Cyber App Solutions Corp., a company focused on the acquisition, exploration, development, and production of helium and beverage-grade CO2, has released its Form 10-Q report for the quarter ending September 30, 2024. The report highlights significant financial declines, strategic initiatives to bolster capital, and operational challenges impacting production and sales.
Financial Highlights
- Helium Revenue: $0 million, a 100% decrease from $121,958 in the prior year due to the idling of the helium processing plant.
- Net Loss from Operations: $(1.71) million, a 45% increase from $(1.17) million in the prior year, primarily due to increased general and administrative expenses.
- Net Loss: $(13.10) million, a 224% increase from $(4.04) million in the prior year, driven by significant notes payable modification costs and unrealized losses on the fair value of notes payable.
- Net Loss Per Share: $(0.16), compared to $(0.05) in the prior year, reflecting the increased net loss.
- Interest Expense: $(0.72) million, a 15% decrease from $(0.85) million in the prior year, due to lower interest on short-term borrowings.
Business Highlights
- Helium Production Challenges: The company has idled its helium processing plant in the St. Johns Field due to mechanical issues and design limitations, resulting in inefficient operations and lower helium recovery rates. This has significantly impacted production and sales volumes.
- CO2 Market Opportunities: The U.S. carbon dioxide market is expected to grow at a compound annual growth rate of 8.4% from 2022 to 2030, driven by demand in the food and beverage industry. The company is positioned to capitalize on this growth with its CO2 reservoirs capable of storing captured CO2.
- Sales Units: During the nine months ended September 30, 2024, the company sold approximately 861 thousand cubic feet of helium, compared to 250 thousand cubic feet in the same period in 2023, reflecting increased production capacity before the plant was idled.
- Operational Segment: The company operates within one reportable segment, focusing on the acquisition, exploration, development, and production of helium and beverage-grade CO2.
- Future Outlook: The company anticipates continued demand growth for helium due to its applications in various industries. However, achieving steady state operations at the helium plant remains a critical challenge.
- U.S. Department of Energy Program: The company is part of a consortium selected to receive an $11.6 million grant from the U.S. Department of Energy to develop the Southwest Regional Direct Air Capture Hub, which aims to advance CO2 removal technologies.
- Operational Adjustments: The company has made adjustments to its operations, including idling the helium processing plant, to address mechanical and design issues that have affected production efficiency.
- Market Conditions: The helium market is experiencing a shortage due to increased demand and decreased production, partly due to geopolitical factors and the depletion of U.S. national reserves.
Strategic Initiatives
- Strategic Focus: Cyber App Solutions Corp. is focused on the acquisition, exploration, development, and production of helium and beverage-grade CO2, with assets concentrated in the St. Johns Field in Arizona. The company is part of a consortium that received a grant from the U.S. Department of Energy to develop a Direct Air Capture Hub, which aligns with its strategic focus on CO2 storage and environmental initiatives.
- Capital Management: The company issued 8,000 shares of Series A Convertible Preferred Stock for $8 million to strengthen its capital base. It also entered into a Securities Purchase Agreement with Kips Bay Select LP and Cyber One LTD, issuing convertible promissory notes and warrants, which are part of its strategy to manage liquidity and capital resources. The company has faced challenges with its convertible notes, leading to a Forbearance Agreement to manage defaults and restructure payments. Additionally, the company raised $987,609 through private placements of common stock.
- Future Outlook: Cyber App Solutions Corp. plans to address its liquidity needs by continuing to seek capital through debt and equity issuances. The company aims to achieve steady-state operations at its helium plant and is exploring opportunities to expand its CO2 production capabilities. The company is also focused on resolving its current debt defaults and improving its financial stability to support future growth initiatives.
Challenges and Risks
- Operational Risks: The company faces significant operational risks due to the idling of its helium processing plant in the St. Johns Field, which has resulted in a complete halt in helium production and sales. This was caused by mechanical issues and design limitations, leading to inefficient operations and lower helium recovery rates. The company continues to incur costs of $50,000 per month for leased equipment despite the plant being idled, and anticipates additional shut-in royalties of approximately $250,000.
- Liquidity Challenges: The company is experiencing liquidity challenges, with a working capital deficit of $23,236,019 as of September 30, 2024, primarily due to outstanding notes classified as current liabilities. The company is in default on its 2023 Convertible Notes, which has led to a series of forbearance agreements requiring significant cash payments and issuance of shares to creditors. These financial obligations, coupled with limited cash on hand of approximately $230,000 as of November 15, 2024, raise substantial doubt about the company's ability to continue as a going concern.
- Capital Expenditures: The company is planning significant capital expenditures for a new helium and CO2 processing plant, estimated to cost $25,000,000 to $30,000,000. However, there is no committed capital to fund these expenditures, and the company is evaluating debt and equity financing strategies to secure the necessary funds.
SEC Filing: