging market that could be worth billions of dollars. It takes between 70 billion to 140 billion gallons of water to frack 35,000 wells a year, the industry's current pace, according to a 2011 report by the Environmental Protection Agency and the costs of actually providing the original water could be in the 6 figure range as one Oklahoma City-based oil driller demonstrates. According to Continental Resources Inc. fresh water delivered to a drilling site costs between 10 and 14 cents per gallon, which alone can cost upward of $400,000 per fracturing attempt.

    And on the flip side such as in the Northeast, oil companies have to pay up to $8 per 42-gallon barrel to contractors to haul waste-water for disposal elsewhere! Now that OriginOil has not only found a successful way to clean frack water for its reuse on site, the company has done so using far less energy per barrel. This offers fracking companies a 1-2 Punch for cost savings and Eco-friendly operations while giving them an opportunity to achieve a "sweeter" result when talking about the quality of crude produced. According to the U.S. Department of Energy, an average of 3 barrels of contaminated water is generated for each 1 barrel of oil produced.

    In the United States, the average is 7 barrels of water. Greentech Media reports "energy companies pay between $3-$12 to dispose of each barrel of produced water, implying a potential world market value between $300 billion and $1 trillion per year." Now OriginOil has kicked things into high gear with its new, scaled up CLEAN FRAC system, which opens massive market opportunity for the company, in my opinion. Furthermore, OriginOil's EWS system has shown to be very energy efficient as well. Halliburton (NYSE:HAL), for example is a much larger company with a multi-billion dollar market cap and a share price nearly 370 times higher than OOIL, however not only is OOIL's system half the size of HAL's but pound for pound or should I say barrel for barrel, the EWS CLEAN FRAC technology buries the competition's energy efficiency by more than 60% with all other variables remaining constant.

    The EWS technology both saves money through cleaning frack water flowback and it also curbs energy usage on project sites by more than half that of the major market players. The company has been undertaking intense research and development during the first half of the year to quickly build on its EWS technology as noted by the most recently filed quarterly report. OriginOil's focus has been on an aggressive licensing and private label strategy as opposed to a simple equipment sales program. According to management, they see this as much more fruitful long-term revenue generation strategy and for early investors, this could mean much larger upside potential once the company signs new contracts for future licensees.

    Aug 18 10:32 AM | Link | Comment!
  • Vaporin Inc Comes Out Swinging In Q1 Looking To Gain First Mover Advantage And Capture Market Share In Burgeoning Vaporizer & E-Liquids Industry

    Aggressive sales, coast-to-coast distribution, and a diversified revenue model are all key traits of a company working to become a market leader in any industry. In my mind Vaporin, Inc. (OTCQB:VAPO) is one of the top companies to view within the space for a few very specific reasons that make it a #1 contender to quickly gain market share within this billion dollar industry:

    Key features to why I think Vaporin is a #1 contender in the space

    1. VAPO has implemented national retail distribution channels
    2. The company offers a diversified suite of vaporizers & e-liquids available online, in stores, and even in vending machines.
    3. Within its first 2 month of operations under the new business model VAPO has already generated $183,000 in revenue.
    4. Vaporin has pushed to become one of the most recognizable brands in convenience stores nation wide through the company's point of sale advertising strategy.
    5. Vaporin has entered into additional markets to include the ever-growing marijuana space.

    If we look at this vape industry as a whole, it's just starting to gain in popularity as you'll see later in this article. Ironically, as big tobacco spends billion of dollars to gain ground in the e-cig space (most notably Reynold's America's $27.4B acquisition of Lorillard), they may actually soon find themselves behind the 8-ball when it comes to vaporizer sales. In fact as you'll read, the vaporizer & e-liquids space has quickly begun to grow, taking both market share and shelf space away from these products. In a recent review of the industry by Wells Fargo analyst Bonnie Herzog, the "Vapor Category" is starting to more meaningfully displace combustible cigarette volume. A direct result of this decline can be seen through the recent drop in sales of Blu e-cigs by more than 35%.

    Christopher Growe, an analyst with Stifel Nicolaus, said the earnings decrease led him to lower his fiscal 2014 earnings forecast by 9 cents to $3.33 a share.

    "We believe the blu eCigs category growth has been pressured by the proliferation of 'open-tank' vapor products…We estimate a 24% revenue decline for the year (for blu eCigs) and a $55 million operating loss for the division as the company invests heavily in the blu brand globally."

    This alone shows the massive impact that the vaporizer market has had on a once dominant player (NYSE:BLU) who held over 40% of the e-cig market.

