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Earth Alive Clean Technologies Inc.Higher Crop Yields: Enzyme Fertilizers
Investment Snapshot Earth Alive Clean Technologies Inc. (“Company”) is a manufacturer and distributor of specialized microbial products used in agricultural and industrial applications. Microbes or enzymes are macromolecular biological catalysts, which speed up chemical reactions. The company has developed fertilizers formulated with soil enzymes, which increase the rate of chemical reactions in crops, leading to higher yields. Enzymatic products have shown efficacy in agricultural applications with the added benefit of lower cost and no environmental side effects, when compared to chemical alternatives.
The other focus of the company is a microbial dust control solution targeted at the mining industry. Dust is a major issue for large-scale mining and construction applications, causing both environmental and technical challenges. Throughout the useful life, equipment maintenance costs associated with dust and tire ware, add up to the equipment’s purchase price. Earth Alive’s solution is sprayed on unpaved roads in the same way as water but has a much longer effective life before needing reapplication. It also has virtually no environmental effects, when compared to its chemical counterparts.
Investment ThesisMicrobial fertilizers are a much more sustainable solution than chemical fertilizers• Crop fields which rely solely on chemical fertilizer applications are experi-
encing a slow decline in long term productivity• Soil becomes oversaturated with the chemicals being applied, and over
time this limits biodiversity within the soil and undercuts helpful, natural nutrient producing processes
• The Company’s Soil Activator (a microbial bio fertilizer) increases water absorption by up to 40%, compared to competing fertilizers, which are not as effectively absorbed by the roots once applied to plants and crops
Earth Alive’s microbial fertilizers deliver greater agricultural yields• Soil Activator provides a 36%+ increase in crop yields • Use of Soil Activator on medical marijuana achieved a 28% increase in
yield compared to only using chemical fertilizers• Strawberry plants achieved better early-season growth, and yield increased
by 41% compared to untreated strawberry plants• Melons require a 66% reduction in chemical fertilizers to achieve similar
yields compared to when Soil Activator is used
Growing demand and 1st shipment of product• In January 2015, the Company shipped its first container of the Soil Ac-
tivator bio fertilizer product for large-scale distribution to growers in the Dominican Republic
• A shipment of sea containers of organic crop inputs is on its way to Baneli-no, in the Dominican Republic, representing sales of over $200,000
• Earth Alive has an exclusive marketing agreement with Brenntag which is expected to generate sales of the companies Dust Suppressant product in Chile
Equity Research Biotechnology | Canadian Small Cap June 17, 2015
Price (June 17, 2015) $0.14Symbol CSE: EAC52 Week range CAD $0.10 - $0.20
Market Cap (M) $11.45Shares Outstanding (M) 81.89Free Float 95%30 Day Average Daily Volume 11,100Total Debt (M) $0.00Cash & Short Term Investments (M) $0.63Total Assets (M) $1.87Revenues (M, LTM) $0.36
Company DescriptionEarth Alive Clean Technologies Inc. was founded in 1997 and started trading on the CSE in April 2014. The company is a manufacturer and distributor of specialized microbial products for the agricultural and mining industries. Earth Alive has created a range of environmentally sustainable industrial and agricultural products through the blending of microbes with other natural ingredients. These products have shown efficacy in dealing with difficult industrial challenges without the use of environmentally harmful chemicals and additives.
All figures in CAD unless otherwise statedThomson Reuters 6/11/2015
Alex CutulencoAnalyst(416) [email protected]
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Investment Highlights
Dust Suppressant product at commercial stage ($4m spent to date) The Company’s patent pending microbial dust suppressant product, EA1, is environmentally sustainable, less labour-intensive, has long-lasting effects, and is efficient in different climates (even at low temperatures) and road compositions. The existing chemical-based products are also not so effective in containing dust and cause serious soil pollution.
Following a McGill University study conducted on the Earth Alive Dust Suppressant product at Barrick Gold Corporation`s Pascua-Lama site in Chile in April 2012, Dr. Viviane Yargeau, Ph.D., Ing. stated “The use of Earth Alive Dust Suppressant will help increase productivity and cost savings in mining operations.” In light of this, the Company has signed an exclusive distribution agreement with Brenntag (XETRA: BNR) for the distribution of EA1 in Chile to foster more sales of the product.
