Ladies and gentlemen, welcome to our conference call to introduce the results for the second quarter of two thousand and twenty-four. My name is Cristiano Veloso. I'm the Founder and CEO of Verde Agritech. Together with me, I have our Chief Financial Officer, Felipe Paolucci. As usual, we're gonna be initially going through the results, the financials, a bit of comments in terms of the market, what's going on, what we're seeing, what we're hearing from other companies, from other players, from the farmers. Then Felipe will go into more detail on the numbers, each one of the results we've achieved, and then at the end of this call, we're gonna be answering questions. If you have any question, please send them via the Q&A option at the bottom of your screen, and at the end of the presentation, we're gonna try to answer as many questions as possible.
As I begin the presentation, I would like to remind you that there will be some forward-looking statements, and actual results might be different. Please take your time, read in detail our disclaimers before progressing. First of all, if you are in the United States, and if you haven't done so yet, you can go on Amazon.com, as well as visit some distributors, and you can buy our product and start benefiting from them yourself as well in the United States. In Canada, we sell by distributors, and it's also available. Starting with the market overview of the first of the second quarter. In the next slide, we start looking at the price for KCI, which is the ultimate benchmark farmers look at when they are buying our products at the moment.
We witnessed in the second quarter of two thousand and twenty-one, the beginning of a steep increase in potash prices. You can see the prices doubling throughout the second quarter of two thousand and twenty-one. If we were going to look before two thousand and twenty-one, the graph shows the price of KCI all the way from two thousand fourteen until two thousand and twenty-one, the price had been pretty much stable, flat, around $250, perhaps $300. For the farmer who's used to buying the price, the product, at that price, it was a major change, which started then and just for the following quarters, kept accentuating. It was a market I'm pretty sure all of us wished we were still living today. Unfortunately, we're seeing the opposite now.
So from 2022 until now, we've seen a steep decline in the price of potash, but unfortunately, as we see in the next slide, not only the price of potash has significantly decreased, but equally, the price of the main agricultural commodities growing in Brazil. Farmers were, on the one hand, happy to see the price of their agricultural imports going down, but at the same time, they were very pessimistic about the prices for everything from corn to soybeans. In addition to that, as we see in the next slide, there was a sharp increase in the interest rate in Brazil. Farmers who had been used to interest rates around 7%, coming down significantly throughout the pandemic, were hit with a period which is still continuous, with interest rates at a very high level.
What you see in Brazil at the moment is the president of the country fighting the president of the central bank. The central bank in Brazil is independent. The president of the central bank, who is an economist from Santander, was appointed by the previous government, has kept interest rates in check to make sure inflation doesn't go out of control, and on the other hand, we have the president of Brazil criticizing the central bank and trying to apply pressure for him to reduce these interest rates. The problem, of course, is that the expenditure for the government in Brazil is increasing. There's a deficit, a budget deficit, and the whole noise in the media doesn't help. So because of that, what was the...
In the beginning of the year, expected for interest rates in Brazil to carry on coming down, the President of the Central Bank had to stop this cycle of interest rate reductions. So for the last couple of meetings, the interest rate has been capped at 10.50%. In the last meeting, even there was some noise, some suggestion that interest rates could even go higher, unless the government did something to control its costs. So unfortunately, the reality for farmers at the moment is a reality where they are making much less money from what they harvest. Every single farmer I've met has that. Every single farmer, I won't say every single, but pretty much 90% or more, will be relying on some sort of financing to produce. And at the moment, what you're seeing there is the base rate.
You're seeing a perspective where this will be for the short term, staying where it is. What has also happened is that a lot of farmers who, as I had mentioned in previous calls, who had bought inputs at very high prices and built big debts, a lot of those farmers are still owing money to suppliers like ourselves and other players in the market. So there was a big conference in Brazil a couple of weeks ago. It's the main conference for fertilizer distributors, agricultural inputs, distributors as a whole. And not only attendance was much, much smaller than previous years, but the mood, unfortunately, the conference among our peers was very bad.
We heard from multiple distributors how much money they were still owed by farmers, how difficult they were seeing the situation, and that is the reality we have been facing, and that's something we need to be sharing. On the next screen, we start talking about the results. So I'm sure I will have an opportunity to dive in deeper and get into more details about the market, but not only how we are trying to navigate this market, which is so difficult. I'm sure there will be more questions in details about the renegotiation of our debt and how we're seeing it, the perspective for the company, and I will most certainly be addressing each one of those questions later on throughout the Q&A.
But before that, let's allow Felipe Paolucci to bring all of us on the same page, so he can take us through the results. But before Felipe starts, and perhaps you can go to the first slide. One opening statement I was gonna do. No, your first slide, Felipe. But one first comment I was gonna make, second slide. The, yes. So for the next one, I think will be easy to, for people to visualize. Yes, this one. But I wanted to give a spoiler here that, whenever we disclose this number here, when you look at the average revenue per ton sold and the average production cost per ton, this number is, it shows a blended cost and a blended sales price between different products.
