Russ: Welcome back to The BusinessMakers Show, brought to you by Comcast Business, built for business. Our topic today: lubricants and coatings. And I’m talking about serious lubricants and coatings, because my guests are Dr. Ajay Malshe, founder of NanoMech, and Jim Phillips, the CEO of NanoMech. Guys, welcome to The BusinessMakers Show.

Jim: Great to be with you, Russ.

Ajay: Glad to be with you.

Russ: Tell us about NanoMech.

Jim: Well, NanoMech is certainly one of the leading Nanotechnology companies in the world, but we really focus on things like specialty chemicals, coatings, and really really advanced material science. We’re about 15 years old; first 10 years were undercover to create huge, immense value in intellectual property, hundreds and hundreds of patents and claims to protect what we’ve been working on and the last 4 years have been all about commercializing this science into real products that are used by virtually everyone, everywhere.

Russ: Okay and you’re there now actually ringing the cash register?

Jim: Ringing the cash register, shipping out thousands of products every day, every week. Yeah, it’s fully commercialized.

Russ: Okay and is it a private company or public company?

Jim: Well, we’re private right now; very much in the growth mode, you know 3-4 hundred percent revenue over year over year. That type of growth.

Russ: How many employees?

Jim: We’re about 60 employees, a good percentage of which are scientists and engineers, and we’ve grown a lot in the last 2-3 years. The last 3 or 4 years have been taking it commercial.

Russ: Okay and headquarters is in Arkansas?

Jim: Headquarters happens to be up in Northwest Arkansas. We’re right in between the largest company in the world, Wal-Mart; and the largest meat company in the world, Tysons; the largest multi-modal trucking company in the world, and hopefully soon the largest nanotechnology company in the world (

Russ: to round out the-); to round it all out.

Russ: All right. That’s really cool. So those categories though, I mentioned, as you heard in the intro, mainly lubricants, that is your biggest gross income product today, right?

Jim: Absolutely. Lubricants is very important to us, Texas is very important to us for that reason too. We have offices now in Dallas and a large facility here in Houston. We’re looking at increasing our production and probably putting it in Houston as well. The reason we’re doing real well in lubricants is that we brought a whole new generation of lubricants to the market that’s especially important in oil and gas and in transportation. What makes it special is the fact that, you know, I mean the world runs on machines; machines run on lubricants. Machines are beginning to get more tight tolerances, more extreme pressure; they’re really made better. And in order to do that, you have to dress the lubrication, the boundary layer of the mating surface, at the very smallest levels called asperities. And the micron technology that worked so well for 50 years is now completely obsolete.

To get into the asperities, to fix those issues like extreme pressure, tight tolerances, corrosion, oxidation, min/max heat temperatures, you’ve got to get down to nanoscale. We do that.

Russ: Okay and you’re talking about asperities, I mean, you’re talking about the problems that you have to solve with the lubricant, right?

Ajay: Yeah, right.

Jim: The asperities are at the microscopic level. So you can’t even see, you know, when you take mating surfaces, whether it’s gears or what have you. With the naked eye you can’t see those imperfections that are there. But we put our lubricants on it and it creates a nanotribological layer. It’s not just nanoparticles, it’s a whole package that addresses those asperities, solves all of those problems like no other lubricant can.

Russ: So tell us about some of the products that might be out there today and we not even know about it.

Jim: Well, we focus, in a way, on mechanical engineering because that’s where all the problems are. So, the world runs on machines, machines run on lubricants, machines have to be cut. Today, more and more of those machines are very, very specialized so you’ve got tighter tolerances, extreme pressure. So that’s where our products like lubricants, that we believe truly are the best in the world, and our cutting tools come into play, and then even the textiles that cover some of that in terms of finishes, all fit nanotechnology and all fit NanoMech.

Russ: Okay, so as you both know, Dr. Richard Smalley, the late, great Dr. Richard Smalley from Rice University made some significant advances in nanotechnology with the carbon nanotubes. Does that play a role in your company at all?

Ajay: Carbon nanotubes, actually I will tell you, Dr. Richard Smalley—late Dr. Smalley, what he has really done, he has really done three significant and important things that people don’t speak much and if I may: first he had increased the awareness about nanotechnology in scientific and non-scientific world, both; second, with his energy level, he really had made people ambitious, what nanotechnology can do; and then he has demonstrated that carbon nanotube is not natural material that you can mine it, whereas it’s synthetic material. What he has really shown, that with nanoengineering you can build synthetic materials that are not in the periodic table.

So, in effect, that it is made from carbon but the design is totally different, so our correlation really to that, just like you build a synthetic material, we really synthetically build molecules, macromolecules at nano scale, and then build them up in a product that Jim described; cutting tools, lubricants, coatings, and what not others.