Strategic acquisition of LFP Solutions IncCompleted on June 4, 2014, Earth Alive acquired all issued and outstanding shares of LFP Solutions in consideration of $250,000 and the issuance of common shares of Earth Alive having an aggregate value of $750,000. LFP Solutions is a manufacturer and distributor of organic agriculture fertilizers and inputs which are sold at the retail level in Canadian stores, as well as on the commercial and industrial levels in Canada and abroad. The acquisition allows Earth Alive to integrate its entire value chain and provides the Company with various additional brands and trademarks such as Gro4 Organics, SmartPots, CowPots, and BigBlue Sea based fertilizer.
Proprietary bio-stimulant product - Microbial Soil ActivatorThe bio-stimulant’s microbial formulation is Canadian Food Inspection Agency (CFIA) certified, patented, 100% organic, not crop specific and can be used in conjunction with chemical fertilizers. The beneficial microbial population improves plant nutrient uptake by converting the soil minerals into easily absorbable nutrients, promoting the plant’s health and growth.
Technological OverviewWhat are Enzymes (microbials)Enzymes are macromolecular biological catalysts that speed up vital biological pro-cesses. The enzymes in the stomach, for instance, ensure that food is broken down into tiny particles that can be converted into energy in the body. Wherever one sub-stance needs to be transformed into another, nature uses enzymes to speed up the process.
Microbial-based solutions are derived from various naturally-occurring microbes such as bacteria and fungi. They have been successfully used to replace or comple-ment traditional fertilizers, and applied in industries ranging from personal healthcare to food processing.
Due to over use of chemical fertilizers and a pH imbalance in the soil, microorgan-isms populations have gone down considerably. Microbes are known to degrade the chemicals and nutrients that are not easily taken up by the plants or are harmful in one or other ways. The plants can then easily absorb these nutrients after the chem-ical conversion.
Microbial solutions provide more choice for farmers and help meet the demand for more sustainable agricultural practices. Such solutions can increase crop yields and help reduce the environmental impacts of modern farming practices, while helping plants take up more nutrients. Biocontrol products protect plants against pests, dis-
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ease and weeds. These products can be applied on broad acre crops such as corn and soy and on fruits and vegetables.
The company’s solution is to use a natural, tree-based carrier to keep microbes alive. This is in contrast to other microbial products whose carriers don’t provide proper nourishment reducing their efficiency. By the time microbes are deployed, they are already weak and soon perish.
ProductsSoil Activator has the potential to tackle the growing US $72 billion market de-mand for organic produce
The Company’s Soil Activator is a certified-organic and patented biofertilizer, which stimulates microbial activity in the soil, allowing for a greater increase in nutrient up-take by the root system. Creating this biofertilizer took over 10 years of research and development, which is seen as both a strong competitive advantage over industry rivals as well as a sound fundamental understanding for microbial technology. Ca-nadian Food Inspection Agency (CFIA) certification for the product was received in November 2014.
The multiple modes of action offered by the Company’s Soil Activator produce health-ier plants and higher yields, with reduced fertilizer, pesticide and water use. This re-sults in more sustainable agricultural practices and increased profitability for growers. Up to 40% of currently used fertilizers applied to plants and crops are not absorbed by the roots, and are totally wasted. Earth Alive’s technology works to increase ab-sorption by 40% in comparison to chemical fertilizers.
Results:
• The use of the Earth Alive’s Soil Activator gives better results than using fertilizer alone (32%+ increase in yield)
• Strawberry plants that received Soil Activator treatment had better early-season growth, and produced 41% more yield than untreated strawberry plants
• In a test field where the normal quantity of chemical fertilizers is decreased by 66% and Earth Alive Soil Activator is applied, melons are significantly larger, foli-age visibly greener and flowers last longer than in the control field where 100% of the chemical fertilizers was used
Source: Earth Alive ResearchExhibit 2: Two identical plant root systems, without (left) and with (right) Earth Alive Soil Activation treatment
Exhibit 4: Aragula without (left) and with (right) Earth Alive Soil Activation treatment
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Dust Solutions battles dust control within the metals & mining industryDust control has become a major issue due to the adverse effects of dust on the en-vironment, its impact on the health and safety of workers, as well as those of neigh-boring communities. Airborne dust has serious negative economic and productivity consequences on industrial operations.
