Cielo Waste Solutions Corp.

Good afternoon, my name is Sergio and I will be your conference operator today. Before we begin, we need to read the following statement. The statements or comments made on this conference call may be forward-looking statements, which may include future-oriented financial information and other statements of the company's plans, objectives, expectations or intentions. These matters involve certain risks and uncertainties and are based on certain assumptions. The company's actual results may differ significantly from those projected or suggested and any forward-looking statements due to a variety of factors. Cielo has included forward-oriented financial information to provide listeners with a more complete perspective on Cielo's operations taking into account the proposed transaction with Expander Energy Inc. Any forward-looking statements are made as of the date hereof and accept as required by law. the company assumes no obligation to publicly update or revise such statements to reflect new information. Listeners should continue to review and consider information disseminated through news releases and otherwise filled by the companies on CDAR+. At this time, I would like to welcome everyone to the Yellow Waste Solutions Company Update Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Start, then the number 1 on your telephone keypad. Thank you. I will now hand it over to Mr. Ryan Jackson, Chief Executive Officer, and Ms. Yazdip Dhaliwal, Chief Financial Officer of CLO Way Solution. Please go ahead.

Thanks, Sergio, and good afternoon, everyone. Thank you for joining us this afternoon. Of course, you realize we're here to talk about the press release and also moving forward what we are planning with respect to the Cielo and Expander transaction. And we'd like to expand on that, no pun intended, as it relates to what the strategy is moving forward as a group and also with respect to how things are going to also look from a financial standpoint as has been previously disclosed. I'm happy to welcome with me today on the phone Steve Kresniak, who is the Chief Technology Officer with Xpander, along with James Ross, Executive Chairman and CFO. Also, Jasdeep Dhaliwal and Ryan Carruthers, who you are very familiar with. And we wanted to start by providing you with a little bit of context around the call today and understand where we got to and where we're going. And with that, we wanted to jump right in and say that since 2022, the new management team has been interested in a larger strategy of not just project development and technological development, but also a larger strategy around M&A and as it relates to complementary technology or technology that is of a bolt-on nature to the existing one that Cielo possesses. We needed to find the right dance partner and the synergies of technologies has been the focus of a long, along with accelerated timeline to revenue being the North Star as I like to call it with respect to Cielo. We wanted to make sure though as we were going forward that we had the right expertise and the caliber of people that would be able to execute on the business model. Understanding that we have significant feedstock agreements to execute on and Quite frankly, time is money. Give you a little bit of a history with Xpander, but they're going to obviously take care of their own stuff as it relates to explaining to you where they've come from and where they're going. But we had initial conversations with Xpander dating back to last year around a potential engagement around Cielo's technology. And what this did is it led to further conversations and understanding of synergies and compatibility between the two companies' needs and goals. Expander's superb engineering expertise and experience, which gets into the hundreds of years as it relates as a collective, and also the diverse skill set of fabrication engineering and engineering procurement and construction services, makes Expander an ideal partner for CLOK. The nature of the transaction is that Cielo has acquired an exclusive license in Canada to use Xpander's enhanced biomass-to-liquids and biomass-gas-to-liquids patented technologies created by our very own Steve Presniak. Since the focus of Cielo's feedstock is railroad ties, we have also acquired an exclusive license for creosote and treated wood feedstock in the United States. How does this impact our future? Well, it allows Cielo to launch our Dunmore project using Expander's technology, honoring existing agreements with CP Rail. Cielo has identified future US locations as well for development with the EBTL, that's the Enhanced Biomass Liquid, then BGTL, Biomass Gas Liquids technology. The focus of our feedstock in the United States will be railroad ties. Cielo has acquired three additional projects that Expander has underway. Expander will be providing ongoing project management expertise for each of the three projects of these, and Cielo's projects in the US and in Dunmore, project management services around engineering, procurement, and construction. That's EPC as an acronym. Technology consulting benefits Cielo through a number of different ways, and we'll get into that as we go forward. With respect to Carsland 1, all agreements are in place or are being finalized. The technology is ready to be executed. The first full year of production is anticipated to be 8.2 million litres per year. And as it relates to the Dunmore project, it is expected to be 34 million litres per year. yielding revenue of $19 million annually and $79 million annually. With respect to Cars Land 2, the other expander project, we have the expectation that further development can and will be done as a secondary facility would be constructed at Cars Land. We already are there. It does make sense to further explore that extra phase. What does this mean for our technology, for Cielo's technology? We're continuing to further enhance that technology and the initial reason why we connected with Xpander in the first place. Management believes that we have an opportunity to develop our technology further as a joint effort with Xpander's expertise and experience now at the table for us to essentially have one team and one goal. There are various stages in the life cycle and Cielo, has moved away from being a pre-revenue, pre-production company to working on developing projects with market-ready technology. At this point, you've probably heard enough of me talking, so I'm going to introduce James Ross. Jim has over 35 years experience in the investment industry, including executive management, small capital investment banking, venture capital, private equity, and sales and trading. Jim has held leadership positions at Jennings Capital and Seafree Power Corp, a renewable energy company, now Good Energy's capital. Jim is a director and a shareholder, or was, a director and shareholder of Platinum Communications, now ExploreNet, and a director of Glenn Breyer Technologies, now Uniserve Communications. Jim was the CEO and director of Expander Energy from 2010 to 2017, and is back again as the executive chairman. Jim is also the CEO and co-founder of Alberta Clean Technologies. Jim, welcome.