We sell multiple products nowadays, so this is a blended number, an average, a blended number, an average number between several different products with different costs and definitely different sales price. So it makes it very hard for anyone to compare this number in comparison to the previous quarter, because unfortunately, one is never comparing apples to apples, because you will have a different mix of products being sold, different mix of FOB or CIF products picked up at mine gate, or products delivered to the farmer, where the farmer has to pay for it. So it's mixed. So we've been trying, now that we've set up SAP, so we've been trying to work out a way to give more transparency and on those numbers.
So we hope that for the next quarter, there will be something there that will allow one to properly follow the growth in or decrease in both sales price and production costs, always comparing apples to apples. So with no further ado, Felipe Paolucci, if you wanted to take over and start the presentation, please go ahead, and I look forward to addressing the Q&A. And if you're watching that on YouTube, please make sure you click subscribe. We have been sharing some new videos we've been making with some of our customers. Our marketing team has been very active compiling those feedbacks, which we use for our Brazilian marketing materials, but we've also been making it available for investors with a subtitle.
So whenever you get those emails from myself with a link to the video, when you click, if the CC, closed captions, isn't activated, you can do that on YouTube, and you're gonna be seeing we've translated from Portuguese to English, and we've added all of that. So it's available. You can hear what they're talking about the project. So, Felipe, please go ahead.
Thank you, Cristiano. Thank you, everyone, for joining the conference and presentation. First, on the highlights. Cash and other receivables held by the group in Q2 2024 were $15.3 million compared to $23.8 million last year. Of course, this happens due to a lower price, as we'll see in the next chart, and also a lower volume in this quarter compared to the prior one. In terms on bank loans, the group secured another CAD 0.8 million in Q2 2024. And the end of June, the group had CAD 41 million on debt and loans.
In terms of profitability, sales in Q2 2024 were 85,000 tons, compared to 107,000 tons in Q2 2023, and the revenue has decreased from CAD 10.3 million last year to CAD 6.5 million in 2024. In terms of EBITDA, EBITDA before non-cash events was nearly close to zero in Q2 2024, compared to CAD 2.1 million in Q2 2023. If we compare Q2 against Q1 this year, of course, we had an improvement, and we do expect to keep improving from now onwards on these terms. The net loss in Q2 2024 was CAD 2.6 million negative, compared to a net profit of CAD 0.2 million in 2023.
In terms of financial statements, we do have here on the left side, the quarterly results, two thousand and twenty-four and two thousand and twenty-three, the difference, and also on the right side of the chart, you can see the year-to-date comparison between from revenue up to net profit and loss. What I'd like to highlight here is that, of course, as I said before, the revenue has decreased, mainly for two reasons. One is a lower volume, and the second one, a lower price, most driven by the KCL price reduction.
Most of the sales delivered in Q2, two thousand and twenty-three, were made prior to that in Q1 or even Q4, two thousand and twenty-one or two thousand and twenty-two, with higher prices, which has this impact now when you compare two thousand and twenty-four against two thousand and twenty-three. In terms of margin, we remain with a significant gross margin up to 72% and 70% cumulative. Also, there is a chart, the next one, that demonstrates the gross margin excluding freight.
We are at, you know, worse scenario, but we still have a very good margin, which means that once we grow again and have higher volumes, the fixed cost will be diluted, and we expect then that this could mitigate a bit the price decrease that we had year-on-year impact. Also, on EBITDA, as I've mentioned before, we had zero in this quarter. And in cumulative scenario, we had a better result than we had in the first quarter of 2024, but we still are lower or worse than 2023.
In terms of, let's say here, the freight expense, we also have a chart that's demonstrating and show a bit on this, and I'll explain why we had a lower cost on logistics and then due to regions of products that we are selling, which are closer to the factory compared to prior years. At the end of the day, we did have a net loss of $2.6 million compared to $241,000 positive profit last year. And cumulative, we had $7.4 million negative, compared to $133,000 positive in 2023.
On this chart, as Cristiano has mentioned before, we expect to bring to you the next quarter a bit more on details on comparative and cost, especially when you compare some special products to regular products, and we'll see that sometimes the increase on cost per ton does not mean that we are less efficient, but it also could be explained by a mix change in the sales, but here, at the end of the day, we did have a decrease in the average revenue sold per ton of 21% on this quarter, and in cumulative, 31%.
And on production cost, we had a higher cost, from $18-$21 per ton, an increase of 17%, which could be explained, as we did disclose in the MD&A and press release, which is we had higher sales on special products. But in the second table, you can see when you exclude freight from revenue, which normally we do not expect or do not want to have margin on freight. And then when we exclude freight from the revenue, it's the same that we could exclude freight from SG&A. So in the end of the day, here, we can see that we had a revenue decrease of 25%, year on year, basically due to KCL price and some other reasons. And the average cost per ton had an increase of 19%.
