We manufacture and distribute Arcoplate, a wear-resistant alloy overlay wear plate produced through a patented process. We believe that wear is the largest single factor leading to production losses in the mining, mineral-processing, and steel manufacturing industries. Consequently, wear solutions are indispensable for these businesses. The wearing of metal parts is generally defined as a gradual decay or breakdown of the metal. This wear of equipment may be due to many causes and accordingly, the selection of wear plate solutions can be a relatively complex process.
In order to minimize the effects of wear, businesses have traditionally employed such wear-combating materials as rubber compounds, ceramics, alloy castings, welded overlay wear plates, and quenched and tempered carbon steel plates. We believe that each of these materials offer a limited solution to the problem of wear. While tungsten carbide is generally recognized by the mining, mineral-processing and steel manufacturing industries as the most wear-resistant material suitable for industrial use, because of its high carbide content, we believe that the high costs associated with tungsten carbide make it impractical for most businesses. We believe that Arcoplate provides industry with solutions to most wear-related problems at a cost which is competitive with conventional welded overlay wear plates and substantially lower than tungsten carbide.
Arcoplate
The patented process by which we manufacture Arcoplate enables us to smoothly and evenly apply an alloy overlay to a sheet of steel, creating a metallurgical bond between the alloy and the steel backing plate that is resistant to wear caused by impact and/or abrasion. We believe that our Arcoplate product line will substantially lower down time and the lost production resulting from this down time.
Conventional welded wear plates have been used in the manufacturing, mining and construction industries for more than half a century and they are characterized by several functional limitations:
- the tendency to separate into chips or fragments when subjected to high impact;
- uneven base metal dilution resulting in uneven alloy content; and
- rough surfaces which result in poor material flow.
We believe Arcoplate has properties that allow it to overcome the limitations of conventional welded wear plates. Independent laboratory and field tests, have shown that Arcoplate provides a wear-resistant barrier superior to that provided by conventional single or multiple-layer wear plates. This is because of its higher carbide content and smoother surface layer. Arcoplate wear plate sheets also can withstand rolling and pressing, within specified fabrication guidelines.
The claims with respect to the properties of Arcoplate, such as bond strength, specific hardness, density, hardness, resonance and wear resistance, have been subjected to studies and testing, by independent laboratories, universities and other recognized testing facilities, including Aust-Amet Pty Ltd and Central Power Research Institute of Bangalore India. Commercial fees were paid to Aust-Amet Pty Ltd while no fees were paid to the Power Research Institute of Bangalore and the National Research Council of Canada.
Arcoplate is designed for installation and use where structures and machinery suffer wear and "hangup" problems. Common situations are:
- the mining of iron, gold, nickel, coal, copper and other ores;
- brick and cement works;
- power stations;
- the manufacture of ore feed bins, transfer chutes, dredging systems and conveyor side skirts;
- bulldozer arms and blades; and
- truck tray liners and bucket loader liners.
Arcoplate is manufactured in a range of grades designed for specific applications. Our products are designed for ease of handling and can be fabricated to suit our customers' specific requirements of shape, size and weight. Sheets of Arcoplate can be welded together to cover large surface areas. We also provide technical consultation services to customers and their design engineers.
We believe that our proprietary method of manufacturing Arcoplate results in a product that has many technical advantages over conventional welded wear plates. Conventional welded wear plates are generally characterized by structural weaknesses and limited wear resistance resulting from inefficient production methods. In order to achieve a wear-resistant, flat surface, a conventional wear plate must be rolled and pressed after its layers of hardfacing have been welded together. This post-production rolling and pressing can result in a weakened surface structure that cannot withstand high impact conditions. The Arcoplate process does not require post-production rolling and pressing. During the Arcoplate process, the plate is coated with the desired alloy thickness in one application, resulting in a uniform and, therefore, structurally sound surface. The Arcoplate process maintains a high carbide content in the overlay, which makes the plate more wear resistant than conventional welded wear plate.