    Vaporizers Quickly Gain Mass Appeal over E-Cigs

    Numerous retailers across the country have identified that many consumers have tried e-cigs and are either dissatisfied and went back to combustible cigarettes or "graduated" to personal vaporizer products. For example, convenience stores rank as one of the largest marketplaces for e-cig sales ($530M) however vaporizers are quickly taking up more "real estate" not only from the shelves but from many of the point of sale advertising spots as well. Analyst Bonnie Herzog is one who thinks that the first quarter of 2014 is where we start to really see the vapor trend take hold and drive the combustible cig decline rate at an accelerated pace.

    "Bottom line, retailers are starting to either discontinue or take shelf space away from disposable e-cigs to make room for personal vaporizers given their attractive growth & margins."

    In previous reports, Herzog found that e-cig sales declined 12.9% in the four weeks ended July 5 from the prior period because of lower prices and as smokers migrated to vaporizers. Herzog estimates that tanks and e-cigarettes have a combined market of about $2.5 billion with $1.4 Billion attributed to e-cig sales and $1.1 Billion to Vaporizers; she believes that tanks will overtake the latter in the next decade.

    Retailers, Ms. Herzog said, are even starting to discontinue or take shelf space away from e-cigs to make room for tanks, "given their attractive growth and margins." In fact, one of the most prominent retailers of these products, convenience stores, have also realized slower growth rates in both e-cig sales as well as traditional cigarette products.

    (click to enlarge)

    (click to enlarge)

    "Importantly, we note Vapors-Tanks- Mods (OTC:VTMS) are under-represented in Nielsen but are growing 2x faster than the vapor category based on our "Tobacco Talk" survey. Investors have been questioning if the investments that are behind vapor justify a possible longer time line to contribute to the bottom line. While we remain bullish on the category long term, we acknowledge near-term e-cig profitability could be soft, particularly as volume moves to VTMs. Bottom line - we continue to believe vapor consumption could surpass combustible cigs in the next decade."

    -Bonnie Herzog, Wells Fargo Analyst-

    Even though vapor tanks are thought of by consumers as being hunkier than the standard e-cig, they do allow smokers and would-be quitters to customize nicotine levels, as well as to puff thousands of flavors. A cult-like following is likely to grow as "vaping" becomes more fashionable and more stores carry the battery-powered metal tubes in a wide range of colors. As a result e-cigarette sales are slimmer this year, prompting manufacturers to invest in the next generation of inhalant products ... as well as smokers.

    Aggressive Implementation of Point of Sale Advertising to Gain Market Share

    There is however something to be learned here from the "spirit of" e-cig industry and for Vaporin that "something", is an aggressive point of sale or POS advertising. Think about Blu e-cigs when they first came out they targeted everything from gas stations to head shops, and you really couldn't go anywhere without seeing some kind of marketing material. This paired with a first-to-market advantage gave Blu the upper hand in the e-cig space when it first became popular. Now that e-cigarettes have begun to fall by the wayside as a result of the introduction of the vaporizer, Vaporin is using the same strategy as Blu used early in its development not only to gain an early market share in the vape market but also to establish itself as the leader in the vaporizer & e-liquids industry as opposed to e-cigarettes.

    Through its aggressive POS driven marketing strategy, VAPO has begun to develop sophisticated distribution channels that span the nation. In its first quarter report, Vaporin identified that a key distribution tactic moving forward will be through convenience stores in densely populated geographies such as the New York Metropolitan area with the aid of "well-known and established distributors" in addition to distribution outlets throughout the US.

    I had the pleasure of speaking with company CEO Scott Frohman who would not specifically name his east coast distributor but did express that they are "the largest in the Northeast" with distribution from Pennsylvania up through New England. He also had outlined the company's national roll-out strategy for distribution to the mid-West and West Coast via several channels that have been established this year.

    This demonstrates the company's ability to not only create a footprint but to also rapidly expand on it to create the most amount of brand awareness for Vaporin. By focusing nationally, VAPO should be able to grab market share that much quicker allowing it to truly achieve that role as the market leader

    The image above is a Vaporin display in the Danbury Mall.

    Trend in Online Retail Suggest More Growth Potential for Companies in online marketplace

    This leads me to the next point that Mr. Frohman was incredibly passionate about which is Vaporin's online sales model. According to Vaporin's CEO, his experience in marketing has allowed the company to capitalize on the "membership program" approach not only to set up a strong stream of repeat revenue but also to implement a "customer base building" strategy. Once customers sign up for the vaporizer trial, they will continue to receive e-liquid packages each month to follow. Mr. Frohman said that Vaporin has had "thousands of new trial customer sign-ups". The monetization on this would be paramount based on the overall production costs of these e liquid bottles and the general lack of effort put into cancellation after initiating a trial offer by most consumers.

