CEMATRIX The Foundation Is Set! We’re Not Kidding!

The Howard Group’s Perspective By: Jeff Walker & Grant Howard

Contributions from: Harvey Brovald & Lisa Montanini

September 2012

There’s no denying that the Alberta oil sands and North American infrastructure are two huge, multi-billion dollar sectors. It’s evident to see their impact just by driving to work amongst the aggravating scatter of road construction or opening up the newspaper and reading about another massive construction project in the oil sands. The beauty of the infrastructure sector is that roads, bridges, tunnels and underground systems need to be constructed, maintained or replaced and are everywhere. The appeal of the oil sands is that when we talk about big, it’s big!

Even in economic downturns, both industries require TLC and attention; hence the opportunity. Everyone knows there are billions at stake. A tiny company would quickly become a large organization just by grabbing a microscopic portion of the pie. In short, that is the goal of CEMATRIX. That’s what we’ll call our “set-up” for the company, which is based in the heart of the Canadian energy sector in Calgary, Alberta. The management team of the cellular concrete company has shown great fortitude, heart and patience, not only to survive through the near economic collapse of 2008-9, but to build momentum while other junior companies disintegrated. Cellular concrete, which will be explained in much more detail further in this perspective, is a lightweight, insulating material that performs superbly in unstable, weak soil and/or seismic conditions. The real question becomes, what are the odds of CEMATRIX becoming an organization of meaningful size? All companies push the concept of “market size”, but that doesn’t hold water for long if the people that grant the contracts and write the cheques don’t invite you to the dance. The other point is, how do you get invited to the dance in the first place? And so, our story begins!

First, by way of full disclosure, members of The Howard Group and the Insight Limited Partnership II, which is associated with HG, own stock in CEMATRIX. Also, HG receives investor relations fees. HG is not a registered investment advisor. As such, this commentary solely deals with HG’s perspectives on why it is aligned with CEMATRIX. Readers should carefully consider all opinions and seek registered investment advice.

CEMATRIX was established in Calgary in 1998 when the company first introduced its innovative cellular concrete technology to Western Canada. The product is primarily used to provide insulation and bearing support along with lightweight fill and void fill. There are a handful of companies throughout North America that provide cellular

concrete, but CEMATRIX has a proprietary process and “special sauce” that enhances the product. Additionally, CEMATRIX is the only company in Canada approved to use cellular concrete for infrastructure applications by a number of provincial ministries

CEMATRIX went public through a Capital Pool Company Program in March of 2005. The stock hit its peak between mid-2006 and mid-2007 where it traded in the $0.50 range. Unfortunately, just as things were looking bright for CEMATRIX, the economic downturn hit in the fall of 2008 and continued on through most of 2009. At that time, CEMATRIX had a lot of eggs in one basket with the majority of the projects located in Alberta’s Oil Sands.

The Danger Of Sector Concentration – The Wisdom Of Diversification

When the world began to go sideways, the majority of the oil sands contracts that CEMATRIX held were either cancelled or indefinitely put on hold. The company saw over $13 million of contracts in hand and/or at the execution stage, literally disappear overnight. Just imagine that you’ve spent years building a business; you realize on your work with millions of dollars of new contracts signed and then events beyond your control turn your world around. This is the time when intestinal fortitude comes to the forefront! In order to wade through this difficult time in the economy, management needed to refocus and much of that meant diversification. The danger of being dependent on the energy industry was acutely obvious and CEMATRIX needed a bigger footprint in the infrastructure sector.

Common

Shares 33,466,000

Warrants @

$0.15 1,000,000

Expire Jan 2013

Options at 2,260,000

$0.10 - $0.15

Fully Diluted 36,726,000

Additional 455,000 options not vested

Insider Holdings

22%

CEMATRIX Company Profile

A testament to patience and persistence is the fact that multiple contracts around North America have been secured in the past several years. Evident in the below chart is the success of the strategy. Not only did management keep the company together through self-sacrifice from the 2009 low point, its move into roads, bridges, utilities, tunnels etc. has proven wise as sales are reaching new levels while the energy industry, as a percentage of revenues, has been declining year over year.