Arcoplate products are currently distributed to customers in the United States, South America, India, Indonesia, Singapore, South Africa, Japan, China, Canada, Malaysia and other countries as well as being extensively used in the mining industry in Australia.
3-D PIPEFITTING CLADDER PROCESS
We have recommenced the development of the 3-D Pipefitting Cladder process. This has been badly delayed however due to the shortage of suitable engineering staff in Australia who would be able to work on the project. This is a computer-driven and software-based mechanical system for depositing a profiled layer of wear resistant alloy onto interior surfaces of pipefittings, used in the dredging, mining, mineral processing, coal-fired power generation, cement manufacturing, and oil refinery industries. Due to their angled and/or curved structures, material does not flow uniformly
through pipefittings, meaning pipefittings generally have higher wear, resulting in a much shorter working life, than ordinary straight pipe.
The 3-D Pipefitting Cladder process under development will be based upon the patented production process we use to make Arcoplate and will enable a wear resistant alloy coating to be applied to interior surfaces of pipefittings at the point where wear is most likely to occur. We believe that the 3-D Pipefitting Cladder process will overcome many of the problems associated with pipefitting wear and greatly reduce production losses due to down time and pipe replacement.
With the new Arcoplate production machine now completed and operational engineering time is now being spent on development of the 3-D Pipefitting Cladder process.
SALES AND MARKETING STRATEGY
The company's objective is to become an international market leader in wear-resistant alloy steel products and to establish significant market share and brand awareness for Arcoplate within the mining, mineral-processing and steel industries. We believe that we can capitalize on our existing patented process for producing Arcoplate through the direct manufacture and sale of Arcoplate-based products to original equipment manufacturers and distributors worldwide. We are establishing market presence by visiting international and domestic trade shows, presenting technical papers at industry conferences, and appointing distributors who will be trained to present and promote Arcoplate products as a solution for wear-related problems.
In the year ended September 30, 2006, one customer accounted individually for at least 10% of our annual sales.
We anticipate incurring increased expenditures in connection with our marketing activities. Our marketing activities are also expected to include substantial engineering support to assist in the development of products for specific customer requirements and certain markets.
We are marketing Arcoplate products to consultant engineering companies both internationally and in Australia in order that they may ultimately incorporate Arcoplate materials into their equipment and plant designs. We will offer the services of our own engineering department to assist these engineers with design planning to optimize solutions for wear and material flow situations.
INTELLECTUAL PROPERTY
We believe that protection of our licensed proprietary technology and know-how is critical to the development of our business. We have obtained patents for process in United States, Mexico, Brazil, Canada, Japan, Burma, South Korea, Australia, France, Germany, Great Britain, Greece, Italy, Belgium, Netherlands and Sweden. We do not yet have intellectual property protection for the 3-D Pipefitting Cladder process. We cannot assure you that our existing patent rights, or any other patent rights that may be granted, will be valid and enforceable or provide us with meaningful protection from competitors. We cannot assure you that any pending patent application will issue as a patent, or that any claim thereof will provide protection against infringement. If our present or future patent rights are ineffective in protecting us against infringement, our marketing efforts and future revenues could be materially and adversely affected. In addition, if a competitor were to infringe our patent rights, the costs of enforcing our patent rights may be substantial or even prohibitive.
RESEARCH AND DEVELOPMENT
We are continually engaged in the development of new products and improvements to our existing products.
MANUFACTURING AND SUPPLY
The raw materials we employ are principally steel and a proprietary alloy compound. We presently purchase steel plate and alloy materials from various suppliers. Four of our suppliers, Cometals, Intersteel Pty Ltd, A & C Trading (WA) Pty Ltd and Bisley & Company Pty Ltd, account for more than 55% of the raw material we require. We also rely heavily on the use of fluxes, compounds designed to remove impurities, during the manufacturing process. We purchase our
requirements for fluxes from various suppliers. We cannot assure you that we will be able to continue to obtain desired quantities of steel, alloy materials and fluxes on a timely basis at reasonable prices and upon favorable terms. We monitor the quality of our products by frequent tests and material certification, and maintain a strict internal quality control system to monitor the quality of production.
