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Independent Reviews for Venture Investors

CNZ.V - New chapter?

Canadian Zeolite Corp (CNZ.V) is focused on the exploration, development and production of zeolite. We initiated coverage on July 31, with a subsequent note on September 27. If you're new to zeolites, they are known for their absorption capacities which have numerous industrial applications.

- Agriculture: Odor control in composting, fertilizer in greenhouse, animal health and hygiene, as well as, feed supplements.

- Aquaculture: Fish farming, aquariums, and transport, removing nitrates, nitrites, and phosphate to maintain water quality.

- Water treatment: Filtration, minimizing runoff, removing micro-organism (ammonia) and heavy metals (Cu, Zn, Ni, Pb).

- Industrial: Road salt replacement, absorbent for oil spills and radioactive waste containment, and gas separation.

Since the last note, the following releases were issued.

Sept. 28 - Appoints Larry Brandenburg to the Advisory Board. Oct. 23 - Acquisition of Earth Innovations Inc (EII) and Strategic Financing. EII provides products for winter traction control, odor management and water quality. EII's product are distributed in Canada and the US through a number of well known retailers. Terms of the transaction include 3M shares, $0.2M in cash. As required by the news a $0.75M private placement is announced at $0.30 with warrant at $0.75 cents. Oct. 31 - Canadian Zeolite Files Audited Financials for June 30, 2017. $25K in royalties and commissions on 2,200 tonnes of zeolite shipped. While commissions on CNZ’s gross sales were not reported, a payment of $0.10M from Canadian Mining Corp. was received for expenses incurred during the spin-out process. CNZ.V did not generate revenue from operations and incurred a a net loss of $1.8M.

Nov. 2 - Agreement with CIH S.A. (Havana International Centre) for Research and Export. CIH S.A. is a trading company and consultancy which, in addition to research, will provide potential market opportunities in Cuba, South America and Canada. CNZ.V has also achieve "client status" with the Commercial Department of MITSA S.A. in Cuba for the supply of Cuban zeolite.

Nov. 9 - Closed Oversubscribed Private placement of October 23rd release. $0.88M at $0.30 with warrant at $0.75. Proceeds will be used towards expansion of distribution channels into eastern Canada and the United States, as well as general working capital. Nov. 14 - Collaborates with UNBC to develop products to remove bacteriological contamination in water. UNBC researchers will use CNZ.V's zeolite to develop a multi-functional adsorbent medium for decontamination of polluted environments. Nov. 28 - Earth Innovations Inc. acquisition is approved at AGM (Nov. 24th). Closing date for the transaction is set for December 5th. Dec. 12 - Completes Acquisition of Earth Innovations Inc (official). Dec. 14 - Stephen Coates, President of Earth Innovations Inc. ("EII"), to continue to lead retail and industrial/commercial business of EII. EII has posted interim sales of over $213,000 (unaudited) for the period between the effective date of acquisition and closing (Sept 30 - Dec 11, 2017). Jan 29 - EcoTraction™ Making Headlines in the Fight Against Road Salt.

Earnings reported in the last period were extremely weak ($25K) and the loss of $1.8M was substantial. In contrast, the acquisition of Earth Innovations Inc (EII), along with the initiative with CIH S.A and UNBC were positive achievements. EII's products will enables CNZ.V to further engage commercial and municipal sector. In addition, the agreement with CIH S.A enables CNZ.V to expand its logistic network beyond the Bromley Creek deposit (BC, Canada). The UNBC collaboration further strengthen CNZ.V's efforts in product development and is synergistic to CIH S.A.

While the recent Eco-Traction headlines were good for CNZ.V, and further raised awareness of zeolites, no new sales announcement were made in the last five months except for the revenue of EII. This has left many investors frustrated especially since CNZ.V had announced repeat sales in Ontario and Quebec (Sept. 19th) prior to the previous earnings. In addition, very little press has been generated since Renmark Financial Communications Inc. was hired for $8,000/month. While Renmark's contract end in March 2018. CNZ.V has not issued a proper business update since Dec. 14th.

The chart reveals that investors have started a "new year sell off", which culminated to a 52 week low ($0.255) when CNZ.V decided to lower the options vesting threshold $0.30 to $0.24 without issuing a news release for the announcement (SEDAR only). While there was a number of insider purchase throughout the period (5) with progress made on multiple front, the recent move was unexpected by the market making a bad situation even worse.

Though we did initially said that CNZ.V was a story in the making, we did not expect so much unnecessary self-inflicted drama. As such, investors are definitely ready for a new chapter. Despite the recent events, we continue to maintain a long position.

DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.


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