MYCELX Technologies : May 26, 2021 – Final Results for the year ending 31 December 2020

26 May 2021

MYCELX TECHNOLOGIES CORPORATION (AIM: MYX)

Final Results for the year ending 31 December 2020

MYCELX Technologies Corporation ("MYCELX" or the "Company"), the clean water and clean air technology experts, announces its audited results for the year ended 31 December 2020.

Highlights

Financial

• Revenue of $7.1 million (2019: $11.9 million)
• Gross profit of $1.6 million (2019: $6.1 million)
• EBITDA of negative $4.2 million (2019: negative $1.2 million)
• Net loss of $6.1 million (2019 net loss of $3.0 million)
• Total operating expenses reduced by 10% year-on-year

Operational

• No disruption to ongoing operations during COVID-19 lockdowns
• $0.8 million contract win for a new downstream application
• Optimisation of the REGEN Retrofit Package
• Assigned dedicated team to progress PFAS market opportunities

Post-period end

• Middle East: Two contract extensions signed in Q1 2020, valued at $2.4 million
• Nigeria: Equipment sale valued at $0.7 million
• Sale of office in Duluth, Georgia, yielded net proceeds of $2.8 million
• Validation and capacity upgrade of PFAS system at Australian Department of Defence location
• In light of customer focus on ESG credentials MYCELX remains well placed to benefit from bidding activity

Corporate

• Tom Lamb will assume the role of Chairman, following the planned departure of Tim Eggar in July 2021

Connie Mixon, CEO, said:

"2020 was a challenging year for the Company, with the combined impact of COVID-19 and the well- publicised issues facing the oil and gas industry. Whilst we have been successfully diversifying, with products that address markets in addition to oil and gas, MYCELX is not immune to the unprecedented slowdown in the global economy.

However, with oil prices now stabilised and Brent crude trading above $60 a barrel, the Company continues to see signs of a recovery taking place, with more robust bidding activity expected to follow in the second half of 2021. We remain upbeat both about our product offering and also the markets and regions where we operate, so we look forward to keeping all our stakeholders updated on the Company's progress throughout the rest of the year."

For further information please contact:

MYCELX Technologies Corporation

Connie Mixon, CEOTel: +1 888 306 6843

Kim Slayton, CFO

Canaccord Genuity, Nominated Adviser

Chairman's Statement

MYCELX's offering has never been more relevant in the fight for a clean environment

I would like to thank all of those involved with the Company for their hard work and support during my tenure as Non-Executive Chairman. Since joining in 2011, the Company has achieved much in challenging markets, in addition to successfully navigating periods of low oil prices and a pandemic. I can stand down knowing that the business is in excellent hands, with Connie Mixon as CEO and Tom Lamb set to assume the role of Chairman upon my departure in July.

We have faced a number of major unforeseeable external challenges since flotation; but throughout that time, we have continued to improve our patented technology. Our REGEN and PFAS solutions are unique and ideally placed to assist our clients in addressing their present and historic environmental and operational challenges.

2020 was a very difficult year for the global economy. The energy and industrial markets were adversely affected by the outbreak of the COVID-10 pandemic, which sent oil and gas prices to multi-year lows. We witnessed unprecedented events, such as the price for WTI futures turning negative in April 2020.

We have now entered a period of almost universal Governmental and private sector concern for the environment so MYCELX's offering has never been more relevant. The effective treatment of wastewater is critical to the fight for a clean environment. We are proud to be able to offer our customers a solution that enables them to address that issue while helping them to reduce costs and increase operating margins at the same time.

Investors and the public markets are laser focused on the Environmental, Social and Governance ('ESG') measures being taken by corporates. Our offering can offer a real solution to enterprises in need of safe and sustainable wastewater treatment. We aim to operate to the highest of ESG standards and continue to monitor changing trends in our decision making as appropriate.

During this difficult period MYCELX was able to maintain operations at all of our sites and further cement our position as a leading global clean water technology company. MYCELX sought to leverage our footprint within our core regions of focus, which delivered commercial opportunities, but also expand into new industry segments, which our patented proprietary technology is well suited to.

In 2020 we acted quickly to reduce our cost base and safeguard the Company's financial position. The Company is well funded to capitalise on new bidding opportunities as they emerge.

