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  • Midwest Energy Emissions: Patented Technology Addresses $9.6 Billion Problem

    Midwest Energy Emissions: Patented Technology Addresses $9.6 Billion Problem

    We recently had a chance to get an update on Midwest Energy Emissions Corporation (OTCQB: MEEC) and their exciting new energy/technology growth story. MEEC develops and employs patented and proprietary technologies to remove mercury from coal-power plant emissions. Its technology has become extremely valuable because of the EPA's new regulations with respect to mercury emissions. The EPA's Mercury and Air Toxic Standards (MATS) rule requires that all coal- and oil-fired power plants in the U.S., larger than 25 mega-watts, must remove approximately 90% of all mercury from their emissions by April 16, 2015, with a potential one year extension to April of 2016.

    MEEC's patented technology has been shown to achieve mercury removal levels compliant with MATS at a significantly lower cost and with less operational impact than currently used methods, while preserving the marketability of fly-ash for beneficial use, a roughly $450 million industry annually, making it a highly attractive option for all utilities facing the mandated upgrade situation. In 2012, the EPA estimated annual MATS compliance costs to be roughly $9.6 billion for the 1,100 coal-fired plants and 300 oil-fired plants in the U.S. that fall under this regulation.

    The MEEC Sorbent Enhancing Additive (NYSEARCA:SEA) Technology

    MEEC technology is based on a patented process of injecting sorbent and proprietary sorbent additives into coal-burning systems both during combustion and after, so that almost all mercury is oxidized, making it much easier and more economical to remove in the exhaust stack. The ME2C system has the added benefit of preserving the usefulness of exhaust ash (called fly ash) as a cement ingredient, preserving or transforming a potential waste-removal cost center towards a profit center for its customers.

    Most current competing injection systems cannot do this at 90% mercury removal performance, and more recently developed competing liquid coal-treatment systems that can preserve usable fly ash create other problems, such as corrosion of steel before the solution has entered the boiler, which requires equipment repair or replacement, and revenue reducing idling of the plant for this maintenance. MEEC systems offer utilities a best in class solution, delivering a mix of low operating cost, low corrosion, high performance mercury removal, and saleable fly ash discharge.

    Intellectual Property

    Technology underlying the MEEC's systems has been developed through 20 years of innovation and field testing by the Energy & Environmental Research Center (EERC), a partially government-funded institution that employs some 300 scientists and engineers and is based in North Dakota. MEEC holds exclusive licenses from the EERC to 25 patents and patents pending in the U.S, Canada, Europe, and China that all last through 2025, providing the Company with a highly-defensible, long-term patent portfolio.

    Revenue Model

    MEEC operates under an attractive recurring revenue model, whereby it installs its sorbent additive, and sorbent feeder systems basically at cost, and then sells customers its additives and sorbents at solid 35% - 40% gross margins. Management has already contracted on over $30 million in recurring, annual revenues. In addition, management expects to be free cash flow positive in 2015, with significant FCF generation in 2016.

    Recent Updates

    During the second quarter 2014, MEEC announced the largest revenue quarter in the Company's history. In August 2014, the Company announced that it had raised $10 million in a private placement. According to management, based on its expectation with respect to significant free cash flows in 2015, the Company does not expect to tap the capital markets going forward as it will be able to self-fund its growth. Over the remainder of 2014 and fiscal year 2015, the Company expects to achieve the following milestones:

    1. Additional customer contract announcements in the U.S. and Canada.
    2. Possible penetration into the very large Chinese coal-fired electricity generation market.
    3. Achievement of cash-flow positive operations followed quickly by positive net earnings.
    4. Markets opening up due to increased global awareness of mercury coal-exhaust toxins.

    Investment Opinion

    MEEC is in the beginning stages of a large scale commercialization effort and will experience significant operating leverage as it grows its revenue base. At present, the Company has 13 units under contact out of an estimated 850 units nationwide, representing a penetration rate of 1.5%. Based on a market size of $2.5 billion in the U.S., a 10% penetration rate would represent $250 million in revenues, which is conservative given MEEC's best of breed, lowest cost patented technology. At 39 million shares outstanding at even one times revenues, that equates to a per share value of $6.41. Based on comps from the pollution and treatment control sector (2.3x sales), this estimate appears very conservative given all the investment positives and strong value proposition.

    In all, the Company is well positioned in an industry with strong, best of breed, cost effective, patent protected technology with high barriers to entry coupled with regulatory requirements which will drive sales. The Company has a recurring revenue operating model with high operating leverage which will drive margin expansion once it is fully scaled. Additionally, the Company is led by a veteran team of energy executives (56% insider ownership) with decades of experience in the space.

