Northstar Clean Technologies Inc.

Good day and thank you for standing by. Welcome to the North Star Clean Technologies Quarter 3 Fiscal Year 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 1 on your telephone. Please be advised that today's call is being recorded. If you require any further assistance during the call, please press star 0. I would now like to hand the conference over to your speaker today, Mr. Aidan Mills, Chief Executive Officer. Please go ahead, sir.

Thank you, Leah, and thank you all for joining the webcast and the call. My name is Aidan Mills. I'm the CEO of NorthStar Clean Technologies, and welcome to our Q3 results presentation. As we said in the first presentation we did last quarter, we're committed to do these results each quarter. and to provide three things. So firstly, to provide an update on the financials to our investors. Secondly, to provide an investor update on how the business is progressing. And thirdly, to answer any questions you might have. I'm pleased to be joined with Syed Amzadjik, our North Star CFO, and Carson Seaton, our Director of Capital Markets. And just for housekeeping, as Liam mentioned, so we'll do the verbal questions at the end, If you have any questions that come up through the presentation, please use the chat, and Carson will take us through the chat questions at the end. And then last piece of housekeeping, of course, you know, there will be forward-looking statements in the presentation. And as you can see from our IR deck, the disclaimers for that are on page two and page three of the IR deck. And with that, I would like to hand over to Siad to take us through the financials.

Thank you, Aiden. Good afternoon, everyone. We're looking at the financials for the nine months ended September 30, 2021. Looking at the first slide, and that is on page seven. We're looking at the balance sheet, and we wrapped up the quarter with $8.3 million. in the bank account, and in current assets, we're wrapped up with about 8.9 million in current assets. We had 2.9 in property, plant, and equipment, right of use assets of about 1.9, 5.4 million in non-current assets, and our total assets for the 9-9-7 of September 30th is 14.3 million. Moving down through the liabilities, we had a half a million in credit facility payable. With lease liabilities, we had a million dollars in current liabilities and long-term lease liabilities of 1.8 to wrap up with 2.8 million in total liabilities. Our shareholders' equity, we had 2.4, 24.7 million in capital reserves of 2.4, a deficit of 15.7 million with total equity of 11.5 million and total liabilities and shareholders equity wrapping up at $14.3 million. Moving over to the next page. And that is page eight of the presentation. That is the shareholders' equity. The only real changes from June until September is an additional $568,000 in share-based payments. And the addition of the loss going to the loss for the period for the nine months, we had $4,887,000, which added $1,904,000. to get to that 4,887,000. Going over to page nine, and that is the income statement. We had in research and development costs for the three months of 117,000. And I'm focusing on the three months because that's where we really started going through and spending a lot of the money after we went public. So that was 117,000 in research and development. Advertising and marketing and promotion, we spent 489,000. Consulting fees, 184,000. Appreciation, which is a non-cash item of 115,000. highlighting the bigger amounts, professional fees, $92,000. Share-based compensation, again, non-cash, $568,000. Wages and benefits of about $97,000. We spent in general administrative expenses, $1.8 million. And again, that included those non-cash items. And we ended up with a loss of $1,904,000. Moving on to page 10, that is the cash flow statement. So now we're looking at, you know, there are some expenses that are non-cash in the income statement. So at the top of the page, we started off with a loss of $1,904,000. after taking into effect non-cash items such as depreciation and share-based payments. Out of operations, we spent $1,342,000. We also spent in investing activities $192,000 in property, plant, and equipment. Down in cash flows from financing activities, we repaid $352,000 of our loans during the quarter and some lease liabilities of $153,000, which rounded out to $2,025,000 in use of cash for the quarter. We started the quarter with $10,277,000 and ended the quarter, as I stated on the balance sheet, of $8,000,000. $251,000. And that is the financial update. Aidan?