Outlook

At the time of writing, although the markets remain fragile, we are starting to see opportunities appear across the industries we are targeting. We have already signed a number of new commercial agreements in 2021 and, with the resurgence in oil prices, we hope to see renewed bidding activity as we move into the second half of 2021 and into 2022. We are excited about the paid trial we have secured for REGEN and expect that in the event of a successful outcome, this will lead to renewed interest from leading Enhanced Oil Recovery players in the oil and gas space. The Company also sees considerable opportunity in the treatment of Per- and polyfluoroalkyl substances ('PFAS'). The treatment of PFAS is not only an environmental imperative, but it is also likely to be a growth market for the foreseeable future. It is therefore important to note that MYCELX's solution is a highly robust form of treatment that is proven to be superior to conventional methods, which has been shown to remove a broader range of PFAS contaminants to below detectable levels.

In closing, I do not know of another business out there that is more 'of the moment' as MYCELX. The environmental benefits, along with the cost savings our technologies generate are unparalleled. I believe that the Company is poised to benefit from greater levels of demand than ever from corporates committed to behave in an environmentally responsible manner.

I look forward to watching the Company's progress after I stand down at the AGM and I would like to thank our shareholders, employees and wider stakeholders for their continued support during what has been a challenging period for the business.

Chief Executive's Statement

MYCELX supports sustainable operations with proven technology

2020 was a challenging year for the Company, with the combined impact of COVID-19 and the well-publicised issues facing the oil and gas industry. Whilst we have been successfully diversifying, with products that address markets in addition to oil and gas, MYCELX is not immune to the unprecedented slowdown in the global economy.

MYCELX carefully deployed its resources and expert personnel in response to the COVID-19 travel and work restrictions. On the delivery side, this took the form of ensuring staff safety, adapting to new operating realities, whilst still providing the superior water and air treatment and a high quality of service to our customers in our key markets. It further involved the development of novel applications of MYCELX patented technologies to address critical water and air treatment challenges in markets beyond the oil and gas sector.

We began 2020 strongly, with three purchase orders in Q1, which gave us confidence that we could build on 2019 to deliver a successful year. Whilst much of the rest of the year was characterised by the pandemic, we took the opportunity to ensure that MYCELX is well positioned to take advantage of the opportunities that lie ahead. This included making strides in product development and decisions to properly scale operations and right-size the business to current needs.

The ever-broadening regulatory framework and focus on the environment has gripped many industries worldwide, and oil and gas is no exception. MYCELX is well positioned to support the oil and gas industry, as well as these wider industries, as they seek to operate in a sustainable manner, with proven technology already in service around the globe.

There are increasing opportunities for MYCELX outside the energy sector in groundwater remediation and air filtration. The technology that we have developed, patented, own and have been successfully rolling out, is ideally positioned to take advantage of this ever-increasing need in industry to deploy the most effective technology that supports and achieves their corporate environmental goals.

Operational performance

MYCELX made several positive developments during 2020. These included contract wins, contract extensions and progress with product developments. Of particular note were contract awards in the Middle East, which we were delighted to win against very competitive and testing conditions. These achievements were made against a backdrop of the team working from home and a slowdown in bidding activity in core markets.

The successes delivered in 2020 clearly demonstrate the value our clients place in having the MYCELX solution in place. It is not only a superior and completely reliable answer to their water and air management needs, it also supports them in the delivery of their ESG reporting and business requirements. Above all, it is cost effective and has been proven to lower both the capital and operational costs of any individual client site.

A new purchase order was signed with a SABIC affiliate later in the first half of the year, valued at $0.8 million. The contract related to an emergency response project, treating process water to maintain plant performance to desired specifications. Supporting a further SABIC affiliate expands our footprint in the key Saudi Arabian market and strengthens our position generally in the Middle East.

In June, we saw a further contract extension provided by SABIC, with the lease of a water treatment system. The value of the contract was $1.8 million. As part of that agreement, MYCELX also undertook to run a trial with a further SABIC affiliate. The trial not only again reaffirmed the Company's position in that market, it also presents a further purchase order opportunity.

The most notable product development during the year was the successful development and commercialisation of a retrofit package that enables MYCELX's REGEN media technology to be placed into

existing installed filter systems. In addition to providing the customer with significant operational efficiencies and improved performance, this technology reduces the capital outlay, encouraging customer adoption and interest. The retrofit package was developed by the Company's in-house R&D team, requiring significant engineering and design input.

Decisive action was taken early in the pandemic to protect the safety of employees and reduce the Company's day to day costs. This entailed stopping all non-essential travel and installing a work from home policy. It also involved a reduction in salaries across the business, with the exclusion of those working on an hourly rate. These measures were effective in supporting our employees as well as protecting the business from the inevitable challenges of COVID-19. It is a huge testament to the loyalty and hard work of our team that, as the business emerges from this turbulent time, we are poised to move on and take advantage of the opportunities before us.

