and now I would like to invite mr Matthew would forgive that present I next presentation the floor is yours okay great so we’re already a little bit behind I’m going to move fairly quickly through this presentation welcome again to the International Congress of SCD pro biotechnology during the conference for those of you who have a computer or a phone going please feel free to follow us on Twitter and or tweet your comments during the conference so my agenda today I’m going to speak a little bit about the global trends and challenges that affect our industry and technology the opportunities that these create the power of innovation to meet these challenges and SCD probiotics technology and global solutions to these challenges so some of the global trends here that I’m going to talk about our climate change and the rapid increase in natural disasters the increase in pathogen outbreaks and the influence of pathogen outbreaks on our lives and Industry the importance and need for sustainable agriculture the over-reliance on pesticides and the influence or the effect that has in the environment and human health the regulatory developments that come from these aforementioned issues and the the consumers and the people of the world demanding green and sustainable products so this graph is quite astounding when you really look at the increase in natural disasters occurring around the world I think as stanislav Cole Bush the previous presentation mentioned everybody knows that something’s happening our climate is rapidly changing and and it’s a very serious issue that that threatens all of us on pathogen control we can see that there’s also an increasing amount and frequency of outbreaks of pathogens recently in the news was what happened in Germany and the EU with many deaths from a coli outbreak we’ve had similar situations in the United States with e.coli outbreak Salmonella outbreaks has some examples in the United States the Center for Disease Control has reported 14 outbreaks since 2006 but most of those occurred in the last couple of years similar is with Salmonella and one thing that having worked with this technology for over 15 years now I have learned and I’m very confident that when you have a high population of pathogens or you have a disease outbreak in any system whether this is in a in a food distribution system like what recently occurred in the EU or when it’s in the digestive system of an animal or a human or in the soil when you have this high disease population of disease-causing microorganisms this is a symptom or a result of an imbalance in the microbial ecology of that system so with our technology we are addressing this issue by basically rebalancing the microbial ecology of these systems as we all know the world population is rapidly expanding we’re nearing seven billion people and the trend is going to continue likely to to increase in world populations so the demand for food and resources is rapidly increasing very interesting trend is the amount of farmland per person globally we can see here in this graph on the right that the

amount of arable land or farmland per person from 1961 to 2002 has steadily been decreasing and it’s nearly half what it used to be this is a result of the increasing population and the the simultaneous decrease in the amount of farmland in the world so farmland is decreasing as a result of two things happening one is urbanization and basically paving over farmland to create development and the other is the methods of chemical farming with intensive use of chemical fertilizers and pesticides over time degrades soils and degrades the land to where you can no longer grow crops on those soils so for example in the world of soil types there’s there’s a broad range of soil types the most the most productive soils like what we have in the Midwestern United States where I grew up these are extremely deep high organic matter soils that will be productive for many years to come but most of the world’s soils are what we call marginal which means that they’re they’re low organic matter they don’t have good structure they don’t have good water holding capacity they don’t have that climate doesn’t have a lot of rainfall they have to be irrigated and it’s these lands that in in the current chemical conventional farming practices these lands quickly degrade until they literally become deserts so the term is desert ification and it’s the creation of desert the global amount of land that is desert and therefore cannot be farmed is increasing every year and interesting story I recently visited the headquarters of a large global crop protection company in Germany and when I visited their visitor center I was I was really surprised they had a large ticker that showed real time the increasing number of the world population and also in real time the decreasing number of Hector’s or acres of farmland so so we’ve got this increase in population and decrease in farmland which is which is a very serious and threatening trend of course we’re all familiar with the fact that as we have increased the productivity of our farmland we’ve used a lot more chemical fertilizers chemical fertilizers are directly related to energy and nonrenewable energy sources such as oil and natural gas because it takes a lot of energy to manufacture these fertilizers and there’s a direct correlation between energy prices and fertilizer costs so as energy prices are going up and we reach or we approach what’s known as peak oil or the the maximum amount of energy that we can produce from non-renewable sources the cost of fertilizers is also significantly increasing this causes an increase in food prices and inflation of the cost of basic nutrition globally in addition there’s a increasing use of pesticides for those of you who don’t know a pesticide is basically a chemical product that kills organisms it could be insects or funds fungi or bacteria or weeds in 1985 there was 17 billion dollars sold globally in the pesticide market in 2008 there was 40 billion dollar market in pesticides so there is a rapid increase and a continuing increase in the use of pesticides globally one of the reasons for this is what I mentioned about the degrading soils over time when you have a poor quality soil in a poor quality environment and when I say poor I mean for the growth of plants in agriculture the plants themselves are weaker they have less immunity and the possibility for disease whether it’s bacterial or microbial disease or whether it’s insect diseases increases and so basically from

