By: Dylan Sikes - AllPennyStocks.com News

Tuesday, March 25, 2014

Polyurethane is all around. It’s used in foam seating, foam gaskets, insulation materials, suspension bushings, adhesives, coatings, sealants, synthetic fibers and many plastics, just to name a few applications. The problem with most of it is that the polymer is manufactured using isocyanates, a family of highly reactive and toxic chemicals. The Centers for Disease Control and Prevention designate isocyanates as a health hazard because they are powerful irritants of mucous membranes, gastrointestinal and respiratory tracts and known to cause asthma. The Environmental Protection Agency is getting more proactive about regulating isocyanates, including speculation on banning certain products, such as those that are regularly used by do-it-yourselfers that aren’t aware of the potential dangers of isocyanates. Last July, the Labor Department’s Occupational Safety and Health Administration (OSHA) launched a National Emphasis Program to better educate and protect workers exposed to isocyanates, explaining the exposure “could result in death.”

All thoughts of a full-blown outlawing aside, a greater awareness and tighter regulations are good for public health and also could be good for a small company like Hybrid Coating Technologies Inc. (OTCQB:HCTI).

On Tuesday, Hybrid released a statement commenting on the initiatives of the California Department of Toxic Substances Control (DTSC) in selecting isocyanates and two other substances for a restriction from a list of 1,10 toxic components. The DTSC’s move falls under the umbrella of the Green-Chemistry Law that was enacted in California last year, giving DTSC the power to outright ban products after following proper protocol, which can include education, a comment period and encouraging manufacturers to find alternatives.

Hybrid Coating is the exclusive licensee of Green Polyurethane™, a product line that the company claims is “the world's first-ever patent protected polyurethane-based coatings and paint products which eliminate toxic isocyanates from the entire production process.” We were not going to dig too much into the claim, but a quick search shows it’s safe to say that Hybrid either stands alone in making hybrid non-isocyanate polyurethane (HNIPU), or its competition is extremely minimal.

In addition to being far safer that traditional polyurethane, Green Polyurethane is reported by Hybrid Coating to provide a solution to overcome many of the shortcomings of the conventional product, namely porousness and permeability with weak hydrolytic stability.

Hybrid Coating licenses the product from Nanotech Industries, Inc., a wholly owned Hybrid subsidiary founded and run by Hybrid Chief Executive Officer Joseph Kristul, according to both corporate websites. Incidentally, Oleg Figovsky serves as Director of Research and Development for both Hybrid Coating and Nanotech Industries and Darin Nellis is named as part of both teams as well.

Hybrid Coating announced last week that it is in advanced negotiations with a Fortune 500 company to modify and commercialize a product. Essentially, the talks seem to be centered on Hybrid utilizing its expertise and platform technology to make the product isocyanate-free. Hybrid Coating expects a definitive agreement to be forthcoming in which it will retain the intellectual property for the new product and give the “household brand” partner worldwide exclusive rights to sell it. Hybrid forecasts its cut of the sales to reach $20 million per year, following a ramp-up period.

This major is one of several that Hybrid Coating says it is in varying stages of negotiations and product testing. Although names can’t be divulged, Hybrid says it’s talking to more than two dozen companies, 11 of which are large international firms.

Now whether this is all lip service about the negotiations remains to be seen. Sales of the products are still negligible as measured by Hybrid Coating having $56,631 in revenue through the first three quarters last year as net loss widened to 41 cents per share from 28 cents per share in the same quarter of 2012. That’s fine, as it is certainly not uncommon with developmental companies. Given all the green initiatives going on and LEED (Leadership in Energy & Environmental Design) projects becoming more common, it will be interesting to see where the company is headed. With a market cap of only $2.7 million, there’s plenty of headroom for growth if they can start inking some deals. Proper due diligence is, as always, encouraged.

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