GOVERNMENT REGULATION
The Arcoplate manufacturing plant is subject to many laws and regulations relating to the protection of the environment. These laws and regulations impose requirements concerning, among other matters, the treatment, acceptance, identification, storage, handling, transportation and disposal of industrial by-products, hazardous and solid waste materials, waste water, air emissions, noise emissions, soil contamination, electromagnetic radiation, surface and groundwater pollution, employee health and safety, operating permit standards, monitoring and spill containment requirements, zoning, and land use. We frequently examine ways to minimize any impact on the environment and to effect cost savings relating to environmental compliance. Our management believes that we are in material compliance with all applicable environmental laws and that our products and processes do not present any unusual environmental concerns.
Our operations are also governed by laws and regulations relating to workplace safety and health, principally under the Australian Occupational Safety and Health Act -- 1984 (WA), which, among other requirements, establish employee training, supervision and general safety standards. Our management believes that we are in material compliance with all applicable workplace safety and health laws and that our products and processes do not present any unusual safety concerns.
We require, and must comply with, various authorizations, permits and licenses to conduct our operations. Government agencies continually monitor our compliance with authorization, permits and licenses and our facilities are subject to periodic unannounced inspection by local, state and federal authorities. Violations of any permit or license, if not remedied, could result in our incurring substantial fines, or suspension of our operations.
COMPETITION
The wear plate solutions industry is highly competitive. We compete in markets against larger multi-national companies, all of which are well-established and may have substantially greater financial and other resources than us. Competitive market conditions could adversely affect our results of operations if we were required to reduce product prices to remain competitive. In the United States and Canada, major manufacturers of wear plates include Triton Inc. and Trimay Ltd. In Australia, major manufacturers of wear plates include Australian National Industries Ltd. and Australian Overseas Ltd. Other major manufacturers in the European Union and Asia include Vautid (Gmd.) and Duraweld.
EMPLOYEES
We employed 25 persons on a full-time basis and one contract employee as of November 30, 2006, including two executive officers, five administrative personnel, four marketing personnel and 15 manufacturing personnel. None of our employees are members of a labor union. We consider our relationship with our employees to be good.
In order to minimize the effects of wear, businesses have traditionally employed such wear-combating materials as rubber compounds, ceramics, alloy castings, welded overlay wear plates, and quenched and tempered carbon steel plates. We believe that each of these materials offer a limited solution to the problem of wear. While tungsten carbide is generally recognized by the mining, mineral-processing and steel manufacturing industries as the most wear-resistant material suitable for industrial use, because of its high carbide content, we believe that the high costs associated with tungsten carbide make it impractical for most businesses. We believe that Arcoplate provides industry with solutions to most wear-related problems at a cost which is competitive with conventional welded overlay wear plates and substantially lower than tungsten carbide.
Arcoplate
The patented process by which we manufacture Arcoplate enables us to smoothly and evenly apply an alloy overlay to a sheet of steel, creating a metallurgical bond between the alloy and the steel backing plate that is resistant to wear caused by impact and/or abrasion. We believe that our Arcoplate product line will substantially lower down time and the lost production resulting from this down time.
Conventional welded wear plates have been used in the manufacturing, mining and construction industries for more than half a century and they are characterized by several functional limitations:
- the tendency to separate into chips or fragments when subjected to high impact;
- uneven base metal dilution resulting in uneven alloy content; and
- rough surfaces which result in poor material flow.
We believe Arcoplate has properties that allow it to overcome the limitations of conventional welded wear plates. Independent laboratory and field tests, have shown that Arcoplate provides a wear-resistant barrier superior to that provided by conventional single or multiple-layer wear plates. This is because of its higher carbide content and smoother surface layer. Arcoplate wear plate sheets also can withstand rolling and pressing, within specified fabrication guidelines.