The Company’s patent pending EA1 dust suppressant technology, mitigates dust by unleashing the power of particles in the soil. The product was developed in collabo-ration with the Novozymes Company from Denmark, a leader in bio innovation.
Performance results:
• Water use for haul road maintenance was reduced by 80%
• Dust emission is reduced by 99% with the use of EA1
• Road treatments are less frequent: one application per week instead of five
Other ProductsThe Company has developed and acquired other non-flagship products, which are targeted to provide benefits within organic agriculture. These products can be seg-regated into two divisions: the Big Blue product line, consisting of ocean-based soil amendments and fertilizers; as well as physical plant containers, which provide nutri-tional benefits for growing plants.
As opposed to the Soil Activator and its primary role of increasing nutrient uptake by plants, the Big Blue product line focuses on providing the actual nutrients to the plant such as calcium, iron, as well as over 90 other vitamins and minerals. Its industrial application focuses on increasing plant development and overall plant health. On the other hand, the plant container line of products have been developed to enhance plant growth within pots. Applications include gardeners wishing to provide nutrients for their plants, and enhance the plant’s root structure.
Exhibit 5: Mining site before (left) and after (right) applying Earth Alive EA1 dust sup-pressant product. Application shown in the middle photo
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Exhibit 6: Rachelle-Béry store
Catalysts and Upcoming Growth Plans1. Additional shipments into the Dominican Republic and other geographical
locations with high agricultural activity
Earth Alive’s products have already found their way to commercial growers in the Dominican Republic, which are looking to increase production of organic and natural-ly-grown goods to meet increasing demand in European and North American markets where demand for organic fruits and vegetables exceeds their availability.
2. Successful expansion into Rachelle-Béry stores
The Company’s full line of organic agricultural and horticultural inputs will be avail-able in all key Rachelle-Béry locations starting in spring 2015. Part of Sobeys, Ra-chelle-Béry has been a leader in organic and natural products since 1984. There are 11 Rachelle-Béry stores and 20 boutiques located in IGA Extra stores throughout Québec. This expansion is seen as a strong catalyst, expected to add additional sales channels for the distribution of Earth Alive’s products. This will have a direct impact on the Company’s sales and market penetration.
3. Growing demand for dust control product guided by a successful distribu-tion of product within Chile
EACT entered into an exclusive distribution agreement with Brenntag (XETRA: BNR) for the distribution of its EA1 microbial dust control product in Chile. Brenntag Cor-poration is already EACT’s exclusive blending partner for the EA1 product in various countries around the world. This development will be a first step towards monetizing the Company’s dust suppressant product.
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Industry OverviewOrganic Agriculture: Market size & positive growth outlook:
Earth Alive is focused on capitalizing on the growing organic agriculture market. This market is driven by shifts in consumer preference towards organic produce, which increases aggregate organic farming. There are currently 1.9 million certified organic farmers in 164 countries. The total global land size of organic production is measured at 38 million hectares. In addition, 80% of these 1.9 million organic producers are lo-cated in developing countries, according to the FiBL-IFOAM survey. As for the market size of consumption of organic products, about US $72 billion was spent globally on organic produce in 2013, as noted by the market research company Organic Monitor. This demand has seen an increase of 13% over the last year.
The global industrial enzymes market is very competitive with Novozymes being the largest player in the industry, followed by DSM and DuPont (after it acquired a ma-jority stake in Danisco and its Genencor division). The companies mainly compete on the basis of product quality, performance, use of intellectual property rights and the ability to innovate. North America and Europe are the largest consumers of industrial enzymes although the Asia Pacific region is expected to undergo a rapid increase in enzyme demand in China, Japan and India, reflecting the size and strength of these country’s economies.
The market is highly competitive, technologically intensive and has small profit mar-gins. Earth Alive is focused on competing based on product differentiation. As not-ed previously, their microbial fertilizers were tested and produced increased yields. Product differentiation will need to stem from the added benefit to organic farmers from attaining higher crop yields, which in turn, would boost a farmer’s revenues.
