2023-06-23 01:10:18 ET
Cielo Waste Solutions Corp. (CWSFF)
Q4 2023 Earnings Conference Call
June 22, 2023 3:00 PM ET
Company Participants
Will Mayes - RB Milestone
Ryan Jackson - Chief Executive Officer
Jasdeep Dhaliwal - Chief Financial Officer
Ryan Carruthers - Executive Vice President, Operations
Conference Call Participants
Presentation
Operator
Hi, everyone, and welcome to Cielo Waste Solutions Live Corporate Update and Corporate Review. This is Will Mayes from RB Milestone. Cielo Waste Solutions is a waste to fuel environmental technology company with the goal to transform waste materials into fuels without harmful emissions. Cielo shares are listed on the TSXV under the symbol CMC and on the QTC -- OTCQB as CWSFF.
Joining us today is the company's CEO, Ryan Jackson; CFO, Jasdeep Dhaliwal and Ryan Carruthers, Executive Vice President of Operations. They'll be providing a review of the corporate strategy and progress made to-date, as well as upcoming milestones. At the end of the presentation, we'll open it up for Q&A for management to address. If you are interested in asking a question or logged into the Zoom app or web platform, you can submit your question directly to us in the Q&A module. Please note this presentation is being recorded today, June 22, 2023, and will soon be made available on the company's website at cielo-s.com.
Today's call may contain forward-looking statements that are subject to risks and uncertainties that may cause actual results, performance, or developments to differ materially from those contained in the statements and are not guarantees of future performance of the company. No assurance can be given that any of the events anticipated by forward-looking statements will occur or if they do occur, what benefits the company will obtain from them. Also some risks and uncertainties may be out of control of the company. Cielo has a full disclaimer contained in their presentation. Lastly, RBMG is not a registered investment advisor or broker dealer for more information, please visit rbmilestone.com.
And now it is my pleasure to introduce Mr. Ryan Jackson, the CEO of Cielo Waste Solutions. Ryan, the stage is yours.
Ryan Jackson
Thanks, Will, as always, and welcome, everyone. I see there's been some great participation today, and I think it's important for everyone to understand that we are looking forward to be able to present to you where we were and where we are now. And in the future of course we'll also be providing and sharing with where we're going. It's always good to look back and be able to provide a certain amount of context on the things that we both noticed as we came into the roles that Jasdeep, Ryan and I did. And also of course with respect to the Board of Directors, the mandate that we had going forward into the future.
So without further ado, will turn this over to Jasdeep for the beginning of the presentation. Jasdeep, it's all yours.
Jasdeep Dhaliwal
Thank you, Ryan. Welcome everyone to our 2023 fiscal year end review. Very excited to share our results, but also very excited to share our results in the context of our strategy, but also in the context of our operations.
As many of you know, Ryan Jackson and I joined, we stepped away from the Board of Directors and joined as part of the management team in June 2022. Initially, in an internal role, subsequently that take was dropped in September 2022. As we assessed the environment within Cielo, its ability for success and also looked at our own skill sets as entrepreneurs, but also as individuals who have experience in building businesses, we knew we could add value. And we're very happy to be here, and we feel we have moved the needle Cielo quite significantly over the last year.
Our goals over the last year have been, first and foremost to develop a clear and attainable path to commercialization. We stepped into a situation where the inflationary environment resulted in a pause on Aldersyde Phase 2 as many of you are aware. We continue down the path of obtaining learnings from Aldersyde Phase 1, pursuing the fabrication of the R&D facility, which is a scale down of the Aldersyde Phase 1 process. And then from there, the plan is to scale up in our first full scale facility.
We continue to maintain a strategy to evolve from ad hoc problem solving and the entrepreneurial approach that was initially used at Cielo. And we wanted to be a data-driven business, transparency was a key role in that. In the last year, Ryan Jackson, Ryan Carruthers, and I have had seven significant touch points with shareholders. We've had three quarterly calls and four webinars through our BMG, and we'll continue to do so in the months to come.
And last but not least, we all -- we continue to oversee stakeholder interest, ensure capital is prudently deployed as we build the long-term shareholder value. So in pursuing goals, what were our objectives? Our first objective was to commission the R&D carefully. As I just mentioned, Aldersyde Phase 1 was an existing process. This process was proof-of-concept that what biomass can be converted to distillate. To save on CapEx, what we did is we took the existing process, scaled it down in the R&D facility to allow for state-of-art equipment, process parameter control, and others other items that Ryan Carruthers can speak to.
We continued the planning for the proposed full scale facility. We compiled based on our understanding, preliminary performance and or for first facility. And we also took the initiative of really take a hard look at Cielo. We took a very hard look at Cielo and looked at, are we positioned for future success? And what changes need to happen within the organization to position ourselves for future success?
Here's a brief overview of highlights that occurred in 2023. We came into a situation where we were able to complete a public offering of $9.8 million gross, which I'll get into -- in the slides to come. As mentioned, Aldersyde Phase 2 was paused, completed the fabrication of the R&D facility, extinguish debt, total aggregate amount of $6.5 million, which was due in September 2023. We leased an asset, which we believe at the first Saskatchewan assets in the short-term at least is a redundant asset. We were able to lease that. With the debt per share conversion that, that allows us to breakeven for cash flow for that facility -- for that location, apologies.