The gross margin, at the end of the day, we had a worse low-margin of 54% against 71% last year. What I would like to highlight as well is that, as I said before, once we grow again, and if we've passed from 90,000 tons to 120, 130, or 200 tons in the quarter, we do expect to have a very significant growth in our margin, especially on cost reduction and dilution on costs, and also, of course, an improvement on EBITDA. This would also dilute the SG&A, as you can see on this chart, that most of it is fixed cost, except some ones like commission, for example.
But most of the salaries and also administrative costs are fixed. So once we grow, we have a lower cost per ton. In the end of the day, a higher EBITDA. But here, we can see that in terms of freight, as I've mentioned before, where we had a lower cost, but also we did have a decrease on sales and marketing expenses, in general, admin expenses. As you remember, I don't know what to do, but last year we had a lot of reduction in number of people. It also impacted the 2023 costs on a higher level since we had the severance fee expenses that we did not have in Q2 2024.
This helps to explain why we had a lower cost. We did not have a significant allowance or bad debt provision, allowance for expected credit losses, compared to last year. We did have BRL 87,000, but in the end of the day, last year, the key, the big impact we had in the second half of the year, in Q3 and Q4. This, most of the sales were made, probably in 2022, and they had late collection and agreements that were not able to be made then. We had the bad debt provision in Q2 2024. In terms of logistics, can see in the left side here, the Q2 2024 sales splits between FOB, CIF and total.
This is a relevant chart because logistics is our, our higher expenses currently, far from the other ones. It's a very important cost center that we have in the company, and most of the clients are asking us for CIF, especially in a situation where the farmers are short on cash, for example. So we can see that we have, like, 81% of the total volume sold was through CIF compared to 72% in 2023. In the prior years, we started, like, 2020, maybe with 50% CIF and FOB, and now I do expect that this 81% remains as is from now onwards.
It's something that should remain now stable, in my opinion, because some farmers, they do have their own trucks, and they want to collect the product. But most of the other ones, they do not have the logistics by themselves, and they ask us to do so. Of course, we should be more efficient since our quotation for freight of three PLs are more frequent, and we have a lot of volume to deliver every day, so it helps the cost improvement and the efficiency of the freight. The average freight cost per ton decreased to $37 in Q2 2024, compared to $48 in 2023.
This decrease, as mentioned as well, it's mainly attributed to a reduction in the percentage of sales made to regions that are more distant from the Verde's production facilities. Last year, most last year, we had a lot of sales to north of Mato Grosso, for example, or even to Pará, north of Brazil. And now we are selling much more in south of Mato Grosso or Minas Gerais or even São Paulo and Goiás. Those regions, we have a lower cost per ton on freight, so this means that we have more efficient logistics and a lower expenses in general with freight per ton sold as CIF.
On this chart, you can see the CAGR growth in the last four years per quarter, on the left side on volume, in the right side on revenue. We can see that we remain positive here, but in terms of volume, we're 0.4% now. Hopefully, this comeback comes to grow again in the coming quarters. In the right side, the revenue, we still in a good shape on 21% growth. Especially, excluding, let's say, 2023, 2022, we are growing again compared to 2021, for example, in terms of revenue. In terms of volume, not yet, but hopefully, we do start to have growth again in the coming quarters.
On cash flow and debt overview, the cash held by the company was $2.7 million at the end of the quarter, compared to $6.2 million in 2023. In terms of trade receivables, we did have $12.8 million, Q2 2024, compared to $17.6 million last year. And this, of course, is an effect on the sales price and volume compared to last year. So, in the end of June or the second quarter, total loan balance was $41 million compared to $38.4 million in Q2 2023. In April 2024, the group initiated a strategic debt restructuring plan involving seven banks, which encompassed the full 100% of the group's current debt.
What I can add here is that the negotiations are progressing constructively, and the group anticipates achieving significant results already with substantial extension of the repayment term period, a grace period, better grace period, and also a reduction in the interest rate. These negotiations are expected to be concluded by the end of Q3, two thousand and twenty-four. Of course, when we sign agreements, and we are able to do the disclosure, we'll do so immediately. So all the shareholders will be the first ones to know when we are ready here. Now I'd like to come back to Cristiano and then handle the Q&A section. Thank you, Cristiano. Thank you, everyone, for joining.
Thank you. Thank you, Felipe. Just before I start answering questions, and there's some quite good questions here.
... well thought out questions. I'm looking forward to answering them. Before that, Felipe, and a lot of questions are about that, so I think I will start talking about it, that way we'll answer a few of those questions. As it stands, Felipe, we have a total debt of about 40 million CAD. Precisely, it's 41 point something million CAD. Most of this debt, as it stands, would have to be payable in the next 12-18 months. What would you say, Felipe?
Yeah, I would say that no more than three years, but half of it should be paid in the next from this April to April 2025, and then most of it in 24 months. Yes.
