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Northstar Clean Technologies Inc. Management Reports 2025
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NORTHSTAR CLEAN TECHNOLOGIES
MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 2024
The following management's discussion and analysis ("MD&A") was prepared as of April 22, 2025 and is management's assessment of the historical financial and operating results of Northstar Clean Technology Inc. ("Northstar" or the "Company") and should be read in conjunction with the audited annual consolidated financial statements of the Company for the year ended December 31, 2024 together with the notes related thereto (the "Consolidated Financial Statements").
The Consolidated Financial Statements were prepared on a going concern basis in accordance with International Financial Reporting Standards. Northstar's management is responsible for the integrity of the information contained in this MD&A and for the consistency between the MD&A and the Consolidated Financial Statements. In the preparation of the Consolidated Financial Statements, estimates are necessary to make a determination of future values of certain assets and liabilities. Management believes these estimates have been based on careful judgements and have been properly presented. The Consolidated Financial Statements have been prepared using policies and procedures established by management and fairly reflect Northstar's financial position, results of operations and funds flow from operations. Northstar's Board of Directors and Audit Committee reviewed and approved the Consolidated Financial Statements and MD&A for distribution on April 22, 2025. All dollar amounts referred to in this MD&A are expressed in Canadian dollars except where indicated otherwise.
Northstar Clean Technologies Inc.
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Northstar Clean Technologies Inc.
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TABLE OF CONTENTS
DESCRIPTION OF THE BUSINESS ... 3
OUTLOOK AND GROWTH STRATEGY ... 3
2024 HIGHLIGHTS ... 5
FOURTH QUARTER HIGHLIGHTS ... 6
ANNUAL RESULTS OF OPERATIONS ... 7
SELECTED ANNUAL INFORMATION ... 8
CAPITALIZATION AND FINANCIAL RESOURCES ... 8
CASH FLOW SUMMARY ... 10
OFF-BALANCE SHEET ARRANGEMENTS ... 11
SHARES OUTSTANDING ... 11
CONTRACTUAL OBLIGATIONS AND COMMITMENTS ... 13
CAPITAL MANAGEMENT ... 13
RELATED PARTY TRANSACTIONS ... 14
FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT ... 14
RISK FACTORS ... 15
SUMMARY OF QUARTERLY RESULTS ... 21
INTERNAL CONTROLS OVER FINANCIAL REPORTING ... 21
FORWARD LOOKING STATEMENTS ... 21
ADDITIONAL INFORMATION ... 22
Northstar Clean Technologies Inc.
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DESCRIPTION OF THE BUSINESS
Northstar is a Canadian-based clean technology company focused on the sustainable recovery and reprocessing of asphalt shingles. Northstar has developed a proprietary design process for taking discarded asphalt shingles, otherwise destined for already over-crowded landfills, and extracting the liquid asphalt for use in new hot mix asphalt, shingle manufacturing and asphalt flat roof systems, and aggregate and fibre for use in construction products and other industrial applications. Focused on the circular economy, Northstar plans to reprocess used or defective asphalt shingle waste back into its three primary components for reuse/resale at its first commercial scale up facility in Calgary, Alberta ("Empower Calgary"). As an emerging innovator in sustainable processing, Northstar's mission is to be the leader in the recovery and reprocessing of asphalt shingles in North America, extracting the recovered components from asphalt shingles that would otherwise be sent to landfill.
Northstar has developed a proprietary design process known as the Bitumen Extraction & Separation Technology ("BEST") technology, to break down the components of single-use asphalt shingles that would otherwise be sent to a landfill, into market quality products. The component parts of an asphalt shingle are approximately 50% aggregate, 25% fibre and 25% liquid asphalt (the "Products"). Once reprocessed, the Products can be used in a variety of applications, including road asphalt, new asphalt shingle manufacturing, construction products, and other industrial applications. The Company hopes to be able to sell these components to paving companies, cement companies, roofing companies, shingle manufacturers and other industrial and construction product manufacturers, who may benefit from a supply of low carbon, reprocessed products. The Company's proprietary process was developed over the last decade with technical and scientific assistance from the United Kingdom and Alberta. The Company plans to reprocess used and defective asphalt shingles into their component parts for reuse/resale and thereby seeks to eliminate their disposal in landfills.
The Company listed its common shares on the TSX Venture Exchange (the "TSXV") and began publicly trading on the TSX-V under the symbol 'ROOF' on July 13, 2021. On January 11, 2022, the Company's common shares commenced trading on the OTCQB Venture Market (the "OTCQB") under the ticker symbol 'ROOOF'.
The head office and principal address of the Company is located at 101, 12111 40 Street SE, Calgary, Alberta, T2Z 4E6. The Company's registered and records office is located at 7046 Brown Street, Delta, British Columbia, Canada, V4G 1G8.
OUTLOOK AND GROWTH STRATEGY
As an emerging innovator in sustainable processing, Northstar's mission is to be the leader in the recovery and reprocessing of asphalt shingles in North America, extracting the recovered components from asphalt shingles that would otherwise be sent to landfill. The Company successfully completed its initial pilot in Delta, BC ("Empower Delta") in preparation for its first commercial scale up facility. Construction of Empower Calgary began on September 20, 2023 and was substantially completed in the first quarter of 2025. The facility is currently in the commissioning stage and is expected to begin operations in the second half of 2025.
Empower Delta – Delta, BC
Empower Delta is located at 7046 Brown Street in Delta, British Columbia. Empower Delta is located on a 4.23 acre property with a 20,000 square foot building. The site of Empower Delta has a large yard for storage and collection of asphalt shingles, and is conveniently located for roofing industry professionals and waste haulers throughout the Metro Vancouver area.
In 2022, the production from Empower Delta delivered significant results in several key areas:
- The production proved the Company's proprietary BEST technology with shingle feedstock processed into aggregate, fibre and asphalt.
- The process enabled the supply of Products to potential customers for detailed testing, and further research and development ("R&D"). This testing helped secure the long-term offtake agreement for Empower Calgary and allowed subsequent successful testing with a number of shingle and flat roof manufacturers. Importantly, the testing results supported the Company's view that the asphalt produced by the BEST technology may be suitable for all three target market sectors of road paving, asphalt shingle manufacturing and flat roof manufacturing.
- The production generated valuable feedback for the design of Empower Calgary from customers, vendors and from the production process itself. The feedback was incorporated into the detailed design process led by the Company's
engineering contractor, BBA Engineering Ltd. ("BBA"). In the Company's view, the feedback, derived from operations at Empower Delta, helped to de-risk the Empower Calgary design.
Pilot operations successfully derisked the technology and served as the engineering foundation for Empower Calgary, the Company's first commercial scale up facility. Given the success of detailed testing and R&D activities described above, throughout 2024 the Company focused resources, including manpower and capital, on scale up activities at the Calgary, Alberta location. Short term, the Company plans to operate Empower Delta as a testing facility that is focused on R&D and product testing.
Longer term, the Company plans to retrofit and develop a commercial facility at the same location as Empower Delta. Subsequent to the end of 2024, the Company secured a 15-year lease extension for the pilot facility and surrounding lands. The site currently holds all necessary regulatory approvals and permits for light industrial operations, offering a future expansion opportunity with reduced timelines and costs associated with permitting and site development. The lease extension supports the Company's long-term growth strategy to establish a portfolio of asphalt shingle reprocessing facilities across North America.
Empower Calgary – Calgary, AB
Empower Calgary will be the Company's first commercial scale up facility located in Rocky View County, a municipal district adjacent to the City of Calgary, Alberta. Construction of Empower Calgary is now complete and commissioning is underway at the date of this MD&A. This is the Company's first modular scale up facility and is expected to be designed and engineered with an estimated capacity of 150–200 tonnes per day. Empower Calgary's build and design are part of the Company's planned national roll out and expansion strategy to operate asphalt shingle reprocessing facilities across Canada and the United States. Northstar's wholly owned subsidiary Empower Environmental Solutions Calgary Ltd. holds a long-term lease agreement comprising industrial-zoned property of 3.98 acres in Rocky View County, Alberta inclusive of a customized building which houses the Company's proprietary processes. The 15-year lease is held until February 2040, with two extension options of five years each.
In 2022 Northstar secured a binding take-or-pay agreement with McAsphalt Industries for 100% of the asphalt produced at Empower Calgary for a 5-year period (and automatic 3-year renewal option).
During 2024 Northstar secured two separate asphalt shingle supply agreements securing feedstock for the Calgary facility with IKO Industries Ltd. for a 5-year period and Ecco Recycling & Energy Corporation for a 3-year period (and automatic 3-year renewal option)
As at the date of this MD&A, the Company has substantially completed construction of Empower Calgary and is progressing through commissioning of the facility.
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2024 HIGHLIGHTS
| Financial Results | 2024 | 2023 |
|---|---|---|
| Loss and comprehensive loss | $ 9,332,820 | $ 6,671,927 |
| Per share – basic and diluted | 0.07 | 0.06 |
| Net cash flow used in operating activities | 5,130,299 | 4,501,739 |
| Per share – basic and diluted | 0.04 | 0.04 |
| Capital expenditures | 19,261,874 | 2,305,217 |
| As at December 31 | ||
| Liquidity & Capitalization | 2024 | 2023 |
| Working capital surplus | $ 4,839,707 | $ 5,170,113 |
| 7.95% senior secured non-revolving loan (1) | 8,132,302 | - |
| Convertible debentures - principal amount (2) | 10,000,000 | 4,325,000 |
| Royalty Debenture (3) | 14,420,000 | - |
| Common shares outstanding | ||
| Weighted average - basic and diluted | 127,827,131 | 121,031,613 |
| Outstanding, end of period | 130,875,408 | 126,710,381 |
(1) As at December 31, 2024, the Company had drawn $8,132,302 from the BDC Financing, with $617,698 remaining undrawn. See Note 8 in the Company's Consolidated Financial Statements as at December 31, 2024.
(2) Since December 2022, the Company has entered into various financing arrangements through issuance of convertible debentures in tranches, raising a total of $10,405,000 at interest rates varying between 10% and 12.5%. As of December 31, 2024, convertible debentures principal amounts totalling$ 10,000,000 remain outstanding, after convertible debentures conversions totalling $405,000 during the year. See Note 9 in the Company's Consolidated Financial Statements as at December 31, 2024.
(3) On September 13, 2024, the Company completed an agreement with CVW CleanTech Inc. ("CVW") pursuant to which CVW provided the Company with $14,000,000 in funding through a five-year 10% second secured convertible debenture (the "Royalty Debenture") convertible into revenue royalties on two future facilities. Balance includes increase in fair value since inception. See Note 10 in the Company's Consolidated Financial Statements as at December 31, 2024.
- Construction of the Company's first commercial scale up asphalt shingle reprocessing facility in Calgary, Alberta, continued with capital expenditures totalling $19.3 million incurred during 2024. As of the date of this MD&A, Northstar had achieved substantial construction completion and was progressing through commissioning activities at the facility.
- Received Emissions Reduction Alberta ("ERA") approval for the Company's submission related to the first milestone following, among other criteria completed, the completion of $75\%$ of the detailed engineering and design for Empower Calgary. As a result of ERA's approval, the payment for the first milestone in the amount of $1.3 million was received during the second quarter of 2024.
- Completed drawings totalling $8.1 million under its $8.75 million non-revolving senior secured debt facility (the "BDC Facility") with the Business Development Bank of Canada related to Empower Calgary. The Company has satisfied all conditions precedent to draw on the BDC Facility. The Company expects to draw down the remaining $618,000 of the BDC Facility as Empower Calgary progresses through to commissioning in 2025.
- In September 2024, the Company closed a royalty transaction with CVW pursuant to which CVW provided Northstar with $14.0 million in funding through the Royalty Debenture convertible into revenue royalties on two Northstar facilities. Upon the achievement of certain production milestones, the Royalty Debenture will convert the full principal of the Royalty Debenture into two, equal royalty interests in the next two of Northstar's planned asphalt shingle reprocessing facilities after Empower Calgary. The royalty interests and their respective royalty rates would be subject to adjustment for capitalized or accrued and unpaid interest, if any.
- Closed a series of private placements of unsecured convertible debenture units totalling $6.1 million, bringing the total raised since December 2022 to $10.4 million. As at the end of 2024, $10 million in principal amount remain outstanding with $405,000 converted into common shares at the election of debenture holders.
Northstar Clean Technologies Inc.
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Generated initial revenue of $641,000 in tipping fees through the startup of shingle collection in preparation for facility commissioning and operation which contributed to funding construction of the facility.
-
Received its initial Canadian patent in July 2024 which followed two patents issued in the United States by the U.S Patent and Trademark Office (the "USPTO") in November 2022 and May 2024. In March 2025, a follow-on patent was issued by the Canadian Intellectual Patent Office (the "CIPO") resulting in the Company's second Canadian patent related to the asphalt recovery stage. This additional Canadian patent further protects the core technology of the Company. Additional patents are progressing in the U.S. and other international jurisdictions.
-
On December 2, 2024 Northstar announced a non-binding letter of intent with Great Lakes Port Management Inc., a subsidiary of the Hamilton-Oshawa Port Authority, for a long-term lease for an industrial zoned property located in Hamilton, Ontario as the site for the Company's planned facility in southwestern Ontario ("Empower Hamilton").
-
Subsequent to the end of the year, Northstar announced two strategic agreements supporting the Company's long-term growth strategy to establish a portfolio of asphalt shingle reprocessing facilities across North America:
-
On February 18, 2025 the Company signed a letter of intent with YORK1 Environmental Waste Solutions Ltd. as general partner for and on behalf of York1 Environmental Waste Solutions, LP, related to the formation of a strategic alliance for the supply of waste roofing shingles and for co-location of complimentary facilities at Empower Hamilton.
-
On March 31, 2025, the Company announced the execution of a 15-year lease extension for its Empower Delta facility giving Northstar the option to retrofit Empower Delta, formerly home to its pilot facility, into a commercial-scale operation.
FOURTH QUARTER HIGHLIGHTS
| Three months ended | ||
|---|---|---|
| 2024 | 2023 | |
| Loss and comprehensive loss | $ 3,168,285 | $ 1,887,798 |
| Per share – basic and diluted | 0.02 | 0.01 |
| Net cash flow used in operating activities | 1,694,980 | 1,191,525 |
| Per share – basic and diluted | 0.01 | 0.01 |
| Acquisition of property, plant and equipment | $ 9,454,340 | $ 2,093,200 |
The Company is currently constructing its first commercial scale up facility, Empower Calgary with commissioning expected to be completed mid-2025 and scale-up operations expected to commence during the second half of 2025. Until commencement of operations, revenues generated by the Company are comprised solely of tipping fees on shingle collections. The loss and comprehensive loss during the fourth quarter was $3.2 million compared to $1.9 million in the comparable 2023 period. The following discussion addresses the significant drivers of the loss and comprehensive loss for the three months ended December 31, 2024 compared with the three months ended December 31, 2023.