    Paul Silver

    Paul Silver is the Managing Director of Research at Wall Street Resources. Previously he has been in auditing with a Big Four accounting firm in New York City, a sell-side research analyst for two global investment banks in New York City including Salomon Smith Barney and UBS Paine Webber. At Salomon Smith Barney he was a member of the firm's research team covering Real Estate Investment Trusts that was consistently ranked #1 by Institutional Investor magazine. Mr. Silver has written extensively on small cap equities and is a contributing writer to numerous publications is a co-manager of the WSR High Alpha model portfolio which has resulted in a 127.39% average annualized return from inception on March 13, 2009 through December 31, 2013. For more information visit: http://www.wallstreetresources.net/High_Alpha_Performance.aspx

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Aug 22 8:47 AM | Link | Comment!
  • National Automation Services Has 3x Return Potential

    National Automation Services has 3x Return Potential

    We recently had a chance to speak with Mr. Robert Chance, CEO of National Automation Services to get an update on his company. National Automation Services, Inc. (OTCQB: NASV) is a public holding company that is focused on the acquisition and integration of private companies in the billion dollar oil and gas services sector. Management's end game is to turn NAS into a large vertically integrated energy services organization that will be a large and growing beneficiary of the domestic energy boom. The acquisition targets must meet management's strict underwriting investment hurdles, including track records of long term, stable, and profitable operations. Additionally, they must be accretive to shareholder value, offer synergies (providing additional revenue streams and cost savings) and be geographically compatible with the other wholly owned subsidiaries. The other significant benefit to be recognized from this rollup strategy is the private-to-public multiple expansion that NAS would capture.

    Once acquired, each wholly owned subsidiary will operate as its own entity with existing management retained. This allows the Company's management to focus on maintaining quality while increasing current levels of revenues and profitability. Each subsidiary provides their financials to NAS and the Company will make site visits to ensure companies are in compliance for reporting and monitoring purposes.

    Deals

    In June 2014, the Company announced the completion of its first acquisition, JD Field Services, in an all-stock deal and debt assumption. JD provides oilfield services to the oil and gas industry primarily focused around those activities that are related to the drilling, operation and maintenance of the well-site. JD is licensed in all states west of the Mississippi River including Alaska to do trucking, but is focused primarily in the Rocky Mountain Region. Oilfield services provided include heavy haul, water haul, and rig moving services as well as equipment, supplies, and specialty long hauling services. JD also provides oil and gas equipment rental services, hot shot, roustabout services and construction site development services. JD also operates a fabrication division that builds special-order oil and gas equipment and trucks for customers.

    JD Field Services has approximately 130 employees and a three year historical average of $24 million in annual gross revenues, 2013 EBITDA of approximately $5.7 million, and net assets valued at around $7.5 million.

    The Company is currently working on two additional acquisitions, having signed purchase and sale agreements with Devoe Construction and MonDak Tank, Inc. Devoe was recently awarded the Prestigious Mercury top 100 fastest growing private companies in Colorado. With more than $1 billion being spent on infrastructure in the Denver-Julesburg Basin, this area is primed for growth. MonDak is located in in Williston, North Dakota, right in the epicenter of the Bakken and Three Forks Shale play. MonDak is a widely respected contracting outfit in their field and have an excellent management team that will continue on with NAS after the purchase. The Company expects to finance these acquisitions with cash.

    According to the Company's initial unaudited review of Devoe and MonDak's books, they are reporting 2013 revenues of $15 million and $7.1 million and EBITDA of $2.2 million and $2.2 million respectively. Together with JD, the parent company would have reported 2013 revenues of $46.1 million and 2013 EBITDA of $10.1 million.

    Future Activity/Deal Flow

    Additionally, the Company expects to continue to add to its acquisition pipeline, with four more additional acquisitions over the next 12-18 months funded with a combination of cash, debt, and stock. According to management, some of these acquisitions may be significantly larger than the ones currently on the table. In addition to the expected organic growth from all wholly owned subsidiaries, the Company fully expects to generate additional sales and cost savings via synergies provided by the vertically integrated structure. Management intends to reverse split the stock 200-1 (maximum) and uplist to the NYSE MKT by the first quarter 2015.

    Funding

    The Company recently announced that it has entered into a five year $10 million (straight debt facility) agreement with a National Commercial Finance Company facilitated by Wellington Shields out of Manhattan. Six million dollars will be used to retire JD Field Services obligations, leaving the rest for working capital and corporate uses. Management indicated that Wellington Shields has committed to providing $30 million in debt and $30 million in equity to finance additional acquisitions.

