Northstar Clean Technologies Inc.

Okay, good morning, everyone, and thank you for joining us for North Star Technology's second quarter 2026 results webcast. I'm Josh from Kim Communications, and I'll be hosting today's call. Joining me today are Aidan Mills, North Star's president and CEO, and Lynda Paananen, North Star's CFO. During today's call, management will review North Star's second quarter results, provide an update on operations in the power category, and discuss the company's priorities for the balance of 2026. This will be followed by an audience Q&A period. Attendees can ask a question at any time by using the Q&A button at the bottom of their screen. A recording of today's event will be available shortly after the conclusion of this call. Before we begin, I'd like to remind everybody that today's discussion may include forward-looking information and statements that are subject to risks and uncertainties. Actual results may differ materially from those expressed or implied, please refer to the company's public disclosure filings for a more complete discussion of these risks and other practice. With that, I'll turn it over to Aidan.

Thanks, Josh, and thanks for the intro. and all great to be on and welcome to the call. So today's call is all about Calgary. As you've seen from the PR which has just been released, as we talked about in the last couple of quarters, the focus for 2026 for Northstar is to deliver an operating facility in Calgary and today that's exactly what we're going to talk about. So we're going to cover four things. We're going to talk about the Q2 financials and Lynda, who's here in the office with me, will talk about that. The 10,000 foot summary with respect to that is it's pretty much the same as Q1 with one huge difference and that is that we have first product sales revenue. Secondly, we'll talk about the Calgary operation to show the huge progress that we've made there. As you've seen from the PR, we've hit the operational targets as set up by ERA for Milestone 4. We produced a record of over 160 tonnes a day at the facility and we've had consistent production through June and July. The third thing I'll talk about is the path forward for Calgary, the maintenance that we did in August and the path forward over the next couple of months. and then lastly I will do a quick update on the patent PR that we issued last week. We haven't really talked about technology development or patents for a long time so I wanted to give you guys an update on that. So as Josh mentioned, forward-looking statements as always and then we've now got the Q2 financials and I will hand over to Lynda to take us through those.

Okay, thanks Aidan. Second quarter financial results continue to reflect Northstar's transition from commissioning and ramp-up towards commercial operations at Empower Calgary. Starting with revenue, so the first chart on the top left-hand side, total revenue was approximately $209,000 in the quarter, relatively consistent with the first quarter. Importantly, Q2 included approximately $35,000 of product revenue, and this is revenue from asphalt sales, representing the first product revenue under agreement with McCashvolts. Tipping fee revenue remained the primary component of revenue during the quarter. And as production volumes increase, we expect product sales or asphalt sales to become a more meaningful component of the company's revenue mix alongside tipping fees. Gross profit was approximately 54,000 in the second quarter compared with approximately 84,000 The decrease primarily reflects lower tipping fee revenue, which is higher margin, together with the introduction of cost of sales associated with our product revenue that we disclosed. During the current stage of the Calgary facility ramp-up, a significant portion of facility operating expenditures continue to be recorded as what we call pre-commercial operating costs rather than cost of sales. As the facility progresses towards commercial production, the composition of both revenue and cost of sales will continue to evolve. Turning to the bottom line, comprehensive loss, the company recorded approximately $3 million loss during the quarter. The reported results include both cash and non-cash items. In particular, the company recorded a non-cash fair value gain of approximately $2 million related to the derivative liability associated with U.S. dollar-denominated convertible debenture. That's a mouthful. Because this liability is remeasured each period, changes in its fair value may result in meaningful period-over-period volatility in reported earnings. Lastly, Northstar ended the second quarter with approximately $6.2 million in cash and cash equivalents. and this compares with approximately $12.7 million at the end of Q1. The approximately $6.5 million decrease in cash during the quarter reflects several factors, including a meaningful normalization of working capital following the March financing. Approximately $3.5 million was used to reduce accounts payable that had accumulated through the preceding quarters. Cash was also used to support operations at Empower Calgary as well as ongoing corporate costs. $800,000 of capital expenditures and approximately $1.3 million of interest and debt-related payments during the quarter. It's important to note that interest related to convertible ventures is heavily weighted to the second and the fourth quarters. So cash used for financing activities will obviously be hiring those two quarters. These uses of cash will partially offset by $1.4 million received on the second tranche of the U.S. convertible to venture financing and $800,000 of the warrant exercise proceeds that were received in the quarter. It's important to note that Q2 included a greater than normal working capital outflow as the company reduced outstanding payables following the financing completed late in the first quarter, and so the cash usage in Q2 was not representative of a typical quarter. As Empower continues through its ramp-up, the company expects to continue allocating capital towards facility operations, reliability improvements, and corporate requirements as it works towards sustained commercial production. Financial results therefore continue to reflect the business in transition. We are beginning to see product revenue enter the income statement while the near-term financial profile continues to reflect the investment required to bring Empower Calgary to sustained operating levels. I'll turn it back to Aidan to discuss the operating progress.