Revenue
During the fourth quarter of 2024, the Company reported tipping revenue of $165,000 compared to $65,000 in the comparative 2023 period. Shingle collection during the fourth quarter of 2024 was generated at Empower Calgary throughout the period in preparation for commissioning and commencing operations. Tipping fees in the comparative 2023 period were generated on shingle collection at Empower Delta, where pilot activities were slowing down as the Company transitioned efforts to scale up activities at Empower Calgary.
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Loss from operating activities
The loss from operating activities increased by $562,000 during the fourth quarter of 2024 compared to the comparative 2023 period as the Company continued to focus resources, including manpower, capital and general and administrative ("G&A") costs towards operational readiness at Empower Calgary.
Other items
Other items increased by $510,000 during the fourth quarter of 2024 compared to the same period in 2023, which are mainly associated with a $427,000 increase in interest and finance charges incurred on new convertible debentures and a $350,000 fair value re-measurement of the Company's Royalty Debenture issued in September 2024.
ANNUAL RESULTS OF OPERATIONS
| Year ended December 31 | ||
|---|---|---|
| 2024 | 2023 | |
| Revenue - tipping fees | $ 640,569 | $ 206,440 |
| Loss from operating activities | 6,668,301 | 6,416,242 |
| Other items | 3,154,624 | 517,461 |
| Loss and comprehensive loss | 9,332,820 | 6,671,927 |
| Basic and diluted loss per share | $ 0.07 | $ 0.06 |
The Company is currently constructing its first commercial scale up facility, Empower Calgary with full scale operations anticipated in 2025. Until commencement of operations, revenues generated by the Company are comprised solely of tipping fees on shingle collections. The loss and comprehensive loss during 2024 was $9.3 million compared to $6.7 million during 2023. The following discussion addresses the significant drivers of the loss and comprehensive loss for the year ended December 31, 2024 compared with the year ended December 31, 2023.
Revenue
During 2024, the Company reported tipping revenue of $641,000 compared to $206,000 during the same period of 2023. The increase in tipping fees is due to the start-up of shingle collection at Empower Calgary, partially offset by reduced shingle collection at Empower Delta as the Company transitioned efforts to scale up activities at Empower Calgary during the middle of 2024, and shingle collection at Empower Delta was paused.
Loss from operating activities
| Year ended December 31 | ||
|---|---|---|
| 2024 | 2023 | |
| Revenue - tipping fees | $ 640,569 | $ 206,440 |
| Cost of shingle collection | (572,547) | - |
| 68,022 | 206,440 | |
| Expenses | ||
| General and administrative | 3,980,502 | 3,684,377 |
| Depreciation and amortization | 1,291,848 | 1,120,283 |
| Share based compensation | 637,263 | 545,787 |
| Rent, utilities and site costs | 631,565 | 381,958 |
| Insurance | 195,145 | 112,083 |
| Research | - | 778,194 |
| Loss from operating activities | $ 6,736,323 | $ 6,622,682 |
The loss from operating activities remained consistent with 2023 as the Company shifted to dedicate resources including manpower, capital and G&A costs towards operational readiness at Empower Calgary. Research activities at Empower Delta decreased as the pilot was ramped down. Correspondingly rent, utilities and site costs and insurance at Empower Calgary
Northstar Clean Technologies Inc.
increased. The increase in G&A expenses is the result of increased staff levels, consulting and professional fees associated with operational readiness at the Calgary facility.
Other items
Other items increased by $2.6 million from $517,000 in 2023 to $3.1 million in 2024 due to new financing charges associated with funding generated throughout 2024. Interest and financing charges increased by $1.4 million compared to the same period in 2023 due to interest expense incurred on new convertible debentures and draws on the BDC Facility which commenced during the third quarter of 2024. In addition, the Royalty Debenture issued in September 2024 included transaction costs of approximately $986,000 which were expensed, and a $420,000 fair value loss on re-measurement of the instrument was recognized during the year.
SELECTED ANNUAL INFORMATION
| December 31, 2024 | December 31, 2023 | December 31, 2022 | |
|---|---|---|---|
| Revenue - tipping fees | $ 640,569 | $ 206,440 | $ - |
| Cost of shingle collection | (572,547) | - | - |
| Loss and comprehensive loss | 9,332,820 | 6,671,927 | 8,200,936 |
| per share – basic and diluted | 0.07 | 0.06 | 0.08 |
| Total assets | 45,728,755 | 17,875,045 | 6,829,057 |
| Total liabilities | $ 47,062,333 | $ 12,437,648 | $ 4,044,550 |
The Company is currently constructing its first commercial scale up facility, Empower Calgary with full scale operations anticipated in 2025. During 2024 revenue was comprised solely of shingle collection at Empower Calgary in preparation for facility commissioning activities and Empower Delta, which generated tipping fee revenue.
The loss and comprehensive loss during 2024 was $9.3 million compared to $6.7 million during 2023 and $8.2 million in 2022. Losses were incurred in all three years driven by financing costs associated with capitalization of the project and operational expenses including staffing, researching, piloting, testing and finally start up commercial operations at Empower Calgary, which is anticipated to begin operations in the second half of 2025.
CAPITALIZATION AND FINANCIAL RESOURCES
Capital Expenditures
| Year ended December 31 | ||
|---|---|---|
| 2024 | 2023 | |
| Empower Delta | $ - | $ 66,184 |
| Empower Calgary | 19,085,037 | 2,235,897 |
| Corporate | 67,321 | 3,136 |
| 19,152,358 | 2,305,217 | |
| Capitalized interest | 109,516 | - |
| Capital expenditures | $ 19,261,874 | $ 2,305,217 |
Capital expenditures increased by $17 million, from $2.3 million during 2023, to $19.3 million in 2024 primarily related to Empower Calgary which is currently under construction and will be the Company's first modular scale up facility, designed and engineered with an estimated 150-200 tonnes per day of asphalt processing capacity.
Subsequent to the end of 2024, construction of the inaugural asphalt shingle reprocessing facility at Empower Calgary was substantially complete, and electrification had been achieved. Final capital costs, inclusive of construction, commissioning and indirect owners' costs will be tabulated at the completion of commissioning as the plant is turned over to operations. Management anticipates that future facilities will benefit from design and construction efficiencies, leading to lower overall
Northstar Clean Technologies Inc.
capital costs compared to Empower Calgary which incurred one-time expenses for facility engineering, module design, first of a kind construction and commissioning and operational improvements.
The Company's development of asphalt processing activities has been funded to date primarily through the issuance of common shares, convertible debenture financings, royalty debenture financings, government loans and government grants. Other than as discussed herein, the Company is not aware of any trends, demands, commitments, events or uncertainties that may result in its liquidity either materially increasing or decreasing at present or in the foreseeable future. Material increases or decreases in the Company's liquidity will be substantially determined by the success or failure of its commercialization of a proprietary process technology for the reprocessing of asphalt shingles and the extraction and recovery of asphalt, fibre and aggregate to be sold and used in asphalt pavement, shingle manufacturing, construction products, and other industrial applications, as well as its continued ability to raise capital.