In Q3, we built what we believe is our dream team, completed a sale of distillate for the second time, the original sale happened in January 2022. And as I mentioned, we continue to commence the planning act for their first full scale facility. Here's an operational overview, the piece I want to speak to here is the lease -- the Calgary office lease. The Calgary office lease was a reassignment of our space. We believed our company -- previously company was at a certain point of growth at this -- at that time.
When we came in, we believe that growth wasn't going to occur in that moment, and we had to write-size our overhead, we have to right-size their staffing and also our office lease. So the reassignment is as it's reflected in the financials resulted in significant savings in G&A, we continue under the leadership of Ryan Jackson and Ryan Carruthers on the R&D facility, the permitting and the testing, and as I mentioned, continue to work on the first commercial facility as well.
I know there's many individuals when we look at our financials. They're looking at individual numbers in the accounting world, and then I'm sure for investors, we're looking at ratios as well. You want to take this opportunity to highlight a few key ratios for you. The one ratio is the current ratio. Last year, in 2022, this ratio was 1.39, which means for every $1 of liability, we had a $1.39 in assets. This year, for every $1 in liabilities, we have $0.14 in assets. However, if you're looking at the financials, this change is the reallocation of long-term liabilities to short-term liabilities, which means the next fiscal year in the next 12 month period, we have $10 million -- $11 million of debt that needs to -- that matures. $2.25 million, which were in the process of settling with renewable use of a deferred revenue, and also approximately, you can say, a $1 million of royalty payable. The reclassification of majority of these items from long-term to short-term has resulted in a decrease in our current ratio.
From a debt to equity side, our debt to equity ratio has increased to 98%. If you look at the diluted impact on the next slide. Fully diluted, we are 1.1 billion shares. We understand the impact of that. But at Cielo, as we look at our financing strategy and we look at our ability to bring in capital into the company, the balancing act is quite challenging and we do our best to make the right decision to add shareholder value. We've extinguished $6.5 million of debt, bringing on more debt, being a pre-revenue, pre-production company is very challenging, the ability to service debts and look at what our interest rates would be.
In the same breath, when we're looking at equity, we're looking at that equity is our currency. It is the investment that people are willing -- individuals investors are willing to make in Cielo believing that there is a technology and a future for this company. Therefore, it's a balancing act between the cap table and between the balance sheet, and we continue to assess that as we're finalizing our financing and looking at our capital structure going forward.
I'd also like to take this opportunity to look at majority of the transactions that have occurred this year on -- at a quarterly basis. So our first quarter end was July 2022, we completed a public offering, growth proceeds were $9.8 million. To complete this public offering, extensive review of public disclosures needed to be completed by the Alberta Securities Commission. The process for this public offering was that Alberta Securities Commission completed extensive review of disclosures, asked Cielo to provide additional disclosures or MD&A or financials and the prospectus that was filed to ensure there was transparency to shareholders on the use of proceeds and our company.
The first step we took with $9.8 million growth. Cash flow into the company is the allocated $4.2 million to the R&D facility. Ryan Carruthers, would you like to take this opportunity to provide additional information on the R&D facility and why it was essential that instead of moving from Aldersyde Phase 1 to a first full scale why the R&D facility was necessary?
Ryan Carruthers
Sure. Thanks, Jas. Good afternoon, everyone. I mean, just to refresh everyone what the purpose of the R&D unit really is to achieve a high degree of detailed performance characteristics. So feedstock yields, optimum carrier fluid design, reactor design, catalyst experimentation, and a detailed material balance for the system. All of which are critical to the path forward before we move to a commercial facility.
The R&D facility will get the sale of the flexibility to experiment the greater range of pressure and temperature regimes, reactor configurations and catalysts to enhance quality of the fuel yield. All in doing so preserving CapEx being that this physical size of the unit, it's much more cost effective than design changes is really it's a scaled down unit intended to be the blueprint for the full scale project.
Jasdeep Dhaliwal
Perfect. Thank you, Ryan.
Ryan Carruthers
Welcome.
Jasdeep Dhaliwal
We also looked at our overall budget across departments at this time. We allocated the $4.20 million R&D facility that we, Ryan Jackson, Ryan Carruthers, and I, at this time, when Ryan Carruthers was appointed EVP in July 2022, the three of us sat down and looked at our budget. We made some difficult decisions, and we looked at where spending was essential at this time and where it wasn't. These hard, very challenging decisions resulted in 47% decrease in G&A. So in 2023, our G&A spending was $3.6 million and 2022 is $6.6 million. I commend the team of individuals, who work beside us, Kate Ayotte, Kimberly Schubach, and Jason Gilbertson in assisting us to make some of these challenging decisions.
Moving on to Q2. As previously mentioned, Aldersyde Phase 2 was paused. We continue down the path of Aldersyde Phase 1, which was designed to provide proof-of-concept by achieving steady state production for a certain period of time. Once this was complete, it was deemed by the operations team that some of the assets used in providing proof-of-concept would not have further economical benefit to Cielo. This resulted in impairment of $26 million as recognized as a one-time impairment on our income statement.
