a letter to the shareholders from Mr Dan Dowe.......
<<Dear Shareholder:
We have been working at a very fast pace this year and have tried to
keep you apprised of our progress through periodic news releases until
we were able to meet with you at our next annual meeting. If you would
like to receive any of our previous news releases, please contact our
General Manager, Dianne Hartwick, at our offices in Canada who will
gladly forward you a copy. At your request, Dianne will also include you
on our news release register.
We had originally scheduled a shareholders' meeting for May 29, 1998,
but needed to postpone the meeting until we amended our annual report
for May 31, 1997. The company has adopted a new accounting policy for
compensation paid in the form of stock or stock options and has filed
the amended annual report on May 22. We are preparing to reschedule the
shareholders' meeting, but would like to give you an overview on some of
the business issues that will be discussed in greater detail at the
meeting.
Product Sales
On March 1, 1998, the company began manufacturing and packaging its
Novacrete admixture and Novacrete finished mortar products with the new
industrial equipment that we installed in our Mississuaga, Ontario
manufacturing facility. The equipment installation was an integral part
of our 60 Day Plan and has made us a bona-fide operating company -- and
we wasted no time taking the next step. In early March we aggressively
pursued a number of large distributors of construction products that
have the outlets and marketing manpower to sell our Novacrete line of
products in the territories that we have earmarked for this year. On
April 14, 1998, we announced that the company sold one truckload of our
Novacrete MP mortar to one of Canada's largest construction product
distributors, CPD Services. On May 19, 1998, the company announced the
sale of another truckload of product to Neese Material Supply Company of
Greensboro, North Carolina. Depending on the actual product and the size
of the truck, a truckload of product represents approximately
$10,000-$15,000 (USD) in revenues.
These distributors stock the shelves of hundreds of construction product
outlets. For instance, CPD and Neese are known in the trade as "master
distributors" because they do not sell products directly to end users.
They sell construction products to local outlets and dealers who in turn
resell the products to end-users, such as contractors, engineers and
government agencies. By working with CPD and Neese, the company now has
access to over 500 outlets for construction products in Canada and the
United States -- and this is just the beginning. Our goal this year is
to have our products available for sale throughout the seven southern
provinces of Canada and from Maine to Florida. Based on our current rate
of progress we should achieve this goal.
Getting our products on the shelves of our distributors' outlets is the
first step toward the full commercialization of the Novacrete product
line. Our ultimate objective is to have contractors, engineers and
architects continuously using our products on bridges, roads, sidewalks,
buildings, manufacturing facilities and the many other applications for
our products.
"Relationship marketing" is the approach we are taking with our
distributors. Spearheading this effort is Richard Dryburgh, our Sales
Manager for North America. Richard joined us in February and has 25
years of experience and considerable contacts in the U.S. and Canadian
construction product market. In addition to overseeing the execution of
our marketing strategy, he is responsible for ensuring that we have the
necessary technical and marketing support to satisfy our customers'
needs. He will also coordinate our involvement in trade shows, including
our participation in the World of Concrete trade show in January, 1999.
We have already hosted product demonstrations before a number of our
distributors' regional sales representatives and have more of these mark
eting events planned for this summer. In addition, we are working with
our distributors on joint mailing and advertising programs to promote
the Novacrete line of products. This past week our offices were flooded
with inquiries about our products as a result of a marketing campaign
that CPD made to each of its 267 outlets. Earlier this month we met with
two other distributors in New Jersey and in the Washington D.C. area,
and will continue to pursue every opportunity to serve the construction
community in the seven southern provinces of Canada and the East Coast
of the United States.
Although we have been successful in recruiting seasoned personnel to
head up our sales and marketing efforts, it is too early to project
sales for this year. However, by getting our products "on the shelf" in
the territories that we have designated for this year, we will have
created the marketing infrastructure that will serve us well into the
future. We are not looking to hit "home-runs", but pride ourselves on
making the extra effort day in and day out to generate sales of our
products and to then stand behind our products with marketing and
technical support.