The claims with respect to the properties of Arcoplate, such as bond strength, specific hardness, density, hardness, resonance and wear resistance, have been subjected to studies and testing, by independent laboratories, universities and other recognized testing facilities, including Aust-Amet Pty Ltd and Central Power Research Institute of Bangalore India. Commercial fees were paid to Aust-Amet Pty Ltd while no fees were paid to the Power Research Institute of Bangalore and the National Research Council of Canada.
Arcoplate is designed for installation and use where structures and machinery suffer wear and "hangup" problems. Common situations are:
- the mining of iron, gold, nickel, coal, copper and other ores;
- brick and cement works;
- power stations;
- the manufacture of ore feed bins, transfer chutes, dredging systems and conveyor side skirts;
- bulldozer arms and blades; and
- truck tray liners and bucket loader liners.
Arcoplate is manufactured in a range of grades designed for specific applications. Our products are designed for ease of handling and can be fabricated to suit our customers' specific requirements of shape, size and weight. Sheets of Arcoplate can be welded together to cover large surface areas. We also provide technical consultation services to customers and their design engineers.
We believe that our proprietary method of manufacturing Arcoplate results in a product that has many technical advantages over conventional welded wear plates. Conventional welded wear plates are generally characterized by structural weaknesses and limited wear resistance resulting from inefficient production methods. In order to achieve a wear-resistant, flat surface, a conventional wear plate must be rolled and pressed after its layers of hardfacing have been welded together. This post-production rolling and pressing can result in a weakened surface structure that cannot withstand high impact conditions. The Arcoplate process does not require post-production rolling and pressing. During the Arcoplate process, the plate is coated with the desired alloy thickness in one application, resulting in a uniform and, therefore, structurally sound surface. The Arcoplate process maintains a high carbide content in the overlay, which makes the plate more wear resistant than conventional welded wear plate.
Arcoplate products are currently distributed to customers in the United States, South America, India, Indonesia, Singapore, South Africa, Japan, China, Canada, Malaysia and other countries as well as being extensively used in the mining industry in Australia.
3-D PIPEFITTING CLADDER PROCESS
We have recommenced the development of the 3-D Pipefitting Cladder process. This has been badly delayed however due to the shortage of suitable engineering staff in Australia who would be able to work on the project. This is a computer-driven and software-based mechanical system for depositing a profiled layer of wear resistant alloy onto interior surfaces of pipefittings, used in the dredging, mining, mineral processing, coal-fired power generation, cement manufacturing, and oil refinery industries. Due to their angled and/or curved structures, material does not flow uniformly
through pipefittings, meaning pipefittings generally have higher wear, resulting in a much shorter working life, than ordinary straight pipe.
The 3-D Pipefitting Cladder process under development will be based upon the patented production process we use to make Arcoplate and will enable a wear resistant alloy coating to be applied to interior surfaces of pipefittings at the point where wear is most likely to occur. We believe that the 3-D Pipefitting Cladder process will overcome many of the problems associated with pipefitting wear and greatly reduce production losses due to down time and pipe replacement.
With the new Arcoplate production machine now completed and operational engineering time is now being spent on development of the 3-D Pipefitting Cladder process.
SALES AND MARKETING STRATEGY
The company's objective is to become an international market leader in wear-resistant alloy steel products and to establish significant market share and brand awareness for Arcoplate within the mining, mineral-processing and steel industries. We believe that we can capitalize on our existing patented process for producing Arcoplate through the direct manufacture and sale of Arcoplate-based products to original equipment manufacturers and distributors worldwide. We are establishing market presence by visiting international and domestic trade shows, presenting technical papers at industry conferences, and appointing distributors who will be trained to present and promote Arcoplate products as a solution for wear-related problems.
In the year ended September 30, 2006, one customer accounted individually for at least 10% of our annual sales.
We anticipate incurring increased expenditures in connection with our marketing activities. Our marketing activities are also expected to include substantial engineering support to assist in the development of products for specific customer requirements and certain markets.
We are marketing Arcoplate products to consultant engineering companies both internationally and in Australia in order that they may ultimately incorporate Arcoplate materials into their equipment and plant designs. We will offer the services of our own engineering department to assist these engineers with design planning to optimize solutions for wear and material flow situations.