All right, so half of our debt payable in the next 12 months, and pretty much all of it payable in the next three years, so that's the situation of the debt as it stands. We have been trying, as we saw the market deteriorating, to negotiate with banks for a while, but we kept paying the debt, and we felt that the banks weren't giving us or paying any attention. Then we retained a consultant, lawyer, to advise us on that, and what the advice was is that until you're paying, they won't do anything. If you want them to bring them to the table and get it renegotiated, you need to stop payments, so that's what we did a few months ago. We stopped paying the debt.
Immediately, all banks who were pretty much ignoring, they came to talk to us to try to find a solution to the problem, and they were very open to finding a solution. Of course, some banks were more open than others to finding a solution for the debt. What we are lucky is that most of our debt is held by Banco do Brasil, which is a state-controlled bank. It's a public company, but it's controlled by the government, and it's the main bank to fund farmers in Brazil. The advantage that gave us is that it's a bank that understands very well the agricultural sector.
It's a bank that sees what's happening to farmers, what's happening to the market, and the feedback we were given, and I was personally given by their director several times, is how much they want to support Verde, how much they understand it's nothing to do with us, it's about the market and how they want to carry on supporting us for the foreseeable future. So as the main creditor, this conversation has been progressing really well. And then Brazil has a legal system which protects the debtor if he can agree on renewed terms with the main creditor, in this case, Banco do Brasil. So, the...
How it works is that, essentially, if we can agree on those terms, the other banks, they will have either to accept the same terms and follow them, so all of the transactions would be the same, or if they don't do so, the part of your submission as a restructuring, they may be subject to a significant reduction on the amount they are owed, significant haircut to the amount they are owed. Some banks, the natural thought whenever one hears that, is that, well, every bank is just gonna prefer accepting terms which aren't great, but are better than writing off their entire debt or most of their debt. That would be the reasonable thing to say.
But unfortunately, some banks, they have some systems in place, procedures, where they just can't agree to those circumstances, and they end up, unfortunately, with their debt significantly reduced. When we announce an agreement, what you should be looking for is a renegotiation agreement with our biggest creditor, a proposal for other banks to join that renegotiation. The consequences for the other banks who don't join this agreement with your leading bank, and the terms. The terms we would be looking and what we'll be expecting from what we already said, it's a material reduction in interest rates. What do I think is a material reduction in interest rates? Anything from 2%-3%, in my mind, in comparison to what we're paying, I consider that material.
A material increase in the time we have for repayment. What I consider a material increase, I would say again, four, five, six, seven, perhaps eight, ten years for that repayment to be made. A grace period for you to start making back those payments in interest and capital, and above all, a consolidation of what has to be the foundation of any of those negotiations or renegotiations with banks, which is a worst-case scenario, cash flow, which would be enough for the company to guarantee its financial stability. In other words, what's really the minimum amount we would need to be selling, we would expect to be selling in a worst-case scenario that would generate enough funds to pay all the costs we have.
So of course, that's what the financial model would have been shared with the banks, would be discussed, would be vetted, and would be a bit of a foundation for that sort of negotiation. Considering that any upside to this worst-case scenario, that would allow banks to get a little bit more repayment than they already have. I think the final say is that what we are negotiating with the banks at the moment is essentially already below their cost of capital in Brazil.
So if those some of those banks the way they fund themselves by issuing certain types of debt for private investors or any retail investors they essentially what I'm saying that the retail investor with money that bank will get paid is the bank is charging more than he will be able to charge us. I think that was a bit confusing. If you are putting money in that bank that you are earning more interest from the bank than we would be paying the bank back. There is it's just the reason I'm sharing this just to demonstrate how much we've been able to stress the negotiations. Wasn't easy.
Felipe has been doing a very good job, talking to all the different banks and all the different lawyers, and we hope that in the coming months, we should be able to, but no later, hopefully, than this quarter, we should be able to provide a pretty good press release with an update. The press release is already being written. We hope that we hope to have the press release written and ready to be published as soon as something is signed. So I believe I gave a long answer to, but that covered several of the questions that were here.
Cristiano, just one comment as well, adding on your point, that also what we're negotiating is not a fixed payment per year, but we would start with a lower amount of payment in the year one, and then increasing year by year. So this also helps the short-term and middle-term cash flow. That's one very important point as well, that we are negotiating.
So there's a grace period, and then the repayment starts off with the repayment of principal, but the repayment of interest, and then just much later on, throughout the payment schedule, we would be paying back, as Felipe just said. Starting with the questions, but before I start with the questions here, just with the attendee list has been increasing. Of course, back in the old days, we used to have a sizable number of people following our calls. The last couple ones were pretty light. Today, I'm very pleased to report to you all that there is a much greater interest of investors attending this conference live. I'm very thankful for your patience and interest, and it's good.
Look, scrolling through the numbers here, considering we've just gone through the Olympic Games in France, I should mention, to the great joy of us all in this call, we are lucky to have an Olympic gold medalist among us. Not just an Olympic gold medalist, but also a bronze medalist. Attending and winning medals in two different Olympic Games. Thank you for participating. Thank you for you all. First question, and then in here, there's a section of very well thought out questions, very elaborate questions, which I will read to you all. The first one: Can you give any information regarding addressing the relative high cost of finance to farmers versus KCL?