It's important to note that if you remove impairment as the one-time expense recognized in the income statement, our net loss for the year is only $10 million, because as noted as an aggregate, it's $36 million. Ryan Carruthers once again, would you like to take this opportunity to please share details on what the learnings were from Phase 1 Aldersyde and how they've benefited the design of the R&D facility?
Ryan Carruthers
Absolutely. So Phase 1 really provided proof-of-concept and really had highlighted the focal points where improvement was absolutely necessary. It validated our initial reactor modifications that extended run times as everybody recalls in the early days we had run times as short as 36 hours. We were able to extend that to seven days in Phase 1 with early modifications. And even at that point, those with ancillary equipment that were preventing us running beyond the [Technical Difficulty]. It offered us an opportunity to test a prototype waste handling system, which will be employing a further refined version in R&D unit. So significant advancements and again proof-of-concept all came from Phase 1.
Jasdeep Dhaliwal
Perfect. Thank you, Ryan. And to move from one Ryan to the next, Ryan Jackson, could you provide some detail in the Fort Saskatchewan property, because this initiative that you laid and this is where your expertise lie.
Ryan Jackson
Thank you, Jas. We have in the course of doing what Jasdeep preferred to in the end of Q1 or part of that hard decision making that we went through, a lot of it was fiscally based, but we also had a understanding of how thin we would be spread operationally, which led us to decide to bring Fort Saskatchewan down to Aldersyde by extension. Part of that process though was also understanding whether or not we could find someone or something that could occupy or purchase the land.
We were presented with an opportunity for a tenant in the short-term in the second quarter. And as a result, we ended up entering into a commercial lease of 15 acres and the building. There was still a remainder of lay down space that we had that we continue to look for a tenant for the conversion of the $2 million converting by debt to shares that was a part of that from our partners at SCF was very important to allow us to not have a negative carry. This of course also allows us to bring in a potential financial fire, I’ll allude to that here in the coming slide.
Over to you, Jas.
Jasdeep Dhaliwal
Thank you. Moving on to the next quarter, please. Our third quarter ended January 2023. We completed the hiring of our core treat -- a core leadership team. Each member wears multiple office hours or our hours of operation are not office hours. We're trying to make the best strategic decisions for the company. It's a good mix of individuals, who have already mentioned that wear multiple hats that take on multiple roles, but also have a passion and a belief in the technology and what Cielo is capable of.
It was important to ensure the retention of these individuals through a retention strategy that was approved by the board. For Ryan Jackson and myself, this is stock-based compensation. Sorry, this is stock option policy, which allows for options to be exercised $0.065, which will be the later of January 2nd, 2024 or the delivery of railroad type testing, commissioning of the R&D facility, as well as completion of construction drawings and process flow diagrams. If those deliverables are not met, the stock options are -- do not vest with does not allow Ryan Jackson and myself to exercise them.
The other aspect is also we complete the sale of distillate and produced and sold 80,000 liters of unrefined distillate to a third-party refiner. As I previously mentioned, this is what's our second time doing this. And in creating a salable product that we were able to sell to a third-party. And the question we always get here is, how come I don't see it on your income statement? In the exciting world of accounting, this is not reoccurring revenue. It's one-time as we are pre-production, pre-revenue company in the financial statements that sits in other revenue and expenses.
And last but not least, moving on to the next quarter. Our fourth quarter April 2023, which is also our year-end. The focus of the accounting team at this time was to complete year-end financials, focus on ensuring that we had transparency completed a revised format for MD&A, which was delivered four months in advance of our filing date. Our filing date is of August 2023. For us, the three management individuals, who stand before you and our entire team, transparency, and also timely execution and providing information to shareholders is very important. At this time, these three initiatives that you see on the screen were spearheaded by Ryan Jackson.
Ryan, can you speak to these, please?
Ryan Jackson
Certainly can. And in the exciting world of real estate, not unlike the exciting world of accounting, I'm sure that people will be riveted by this, but nonetheless, Fort Saskatchewan we decided to list with of course the board's approval and I guess it was in around the March mark with respect to the listing at $17 million and this is based on a broker's opinion and we had listed it with and you have it listed on Cushman & Wakefield website and also it's on the MLS as well.
We do have through that process extinguished an additional $4.5 million debt through the debt per share conversion again with our partners at SCF, this should not be viewed as an insignificant transaction, because it really does position the real estate to be sold at market and allows also there's a certain amount of realization of equity value inside the real estate that currently exists. And even if it didn't in a worst case scenario Cielo isn't in a position where now we would be considered upside down as it relates to the value of sale versus what we actually owe on the balance of the mortgage.
Going forward, we have a number of parties that are interested in the -- and have fielded a number of inquiries whereby we have quite frankly ongoing discussions around the sale of Fort Saskatchewan property and a number of different variations on that very same thing along with a number of different suitors that are looking at it. In addition to what we anticipate to be a sale being completed at a certain point in time in this fiscal year, we'd like to think that the lease that we continue to realize on with our tenants is going to continue to allow us to have a no negative carrier, very little negative carrier with respect to showing the debt on the property.