Cellular concrete was first developed in Sweden in 1914 with the intention of producing heat-insulated building materials. After World War II, the technology quickly spread and played a vital role in rebuilding much of Europe, primarily in Germany. Although the product remains relatively unknown in North America, cellular concrete products have stood the test of time and have successfully

been used throughout the world for nearly 100 years.

Cellular concrete is often referred to as foam concrete because the hardened product somewhat resembles foam board insulation and it is generally lighter than water. The material is a unique formulation consisting of Portland cement, water, a specialized foaming agent and compressed air. There is typically no aggregate or gravel in cellular concrete. The foaming agent and compressed air cause air bubbles to become trapped within the concrete. The result is a lightweight material that is highly fire resistant, sound absorbing and insulating.

What Is Cellular Concrete?

Cellular concrete functions as an excellent replacement for traditional types of insulation, such as compacted soil, expanded shale and plastic foam board insulation. These sorts of materials pose a variety of construction challenges to overcome as indicated in the chart provided. CEMATRIX has successfully utilized its advanced cellular concrete formulation for a variety of applications including: o Insulating road bases. o Protecting against permafrost underneath roadways, buildings and other

infrastructure. o Roads, highways and runways

over weak and unstable soils. o Insulating shallow utility

installations. o Building industrial and

commercial floors for oil sands facilities, pile caps and tank bases.

o Retaining wall and MSE Panel backfill.

o Grouting abandoned utilities. o Tunnel and void fill. o Shallow foundation support and

insulation. o Pipe embedment and protection.

Compared to EPS, Rigid Foam Compared to Granular, Flowable Fill,

Board Insulation Fillcrete, Pumice, Fly Ash, Slag

Greater comprehensive strength Reduced loading

Less prone to damage by construction equipment Self compacting

Less sub-grade preparation Inherent insulation

Resistant to hydro-carbons (no liner) Ease of excavation

Not subject to creep under sustained loads No liner required

Vastly superior fire and heat resistance

Greater speed and ease of construction

Monolithic (flexural and tensile properties)

Reduced construction traffic on-site

Remote placement; less congestion on-site

Cost of construction (dependant on area and application)

Where Is Cellular Concrete Used?

Insulation o Cellular concrete is an incredibly insulating material making it the ideal choice for

construction projects in cold climates. o Pipes carrying liquids for instance, need to be insulated when they cannot

be buried below frost penetration depths in order to prevent freezing. The ground frost level can often range from 10 to 14 feet. Cellular concrete’s insulating capabilities make it the ideal product for insulating utility lines and pipes without having to penetrate so far beneath the ground.

Durability o Has a longer lifespan and is far more durable than most traditional forms of insulation materials.

o Increased resistance against adverse weather. o Fire resistant. o Mold resistant. o Hydocarbon resistant.

Lightweight o Typically about one-fifth the weight of regular concrete making it easy to use for a wide variety of functions for which regular concrete,

which is non-insulating, is too heavy.

Cost Efficiency o A cost effective choice when compared to competing products due to its initial

placed cost, which has been proven to either be lower or comparable. o Other insulating materials such as foam board insulation or EPS blocks

creep under load and have an extremely limited load bearing capacity, often requiring numerous structural layers to overcome these limitations, inevitably increasing the project’s overall cost.

o Cost effective in the long-term, as the material has a longer lifespan and requires less maintenance than competing products.

o Reduces construction timetables due to the increased speed of placement and the structural capabilities of the product.

o Cellular concrete is a cast-in-place material that conforms to the space it is filling and levels out on its own. On the other hand, when plastic

foam boards are used, a leveled sand layer is required and extensive labor and is required to complete the installation.

o The product’s high air quality and low density allows it to easily be pumped at long distances or heights. The material is produced onsite, which also lowers transportation costs.

What Are The Benefits Of Using Cellular Concrete?

