Overview
We are an asphalt preservation and repair equipment company. Our innovative, and eco-friendly hot-in-place recycling process corrects surface distresses within the top three inches of existing pavement by heating the surface material to a temperature between 350° and 400° Fahrenheit with our electrically powered infrared heating equipment, mechanically loosening the heated material with our processor/tiller attachment that is optimized for producing a seamless repair, and mixing in additional recycled asphalt pavement and a binder (asphalt-cement), and then compacting repaired area with a vibrating roller or compactor. We believe our equipment, technology and processes provide savings over other repair processes that can be more labor and equipment intensive.
We have not yet commercialized our products and we are therefore classified as a development stage enterprise. Although we have had some limited sales for our products, our efforts continue to be principally focused on developing our distribution network and improving our products to make them completely standardized. We believe we will have commercialized our products in calendar year 2014 and will be focused at that time on the sale of our products. At such time as that occurs, we will no longer be classified as a development stage company. We currently operate in one business segment.
Heatwurx Products
Heatwurx HWX-30 - Electrically Powered Infrared Heater
The HEATWURX™ HWX-30 Electric Infrared Heater is designed to effectively heat asphalt pavement to a pliable 350° to 400° Fahrenheit without scorching, burning, or oxidizing the existing asphalt. The HWX-30 is easily attached to a skid steer with standard quick releases and is a self-contained mobile infrared heater that can be used to repair/rejuvenate asphalt damaged by potholes and cracking. The HEATWURX™ HWX-30 Electric Infrared Heater specifications are as follows:
· Weight 3,550 lbs. (with generator mounted)
· Heats repair area of 30 square feet
· Generator requirement 45 kilowatts
· Custom industrial heating elements
· Cycle times of approximately 20 - 40 minutes depending on depth and weather conditions
· Fuel consumption approximately 2.8 gallons of fuel per hour
· Heavy duty steel constructed frame
· Top wind 7,000 lbs. jacks
· Six inches of heat resistance insulation
· Heavy duty high temperature powder coated finish for maximum durability and visibility
· Heavy duty steel attachment plate for skid steers or forklifts
Heatwurx AP-40 - Asphalt Processor
The HEATWURX™ HWX-AP40 Asphalt Processor is powered by an orbital hydraulic motor and has a 40 inch working width. Designed to process and rejuvenate existing asphalt in place, it processes, remixes, and levels the heated, rejuvenated asphalt to the desired depth, ready for compaction. It is designed to easily attach to a skid steer and has custom beveled tines to provide a seamless bond between the repaired area and existing pavement. The HEATWURX™ HWX-AP40 Asphalt Processor specifications are as follows:
· One inch wear plate with ability to adjust to desired depth
· Orbital hydraulic motor
· 40” working width
· 5/16 inch processing blades
· Custom beveled cutting blades tooling to maximize asphalt bonding
· 12 gauge wings to funnel material into desired location
Company History
Heatwurx, Inc. was incorporated under the laws of the State of Delaware on March 29, 2011 as Heatwurxaq, Inc. and subsequently changed its name to Heatwurx, Inc. on April 15, 2011. Our founders were Larry Griffin and David Eastman, the principals of Hunter Capital Group, LLC, an investment banking entity, which acquired our technology, equipment designs, trademarks, and patent applications from Richard Giles, the inventor and a founder of the Company in April 2011.
Competitive Environment
Potholes occur on asphalt-surfaced pavements that are subjected to a broad spectrum of traffic levels, from two-lane rural routes to multi-lane interstate highways. Any agency responsible for asphalt-surfaced pavements eventually performs pothole patching or repair. Pothole patching or repair is generally performed either as an emergency repair under harsh conditions, or as routine maintenance scheduled for warmer and drier periods. Pothole patching and repair can be performed during various weather conditions.
In most cases, the public likes all potholes to be patched or repaired promptly and forms a negative opinion of the agency when this fails to happen in a timely manner.
Potholes are generally caused by moisture, freeze-thaw cycle, traffic, poor underlying support, or some combination of these factors. Pothole patching or repair is necessary in those situations where potholes compromise safety and cause damage to vehicles.
In general, the competitive environment for asphalt patching and repair is fragmented. Numerous entities including contractors, municipalities and others provide services to repair roads. However, there are a number of generally accepted methods of repairing and patching asphalt that our process competes against which are listed below under, “Examples of Asphalt Repair and Patching Techniques”.