    Coinciding with the online strategy is Vaporin's traditional online sales approach. Directly on the site, a customer can order a vaporizer kit or replacement e-liquids and have them shipped (for free) directly to their homes. According to a recent Forrester Research e-retail forecast, found that increased shopping by consumers on mobile phones and tablets will help propel the growth of online retail sales. Increased spending by digital natives-consumers who grew up using the Internet from their earliest years-will also contribute to the growth as they move into their prime spending years. Forrester's report showed e-retail's share of total retail sales will continue to inch upward, from 8% in 2013 to 11% in 2018. The dollar growth from the actual 2013 figure of $263 billion to the forecast $414 billion for 2018 is 57.4%, places VAPO's sales model in line with the current market trend poised for growth over the next several years.

    Diversifying through Innovation: New Vending Machine Distribution

    As another revenue driver, VAPO also has announced that it would begin distributing product through an exclusive agreement with Seaga Manufacturing, via its Vapestation vending solution. The focus is to set up these vending machines in highly populated locations that "attract consumers over the age of 21". These would include places like night clubs, strip clubs, and bars. In May, Vaporin deployed the first of its Vapestations initially being rolled out in South Florida, Las Vegas, & Illinois.

    Until recent, some states like California wanted to ban the sale of vapor products in vending machines. That's all changed and in a recent Sacremento Bee article, the writer explains how a proposal to ban the sale of vapor products in California vending machines died in an Assembly committee Wednesday as both sides accused the other of advancing the interests of tobacco companies at the expense of public health.

    Now that this has been decided, the market is open for new companies to implement distribution through these machines. This distribution strategy provides a key consumer demographic with access to Vaporin's products in areas that otherwise would not supply them. The deployment of these machines is not only a competitive advantage, but will also add another revenue stream to VAPO's business. In my opinion, this is probably a minor revenue driver at this time simply for the reason that there are states that do not allow these kinds of machines but nonetheless, Vaporin does have another way to monetize its product mix and expand further into the vaporizer and e-liquids market.

    Diversification Through Alternative Markets: Vaporin and the Marijuana Industry

    Recent news of agreements with Terra Tech (OTCQB:TRTC) shows that Vaporin has also made an entry into the cannabis marketplace. In the June release, Terra Tech states that it will purchase Vaporin's proprietary vaporizer products for resale throughout their cannabis dispensary network in California, Colorado, Washington and Oregon. Vaporin "anticipates generating revenue from this distribution agreement during the third quarter of 2014."

    More states are seeing the benefits to legalization of both forms of marijuana (recreational & medicinal) and this being said, New York, Florida, and Illinois for instance, have all implemented programs that revolve not only around the medical aspect but also very specific delivery methods of the drug that do not involve actually smoking the plant. Since vaporizing is considered a smokeless alternative, the market potential for Vaporin has potential for growth as more states continue to realize the overall benefits of implementing an MJ program.

    Putting it All Together: Numbers Don't Lie

    Based on VAPO's most recent 10-Q, the financial results suggest favorable consideration to meet its goal of added expansion. Revenues for the quarter show that the company was able to generate roughly $180k. Assets show to have increased by more than 150% due mostly to a jump in accounts receivable and inventories. As of March 30th, inventories equated to roughly $658k, which was an increase of almost 110% above those in the previous quarter.

    In addition to the above, Vaporin's financing activities have allowed the company to obtain roughly $3.5million through equity purchases at a pps of $0.10 and without warrants. It shouldn't be a surprise at this point the obvious benefit to additional capital, which should firm up the company's ability to aggressively go after increased market share through its point of sale advertising strategy. For companies looking to become market leaders and build brand recognition, a top-heavy approach to creating a strong advertising campaign is a cornerstone taking a majority of customers in the market. Blu, for instance, spent $40 million in 2013 on its advertising and was known as the market leader for e-cigs. Through a similar marketing approach, Vaporin has shown that it's willing to spend the money in order to become the market leader for vaporizers and e-liquids.

    Note that Vaporin underwent its name and symbol change early in February, which means it has been able to accomplish all of this in a very short time frame. I for one will be looking for its next earnings report to confirm that the company has (or has not) obtained an increase in market share while continuing to drive its revenues.

    The Risks

    Obvious risks with Vaporin include higher volatility in lower priced stocks and the legal ramifications that coincide with the marijuana industry. Additionally, it would seem that the FDA has taken an active role in monitoring the health aspects of vaping but I believe it's still too early to tell what those could actually be. Vaporin has also shown several potential risks through its latest quarterly filing. The company has identified an increase of $778,000 in operating expenses, which are most likely due to an increase in advertising and promotion expense as a result of the aggressive point of sale advertising and online media development; the filings show that the company spent roughly $215,000 on this alone.

