CONSULTANT REPORT:

An independent consultancy firm was called in to inspect EnV Board, and to determine its likely acceptance to the market in lieu of floating on the stock market. Following is a report they handed to Michael Wallace after a three month inspection of the available information and some remaining sample panels.

In lieu of Terrorist activity worldwide, this report is updated as at Nov 2002

The concept of using waste paper to create building material that can be used for a number of things including wall claddings. The product was first developed by Michael Wallace in conjunction with Molecular Technologies Pty Ltd during 1992 to 1994 but development was suspended in 1994 due to legal action by one of the shareholders of the company against the then director, James Daemar. As this shareholder turned out to be a cousin of the leading competitor to EnvBoard, it is reasonable to assume that the legal action was an attempt by a large multi national company to stop further research and development of the EnV Board.

They succeeded in getting Molecular Technologies wound up in a drawn out court battle, due to the fact that Molecular Technologies could not continue to fight the legal challenge. The legal action was based on misdirection of funds by the now deceased director, James Daemar, and was not directed at the products, as there were no grounds.

The legal challenge was eventually settled out of court, but not before the process destroyed production timelines which effectively ended the approved government grants. Investor confidence plunged and James Daemar became ill shortly after the legal proceedings ended. He passed away some 30 months later.

The inventor, Michael Wallace, continues to hold the intellectual property. Due diligence confirms that the ownership of the intellectual property resides with the inventor and that no other party has any claims over it.

EnV Board is an exciting development in the building trade. The board is produced from waste paper, be it plain, newsprint, waxed or inked paper or just white or brown cardboard. The end product (given the running title of EnV Board) is set to be highly cost effective, and environmentally friendly. (through recycling and not using any bleaches or harmful chemicals in the manufacture process) The initial area targeted will be wall and ceiling cladding.

The option is to gain a worldwide Patent for EnV Board, or to simply register the product as a trade secret. There is no way to analyse the product through spectrum analysis, as it incorporates significant organic compounds and an interference agent is also added.

Development and market introduction will happen in three phases. The first is to re-establish the coupon manufacture and to pass the necessary CSIRO tests for fire, impact and water resistance. This is expected to take 6 months. (Cost $360K)

The second stage is to move to establish commercial viability. The product is expected to approx. 16 months to 3 Years to determine its best position in the market (Cost $2 Mill)

The Third Phase is to produce and market the product to get to market. Total cost of development to the third stage is undetermined, and will only be know after Stage Two is completed. However, it is significant that essentially the product uses the same technology as paper manufacture, and so presents the likelihood of an extremely low final stage cost to an existing paper merchant.

It is projected that the interested parties at Stage Three will be part of the overall process, and involved with testing and creating samples under conditional confidentiality agreements.

1. Completing Initial Research and Development

Money is required to complete the research and development to the stage that final product testing can be completed. The research and development is required to make EnV Board fire resistant (which has already been successful) and also to further develop impact, water and pest resistant whilst remaining environmentally friendly.

This phase will cost approx. $ 360 000. At the end of this phase an independent expert will verify the product qualities before phase 2 is started. The timeframe for phase one is approximately 4 to 6 months.

2. Production Development

After a successful phase one EnV Board will proceed to the commercial viability phase. This entails the design and commissioning of the first production facility and determining the best process and formulation for full size panels. With recent advancement in High pressure roll form technology it is possible that low cost production facilities can be built.

This equates to a lower capital investment in production facilities generating a higher return on investment.

Phase 2 is expected to cost $ 1.6 million and be completed within approximately one to three years of the initial phase one research and development being complete.

Phase Three can run concurrent to Phase Two, however, no significant plant can be built until the essential qualities and production considerations are resolved. With R&D it could confidently be projected to have the entire process to be ready for market within 3 years.

Because of the simple nature of the product, however, it may be possible to set up production facilities in the Third World within 12 months, and to test the product on the open market without the onerous legal considerations inherent in Western culture.

 

1. Fire Resistant - In the initial product development the Australian CIRSO (New Zealand equivalent is the DSIR) performed fire tests on the product to Australian Standard 1530 Part 3. The sample supplied were heated on a naked flame to a temperature greater 1 100 degrees Celsius, they gave off little smoke and did not support combustion. In common language they did not burst into flames. They also exhibited relatively low smoke emission, no ignition or heat evolvement. Therefore in the midst of a fire, death or injury from smoke inhalation will be minimised by the use of EnVBoard. This factor is a major plus in the marketing of EnV Board.

2. EnV Board has superior tensile strength to most other boards on the market. EnV Board will be lighter and easier to handle than most other similar materials.

3. Potentially EnV Board could compete effectively with wall cladding products, roof cladding products and framing products amongst others. Further research and development is required.

4. EnV Board does not produce any toxic emissions during manufacture thus being environmentally friendly

5. EnV Board is completely free from formaldehyde that is now considered to cause cancer. Formaldehyde is the basis of various other competition cladding products.

6. EnV Boards paper content creates an insulator for both sound and extreme of temperature thus adding value and lowering building costs.

