Mr. Jeremie Lavoie reports

CO2 SOLUTIONS ANNOUNCES FISCAL 2018 THIRD QUARTER RESULTS

CO2 Solutions Inc. has released its financial results for the three-month period ended March 31, 2018. The corporation's detailed financial statements and management's discussion and analysis will be filed and available on SEDAR.

Three-month period ended March 31, 2018, and subsequent operational highlights

Information on the Saint-Felicien project

The Saint-Felicien project continues to be on budget and on schedule. The engineering and procurement of long-lead items are complete, and the corporation has selected the contractor, Alco TMI, from Alma, Que., to build the capture unit and install it on the site at the Resolute Forest Product pulp mill in Saint-Felicien, Que. Construction of the Saint-Felicien capture unit is expected to be completed by the fourth quarter of 2018, followed by a six-month period of commissioning and demonstration. After this will begin the commercial operation, which consists in providing carbon dioxide to Serres Toundra's adjacent greenhouses.

Information on the VCQ project

The corporation continues to lead the world's most comprehensive CO2 capture and utilization demonstration project known as Valorisation Carbone Quebec (VCQ). Started in February, 2017, the objectives of this project are to develop and demonstrate commercially viable end-to-end solutions to capture and utilize CO2 in various applications while reducing greenhouse gas (GHG) emissions.

In its successful first year, the VCQ project marked the following milestones:

• Management and the scientific orientation committees responsible for overseeing the governance of the VCQ project were put in place. Membership of these committees is drawn from executives and scientists from industry (Suncor, Total, Hatch Ltd. and CO2 Solutions), academia (Universite Laval and Polytechnique de Montreal) and the Quebec government.
• Total SA signed on as the VCQ project's first industrial partner.
• Additional industrial CO2 utilization technology and end use partners have been identified, and discussions are currently being pursued along multiple fronts to broaden even further industry's and academia's participation in the VCQ project.
• An agreement was reached with Chimie Parachem, a 51-per-cent subsidiary of Suncor Energy, for use of its industrial facilities in Montreal-East as the chosen VCQ demonstration site.
• A 10-tonne-per-day carbon capture plant utilizing CO2 Solutions' enzymatic process in packed columns was commissioned at the Parachem facilities.
• A 10-tonne rotating packed bed contactor has been ordered and is slated for delivery at the VCQ demonstration site by September, 2018, to be followed by an operational demonstration.
• Over 100 CO2 utilization technologies from around the world were evaluated for their potential to effectively participate in the VCQ project.
• Agreements were reached with providers of CO2 utilization technologies converting CO2 into methanol, dimethyl ether and protein for animals, such as Kiverdi and Pioneer Energy.
• Hatch, a major international consulting engineering and implementation firm, committed to provide engineering and other services to realize the installation of the various capture and utilization units on the Parachem site, and upon the conclusion of the demonstrations, will generate the related techno-economic reports.
• Carbon Consult Group, a leading carbon management and valorization group has agreed to join the VCQ project as a supplier of services to quantify the reduction of GHG (greenhouse gas) emissions offered by the various technologies.

CO2 Solutions welcomes Total as an industrial partner in the VCQ project

On March 27, 2018, CO2 Solutions welcomed Total, a French global integrated energy company, as the first industrial partner to join the VCQ project. The industrial partner category is one of five partnership types in the VCQ project (alongside founders, utilization technologies, service providers and end-users). Industrial partners make financial contributions to the VCQ budget in exchange for access to the techno-economic reports of the various technologies demonstrated during the project. The amount of these contributions is undisclosed for competitive reasons. Contributions from industrial partners will enable the VCQ project to increase the number of demonstrated technologies and accelerate their eventual commercial implementation.

CO2 Solutions receives an additional $7.5-million grant to enhance and extend the VCQ project until 2022

On March 28, 2018, CO2 Solutions announced that it had received a $7.5-million grant from the Province of Quebec to enhance and extend the VCQ project from its original end date of 2019 until 2022. In addition to extending the length of the project, this grant will allow the VCQ project to increase the number of utilization technologies it will demonstrate. It allows the corporation and its partners to build on the success of the project's first year and pursue the realization of one of the most ambitious carbon capture and utilization projects (CCU) in the world.

Success in round 2 of the NRG Cosia Xprize

On April 9, 2018, CO2 Solutions announced that two of its joint entries at the NRG Cosia Xprize competition had passed round 2 of the competition. The winning entries are Carbicrete of Montreal, Que., and CERT of Toronto, Ont. CO2 Solutions and these partners shared $500,000 (U.S.) for each of the selected entries in round 2, for a total of $500,000 (U.S.) for CO2 Solutions, which was received in May.