New Products
Our Operations Manager, Gary Lacey, who by training is a cement
technologist, has thrown himself into new product development, and in
June, we will begin marketing Novacrete FC, which is a fast-setting
product that is designed for repairs of concrete surfaces that need to
be placed back into service within 24 hours. More importantly, Novacrete
FC can withstand vehicular traffic within 2 hours from installation. The
market for Novacrete FC includes repairs of bridges, roads, parking
garages, airport runways, sidewalks, manufacturing facilities and other
areas where the timely completion of the repair is critical. By
September, we are planning to have the following four products available
for sale which will give us a complete line of engineering-oriented
products.
Novacrete GEL lightweight mortar for overhead and soffit repairs.
Novacrete DURATOP heavy duty floor topping that is designed to provide
abrasion and chemical resistance in areas that have continuous exposure
to aggressive and industrial usage. Novacrete FLOORCAP self-leveling
product for easier installation of large flooring areas. Novacrete
FLEXCOAT flexible coating for the protection of new concrete and as an
aesthetic coating for restored concrete surfaces.
These products will round out our current product menu which presently
consists of our proprietary Novacrete Admixture, a fibre-reinforced
admixture, Novacrete Adment-77A, Novacrete MP (multi-purpose mortar) and
Novacrete MPR (fiber-reinforced mortar). We are also considering adding
a grout product and a mortar product containing an anti-microbial
component for use in hospitals, restaurants and other areas where
sensitivity to sanitary conditions are high or are mandated by reg
ulation. To complement our line of "engineering products" we are
interested in expanding our product line to include a stucco system and
other decorative or architectural-oriented products.
Acquisition Opportunities
In addition to expanding the number of Novacrete mortar products, we
have identified three other opportunities to expand our line of products
and services through acquisitions. Strategic acquisitions of businesses
and products will reduce the lead time for developing a full line of
concrete repair products and will increase our distribution capabilities
by making our entire line of products more attractive to distributors
who service large contractors. The acquisition of established businesses
will also improve the company's financial position by adding management
personnel, revenues, cash flow and assets, which may enable us to have
our stock listed on the American Stock Exchange or quoted on NASDAQ
SmallCap Listing in the near future. Our discussions with potential
acquisition candidates are at an early stage, however we intend to be
very proactive in this area of business development, as well, and are
hoping to have more certain news for you at our upcoming shareholders'
meeting.
Personnel Matters
In April, the company hired John Bellocchio from Anti-Hydra
International as its U.S. Regional Sales Manager. At Anti-Hydra, John
was responsible for overseeing sales of a concrete admixture and fibers
for secondary reinforcement of concrete -- two markets that Novacrete
intends to enter this year. Having John's knowledge and contacts in
these areas will be invaluable to our overall sales efforts. John will
be based out of a new office that the company will open in Cedar Grove,
New Jersey, in June. This location will provide him with immediate
access to the construction product market encompassing New York, New
Jersey, Pennsylvania and Connecticut and allow him to be closer to our
distributors throughout the East Coast of the United States. To support
our selling efforts in the United States, we are working on establishing
a core group of agents that will represent our products on a commission
basis. These agents will be thoroughly trained in all aspects of our
products and will enable us to provide on-site technical and marketing
support to end users of our products.
As some of you may already know, in January we were very fortunate to
have Edward G. Malloy, President of the Building and Construction Trade
Council of Greater New York join our board of directors. As the head of
the Building and Construction Trade Council, he oversees over 200,000
workers in the construction trades and is instrumental in initiating new
construction projects at the municipal, state and federal level and in
the private sector, as well. Ed Malloy brings to us considerable
knowledge of the construction field and has given our company greater
visibility in both the public and private sectors.
We hope this letter has been informative and we encourage you to attend
our shareholders' meeting this summer.
Sincerely,
Daniel W. Dowe
President and CEO |