The other part of this that's also attractive is that from an financial buyer perspective looking at least a certain amount of debt servicing that can be attributed to a purchase would also be part of that scenario. So we have a financial buyer opportunity, we have strategic buyer that might also be looking at it from a strategic perspective as it relates to the petrochemical and refining corridor that is the Fort Saskatchewan or the industrial heartland space. And we have a very positive and good outlook on what we can do with the property. So that also then leads us to focusing really on our first full scale facility, which just didn't fit up in Fort Saskatchewan, it was used initially or purchased initially for the purposes of maybe potentially locating a facility there, that's then pivoted to an R&D idea with respect to that and then what we've had now is the iteration down to Aldersyde, which is a great operational and logistics spot for us.
And also as it relates to the land or the real estate, we certainly don't see a value erosion with respect to the real estate that we have currently in Fort Saskatchewan. So a very good option instead of obligations.
And I'll turn it back to Jasdeep.
Jasdeep Dhaliwal
Thank you, Ryan. I'd like to progress further and just speak to the income statement highlights. We've spoken about the balance sheet ratios and the impact on the transactions we've had. On the income statement side, the impact or the transactions that were completed throughout the year has been very consistent. We were able to decrease the expense related to research and development. The focus there being on the fabrication of the R&D facility, G&A has significantly decreased. And once again, I'd like to highlight that the net loss is $36 million, but out of which $26 million is one-time impairment.
And moving forward to the next slide. Ryan Carruthers, would you like to speak to the R&D facility and the major deliverable that we completed within the year?
Ryan Carruthers
Sure. I mean, it's previously disclosed end of April, we actually completed commissioning on time. What I'm actually happy to report this time is with all cost assessed, we actually came in on budget as well, which I feel is a significant achievement for CLO another milestone achieved. Really, we sit right now. The R&D unit is ready to run simply waiting on permit approval.
Jasdeep Dhaliwal
Wonderful. Thank you. I'd like to take this opportunity to pass it to Ryan Jackson to lead the conversation on some of the work we've been completing over the last few months with EPA, Brian?
Ryan Jackson
It has -- thanks, Jasdeep. It has been a very, I guess, I’d say it has garnered a lot of attention at it -- and rightfully so as it relates to our investors and shareholders with respect to Cielo. Trust me, for every bit of attention that is garnered from investors and shareholders, we can certainly say there is an exponential increase due to the management focus as well. What we have to understand and you see I'm not going to read to you what the slide shows. For those of you that are dialing in, there is an understanding that this is not a rejection, but a need for further information.
We want to be clear that while all of the back and forth that we have with the regulator there is the exactly data back and forth and this is something that is unique to the regulator as much as it is to anyone else. No one else is asking to do this other than Cielo. So there's a lot of learnings that have quite frankly happen on both sides of this and additional information to ensure that the mandate that the regulator has fulfilled is very important. So with that, of course, we have to continue to provide and iterate additional information to provide both that has not been asked before or obtained before with the first Phase 1 facility and that we have now received preliminary results from a lab that does understand the understanding of what it is exactly in the compositional makeup and analysis and we expect that report to be here very, very soon.
That data that we have will then of course be put into the final application we have a draft application that is very voluminous, there's a lot of it and trust me there's a been a very interesting learning experience all the while for both the regulator and for Cielo. So we want actually -- I want to take a chance to thank the regulator at Alberta Environment protected areas for actually engaging in the discourse that they have with respect to the application that will be forthcoming and that will be forthcoming very, very shortly and that then will lead us to the ability to run that R&D facility that Ryan had shown you with respect to the pictures earlier.
We did engage a third-party by the name of Matrix Solutions. That is something that we have leaned on their expertise and experienced quite a bit. As a result of that, they are meeting this application with Cielo’s help and they've done 100s of these. So this is not something whereby we're learning how to apply by any stretch. This is very much a matter of when not if.
And with that, I will send it back to or actually, yes, I'll send it back to Jasdeep.
Jasdeep Dhaliwal
It’s wonderful. Thank you, Ryan. I really appreciate that update. Provides a lot of clarity on our EPA process. Hey Carruthers, why don't we start with you on providing further clarity. I know you touched on this topic in your last webinar. But why is there a focus for Cielo on railroad ties?
Ryan Carruthers
I'm going to give that over to Mr. Jackson.
Ryan Carruthers
Okay. The other, Ryan. Certainly, we have, of course, an current agreement in place with CP Rail as it relates to the feedstock of railroad ties. And what a lot of folks probably have seen in their drive down along through any parts of Canada, but especially out in the Western part of Canada is where the majority of these railroad ties will be sourced. You see a lot of these piled up on the side of the road. Now we do understand that there is a desire and there's a desire in sales part two for us to be testing other types of feedstock such as plastics and rubber.
The one thing that is definitely a recurring sustainable feedstock though is railroad ties and our understanding of wood waste and what that means to look like and how we convert it to fuel has a significant bearing on how efficient we believe we can be in dealing with a different type of wood waste, which is railroad ties. Now they are soaked with [Indiscernible] and as I mentioned earlier with the EPA we have a way to be able to address those nasty things that are inside the compositional analysis that we're seeing with respect to the lab.