Russ: Well, I remember back when he was discussed and written about so much here too, there was this, always this sort of underlying theme that actually manufacturing with nanotechnology was really going to be difficult. But is that what you guys actually do?

Jim: Yeah, no, we manufacture using nanoscale. We typically nanoengineer, nanomanufacture, and then through what we call convergent assembly, produce a product that no longer is at nanoscale but because it was nanoengineered it is far superior to anything that’s out there today. The fact is is the US is going through a situation where we’ve seen our GDP drop in manufacturing from about 78% down to 17%. China’s coming on incredibly strong. You saw what they did to us in solar; batteries. I mean, they even own our own intellectual property now after bankrupting those companies. Well, never before has there been such a moon race in business as there is right now in nanotechnology. China is building out a thing called the Nanopolis to try and literally beat the United States in nanotechnology. Russia has a thing called Rusnano where they have a 10 billion dollar fund operating in the United States to buy out a lot of our nanotechnology and nanoscience.

The United States has spent about 20 billion dollars over the last 10-15 years in creating nanotechnology at the laboratories and so forth, but we’re now beginning to really commercialize this and, truly, our national security begins to depend on our advancement and productization, beyond R&D; productization of nanotechnology. Because at the end of the day, everything that is commercialized and built can also be weaponized, and so we fit in all of those categories. First of all, making the best lubricants in the world; then, making the best coatings. Think Ironman; I mean, indestructible type coatings that can be used for everything from body armor, to your cars and so forth; to new types of textiles that are safer, better, totally fireproof, don’t add any weight; things like that.

Russ: So, the US military is either a customer or a prospective customer.

Jim: Not only a customer but a backer. We’ve won all the awards from the Department of Defense, you know, Office Naval Research, early on that helped us; Department of Energy, the National Science Foundation, and then on the commercial awards over the last year we swept the awards from the Edison Awards, the R&D 100, the Innovative Research awards with the EPA, and we’re proud of those. That’s not what runs the company, what runs the company is revenue, so we actually build and sell a lot of product, and especially in Texas. We have offices in Dallas, in Houston, that are growing. We’re trying to facilitate right now building down in Houston a production facility to keep up with the demand that we see from the major companies you hear about all the time in this space, because we not only increased the performance dramatically; not 2x, but sometimes 10x, while we reduced the cost for these operators, these service companies, and manufacturers in the Houston area.

Russ: So, we’re here in Houston right now. We’ve talked about Rice; you mentioned oil and gas. Is oil and gas, is that sector important to you?

Jim: Oil and gas is really the industry that got us started. We started working with a company, Cameron, here locally. It must have gone good because we’ve been featured in their annual report as kind of their top new technology the last two years.

Russ: Okay, and when did that start?

Jim: That started about two and a half year ago. So, the company is 14-15 years old, but the first 10 years we sort of hid out underneath the cover of creating all our intellectual property. Hundreds of patents, thousands of claims, so that we could protect this incredible process methods to creating this type of nanoengineered lubricants.

Russ: Okay, very impressive. So, do you see perhaps that the oil and gas industry would be your biggest and most important industry?

Jim: It is without question today the biggest. We’re working with, if you name the major companies in Houston in oil and gas, companies like FMC, companies like Halliburton, companies like Cameron and many more; GE oil and gas, and so forth. We’re working heavily with some of these, some of these we’re in the early process, but almost every one of the companies in this area of size we’re already working with to improve, at the end of the day, and innovate a lot of their situations where perhaps there were some problems they needed to overcome. The best thing about nanotechnology is is that really all the problems left in manufacturing today are at nanoscale, which means the solutions are at nanoscale.

Russ: Okay, interesting. So, and there’s many categories of need for lubricants in oil and gas, as there are, I guess, the sealants too. Is that right?

Ajay: Absolutely. If you look at the oil and gas industry, you are to look at the upstream, midstream and downstream. You’ve heard that before. So, in the upstream application, if you’re working with the gate valve, the stack, what they call valve stacks, trees, for the fracking, you are having the sand and oil and gasses and what ideally has been pulled out of mother earth. Now you’ve got to protect those mechanical equipment. For that, you need lubricants. So we, as a company, have designed a lubricant, very specifically customized for our upstream application to protect those gate valves so you’re rental assets; you can have bigger savings and you can pass on some of that savings to your end users. In a midstream, you’re transporting now the material that you just had fracked, and for that products like ball valves, which their maintenance life is important.

Those ball valves can be in very cold part of the world or in the countries like in Africa, like Angola, or they can be in the Middle East or they can be in Corpus Christi, and so we have products that can reduce the seizing of those metal to metal contacts that Jim described bound in lubrication. So, steel to steel contact, steel to polymer contact, and then there are downstream applications. So, our products go upstream, midstream, downstream, all the way in some of the very high end products like BOP, blowout preventer; subsea applications as well as on—

Jim: Without question, the two biggest problems that they face in this industry usually are both lubrication and then also corrosion, and we fix both of those. So, we have really novel, counterintuitive approaches to fixing both of those. We believe we have the best corrosion resistant products; coatings, that exist, and without question, the best lubricants to solve the lubricating issues in this industry. This is not the only industry we’re in; we’re obviously in automotive, racing, aerospace, other industries as well.

