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Abakan 2014 Year in Review
2014 at a Glance - $9M in Working Capital; Launched New Products; Created a Presence in Canada, Mexico, Taiwan, and China
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To our Valued Shareholders,
I write with great confidence at this time of the year as I look back at the goals, challenges and accomplishments we have tackled over the last twelve months, due to the support of each and every one of our shareholders, employees and management. Thank you.
MesoCoat Inc., our principal subsidiary, went through many ups and downs, typical of a development stage company as it strove to take products to market in 2014. We have proven that our disruptive technologies, products and future products are better or will be better solutions for their intended use. The reality of that statement to us is one of discernible value. One most important indicator of that value is that many multinational corporations and government organizations have been giving us a helping hand to complete our journey. Abakan’s share price did not perform as we all would have liked in 2014, but I foresee a less volatile and better valuation in 2015 based on the important alliances, organizational changes and goals achieved during this past year and on what we expect to accomplish this coming year in technology advances, sales and other corporate developments.
Abakan prides itself on having worked 24-7 to reach our common goals. For many of our team “24-7” is not a figure of speech but an actual commitment that I witness week in and week out. I know that this commitment will continue until we can capitalize on the value created by our work as we maximize the parameters of our technology development and focus on marketing. Abakan is very fortunate in that ours is a market driven by market-pull (demand) rather than a market-push (marketing). The effect being that we believe that Abakan is at the onset of creating a global presence with superior products that lend proven solutions to given problems in the marketplace.
2014 was an exciting year for us. We secured commitments for $9M in equity, non-dilutive and debt financing, increased our direct ownership in MesoCoat to 87.5%, and doubled our PComP powder production capability. We were awarded several large test and commercial orders for our PComP coatings from certain of the world’s largest steel and mining companies. Our CermaClad related efforts have included successfully cladding ever longer sections of pipe with every run as we approach our goal of cladding full-length (40 feet) pipes. When we meet this primary objective MesoCoat will be in a position to commence commercial sales. We have also secured several fully-funded developmental projects to develop new products that will sustain a healthy product pipeline. Working in collaboration with our global sales partners we are in the process of creating product marketing channels in Canada, Mexico and Asia. Furthermore, during 2014, our products won a couple of highly prestigious industry awards, and added several new experts to our technical and commercial team.
While 2014 was a very busy year for us, we expect 2015 to be even more exciting. We expect to commission a 160 ton PComP powder production facility that will also include three thermal spray coating cells by September of 2015. When fully operational, the new PComP production and coating facility could produce enough powders and coating services to generate approximately $32M in annual revenues. Additionally, we expect to develop full-length (40 feet) clad pipes before the end of the calendar year 2015. Once accomplished, we expect to set-up our first 4-line clad pipe manufacturing facility and begin full scale clad pipe production. One such manufacturing facility could generate approximately $220M in annual revenues. We also expect to expand our footprint in Mexico, Canada, and Asia in 2015 with an eye on also creating a presence in the Middle East.
The constant recognition we receive from leading research institutes, trade bodies, media houses and development partners and customers is a source of ongoing validation for our team. Our solutions embody a suite of disruptive innovations in materials, process and products. We are not trying to improve things by only 10%; that is not and will never be our goal. Rather, we are developing groundbreaking solutions that are up to one or more orders of magnitude (ten times) better than what currently exists in the market. We know that this is not an easy task. Our path is laborious and challenging along a timeline that has frankly taken us a lot longer than we anticipated. However, we believe that the finish line is in sight and that reaching the end goal will be well worth the effort.
Despite the delays, we have made great strides towards reaching our PComP and CermaClad goals in 2014. We are well positioned to achieve our PComP production expansion and are within reach of beginning the full scale production of full sized 40’ clad pipe in 2015. On a final note, I would like to iterate that there are very few companies in the world of material science like Abakan, with such a diverse portfolio of products that can offer an order of magnitude higher value proposition when compared to competing products.
I look forward to providing additional updates on our progress as we move forward.
Sincerely,
Robert Miller
CEO, Abakan Inc. |
In this issue - 2014 At A Glance:
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Funding - $9M
Abakan and MesoCoat secured $3,000,000 in equity financing, $3,750,000 in development financing, and a $1,500,000 loan in calendar year 2014. This funding has been and will be used to scale-up production to generate significant revenue, establish a wear-resistant clad pipe demonstration plant in Alberta, Canada, develop new products and applications for our core technologies and complete development and qualification of our most-promising high-value products.
Mentioned below are a few highlights of our fund raising efforts in 2014:
- Nov 14, 2014: Abakan Secured $3M Strategic Investment from the Largest Global Wear-Resistant Clad Plate Manufacturer
- Oct 6, 2014: MesoCoat Received $500,000 from Department of Energy and $150,000 from the National Institute of Health to Develop New Applications using its CermaClad™ technology
- May 28, 2014: MesoCoat received $250,000 from NASA to Develop Coatings for Extreme Environments
- Apr 23, 2014: MesoCoat Received $100,000 Funding from the EPA to Develop CermaClad™ as an Alternative to Toxic Galvanizing
- Apr 23, 2014: MesoCoat and its Technology Development Partner received $2.75M from Canadian Agencies to Establish Wear-Resistant Clad Pipe Development Facility
- Feb 18, 2014: MesoCoat awarded $1.5M Loan to Scale-Up PComP™ Production and Expand PComP™ Coating Services
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Corporate
In 2014, Abakan reached closer to its goal of acquiring a 100% equity interest in MesoCoat and current owns 89.9% in direct and indirect interest in MesoCoat. Abakan is currently working with Powdermet to acquire 100% of MesoCoat. Abakan also secured strategic partners in Mexico and Taiwan; and is working on securing similar high-value partnerships in Canada, and the Middle East.
Mentioned below are a few highlights of our corporate development efforts in 2014:
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Commercialization
“We are cladding longer sections of pipe with every run, and the results have been very promising. We expect to deliver large sections of corrosion-resistant clad pipes for testing to oil and gas majors early next year” said Dr. Evelina Vogli, Head of Research and Development at MesoCoat Inc. MesoCoat receives approximately 2 inquiries about clad pipes every week; and some of these are for very large projects which require 200+ kilometer of clad pipe. These expressions of interest could translate to approximately $1 billion worth of clad pipes. “From what we understand, it is just a matter of time. We are fairly confident about developing full-length clad pipes and we know that ‘if we build it, they (oil and gas companies) will come’. There is significant shortage of clad pipes which is evident from the delays associated due to either the clad pipes not being supplied on time or the clad pipes that were delivered not meeting the quality requirement”, said, Robert Miller, CEO, Abakan Inc.
“We are working towards a $1.5M loan commitment from the State of Ohio for scaling-up our PComP powder production. In the last 5 months we have doubled our powder production and cut wastage by over 50% thanks to a massive team effort. We are also far advanced with obtaining planning permission for a new lab and production building of 12,000 Ft square to increase powder production to 160 tons/year. A new facility would give us the option for further scale-up, and also to set-up thermal spray coating services in the new facility. We recently purchased new, high-end, analytical equipment, and are about to install two large furnaces. The new furnaces would allow us to produce larger batches of PComP and bring down our production costs. We have no doubts that we have an outstanding product. Once the economies of scale associated with large-scale production come into play, we are confident that we will have a higher value proposition, which would drive adoption and growth of our PComP thermal spray coating powders,” said Stephen Goss, CEO, MesoCoat Inc.
Mentioned below are a few highlights of our commercialization efforts in 2014:
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