the use of these chemicals in agriculture which degrade the quality of the soil over time it also creates a need to use more chemicals more pesticides so it’s kind of like a cycle that the more you use the more you have to use and this is a trend that also has very serious consequences so a few facts from the World Health Organization about pesticide use up first of all I want to say that I’ve in preparation for this presentation I was reading quite a few reports that have been put out by different global agencies about the use of pesticides and one of the things that is reported commonly in all of them is this is a very hard thing to to keep track of okay the most amount of poisoning and toxic effects of pesticides are in developing countries in impoverished areas typically women and children are the most impacted and there’s nobody out keeping track of this if someone in a developing country who’s living below the poverty line gets sick because they’re applying agriculture chemicals or they get contaminated by agricultural chemicals there’s no one there keeping statistics on it so these statistics are are very difficult to determine but there are certain trends that are clear up to 41 million people have acute pesticide poisoning and death each year it’s mostly affecting as i mentioned women living in poverty women and children in the united states children on average get an estimated five servings of pesticide residues per day in their food and water it’s also interesting to see how the trend is changing in terms of pesticide use these graphs show the percentage of pesticide use so as you can see in 1985 North America was the largest user of pesticides however in 2008 Europe is now the largest user of pesticides with about one third of the pesticides used and Latin America Asia are significantly increasing their use of pesticides globally so there’s there’s an interesting report that comes out every year in the United States where consumer advocacy advocacy and safety groups study a wide variety of the most commonly purchased vegetables and fruits and they take vegetables and fruits out of the grocery stores and they sample them and test them for pesticide residues and they come out with what they call the Dirty Dozen these are the the 12 produce fruits and vegetables that have the highest concentration of pesticide residues apples are typically number one on the list for example apples are consumed by children in school lunch programs and ninety-eight percent of conventional apples apples have pesticides that’s ninety eight percent of conventional apples so just a note when you consume an apple be sure to wash it or or don’t consume the skin because they are covered with pesticides celery is also number two and strawberries is number three two trends result from all these challenges that I’ve just mentioned one is the consumers becoming more knowledgeable so especially in developing countries the consumers are becoming more knowledgeable about these threats and about these challenges to health and the environment and so they are increasingly demanding natural and green products as well there’s increasing regulatory pressure on farmers and commercial activity to curtail or to protect the environment and consumers so there’s this increasing regulatory pressure an example of the growing consumer demand in the United States is is a company called whole foods which is the largest retailer of natural products in the world and you can see in in 1980 they had one store with very little sales and in 2010 they had 300 stores with over 9

billion dollars in sales and Whole Foods is an example of a commercial company a for-profit company responding to this increase in demand and and and taking advantage of the opportunity to commercialize products that truly are natural and safe and healthy so these global trends in my view also can be viewed as opportunities pro biotechnology solutions can harness the power of nature to solve some of these problems we can incentivize and reward innovation in these areas so that we can solve these problems and SCD probiotics and our licensing network is a business model to incentivize and support innovation that solves these global challenges so these are opportunities in terms of the commercial opportunity the most established market for probiotic products is in the food and beverage industry everybody here is familiar with yogurt and probiotic drinks like kefir etc these are age old ways of getting beneficial microorganisms into the diet and that’s a large and growing industry with 31 billion dollar industry projected for 2014 europe has the largest market of forty two percent for probiotics you know and it’s interesting to me if you as you talk to people and I’ve been in this business for 15 years so I’ve seen a lot of this trend evolving in ten years ago when I would talk to people about probiotics many people didn’t know what they were now when you talk to people about probiotics almost a very high percentage of people are aware of probiotics for for humans and increasingly they’re aware of probiotics for animals what what nobody almost nobody is aware of is probiotics for plants and agriculture and and that’s one of the areas where we are pioneering and basically opening up new markets for this type of beneficial technology so there’s an opportunity for innovative commercial green technology solutions governments are incentivizing green technology development an example is our SCD probiotics received a 1.4 million dollar incentive package from the state of missouri missouri technology corporation earlier this year the private sector is is increasingly recognizing these trends and increasing their investment in green technology because they see that’s what consumers want and an example there is through some of the worst economic times we’ve we’ve been able to increase our investment in the technology through investors SCD probiotics and probiotic technology innovative sustainable solutions our consortium technology offers this opportunity because it’s it’s a it’s an advancement on basic microbial culture technology our business model is intended to incentivize the development and spread of these products on a rapid pace around the world SCD probiotics in agriculture the missing link so we’ve been going through this green what’s known as the green revolution started in the 50s basically the introduction of chemical fertilizers and pesticides in agriculture to significantly increase the productivity of soil and the productivity of our agriculture but with total disregard for the microbial environment the only the only time microbes have been studied in agriculture typically and historically has been when we when there’s an instance of disease so when there’s bacterial or fungal diseases we study that disease but we there’s been very limited study of the opposite side which are the beneficial microorganisms or the probiotics and how they influence agriculture what we’re finding over decades of research not only our organization but other organizations is that this missing link of looking at and managing and