    VAPO also saw an increase of about $529,000 in general and administrative costs (which includes an increase in stock based consulting of $255,000) and an increase in professional fees of approximately $31,000. A net loss was realized as a direct result of top-heavy efforts to grow and develop operations, as well as gaining market share. Similar to Blu brands approach, Mr. Frohman explained that the company's focus is to rapidly gain market share both strategically and financially. His approach to a top heavy advertising and development plan should pave the road for Vaporin to reap the rewards once this infrastructure is securely in place at a national level.

    Conclusion

    In the case of VAPO, the company has already foreseen the consumer shift from e-cigs to vaporizers & e-liquids and accordingly has begun to establish itself not only in the traditional vape space but has also moved into the cannabis industry. Additionally Vaporin has focused on growth driven opportunities to obtain a larger market share. Despite the previously mentioned risks regarding market volatility, financial loss in the first quarter, and the current state of the cannabis & vapor industries, it appears that management firmly believes the current mix of national distribution, online "customer base building" efforts, an aggressive point of sale marketing program, and additional opportunities in the marijuana sector should put Vaporin as the #1 contender to grab a larger share of the vaporizer & e-liquids market.

    My final thought on this is that Vaporin has in fact identified an opportunity with the launch of a vaporizer & e-liquid product and based on the growing mass appeal of vaping compared to the previous popularity of e-cigs, VAPO has made it very clear that they are on the path to becoming a strong company. One thing is for sure: companies are releasing second quarter earnings right now and I'll be interested to see how much growth Vaporin has seen over the last 3 full months of operations. If it keeps up the pace the company had during the first quarter, I personally believe that VAPO should begin to emerge as the vaporizer & e-liquid market leader.

    Contributor's 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.

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

    Tags: TRTC, VAPO, long-ideas
    Aug 11 11:10 AM | Link | 1 Comment
  • OriginOil Attracts Potential Customers Through Latest CLEAN FRAC Demo

    Yesterday OriginOil, Inc (OTCQB:OOIL) announced continued success from demonstrations of its CLEAN FRAC technology. Not only does it boast an incredible ability to remediate dirty frac water but it can also do so at extremely superior energy usage rates.

    In yesterday's announcement, the company found even more favorable demonstration results from third party testing company, Lizard Analytical Laboratories. Results of the study can be found HERE. Of note, the CLEAN FRAC system was able to remove:

    99.5% Turbidity
    90.3% Suspended Solids
    90.5% Oil & Grease

    "We are now scheduling multiple customer site trials and intend to continue to publish performance results and case studies from these test sites.," stated Lee Portillo, VP of Engineering for OriginOil.

    Bill Charneski, President of OriginOil's Oil & Gas Division explained that many of Origin's potential customers have been asking for these third party results which the company now has available. The expectation now is that these results will accelerate Origin's sales process which, in my opinion is the obvious next step after posting such positive results over the last few months from several third party testing facilities.

    When it comes to energy efficiency, OriginOil, Inc.'s (OTCQB:OOIL) EWS technology has shown to be 60% more energy efficient than that of Halliburton, a big name in the clean frac water industry. BCC Research reports the market for equipment to treat wastewater from fracking operations and conventional wells is predicted to grow 9% by 2018...So let's get to the numbers:

    Even though Halliburton (NYSE:HAL) is a much larger company with a multi-billion dollar market cap and a share price nearly 370 times higher than OOIL, it's the developmental nature of OriginOil that supports what I'm about to state next:

    Not only is OOIL's system half the size of HAL's but pound for pound or should I say barrel for barrel, the EWS CLEAN FRAC technology buries the competition's energy efficiency by more than 60% with everything else remaining constant. These numbers aren't something to bat and eye at either. The EWS technology both saves money through cleaning frac water flowback and it also curbs energy usage on project sites by more than half that of the major market players.

    The Wall St. Journal cites that companies are racing to find ways to recycle the water used in hydraulic fracturing, chasing an emerging market that could be worth billions of dollars. It takes between 70 billion to 140 billion gallons of water to frack 35,000 wells a year. This is the industry's current pace, according to a 2011 report by the Environmental Protection Agency. But the costs of actually providing the original water and disposing of the dirty water could actually be in the 6 figure range as one Oklahoma City-based oil driller, Continental Resources Inc. demonstrates.

    In my opinion, OriginOil is quickly becoming a market leader not only for its waste water cleaning technology but also for its ability to achieve a higher cost savings above its competition. This should be a company to pay close attention to because based on consistent and positive demonstration results, sales could be right around the corner.

    Contributor's 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.

    Aug 08 9:49 AM | Link | Comment!
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