INTELLECTUAL PROPERTY
We believe that protection of our licensed proprietary technology and know-how is critical to the development of our business. We have obtained patents for process in United States, Mexico, Brazil, Canada, Japan, Burma, South Korea, Australia, France, Germany, Great Britain, Greece, Italy, Belgium, Netherlands and Sweden. We do not yet have intellectual property protection for the 3-D Pipefitting Cladder process. We cannot assure you that our existing patent rights, or any other patent rights that may be granted, will be valid and enforceable or provide us with meaningful protection from competitors. We cannot assure you that any pending patent application will issue as a patent, or that any claim thereof will provide protection against infringement. If our present or future patent rights are ineffective in protecting us against infringement, our marketing efforts and future revenues could be materially and adversely affected. In addition, if a competitor were to infringe our patent rights, the costs of enforcing our patent rights may be substantial or even prohibitive.
RESEARCH AND DEVELOPMENT
We are continually engaged in the development of new products and improvements to our existing products.
MANUFACTURING AND SUPPLY
The raw materials we employ are principally steel and a proprietary alloy compound. We presently purchase steel plate and alloy materials from various suppliers. Four of our suppliers, Cometals, Intersteel Pty Ltd, A & C Trading (WA) Pty Ltd and Bisley & Company Pty Ltd, account for more than 55% of the raw material we require. We also rely heavily on the use of fluxes, compounds designed to remove impurities, during the manufacturing process. We purchase our
requirements for fluxes from various suppliers. We cannot assure you that we will be able to continue to obtain desired quantities of steel, alloy materials and fluxes on a timely basis at reasonable prices and upon favorable terms. We monitor the quality of our products by frequent tests and material certification, and maintain a strict internal quality control system to monitor the quality of production.
GOVERNMENT REGULATION
The Arcoplate manufacturing plant is subject to many laws and regulations relating to the protection of the environment. These laws and regulations impose requirements concerning, among other matters, the treatment, acceptance, identification, storage, handling, transportation and disposal of industrial by-products, hazardous and solid waste materials, waste water, air emissions, noise emissions, soil contamination, electromagnetic radiation, surface and groundwater pollution, employee health and safety, operating permit standards, monitoring and spill containment requirements, zoning, and land use. We frequently examine ways to minimize any impact on the environment and to effect cost savings relating to environmental compliance. Our management believes that we are in material compliance with all applicable environmental laws and that our products and processes do not present any unusual environmental concerns.
Our operations are also governed by laws and regulations relating to workplace safety and health, principally under the Australian Occupational Safety and Health Act -- 1984 (WA), which, among other requirements, establish employee training, supervision and general safety standards. Our management believes that we are in material compliance with all applicable workplace safety and health laws and that our products and processes do not present any unusual safety concerns.
We require, and must comply with, various authorizations, permits and licenses to conduct our operations. Government agencies continually monitor our compliance with authorization, permits and licenses and our facilities are subject to periodic unannounced inspection by local, state and federal authorities. Violations of any permit or license, if not remedied, could result in our incurring substantial fines, or suspension of our operations.
COMPETITION
The wear plate solutions industry is highly competitive. We compete in markets against larger multi-national companies, all of which are well-established and may have substantially greater financial and other resources than us. Competitive market conditions could adversely affect our results of operations if we were required to reduce product prices to remain competitive. In the United States and Canada, major manufacturers of wear plates include Triton Inc. and Trimay Ltd. In Australia, major manufacturers of wear plates include Australian National Industries Ltd. and Australian Overseas Ltd. Other major manufacturers in the European Union and Asia include Vautid (Gmd.) and Duraweld.
EMPLOYEES
We employed 25 persons on a full-time basis and one contract employee as of November 30, 2006, including two executive officers, five administrative personnel, four marketing personnel and 15 manufacturing personnel. None of our employees are members of a labor union. We consider our relationship with our employees to be good.
