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Interview with Darren Lamothe of Diversified Industries Ltd. (DVS.V)

JIM:  Welcome to the
Big Picture Speculator Podcast.  Today is Monday, January 7, 2008 and
we are speaking with Darren Lamothe, the president, CEO and director of
Diversified Industries Ltd. (DVS.V).


I am a shareholder and
investor relations consultant to Diversified.  Welcome Darren!


Darren:  Thanks Jim!


JIM:  I guess we get
started.  Why don’t you tell our listeners about your business
background and how you got involved in the chemical business.


Darren:  Well, basically
I have always worked in the oil and gas industries.  Over the course
of the past 15 years, I have been involved in a couple of different
business.  The first one being a chemical recycling business that was
a franchise and I guess has kind of started my business in the
chemical world.  That business was established in Vancouver and I
worked up to three years and sold the business and moved out to
Alberta and really I guess want to reestablish the business with more
of an industrial focus and more of a focus on oil and gas industry
and so the company was involved from that.  Basically, we started out
doing some recycling and some chemical manufacturing and distribution
and this kind of evolved from that.


JIM:  What kind of
chemicals does CFR Chemicals sell and who do you sell them to?


Darren:  Basically, the
focus of the company in the past has been more towards what the
industry would call  process chemicals.  Those products are used
primarily in gas plants , various what we would call surface areas
of other industries so a lot of commodity-type products, heat
transfer fluids, and that sort of things,
solvents.  Over the course of the last two or three years, we have
kind of shifted our focus more towards what we would call specialty
or production chemicals.  These products are little more specialized,
more proprietaries, typically use more down hole or below the surface
products such as the emulsifiers, formers, defoamers, scale
inhibitors, paraffin inhibitors, and H2S scavengers are one that has
taken particular interest of late.


JIM:  Okay.  Now, just
for background for people.  You were the president of CFR chemicals
which was private and then it was acquired by Diversified Industries
which is publicly traded.  Is that correct?


Darren:  That is
correct.  Yes.


JIM:  Okay.  So, what
was the motivation for diversified and I guess what was the
motivation for CFR chemicals to agree to being taken over?


Darren: Well, really,
the interest started with a demand from one of our customers for an
H2S scavenger. We had done some research. We come across
Diversified and a proprietary product that they had developed. We
offered it to our customers and they showed quite a bit of interest
in having us supply them the product. So, as we kind of developed that
relationship of Diversified, we realized that we were in a good
position to both manufacture and sell the product to industry.


JIM:  That is


Darren:  The H2S
scavenger products really has lot of interest for us.  Most
of our customers used the product in some areas of their business and
the product of Diversified has some unique characteristics, we have noticed some
improvements over existing technologies as well as some advantages
mostly to do with user friendliness I guess or handling on the
product.  It is a non-regulated, non-hazardous product.  Really, the
purpose of the chemical is to neutralize hydrogen sulfide which is
extremely dangerous.  It is byproduct that is found in various oil and
gas products and the chemical is added to the gas or the liquid and
it neutralizes the hydrogen sulfide.  And the product of Diversified
is very effective at doing that and so we started offering our
products to our customers and in May started manufacturing the
product at our facility west of Red Deer.


JIM: What
kind of demand do you see for that product? Is that the potential
that really grow?


Darren: Really, it does
have a tremendous amount of potential for oil and gas. H2S is quite
prevalent approximately 60% of production in the world has some
hydrogen sulfide in it and because of the danger to the workers are
handling it, the corrosive nature of the hydrogen sulfide, it is
really something that has an appeal both locally and internationally
and that is one of the nice things about the product is that it is
proprietary, it is patent pending, and it is very unique. There is a
lot of interest both locally and internationally.


JIM:  Okay.  As far as
the share structure of Diversified, how many shares do you have
outstanding and who owns them and what is your approximate market cap?


Darren:  Right now,
there is about 29.5 million shares outstanding.  There is also
10,800,000 shares in escro.  Traditionally, the price over the last year, I supposed has been
ranging from below 20s to the low 30s cents per share.  Currently,
the market value is between 6.5 and 8.5 million for the


JIM:  Okay.  Now, I am
just going to take a quote from a recent press release here.  It says
that, “With your first quarter recently completed, we are
pleased to announce our revenues will be approximately 5 million up,
70% from the same period last year.”  And I guess my question
to you is how did you achieve that kind of growth rate given, you
know the oil patch has been kind of slowed down here in Western
Canada for the last couple of years.  What is the story behind that
kind of growth?


Darren:  Really, what is
behind that is we now have access to capital and that has really been
a hindrance to the company in the past.  You have to have enough
capital to bring in the inventory and to develop support the fails.
And in the past the has been a problem for us.  Since the
acquisition, we have secured financing through the Bank of Montreal
and that has given us the ability to grow the company significantly.
Really, right now, we still have a small amount of market share so we
can grow our sales significantly over the next several years just
through expanding our market.


JIM:  So you can
get future sales from just a larger
market share in your existing markets?


Darren:  That is a big
part of that.  Of course, the proprietary product that Diversified
has is opening a lot of doors for us as well because it is unique.
It is something that none of our competitors have.  It gave us an
edge I supposed in opening certain doors. And it has also expanding
our presence internationally.  We have got a lot of interest from
customers internationally and once they expressed interest in that
product, it opened the door for us to offer a lot of our
other products as well.


JIM:  Now, you
mentioned some positive changes since CFR was acquired by
Diversified.  What other kind of changes that happened?  I mean, from
the private CFR now being, you know, being taken over by Diversified?


Darren:  Well, I guess
really the changes for us have been primarily in having the capital
to expand our infrastructure, the increase of inventory.  The company
has always had a focus on research and development and looking for
unique products to offer to our customers and the merge at
Diversified really stayed in well with that strategy.  Diversified
strategy really has been to look for technologies that they could
either develop or acquire and find markets for those products and
that really did well with CFR’s strategy as well.  Right now,
we are looking at several other opportunities that they are very
synergistic with our business that would expand our business and give
us probably a more diversified portfolio.


guess to sum up.  What is the upside potential for
investors in Diversified Industries?  I mean we can see some pretty
big sales growth but maybe if you can just kind of paint the blue sky
picture as to why someone might interested in becoming a shareholder
of Diversified?


Darren:  Well, really, I
think right now the shares are very low in terms or the future
potentials of the business.  In the past number of years, Diversified
has had negligible revenues and really has had no profit to speak of.
We believe that with our current business that CFR has brought to
the table, the relationships that we have with our various suppliers
and various customers as well as the technology that Diversified had,
it is going to really bowed well for the future in terms of growth
and profit for the company which we believe will reflect in a strong
sustainable share value.


JIM:  We have
been speaking with Darren Lomat who is the president, CEO, and
director of Diversified Industries.  The stock symbols DVS.V.  Darren,
is there anything else you would like to add just to sum up here?


Darren:  Not really.
You know, again we feel that it is a pretty exciting time for
Diversified.  We have got a lot of exciting things happening.  Things
are growing steadily.  We are really excited to see what happens over
the next couple of years and again, we are looking for investors who
are looking to buy and hold our stock and we think that it is going
be pretty exciting in the next couple of years.


JIM:  Okay.  Thank you
very much Darren.


Darren:  Thanks Jim.


JIM:  That concludes
this episode of the Big Picture Speculator Podcast.  Look for our
podcast the Big Picture Speculator blog:
Jim will turn over the shareholder of Diversified Industries and in
addition he is an investor relations consultant to the company.