But beyond that we're not paying for our feedstock, right? They’re paying us to take feed stock. Now that's a problem we're solving both on the front end and the back end. The front end problem we're solving is obvious. We're getting rid of both a visual and potentially bad notches subsidence that's sitting leaching into the groundwater or going up into the air if they're burning at a foundry for a cogeneration facility. But the second problem we're solving is we're meeting a significant sustainable fuel need on the back end of this.
There is a mandate coming and everyone's aware of it both whether you're in the marine or transportation world and marine is transportation obviously, that is we need to be able to have a sustainable fuel whether it be aviation, marine or railroads, cars, trucks, you name it. This is another need and another problem we're solving, because there is a significant trade deficit in Canada alone of hundreds of millions of liters of fuel that we import currently in the biofuel basis. So we're solving another problem on that end as well.
Also and it's important to understand this and then I'll move on, because I'm ranting a little bit. The railroad ties is allowing us to focus on a problem that we can solve today. We know we'll be able to solve additional waste stream problems and I know that there's an emotional attachment of plastics and we will take a look at that in a very serious nature. And also with rubber, the sustainable nature of this feedstock though and the profitable nature in which we're able to process it is significant and that's what we've decided to focus on. And that's why we're doing railroad ties first.
Jasdeep, over to you.
Jasdeep Dhaliwal
Thank you. Appreciate that, Ryan. So as we wrap up one year, the question always is, where's the next year going? And we just wanted to highlight three key areas on what we're working on. Working capital, yes, we are in discussion with Crestmont. For Cielo, it's how do we want to position ourselves as not only in this moment, but in what we consider our vision and our strategy to be in the next six to eight months. As I've already discussed, yes, debt is an option, but servicing debts is other -- if funds are needed in other operational activities, is that a hindrance or is that a benefit?
The secondary piece is dilution. So if we go the path of issuing equity, then it would have impacted that. And let's not forget, of course, Saskatchewan is available for sale. How does that impact cash flow coming in from that possible stream as well? So when an update is available, one will be provided to shareholders. At this time, we are working through our working capital, and we look forward to providing an update as soon as possible.
Ryan Jackson, I'll pass it on to you for project pipeline.
Ryan Jackson
And that's one of the many projects we have as we're working capital project in addition to others. There's a number of projects that Cielo continues to work on outside of and in addition to the project pipeline and relating to specific funding projects around processing wood waste, railroad ties, et cetera. We also have, of course, a number of business conversations that happen on a daily basis along with some other letters of intent that we have considered and that we want to look at over the course of the next little while around other wood waste or other feedstock opportunities that might come our way that we're actively seeking, similar to that of the CP Rail along with of course our EPA project among others.
So a lot of business conversations around feedstock around of course the subsequent off take of those general things that we create whether it be whatever molecule it might be whether it be aviation fuel or diesel among others. So as Jasdeep has referred to one we can tell you, we certainly will. We certainly don't want to select, we disclose anything here or within any investor shareholder conversations. That's why we have these webinars to be able to provide you along with the press releases to provide context.
And I'll leave it over to Ryan Carruthers for the rest.
Ryan Carruthers
Really, my piece is that the keys are in the ignition. The R&D unit is ready to go as soon as we have permit approval, we'll be firing up and testing railroad ties as soon as we do receive that approval, it's our intent as well to file an additional amendment, and that will be to allow for processing of plastics and other materials.
Jasdeep Dhaliwal
Perfect.
Ryan Jackson
We look forward to starting this thing up and getting some information out of it.
Jasdeep Dhaliwal
Thank you, Ryan and, Ryan. And on the screen before you is the three of us. We are the leadership team here at Cielo. You can only steer as good as the navigation that's provided you. We are grateful for Ryan Jackson being the captive of our ship for the guidance he provides through. Sometimes the fog at Cielo as we're dealing with legacy issues, figuring out our strategy, understanding some of the limitations, especially looking at our dilution, and also to Mr. Ryan Carruthers on the operation side, who consistently provides us with information and further confidence in our technology and our ability to deliver.
Last but not least, I think it's also important to mention individuals, who are not within Cielo, our external legal counsel, [Antonina Faskovich] (ph), who spearhead’s conversations TSXV and also provides invaluable guidance to us when we're looking at strategies within Cielo as well. Last but not least, they do work beside us, but in the work chart, they sit above us, which is our Board of Directors.
Ryan Jackson, could you share more a little bit more about the Board of Directors involvement and also some of the activities that have been undertaken over the last year.
Ryan Jackson
Certainly and I echo, of course, the rest of the team that is within the organization. It's a small mighty team and we obviously have done that on purpose to ensure that the G&A that Jasdeep showed you earlier remains very lean. Of course, the Board of Directors that you see in front of you, Sheila has been a tremendous chair and one that we rely on as a leader from all of her work that she's done in the space and the corporate governance that she displays is second to none. The honorable Peter MacKay and Larry Schafran provide us with that balance that we really do depend on, because the board has been asked to do a lot of heavy lifting as committee as a whole in a lot of in general ways. So of course I'm also on the board and would like to think that we have a very solid team, in fact, I know we have a very solid team to move this company forward.