addressing the microbial ecology of agricultural systems or the balance of microorganisms the presence of certain types of microorganisms in the agriculture system is is the next great chance for us to have a second Green Revolution and further increase the productivity and the sustainability of our agriculture systems why is that well because by managing the microbial ecology using probiotic technology like SCD probiotics you can improve the efficiency of fertilizer use so this is a very important issue as I mentioned the rapid increase in cost of fertilizer and the issue of the energy crisis that will come sometime or is here or is coming in the future being able to more efficiently utilize fertilizer is is very important we find in our programs that we can basically reduce the fertilizer input and maintain or even increase yield so this basically means a more efficient utilization of fertilizer within the system we can reduce the reliance on pesticides this this comes in the form of competitive exclusion where you establish beneficial probiotics in the system in the soil on the file a sphere of the plant and those beneficial microorganisms keep the pathogens or the disease-causing microorganisms in check they keep them in lower population so you have less frequent and less severe outbreaks of bacterial diseases fungal diseases which equates to less reliance and less need on to use pesticides so it’s really like a preventive measure that ultimately reduces the use of pesticides we also have developed probiotic based products for controlling insect pests such as larvicides that kill certain types of insects these are natural probiotic based products and there’s there’s a lot of innovation occurring in this area as well so using natural probiotic based products to reduce pesticides improving soil quality and nutrient availability over time I mentioned earlier about the process of degradation or the decline in soil quality that results from chemical farming or conventional farming especially in those marginal soils that are already low quality to begin with they have low organic matter low nutrient content etc by establishing a microbial management approach and introducing the right types and quantities of beneficial microorganisms into the system you can actually improve the soil over time and and reverse this trend of degrading soils so one of the largest users of probiotic technology in the world that I’m aware of is a government in the Middle East and they have effectively reduced this trend or reduced the size of the desert as a result of using this type of technology increasing the organic matter in the soil which is directly related to this soil quality it’s also a huge carbon sink so one of the one of the areas that were we’re pioneering and working with is is is figuring out how to quantify the carbon that gets maintained or built in the soil by using our technology everyone’s aware of the greenhouse gas legislation and carbon credits and this this concept of global warming or climate change as a result of carbon being emitted into the atmosphere there’s preliminary evidence that that demonstrates that by using our type of technology and increasing the microbial load of soil in agriculture we’re also increasing the carbon content of that soil and therefore becoming a sink for carbon in the soil and that’s in the form of organic matter and then of course improving the the overall quality of the produce and the crops that are produced it’s it’s widely known and recognized in agriculture that when you have the healthiest soil the most the best environment for a plant to grow that plant creates the most nutrition in the the fruit or the vegetable or the

brain and so you know basically by improving the soil quality through microbial technology we can also improve the nutritional quality of the of the produce so I’m going to come out to our business model which is absolutely fundamental for successfully expanding this technology around the world in achieving the benefits that that are so greatly needed and capturing the commercial opportunity we we instituted in 2007 a licensing program where basically we license our technology as I mentioned in my greeting this morning that there are a number of licensees here in the room and these licensees are basically pioneering the use of this technology in markets all over the world I think were we have over 30 licensees working in around 30 countries around the world these are some logos of these and inherent or built into our licensing model is a way to incentivize our licensees to also innovate so so rather than SCD being the only the only company in this network that is developing new products we also have licensees who are pioneering and developing all kinds of new products and new applications and built into our license agreements is an ability for us to license that added technology back into SCD and out to the rest of the network so so for example I’ll use an example we have a presentation over the next two days from dr. cheveux MP live from eco systems and technologies in India and they they have basically taken our basic SCD bio clean technology they’ve added technology to it they’ve licensed that back to SCD and now SCD is in the process of offering that to broader licensee network and so and and of course when we do that we we compensate ecosystems so in this way we can create sort of a synergy frankly modeled a lot like the consort echnology how the micro organisms interact in a consortium is this concept here that the whole is greater than the sum of its parts so here’s here’s a little bit of a trend of our licensee network and an a projection of how we expect to see it grow over the coming years so this conference is is also a very important part of the innovation of the expansion of this global network getting all of you here getting you together giving you a quick and broad breadth of the technology applications the science behind it I think we have 33 presentations from 16 countries and six continents over the next two days all kinds of innovative applications from human health to companion animals to agriculture to waste an environment applica so I think the way we’ve set up this conference is going to be a great benefit to all of you and to the network and allow us to take a quick as a big level up in terms of awareness collaboration and innovation within our network so we are only going to overcome these challenges and problems through innovation the creation and the development of new technology or new understandings of how the natural world works and how we can work with it a basis for the innovation in SCD probiotics is the pioneering work that we have done and are doing in consortium technology and basically consortium by nning many microorganisms together to achieve a more efficient and a more effective result in application as compared to pure culture technology which is one strain of microorganism that has been grown in a laboratory that has not had to compete with other organisms that has not had the type of challenges and adversity and it’s in its development pure culture technology certainly has a role and an earlier