Thanks, Ryan. Thanks so much, and it's a pleasure to be here today, Ryan, with yourself, Jasdeep, and of course, my longtime partner, Steve Kresniak, on the line, and Gord Crawford, who's also with us here in the room. As Ryan mentioned, I'm currently the executive chairman and CFO of Expander Energy Inc., Our team, of course, of the last 15 years has been focusing on two very core technologies, which Steve Kresniak may allude to a little bit later in his opportunity. But it's gasification of anything that is carbonaceous, so that's anything that has carbon in it. And in combination with Fischer-Tropsch, which some of you on the call may know, it's a well-proven technology that's well over 100 years old. And our focus has always been to make high-value synthetic fuels. to the combination of carbon and hydrogen at the end of the day. So our goal is net carbon or net zero carbon intensity fuels, and this is what brings us together today with our partners at Cielo. Along with my colleagues from Xpander, Larry Hager, Steve Price, and of course myself, we're very excited to be joining Sheila, Peter, and Larry, the rest of the Cielo board, as we move the companies forward Having worked on developing our technologies, as I said, over the last 15 years, by completing an independent assessment of our technologies, we were in communication, we were about to commercialize our technologies. The strategy to commercialization for us has always been the public market as an opportunity. So we looked at IPOs, we looked at other forms of entering into the public market, and there seemed to be an opportunity before us that made some sense. So preliminary conversations that I had with Ryan Jackson, as he alluded to over a year ago, thought that this might be a possibility. We commenced our discussions as talking about the technologies, how we can work together as a group and pursue what their interests were and of course pursuing ours at the same time. We began exploring these possibilities and what's ultimately in the press release that you have received or at least are aware of a week ago, that we're pursuing a partnership as we move forward Along with the entire Xpander team, I was personally impressed with the caliber of Brian and Jasdeep, what they bring to us and bring to this partnership. Those are skill sets that Xpander needed and wanted, and we can see that we're going to be achieving that from that management. It's been a tough hole for the Cielo team. They've done a lot of heavy lifting over the course of the last 12 to 18 months, obviously writing the ship for the company. And that's important for us, too, as we enter into this partnership, because going forward, we want to have a strong execution team, and we think we can work together. And Ryan and Jasdeep have a very critical role in that. So, Ryan, without any further ado, I will pass it back to you, but thanks for the opportunity.

My pleasure, Jim, and thank you. I'm now going to introduce Steve Kresniak, who Steve has spent over 40 years as a consulting engineer worldwide in the upstream, downstream, and offshore hydrocarbon energy industry. Steve has extensive EPC and EPCM experience, so that's engineering procurement construction, again, for those of you keeping score at home, as well as a technology developer and inventor of many international issued process patents, including expanders EGTL for gas-to-liquid and EBTL for biomass-to-liquids, biomass gasification, and Fischer-Trop crude processing technology for bitumen, heavy oil, and refining bottoms upgrading. His areas of expertise include facilities for natural gas production, NGL extraction, deep cut turbo expander, SAGD heavy oil production, bitumen upgrading, refining, coking, hydro processing, fissure trough synthesis, gasification, syngas production, carbon capture and sequestration, offshore production platforms, and subsea flow assurance. I almost got through all of that without messing up. For over 32 years with Colt Engineering, where Steve was a partner and was involved in the EPC lump sum projects, leader for front-end project development teams, technical specialist and technology development lead with Colt Engineering Corporation, which has been purchased since then by Worley Parsons, Steve has authored several patents. And with that lofty introduction, Steve, welcome.

Thank you very much for that introduction, Ryan. Again, my name is Steve Kresniak. I want to first say that I'm very pleased that the Cielo and Expand agreement has been completed and also that I'm very excited to be part of the new future of Cielo entering the biosynthetic low carbon fuel business. My key role will be to lead the technical and project teams of the Cielo biosynthetic fuel business that is from early project development stage through detail engineering, construction and operations. Specifically, I will lead our in-house specialty project management and engineering team that will execute the multiple projects. Two topics that I want to touch on in this call is, first of all, brief history and concept of expanders technology. The general background and history of expanders technologies that we are a unique engineering technology and project development company that has been involved in the science of syngas production and synthetic fuel production for over 15 years. We've developed and deployed several patented technologies. As you've heard, a few of the specialty technologies is the enhanced biomass conversion to biosynthetic fuels, the biomass gasification technology and syngas production, as well as as well as design and deployment of unique proven Fishertrop licensed technologies. We specialize in the design construction operation of what we call small scale conversion facilities. The sizes tend to range between 3 million liters a year production to 300 million meters per year of production. We specialize in the production of renewable low-carbon synthetic liquid fuels, also referred to in the industry as paraffinic fuels. And these are derived from renewable feedstock, feed sources such as forestry waste wood, construction waste wood, railway ties, telephone poles, RDF. It's a form of boutique municipal solid waste and any other waste, cellulose material or biomass material. based feedstocks. Our product is always the same. It's clean-burning, high-cetane, biosynthetic diesel and jet fuel. We always target for all our facilities to be certified at net zero carbon emissions. Specifically, that means CI or carbon index ratings of less than 30 and as low as minus 40 grams of CO2 equivalent versus joules of fuel. depending on the site locations and the input streams like electric power. The low carbon clean fuels will target markets in the truck transport, the rail transport, marine transport, off-road construction and farming machinery and aircraft industry. Our products are primarily in the diesel and jet range specification. The second topic I want to briefly touch on is what we believe is the future opportunities or the short-term opportunities for Cielo. First, our current commercialization goal will be to develop and deploy commercially ready multiple projects in Canada, and you've heard a few mentioned already on this call, and select projects in the United States of a range of 30 million to 300 million liters per year scale. We are proposing a project pipeline of six projects in the next five years of which two projects are proposed to have production as early as 2026 and 2027. We propose to continue to advance the research of the Cielo catalytic thermal cracking paralysis process to confirm a sound commercial application. And we also have some interesting potential to integrate the biosynthetic license technology from Xpander with this yellow catalytic thermal cracking paralysis process. Finally, we believe we will reach FID, which is final investment decision status for the cars on phase 1 project by the end of Q3 2023. and we will also are looking forward to reaching FID for medicine had done more project by Q2 2024.