7. EnV Board is made from low grade waste paper and cardboard. EnV Board will use considerable amounts of waste paper/ cardboard that will help increase the amount of paper being recycled each year. Currently less than 50% of the paper is being recycled. Japan recycle 50 % of its waste paper this is the highest of any country worldwide. The remainder is going to landfills that are fast filling up around the world. EnV Board manufacturing process can use any waste paper products to produce the final product. The raw material is available in quantity worldwide.

8. Initial product costs are favourable which will allow EnV board to compete price as well environmental and quality issues.

9. EnV Board itself can be recycled hence we are developing a reusable product that in time will reduce the pressure on the environment from the continue demand for raw material from forestry or mining.

10. Preliminary costing show that EnV Board is very price competitive. Early development suggests that EnV Board will be able to be manufactured in existing localised ply and paper factories. This will open the possibility to low cost manufacture, with potential direct marketing to the end user, mainly the construction industry. This has the advantage of making EnV Board attractive to end users.

EnV Board will be attractive not only on safety and environmental grounds but on commercial grounds. Hence EnV board will be cost competitive, design competitive, user friendly and environmentally friendly.

 

1 . Is the Research and Development going to be successful The early indications are that is going to easily achieve a commercial viable process. The base product is cheap, the chemical ingredients are cheap, the basic work is already done… It is now a process of refining and completing what is already in motion. It should be noted, the original product was one selected from literally thousands of similar concepts to be awarded the PNEB Grant. This means that leading lights in the recycling industry have already inspected and approved the development. Even so, at every stage there will be independent experts who are well known in the industry validating the findings and product tests.

2. Variable Supply - Although the raw materials are plentiful, supply may be variable. Any variable supply issues can be managed effectively in a number of ways once the situation is identified. The quantity of supply is available, and local councils are willing to aid the supply of the material due to current stress on landfill sites.

3 . The marketplace does not accept the product. Given the benefits that EnV Board has and that it will be competitive on price, this is not an issue. Adding to the market forces is the new significance of IMPACT RESISTANCE, and there is nothing on the horizon at all that offers commercially viable safety that EnV Board offers. Demand is expected to be high.

4. Anti Competitive Behavior by Multi Nationals - By having a low cost capital requirement and lower cost of production it will be difficult for large companies to effectively force EnV Board out of the market. Even so, the EnV Board Company will financed in such a way as to withstand any price war.

5. Length of time to Production - It is anticipated that the EnV Board will be in commercial production within 18 months to 3 years. This has the added risk that presently unknown yet similar competing products may beat EnV Board to the market. The worldwide market is huge, more than enough room for innovative competitors to prosper in the market.

The wall cladding market throughout Australaia uses in excess of 350 000 tonnes of material a year. Large players such as Carter Holt in New Zealand and Boml and James Hardie in Australia dominate the market.

The major competing product is Gypsum Fibre Board (commonly known as Plaster or Gyp Board) made mainly from clay and manufactured in large factories owned by the companies mentioned above. Due to size of the local market, there is room for a new player with a superior product.

EnV Board, due to it use of what otherwise would be rubbish, can be easily set up and manufactured in numerous areas around the world.

Research to date shows no other product on the market that is entirely made from waste paper and which uses an environmentally friendly process. However there are similar products being developed in Germany that uses some waste paper in its process, but it does not compete with Gypsum Fibre Board, nor does it pass CSIRO evolved smoke index tests.

The Market

The Anti-Terrorist protection potential that EnV Board offers is extraordinary, and it is easy to envision that this will give enormous FREE PUBLICITY to the product wherever it is made available throughout the world

EnV Board offers many possibilities, yet the largest and most easily capitalised market niche is the building industry. The market for just wall cladding and roof cladding is huge. The North American market is the largest. North America is also the biggest user of paper in the world followed by Japan and the Europeans, hence these countries have extensive raw material supplies. They all suffer landfill issues, and many offer subsidies to recycling projects.

Interest from several countries was formally expressed from 1994 through to the present. Having made informal approaches recently the interest remains high in the local building industry and in overseas countries.

European countries (Specifically the UK) are now offering financial incentives to companies that can produce products that are environmentally sound and can use recycled materials in their production. What this points to is that the world and most especially the Europeans are becoming more environmentally conscious and are demanding products that are not harmful to the environment or themselves. This is the original market EnV Board was specifically designed to cater to.

The potential market size worldwide is huge, even if EnV Board only captures a small market share. EnV Board production estimates indicates it will be able to be viably manufactured in both rich and poor countries, so transport and distribution will not be a problem.

Once research is completed and the production process finalised, the business model will be completed. Accordingly, all currently profitable production and marketing models will be considered.

Due to the simplicity of the product and its likely ease of acceptance EnV Boar d is potentially a product that will be sold around the globe. To achieve that result it is envisioned that management will enter into licensing agreements.

This is a product that is a very exciting development in the building industry and could make the construction of environmentally friendly homes more practical and cost effective. We have only touched on the prospective uses in this report.

The initial research is promising and suggest that the EnV Board will be extremely cost competitive when compared to other products.

No of Board Per Tonne 40

Research & Development 360,000

Production Viability Cost 2,000,000

Royalties 5%

Current Retail Price for Plaster Board for 1200 X 2400 is $ 17.00

NOTE: Small Plants cost efficient at 6 000 tonnes pa

NOTE: Retail price for Plaster Board is presently over $5 per Metre

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   Last modified: August 27, 2004