Loans payable
| Year ended December 31 | ||
|---|---|---|
| 2024 | 2023 | |
| Secured: | ||
| 7.95% senior secured non-revolving loan | $ 8,132,302 | $ - |
| Equipment loan | - | 58,472 |
| 8,132,302 | 58,472 | |
| Less debt issue costs | (275,456) | - |
| Accrued interest | 82,012 | 175 |
| Interest payments | (82,012) | (175) |
| Repayment | - | (60,000) |
| Plus interest accretion | 27,503 | 1,528 |
| Current and long term loans payable | $ 7,884,349 | $ - |
During the year ended December 31, 2023, the Company entered into a binding definitive credit agreement with BDC for project financing (the "BDC Financing") at Empower Calgary of up to $8.75 million in non-revolving senior secured debt, with proceeds to be used for the development and construction of the Company's inaugural asphalt shingle reprocessing facility. Drawing on the debt is subject to a number of conditions precedent and is secured with a first security interest over the assets of Empower Environmental Solutions Calgary Ltd. and guarantees from Northstar and Empower Environmental Solutions Ltd., supported by a first security interest from both guarantors.
The BDC Financing contains a number of financial, insurance and reporting conditions. Once the BDC Financing is fully drawn and commencing with the fiscal years ending after December 31, 2025, the Company must maintain a fixed charge coverage ratio of 1.1:1. Additionally, during the course of the BDC Financing, the Company must maintain suitable environmental and commercial general liability insurance policies, provide financial statements on a timely basis, maintain good standing with various government agencies and remain in compliance with environmental laws and regulations, among various other reporting obligations.
The Company acquired $270,000 of equipment from a company controlled by a former officer of the Company. The term of the loan was 30 months, beginning January 1, 2022 and ending June 30, 2024.
Northstar Clean Technologies Inc.
Convertible debentures
| Year ended December 31 | |||
|---|---|---|---|
| Date of issue | Maturity | 2024 | 2023 |
| December 2022 | December 2025 | $ 1,270,000 | $ 1,440,000 |
| February 2023 | February 2026 | 625,000 | 625,000 |
| December 2023 | December 2026 | 2,200,000 | 2,260,000 |
| February 2024 | February 2027 | 1,200,000 | - |
| May 2024 | May 2027 | 2,455,000 | - |
| June 2024 | June 2027 | 2,250,000 | - |
| Balance, end of year | $ 10,000,000 | $ 4,325,000 |
Since December 2022, the Company has completed various financing arrangements through the issuance of convertible debentures in tranches, raising a total of $10.4 million. As of December 31, 2024, convertible debentures principal amounts totalling $10 million remain outstanding, after convertible debentures conversions totalling $405,000 during 2024.
During the year ended December 31, 2024, the Company issued $6.1 million (during the year ended December 31, 2023 - $2.9 million) in aggregate principal amount of convertible debentures.
Royalty Debenture
| Year ended December 31 | ||
|---|---|---|
| 2024 | 2023 | |
| Balance, beginning of year | $ - | $ - |
| Fair value at issuance | 14,000,000 | - |
| Increase in fair value | 420,000 | - |
| Balance, end of year | $ 14,420,000 | $ - |
On September 13, 2024, the Company closed a royalty transaction, pursuant to which CVW provided the Company with a total of $14 million in funding through the Royalty Debenture, convertible into revenue royalties on two future facilities. Upon the achievement of certain volume and financial milestones, the balance outstanding will convert into two equal royalty interests in the next two of Northstar's planned asphalt shingle reprocessing facilities after Empower Calgary. Proceeds received from the Royalty Debenture will be used for working capital requirements and general corporate purposes, expected to include business development to support future site selection and facility build-out.
CASH FLOW SUMMARY
| Year ended December 31 | ||
|---|---|---|
| 2024 | 2023 | |
| Net cash provided by (used in): | ||
| Operating activities | $ (5,130,299) | $ (4,501,739) |
| Investing activities | (18,925,752) | (1,594,574) |
| Financing activities | 26,421,742 | 12,541,155 |
| Change in cash and cash equivalents | $ 2,365,691 | $ 6,444,842 |
Net cash used in operating activities for the year increased by $629,000 in 2024 compared to 2023, driven largely by the net loss for the year and offset by the increase in non-cash interest charges on loans and convertible debentures.
Net cash used in investing activities for the year increased by $17.3 million in 2024 compared to 2023 primarily related to the $19.3 million acquisition of property plant and equipment during 2024 compared to $2.3 million during the comparable 2023 period.
Northstar Clean Technologies Inc.
Net cash provided by financing activities increased by $13.9 million in 2024 compared to 2023, including net proceeds of $13 million on issuance of the Royalty Debenture less issuance costs, $8.1 million in loan proceeds and a $3.2 million increase in net proceeds on issuance of convertible debentures, partially offset by $730,000 increase in interest paid on convertible debentures. During 2023, the Company received $8.4 million associated with the issuance of preferred shares and $2.6 million from the issuance of common shares.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has not entered into any off-balance sheet transactions.
SHARES OUTSTANDING
At December 31, 2024, the Company had the following share capital instruments outstanding or exercisable:
| Common Shares: | |
|---|---|
| Outstanding at December 31, 2023 | 126,710,381 |
| Vesting and release of equity-settled Restricted Stock Units (“RSUs”) and Performance Share Units (“PSUs”) | 1,656,527 |
| Exercise of warrants | 653,500 |
| Conversion of convertible debentures | 1,855,000 |
| Common shares outstanding as at December 31, 2024 | 130,875,408 |
| Convertible securities: | |
| Equity-settled RSUs and PSUs | 2,321,700 |
| Stock options outstanding | 9,844,043 |
| Warrants | 52,968,725 |
| Convertible securities as at December 31, 2024 | 65,559,468 |
| Preferred Shares | |
| Outstanding as at December 31, 2024 | 29,244,756 |
Subsequent to the end of the year, the Company had the following share capital instruments outstanding and exercisable at April 22, 2025:
| Units | |
|---|---|
| Common shares: | |
| Outstanding as at December 31, 2024 | 130,875,408 |
| Vesting and release of equity-settled RSUs and PSUs | - |
| Exercise of warrants | 1,290,808 |
| Conversion of convertible debentures | 2,815,000 |
| Outstanding as at April 22, 2025 | 134,981,216 |
| Convertible securities granted and outstanding: | |
| Equity-settled RSUs and PSUs | 1,005,352 |
| Stock options outstanding | 9,844,043 |
| Warrants | 52,247,916 |
| Convertible securities as at April 22, 2025 | 63,097,311 |
| Preferred Shares | |
| Outstanding as at April 22, 2025 | 29,244,756 |
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The following chart illustrates the potential fully diluted capitalization of the Company assuming all dilutive securities, including those already issued and those not yet issued, are converted into common shares as at April 22, 2025:
Fully Diluted Capitalization (effective)
(#'s in millions)
(1) Outstanding as at April 22, 2025.
(2) Includes granted and outstanding stock options, equity settled RSUs and equity settled PSUs.
(3) Includes outstanding warrants associated with Type 2 convertible debentures and outstanding warrants issued upon exercise of Type 1 convertible debentures. For additional information related to features of the Company's convertible debentures refer to Note 10 in the Consolidated Financial Statements as at December 31, 2024.
(4) Includes outstanding warrants associated with historical financings and broker warrants.
(5) Shares to potentially be issued should holders of outstanding Type 1 and Type 2 convertible debentures convert to equity rather than request repayment.
(6) Includes warrants to be issued upon conversion of remaining Type 1 convertible debentures.
(7) Should all warrants and stock options currently issued and potentially issued upon conversion of convertible debentures be exercised, the Company would receive approximately $20 million in gross proceeds.