Back to you, Ryan. Thank you, Steve, and just wanted to throw it straight over to Jasdeep Dhaliwal who needs no introduction. And I'll leave it at that.

Thank you, Ryan. I welcome everybody to this very important and special call. I'd like to begin by thanking Steve and Jim. The due diligence process was extensive and sincerely appreciate your collaboration to ensure we captured the essence of due diligence and we look forward to the journey ahead. I also look forward to introducing everyone to Gord Crawford on the operational team. His expertise adds significant value on the project development side. I do want to add a little bit of information or highlight Ryan's opening remarks about management strategy. When Ryan and I came on board, we had a two-prong approach. One was resolving legacy issues, legacy issues that were holding Cielo back from future success. We discussed those on our year-end call back in June. The second piece of it was the strategy going forward. We were looking at partnerships, collaborations, possible M&A that could occur. In speaking with Expander, the best approach was this license agreement. The benefit of this is a synergetic approach. Expander continues to develop their technologies as a separate entity. We get to utilize and partnership with Expander on the project development side And the six projects that were mentioned in the press release, I'd like to revisit those as well. The first one being Carsland 1, that is an expander project that has been majority developed. Dunmore, where we'll be using expander's technology to deliver on our CP Rail agreement. As many investors know, that expires in 2025. And then there's future projects, Carsland 2, along with Slave Lake. And Cielo is currently scoping out possibly two locations in the U.S. So the valuation that was provided for our 906 million shares for a value of 45 million was based on future cash flows for these six projects. And in the press release, we've only focused on the two that are on the horizon in the next two years, Carsland with $19 million in revenue, EBITDA of 9 million, Dunmore with revenue of 79 million, and EBITDA of 46 million. Another important piece to consider is we are aware of the dilutive impact of issuing 906 million shares, and we are contemplating a share consolidation of up to 15 to 1. I want to reiterate that it's up to 15 to 1. Management is currently assessing the best ratio that would serve and add shareholder value, but position ourselves for future success. Brian, I think that captures my piece. Back to you.

Okay. Thanks, Jasmine. Basically, to wrap this up in a bow, what this is is a transformative moment for Cielo. This is something that we can only have come to, quite frankly, at a later date and time, that this allows us to accelerate all of our plans from a business perspective. We have a chase for feedstock that we have to be out in front of, and this allows us to maximize on that chase. I think moving forward, the technological and the operational depth that Xpander brings to this Cielo team is not in question at all. I think you'll see as you go through and dig deeper, if you will, that you'll find that this is, quite frankly, a match made in heaven. So I wanted to, Sergio, open things up for the Q&A back to you, and we'll take any calls. Any questions?

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 1. If you want to withdraw your question, please press star 2. Your questions will be pulled in the order they are received. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Gary the Fuhrer, a private investor. Please go ahead.

Thank you, operator. Good afternoon, everybody. I guess I got a two-part question here. The first one is, does Xpander have any production facilities that are actually working today that can demonstrate to the shareholders that this is more than just a concept, but actually works and works I guess the reason I say that is with the history of Cielo through the years, there's been lots of promises made with the proprietary technology that Cielo has. And we were told as recently as a couple of months ago that we were just waiting for EPA approval, et cetera, et cetera, to be able to test in the R&D facility. And then that would be implemented in Dunmore. Now it sounds like the proprietary technology has been sort of put on the back burner, if you will. And that expander is now becoming the predominant technology for Cielo, at least in the not too distant future. So how can you assure the shareholders that this technology actually works and isn't more just, you know, nice dreams and nice thoughts, but that it actually can be put into place and start being monetized?

Hi, Gary, and thanks for your question. I guess that's a question maybe best answered by the expander folks. So I'll defer to Jim who will probably deflect to Steve.

Thanks very much, Ryan. And Gary, thank you for the question. And not to dodge the bullet, but I think Steve is probably the best one to answer where we are in our commerciality phase. So, Steve, do you have some comments?

Yeah, so, Gary, we have a facility that's located that we work with our partner. It's just southeast of Calgary and that particular facility was designed and developed in the last five years and has been in production now for about a year and a half.

Are you able to provide any sort of operating statistics on that facility to just to give the shareholders a little bit more comfort that, you know, this thing is actually, you know, got a life and that there's some volume and scale to that facility.

Thanks, Gary.