Current Trends Growth Drivers Growth Barriers
• Rising demand for food as population grows
• Sustainability in farming
• Focus on yield maximiza-tion
• High input costs• Emerging markets’ GDP
and population growth• Regulatory requirements
for more sustainable farm-ing practices
• Biological solutions at relatively early stage of development
• Low pricing for traditional input and crops
• Robust technology
Exhibit 3: Growth of organic agricultural land by continent 2005-2012
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Africa Asia Europe La6n America Northern America
Oceania
Million he
ctares
2005
2009
2012
Exhibit 4: Industry Outlook
Source: Research Institute of Organic Agriculture FiBL
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Dust Control Industry: Current Issue and Market Dynamics
In the past decade, a number of major studies have been conducted in the USA to determine the sources of atmospheric air pollution. The findings of most of these studies are that ‘non-traditional sources’ contribute more than half of the atmospher-ic particulate burden. One of the components of the ‘non-traditional sources’ is emis-sion from industrial and unpaved roadways, including surface mines and works. It is in the interests of mining companies, and a requirement of the new reality in the era of Environmental Management Plans (EMP), to devise dust control plans.
Source: Schonland Research Centre for Nuclear Sciences - Control Of Dust Emission And Impacts From Surface Mines And Works
The major impacts of dust emission within mining sites are of reduced productivity and increased maintenance costs of equipment. Good roads improve production, extend tire life, reduce wear on mobile machinery and reduce overall operating costs. However, despite this, approximately 80% of all large tires fail before wear due to poor maintenance and operating practices. Recent study at a major metals mine in-dicated tire cuts (45%) and impact damage (30%) as the largest contributing factors towards premature tire failure. It used to be that tires were just a cost of doing busi-ness. Mine owners were accustomed to spending the initial purchase price of a large mining truck in tire-related costs over the lifetime of the machine.
Source: Chadwick International Mining, March 2011
A previous solution to dust control was to simply spray the road with water. On the surface this was a cheap and easy solution, however improper watering creates ideal conditions for haul road accidents. Water makes fallen rocks even more dangerous to tires, as wet rock cuts twice as quickly as dry rocks. In addition, over-watering, haul road surfaces become spongy and slick, causing trucks (especially empty haul trucks) to lose traction and slide. It can also cause engines to rev and tires to spin, increasing fuel burn and reducing tire life.
In current market dynamics within the commodities industry, companies are focusing on margin quality over price driven volume growth. Metals and mining companies now face the dilemma of how to best allocate their capital. Equipment maintenance is just another nuisance faced by miners, which lowers productivity and decreases op-erating margins. Dust mitigation may serve as an efficient manner of cost reduction, leading to improved margins.
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RisksAttaining Clients: The Company’s future success greatly depends on its ability to gain additional clients. If the Company is unable to do so, then very few sources of revenue are to be expected.
Monetization of Products: The Company has several potential sources of revenue, which are still in their early stages of deployment. The success of the Company large-ly depends on its ability to go to market and monetize such products/services.
Ability to hit Profitability: The Company is currently operating at a net loss, and such results may be expected to continue for the near term. There is no assurance that the Company will ever generate any profits.
Financing and Dilution: The Company’s ability to continue as a going concern and accomplish future strategic plans, largely depends on obtaining additional financing. In addition, these additional funds may be dilutive to current shareholders.
Lack of Operating History: The Company has limited history of operating, and there-fore must be considered a start up. As such, the Company is subject to risks common to such enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial and other resources and lack of revenues.
Dependence on Management: The Company is significantly dependent on its man-agement team including outside management advisors and consultants. The loss of the Company’s Directors or senior officers, other employees, advisors, or consultants could have a material adverse effect on the business.
ConclusionEarth Alive is a manufacturer and distributor of specialized microbial products target-ing agricultural and industrial applications. One of its flagship products, the Soil Acti-vator, has produced a clear value add to organic farmers, by supplying a bio fertilizer which is proven to increase crop yields by as much as 41%. This product landed the Company its first shipment order to farmers in the Dominican Republic, while also strategically partnering with Rachelle-Béry locations, to increase visibility and dis-tribution of product. The Company is strategically positioned to capture the growth within the organic agricultural market, while also improving upon their dust mitigation product. Further contract negotiations are expected for both product lines, which are expected to increase revenues within the short to medium term.