Looking to the future

We feel increasingly confident that MYCELX is well placed to pick up again on the momentum it saw pre- pandemic. A large part of this is down to being well situated to benefit from the dramatic growth in environmental regulation worldwide, combined with more stringent requirements for effective and definitive ESG reporting. ESG reporting effects every aspect of a customer's business today, from funding to winning contracts, and has become central to the way business is conducted, driving strategy and board level decisions.

Against this backdrop, the Company has made a strong start to the year with two project extensions, signed with customers in Saudi Arabia. The Company has also delivered equipment for the third sale in Nigeria and has commenced contract execution for a paid trial of the newly developed REGEN solution. A successful outcome of the trial is expected to lead to further interest among EOR producers.

MYCELX is benefiting from efforts made to right-size the business for the future. This culminated in the successful sale of the office in Duluth, Georgia, post the period end, for a total consideration of $5.4 million. Net cash proceeds from the sale, of $2.8 million, support the Company's net cash position of $6 million, providing a good platform for the future.

As per the announcement of 23 March 2021, Tom Lamb will be assuming the role of Chairman, following the planned departure of Tim Eggar in July. Tom is currently a Non-Executive Director and I look forward to working closer with him in his new role. On behalf of the team at MYCELX, I would again like to take the opportunity to thank Tim for the tremendous contribution he has made to the Company, including supporting its expansion into new territories and taking it public on the London Stock Exchange in 2011.

The Board is fully focused on maximising shareholder returns, and thereby maximising shareholder value. We are thus very mindful of the importance of regular and interactive dialogue with our shareholder base. We will make every effort to not only adhere to best guidance but to actively look to address and answer any shareholder concerns that may arise. As a significant shareholder myself, this is paramount in my thinking.

I am delighted to report that following all the hard work in 2020, MYCELX is well placed and has had a strong start to the year, trading very much in line with the Board's expectations. This, combined with encouraging signs across our key markets, means that the Board remains confident of the Company's prospects for the year ahead.

Financial Review

Due to the combined impact of COVID-19 and the well-publicised issues facing the oil and gas industry, total revenue decreased 40% to $7.1 million for 2020, compared to $11.9 million for 2019. Revenue from equipment sales and leases decreased by 55% to $4.3 million for 2020 (FY19: $9.5 million) and revenue from consumable filtration media and service increased by 17% to $2.8 million (FY19: $2.4 million).

Gross profit decreased by 74% to $1.6 million (FY19: $6.1 million) and gross profit margin decreased by 23%

(FY19: 51%). The decrease in profit margin was the result of a large inventory reserve for slow moving and obsolete inventory.

Total operating expenses for 2020, including depreciation and amortisation, decreased by 10% to $7.6 million (FY19: $8.5 million). The largest component of operating expenses was selling, general and administrative ('SG&A') expenses, which decreased by 6% to $7.3 million (FY19: $7.8 million) as the Company implemented a series of company-wide cost saving measures.

Depreciation and amortisation within operating expenses decreased by 20% to $310,000 (FY19: $386,000), primarily due to older equipment reaching the end of its useful life.

EBITDA was negative $4.2 million, compared to negative $1.2 million in 2019. EBITDA is defined as net profit before interest expense, provision for income taxes, and depreciation and amortisation of fixed and intangible assets, including depreciation of leased equipment which is included in cost of goods sold. The Company recorded a loss before tax of $5.8 million in 2020, compared to a loss before tax of $2.5 million in 2019. Basic loss per share was 31 cents in 2020, compared to basic loss per share of 15 cents in the previous year.

As of 31 December 2020, total assets were $19.1 million with the largest assets being property and equipment of $6.8 million, inventory of $5.6 million, $3.8 million of cash and cash equivalents including restricted cash and $1.5 million of accounts receivable.

Total liabilities as of 31 December 2020 were $5.3 million and stockholders' equity was $13.8 million, resulting in a debt-to-equity ratio of 38%.

The Company used $1.5 million of cash in operations in 2020 (FY19: $1.9 million used in operations). The Company used $159,000 in investment activities compared to $867,000 for 2019. In 2020, the Company's financing activities included net proceeds of $997,000 from advances on the line of credit, $401,000 from a forgivable loan, and $96,000 paid towards debt.

Post the period end, the Company completed the sale of its building in Duluth, Georgia, USA for a total consideration of $5.4 million. The Company recognised a financial gain of approximately $2.5 million on the sale of the property and net cash proceeds were approximately $2.8 million. The Note Payable and line of credit were paid in full and $500,000 of cash was reclassified from restricted cash. The sale enabled the Company to right-size its office space needs across its main operating locations and provided cash proceeds which will be used for working capital purposes to support the business needs.

Statements of Operations

(USD, in thousands, except share data)

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