Examples of Asphalt Repair and Patching Techniques
The following techniques and asphalt repair methods have been documented by the Transportation Research Board as part the Strategic Highway Research Program (“SHRP”). The Federal Highway Association Long Term Pavement Performance (“LTPP”) program conducted five years of additional research on pothole repair, providing guidelines and recommendations to assist highway maintenance agencies and other related organizations in planning, constructing, and monitoring the performance of pothole repairs in asphalt-surfaced pavements.
Throw-and-Roll
Many maintenance agencies use the “throw-and-roll” method for patching potholes. It is the most commonly used method because of its high rate of production.
The throw-and-roll method consists of the following steps:
1. Shovel the hot asphalt into a pothole (which may or may not be filled with water or debris).
2. Drive over the asphalt using the truck tires to compact.
3. Move on to the next pothole.
One difference between this method and the traditional throw-and-go method is that some effort is made to compact the patches. Compaction provides a tighter patch for traffic than simply leaving loose material. The extra time to compact the patches (generally one to two additional minutes per patch) will not significantly affect productivity.
This is especially true if the areas to be patched are separated by long distances and most of the time is spent traveling between potholes.
Crack Sealing
Crack sealing is utilized by agencies, parking lot owners and homeowners to seal cracks in asphalt pavement to prevent water and other debris from penetrating the asphalt and causing further damage during the freeze and thaw cycles. This method is preventative and not suitable for repairing or patching potholes.
The process for sealing cracks consists of the following steps:
1. Clean the surface of the area to be sealed and let dry.
2. Heat the sealing material to 300° to 400° Fahrenheit.
3. Pour the heated material into the crack.
4. Let cool and dry.
5. Place a layer of sand over the sealing material to prevent tracking by vehicle tires.
Spray Injection Patching
The spray injection repair technique is performed by spraying heated aggregate (minerals such as sand, gravel, or crushed stone) into the area to be repaired. This repair method requires a truck to haul the replacement asphalt and specialized machinery to heat and disperse.
The spray-injection procedure consists of the following steps:
1. Blow water and debris from the pothole with a high-pressure air blower.
2. Spray a generous layer of binder (asphalt-cement) on the sides and bottom of the pothole.
3. Blow heated aggregate (minerals such as sand, gravel or crushed stone) and asphalt-cement (binder) into the pothole.
4. Cover the patched area with a layer of dry aggregate (minerals).
This procedure process does not include compaction of the repaired area.
Semi-Permanent Repair (Saw cut)
Many agencies employ semi-permanent repair methods such as saw cutting. This method represents an increased level of effort for repairing potholes. This increased effort increases the performance of the repair by improving the underlying and surrounding support provided for the repair. It also raises the cost, due to the increased labor required and the amount of time the repair takes.
The semi-permanent repair method has traditionally been considered one of the best for repairing potholes, short of full-depth removal and replacement. This procedure includes the following steps:
1. Remove water and debris from the pothole.
2. Using a radial saw with a hardened blade, cut the repair area on four sides creating a square or rectangle.
3. Remove the material inside the section that was cut.
4. Shovel hot asphalt into the repair area. Spread with an asphalt rake to proper grade.
5. Compact with a vibrating drum roller or vibrating plate compactor.
This repair procedure results in a tightly compacted repair. However, it requires more workers and equipment and has a lower productivity rate than both the throw-and-roll and the spray-injection procedure.
Intellectual Property
We currently have three issued U.S. patents: two utility patents and one design patent. We have four pending U.S. patent applications.
Our two issued utility patents, US Patent Nos. 8,562,247 and 8,556,536, were issued in October 2013 and cover certain unique device aspects of our asphalt repair equipment. Our design patent, US Patent No. D700,633, was issued in March 2014 and covers the ornamental design of our asphalt processor.
We have received a notice of allowance from the US Patent and Trademark Office (“USPTO”) on a third utility patent covering certain unique method aspects of our asphalt repair equipment. We anticipate issuance of this patent in June 2014.
Our patent application, entitled, “System and Method for Sending and Managing Pothole Location and Pothole Characteristics” was filed in January 2013; no substantive action has been received from the USPTO.