Strength o It’s common knowledge that as the density of a material goes down, so does its

strength. The density of cellular concrete can be precisely manipulated to optimize the comprehensive strength of the end product based on the function it is being used for.

o Of note, cellular concrete at a density of 1/5 that of regular concrete has 2 to 3 times the strength of compacted gravel.

o The product retains its own structure, which is ideal when maintenance surrounding the area is required, eliminating the risk for settlement and movement.

Environmentally Friendly o Large corporations, particularly those in the development industry, are under

unyielding expectations to be as environmentally friendly as possible in the

execution of their projects. Cellular concrete is the ideal choice in replacing traditional materials that can be harmful to the environment such as plastic foam boards or EPS Blocks.

o Environmental compliance is a necessary component to consider for corporations who aim to deliver high quality, long lasting and low maintenance structures.

CEMATRIX has provided the sale and onsite placement of cellular concrete for hundreds of projects over the past 14 years. Their projects have taken them all across Canada and recently into the United States as well. An outline of some of their most recent work and a brief introduction to their management team is provided below:

CEMATRIX Corporate Experience

A Note on Management – Quality of Character

The first place you need to start is with “the people”. Above, we addressed the tough economic times and you “do what you need to do” to get through these periods. Not only was the management team out working the jobs, it took pay cuts until 2011 until sales improved once again. Also, The Howard Group assisted the company in raising $500 thousand for a Convertible Debenture in January, 2010. CEMATRIX management, directors, HG principles, the Insight LP II and a series of individual investors participated. Like clockwork, the interest and principle payments were received each quarter and the convertible debenture was paid out in January, 2012. CEMATRIX has driven growth while keeping down its costs without adding a significant amount of new metal and people. However and based solely on what management sees as “the opportunity”, it plans on adding more equipment by early 2013 based on a realistic expectation of capturing a meaningful amount of new business. President and Chief Executive Officer Jeff Kendrick, C.A.

o Over 20 years senior management experience with building/construction companies

o Mr. Kendrick has been the President & Chief Executive Officer of the Company since its inception except for a short period from June 2007 to July 2008 when Mr. Kendrick served as the Company’s Chief Financial Officer. From 1989 to 1997, Mr. Kendrick was the Chief Financial Officer for Jager Industries Inc. He managed the finances and provided direction to a company that achieved major market share in North America, for its building products. Mr. Kendrick is a Chartered Accountant and worked in public

accounting from 1983 to 1989. Chief Financial Officer Bruce McNaught, C.A.

o Over 20 years financial management with TransCanada Corporation (Nova Corporation)

o Mr. McNaught joined the Company in the fall of 2008, to take over from Mr. Kendrick.

Mr. McNaught is a Chartered Accountant with over twenty-five years experience in various senior financial and general management roles with TransCanada Corporation (NOVA Corporation), one of Canada’s largest public companies. This experience included several years of financial reporting for this large Canadian public company, acquisition analysis and integration, regulatory hearings, contract negotiation, process improvement initiatives and public financings.

Vice President of Sales and Marketing Steve Bent

o Over 25 years experience in sales management o Mr. Bent joined the Company in 2009 with over twenty-five years of North American sales

and marketing management experience in the building and construction industries. Mr. Bent spent four years leading the development of Westech Building Products as their National Sales and Marketing Manager. Westech's sales of vinyl siding and PVC fence products grew dramatically during Mr. Bent's tenure. Mr. Bent also spent five years in sales management with Daymond Building Products and five years in sales management with Vytec Corporation.

When we first heard about CEMATRIX, we asked a simple question that if cellular concrete is such a great solution, why haven’t we heard of the product and why isn’t everyone using it? Should the discussion be about straight economics, it would be quickly answered. However, life is not that simple and sometimes multi-million dollar jobs are lost because an aging bureaucrat that is close to retirement is not going to risk trying “something new”. This is reality versus the Utopian world that all is fair. What does matter is that CEMATRIX has shown a remarkable ability to overcome obstacles. Also, CEMATRIX has consistently won the two thumbs up from the major engineering firms that it needs to have on side, as those firms are the organizations that recommend and engineer/design solutions to government and