Northstar Clean Technologies Inc.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The information presented in the table below reflects management's estimate of the contractual maturities of obligations at December 31, 2024. These estimates may differ significantly from the actual maturities of these obligations.
| Commitments | 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total |
|---|---|---|---|---|---|---|---|
| Variable Lease Commitments: | |||||||
| Northstar (i) | $ 26,158 | $ 28,536 | $ 28,536 | $ 28,536 | $ 28,536 | $ 2,378 | $ 142,680 |
| Empower Calgary (ii) | 118,500 | 118,500 | 118,500 | 118,500 | 118,500 | 1,283,749 | 1,876,249 |
| Empower Delta (iii) | 215,654 | 215,654 | 215,654 | 215,654 | 215,654 | 2,372,193 | 3,450,463 |
| 360,312 | 362,690 | 362,690 | 362,690 | 362,690 | 3,658,620 | 5,469,392 | |
| Other obligations | |||||||
| Lease Liabilities | |||||||
| Northstar (i) | 51,671 | 56,368 | 57,983 | 59,744 | 59,891 | 4,991 | 290,648 |
| Empower Calgary (ii) | 757,559 | 849,323 | 860,980 | 872,869 | 884,997 | 10,280,414 | 14,506,142 |
| Empower Delta (iii) | 609,838 | 875,653 | 897,544 | 919,983 | 942,982 | 12,065,978 | 16,311,978 |
| 1,419,068 | 1,781,344 | 1,816,507 | 1,852,596 | 1,887,870 | 22,351,383 | 31,108,768 | |
| Loan Payable (iv) | 394,080 | 672,960 | 672,960 | 672,960 | 672,960 | 5,046,382 | 8,132,302 |
| Interest on Loan Payable (iv) | 638,598 | 590,552 | 537,051 | 483,610 | 430,051 | 1,520,143 | 4,200,005 |
| Convertible Debenture (v) | 1,270,000 | 2,825,000 | 5,905,000 | - | - | - | 10,000,000 |
| Royalty Debenture (v) | - | - | - | - | 14,000,000 | - | 14,000,000 |
| Total other obligations | $ 3,721,746 | $ 5,869,856 | $ 8,931,518 | $ 3,009,166 | $ 16,990,881 | $ 28,917,908 | $ 67,441,075 |
| Total commitments and obligations | $ 4,082,058 | $ 6,232,546 | $ 9,294,208 | $ 3,371,856 | $ 17,353,571 | $ 32,576,228 | $ 72,910,467 |
(i) Leased office space with an initial term of 5 years commencing February 1, 2025, and includes one additional 5-year term. Early occupancy was obtained December 1, 2024. Other obligations include undiscounted future obligations associated with this liability.
(ii) Leased land and building for the planned scale up facility in Rocky View County near Calgary, Alberta. The first two months of 2025 are based on the initial lease agreement. Commitments also include the renegotiated lease which starts March 1, 2025, for an initial term of 15 years with two additional 5-year optional terms. Other obligations include undiscounted future obligations associated with this liability.
(iii) Leased land and building for the pilot facility in Delta, BC with an initial term commencing January 1, 2025, and ending December 31, 2040. The lease, commencing on March 1, 2025, has been treated as an adjusting subsequent event and as such is included in commitments as at December 31, 2024. Other obligations include undiscounted future obligations associated with this liability.
(iv) This represents scheduled principal repayments and associated interest payments based on BDC Facility contract terms.
(v) Principal payments only, excludes interest.
Capital Commitments
As at December 31, 2024, the Company had contractual commitments to acquire property, plant and equipment within less than one year for $nil (December 31, 2023 – $3.7 million related to the development and construction of Empower Calgary).
CAPITAL MANAGEMENT
The Company's capital comprises its shareholders equity under management. The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to pursue the development of its processing technology and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable risk.
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt or convertible debt, enter into strategic partnerships, enter into royalty financing arrangements and/or acquire or dispose of assets.
In order to facilitate the management of its capital requirements, the Company prepares expenditure budgets that are updated as necessary depending on various factors, including successful capital deployment and general industry conditions. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company's management to sustain future development of the business.
In order to maximize ongoing development efforts, the Company does not pay dividends. The Company's investment policy is to invest its short-term excess cash in highly liquid short-term interest-bearing investments with maturities of 365 days or less from the original date of acquisition, selected with regards to the expected timing of expenditures from continuing operations.
Northstar Clean Technologies Inc.
The Company assesses its financing requirements and its ability to access equity or debt markets on an ongoing basis. The assessment considers: the stage and success of the Company's evaluation and execution activities to date, the continued participation of the Company's partners in evaluation activities and financial market conditions. It is possible that future economic events and global conditions may result in further volatility in the financial markets which could negatively impact the Company's ability to access equity or debt markets in the future.
There have been no changes to the Company's approach to capital management during the period ended December 31, 2024. The Company is not subject to externally imposed capital requirements.
RELATED PARTY TRANSACTIONS
(a) As at December 31, 2024, accounts payable and accrued liabilities include $351,000 (December 31, 2023 - $673,000) owing to key management personnel. The amounts are unsecured, non-interest bearing and due on demand.
(b) Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. During the years presented the Company paid or accrued the following key management personnel compensation to directors, officers, and/or companies controlled by directors and officers and/or companies with certain directors in common:
| Year ended December 31 | ||
|---|---|---|
| 2024 | 2023 | |
| Advertising, marketing and promotion | $ - | $ 81,750 |
| Consulting fees | - | 24,000 |
| Share-based compensation | 466,117 | 391,569 |
| Wages and benefits | 2,101,246 | 1,391,915 |
| $ 2,567,363 | $ 1,889,234 |
(c) During the year ended December 31, 2022, the Company acquired equipment in the amount of $270,000 plus GST and PST from a company controlled by a former officer of the Company. As at December 31, 2024 the balance was $nil.
(d) During the year ended December 31, 2024, the amount of $50,000 (December 31, 2023 - $325,000) was received in convertible debenture proceeds by officers or directors of the Company.
(e) During the year ended December 31, 2024, the Company issued 1,088,591 (December 31, 2023 - 401,757) common shares to key management personnel for equity-settled RSUs and PSUs for 249,499 and 839,092 common shares, respectively (December 31, 2023 – for 92,712 and 309,045 common shares, respectively).
FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Financial Risk Management Objectives
The Company examines the various financial instrument risks to which it is exposed and assesses the impact and likelihood of those risks. These risks may include credit risk, liquidity risk, currency risk and interest rate risk. Where material, these risks are reviewed and monitored.
Liquidity and Capital Management
The Company manages its capital to ensure that it will be able to continue as going concern while maximizing the return to shareholders through the optimization of debt and equity balances.
The capital of the Company consists of items included in Shareholders' (Deficiency) Equity.
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The Company manages its capital structure and makes adjustments in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may issue equity or return capital to shareholders. There were no changes to the Company's approach to capital management during the period ended December 31, 2024. The Company is not subject to externally imposed capital requirements.
Credit Risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The carrying amounts of financial assets best represent the maximum credit risk exposure at the reporting date.
Cash is held with reputable banks in Canada. The long-term credit rating of these banks, as determined by Standard and Poor's, was A+.
The Company's receivables consist of mainly amounts receivable from customers for tipping fees. Following credit evaluations, it was concluded that the counterparties possess strong creditworthiness, demonstrating their ability to meet financial obligations consistently.
Liquidity Risk
Liquidity risk is the risk that the Company will not meet its financial obligations as they become due.