    Investment Opinion

    Shares of NASV currently trade at $0.032 per share on the OTCQB, with 751,987,293 shares outstanding, making a market capitalization of $24,063,593. Holding the market cap constant, post a 200-1 reverse split, this share count would equate to 3,759,936, or $6.40 per share (exceeding the $5.00 minimum price to list on the NYSE MKT).

    If we take a look at a few publically traded comps in the oil and gas service sector, we can try to size up where NASV stands. For instance, one of our comps, Nuverra Environmental Solutions, Inc. (NYSE: NES) provides environmental solutions for unconventional oil and gas exploration and production, including the delivery, collection, treatment, recycle, and disposal of restricted environmental products used in the development of unconventional oil and natural gas fields. On an Enterprise Value (NYSE:EV)/revenue multiple, shares of NES trade at 2.02x. GreenHunter Resources (NYSE MKT: GRH) provides hydraulic fracturing services, as well as fluids handling, hauling, and barging services. On an EV/revenue multiple, shares of GRH trade at 3.49x. For this purpose, we can take the average of our two comps to arrive at a multiple of 2.76x. Using historical revenue numbers for JD and the other two companies to be acquired; we arrive at an enterprise value of $127.2 million, which assuming net debt of $17 million gives us a market capitalization value of $110.2 million, or $29.30 post reverse split. In our view, this means that shares of NASV currently trade at a 78% discount to historic value, with no accounting for future organic growth, synergistic cost savings or growth via future acquisitions. Assuming management is able to successfully execute on its future rollup strategy and uplist to the NYSE, we believe that NAS, after acquiring an additional four undisclosed companies and integrating them into the parent, should approach $200 million in market cap by the end of 2015.

    Paul Silver

    Paul Silver is the Managing Director of Research at Wall Street Resources. Previously he has been in auditing with a Big Four accounting firm in New York City, a sell-side research analyst for two global investment banks in New York City including Salomon Smith Barney and UBS Paine Webber. At Salomon Smith Barney he was a member of the firm's research team covering Real Estate Investment Trusts that was consistently ranked #1 by Institutional Investor magazine. Mr. Silver has written extensively on small cap equities and is a contributing writer to numerous publications is a co-manager of the WSR High Alpha model portfolio which has resulted in a 127.39% average annualized return from inception on March 13, 2009 through December 31, 2013. For more information visit: http://www.wallstreetresources.net/High_Alpha_Performance.aspx

    Aug 01 9:01 AM | Link | 2 Comments
  • AudioEye Offers A Solution For Over 33 Million Vision Impaired Computer Users

    AudioEye Offers a Solution for Over 33 Million Vision Impaired Computer Users

    AudioEye (OTCQB: AEYE) is an innovative technology company that developed patented Internet content publication and distribution software that enables conversion of any media into accessible formats and allows for real time distribution to end users on any Internet-connected device. AudioEye's Audio Internet® is a technology that utilizes patented architecture to deliver a fully accessible audio equivalent of a visual website or mobile website in a compliant format that can be navigated, utilized, interacted with, and transacted from, without the use of a monitor or mouse, by individuals with visual impairments.

    For individuals with hearing impairments, Audio Internet® provides captioning for websites, and the challenges of reaching those with other impairments are also addressed by the technology platform. Complete with an ever-growing suite of utilities tailored to the needs of different disabled users, the AudioEye® Audio Internet® Accessibility Platform is a fully scalable cloud-based solution designed and developed to meet the needs and compliance mandates for an ever-growing demographic.

    The market opportunity for such services is huge as most websites are developed with the assumption that users can see the sites, visually-impaired users have difficulty using such websites. As a result, providing accessibility services for these websites has become a huge market opportunity as there are approximately 33 million computer users that have some form of visual impairment.

    Intellectual Property

    AudioEye has a patent portfolio comprised of six patents in the United States, as well as several pending U.S. patents. Its portfolio includes a number of patents that describe unique systems and methods for navigating devices and Internet content, as well as publication and automated solutions that connect to any content management system, and can deliver a mobile, usable, and accessible user experience to any consumer device. The patented technology is the foundation of the AudioeEye's mission to become the standard for Internet accessibility, mobile audio Internet navigation, and multi-format publishing technology as well as Internet content publication and distribution software.