industry. The construction of oil & gas related facilities are high-stakes endeavors, often consisting of long-term, complex project timelines and remarkable budgets. General infrastructure projects are equally high-cost endeavors. The owner initiating these projects; be it the government, a large corporation or one individual, has one goal in mind: to see the project successfully completed in as little time, with as little risk and for as little money as possible. The simple fact is people are afraid to “step out” to try relatively new ideas when time, reputation and more importantly – money, may be on the line. With any new product, there is almost always a bias to staying with traditional methods with which people have grown comfortable. The adoption of a “new way” is often gradual, if not excruciatingly slow. We say this in context of the North American attitude, even though this is a tried and true product in other parts of the world. The added bonus is that CEMATRIX has proprietary aspects to its business. Market acceptance has been a serious challenge for CEMATRIX. Management has worked tirelessly over the past 14 years to prove to key engineers and contractors that its product is as beneficial as its assertions. With every successfully executed project,

construction engineers and large corporations are becoming increasingly aware of and comfortable with the product and recommending cellular concrete in their bids for construction and infrastructure projects. The continual growth of CEMATRIX’s project portfolio and success stories demonstrate the benefits of using cellular concrete and the optimal results that can be achieved. It’s important to mention that the majority of CEMATRIX’s work comes from repeat clients and common sense dictates that this speaks volumes to the product’s quality and the professionalism of the service.

Why Isn’t Everyone Using It?

Tried and True for the Past 100 Years o As mentioned, cellular concrete has successfully been used around the world for

the past century. o In order to obtain approval by provincial ministries, lengthy engineering studies,

quality assurance testing, and due diligence reviews must be performed. CEMATRIX has invested significant time and energy into certification for public sector work with great success.

Competitive Advantage o One of the biggest challenges other cellular concrete companies have failed to

overcome has been keeping the product consistent for high volume applications. Improperly mixed foam additives can result in an area with inconsistent comprehensive strengths and density increasing the likelihood for a foam collapse.

o CEMATRIX’s automated computer-based processing system provides consistent mixtures, regardless of the material they have to initially work with. The additives are not compiled by hand and not subject to human error, resulting in accurately blended batches every time.

o CEMATRIX has a proprietary process and “special sauce” that enhances the qualities of cellular concrete. Not only is their product unique, but they way in which they make it is unique as well.

o CEMATRIX is approved for infrastructure applications by a number of provincial ministries, most recently from the Ministry of Transportation, Ontario (MTO).

o The lack of competition has made it more difficult to convince industry and government to utilize cellular concrete, but at the same time this is a serious advantage in that CEMATRIX is at the head of the pack when engineers and contractors choose to use the product.

Market Opportunity o CEMATRIX has set itself up to play an active role in supporting two very large,

stable, demanding and long-lasting industries. o The federal and provincial governments have no choice but to spend billions

of dollars each year to address infrastructure requirements. Roads, bridges, utility corridors and tunnels need replacing and maintaining. This is a simple undisputed fact.

o We could recite facts and figures till the cows come home but anyone who’s read a newspaper in the last few years knows Alberta’s oil sands are going to need several hundred billion dollars of investment in the next decade. Winning a microscopic percentage of that business translates into a rather sizeable piece for CEMATRIX. The question remains, what are the odds CVX will continue to win bids?

Strong Management Team o CEMATRIX is led by a tenacious management team, which is experienced, focused

and actively involved with the day to day activities of the organization. o Managed to successfully lead the company through a failing economy. o Applied the valuable lessons learned during the low times into developing a concise

and realistic business development plan for optimal growth.

What Sets CEMATRIX Apart?

Demand

o Corporations and the public are more conscientous than ever that both the quality of design and quality of construction materials are essential factors in constructing a product that is durable, resilient, and requires as little maintanence as possible. o The tendency towards longterm thinking has instilled a desire to find the next big thing in sustainable development, making potential clients more receptive to new, unconventional ideas. Particularly so when the new idea has already been put into practice and demonstrated effective results.

