Cielo Waste Solutions Corp. (CMC.V) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Cielo Waste Solutions Quarterly Investor Update Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Ryan Jackson, Chief Executive Officer; and Ms. Jasdeep Dhaliwal, Chief Financial Officer of Cielo Waste Solutions. Please go ahead.

Thanks, Michelle, and welcome, everyone, and thank you for joining us today. Of course, Cielo is a waste-to-fuel environmental technology company. And today -- or rather on -- as of July 31, 2022, and further to the press release that was issued on September 30, 2022, we'd like to provide a synopsis of the financial results for the 3 months ended July 31. All of the amounts in the call will be in Canadian dollars. And of course, when we talk about quarterly, we're talking about a fiscal quarterly Q1. I'll turn it over to Jas to go over the financial highlights.

Good afternoon, everyone. As Ryan mentioned, this is our Q1 quarterly financial results for the period ended July 31, 2022. So just to do a brief overview of the financial results and as it was welcomed by the shareholders and by our investors, a quick review of the key events that happened within the quarter. So total assets decreased in Q1 by $19.7 million in -- compared to April 30, 2022. This decrease was, in PP&E, offset by an increase in cash and prepaid. As noted on our income statement, we had a $24.4 million write-down or impairment of our assets related to decommissioning of the Aldersyde Facility. Another significant event that happened that we will touch on in detail in a little bit is Cielo completed a public offering of units issuing 139.6 million units at a price of $0.07 for gross proceeds approximately of $9.8 million. Total liabilities also decreased by $1.1 million. There is a decrease in accounts payable of $1.4 million, offset by an increase of $0.1 million in long-term loans. Total noncurrent liabilities decreased by $2.3 million as of July 31, and the net loss for Cielo for the 3 months ended for July 31 was $27.6 million, an increase of $24.6 million from $3.0 million for the 3 months ended July 31, 2021. The working capital of $9.0 million at July 31 can be compared to $1.2 million at April 30 2022. We had financing costs in relation to the capital raise -- into the raise, the short-form prospectus, which I will touch on, of $635,000 and other costs for G&A $900,000 approximately, research and development $550,000. And as I mentioned previously, impairment loss of $25.3 million. Before I touch on the 2 key events that we can speak to our transaction that were noted within the quarter, the first one was impairment. As noted in our May 2022 press release, Phase 2 of the Aldersyde Facility was paused due to inflationary period where the budget and the cost to proceed with a Phase 2 was -- resulted in increase of double the expected CapEx. As previously stated, as you are aware, that Aldersyde Facility was a retrofit of a previous biodiesel facility. Moving away from Phase 2 does not impact our ability to move closer to commercialization but rather takes us directly to the R&D facility to attain economic data. From an impairment standpoint, though, the trigger in May 2022 was the fact that the assets in Aldersyde, we had to make an assessment on do they fit into a full-scale facility or a R&D facility. Assessments completed by -- led by Mr. Ryan Carruthers, our EVP Operations, resulted in impairment of $25.3 million. Other questions we've been asked in relation to this, do you want to take this opportunity to address frequently asked questions is when we speak to an R&D facility and we're discussing a write-down of Aldersyde, are we starting from scratch? And our answer is no, we are not. If -- as noted previously, we tested biomass, which is a wood-derived feedstock. We will be able to take the learnings or the data gathered and enhance that as we work on a scaled-down version in the R&D facility to obtain the necessary economical data. So another term that can be used in synonym for R&D facility, the optimization. It's the last 9 yards. The ability to measure the variables that can be changed at an R&D level and the optimization facility or the R&D facility are now feasible, which Aldersyde would allow us. And if we wanted to bring those metrics in, that's what Phase 2 would have been. So that's the impairment piece that we wanted to highlight. The other significant piece for Q1, we'd like to highlight is the capital raise that occurred in July. This was a milestone moment for Cielo. So to just our -- we have very sophisticated investors, but I just want to walk through the process for the few, again, frequently asked questions we have in this area. The short-form prospectus process was that a preliminary short-form prospectus was filed and -- filed on SEDAR. A question-and-answer, a disclosure review of all our public disclosures ensued with Alberta Securities Commission. We were able to successfully address their concerns and ensure our disclosures were in line and reflected the true operations and strategic vision of Cielo. As noted in the short-form prospectus, under the use of proceeds, we outlined what the use of the proceeds from this raise will be, which is predominantly the R&D facility and the minimal support on the G&A, the corporate expenses side. This short-form prospectus was filed in Alberta, BC and Ontario -- and in Ontario. Investors who could participate in this jurisdiction did. And this was a milestone moment for Cielo because that enhanced review. That additional review of our public disclosures was essential for Cielo because it shows that we do have a strategic plan, a vision. And having support of the Alberta Securities Commission helped solidify our strategic vision. Those were the top 2 events we can note. And as mentioned, the use of proceeds is outlined in the short-form prospectus. So as we've been making strategic decisions throughout this quarter and in future quarters, we keep in mind that the use of proceeds from this raise are predominantly for the R&D facility. Other aspects of our results to mention just because the questions do arise, our quarterly financials are reviewed. It is not an audit completed by KPMG. And other than that, the net loss as previously mentioned was $27 million, noted on the financial statements. Ryan, I've nothing further. I'll pass it back to you.

All right. Thanks, Jas. And what we'll do is we'll open it up to questions in a moment but did want to provide further to the R&D conversation a bit of an update as it relates to the R&D facility and the construction and eventual commissioning in Q1 of 2023. As of right now, the process flow diagrams and piping instrument diagrams have been finalized. And we have preliminary 3D modeling that allows us to procure long-lead items with respect to the construction of the facility. Everything is continuing in Aldersyde as it relates to the decommissioning activity, and it remains on schedule and on budget. So that's the essential operational update such as it is with respect to the R&D facility. And we'll now, Michelle, throw it back to you to open it up for any questions.

[Operator Instructions] There are no questions from the phone lines. I'll turn the conference back to your hosts.