Perfect. Thanks, Lynda. Okay. So the operating update. Let's focus in on June and July. We had during late June and through July consistent front-to-back production that enabled us to hit the ERA milestone for target. We had record production of over 160 tonnes per day on the peak day. and most importantly and kind of reflected in the Q2 and you will obviously see reflected more in Q3, we had regular asphalt deliveries and therefore product revenue coming in the door. And we had, if people had been near the site, we had drawdown of shingle inventory at site, obviously to maintain those production levels. Now, at the end of July and August, we were able to fast track one of the updates that we had identified, or sorry, upgrades that we had identified for material handling and so as you know when we chatted in the last quarter that's the key thing that we had identified was the material handling at the site on the front end and this is one of the system elements that we'd identified earlier in the year and we were able to carry that out in late July and early August. and then for the balance of August we carried out the first maintenance on the hydrocarbon system which as you know produced first oil last year and so we carried out maintenance on that which took us through the balance of August and the whole system from front to back is now restarting this week. Let's just talk a little bit about ERA so as you can see The grant, the technical, ERA technical team has signed off the delivery of the milestone. It's gone forward now for funding. We expect the grant funding to be coming in the near term and The request for that is 488k. Once they take the project holdback of 10%, that will mean a delivery to North Star of about 440k. And the project holdback is being the same at every single stage through the project. So when the milestone payment comes out, ERA holdback 10%. And that's paid in a holdback payment at the very end of the project. and that will come after the facility upgrade which is planned at the end of the year and then when we deliver the final project report in Q1. So that hold back of $708,000 across the whole of the project will be delivered in Q1. So we pointed out the hold back just to be able to be clear about how the ERA process worked. Now, we also expect the second Tamco to venture at the same time as that payment. And as you guys know, that's a $2.8 million USD payment, which should follow alongside that milestone 4 payment. Okay, so then let's talk about moving forward. So we've got the interim processing as we chatted about through July, the reliability upgrade and maintenance in August and now we move into the next phase which is again interim processing through to the upgrade in Q4. So just to be super clear about this, now we have done the reliability upgrade and the maintenance that was carried out in August, we expect increased reliability, increased yield, increased throughput, increased operating hours and increased product delivery all the way through now to the upgrade at the end of the year. The target, as we've said before, is over 100 tonnes a day. and we're very confident with the ability of the facility to produce exactly that. So we've done it for the delivery of ERA through late June and into late July and we expect exactly the same thing now with the operations team as we move into September. So all the way to the full upgrade at the NICU 4, that's what we expect. The Q4 upgrade, as we've talked about before, is the final step for the Calgary facility. Equipment's ordered, the work is scheduled, and in my opinion, it's the last step towards profitability for the facility as we move into 2027. So we expect to see the September performance reflected in the Q3 results, and also as we move through Q4, we expect to see additional revenues arising from a financial performance perspective to deliver as we go into profitability in 2027. So the intellectual property update. So you saw the PR that we popped out last week, which was the addition of the fourth US patent. So we've updated this slide as well to kind of give a bit of a status as we are with all of the patents. So in Canada, as you know, two patents have been awarded. We have one additional follow-on and one new patent filed in Canada that are under review. In the US, we have one additional follow-on that is under review. And for internationally, we originally filed the PCT, as you know, in 2023, so a while ago. And now we're progressing specific country-specific payments or patents. And they are divided into a couple of different countries that we've applied for internationally. and a couple of those are just in progress and in actual fact have just been filed but one of them we actually have had that feedback from the examiners in the country and are now answering that so we may have an international patent hopefully awarded as we come out of the year. So in summary for Q2 we believe we've made huge progress for the facility and the technology This is the first quarter I have sat here, and Lynda as well, to talk about product revenue and our results. So that's a kind of a landmark timing for that to be delivered. We've enabled full front-to-back processing. all the things that we talked about in the last kind of six months to the year where we had bottlenecks or we had material handling issues we believe we have solved. And the last step of that is the final upgrade which is scheduled for Q4. We've delivered the Emissions Reduction Alberta milestone for production objectives. So that's a third party validation that the facility is actually doing what we hoped and expected it to do. and now we've carried out accelerated upgrade maintenance for us to, as we believe, to really drive through with operational performance through to the upgrade. We have huge confidence moving into Q4 here. We've got huge confidence in the facility upgrade and we have got huge confidence in moving in to profitability as we head into 2027. So Josh, I think that's the summary.

Excellent. So just a reminder again, you can use the Q&A button at the bottom of the screen to submit any questions you may have. And with that, we'll just jump to our first question. The first question is, it's great that you're focusing on Calgary. Still curious if there's any updates or anything to look out for with respect to Baltimore and Hamilton expansion.