Oh, go ahead, Steve.

Go ahead, Ryan. Oh, I was just going to say the best response is.

No, I was going to ask for you.

Yeah, so the best response to that is we can probably respond to email on that question. There is an email that's available that you can forward to and we can give you an answer to your questions.

Well, is there a reason why you can't share that with the general public? I mean, I'm not asking for, you know, I just want to have a comfort level here, not just for myself, but I think all shareholders would like to know that you've got a production facility that's out there southeast of Calgary and that it's producing whatever volume it's producing and it actually, the technology works.

So, Gary, this is a private Alberta corporation that doesn't publish those numbers as a practice. So, I guess, short of us lying to you on the phone, and whether or not you believe us or not, I guess, is up to you. We do, as Steve answered your question, that has been in operation for a number of years. well, we started construction, they started construction five years ago, and it is operational. Beyond that, I'm sorry, but those are numbers that are not available to the public, and it's not up to CLO to disclose numbers of things that aren't theirs. So they're operational, Steve answered the question. I think beyond that, if you want proof, I'm afraid it's going to have to be in the doing rather than just You'll have to basically allow us to provide you with that it's operational and go from there.

Okay, thank you.

I've just got one quick follow-up then, Ryan, for yourself. Can you explain? I think the first monetization, if I'm not incorrect, at least from a Cielo perspective, is 2026 Cars Land 1. Can you explain why the deal would have been structured that effectively, it's almost like a reverse takeover in the sense that the expander management and executives will get Cielo stock and that their ability to effectively, if they so desired, to sell all their shares by, I'm going to say, January 1st of 2025 to monetize their business value of $45 million. could take place well in advance of Cielo even getting the first dollar of monetization out of the Cars Land 1 facility?

So to answer, so it's a bit of a two-parter. One's a statement, one's a question. So I'm going to tell you that Expander's views, they can speak for themselves and they will. The conversations we've had, this isn't an exit opportunity for Expander. This is a contemplated investment that they're making just as much as we are. They're not looking to head for the exits based on the monetization of a technology that's quite frankly in the billions of dollars. So I guess that's their prerogative. They can certainly do that if they want, and they're welcome to do it if they so choose. They're their own people. But I can tell you that's not the conversations that we've been having. And of course, you're not privy to those. So on the surface, your question makes a ton of sense. But Jim, do you want to build on that?

Yeah, Gary, let me just kind of respond. As Ryan pointed out in the history that I've had with capital markets, I think the strength of why we're part of this partnership is the fact that three of our shareholders and directors are now going to participate in supporting Ryan and Jasdeep and the rest of the team on execution. It also was reflected in the press release that Xpander intends, corporately, to hold a position in Cielo going forward. So this is not an exit strategy for us. This is a commercialization opportunity, and we are going to build on that. So I think in all confidence, myself included, along with my partners at Xpander, our objective here is success, and ultimately, That's why we're here today, having this conversation and listening to your questions, because it's important for us to have everybody on the same page. I hope that's useful. Thank you.

Thank you. Your next question comes from Ron Chopek from Bosco Enterprises. Please go ahead.

I was just wondering what the plan is with Alderside and what's happening with the EPA permits for Alderside.

Thanks, Ron. We have been waiting for some sort of supplemental request from the EPA. At the present time, we have not received one. Based on some other inquiries from third parties, we've been led to understand that that review is going to be occurring in the fourth quarter and that until that period of time Alderside will continue to remain ready to operate once that is received.

Okay, does that also mean that kind of reading into the maybe the Cielo technology don't work?

Not at all. Actually, it's the exact opposite. We wouldn't be seeking a permit if it didn't. Okay.

Thank you. You bet.

Thank you. Ladies and gentlemen, as a reminder, should you have a question, please press star 1. Your next question comes from Carmen Calderaro, a private investor. Please go ahead.

Good afternoon, guys. I had a question. So I'm gathering that this all didn't come as a whim. And you guys must have had some sort of testing or something going on if this technology works on the railway ties. Have you guys actually tested anything with the railway ties to see if this technology works with what you guys are trying to achieve already? Or are we just waiting for the merger first and then we're going to carry on as we go forward?

Thanks, Carmen. That's a great question and certainly that's one that I'll defer to Steve Kresniak on as it relates to the specificity of the testing that's occurred with rail rate ties, which has actually occurred. So, Steve, do you want to expand on that?

Yeah, thank you for the question. The answer to that question is the biomass gasification component where we convert the railway ties to syngas has been tested There's two types of biomass gas fires that we're planning to pursue for the Medicine Hat Project, and both of them have been tested with railway ties and what we call treated lumber.

And was it successful? Has it shown promise that there could be profitability coming sooner than later, or is there a big adjustment still needs to be made and a lot more work ahead of us?

In both cases, the testing was exactly what we needed to get done in order to get the final design and get it commercialized.

Okay. Thank you. Thanks, Carmen.

Thank you. Your next question comes from Pedro Brum, a private investor. Please go ahead.

Hi there. Thanks for taking my call. My question is, is the proposed plan for the first commercial facility going to depend on the success of Cielo's technology? For instance, is the plan Cielo's tech step one and then Expander's tech step two and three in the process?