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Appendix A: ManagementDavid Gilmour – CEO
David Gilmour previously worked at Cirque du Soleil, a Montreal-based entertainment company, as head of the Corporate Alliances Division. During his four year tenure at Cirque, David built a roster of Blue Chip corporate partners for the company on 4 continents. While at the Cirque, the Chicago-based IEG Group called David one of the 10 most creative corporate alliance executives in the USA. Before acquiring Earth Alive Resources in 2011, David spent 5 years as the head of Jig-A-Loo, a heavy chemicals and lubricant manufacturer. While there, he became acquainted with new, alternate, and high performance clean technologies, available for a variety of indus-trial applications.
Professor Viviane Yargeau, Ing. Ph.D. – CTO
Dr. Yargeau is a chemical engineer and is currently an Associate Professor and Grad-uate Program Director in Chemical Engineering at McGill University. She is also an Associate Member of the McGill School of Environment. She is a leader in the control of environmental pollutants and her research focuses on both fundamental and tech-nological aspects leading to improvement of technologies to mitigate the release of pollutants in the environment.
Marcelo Soutullo – VP, Dust
Prior to settling in Montreal in 2000, Marcelo Soutullo spent 15 years with CSAV, an international shipping line based in Chile, managing fleet personnel and coordinating marine standard certifications. As an independent consultant, he focused on sustain-able and renewable energy production using organic material, and represented Earth Alive products to distributors based in the Caribbean and Chile. Marcelo joined Earth Alive as Vice President of Business Development in March of 2013.
Michael Warren – VP, Agriculture
Michael built and managed LFP Solutions, an organic soil inputs distribution com-pany, which joined Earth Alive in 2014. With a natural propensity for adventure and discovery, Michael consistently identifies innovative business concepts and brings them to market, with a focus on products that are earth and human-friendly. At Earth Alive, Michael is responsible for product and market development in various parts of the world, particularly Latin America and Africa. He has a Business Degree from
Bishop’s University.
Appendix B: A Sample of the Company’s Clients
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Appendix C: Recent NewsEarth Alive Ships Organic Fertilizers To Banelino, An Organic Banana Coopera-tive In The Dominican RepublicA shipment of sea containers of organic crop inputs is on its way to Banelino, in the Dominican Republic, representing sales of over $200,000.
Third Party Testing Shows Earth Alive Soil Activator Boosts Yield Of Medical MarijuanaMedical marijuana plants grown with Soil Activator produced 28% more than plants grown with standard fertilization alone. The demand for medical marijuana is increas-ing rapidly, and competition for that business is going to be fierce.
Earth Alive appoints Vincent J. Ennis as Vice President Business Development and Licensing with a mandate to license Earth Alive’s innovative technology platforms out to global industry market leaders“The next phase of our strategy is to partner with global industry market leaders and license out our technology so we can benefit from their marketing horsepower, achieve significant reach in global markets, and bring our sustainable environmental solutions to the world.
Earth Alive and Brenntag Sign Exclusive Distribution Agreement in ChileEACT entered into an exclusive distribution agreement with Brenntag (XETRA: BNR) for the distribution of its EA-1 microbial dust control product in Chile. Brenntag Cor-poration is already EACT’s exclusive blending partner for the EA-1 product in various countries around the world.
Earth Alive Secures Financing for its clients in the Dominican RepublicEarth Alive established financing facilities for its clients in the Dominican Republic with leading banks and financial institutions in Canada and in the Dominican Repub-lic. This multi-million dollar financing program greatly assists the Company’s local partners and demonstrates its commitment to building strong and long-term client relationships in the country. This Earth Alive financing program will be available to large private growers and local COOP’s alike. These finacing facilities are available to all clients of Earth Alive in the agriculture and dust control business units.
May 13, 2015
May 11, 2015
May 6, 2015
May 4, 2015
February 4, 2015
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