slide where i showed the size of the global market in food and beverage for probiotics this is pretty much ninety percent or i I’m sorry ninety-nine percent pure culture technology and and that was certainly the pioneer in understanding beneficial microorganisms and and in human health and in animals in the digestive system because there’s such a small area you can apply high populations of pure cultures and get a very therapeutic a very obvious and measurable result in terms of health benefits but in much larger scale applications Chas wastewater treatment systems environmental remediation river remediation beaches and ocean remediation agriculture soils these are our huge areas you know and using pure culture technology is frankly from my experience too expensive and you don’t get good establishment of those pure culture organisms in such a large environment so you need something in order to harness or in order to use this probiotic technology in these very large scale applications they have to be more efficient they have to be the microbes have to be more efficient more resilient more effective and we achieve this through consortium technology so this technology because it’s its fundamental understanding and application in microbial ecology which affects every aspect of our lives our health our industry our agriculture this microbial ecology is like I said the missing link or or a key to to understanding and managing these systems and so therefore it means that there are an incredibly broad array of commercial applications and opportunities in this technology field these are some of the applications that we are already working in developing products in and we’ve we’ve got a number of products on the market through our licensing network and we have a number of products that are that are in development in terms of waste water quality pathogen control and animal health and soil fertility these are just a few examples kind of a snapshot if you will of the global breadth of applications with our technology and results that we’re achieving already and we’re just just getting started some examples of innovation and new products that are coming out or that we’ve recently released our home farm and garden product line with our barn cleaner our horse product fruit and vegetable cleaner our cleaning products for the home and and kitchen and industrial applications our soil enrichment products bodyguard these are all positioned for the consumer products market which in the United States the United States is the largest home and garden consumer products market in the world Home Depot Lowe’s and Walmart control two-thirds of the market and these products are positioned to capture that opportunity because the the market is demanding these green and natural products and throughout the next two days you’ll see more in-depth presentations about these products products that are currently being developed by SCD or some of our licensees are also quite broad in their range all kinds of products for people all kinds of products for pets lawn and garden for industrial applications out of respect from time I’m going to skip through a few of these slides because I want to make sure that we don’t run too late I do want to mention that one of our values that is most important in our business model and in our commercial activity is maintenance of a high standard of quality and this is this has been one of our core values from the beginning is that we we establish systems to verify and maintain high quality products throughout the entire

network so and and you know the old saying a chain is only as strong its weakest link that very much applies in this technology where we we manufacture mother-culture and we developed formulas and then we empower our licensees to manufacture secondary products from those mother cultures and so the quality control systems both in-house at SCD probiotics for manufacturing mother culture as well as in our licensee network has to be maintained its it’s a non-negotiable type of thing and and and we’ve put a lot of dollars and time and research into figuring out what is the cost effective way to maintain quality and and have quality production systems one of our most recent developments is a secondary production unit this is basically a manufacturing unit in a shipping container that allows a standardized manufacturing process so that every time product is manufactured by a licensee it’s done exactly the same way and according to the same standards and quality so this is an example of some of that pioneering work that we’ve been doing for quality the conclusions here the global challenges are very serious they are real we have to find solutions and address them consumers and regulators are demanding greater solutions this is this is the trend it’s only going to increase so there there’s also therefore an opportunity innovation is our only chance to solve these problems and and and meet the opportunity SED probiotics is pioneering innovative technology solutions and business models to solve some of these problems and take advantage of the opportunity and basically we have some of the Lucian’s already and it’s now a matter of spreading those solutions around the world as opposed to developing them so thank you very much

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