Are you any nearer or in a position to give a real terms, 5%-10% discount to KCL after all costs, including cost of financing? The short answer is that in some cases, we can be very aggressive. So in some cases, if a farmer is closer to the mine, if the farmer has very good credit, we can be very aggressive on offering terms which would undercut the price of imported potash. The problem about doing that is that our balance sheet, as you may expect, is very small, so our capability of borrowing funds to operate in this way is restricted. So that has been a problem for us to carry on an accelerated growth trajectory as we have experienced in the past. The way we're trying to address that, Mark, is by focusing on high value-added products.
So we have a new line of products with different benefits, different raw materials, different technologies, and if before we weren't very effective on selling this product, because our team was essentially at home trying to cold call farmers and achieve this market via you know, over the phone. Now we have a very strong team in the field with about 30 salespeople, all very experienced in space, all very experienced in selling specialty fertilizers, led both by a vice president of sales, but also overseen by 5 other sales directors who equally have an outstanding résumé with a lot of experience. So it's still early days. This team has really just started working this quarter. We know this takes time to materialize and mainly makes me very bullish for next year.
Might be a bit too soon, will be a bit too soon to see the full results, the full potential this year, but I am growing more and more optimistic about what we can deliver, managing to dissociate ourselves from KCl and starting to demonstrate to farmers in the field, and allow farmers to start putting a dollar sign on the other benefits they're seeing from using our product. The other question, given the potential change in the economic climate and what looks like we may be nearing a top and decline in overvalued stock markets, does Verde have an actionable survival game plan should the economic climate and agricultural commodity prices and demand fall considerably for some time? I believe I've answered this question with the opening, plus the second question. We are planning for the worst.
We're hoping for the best when it comes to the renegotiation of our debt terms. The numbers we see there in this financial modeling or what we believe would be worst case scenarios, which we strongly believe, and those worst case scenarios could be achievable, and with the team, we're taking the actions we can to increase sales. If I didn't answer the question, if I did not answer any of the questions and you want more information, please just send the question again. I'll scroll through them again, and make sure they get answered. The other question we have here: Do you have any developments you can share about using nitrogen-fixing bacteria as part of meaningfully reducing the amount and cost of nitrogen fertilizer for farmers? It's a good question.
The main market, of course, in Brazil is grains. When you look at grains, Brazilian farmers or Brazil as a whole has been a pioneer in using microbes to fixate nitrogen. Back in the eighties, some researchers in Embrapa developed some microorganisms that in association with soybeans, they can fixate nitrogen. So you grow first your soybeans, those microbes increase the amount of nitrogen to the soil, and then when it comes to growing corn, you don't need to apply much nitrogen anymore. So it's already a pioneer, but because it's such a pioneer, it's the cheapest source of microorganisms you can come across. And it's a very commoditized market, very cheap, very low margins.
Where we're focusing our microbial business development, I had a call this morning again about this topic with our technical team. We have a phenomenal, brilliant, and amazing new technical director. It's more in line with products that bring other meaningful benefits to the soil. For example, phosphate. Brazil has a record amount of phosphate, phosphorus in soils, which react with soil aluminum and can no longer be available for crops. So there's some microbes, and we have those developments where those microbes can make that phosphate available back. That's Bacillus megaterium. Then there are other microbes which can address soil diseases. The main soil disease you have in Brazil at the moment is nematodes.
So you have, again, a couple microorganisms, Bacillus subtilis and Bacillus licheniformis, which are very effective, and farmers are already buying products that deliver those, those microbes. So that's more along the lines of our new development when it comes to microorganisms. The key advantage we have, of course, is that there isn't a better vehicle for one to apply microbes to soils than our product. It creates this perfect environment with a number of micro ecosystems, micro pores, where microbes stay there, protected from when they get to deployed to the soil, to when they can start bringing benefits to the soil. The conventional way of applying microbes is literally just spraying it to the field, or adding it to some hostile environments, which are now seeds. So it's quite unique, the technology we have.
Now with this team on the ground, specialized on selling premium products, it's something we expect to see more and better development in the coming years. We're also registering the product as a soil conditioner, which also opens up the range of microbes we can be adding to the product. It's exciting. We haven't been able to devote as much time as we wish we could. Now, with our new technical director and also this team, I hope to start seeing more traction. Next question: Is there anything worthy of mentioning in Verde using biological agents to break down organic matter more efficiently in plowed fields after harvest and before the second planting to improve soil? That is an interesting one, which we haven't looked at.