Thanks, Syed. So Syed outlined in the financials a $2 million span from 10.3 to 8.3 and a quarter. But about a million of that, of course, is the repayment of the loan, the capital that was spent on the Delta facility to start to bring us towards steady state production, and of course an aggressive marketing strategy that we engaged on after the financing. So let's then go through the corporate update. I mean, again, as I talked about the last time, the five points that we always talk about with respect to this business is This is a business that is ready to deliver now. This is not a 2030 ESG play. This is ready to deliver in 2022. It fits incredibly well with the broad ESG and circular economy and also lowering the carbon footprint of this business and we'll actually describe the measurement for that that we delivered in this quarter. We think the business model is significant commercial upside. We believe that the fundamentals have pricing upside, not pricing pressure. And certainly the ESG and circular economy benefits that we believe we can bring can help that. And we have a strong capital structure. So as he had said, you know, $8.3 million worth of cash on the balance sheet and significant work in the last quarter and continuing on non-dilutive funding. And lastly, and most importantly, it's about solving the significant environmental problem on asphalt shingles. So one of the things that we worked out in the last quarter as we tried to describe this to the marketplace was these are the US figures. And as you can see, 12 million tons of shingles are sent to landfills in the US annually. It's about 1.5 million tons in Canada. But if you take that 12 million tonnes and you assume that about 25% of an asphalt shingle is oil, that ends up at about 3 million tonnes of oil. And from a barrels perspective, that's nearly 18.5 million barrels in a year going into landfill, which is exactly the same as one day of... U.S. production. So if you can imagine the 1st of January, that with respect to asphalt shingles, it's essentially like a day's worth of U.S. production going into landfill for the annual figure that goes into landfill from an oil perspective. And that's the problem that we want to solve. And we've now got ways to talk to the market about that, hopefully in a more impactful way. The 1.5 million tons that goes into Canadian landfill, that's approximately equal when you work it through in barrels to about half of Canada's production, but over 20 million barrels a year going into landfill from across North America. So one of the things that's been important, I think, as people see a spend and think about where we are, is where are we in recent milestones and what happens subsequent to the quarter end? Well, as you know, we had shares and warrants commenced trading on the TSX Venture Exchange under the ticker ROOF. I joined the company just after that. We received the testing results from our commissioning, so we know that out the back of our plant comes sales quality asphalt. One of the things I talked about with respect to the structure and the capital structure was non-dilutive funding. And so we engage Wellington-du-Pont Public Affairs out of Ottawa to help us with the engagement with the government. So hugely important non-dilutive funding from a federal, a provincial and a municipal level within Canada and obviously a federal and a state and again a municipal level in the US. And Wellington-du-Pont are helping us engage governments with respect to that non-dilutive funding, which is very important for us as we think about the expansion program going forward. We started the RFP process for engineering. We sent that out. We had three engineering firms bid for that to do the engineering design study. And you can see that subsequent to the quarter, we awarded that to BBA as an independent engineering firm. And so they are doing the detailed design for the scale-up plants. We'll talk about that a little bit later. And we also began market analysis for the target markets in Q3. So since then, we've completed the commissioning runs at the Empire facility. So we know that the Delta plant produces the products that we need at the back end. And now what we're working to do is bring that plant to steady state production. So that's the last one. You see the point there that we're preparing for steady state production. And one of the other pieces of analysis that we kicked off was the life cycle analysis, so the CO2 analysis for the plant at Delta, which was very successful, and I'll cover that in a little minute here. So talking about the strategic next steps, so we've completed the CO2 footprint analysis. We've started the engineering study. It's due to have detailed design by the end of Q1. And we started the detailed market analysis. And again, along with Wellington DuPont, we've been looking at the target markets that are best to deploy the scale-up facilities and the scale-up program. So let's talk about the lifecycle analysis. So this is one of the pieces of news that we got back when the analysis was finished in November. So subsequent to the quarter, but a very important piece of evaluation nonetheless. So if you think about the base business today, if North Star didn't exist, what would be happening would be there would be asphalt shingle tiles would be going into landfill and the asphalt would be replaced by virgin production. And if you look at that and you think about one ton of asphalt shingle tiles, that delivers a carbon CO2 equivalent emission of about 200 kilograms per CO2 per ton of asphalt single. So as you can see, 199.15 kg to be exact, and that is the baseline assessment. And so the baseline assessment was based on international standards of measurement, and the asphalt footprint was taken from the EPA in the US. So very credible locations for the figures. And then we examined our footprint. Now, to be honest, the footprint, of course, is designed on our expected emissions from the facility at Delta. However, this is per tonne, and so we will know the exact figures, of course, from that and the expansion plant as those move into steady-state production. But these are the estimates for the minute. And the estimate shows that the Delta production to produce exactly the same tonne of asphalt per tonne of feedstock on the front end is 72.21 kilograms. So that is a 60% reduction versus the virgin production and landfilling, and approximately 122 kilograms of CO2 saved with a ton of production, which is a significant saving and actually adds the actual statistical analysis to the assertion that we have always had that this is a very advantaged green asphalt for this market, given a significant difference from virgin production. So then let's talk about the Delivery timeline over the next little while. So as you can see, we've got Q4 where we've completed the independent CO2 footprint assessment and we've commenced engineering, so as we talked about. And two of the big things for Q1 is, of course, steady state production at the facility in Delta. And secondly, the completion of the engineering study. So as I said, engineering study expected to complete by the end of Q1 and steady state production in Delta also expected in Q1. So remember the Delta plant isn't, this isn't a bench scale plant. So the difference between the fully scaled up plant and the Delta production at full capacity is, you know, like 2x to 3x. So we believe that, well, firstly at Delta we'll move to steady state production, then we'll do bottleneck to get to full production coming out in Q2. So steady state production in Q1, we'll see a steady state process. We'll see deliveries to customers. And Q2, we'll see deliveries in the front end of the facility and moving to the expected production at the facility. I've said the capacity of Delta is expected to be in the 50 to 100 tons per day range at full scale. And that's what we think. The scaled-up facility that the design is going on for now, we expect that to be between 150 and 200 tons per day. So that is the design engineering that's going on for that, as we say, end of Q1. And we expect construction on the first facility to begin at the beginning of the second half of next year, so targeted at this minute in time for 1st of July. And here are our investor highlights. We've been through a number of these. And again, I mean, our view is this is ready to deliver now, not in 2030. It fits well with the broad environmental and ESG and circular economy. Our assessment shows that we will lower the carbon footprint in delivering asphalt. Our business model has significant commercial upside. The strong capital structure with $8 million worth of cash at the end of Q3 and significant work going on on non-dilutive funding. And then once again, solving a significant environmental problem with 100% diversion of landfill and a 60% reduction in carbon intensity. So that ends the remarks for the investor remarks for the presentation. I'll hand it back to you for questions.

