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Best Idea Update > Cornerstone Deal To Close For GlyEco

|Includes: GlyEco, Inc. (GLYE)

Dr. John L. Faessel

ON THE MARKET

Commentary and Insight

UPDATE - GlyEco GLYE.OB

Cornerstone deal to close

Per last Tuesday's (9/12/2012) SEC form 8K/A, an amended filing re: GlyEco's acquisition of Full Circle Manufacturing Group, Inc, indicated that they will close a 'cornerstone' deal on or before September 30, 2012.

GlyEco is well underway with its roll-up strategy acquiring profitable companies; since February of this year they have acquired seven (7) companies (see Bloomberg article re the last acquisition.)

GlyEco is directing its energies in acquiring large amounts of the near limitless quantities of the hazardous waste glycol ("feedstock") reclaimed from sources such as used anti-freeze from the automotive industry, used coolant from heating and air-conditioning systems, waste glycol from polyester fiber and plastic bottle manufacturing, aircraft de-icing fluid runoff, and waste ethylene oxide from medical equipment sterilization. GlyEco process this feedstock with their patent-pending technology returning it to its original 'virgin' quality. Then, they sell it back into the market. Demand for glycol continues to exceed supply with exponential growth predicted. Consider that waste glycol feedstock is often free, and in some cases - i.e. in Europe - users pay for disposal.

According to the original SEC filing (OTCPK:GLYE) plans to increase processing capability in New Jersey to at least 10 million gallons per year during the initial installation of its patent-pending GlyEco Technology™. My analysis indicates that the company will reach the break-even point at about 1 million gallons.

Full Circle, located in New Jersey, is a cornerstone deal for the company and the first facility to be upgraded with GlyEco Technology. This plant will produce the highly sought after Type 1 (ASTM E1177 Spec) recycled material - indistinguishable from newly produced glycol. Key here is that right now (OTCPK:GLYE) can sell Type 1 glycol for over $4.70 a gallon. This quality of recycled material may be sold for a $1 per gallon premium and that's straight profit. Importantly, GlyEco does not need to stop or slow processing to implement their technology. The (patent-pending) magic is in the chemistry, and does not rely on proprietary equipment. GlyEco is buying all the revenue and profit without interruption.

Central and of strategic importance to this transaction is that the New Jersey plant has extensive rail facilities and will connect to the wide rail network in the heavily industrialized northeast. The New Jersey location is in the heart of a hub of rail freight distribution. The location and shipping capabilities of this facility also position it to take in very large quantities of non-antifreeze waste for processing -- a first anywhere in the world.

Even as GlyEco is relatively new and undiscovered management carried out several years of planning and leg-work prior to their official launch and hit the ground running. They had the idea, developed their technology, researched the market, and developed the key business relationships. GlyEco's progress to date of acquiring 7 profitable suppliers of 'feedstock' glycol waste in such a short time can only be described as exemplary.

See the seven [7] (OTCPK:GLYE) acquisition deals, and the hyperlinks to the SEC 8-K docs below. **

Globally, over 5 billion gallons ($25 billion) of glycol is consumed annually. North America consumes an estimated 1.1 billion gallons each year. Steady growth is forecast for this petrochemical, and well into the future. Part of the opportunity here in North America is that a large amount of waste glycol is 'created' in four completely unserved industries. In North America about 700 million gallons of the waste glycol 'feedstock' are created while the rest of the world likely generates another billion gallons or more.

Glycol sales prices are on the rise, while (OTCPK:GLYE) processing costs stay relatively constant. One can grasp the huge EBIT. In time, I believe that the company will kick-out a big dividend due to the huge free cash flow.

The average sale price of ethylene glycol in 2011 was approximately $5.69 per gallon, with a seven-year average sales price of about $4.57 per gallon.

Management Team is Key

Let's jog your memory in recall of a huge roll-up success; $15.8 billion market-cap Waste Management (NYSE:WM), and how it grew in seven years from $2 million in revenues to $14 billion through a series of acquisitions of smaller cartage / garbage / waste companies. Vital to the GlyEco's acquisition strategy is that it is orchestrated by Waste Management's creator, John Lorenz.*, Certainly previous experience is not a guarantee of future success, however investing alongside Lorenz, GlyEco's CEO, who has 35-years of experience, coupled with a strong track record provides better leadership and knowhow than a person who has no experience at all.

GlyEco's management team is seasoned in the operational details of big-footprint commercial applications. The team is comprised of experts in solid waste management, mergers and acquisitions, chemical engineering, and glycol recycling.

The Technology

At the heart of the GlyEco recycling process is the patent-pending technology that can process and clean all five types of hazardous waste glycols to meet or exceed ASTM standards and the only known process able to do so. Furthermore, the US Environmental Protection Agency [EPA] requires most federal agencies buy antifreeze with the highest recycled content level practical. Most agencies report a lack of supply to meet their demand.