A Few Cons…

There are con’s to this story and that’s where we’ll start before addressing multiple pro’s to consider. o The business is cyclical and tracks the weather and construction patterns in

Canada. o Although an engineering firm may have endorsed and recommended CEMATRIX`s

cellular concrete, that doesn`t guarantee it will be included in a contract. o Even when CEMATRIX wins a contract, there is a chance that the job could be

delayed, product requirements changed, or in a worst case scenario, cancelled. o Although the business has been growing, it needs more financial flexibility. Its $1.2

million operating line currently meets the company’s needs, but due to the lag time between job completion and final payment, cash flow can be squeezed.

o The company by its nature will not generate a steady news flow, which puts it at a disadvantage in the public arena. It is an industrial story, plain and simple, and requires patience.

…But Many Pros!

o CEMATRIX, in our opinion, is a story that makes sense. The company’s objective is to grab a very tiny piece of the infrastructure and oil sands sectors and, in turn, become a very large company.

o CEMATRIX has earned its stripes and convinced the largest engineering firms in the country of the quality of its product, which was no small task to accomplish.

o CEMATRIX’s proprietary foaming solutions are unique. o CEMATRIX is winning government contracts and has won over several large Oil

Sands producers. o CEMATRIX is an approved supplier of cellular concrete solutions in Canada by

multiple provincial government departments. o CEMATRIX’s client base demonstrates the quality of its product and workmanship. o CEMATRIX’s sector diversification strategy turned the company around and

dramatically reduced risk. o CEMATRIX’s market cap as of this writing was approximately 30% of its historical

revenues. o CEMATRIX’s projected 2012 Sales per Share are $0.28 or 3.5 times its stock price

as of this writing.

The Business – The Stock Market – A Disconnect! Business was on the rise in 2007 with $7.5 million in sales and just over $800 thousand in operating income and then 2008 descended upon the world. 2011 revenues of $7.8 million surpassed 2007 numbers but operating income was less, coming in at $403 thousand. 2012 revenues are forecasted at $9.3 million. The point is, the company in 2011 emerged from the economic meltdown but the stock hasn’t; yet. Looking at the market from the basis of revenues per share (above chart), as CEMATRIX is at the early stage of the earnings cycle, the average stock trading price in 2007 was $0.35 a share versus $0.08 in 2012. Generally, investors were in a happy mood in 2007, and that was reflected in most stocks, even the micro and nano caps. In CEMATRIX’s case, it was coming off a solid 2007 and what looked like a banner 2008 based on $13+ million in oil sands projects,

but we know how that story ended! CEMATRIX is currently trading above $2.6 million, or a third of last year’s sales. In 2007, it was trading at an average value of $11.7 million and at its high point, $17 million. Based on these points and all that has been discussed in this Howard Group Perspective, is there a case for the value proposition and the risk – reward scenario?

2007 2012

Average Share Price

$0.35 $0.08

Average Market Value

$11.7 million $2.6 million

Market Value as % of

Revenue

153% 28% (forecast)

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Jeff Walker

The Howard Group Inc. Toll Free: 1-888-221-0915

Phone: (403) 221-0915

jeff@howardgroupinc.com

Disclaimer The Howard Group is not a registered investment advisor and as such, individuals should consult a registered investment advisor prior to making investment decisions in relation to the company discussed in this commentary. The information presented in these website pages was obtained from sources believed to be reliable but is not guaranteed, is not all conclusive and should not be relied upon as the sole source of information/opinion for making an investment decision. The Howard Group or its employees may own securities in the company discussed in this commentary. The Howard Group receives remuneration for Investor Relations activities from the company discussed in this commentary. Except for the statements of historical fact contained herein, certain statements contained in this presentation constitute “forward-looking statements” as such term is used in applicable Canadian and US laws. These statements relate to analyses and other information that are based on forecasts of future results and assumptions of management. Any statements that express or involve discussions with

respect to predictions, expectations, beliefs, plans or future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and should be viewed as “forward-looking statements”. Forward-looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and the Corporation undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, except as

required by applicable law.

THIS IS NOT A RECOMMENDATION TO BUY OR SELL ANY SECURITY