Great question, Pedro. Thanks. We have, and one of the reasons why we engaged Xpander in the first place was to determine exactly the lead time that was going to be required to take advantage of the existing agreements we have for both Xpander's feedstock agreements and also Cielo's. And the best determination of that was a blend of the two technologies in the future. Currently, though, we're not going to have to wait, for example, for the EPA permit to give us the opportunity to move forward with the Alderside R&D facility. So, in answer to your question a little bit, it's not dependent on anything related to the Cielo technology exclusively.

Okay. So, essentially, Should the Cielo technology not come to fruition in the worst-case scenario? Is there still a path moving forward to commercialization solely based on expander's technology?

We're basing what we have today to move forward based on the current expander kit, if you will, and the Cielo technology will continue to be further developed so that we can integrate it in future projects, but it is not dependent, underlined, people 24-point font not dependent on the current yellow technology 10-4 thanks for your hard work sir thank you Pedro thank you your next question comes from Bob Mark with her I select from selective asset management please go ahead I can you talk about the capex that's required for specifically both the

Carsland 1 project and for the Dunsmore facility. And I assume that there's a difference on the argument of the expected sales of $19 million and $9 million worth of EBITDA from Carsland is a 47% EBITDA margin, where Dunsmore is $79 million of sales with $46 million of EBITDA, a 58% margin. So I'm assuming that there's some economies of scale as you get bigger, but if you can address the actual capex required for each facility, please. Thank you.

Hi, Bob, and thanks for your call. We don't typically disclose the CapEx for our facilities prior to us receiving the final investment drawing estimates based on the fact that there's a pretty significant range between the two, although our initial estimates have us well within the range of a return on investment or internal rate of return of around 20 to 25%. You are correct in assuming the investment rate of return or sorry, the EBITDA margin, if you will, around the economies of scale between the gasification of the railroad ties and the syngas that results in the production of the syngas that comes through versus the Carsland facility. There's an existing facility that Steve mentioned earlier that we're working with that also has an impact on those margins whereby we don't have the same, and that's the third party referred to in the press release. So there's a little bit of an impact there on what I would call tolling for the syngas that we're going to be using.

Okay, and the syngas itself, would it be described as something that Enbridge and or Fortis would end up saying, ah, this is methane quality that we can quite aptly inject into our existing pipelines?

That would be something Presniak would answer better.

No, syngas is actually the combination of carbon monoxide and hydrogen. We strategically convert the biomass material to syngas so that we can produce liquid fuels. You cannot put syngas into natural gas pipelines for sale because of the CO content.

Okay, and do any of the calculations that you had as far as the EBITDA numbers for either facility include anything as far as potential carbon credits on the argument that you're using a renewable source of wood fiber and or railroad ties?

Steve?

Yes, I'll just say that I'll let Jim detail out exactly what's involved. We, as I mentioned in my little speech there, that we design these facilities for what's called CI or carbon index rating of as close to net zero as we can get. And typically with these biosynthetic fuels that we create, we're running below 30 CI and into the minus 40. So there are credits involved, and I'll let Jim speak to what those are and what the impacts are.

Thanks, Bob. I mean, as far as the credit market is concerned, As you may well know, British Columbia is the only real active credit market in Canada for the moment. In the case of the Carsman facility, we're looking at producing a fuel. They're very similar to hydro-treated vegetable oil or HDRD, which you might be familiar with, which does have an active premium price in the marketplace. So that'll be sort of the target market for the outcomes of that location. In the case of Dunsmore, we're doing further work. We've made application to the BC government for access to credits, should they be available to us. But it is part of the business model going forward, depending on the market, as you know.

Okay. And on the materials that you do produce, on the liquid fuel side, do you expect to have long-term offtake agreements that you could then end up satisfying your friendly banker and or investors to help with? a potential debt financing of the structures.

Just so you know, Bob, you put a smile on all of our faces when you said friendly bankers, so just to be clear. Yeah, it's an interesting question because offtake is a typical response one would expect to have and have to have. What we found is that the market dynamics being what they are and the demand for the renewable fuel, specifically diesel, whether it be sustainable aviation fuel or renewable diesel, it's really, we're being very careful as to not establish a ceiling or floor with an offtake agreement given the amount of volumes that we're anticipating to create. So there is an absolute need from a market development standpoint for those things to happen, but we're not going to tie our hands, if you will, too much, at least initially with an off-take agreement. Given the market dynamics being what they are right now, we have more places to send it than we have fuel to send.

Thank you very much. Thank you.

Your next question comes from Carmen Calderaro, a private investor. Please go ahead.

Hey, Ryan, just a follow-up on a comment you made. You said that now that you guys have the permit from being acquired, can't you start working on the other side with the R&D because you've acquired this permit and not waiting for the one that has to be approved?

Hi, Carmen. Sorry. So... We've acquired the projects which have a permit specific to that location. They are all very specific to not just the location, but the technology and all of the other things that go into it. So unfortunately, it's not a catch-all permit, if you will.

So they have a permit to work on the railway ties, but it just has to be on their facility in that particular location. technology that they're using and not on the Alderside one that we've submitted in.

Right. The specific permit we're referring to is for Slave Lake, which isn't railroad ties. That's a wood waste permit. But the technology is the back end and all those other things. And I don't want to put words in Steve Krenzniak's mouth, but this is a zero emissions technology or facility that's going to be put in and so all of the further applications that are being made or have been made are of the same kit, if you will. Jim and Steve can expand on that perhaps.