Accounts payable and accrued liabilities are paid in the normal course of business generally according to their terms. In the normal course of business, the Company enters into contracts that give rise to commitments for future minimum payments. As at December 31, 2024 the Company had $10.2 million cash to settle current liabilities of $6.2 million.
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market interest rates. The Company is not subject to interest rate risk.
Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company's exposure to the risk of changes in foreign exchange rates relates primarily to the Company's cash balances held in United States dollars and U.S. dollar denominated payables.
As at December 31, 2024, the Company has certain monetary items denominated in United States dollars. Based on these net exposures, a 10% change of the Canadian dollar against the United States dollar would result in an impact on net loss of approximately $17,000 (December 31, 2023 – $612,000). The Company does not hedge its risk from changes in foreign currency exchange rates.
RISK FACTORS
Risks Related to the Company, its Business and Industry
Environmental Regulations
All of the Company's operations will be subject to environmental regulations, which can make operations expensive or prohibitive. The continued evolution of environmental regulations may lead to the imposition of stricter standards, more diligent enforcement, and heavier fines and penalties for noncompliance. The cost of compliance with changes in governmental regulations could reduce the profitability of operations at its current asphalt shingle extraction facility, Empower Delta, or cause delays in the development of future facilities, including its proposed Empower Calgary facility.
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The Company is subject to substantial governmental regulation that will change over time
The Company is subject to potential liability and restrictions under environmental and other laws, including those relating to transportation, treatment, storage and disposal of wastes and hazardous wastes, discharges of pollutants to air and water, and the remediation of contaminated soil, greenhouse gas emissions and the remediation of contaminated surface water and groundwater. These laws and regulations are subject to ongoing changes, not all of which are predictable. The operation of the Company's business has been and will continue to be subject to regulation, including permitting and related financial assurance requirements, as well as attempts to further regulate the Company's operations. Permits may take years to obtain or renew as a result of numerous hearings and compliance requirements with regard to zoning, environmental and other laws and regulations. These permits may be subject to resistance from citizen or other groups and other political pressures. Local communities and citizen groups, adjacent landowners or governmental agencies may oppose the issuance or expansion of a permit or approval the Company may need, allege violations of the permits under which we currently operate or laws or regulations to which Northstar is subject, or seek to impose liability on the Company for environmental damage. In addition, failure to receive or maintain regulatory, zoning or other approval, permits or authorizations, may prohibit the Company from establishing, or cause or contribute to delays for it in new or expanding capacity at our existing facilities.
Inability of the Company's technology to meet performance expectations
The performance of the Company's processes may encounter problems due to the failure of its technology, the failure of the technology of others used in its processes, the failure to combine these technologies properly, operator error, or the failure to maintain and service the systems properly. Many of these potential problems and delays are beyond the Company's control. In addition, poor performance may involve delays in project installations and modifications to the processes, as well as third party involvement. Any problem or perceived problem with the processes, whether originating from its technology, design, or from third parties, could hurt Northstar's reputation and the reputation of its products and limit our sales. In addition, the Company may suffer contractual implications with customers if the failure of a system to perform results in a lack of product or a lower specification product than promised under an agreement with a customer.
The Company currently relies on a single existing facility: Empower Calgary
The Company's production activities are focused on its Empower Calgary facility in Calgary, Alberta. Adverse changes or developments affecting Empower Calgary could have a material and adverse effect on the Company's ability to develop its processes, its business, financial condition, and prospects. Single facility risk extends to:
- Reliance on a single customer for a significant portion of our liquid asphalt revenue from Empower Calgary;
- Lack of formal sale agreements for fibre and aggregate at Empower Calgary; and
- Lack of sufficient supply agreements for Empower Calgary.
Operating risk and insurance coverage
Over the course of its operations, the Company may be affected by or subject to a number of operational risks and the Company may not be adequately insured for certain risks, including: labour disputes; catastrophic accidents; fires; changes in the regulatory environment; impact of non-compliance with laws and regulations; natural phenomena, such as inclement weather conditions, floods, earthquakes and ground movements. There is no assurance that the foregoing risks and hazards, if made real, will not result in damage to, or destruction of, the Company's technologies, personal injury or death, environmental damage, adverse impacts on the Company's operation, costs, monetary losses, potential legal liability and adverse governmental action, any of which could have an adverse impact on the Company's future cash flows, earnings and financial condition. In this regard, the Company currently has full insurance coverage including liability insurance and insurance to protect its assets. While the Company believes its insurance coverage addresses all material risks to which it is exposed and is adequate and customary in its current state of operations, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which the Company is exposed. In addition, no assurance can be given that such insurance will be adequate to cover the Company's liabilities or will be generally available in the future or, if available, that premiums will be commercially justifiable. If the Company were to incur substantial liability and such damages were not covered by insurance or were in excess of policy limits, or if the Company were to incur such liability at a time when it is not able to obtain liability insurance, its business, results of operations and financial condition could be materially adversely affected.
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Risk Factors Relating to General Economic and Political Conditions
Limited Operating History
The Company has only a limited operating history upon which an evaluation of the Company and its prospects can be based. In particular, the Company has a limited history with its asphalt shingle reprocessing operations at Empower Delta, which currently remains as an R&D and testing facility. The Company does not currently expect Empower Delta to become a commercial operation.
While construction is nearly complete, and commissioning has commenced, Empower Calgary has yet to commence full commercial operations. The Company is subject to many risks common to venture enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial and other resources and the lack of revenues. There is no assurance that the Company will be successful in achieving a return on shareholders' investment or meeting other metrics of success.
The Company incurs substantial expenses in the establishment and operation of its business. A significant portion of the Company's financial resources have been and will continue to be directed to the development of its business and related activities at both Empower Delta and Empower Calgary. The success of the Company will ultimately depend on its ability to generate cash from its business. There is no assurance that the required funds will be available for future expansion of the Company's business. If the Company does not have access to the required funds to continue the operation and development of its business and operational activities, and to the extent that it does not generate cash flow and income, the Company's long-term viability may be materially and adversely affected.
Future Capital Needs, Uncertainty of Additional Financing and Dilution
The ability of the Company to secure any required financing to sustain operations and expansion plans will depend in part upon prevailing capital market conditions and business success. There can be no assurance that the Company will be successful in its efforts to secure any additional financing or additional financing on terms satisfactory to management.
The Company may need to raise additional funds in order to support more rapid expansion, develop new or enhanced services and products, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. The Company may be required to raise additional funds through public or private debt or equity financing, strategic relationships, royalty agreements, government grants or other arrangements. There can be no assurance that such additional funding, if needed, will be available on terms attractive to the Company, or at all. Even if such funding is available, the Company cannot predict the size of future issues of the Company's securities, including its common shares or securities convertible into the common shares, or the effect, if any, that future issues and sales of the common shares will have on the market price of such shares.
Furthermore, any additional equity financing may be dilutive to shareholders and debt financing, if available, may involve restrictive covenants, as well as royalty financing. If additional funds are raised through the issuance of equity securities, the percentage ownership of the shareholders will be reduced. As such, shareholders may experience additional dilution in net book value per common share, or such equity securities may have rights, preferences or privileges senior to those of the holders of the common shares. If adequate funds are not available on acceptable terms, the Company may be unable to develop or enhance its business, take advantage of future opportunity or respond to competitive pressures, any of which could have a material adverse effect on the Company's business, financial condition and operating results.