So in Brazil, farmers do direct planting, so they leave over the soil the organic residues from the previous one, and that is an interesting one, the use of those biological agents. It's more of a newer market in Brazil. And Mark, I'm not aware of. I haven't done much research, so if you want to reach out and share what you have in mind, it will be very much appreciated. It's not entirely in our radar. In the past, we communicated with companies that do composting and accelerated composting for industrial and agricultural partners. They have some microorganisms they use for accelerating composting. We did have some conversation, but it's a smaller market in Brazil to the other sorts of soil conditions I've mentioned. It's more of a niche market.
It doesn't mean it's a bad market, but it's not something we were focusing about. I'd absolutely welcome your thoughts here. The other question, as a long-term shareholder and on the news of the parting of ways with WayCarbon, I would just like to say financial conditions providing, I would like to see Verde to come to a carefully considered and explored option for progressing with carbon credits, rather than rush and choose the wrong, less optimal and beneficial path, and make sure it is mapped out and actionable. That's a good feedback. We appreciate it. It's as we've been saying all along, enhanced rock weathering had a boom a good few months ago, when a number of companies that were spin-outs from universities, like Sheffield University, Stanford, Yale.
So those spin-outs, which you can read in the media, they were able to pre-sell carbon credits from some heavyweight players like J.P. Morgan, Microsoft, and others, in order to generate the future, those carbon credits. So there was a lot of interest in that. That interest, it mainly came from the usage of the rock, which had been the main one, used for ERW, or, you know, one might say the only one that is monetized, been monetized so far, which is basalt, most abundant rock in the world, and one that has been widely used because it also can capture carbon. They were there, they were ready, they got this first wave of funding.
More recently, or over the last few months, after this big boom, where we thought we would be selling straight away, when we had that report from the Newcastle University, we thought that we'd be able to carry on the same way. But at the same time, the market started changing. And buyers, given everything which was happening in the market, buyers started looking for more in terms of confirmation of carbon precipitating. That is what we've been working on ever since. Because it's a new science, and because you have numerous smart people working on with very big egos, which is natural, and different views and different agendas, it's an industry that has been accelerating and shaping itself as we speak.
We've attended conference and we've been trying to navigate, but it's a different framework to what it was before. I was personally a bit frustrated with all of that, and this uncertainty, and especially frustrated when talking to different scientists who should be saying similar stuff with different views. But one interesting realization or essential realization was that there was a big disconnect between a scientist and a carbon verifier, a company that issues carbon credit certificates. The first carbon certificate company to try to bridge that gap was Puro. Puro, which was taken over by Nasdaq, now it's Puro Nasdaq. They launched over a year ago now the very first ERW guideline document. But that very first ERW guideline document didn't go very well.
The sort of requirements they had proved to be not just complicated, but a bit. I won't say, but I think it's safe to say that no one had issued carbon credits using the guideline they launched. Then another organization from San Francisco called Isometric, they launched their own guidelines, which then got immediately criticized by everyone in space, saying to follow that would be just too expensive, prohibitively expensive. And that also reduced the interest in. That also, like, didn't go through. So what's happening right now is that Puro.earth, which has the backing, of course, the ownership of Nasdaq, and it's an interesting carbon verifier, because they've been specializing exclusively on what's called permanent carbon removal.
The sort of carbon you remove from the atmosphere with a very small risk of reversion of it going back, think about planting trees and wildfires and all the carbon going back. That is the problem. Some technologies, like ours, like ERW, can fix, and that's what Nasdaq has been focusing on. Puro.earth is working on a new methodology, which they, some people in the industry, including ourselves, expect will be a major milestone and will allow companies like ourselves to effectively unlock the capability to start certifying and monetizing carbon credits. We, in order to try to develop that, and in that regards, I will answer a couple of questions below what I've seen here.
When we started this development, we tried to bring a phenomenal diplomat, Lucas Brown, from former British consul, to help us lead the project. Even though he was a fantastic diplomat on the science element, it just didn't work as we would expect. We thought we would be resolving this problem with a credible local project developer, who would, of course, be sharing some results, sharing some of the upsides, some of the financial, which was WayCarbon. We started working, but WayCarbon was just as lost as we were in terms of the shortcut towards carbon credit monetization, issuing effectively those carbon credits.
The best day was when we managed a few weeks ago to hire to help us validating, doing MRV and effectively issue those carbon credits, a phenomenal scientist who not only has the academic experience for ERW, not only was one of the founders of one of the most successful carbon credit, ERW carbon credit companies out there, but also who has now moved to the other side and is working on the carbon certification from the certifiers, from the carbon certifiers. For the first time, in all this time, I was able to talk to someone who understood all problems, all issues, understood the problems from a developer like ourselves, the issues with the science, the issues with what the buyers of certified carbon credits want us to do, the issues with what is required to certify.
And after she started working for us, I think the project became even more stronger. We're excited. There's a number of tests and assessments and testing, which we are done following her recommendation. So I hope that this will move us to a much better position. It's exciting, but as I said at the beginning, it's there is still a lot of scientists with some big egos working on this, and things have been changing a lot. So my hope is that the publication of this new standard by Puro will consolidate and will unlock the market. So that was a very long answer.