Yeah, the carbon, the design that we refer to on Slave Lake is essentially what we're going to be doing in Carsland. So from the point of the EPA or the Alberta Environment, whatever they call themselves today, it's an acceptable process. There is no effluent that comes out of this process apart from the fuel itself when we go through it. So we see ourselves as a zero footprint from an environmental point of view.

So technically you guys could start working on the railway ties at those facilities.

I suppose it's technically possible, that's for sure. But as I say, it's a result of where we want to get to first.

Okay.

Which is on the pure wood waste. Okay. All right. Thank you.

You bet.

Thank you. Your next question comes from Eugene D., a private investor. Please go ahead.

All right. Thanks for taking my call. You're currently on a stop sell on the TSX. Yes.

make the stock active again for buying and selling it's a great question eugene the proposed transaction is subject to the approval of the tsx venture exchange we determined it to be a fundamental acquisition as defined by the policies of the tsxv and accordingly the company's common shares have been halted from trading and will be continue to be halted until the TSX completes its review. Once we have the approval, we'll state a news release once the halt can be lifted, according to the TSX-B. So it's over to them, essentially, to review and approve the transaction before we can start trading the stock again.

Does that... Because I think I heard that you guys are doing... You're thinking of a reverse split? We... 15 to 1, has that been included in the proposal?

No, it has not been. That's subject to the shareholder approval that would be conducted at the AGM. Okay. And when is the AGM scheduled? October the 26th. We've sent out the information circular for that already. All right.

And so one part, last part of the question then, do you have an anticipated date when you think the stop cell will, or you're kind of waiting, waiting, waiting? Are you expecting anything before October for the EGM?

You know, if I could speculate on a hypothetical, I would, but that doesn't do us any good, Eugene. So I'm afraid it'll just be up to the TSX-B and when they decide that they have the information they need to lift the halt.

What would be helpful as a shareholder is if on your website, you updated your website and talked about that a little bit. Because right now, as a shareholder, there would be nothing for me to put any information on.

That's a great suggestion, Eugene. We'll certainly do that after we close the transaction with Expander. We have to close the transaction first, but we have closed to the news release and would certainly provide that information should that not be lifted prior to our closing. Okay, thank you. You're welcome.

Thank you. Your next question comes from Derek McCauley, a private investor. Please go ahead.

Yes, hello. Thank you for taking my call. The question I have really is, I mean, I come in when there was a bunch of MOUs that were touted on websites and different agreements and operation agreements, things like that. We've went from buying land, selling land. You know, I'm just curious at this point now, I mean, now that we're getting into the partnership realm, we're talking shareholder dilution. I mean, where are we really going here? I mean, have we finally landed somewhere that is strategic in a direction or is this just kind of the last ditch effort?

That's it. You know what, Derek, that's a really good question and I appreciate the sentiment. Quite frankly, this is CLO 2.0 and we're taking advantage of exactly the opposite of the previous focus, which was, I'll call it a shotgun approach. We've got a scoped in rifle that is aiming for a specific feedstock opportunity that quite frankly, we can't afford to let go by. And that's what we're focused on. So overall, the only way this gets done is by working with Xpander in a timely manner. Could we do it ourselves? Yeah, sure. We probably could. But guess what? After that period of time goes by, potentially, we're not sure what is left with respect to the feedstock opportunity that's in front of us, not to mention the CP rail commitment that we currently have. So at the risk of sounding glib, it really is a new day. And the equation we like to use internally is 1 plus 1 equals 10. So last-ditch effort is far from the way we do this.

Okay, thank you.

Thanks for the call.

Thank you. Your next question comes from Gary DeFuer, a private investor. Please go ahead.

Thank you, Operator. Actually, I got two questions. The first one is with respect to the feedstock. Has Expander been able to test anything other than wood-based waste in their system to see if there's other waste feeds that could be potentially used down the road. I appreciate you don't have it today from a commercialization standpoint, but are there other feeds that have been at least tested to see that they're viable?

Thanks, Gary. I'll let the expender folks answer that. I'm looking at Jim.

I guess at the moment, from a commerciality point of view, wood waste is what we spend a lot of our time with. Is there possibilities with other feedstocks? Absolutely. We certainly have gone down the path of testing some. Steve, unless you want to make a further comment on it, what else has been in the queue?

Yeah, basically what I'd like to say is we have A in-house gas fire that we use is very efficient gas fire. It's very focused on waste wood and we will be doing multiple tests to push its limit in the next few years. However, we do have a working relationship with another outfit that gives us a gasifier that can produce any form of MSW. So we believe we have all the various feedstocks

gasification processes we need in order to handle pretty well everything could be thrown at us okay thank you for that um i have i have one follow-up question this is actually for jazz deep um and it's really with respect to the balance sheet and maybe just a little bit of um shut a little more color on a transaction that just recently occurred as deep um A few months ago was announced that Fort Saskatchewan property was going to be, was on the market. You had an independent market appraisal of about $17 million, I believe, plus or minus. It was indicated on a previous call by yourself. And I think also Ryan, that there was lots of interest, multiple parties, and I believe it's next to the Suncor expansion. So, you know, that, that should be quite positive, but you know, maybe it's 17 million, maybe it's a little bit less or a little more. But all of a sudden, in very short order, we find that we're selling this property to FCF for effectively $11 million just to wipe out the debt. And that the extra $2 million that we might make, which is still a far cry from $17 versus the mortgage that was on the property, is based on their best efforts. So could you shed a little color of why all of a sudden, as a shareholder, we've seen such a decrease in the the transaction value versus what was touted not maybe more than two or three months ago?