Failure to Protect its Intellectual Property
Failure to protect the Company's intellectual property could harm its ability to compete effectively. The Company is highly dependent on its ability to protect its proprietary technology. While the Company was issued two patents for a portion of its front-end technology in the BEST process by the USPTO in November 2022 and May 2024, and was issued two patents for a portion of its proprietary technology by the CIPO in July 2024 and March 2025, the Company's entire process is not fully patented and thus not fully protected at this point in time. The Company also has filed further patents with CIPO and filed a Patent Cooperation Treaty application for the international patent system. The Company intends to rely on a combination of patents, copyright, trademark and trade secret laws, as well as non-disclosure agreements and other contractual provisions
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to establish and maintain its proprietary rights. The Company intends to protect its rights vigorously. However, there can be no assurance that these measures will, in all cases, be successful. Enforcement of the Company's intellectual property rights may be difficult, particularly in some nations outside of North America in which the Company may seek to market its products. While U.S. and Canadian patent and copyright laws, international conventions and international treaties may provide meaningful protection against unauthorized duplication of technologies, software and innovations, the laws of some foreign jurisdictions may not protect proprietary rights to the same extent as the laws of Canada or of the United States. The absence of internationally harmonized intellectual property laws makes it more difficult to ensure consistent protection of the Company's proprietary rights. Despite the precautions, unauthorized third parties, including its competitors, may be able to: (i) copy certain portions of its products or innovations; or (ii) reverse engineer or obtain and use information that the Company regards as proprietary. Also, the Company's competitors could independently develop technologies that are perceived to be substantially equivalent or superior to the Company's technology. The Company's competitive position may be materially adversely affected by its possible inability to effectively protect its intellectual property.
Intellectual Property Infringement
Other companies may claim that the Company has infringed their intellectual property, which could materially increase costs and materially harm the Company's ability to generate future revenue and profits. Claims of infringement are becoming increasingly common as the industry in which Northstar operates develops and as related legal protections, including patents, are applied to products. Although the Company does not believe that its products infringe on the rights of third parties, third parties may assert infringement claims against the Company in the future. Although most of the Company's technology is proprietary in nature, the Company does include significant amounts of capital and equipment in its products. Any such assertion may result in litigation or may require the Company to obtain a license for the intellectual property rights of third parties. Such licenses may not be available, or they may not be available on reasonable terms. In addition, such litigation could be disruptive to the Company's ability to generate revenue or enter into new market opportunities and may result in significantly increased costs as a result of the Company's efforts to defend against those claims or its attempt to license the patents or rework its products to ensure they comply with judicial decisions. Any of the foregoing could have a significant adverse impact on the Company's business and operating results as well as its ability to generate future revenue and profits. The loss of licenses for the technology or the lack of support or enhancement of such technology could materially adversely affect the Company's business. The Company could also be forced to do one or more of the following: (i) stop selling, incorporating or using its products that use the challenged intellectual property; (ii) obtain from the owner of the infringed intellectual property right a license to sell or use the relevant technology, which license may not be available on reasonable terms, or at all; (iii) redesign those products that use allegedly infringing technology which may be costly or time-consuming; or (iv) refund license fees and other amounts received, and make payments of additional amounts in damages or settlement payments, for allegedly infringing technology or products.
Management of Growth
The Company has recently experienced, and may continue to experience, rapid growth in the scope of its operations. This growth has resulted in or may result in increased responsibilities for the Company's existing personnel, the hiring of additional personnel and, in general, higher levels of operating expenses. In order to manage its current operations and any future growth effectively, the Company expects to continue to implement and improve its operational, financial and management information systems, as well as hire, manage and retain its employees and maintain its corporate culture. There can be no assurance that the Company will be able to manage such growth effectively or that its management, personnel or systems will be adequate to support the Company's operations. The inability of the Company to deal with this growth may have a material adverse effect on the Company's business, financial condition, results of operations and prospects.
Loss of Key Employees and Contractors
The Company depends on and will continue to depend on a number of key employees and contractors, the loss of any one of whom could have an adverse effect on the Company. The Company will not have and is not expected to purchase key person insurance on such individuals, which insurance would provide the Company with insurance proceeds in the event of their death. Without key person insurance, the Company may not have the financial resources to develop or maintain its business until it replaces the individual. The development of the business of the Company will be dependent on its ability to attract and retain highly qualified management and operating personnel. The Company will face competition for personnel
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from other employers. If the Company is unable to attract or retain qualified personnel as required, it may not be able to adequately manage and implement its business plan.
Liquid Market or Securities
Even though currently the common shares, which trade on the TSX-V and OTCQB, have an active and liquid market, there can be no assurance than an active and liquid market for the Company's common shares will continue or be maintained.
Litigation
The Company may become party to litigation from time to time in the ordinary course of business which could adversely affect its business. Should any litigation in which the Company becomes involved be determined against the Company such a decision could adversely affect the Company's ability to continue operating, the market price for the Company's common shares, and could use significant resources. Even if the Company is involved in litigation and wins, litigation can redirect significant resources. Litigation may also create a negative perception of the Company's brand.
Reporting Issuer Status
As a reporting issuer, the Company is subject to reporting requirements under applicable securities law and the policies of the TSX-V. Compliance with these requirements increases legal and financial compliance costs, makes some activities more difficult, time consuming or costly, and increases demand on existing systems and resources. Among other things, the Company is required to file annual, quarterly and current reports with respect to its business and results of operations and maintain effective disclosure controls and procedures and internal controls over financial reporting. In order to maintain and, if required, improve disclosure controls and procedures and internal controls over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management's attention may be diverted from other business concerns, which could harm the Company's business and results of operations. The Company may need to hire additional employees to comply with these requirements in the future, which would increase its costs and expenses.
Unexpected Disruptions Affecting Projects and Operations
The Company's current and future operations can sometimes be subject to delays for a variety of reasons, including labour slowdowns, construction delays unrelated to the Company's products, technological malfunctions, defective materials, or workplace safety. Such delays may delay the recognition of revenue, discourage customers from doing business with the Company, and may hurt the Company's reputation, affecting future sales prospects. The Company may lose sales and may not be able to replace those sales at an acceptable margin or at all. There can be no assurance that such delays will be overcome in a timely manner and to the satisfaction of the customer.
Furthermore, the Company enters into agreements which, consistent with industry standards, may include liquidated damages or termination provisions which may allow customers to claim amounts or terminate and not proceed with proposed projects.
Macroeconomic and Geopolitical Risks and Uncertainties
Macroeconomic and geopolitical risks and uncertainties may have a material adverse impact on the Company's operations and capital expenditures. The Company procures a portion of its supplies and equipment from global suppliers. Economic, legal and political conditions globally could adversely affect the Company's ability to conclude sales and procure and timely deliver products. These factors may significantly adversely affect the availability and costs of raw materials and equipment, contribute to inflation and cause currency fluctuations, and cause market volatility, all of which could significantly impact the Company's revenues and profitability, growth projects and its ability to raise capital as needed.
The Russia-Ukraine war and its related economic and political sanctions on global fuel sources has exacerbated an already challenged global shipping environment and supply chain challenges, for example. These conditions are beyond the Company's control and there can be no assurances that any mitigating actions by the Company or the Company's suppliers will be effective. The Russia-Ukraine war has drastically reduced capacity for Ukraine to supply goods and raw materials, such
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as steel. The sanctions imposed on Russia have also led to the reduced availability of Russian-produced steel and other products.
The Israel-Palestine war and its related economic and political tensions have created geopolitical risk globally, for example. These conditions are beyond the Company's control and there can be no assurances that any mitigating actions by the Company or the Company's suppliers will be effective.