Our patent application, entitled, “System and Method for Controlling an Asphalt Repair Apparatus” was filed in February 2013; the USPTO rejected the application based on prior art referenced by the examiner. Our response to the rejection is due by March 20, 2014. We expect to file a response which argues that the invention as claimed is patentable over the cited prior art.
Our patent application, entitled, “Asphalt Brick Device and Method of Making Same” was filed in June 2013; no substantive action has been received from the USPTO.
We intend to develop other technologies for which we will seek patent protection. In addition, we have made and expect to continue to make certain international filings to attempt to protect our intellectual property rights in a limited number of countries outside of the United States. However, we do not have any assurance that our current pending patent applications will be granted or that we will be able to develop future patentable technologies. We do not believe our ability to operate our business is dependent on the patentability of our technology.
Governmental Regulation
We do not manufacture our own equipment nor do we utilize our own equipment to perform road repair. It will be up to the manufacturer as well as the end-users to comply with any governmental regulations. To the extent that any regulations require changes to our equipment, we will have to comply or risk losing the customers. See “Risk Factors” for a discussion relating to compliance with government regulations.
As part of our sales operations, we hire drivers with Commercial Driver’s Licenses (CDL’s) to transport our asphalt repair equipment across the country to demonstrate the effectiveness of our equipment to potential clients. As such, we are a motor carrier subject to regulation by the U.S. Department of Transportation (DOT) and the Federal Motor Carrier Safety Administration (FMCSA), and certain business is also subject to state rules and regulations. The DOT periodically conducts reviews and audits to ensure our compliance with federal safety requirements, and we report certain accident and other information to the DOT. Our operations into and out of Canada is subject to regulation by those countries.
In 2011, the FMCSA amended the hours-of-service (“HOS”) safety requirements for commercial truck drivers. The remaining provisions of the HOS Final Rule became effective July 1, 2013. While we continue to evaluate and adjust to the impact of the Final Rule on various segments of our operations, we do not anticipate a negative impact on our operations or productivity.
In 2011, the FMCSA published a Notice of Proposed Rulemaking to require currently logging drivers to complete their logs using an Electronic On-Board Recorder (“EOBR”). The final rule regarding this proposal is expected to be published in the first quarter of 2014. Since the issuance of this proposal, we have been reviewing our small fleet and are developing a plan to replace any legacy on-board recording equipment within our fleet. We do not anticipate a negative impact on our operations or productivity.
In 2013, the FMCSA, in conjunction with the National Highway Traffic Safety Administration, submitted a Notice of Proposed Rulemaking to require the installation of speed-limiting devices on heavy trucks. The final rule regarding this proposal is expected to be published in the third quarter of 2014. We believe this rule will have minimal implementation cost due to the small size of our fleet. We do not anticipate a negative impact on our operations or productivity.
In February 2014, the FMCSA published a Notice of Proposed Rulemaking establishing a Commercial Driver’s License Drug and Alcohol Clearinghouse. This rule will establish a database of commercial driver´s license holders that have failed or refused a controlled substance or alcohol test. The rule will require carriers to report positive test results and refusals to test into the Clearinghouse and query the database when hiring drivers. We do not anticipate that the establishment of the Clearinghouse will have a meaningful impact on our driver hiring process.
We continue to monitor the actions of the FMCSA and other regulatory agencies and evaluate all proposed rules to determine their impact on our operations.
Employees
As of March 27, 2014, we had seven full-time employees and one part-time employee.
Competition
According to the 2011 IBIS World Report on US Road and Highway Maintenance, the total spent on road maintenance in the United States is in excess of $30 billion per year. As an emerging company, we are at a competitive disadvantage because we do not have the financial resources of larger, more established competitors, nor do we have a sales force large enough to challenge our competitors. We intend to address this disadvantage by entering into distribution agreements with larger companies, and providing education and training to our sales partners, customers, and governmental agencies. We also believe that our equipment and processes are better than what is offered by other companies, and that purchasers will choose our equipment because of its effectiveness, quality of design, reputation in the marketplace, as well as the recognition we have received from state and federal agencies. We intend to offer an industry standard one-year limited warranty and provide nationwide service though our Original Equipment Manufacturing (“OEM”) partners and resellers. See “Risk Factors” for a discussion of the risks associated with our company.
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