Russ: Well, I do want to talk about those too, but before we leave oil and gas, is your product used today?

Jim: We ship thousands and thousands of pounds every day (

Russ: In oil and gas.) into oil and gas and into the Houston area. We have capacity to deliver basically on millions of pounds and we’re out shipping as fast as we can. We run three shifts without stopping, all day long. We continue to add to the factory space; another reason why we need to be very soon putting in a production facility in Houston.

Russ: Wow, so obviously oil and gas is a very important sector to you. What are some other sectors that have meaning for NanoMech.

Jim: Well, besides oil and gas, you know, aerospace is big for us. When you think about the engines and the components to all the airplanes; they’re all alloys now, so you’re talking about Inconel, titanium, rene. They’re really hard to cut so our nanocoated cutting tools are the very best for cutting into those, and as well as they have a nano-serrated edge on them that allows us to create the best finishes. So, we really get into aerospace. Automotive turns out to be really big, and when you start out in automotive, while Detroit’s really important, we have an automotive office in Detroit, the automotive manufacturers they really look at the very top of the food chain. So, they look at like racing, and typically, Indy car racing.

What’s happening there because the products that are being used out there today, which are our products at Indy, are the products 2-3 years from now that will be what makes all the cars safer, run better, last longer, and so we’re very involved with Indy car racing. We’re also very involved in electronic vehicles, so EVs. We work with a company called Tesla. They have incredible, enormous, fantastic innovations and ideas. And so, to be Tesla you have to work with the other Teslas as your suppliers, and we’re one of those, and we’re proud of that.

Russ: Wow. So Tesla, I mean from what I understand too, that with the way that it works, there’s no real transmission so there’s a lot more RPMs zipped up real fast which calls for your product, right?

Ajay: You know, those RPMs create basically material to material contact. And those two boundaries, when they meet, because of RPM, because of the load, because of the environmental condition, they demand more from the lubricant than traditional lubricant can provide. And, so again, going back there, and Jim rightly said, for Tesla to be Tesla, they need to work with suppliers; those that can think outside the box just like them. So, this is what we do. Another important sector that we work is trucking, because if you really think, there are more than two million trucks on the roads of the United States and trucking is a very important vein that connects all of our distribution centers; from food, to gasoline, to everything. And so we work very deeply with the trucking industries to make them efficient.

Jim: We work with many of the largest HD—heavy duty truck companies, so when you’re out on the road on the expressway and all these major chains are passing you, thousands and thousands of those trucks are already lubed (

Russ: that’s your product), with our product and that makes them run longer, safer, so in between the intervals of when they need to be lubed and so forth to keep them very safe and wear well; it’s us.

Russ: Okay, cool. So, our audience, as you know, is a business audience, and they’re probably thinking this sounds too good to be true, but you do have competitors, right?

Jim: Well, we don’t really have competitors in this space at the nanotechnology scale. Obviously, there are the guys that have been around for a hundred years, fifty years, that are still using lubricants and things that are at micron scale. I mean, with the tighter tolerances, with the extreme pressure, those lubricants get squeezed out. Our lubricant is completely different in that it creates a nanotribological film at the mating surface where all the friction is, where all the wear is so it doesn’t get squeezed out. It lasts longer and performs better, so we believe, with all of our intellectual property that we worked on over the last ten years, kinda under the secret cover, that we’re in the position to carry this forward for a long time as the leader.

Russ: Wow, that’s impressive. Okay. So, you mention this 10 years a couple of times, too. So, my business audience is probably wondering, well, that makes sense, but it takes a lot of capital to do that, but you couldn’t be at cash flow positive yet, could you?

Jim: We’re doing real well. From a revenue side our growth is running 3-400% year over year. We continue to grow the company. We’re no different than a typical Silicon Valley company in that we want to be the first movers, so we really operate on capital that we get from, you know, great investors, tremendous investors, names that you would know and are on our board and so forth. People that, you know, really founded Motorola, founded Discovery Channel, guys like that that really love science, also love America; wanna see a resurgence of American manufacturing to keep us competitive and those are the kind of people that invest in us.

Russ: Okay. Ajay; Jim, I really appreciate you sharing your exciting story with us today.

Jim: Well, thank you Russ.

Ajay: Thank you, Russ.

Russ: You bet. And that wraps up my discussion with Dr. Ajay Malshe and Jim Phillips of NanoMach. And this is The BusinessMakers Show, brought to you by Comcast Business, built for business.