Exposure to U.S. Trade Tariffs
Recent changes in U.S. trade policy, including the imposition of new tariffs on Canadian goods and materials, could pose a risk to our operations, supply chain, and financial performance. Increased costs for equipment, materials, chemicals and components sourced from Canadian suppliers impacted by U.S. tariffs could result in higher input costs for the Company. These upstream pressures may lead to inflationary pricing, supply chain delays, or limited availability of key products.
Furthermore, broader economic uncertainty and reduced cross-border trade activity may have a dampening effect on Canadian economic growth, which could indirectly affect customer demand, project timelines, and access to competitively priced goods and services. The Company is currently evaluating opportunities for expansion into the U.S. market, and future operations could be directly exposed to U.S. trade policies, tariffs, and associated compliance requirements. There is also an increased risk of reduced access to capital and foreign investment due to perceived instability in U.S.-Canada trade relations, which could adversely impact our growth strategy. We continue to monitor macroeconomic conditions and trade developments to assess potential impacts on our operations and cost structure.
Sourcing Equipment
The continuation of global transportation and logistics challenges may have a negative impact on the Company's ability to timely source products and capital equipment. To the Company's knowledge, none of the Company's suppliers or customers have entered into bankruptcy, or experienced a natural disaster, pandemic-related events or other adverse supply chain effects. The Company's purchasing plan identifies alternative sources of supply for equipment suppliers and product fabricators that are essential to the Company's business operations.
Force Majeure Events
The Company's operations may be adversely impacted by factors that are beyond the Company's control including pandemics, natural disasters, terrorism, labour disruptions, outbreaks of war, and other forms of economic, health or political disruptions. Such factors may not be foreseeable and may significantly adversely affect global economic conditions, including inflation, supply chain, global shipping, and currency volatility. While many of the restrictions imposed during the COVID-19 pandemic are now being eased globally, the Company's business may still be impacted through lingering or renewed effects of the pandemic, including through supply chain constraints, financial constraints of its customers and suppliers, increasing costs, and difficulty attracting skilled labour, with a result that it may not be able to build, own and operate its Delta pilot facility and/or Empower Calgary within the anticipated timeframe or on budget. In some cases, such delays may result in liquidated damages and may adversely affect the Company's operations.
Climate change has increased the incidence of natural disasters caused by weather and climate extremes including heatwaves, droughts, forest fires, atmospheric rivers, torrential downpours and flooding.
Future incidents could significantly adversely affect the Company's operations either directly, or by affecting the businesses of its suppliers or customers. Other events and factors that are beyond the Company's control but that may have a significant adverse effect on the Company's operations include but are not limited to strikes and labour disruptions affecting the Company's suppliers or customers, and global political instabilities such as the outbreak of war, discussed under the heading "Macroeconomic and Geopolitical Risks and Uncertainties".
While the Company works to mitigate the effects of these uncontrollable events, there is no assurance that they will be effective in doing so in future, particularly when multiple events coincide, and they may negatively impact the Company's operations and profitability.
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SUMMARY OF QUARTERLY RESULTS
| December 31, 2024 | September 30, 2024 | June 30, 2024 | March 31, 2024 | |
|---|---|---|---|---|
| Total assets | $ 45,728,755 | $ 36,949,134 | $ 20,683,139 | $ 17,909,998 |
| Property, plant and equipment | 22,418,635 | 15,694,999 | 9,348,796 | 6,666,930 |
| Working capital (deficit) | 4,839,707 | 9,794,657 | 3,446,112 | 3,440,770 |
| Shareholders’ (deficiency) equity | (1,333,578) | 1,199,210 | 4,244,205 | 4,238,202 |
| Expenses | 2,270,470 | 1,473,856 | 1,448,114 | 1,543,883 |
| Loss and comprehensive loss | 3,168,285 | 3,207,180 | 1,375,777 | 1,581,578 |
| Per share - basic and diluted | $ 0.02 | $ 0.03 | $ 0.01 | $ 0.01 |
| December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 | |
| --- | --- | --- | --- | --- |
| Total assets | $ 17,875,045 | $ 17,013,792 | $ 6,703,697 | $ 6,019,542 |
| Property, plant and equipment | 5,040,686 | 3,135,979 | 3,103,004 | 3,210,572 |
| Working capital (deficit) | 5,170,113 | 6,632,707 | (305,037) | (1,428,964) |
| Shareholders’ (deficiency) equity | 5,437,397 | 6,756,306 | 2,373,552 | 1,323,233 |
| Expenses | 1,834,702 | 1,499,739 | 1,614,757 | 1,673,484 |
| Loss and comprehensive loss | 1,887,679 | 1,399,574 | 1,696,078 | 1,688,596 |
| Per share - basic and diluted | $ 0.02 | $ 0.01 | $ 0.01 | $ 0.02 |
The following items have had a significant impact on the quarter over quarter increase in total assets, property plant and equipment and loss and comprehensive loss, during the eight most recent quarters:
- Significant capitalization of the Company through the issuance of convertible debentures and the Royalty Debenture, receipt of government grants, including from ERA and Alberta Innovates, and the BDC Financing;
- Significant capital expenditures related to the construction of Empower Calgary; and
- G&A expenses remained relatively consistent period-over-period, reflecting disciplined cost management and operational efficiency in moving the Company's growth strategy forward.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
The Company has controls and procedures in place to ensure that information required to be disclosed by the Company under securities legislation is recorded, processed, summarized, and reported within the appropriate time periods and that required information is accumulated and communicated to the Company's management so that decisions can be made about the timely disclosure of that information.
FORWARD LOOKING STATEMENTS
This report includes certain statements that may be deemed "forward-looking statements" within the meaning of applicable securities legislation. All statements, other than statements of historical facts that address such matters as future events or developments that the Company expects, are forward-looking statements and, as such, are subject to risks, uncertainties, assumptions and other factors of which are beyond the reasonable control of the Company. You can identify these statements by forward-looking words such as "expects", "does not expect", "plans", "anticipates", "does not anticipate", "believes", "intends", "estimated", "projects", "potential", "scheduled", "forecast", "budget", "hopes", "objective" and similar expressions, or that events or conditions "will", "would", "may", "could", "can", "should" or "might" occur and similar words. Such statements give the Company's current expectations or forecasts of future events and are not guarantees of
future performance and actual results or developments may differ materially from those expressed in, or implied by, this forward-looking information. With respect to forward-looking statements and information contained herein, we have made numerous assumptions including among other things, with respect to anticipated costs and expenditures, and the Company's ability to achieve its goals. Although management believes that the assumptions made and the expectations represented by such statements or information are reasonable, there can be no assurance that a forward-looking statement or information herein will prove to be accurate. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or information. Factors that could cause actual results to differ materially from those in forward-looking statements include, for example, such matters as continued availability of capital and financing and general economic, market or business conditions as well as risks associated with foreign trade policies, including the imposition of or changes to U.S. tariffs, which may impact input costs, supply chain dynamics, or future cross-border expansion. Although we have attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in the forward-looking statements or information, there may be other factors that cause actual results, performances, achievements or events to differ materially from those anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking statements or information. Any forward-looking statements are expressly qualified in their entirety by this cautionary statement. The information contained herein is stated as of the current date and subject to change after that date and the Company does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
ADDITIONAL INFORMATION
Additional information regarding the Company can be found on SEDAR+ at www.sedarplus.com.
Northstar Clean Technologies Inc.
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