And as a reminder, to ask a question, you will need to press star 1 on your telephone keypad. To withdraw your question, press the pound key. Again, that's star 1 on your telephone keypad. Please stand by while we compile the Q&A roster. I'm showing no question over the phone at this time. I would now like to turn back the call to Mr. Carson Siddons, Director of Capital Markets.

At this point in time, I don't see any additional questions. We just had one come in here. Who has been standing on your share price for the last 90 days? Any plans to address this?

Sorry, Carson, repeat that?

It's a question regarding the share price over the last 90 days and any plans going forward.

Well, I mean, I think the share prices we saw after the debut rallied, you know, kind of rose to 50 cents. I think the thing that we need to think about with respect to the share price, especially in this sector, is to deliver on our technology and deliver on our commitments. So I think we have had... Not people who are necessarily competitors in the space, i.e. not competing in asphalt technology, but people who are in the space of converting waste or other products and are looking at steps in the circular economy or steps in moving products to different markets from waste have had technology challenges. And so I think the market for this space is definitely looking for us to deliver on Q1 steady state production. I think Q1 steady state production and then taking the delta facility to 50 to 100 tons a day in Q2. And then I think the detailed engineering completing at the end of Q1 and the first scale-up plant not only being built but also delivering and we think you know that's probably a six month timeline and so we would expect to be commissioning our scale-up plant hopefully by the end of this time next year. I think we need to deliver on those promises and I think if we do that then we would expect the share price to react accordingly. Carson anything else to add from a capital markets perspective?

Nothing further from my end.

I think that sounds like we have no additional questions.

I'm showing the question.

We have one that just came in. Can you please speak to the confidence in the engineering and furthermore elaborate on the confidence that we have in the engineering progress so far.

Well, if you look, if you go onto BBA's website, you will see that not only have they done a wide range of, if I would describe it as renewable technologies, but they've also been very supportive of companies that move from pilot scale or small commercial scale to scale up. So that was one of the reasons that we chose the three engineering companies that we did to send an RFP out to were people that we knew that could deal with the scale-up size. And again, we don't need to scale up from a pilot facility that's on somebody's bench to a full-scale plant. This is not a 10x or a 20x or even a 100x scale-up. This is a 2 to 3x scale-up. So the first thing from an investing perspective that I have to me 2x or 3x is not a material scale-up risk the second thing I have confidence in is the engineers and that's BBA and the third thing I have confidence in is this this detailed engineering this detailed engineering that's going on isn't to re-engineer a plant and and solve problems from the original plant it's essentially to take the original design that we know works and and scale it up so it's more efficient and its capacity is expanded. The fourth thing that gives me confidence is the BBA are doing two things for us. So the first thing is they're doing the detailed design, and the second thing is they have agreed to work with us on asset improvement as we go. Look, to be fair, this technology is a first. We know that. And my view always has been that Plant 5 will be better than Plant 3, and Plant 10 will be better than Plant 5. So the engineering contract with BBA has two elements. One is the detailed design, so to get us to the build of Plant 1. And then there's the ongoing optimization, where they look at the information coming back from every plant and help us with the optimization moving forward for plant improvement. So I think those elements give me real confidence in not only the base engineering for the detail design, but also the fact we have an engineering partner in BBA that will help us improve going forward.

Okay, thank you, Aidan. There are no further questions at this time.

And this concludes today's conference call. Thank you all for your participation.