Jasdeep Dhaliwal
Perfect. Thank you, Ryan.
Ryan Jackson
And I guess for back to Will.
Question-and-Answer Session
A - Will Mayes
Well, thanks, guys. Thanks, everyone for and very informative update. And as noted, we're now moving into the Q&A portion of the presentation. If you have a question, you can ask it directly in the Zoom Q&A module. If we do not have time to get to your question, we will respond via email in a timely fashion. We've had many questions submitted prior to the call, so why don't we go ahead and get started with those?
First question here, multi-part, what are the near-term events or milestones on the path to commercialization? What is the status of the Fort Saskatchewan property? With so many shares outstanding, maybe current, and prospective shareholders are reluctant to buy more shares in fear of a reverse split? Can you address those topics? Thank you.
Ryan Jackson
Sure. Well, I'll take that. So the first part of this is what are the near-term events or milestones in the past commercialization? I think we've been clear with respect to that we have, of course, the R&D facility permitting that is going to be required with startup we have it ready to go. It's commissioned as Ryan Carruthers mentioned, it’s the -- keys are in the ignition, EPA holds the fuels -- fuel sell if you will to be able to start the vehicle. We are again confident I want to reiterate it is when not if that we are going to be able to proceed with this and we believe it will be in a timely fashion.
The second part of that question is the Fort Saskatchewan property mentioned that four. We've had a number of inquiries and interest in the facility, as well as the land that is adjacent to the facility and Dow Chemical announced a billions of dollars of investments in the Fort Saskatchewan area to their facility directly to the North of us. We're hopeful and mindful that, that is not an insignificant project that is going to be done over the next five or more years. So we continue to have a number of conversations with our brokers around the Fort Saskatchewan facility and there’s number of interested parties out have already inquired.
The prospective shareholders that are reluctant to buy more shares for a reverse split that's something quite frankly that is I know it's a math thing and that's more Jasdeep’s thing than mine although I can significantly say that there's never substantially say that the value of the company doesn't change based on the number of shares, the value of the company based on the price of the shares. So that is all relative and a reverse split we've gone on record numerous times to say there isn't a reverse split without some reason to do so and that would have to be and would be viewed as accretive to Cielo shareholders. This isn't a matter of us doing a reverse split, so that we feel better about ourselves and our outstanding shares. This is something that has to make business sense and it would also, as I mentioned earlier, be of value to the company and to its shareholders.
Will Mayes
All right. Thanks, Ryan. Next question up is asking what differentiates Cielo from the competition and similar companies?
Ryan Carruthers
I’ll take that one. See, we were in Cielo employ the patented process and to my knowledge, to be quite frank, we have no direct competitors in the waste of fuel space, specifically as a pertains to railway type.
Will Mayes
Okay. Thank you. Well, it's a statement that came in transparency and frequent updates appreciated. Please continue right now.
Ryan Jackson
Thanks. I mean, as mentioned, we've provided seven updates, I think, Jasdeep mentioned it to shareholders through the webinars and quarterly results. Those are the 12 months and we're going to continue to do so.
Will Mayes
Great. Another question coming up on financing, really. Please assure shareholders that more dilutive activities and events are not planned or likely, we have been very patient after what has transpired under previous leadership and boards?
Jasdeep Dhaliwal
I'll take that one since it's talking about numbers. I can only echo what Ryan Jackson mentioned. We will take the best approach possible to add shareholder value. We're constantly assessing the three streams of financing Fort Saskatchewan is one possibility, debt, and also equity. We understand the dilutive impact, and we understand also that our shares are our currency, and for shareholders I believe in our technology and technology that we believe we can deliver on as well. Thank you.
Will Mayes
Great. Next question up is, I still believe in the potential of the technology, and I would like to know some of the numbers for the carbon credit side of the proposition.
Ryan Carruthers
Really, the R&D unit, the operation of the R&D unit is going to allow us to optimize the process and then ultimately better understand the energy input required to support the TCD, so thermal catalytic depolymerization process. So data will be utilized and calculated portion of the CI score, but we'll need to finalize the specs of the product to fully determine our CI score. So all I can say is, it's coming.
Will Mayes
Very good. Next question up is I'd like to ask about the value to the shareholders. When will shareholders see some return on their investment?
Ryan Jackson
So loaded question, Will, but one that is fair to ask the value that we are creating in the company has to be viewed beyond just the quarter that we're currently in. This is a marathon not a sprint that we're in the process of doing. And if you look back at the tremendous amount of work that's been done by the company in the last fiscal year that is the purpose of this call today. We have to now look to suggest that this company is now positioned to be able to execute. We have to look after and an investor shareholder looked at me and asked me this question after we took a look under the hood. What led you to -- what decisions were made earlier and it's or in the past, this is something that has really good bones. And it's a kind of a house metaphor, but it really does have good bones. This company has a ton of upside potential through the railroad ties story and our ability to execute on that is now in place.