Re Financial Risk

GlyEco has raised a total of $6.5 million to date. They have already closed on its first acquisition (Minnesota) and their 6 additional acquisitions are subject to further capital injections. Because of managements history of a major success on a very big stage I believe they will have minimal difficulties closing their current $5million equity offering that will add additional dilution of 10 million shares. Importantly, this would put them into Type 1 glycol production and any future acquisitions could be made via cash flows

New Targets in the Roll-Up Strategy

The company has further identified additional potential customers and developmental partners in North America, Europe, throughout Asia, Mexico, South America, India, and Australia.

Revenue & Earnings Projections

Management's revenue/earnings snapshot paints an eyebrow raising picture.

· year one EPS are projected at $0.40 a share

· projected 2012 revenue is $6 million

· projected 2013 revenue is $48 million

· projected 2014 revenue is $73 million

Going Forward

With the above-mentioned markedly successful Waste Management roll-up as a model, I believe that GlyEco management complete additional acquisitions along the lines of the seven recently announced deals. In my opinion, revenues and profits would expand exponentially as the acquired assets upgrade to the GlyEco technology and that news flow will drive share price.

More Detail on Key Management

* Mr. John Lorenz is a founder, the CEO and Chairman of the Board (19.3% shareholder) of GlyEco (OTCPK:GLYE). Mr. Lorenz founded Environmental Waste of America, Inc. in 1986, where he served as President and CEO between 1986 and 1997 until its merger with Envirofil, Inc. This is the public company which, through a series of mergers and acquisitions, morphed into Waste Management, Inc. NYSE with a market cap of $ 15.8 billion. Waste Management currently offers environmental services to nearly 20 million customers. Together with its competitor Republic Services, Inc., the companies handle over 50% of the municipal solid waste disposal and recycling in the US.

** The 7 deals by GLYE since February2012

7. June 7, 2012

GLYECO, Inc Files SEC form 8-K

On June 7, 2012, GlyEco, Inc., a Nevada corporation entered into a preliminary agreement with Antifreeze Recycling, Inc. located in Tea, South Dakota

6. May 31, 2012

GLYECO, INC. Files SEC form 8-K, Other Events

EDGAR Online - On May 31, 2012, GlyEco, Inc., a Nevada corporation, entered into a preliminary agreement with Renew Resources, LLC. of Rock Hill, SC.

5. May 23, 2012

GLYECO, INC. Files SEC form 8-K, Other Events

EDGAR Online - On May 23, 2012, GlyEco, Inc., a Nevada corporation, entered into a preliminary agreement with Enviro-Cool, a Georgia LLC.

4. April 16, 2012

GLYECO, INC. Files SEC form 8-K, Other Events

EDGAR Online - On April 11, 2012, GlyEco, Inc., a Nevada corporation, entered into a preliminary agreement with Evergreen Recycling Co., Inc., an Indiana corporation.

3. March 27, 2012

GLYECO, INC. Files SEC form 8-K, Other Events

EDGAR Online - On March 22, 2012, GlyEco, Inc., a Nevada corporation, entered into a preliminary agreement with MMT Technologies, Inc., a Florida corporation.

2. March 22, 2012

GLYECO, INC. Files SEC form 8-K, Other Events

EDGAR Online - On March 16, 2012, GlyEco, Inc., a Nevada corporation, entered into a preliminary agreement with Full Circle Manufacturing Group, Inc., a New Jersey corporation.

1. February 7, 2012

GlyEco Announces Acquisition of Glycol Recycler Recycool

Marketwire - On Tuesday 2/7/2012, GlyEco, Inc., a Nevada corporation, announced it has signed an asset purchase agreement to acquire certain assets of Recycool, Inc.

More about Glycol

Waste Glycol generated in the United States

Estimated gallons per year by Industry

Automotive Antifreeze

202,000,000

Textile Purge Stream

193,300,000

Aircraft Deicing Fluid

35,000,000

Heat Transfer Fluids

234,000,000

Sterilization Processing

32,130,000

TOTAL

696,430,000

Source: Statistical Reconciliation GlyEco, Inc.

The glycol waste data I use is compiled and verified by several sources including the U.S. government, reporting from each of the five industries, as well as distributors and customers, e.g. Dow Chemical (the world's largest producer), MEGlobal and SABIC within each industry. ICIS Chemical News is arguably the most reliable source for allocation breakdowns of global glycol distributions as it is the world's largest petro chemical information provider.

Disclosure: I am long GLYE.OB. I purchased shares on the open market and will likely buy more.

Disclosure: I am long OTCPK:GLYE.