Thank you for the question, Gary. Yes, I can speak to management strategy, and then I'll let Ryan finish off with his thoughts on it. For us, in positioning ourselves for future success, especially with the expander opportunity on the horizon, creating a stronger balance sheet was important to us. And that's part of an ongoing resolution of legacy issues. You can consider this as a vendor take back or a strategy at our end where a resolution in the near term was important to us. But Ryan, I'll let you elaborate on the additional strategies around that.

Yeah, just around for the sake of information, Gary, the broker opinion of values would not constitute an appraisal nor had it ever been appraised at that number. That was the retail price, if you will, that we were asking for the property. with an existing tenant in place. So notwithstanding that, we made a decision to move forward with respect to not having that amount of debt on our balance sheet and the benefit of whatever we could get in the way of holding on to that asset beyond the carrying cost that we're going to significantly escalate as a result of an upcoming renewal on the interest rate was going to be very prohibitive to any equity being achieved after we service the debt. So that's really ultimately the opportunity that presented itself. And in order for us to move forward with the expander, as Jasdeep mentioned, it was important to move forward.

Okay. Thank you for that. And I guess if I could just, I understand that from a previous press release on October 28th, there's a deadline for CMC to sort of submit a proposal to RU in exchange for their participation interest in the Dunmore facility. So in light of the expander transaction, what happens with this $2 million RU participation interest?

Thank you for the question in relation to Renewable You, Gary. We're in conversation with Renewable You. They've reviewed the press release. They're aware of the recent developments, and it's important to note that Renewable U has also been a long-time partner, so they are very, very interested and very pleased with the recent developments, and we'll be working with them to figure out next steps.

Okay. Thank you. Thank you. Thanks, Gary.

Thank you. Your next question comes from Rob Napoli from Kindle Legal. Please go ahead.

Good afternoon. One quick question for you gentlemen is CP Rail. Is CP Rail paying Cielo for the ties or is Cielo paying CP for the tiles? How is that transaction working?

Thanks, Rob. Yeah, we have a tipping fee that's been disclosed in previous press release around CP Rail paying Cielo for the disposal of their rail ties.

Okay. Sorry, you cut out there, Rob. Hello? Okay. Yeah. Thank you.

Your next question comes from Bob from Selective Asset Management. Please go ahead.

Hi. Just to follow up on the IRR kind of comment, which was in the 20% to 25% range, The question is, is this before or after a potential 25% hypothetical tax rate?

That would be before, Bob.

Okay. Turning to the kind of access to wood fiber, since the Dunsmore facility, if it's going to be reducing 34 million liters, Carlin's 8.2, total is 42.2, then Dunsmore would be 81% of the whole pie. So the question becomes one of how many tons of wood fiber would it require to feed, if you wish, the Dunsmore facility? And I'm assuming as far as the potential specific feedstock opportunity, it would be something that is in the Dunsmore neighborhood and hopefully within less than a 50 mile radius to be able to end up reducing kind of transportation costs to get feedstock through to Dunsmore. So any guesses or insights as to how many tons of fiber required to keep Dunsmore happy?

Well, we currently have an agreement with CP Rail on the per-tie basis, which is about 90 kilos per tie of $500,000 per year with up to a million per year. There's a certain legacy aspect as it relates to the ties, Bob, once we chew through those. The FOB Medicine Hat or FOB Dunmore would be the way we receive the ties. It is strategic. We were asked by CP Rail to have one of two locations and the one that we chose was acceptable to them prior to us agreeing to move forward. So that does, and that's a very astute observation, is that transportation for feedstock will kill you. And that's why we focused on the facility location that we did. Moving forward, And with the other opportunities, especially into the United States with respect to the rail ties, I might suggest that Dunmore wouldn't be, it would not be any smaller than the current Dunmore facility. And most likely the expectation is that we would be able to accommodate any number or any amount of ties that would be available to us by any class one carrier in the United States.

Okay, so in Fisher price terms, if it's 500,000 ties at 90 kilos per pop, that sounds like about 45,000 long metric tons per year. And since I don't have a great memory, the description moments ago was that the tipping fee from CP was disclosed. Could you end up telling us what the number is so we can do a little back of the envelope calculation?

Sure. The initial agreement that we have with CP Rail is for $2.50 per tie without metal and an additional surcharge of $5 per tie if there is metal that is contained inside the... And some of them have end pieces with metal and there's a certain removal piece that has to happen or should happen before we put it into the gas fire. So anywhere from $2.50 to $7.50 a tie depending on the composition of the tie.

Okay. So if we use three bucks a tie in round figures, I think I'm seeing about a million and a half bucks worth of potential tipping fee on a half million ties at three bucks a pop.

Okay. Yeah. Yeah. That's conservative. Yeah.

Okay.

Thank you very much.

You're welcome. Thank you. Your next question comes from Carmen Calderaro, a private investor. Please go ahead.

Hi, guys. Another question. I remember a little while back, you guys came out with a schedule in terms of the directors and being able to buy shares. And you had put certain targets that had to be met and stuff like that. Now that this pivot has come into play, has that schedule been sort of null and void? And now you guys can start to participate? Or does anybody have any intention of participating as an inside trader and buying?