I apologize, but it's a very important topic, and there were several questions further down, which dealt with different elements of this question, which I believe I've answered them all in here. If you feel I didn't, please come back and ask the question again. The next question: How are things going in working with existing clients that currently only purchase small amounts relatively to their acreage? Is there any progress on getting them to change fully to various products, incentivizing all the marketing methods, even if they have indicated this is something they will do in coming seasons, given the agricultural market conditions were difficult at the moment? It's so hard to answer this question with a one-size-fits-all answer. I think the only way I can answer this question is to say, for example-...
We recently had a customer who has been buying the product for a few years now, and we had been negotiating with him. And as part of this negotiation, our brilliant salesperson just said, "Oh, you know, just ask him, do you have anyone else who you think might benefit from our products?" And immediately the farmer said, "Yes, there's my friend here who you should talk to." She went to talk to this farmer, to this other client, and this other client, who had never used the product before. On the back of the positive feedback from his friend, our client, he went on and bought 8,000 tons of product. 8,000 tons of product, which is about 8,000 hectares.
It's a good, decent sized farm, 8,000 hectares. If you think a hectare in Brazil at the moment will cost anything from $20,000-$40,000. He went and bought the product all at once without doing any previous test, just on the back of what his friend said was a good product. So we've seen stuff like that happening, and especially when something like that happens, we kind of get worried. You know, is this guy actually gonna pay us back? Because he's only buying because his credit is gonna poison. He's interested in paying for the product, but in this case, he actually paid in advance.
So even as we were, you know, finalizing negotiation, and we hadn't even signed the contract yet, he wired funds to pay for 8,000 tons of product. So we see that happening. We also see other clients who are happy with the product, but sometimes change the consultant who is advising the farm, and then this consultant who is advising the farm, sometimes they would have some sort of arrangement with another supplier, be it, you know, one of the large international companies or whatever. And then this consultant will say, "Okay, fine, this is a good product, but you hired me now to look after the farm technically, and I want to use this other product because this is the one I've been using," and then we lose a sale.
So it's so hard to have just the one size. In terms of the second part of the question, in terms of marketing methods that we try to use, we try to create long-lasting relationships, so we try to satisfy farmers as best as we could, depending on the relationships. We have, in the previous quarter, we had discussed some sort of member get members, some sort of discount or something that is done for people who recommend other customers. The bit of the consensus of the sales team was that for most farmers, they already would deal with, they want to do it because they want to help, not necessarily because they're going to get something.
So what we've been doing, of course, is keeping a track of people who have been helping us, and then come Christmas or their birthdays, we sure give them some sort of gift, but nothing institutional, where there is a commission for them to be compensated. The next question, it's about our YouTube channel. You will see our YouTube channel is. We've restructured it. We're cleaning up a lot of the material that was there. We had some feedback. People couldn't find what was the most relevant, most recent stuff, so we've decided to clean up the channel and you what you're getting there is in line with our last marketing communication. A few of those questions I've answered. There's one question here. Well, I think this I've addressed on our calls. Oh, there's one question.
On a prior call last year, Felipe said he planned to reach out to the banks to arrange more competitive financing terms, enabling you to offer farmers increased line of credit. Why has there been no improvement? The reason there has been no improvement is that for us to give more competitive terms, we need to be able to have a greater, bigger balance sheet. That's number one. Number two, farmers themselves became a risky business. So if in the past, a lot of banks and investors were very eager to finance farmers, there are several financial products raised with that purpose in Brazil. But then after what we saw this year, with insolvency going up, a lot of those investors lost a lot of money. So some of those funds went into default and got big haircuts.
A lot of ininsolvency from farmers. So the market at the moment in Brazil isn't very bullish. So, for example, there's a certificate called CRA, which allows an investor, private investor in Brazil, to fund activities in the agriculture space, free of income tax. So it's a benefit, a government benefit, which translates into more competitive rates for farmers and companies in the business. If before you would go to a bank and there would be a wide range of products, several different offerings, they've pretty much dried up. It's rare now for you to come across. So everyone became much more cautious this year in providing that. So that gave a much bigger impact. So it's not looking phenomenal at the moment.
Another question: Is there a case for cautious optimism with what, with the, I believe I've heard better climatic conditions with La Niña coming next year, La Niña coming next year? But yes. So yes. Yes, and yes. There is a more bullish view forming for agriculture next year. If you read the research reports from the good analysts, market analysts, research analysts out there, some of them are talking about it. There's one analyst who covers in very detail the potash space. So he's starting to see some starting a little bit more bullish from next year onwards. It's cyclical, isn't it? It's cyclical.
It's like that farmer I've mentioned before, who I know in Brazil, this older gentleman who told me how he loves, and always throughout his life, he learned in the early days to love the bad markets, because that was how he made his billions of reais. So, that's how he made his billions, which was by buying, in his case, farms, land, when market crashed and understanding whenever there was a big cyclical, it wasn't the time to get too confident and played it safe. So he just did that consistently over his lifetime, and it's a very impressive company he built from nothing, really. Literally nothing. Next question here is a very good one. So talking about a soil activator company.