    Opportunity

    The Internet was created as a visual medium connected by point and click technology. As such, it can be challenging to use and navigate for the elderly, disabled, and many other groups of individuals. AudioEye, Inc. recognized the opportunity to address this challenge and invented and patented a technology that could convert it into a spoken medium by cataloging and converting content into audio "filing cabinets" with access through a powerful audio media player. The target market for this technology is broad and vast and the government is one of the primary market drivers.

    In October 2010, Congress passed and President Obama signed into law the 21st Century Communication and Video Accessibility Act which mandates that all government websites (city, state, and federal) to be compliant and have accessibility to Americans with disabilities. As a result, providing accessibility services for these websites has become a huge market opportunity as operating systems developed such as touchtone telephone, access audio files that have already been translated, translate text-to-speech user commands that provide an ideal solution for accessibility issues thus resulting in significant demand for AudioEye's patented solution.

    What is the audience we are talking about? There are approximately 25% or 33 million computer users2 have some form of visual impairment. In total, there are approximately 54 million3 individuals with permanent disabilities. In addition, 6.6 million children in the U.S. receive some form of special education instruction. The Company is demonstrating a commitment to social responsibility by providing the elderly, visually impaired and learning disabled with improved Internet navigation tools by addressing the newly signed 21st Century Communications and Video Accessibility Act. However, these groups of individuals are the "low hanging fruit" for the Company. The total market for this solution is much broader.

    Consumers currently spend 85% of their time with audio/video-oriented media like radio and television, compared with 15% on print formats. There are over 76 million baby boomers, representing over $2 trillion in income, and account for 50% of the discretionary spending power in the U.S. Psychological tests have proven that people remember 20% of what they hear, 27% of what they see, and 52% of what they hear and see. When we put these statistics together, we arrive at an enormous market opportunity for businesses looking to find more customers.

    AudioEye plans to license its technology in a broad array of industry and product verticals. These organizations include but are not limited to the following:

    1. Mobile Device Manufacturers,
    2. Mobile Device Software Providers
    3. Mobile Device Operating System Providers
    4. Mobile Marketing Operations
    5. Mobile Internet Access Providers
    6. Internet Device Manufacturers
    7. Satellite, GPS, and Automotive Device Manufacturers
    8. Internet Browser Providers
    9. Internet Media Service Providers
    10. Internet Content Publishers
    11. Internet Media Publishers
    12. Internet Service Providers
    13. Internet Search Providers
    14. Internet Ecommerce Providers
    15. Internet Marketing Operations
    16. Internet Accessibility Services Providers
    17. U.S. Federal Government Internet Operations
    18. U.S. State Governments Internet Operations
    19. U.S. Departments, Bureaus, Agencies,and Territories Internet Operations
    20. Native American Business Operations
    21. Native American Governments
    22. Content Delivery Networks (CDN)
    23. Foreign Governments
    24. Appliance Manufacturers
    25. Healthcare Products Manufacturers
    26. Prescription Medication Pharmacy Operations
    27. Pharmaceutical Companies
    28. "How To" Operations
    29. User Manual Publishers

    AudioEye's Product

    The AudioEye solution assists companies to communicate to all site visitors by making websites dramatically richer, creating immediate affinity through talent voiceover (e.g actors, celebrities) making it a more productive, enjoyable experience for the visitor. The technology allows website visitors to listen to all web-based content (text, RSS, podcasts, video) through the Audio Eye Player. By listening to audio prompts and using keyboard commands, an Internet user can navigate and listen to a site's content selections, complete forms and registration information and conduct transactions. Users can elect human voice recording option or real-time conversation of text to audio in multiple voices and languages. The delivery of content is in streaming media and has high security features. For the website visitor, the AudioEye "Surf by Sound" technology is easy to use, free, and safe.

    The AudioEye solution also provides new revenue streams through advertising and sponsorship on the Audio Eye player, or in audio feeds. The commercializing RSS (Really Simple Syndication) content in audio format or linking podcasts to an audio navigation system presents a unique value-add opportunity to sell a new class of effective Internet advertising, sponsorships, and paid search. The AudioEye solution can also improve and increase direct response performance as well as messaging and branding communication by offering real-time measurement and reporting metrics and providing in-depth information surrounding a consumers experience and interests.

    Recent Milestones

    In early July 2014, the Company announced that it expects to report record operating results for the second quarter of 2014. Highlights include revenue of approximately $3 million ($12 million annual run-rate) for the three months ended June 30, 2014, compared to approximately $0.2 million in the prior-year quarter. Second quarter revenues represent an approximate 200% quarter-to-quarter increase relative to revenue of $1 million in the quarter ended March 31, 2014. In addition, the Company expects to be profitable for the second quarter 2014.