Summary of financial results for the three-month and the nine-month periods ended March 31, 2018

Revenues

The corporation recorded $10,000 in revenues for the three-month period ended March 31, 2018, and $30,000 for the nine-month period ended at the same date and $50,000 for the same periods in 2017. The 2018 revenues are related to a preliminary engineering study to assess the viability of applying its enzymatic carbon capture technology in a potential 32-tonne-per-day CO2 capture project for the metallurgic industry as announced on Sept. 7, 2017. The 2017 revenues are related to a sale of enzymes. Funds received from subsidy or grant agreements signed with federal or provincial government agencies are not treated as revenue. Rather, these amounts are accounted for as a deduction from research and development expenses in the period the contribution is claimed and accrued (see research and development expenses section herein).

Research and development expenses

Research and development expenses, before tax credits and government assistance, increased by $1.57-million to $2.25-million for the three-month period ended March 31, 2018, compared with $690,000 for the same period in 2017. Increases in the three-month period from that of the prior year reflect the significant increase of work associated with the VCQ and Saint-Felicien projects. These expenses will continuously vary based upon the development phase and activity levels of continuing projects undertaken by the corporation.

For the nine-month period ended March 31, 2018, research and development expenditures, before tax credits and government assistance, increased by $6.08-million to $7.84-million from $1.76-million for the same period last year. As was the case above relative to the three-month increase, this increase reflects the higher volume of research and development activities associated with the VCQ and Saint-Felicien projects, as well as the completion of the ecoEnergy project that occurred in December, 2016.

Quebec provincial research and development credits accrued during the quarter were $100,000 and $140,000, respectively, for the nine-month period ended March 31, 2018.

General and administrative expenses

General and administrative expenses totalled $510,000 for the three-month period ended March 31, 2018, compared with $550,000 for the same period in 2017, representing a decrease of $40,000. This net decrease is predominantly related to a non-cash decrease in patent amortization expense relative to the writedown in value of certain patents of $40,000, a decrease in compensation-related expenses (cash-based salaries and benefits and non-cash-based stock compensation) of $20,000, an increase of $20,000 in professional fees primarily related to legal and professional fees associated with public relations, investor relations and communications, and general administration, and an increase of $10,000 in travel expenses and general office expenses.

General and administrative expenses totalled $1.69-million for the nine-month period ended March 31, 2018, compared with $1.75-million for the same period in 2017. This net decrease of $60,000 is predominantly related to a non-cash decrease in patent amortization expenses relative to the writedown in value of certain patents of $190,000, a decrease of $80,000 in professional fees primarily related to legal and professional fees associated with public relations, investor relations and communications, and general administration, a net increase in compensation-related expenses (cash-based salaries and benefits and non-cash-based stock compensation) of $150,000, an increase in travel expenses for the nine months of $70,000 and an increase in government assistance for administrative expense of $20,000.

Financial expenses, net

Financial expenses, net, for the three-month period ended March 31, 2018, was a gain of $230,000, a $350,000 difference from the $120,000 loss for the same period last year, reflecting a gain of $360,000 relating to the receipt of the refundable contributions from Canada Economic Development announced on Dec. 4, 2017, offset by accretion, interest and other financial expenses. Financial expenses, net for the nine-month period ended March 31, 2018, was a loss of $40,000 compared with a loss of $360,000 for the same period in 2017. The decrease of $320,000 is mainly due to the gain of $360,000 relating to the receipt of the refundable contributions from Canada Economic Development offset by accretion, interest and other financial expenses relating to the convertible debt and term loans outstanding at March 31, 2018.

Loss and comprehensive loss for the quarter

The corporation recorded a loss of $490,000, or nil per share, for the three-month period ended March 31, 2018, a decrease of $420,000 from the loss of $90,000, or one cent per share, for the same period in 2017. No significant factors, other than those described above, contributed to the change in the loss for the periods. For the nine-month period ended March 31, 2018, the corporation recorded a loss of $2.33-million, or two cents per share, a decrease of $1.33-million from the loss of $3.65-million, or three cenets per share, for the same period in 2017. No significant factors, other than those described above, contributed to the change in the loss for the three-month or the nine-month periods.

Liquidity and financial position

As at March 31, 2018, the corporation had an aggregate balance of cash and cash equivalents of $8.12-million and negative working capital (current assets less current liabilities) of $3.87-million.

The unaudited condensed interim consolidated financial statements for the three-month and nine-month periods ended March 31, 2018, and 2017, the related notes included therein, management's discussion and analysis for the period ended March 31, 2018, and additional information regarding the corporation, are available on SEDAR.

About CO2 Solutions Inc.

CO2 Solutions is a leading Canadian innovator in the field of enzyme-enabled carbon capture and has been actively working to develop and commercialize the technology for stationary sources of carbon pollution. CO2 Solutions' technology lowers the cost barrier to carbon capture, utilization and sequestration, positioning it as a viable CO2 mitigation tool, as well as enabling industry to derive profitable new products from these emissions. CO2 Solutions has built an extensive patent portfolio covering the use of carbonic anhydrase, or analogues thereof, for the efficient postcombustion capture of carbon dioxide with low-energy aqueous solvents.

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