This is another question, who I think would be interesting. One thing I love about doing those calls, and I love about to communicate with you, is the number of highly not just highly educated, but people covering us as investors and following us, who understand the market really well. Most probably executives from the market or the space or farmers themselves. We have a phenomenal community of investors and people following us, which I'm very thankful for, and always pleased to reach out. We love talking to you, and in this case, it's another one I told Luiz that I want to talk. But he's talking about soil activators, which is something which has been growing, a market that has been growing.
Our products have some benefits in that regard, we've seen that. We should be putting out the press releases soon. I hope, in showing some of that, but he's talking here about nitrogen, phosphorus, how some elements can increase that availability of nitrogen and phosphorus in the soil. So we do. We have that, we will put that press release on that. And he, you asked a very specific question which I want to discuss to you. I can't even answer here. I think I need to understand a little bit more what you mean. There's some questions here about the extraction capacity and the fact we filed for another mining permit. It's essentially renewing something we already had, that had expired.
It's something just as ordinary renewal from this mining permit. There is nothing there. The question is, if you already have capacity, why are you applying for more? We will carry on applying for more. Just remember, we aren't talking about it, but we carry on with our submission for getting a permit to produce 25 million tons per year. Now, you know, given everything which is happening in the market, it does sound a bit out of whack to talk about our application on file for an additional 25 million tons of production, but we remain committed.
We remain committed, that it's our job to make sure as much of this rock gets spread to fields as fast as possible, because the more of it that gets spread to fields, the healthier we all get, because of all the trace elements it has. The healthier the world gets, because of its capability to remove carbon and to increase soil microbiome by removing chloride from conventional KCl. Other question. Many options have been shared to management lately, sometimes at a price under recent share prices. How motivation? So there is. It's impossible for you to issue options below market price. You need to follow a metric on your. Well, I guess it's a five-day VWAP, kind of so. But we never do the VWAP, we do, like, the last trading day.
So sometimes what might happen, which is what you might be referring to, is that sometimes when there's the board meeting, option to a certain sales director might be issued, and then when it gets filed, you have, like, a number of days later on, after when you file those things. Once it gets filed, the share price came down. So there's a mismatch when the option gets granted in a board meeting sometimes, and when it gets filed, it doesn't happen the same day. More questions about the mining permit. More about the carbon things about the carbon, the YouTube channel. Just going through, see if there's anything else we left. A question here about Elon Musk's award. So we didn't win it. We didn't win the $100 million, unfortunately.
I think Elon made a mistake, but we're thankful that we were ranked among the world's top one hundred solutions. As part of this world's top one hundred solutions, we are getting a lot of attention from them. So this conference is taking place in September, only for the top one hundred companies, where there is a phenomenal list of lineup and people they bring to talk to us on the carbon and from buyers and everything. So they are making sure they work towards achieving. There's some mentoring as well, which there are some people behind it offering us this. There's an interesting community which we hope to benefit, but unfortunately not with $100 million, even though I think we deserved it.
Another question about sales to coffee clients, that the purchase season for coffee is at full swing. We're trying to do as much as we can, and I think I've addressed all the questions here. Let me go back to the beginning here, and I can't see any new questions here. So if you sent a question, and you feel like that I didn't fully answer it, or you want more detail, please do so. If you haven't sent a question yet, and you're thinking about there's something bugging you, or if you just wanna give us a feedback, please go ahead and do so. I shall wait here a little bit to see if something pops up. Nothing's showing up.
I think the way I'd like to end today's call is by sharing a meeting we had three weeks ago with our senior commercial team, our B2B sales, our marketing director. It was like stepping into a different company in comparison to what we used to be last year. It was like stepping into a different company in comparison to what we were, I would even say, two or three months ago. For the very first time in our history, we have a very, very robust sales team. If before we're very good and we're very successful with inside sales, with a team of very young, fresh people out of university, working the phones, trying to create online relationship with farmers and trying to grow the company exclusively that way.
This time, we have a hybrid system, where we have that team working alongside a very experienced, very successful team of field sales and senior leadership. So it's exciting. It's the same time frustrating, because it's just happening now, and it's frustrating because we understand the cycle of agriculture, and we understand those results will not be happening overnight, but it is a very material improvement on what we had seen in the past. So it's very exciting to see that, and we hope this will translate into much greater gains in the coming months. I'd like to thank you all for attending this conference live. If you've joined us on YouTube, please share. Please hit that like button if you like it. Always reach out.
Clearly, some people all from this space, from the industry are following us. Hopefully, shareholders, please reach out. We're always eager to learn. We always have an open mind, a growth mindset, so let's carry on growing the company together. Thank you very much, everyone. Stay safe, and hope to see you soon. Bye-bye.
Thank you. Bye-bye.