One Way Insulation A Cool Idea

An early stage Australian technology that can significantly improve heat management by
significantly reducing heat travelling in one direction while allowing it to move in the opposite direction is behind a $2 million capital raising by World Wide Coatings Holdings Pty Ltd.

World Wide Coatings trades as TAG Technology as its development is known as Thermally Active Granules (TAG).
TAG is an additive to coatings such as paint and can be applied to a range of materials. The company says that by reducing the flow of heat in one direction, it can provide a low cost insulation effect that is superior to existing types of insulation. The main benefits are reductions in energy consumption, greenhouse emissions and cost.

The company says that when used in external paint, for example, it can reduce the flow of heat into a building and also increase the flow of heat out of the building. Applied to the inside of a building it would have the reverse effect, decreasing the outflow of heat
and increasing the inflow.

The insulation effect keeps a house cooler in summer and allows it to cool down faster at night. TAG Technology says such a house can be between three and seven degrees cooler, resulting in less use of air conditioning.
This one-way or diotic effect differentiates TAG from conventional insulators which slow heat
movement in both directions so that for example houses that heat up during the day take longer to cool down at night.

TAG Technology says that based on research and observation to date, “adding TAG at the right particle size and correct level into a polymer matrix creates an interference effect for some types of low-to-near infrared energy (i.e. heat), but not others. In doing so, it
acts like a “diffraction grating” by only blocking heat at certain wavelengths.”
The active ingredients in TAG are based on a plantroot and have been synthesized into a chemical compound. The result of six years of research and development, TAG is derived from cheap materials and is non toxic and not consumed over time so it can work
for the life of the wide range of products into which it can be added, says the company.
Commercialization Strategy TAG Technology’s strategy is to licence the technology to manufacturers in a range of industries, and receive royalties based on sales.

Its main focus is the power industry where it says a TAG coating on power lines can reduce ‘line heat’ and line sag and thus reduce the loss of electricity during distribution. It does this by both deflecting heat from the sun and “pumping heat out of the line”. Up to 50 per cent of electricity can be lost in summer, which is currently replaced by further generation, says the company.
Testing by power line manager, Downer EDI Ltd, shows that TAG coated power lines can be up to 23 degrees cooler and line sag is reduced by up to 135 per cent. TAG Technology says it has commenced commercial discussions with Downer EDI about the possible coating of new and existing power lines.

TAG Technology’s first signed licence agreement is with Taubmans, Australia’s third largest paint manufacturer. Taubmans has included TAG in its new iCool range of external paints, and plans to add TAG to three existing exterior paints. Marketing of the iCool range is scheduled to begin in September.
Discussions have also been held with food and beverage packaging manufacturers Amcor and Huhtamaki, and the technology has been presented to computer chip manufacturer Intel. Opportunities are also seen in textiles; window films; gas, petrol and chemical storage; defence; and fire protection products.
Capital Raising
TAG Technology would like to raise the $2 million it seeks from one or several sophisticated or professional investors. The minimum subscription is at least $200,000 per investor. It would favour investors who can bring relevant skills or other value add to the company.

TAG is offering a 22.2 per cent equity position in the company, which gives it a valuation of $9 million after the equity injection. The new capital will be used for commercialization
activities including generating revenue from existing licence agreements, further R&D, specific application testing, patenting, and working capital for entering the power line coating market.
The technology has received a Federal Government grant under the Commercializing Emerging Technologies (COMET) Program, and the company intends to apply for other Government programs.

The company says it has full patent protection so far in New Zealand and South Africa with the US expected soon and that applications in many other countries are at examination stage.
TAG Technology is a start-up business, and the company made a $0.5 million loss for 2004-05. While it is forecasting profits for 2005-06 and 2006-07, these are reliant on the successful implementation of the commercialization strategy.
The strategy includes commercialisation of the Taubmans license and receipt of the royalty income.

Other strategy objectives are execution of license agreements with Downer EDI, Huhtamaki and what is said to be a global player in the paint industry.
The share register comprises 14 current shareholders, mostly individuals, who have put in $1.5 million to date for R&D, patents and working capital.
The company says the pre-money valuation of $7 million is supported by the previous round of capital raising when US$0.7 million was raised at a pre-money valuation of $6.5 million.
Relevant risk factors for potential investors to consider are illiquidity, dependence on key personnel, and the lack of operating history. While there is also the possibility of increased competition from well funded competitors, TAG Technology claims that its technology “is estimated to be well in advance of any competitor’s technology.”

The People
The managing director of TAG Technology, David Forder, has 15 years experience in the coatings industry and is a former chief executive officer and director of Bristol Paints and general manager of Taubmans. He is a Bachelor of Industrial Science in Applied Chemistry.
The inventors of TAG, John Smyth and Sandy Richardson, are also directors. Mr Smyth is an
electrical engineer and has worked in the electrical, mining, petroleum and marine sectors including contract engineering for BHP Australia. Mr Richardson, who is non-executive chairman, has 13 years experience in industrial design and engineering for a wide range of products.
TAG says it intends to add to the board and following a successful capital raising will make
additional appointments to the management team.
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