    In addition, the Company achieved the following:

    1. Approximately $1 million in contracts were secured with leading national health care companies.
    2. The Company executed licenses for its technology with organizations involved in the consumer packaged goods (NYSE:CPG), retail and coupon, and online jobs posting verticals during the second quarter of 2014.
    3. The Company is engaged in a pilot program to audio-enable websites for one of the largest telecommunications companies in the U.S.
    4. The Company has identified opportunities and is involved in discussions with over 50% of the federal government agencies regarding the procurement of its services.
    5. The Company has identified opportunities and is involved in early discussions with numerous state, local and municipal governments for the procurement of its services.
    6. The Company has obtained scope of work parameters and identified business opportunities with multiple professional sports teams/leagues, one of the largest biopharmaceutical companies in the U.S., and dozens of other enterprises that are expected to result in contract signings over the next several months.

    Based on these encouraging financial results and the ongoing discussions, AudioEye management believes that the Company is in the early stages of the large-scale adoption of its technologies by federal, state and local governments in the U.S. and abroad.

    Strengths

    The Company has three competitive strengths. It has a unique patented technology with a patent portfolio that includes patents and pending patent applications in the United States with over 60 issued claims that canvass Internet and mobile markets that support AudioEye's business and technology licensing process. It also operates a licensing business model and has identified key identified vertical end-markets including but not limited to U.S. Government, mobile carrier, higher education, digital couponing, content delivery networks, marketing organizations, e-learning organizations, ecommerce operations, device manufactures, Internet technology, and communications. Finally, AudioEye's research and development team is comprised of experienced software developed, ecommerce, mobile marketing and Internet broadcasting that have worked together as a team for over fifteen years. During their careers, this team has developed several technologies programs for Fortune 500 organizations, state, federal and local governments in the U.S. and several leading organizations in a wide range of end-markets.

    Investment Opinion

    We have had our eye on shares of AEYE for months. On July 2nd, we pulled the trigger, adding AudioEye to our select High Alpha Portfolio at $0.33. It closed that day at $0.56 and has traded as high at $1.07 as recently as July 22nd on strong volume. At current levels, shares of AEYE are trading at a market cap of $53 million, representing a lofty 25x price/sales multiple. However, using a $12 million annual run-rate based on the pre announced top-line results for the second quarter 2014 shrinks the multiple to only 4.4x. Sales growth over the past five quarters has been very strong and consistent, with triple digit quarter-to-quarter sequential growth in the soon to be announced second quarter. Based on stellar sales growth and market penetration trends and deal flow, we believe that shares of AEYE remain attractively priced. We would certainly open a new position or add to an existing on any significant pullback. As management continue to execute on its strategy, we believe that AudioEye represents an attractive underfollowed technology opportunity that simultaneously addresses a major social issue and government legislation while creating brand new revenue streams for businesses.

    Paul Silver

    Paul Silver is the Managing Director of Research at Wall Street Resources. Previously he has been in auditing with a Big Four accounting firm in New York City, a sell-side research analyst for two global investment banks in New York City including Salomon Smith Barney and UBS Paine Webber. At Salomon Smith Barney he was a member of the firm's research team covering Real Estate Investment Trusts that was consistently ranked #1 by Institutional Investor magazine. Mr. Silver has written extensively on small cap equities and is a contributing writer to numerous publications is a co-manager of the WSR High Alpha model portfolio which has resulted in a 127.39% average annualized return from inception on March 13, 2009 through December 31, 2013. For more information visit: http://www.wallstreetresources.net/High_Alpha_Performance.aspx

    P.S. If you missed the recent move in AudioEye, you have no excuse for missing future buy opportunities at WSR!

    If you had a premium membership to our website you could have taken $5,000 and turned it into $15,000 in under a week with our buy recommendation of AudioEye. And that's just one of our picks. With a track record of over 126% annualized returns over the past five years, you can understand why our subscribers stay with us year after year… Checkout our free membership. Or subscribe to our premium membership and receive a special, limited time, "New Subscriber" 1 year money back guarantee.

    2 According to a Forester/Microsoft report titled: "The Wide Range of Abilities and
    Its Impact on Computer Technology- A Research Study Commissioned by Microsoft Corporation
    and Conducted by Forrester Research, Inc., in 2003" tinyurl.com/nx5zea4

    3 www.disabled-world.com/disability/statis...

    Disclosure: The author is long AEYE.

    Tags: AEYE, Technology
    Jul 25 8:23 AM | Link | Comment!
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