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buenokite

11/16/13 9:45 AM

#249742 RE: Renz #249736

The fundamental problem is processor #3 seems to be running very poorly. While the company did not break out the performance of processor #3, we do know the company only did 55,000 more gallons in Q3 2013 than they did in Q4 2012 which was the last "HTF" quarter. Of course that could change but that is what a buyer is facing today.

And the performance of the processors is poor despite the fact they require plastic that has a market value (the company pays for the plastic) and HTF which has a market value. Even if the buyer has access to that type of plastic they have to decide not to sell the plastic that has a market value and put it in the processor. And it appears the HTF processing is actually a drag on the economics of the processor hence this statement in the latest 10Q: "Currently, we are working on shifting the plastic to oil ratio to find a conservative-to-minimal amount of heat transfer fluid needed to continue to operate with plastic, while still yielding the HTF’s positive effects. This will eventually allow for further curbing of costs."

So bottom line is a buyer will have to be willing to put forward a significant upfront investment not just in the processors but all the infrastructure for a pyrolysis process that is not yet proven despite requiring plastic that has a market value AND HTF which has a market value.

And beyond those issues, a buyer will do their diligence on the company itself and want to know that the company has the ability to support the buyer through the inevitable issues that will arise with an initial deployment. And they will want to see that their machine purchase is the life preserver allowing the company just to keep the lights on.

All of these items will make a sale difficult and if a sale is made, they will have a material impact on the overall price and economics of the contract.