Will Mayes
Okay. Thank you, Ryan. Next person would like to know what's going on with plastic waste management?
Ryan Carruthers
I guess they did touch on this briefly earlier, but really once we've received our permit approval to process railroad ties, we'll be submitting an additional amendment that will allow us to test plastics. So some will ask why wasn't that application or why wasn't plastics added to the initial amendment, reason being that makes that application far more cumbersome, more lengthy to put that application together, as well as more lengthy for EPA to review it. So the quickest path forward was just railroad ties and then following that will be an application amendment for plastics. So, subsequently, it will complete the required modifications, the facilities for plastics they've acquired. And in addition to that, the same as Ryan mentioned earlier, I do want to reiterate that our shortest path profitability is railroad ties.
Will Mayes
Great. Thanks, Ryan.
Ryan Carruthers
Yes.
Will Mayes
Next question up somewhat related. Cielo will -- when will Cielo be ready to scale and commercialize this technology? I’m a believer and patiently waiting for good news.
Ryan Carruthers
Thank you. We're also believers in our technology. The learnings and data generated from the R&D unit will allow commencement of the design of the full scale facility. So scalability was a key consideration during the original design of R&D, so everything we're doing within R&D will and can and will be scaled up during the design engineering of the scale.
Will Mayes
Right. Related to the facility. Can a person take a tour of your facility?
Ryan Carruthers
Due to the confidentiality of our patented process, we do not allow tours of our facility.
Will Mayes
Got it. Next question up, does the company already have an engineering partner for scaling up operations?
Ryan Jackson
To Ryan's earlier point, we had to convince him that those pictures weren't going to be too much to show. But yes, there's a certain -- we have been issued an RFP and we are currently adjudicating the PPC that we would be selecting and we're having those conversations as we speak.
Will Mayes
Good. Next question, please provide a plan and timeline to profitability?
Jasdeep Dhaliwal
I can speak to that because it speaks to profitability and finances. We have developed preliminary performance once we obtain EPA for approval for permitting and running through railroad ties, we can confirm those pro forma results. What are gross margins? What is our EBITDA? What is our CapEx? Once we've confirmed those values, we can release them to shareholders through a press release, and subsequent to that, continue the path to commercialization and developing our first facility as well. Some of those steps, like I said, like Ryan mentioned, all have occurred at this time, but we're limited until we have the R&D data that verify their performance, and we can release those results to shareholders.
Will Mayes
Okay. Next question, this investor would like you to provide more detail on why the initial permit to process railroad ties was denied. They had watched the previous webinar, and it seems that the team is very confident on getting the permit. But given the current share price and the investment community seems to be much more skeptical than the management team. Please provide an expected date for the permit approval?
Ryan Carruthers
Okay, that's a multi-partner. So we did provide earlier and understanding that the application was based on efficiencies initially and we had to and were asked by AEPA to reapply with respect to the deficiency of the information and it doesn't necessarily have anything to do with the ability for the projects to be successful. This is an ongoing discussion that is part of an internal process within the regulator and it's meant to be more efficient, because it's not a matter of trying to correct someone's homework and get them sent back by the teacher to their desk to do it again. It really is just that simple. We are really working through a lot of the requests that are continuing to iterate from AEPA. We do believe now and have the sufficient data that we need to be able to make that application and with a fulsome application comes a fulsome response and that is exactly what we expect.
The expected date of the permit approval is something that is really not in our control and we've said that right from the jump. We've always said that there has been and will be a commissioning of the facility to be an expected date of X. We did not, however, commit to and expect date of approval based on the very intricate nature and very specific nature of the application. And all of these applications I would imagine are very specific. And when we're putting or when people are asking to do something with bad things, we want to make sure we're not putting bad things in the air and fair enough the regulator has to assure that that's indeed happening and it's actually making us better as a result. It's something actually that we welcome as a company to be able to demonstrate that.
We are actually going to be and expect us to be considered an ESG company not really good if we don’t put -- if we put that stuff into the atmosphere. So all of that being said we aren't -- there isn't one reason why we were rejected it wasn't a matter of us being rejected it was. Can we have more please? And that's very important to understand.
Will Mayes
Thanks, Ryan. Next question regarding the R&D process and its success seemed very vague in the previous webinars. Although you have said the design can successfully process railway ties. I know the previous design had issues with clogging and was unable to process the feedstock. How are you so sure that the new design can do this at a large scale? What sort of waste material is generated from the process? And is the [Indiscernible] free and easily sold or disposed of?
Ryan Carruthers
More big-parter for sure. I mean, I think to clarify, so the detail of the R&D process and its success, well, the R&D process or unit has not been operational yet. So I think maybe what they're referring to is the previous processing plant, which we referred to as all the size Phase 1, really it was created to provide proof-of-concept. So the process, you know, failed to provide continuous operation past seven days, but it was due to ancillary equipment failure. Coking and plugging that occurred previously prevented run times beyond 36 hours. So the modifications we made in early 2022 actually resulted in significantly extended run times. But as mentioned, failure to run beyond seven days were not due to the plugging and coking, it was due to the auxiliary equipment failures.