There is. Sorry, I did actually, somebody just pulled me up. I did make a mistake with respect to the TAMCO follow-on payment. I actually said $2.8 million US, not $1.8 million. So sorry, just to be absolutely clear, along with the emissions reduction Alberta payment, we would expect the associated TAMCO payment for milestone four to come in at the same time, and that's $1.8 US, not $2.8. So apologies. I misread that.

So yeah, Josh, great question.

Yeah, so obviously with the production of Calgary and the ERA milestone for we focused this call completely on the Calgary operation. But yes, both Baltimore and Hamilton continue to develop site development and ready for next steps once the sites are completely signed up and leased to start farming. So yes, both progressing in parallel with the work that's being done at Calgary and both progressing to a point whereby construction of the second half of 2027, as we've kind of signalled before, we still think will be achievable.

Great. Thank you for that. We've got a question about upgrades here. So I guess two-part question. Can you speak a bit to what the benefit was of getting some of the winter upgrades done earlier in August? And also, will those upgrades allow the plants to continue processing during the final upgrade in winter?

so let's add to the second one first we think of the minimum disruption the way that we've planned the upgrade is that the upgrade is likely to come in on a separate skid so not require significant kind of retrofit work in the or kind of you know squeezing for anybody who's done any of the investors who've done the site walkabout they know that inside the building is pretty tight with respect to equipment so the upgrade is going to be are going to be delivered on the skid and which will then be connected into the facility. So kind of pipes coming in and coming out. So that's relatively straightforward to do. Now, it always does need, you know, safety-wise shutdown, et cetera, et cetera, or, you know, a better time to be able to tie, you know, tie pipework in and tie electrics in, et cetera. But it's not going to be, you know, a material time to be able to have to shut the process down. So we should be able to minimize the disruption to production as kind of like the overall goal that we see, so not a significant shutdown to the plant. And the first, yeah, and then So as we kind of step in back and look at the 10,000 foot view, we identified a number of different sections as we looked at with respect to the material handling. One of those sections, I mean a couple of those sections have been in the plant and have already been addressed. and one of the sections that was in the plan, we were able to almost fast track procure the equipment. So that was ready and available to install at the end of July there. And so that was how we took the advantage of the acceleration and it was really due to The speedy delivery of the equipment enabled us to address it straight away. And so that was the advantage. Now, the upgrade is coming towards the end of the year. That involves more complicated equipment and therefore just longer lead time for delivery. And that's really the thing that's driven this. No other constraint, just about equipment delivery lead time. So when we were able to get stuff that was quicker, we were able to install it almost straight away.

Perfect. The next question is with respect to the ERA milestone. So, can you confirm sort of the requirements to meet that milestone in terms of how many days of operation and also what the tonnage per day requirement was?

So, the tonnage per day was in the order of 100 tons a day. So, what we had to demonstrate was, you know, and obviously when you're running a facilities. Sometimes you'll have nine tons a day, sometimes you'll have 120, sometimes you'll have 75, etc., etc. So it was more around consistent, steady production kind of day after day in the area of 100 tons a day. And so that's what we had. And also, as you saw, the record production day was 162, I think. And again, that kind of that demonstrated the front end capability of the facility. So that was the production target for ERA for milestone four was more of a kind of sustained repeatable production, which is what we delivered, which is actually in terms of moving forward as well because we've now demonstrated the plant can run day after day after day and look a number of people we've had feedback whereby if we just announce a production target that's fine if you hit a good production number But then you're going for the next, you know, kind of four weeks. That's kind of irrelevant from an operation and kind of sustainable delivery performance. And so as we move into, you know, start to plant up actually tomorrow, that, you know, post-maintenance, that is the target. So it's really important to have a realistic target of 100 tonnes a day. But it's also really important to continue to, extend operating hours and therefore deliver sustained operational delivery as we go through. So that's the target now as we move forward. I mean, was obviously for ERA and will be moving forward.

Great. And just one follow-on to that, was there a specific number of days the 100 tons per day needed to be achieved? 20. 20?

Yeah.

Perfect. The next question, I think you've answered on previous presentations, but for our new listeners, are asphalt sales tied to the price of crude or is it a contracted sales price?

Both. It's a contracted sales price that has both exposure to the asphalt price and his exposure to the crude oil price. So as crude oil moves, the asphalt price in our contract will move. So the contract is combined and made up of those main elements.

Great, thank you. That is actually all the questions from today's presentation, so I'll hand it back to you for any closing remarks. And just to remind everybody, a replay will be available shortly after this call through the link you joined by, and will be up on our YouTube channel sometime tomorrow morning.

Well, listen, thanks Josh for hosting and running through the questions, and thanks everybody for joining. Thank you very much. continue to move the technology forward, continue to move the facility forward and continue to demonstrate the realization of moving this business towards profitability with throughput and we're hoping and Sarah Gingrich.