Yeah, I wouldn't want to use the term inside trader, but I would say insider. Insider. Yeah. So, yeah, the board is reviewing the retention strategy that was initially put forward from a management perspective that was milestone driven. And certainly, we want to ensure that it's fair and equitable as it relates to what now is a new set of milestones that's driven by more than just the internal management team here. So the board is revisiting that as we speak. And also, as it relates to the insider status, we always defer to council, of course, when we're looking to try and buy shares. We've been in blackout, it seems like, since Jasdeep and I took over in 2022. But the desire absolutely is there. It's a matter of the legalities of that desire being met.

Okay. Well, hopefully we can see some action that puts some more confidence in the individual investors and shareholders out there already, right, that you guys are agreeing and you want to participate. So hopefully that will get straightened out soon.

Yeah, we hope so as well.

Good. Thank you.

Thank you.

Thank you. Your next question comes from Gary the Fuhrer, a private investor. Please go ahead.

So Ryan, just following up on the last question, you and Jasdeep were granted stock options, I believe at six and a half cents a while ago by the board. With the stock currently halted at five cents and with the amount of dilution and potential reverse split that may be coming, that typically would put downward pressure on the share price. So do we have your assurance as the CEO that your options will not be repriced or adjusted downward to sort of take advantage of the, you know, kind of call it market opportunity or timing?

Thanks, Gary. So the options have yet to be granted. They aren't granted until the milestones have been achieved and the board are reviewing those as well. I can tell you this personally, I would not be seeking to have them repriced. I believe it's still very reflective and even appropriate given the investment that I would be making. I'm not the least bit concerned at that current price. And Jasdeep can chime in on her own.

I think the important piece to note that this is a board decision. Management compensation is determined by the board. So at this point, our personal opinions would probably be irrelevant. But I echo Ryan's sentiments. The price is what was agreed to at this point, and there's nothing further to comment on.

Okay. Now, that's very assuring. So thank you for shedding some color on that. Just one last question on the financing, Jasdeep. $45 million, it has to be raised. I can make an assumption of where that's likely coming from, but that's sort of irrelevant. Why is that so critical to this transaction actually being able to be closed from an expander standpoint? Why was that such a critical number to have $45 million, other than it matches up perfectly with the value that was ascribed to their business on a present value basis?

I think it's... serendipitous, I guess, to assume that the $45 million correlates to the other $45 million. They are not. We completed due diligence. If I was in expander shoes and I was licensing this technology, ensuring that Cielo is able to deliver financing to launch our projects that are, as you know, the timeline for Cars Land in 2026 would be very important to me. So therefore, Financing being a term or a condition as part of closing is entirely reasonable to Cielo, but I can't speak on behalf of Expander. Jim, your thoughts?

Thanks, Jen. Yeah, the financing is important because obviously we're in a position to execute on the Carsman project. So to know that there was an opportunity to access market capital or capital markets in this particular case was important for us. So the relationship between the two companies, The ability of what Jasdeep and Ryan have been able to accomplish over the last year, I think is important in the success of what that financing is. I've made a commitment to assist the management team in every level I can to attract capital. And we've had discussions with others who are waiting to see the closing of this particular transaction in order to participate. So I'm comfortable that we'll get there, but it is a critical piece for our shareholders that the financing was in place for us to succeed.

I appreciate that. As a former CFO, I'm just surprised at the quantum, you know, to roll out these facilities. Putting $45 million on the balance sheet, you know, sort of on day one, if you will, is a large amount. And I do appreciate from an expander's perspective, they want to make sure that there's, you know, financing available. But as these facilities roll out to the tune of, you know, maybe four, five, six million dollars a year per facility. I'm just kind of surprised that this quantum is required right away. That was my comment.

That's actually a great comment, Gary. I think in structuring any type of deal, we have to take various aspects into mind. Cielo's non-capital losses, the legalities, even the liabilities piece. We can't say that the $45 million that would be financing Carsland is the exact same structure for all facilities going forward in assessing what the best approach is for Carsland itself. If you look at its capacity, its EBITDA and the revenue, we can consider it a small scale in comparison to the size and the scope of future projects. So, yes, I can understand your concerns on putting debt on the balance sheet. but there is a larger strategy at play looking at our non-capital losses and the benefits Cielo would attain in utilizing those.

Okay, well, that's great. Thanks, Josie.

Yeah, and Gary, real quick before you run, I mentioned or I misspoke that options hadn't been granted. They've been granted. They haven't vested. Right, correct. Yeah, correct. Thanks, Ryan. Okay, you bet.

Thank you. There are no further questions at this time. You may proceed.

Okay. Well, you know, very pleased to see the level of participation and the engagement that we had today. I want to thank everybody, especially our guests from Xpander for joining. We can't tell you how excited we are. Actually, we can tell you. We're telling you right now. We're quite excited. And we all have a collective goal And we've internally adopted One Team, One Goal colloquially as a way for us to show that we are indeed invested both financially and also spiritually, if you might say. So we're going to move forward with executing on a significant number of facilities over the next five years. This is something that we're taking now to market, a market-ready technology thanks to our work with Xpander and we're going to provide market capitalization thanks to Cielo. So looking forward to the future and thanks again everyone for joining and we look forward to talking again soon.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.