We do not anticipate having the same issues with the R&D facility to unpackage the rest of that question as well. Waste material -- waste material will be handed by an appropriate AEP approved disposal facility. Those contracts are already in place and the disposal facility is aware of what they will be receiving as is the AEP aware of the waste product being generated.
Ryan Jackson
Is there anything else there.
Will Mayes
I think you hit all the points there, Ryan. Thank you. Next question in, now that you are planning to build a Dunmore facility. Do you have projected numbers of revenue and profit? What is the expected diesel output?
Jasdeep Dhaliwal
I’ve previously mentioned Will. We do have projected numbers. We do have projected revenue, gross margin. However, we cannot release them until we verified that these numbers are accurate. These numbers are based off of learning from the proof-of-concept, all verified Phase 1 stage, therefore running railroad ties through the R&D facility is essential to confirm and verify these values before we release it to the shareholders, and part of that will be the diesel output that we'll be disclosing as well.
Will Mayes
Very good. Thanks, Jas. Next question up is the Crestmont financing contingent on permit approval? Any risk to the financing falling through? If so, what alternatives have you to explore?
Ryan Carruthers
Multiparter again. So, no, the Crestmont financing is not contingent on permit approval. The Crestmont relationship that has been going on and has been with Cielo for quite a period of time prior to even the LOI, the binding LOI being signed and disclosed late last calendar year. There is an understanding that this is a very good exercise and due diligence process that Cielo has undertaken with Crestmont, akin to that of the EPA quite frankly with respect to how long it takes to really get into the weeds in a company that has a significant history and that is something that when you're asking someone not just for a certain amount of financing from a working capital standpoint, but this is a much bigger picture opportunity that we're identifying with our funding partners and Crestmont is one of them.
So to understand the larger, bigger picture financial strategy, I think is important and not get lost on a short-term working capital conversation, which we have a number of different alternatives for that's really not the point. The point is, well, it's great you guys are going to be able to pay your bills. How are you going to fund the first full scale facility and subsequent facilities to that, and it's important for us to be able to answer that question and there are people Crestmont being one of them that want to have an ability to answer that with us and for us. Does that make sense?
Will Mayes
Yes. Thank you, Ryan. Next question up is do you know what the concentration of benzopyrene would be in the tires -- ties, sorry. As I understand it, it only takes a small amount to be deemed hazardous and then since Alberta environmental, does not allow the import of hazardous waste into the province. I was wondering if you were able to get a permit exemption for the ties to be able to bring them in from other geographies.
Ryan Carruthers
Short answer, railroad ties are not considered hazardous waste, and there are no restrictions regarding their import. So no permit exemption will be necessary.
Will Mayes
That's great. We're actually running up on time. I think maybe if we just have some concluding remarks and maybe some milestones that investors could look forward to.
Ryan Jackson
Thanks, Will. And I want to again to this opportunity to thank everyone for joining us today. It's very important for everybody to understand that we're working at this very, very diligently. And now as I mentioned earlier that we have positioned the company in the way it is under the stewardship of Jasdeep and her team and with respect to Ryan and the readiness that we have with respect to the operational side, we are now really positioned to move forward with a very success focused basis and we want to make sure that we execute quite frankly on the plan. And we know and have demonstrated what that plan is.
I want to thank also of course the people behind the scenes that make this thing possible and to of course our board members and everything else I have mentioned before. But most importantly, yes, thank you to the shareholders and the investors, who joined us today and also those who continue to be passionate about Cielo. This is something that we all share and we all have a common goal here, which is to make something good or something bad and that's precisely what we intend to do.
So thank you to everyone joining today and will I actually defer to Jasdeep and Ryan for any final comments they might have as well. Ladies first.
Jasdeep Dhaliwal
Thank you, Ryan. Thank you to all the shareholders, investors who joined today. Thank you to our entire team to put to -- for putting together a revised MD&A. Transparency is very important to us, but clarity is just as important. So we'd love feedback from investors and shareholders on the new presentation, and we continue to look to your feedback on how we can communicate not just financial information, but our strategy better as well. And as always, Ryan, I and Ryan are available to take your phone calls and questions as you need. Ryan Carruthers?
Ryan Carruthers
Thanks, Jas. Yes. Really, we're just -- we're excited to fire up this R&D unit as soon as we possibly can. We're waiting with bated breath and we'll get this thing fired up, get the data, and move this company forward. We appreciate your patience, be confident that we're doing everything in our power to advance this forward.
Will Mayes
Well, thanks everybody and thanks for joining the webinar today. As Jas mentioned, we will actually be sending out a feedback form to those who registered for the webinar. So please make an effort to reply to that. Also today's webinar recording will be soon made available on Cielo's website. And if you have any additional questions that have not been addressed, feel free to send them to cielo@rbmilestone.com. Again, that's cielo@rbmilestone.com, we also know that we have not gotten to all the questions on the Zoom, and we will make every attempt to reply to those in a timely fashion.
Thanks again everybody. You're now free to disconnect.
Operator
Goodbye.
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Cielo Waste Solutions Corp. (CWSFF) Q4 2023 Earnings Call Transcript