by Debra Fiakas CFA
Last week RDX Technologies, Inc. (RGDEF: OTCQX or RDX: TSXV) announced an agreement to supply renewable diesel to the Tyson Farms’ Temperanceville Facility in Virginia. The Energy Division of RDX sells three grades of methyl ester fuels that can be used in boilers and small generators. RDX did not disclose the value or size of the Tyson Farms contract. However, the contract apparently is for one year with a second year option.
RDX operates renewable fuel plants in Missouri and California. Waste streams are aggregated at the two plants by truck and processed using technology developed by RDX CEO Dennis Danzik and his colleague Vincent Meli. The company describes its process as ‘water mining’ wherein contaminants are separated from the water with electrochemical and photochemical techniques. Waste polymers from the water have energy value and are converted to methyl ester fuels.
Selling fuel is not the only way RDX Technologies plans to generate revenue. The company also wants to franchise its technology and sell water treatment equipment to aspiring fuel producers. Called the RDX BlueDot system, the company recently announced a contract with Pontus Energy, LLC. to set up sixteen franchise locations in Ohio, Michigan and Kentucky. The contract was valued at $19.2 million
The company recently signed the Environmental Engineering and Science Department of Stanford University to use the RDX BlueDot system for further development of water treatment solutions. RDX management expects the Stanford deployment to support subsequent franchising efforts in commercial markets where water treatment is an important or even more important than renewable fuel sources.
In the twelve months ending June 2014, RDX Technologies reported a loss of $10.0 million on sales of $36.7 million in sales. That seems like a dangerous loss, but cash used to support operations was a significantly smaller amount $176,620. The company has approximately $4.9 million on its balance sheet, which should support operations for a while longer if cash usage is kept under control.
The wisdom of a distributed power generation solution appears to be catching on and local communities are anxious to find smart ways to upgrade waste. Of course, water is in short supply everywhere. Technologies to clean up water are becoming even more critical.
RDX Technologies is still a developing company, but some of the technological risks appear to have been eliminated with the first commercial deployments. There does appear to be a fair amount of execution risk left, but the stock is still worth watching for all investors interested in a stake in the waste-to-energy market.
Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.
Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.