Cielo signs LOI to acquire assets; arranges financing

Executive Summary

• Cielo Waste Solutions Corp. has executed a binding Letter of Intent (LOI) to acquire proprietary project development and evaluation assets from Canadian Discovery Ltd. (CDL), marking a strategic shift toward becoming a scalable clean fuels project development company.
• Concurrent with the acquisition, Cielo is raising $1 million through a non-brokered private placement, with participation from CDL principals and company insiders.
• The transaction involves issuing shares for asset consideration and units for financing, with proceeds designated for the development of "Project Nexus" (a sustainable aviation fuel facility) and general working capital.

Key Details

• Asset Acquisition Terms:
  • Cielo will acquire 100% of CDL's interest in proprietary project development and evaluation assets, including databases, data sets, models, analytical tools, and intellectual property related to renewable and low-carbon fuels.
  • Total consideration is approximately $2.6 million, paid via the issuance of 17,333,333 common shares at $0.15 per share.
  • Share Issuance Structure:
    • 10,000,000 shares issued upon closing, subject to a 12-month hold period (4-month statutory + 8-month consecutive).
    • 7,333,333 shares issued upon closing, deposited into escrow with Olympia Trust Company, and released on an earnout basis within 36 months of closing based on performance milestones defined in the Asset Purchase Agreement (APA).
  • CDL and its principals are subject to 24-month standstill provisions regarding the consideration shares and financing units.
  • No finders' fees are payable for the acquisition.
• Concurrent Financing:
  • Non-brokered private placement raising aggregate proceeds of $1 million.
  • Issuance of approximately 16,666,666 units at $0.06 per unit.
  • Unit Composition: Each unit consists of one common share and one whole common share purchase warrant.
  • Warrant Terms: Each warrant allows the purchase of one common share at $0.15 per share for a period of 48 months from issuance.
  • Use of Proceeds: Continued development and early-stage engineering of Project Nexus (sustainable aviation fuel facility in Prince George, B.C.), including regulatory and incentive application work, plus general working capital.
  • Hold Period: All securities issued in the financing are subject to a 4-month-plus-one-day hold period.
  • Related Party Transaction: The financing constitutes a related party transaction under Multilateral Instrument 61-101, but is exempt from formal valuation and minority shareholder approval requirements as related party participation is not expected to exceed 25% of market capitalization.
• Board Appointment:
  • Kaush Rakhit, Executive Chairman of CDL, will be appointed to Cielo’s Board of Directors upon closing of the acquisition.
  • Following this appointment, the Board will consist of five directors (four incumbents and Mr. Rakhit).
  • Mr. Rakhit will be nominated for election by shareholders at the next Annual General Meeting.
• Closing and Regulatory:
  • Anticipated closing date is March 2026.
  • Conditions include execution of definitive agreements, completion of due diligence, satisfaction of customary closing conditions, and receipt of regulatory approvals, including TSX Venture Exchange approval if required.
  • The acquisition is expected to meet criteria for an expedited acquisition under TSX-V Policy 5.3.

Notable Quotes

• Ryan C. Jackson, CEO: "This transaction is expected to conclude Cielo's restructuring chapter and mark our full entry into execution. By internalizing these capabilities, we will have built the technical and commercial foundation required to advance Project Nexus and systematically develop future projects with speed, discipline and capital efficiency."
• Kaush Rakhit, Executive Chairman, Canadian Discovery: "Over the past several years, we built these tools and data sets to support disciplined, repeatable project development decisions. Cielo's focus on advancing Project Nexus and building a scalable waste-to-fuels platform made it a natural fit. We believe they will be most impactful when fully integrated into an active development organization with clear execution objectives."