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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
40-F
 
REGISTRATION STATEMENT
 
PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE
 
ACT OF 1934
OR
 
ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES
 
EXCHANGE ACT OF 1934
For the fiscal year ended
 
Commission File Number:
 
December 31, 2022
 
 
001-39989
 
PYROGENESIS CANADA INC.
 
(Exact name of Registrant as specified in its charter)
Canada
 
3599
 
N/A
(Province or Other Jurisdiction
of Incorporation or
Organization)
(Primary Standard
Industrial Classification Code)
(I.R.S. Employer Identification
No.)
1744, William St. Suite 200
Montréal
,
QC
,
H3J1R4
CANADA
Attention:
P. Peter Pascali
Chief Executive Officer
Tel:
1
-
514
-
937-0002
 
(Address and telephone number of Registrant’s principal executive offices)
National Registered Agents, Inc.
1209 Orange St.
Wilmington
,
Delaware
19801
Tel:
202
-
572-3133
 
(Name, address (including zip code) and telephone number (including area code) of agent for
 
service in the United States)
Securities registered or to be registered pursuant to section
 
12(b) of the Act:
 
 
Name of Each Exchange on Which
 
Title of Each Class
 
Trading Symbol(s)
Registered:
Common Shares, no par value
PYR
The Nasdaq Stock Market LLC
Securities registered or to be registered pursuant to Section 12(g)
 
of the Act:
None
Securities for which there is a reporting obligation pursuant to Section
 
15(d) of the Act:
None
For annual reports, indicate by check mark the information
 
filed with this Form:
 
Annual Information Form
 
 
Audited Annual Financial Statements
Indicate the number of outstanding shares of each of the
 
Registrant’s classes of capital or common stock as of the close of the period covered
 
by the annual report:
Title of Each Class
 
Number of outstanding shares
Common Shares, no par value
173,580,395
 
Indicate by check mark whether the Registrant (1) has filed
 
all reports required to be filed by Section 13 or 15(d)
 
of the Exchange Act during the preceding 12 months
(or for such shorter period that the Registrant was required
 
to file such reports), and (2) has been subject to such filing
 
requirements for the past 90 days.
Yes
 
 
No
 
Indicate by check mark whether the registrant has submitted
 
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation
 
S-T (§232.405 of this chapter) during the preceding 12 months
 
(or for such shorter period that the Registrant
was required to submit and post such files).
Yes
 
 
No
 
Indicate by check mark whether the registrant is an emerging growth
 
company as defined in Rule 12b-2 of the Exchange Act.
Emerging growth company
If an emerging growth company that prepares its financial statements
 
in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the
extended transition period for complying with any new
 
or revised financial accounting standards provided pursuant to Section
 
13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a
 
report on and attestation to its management’s assessment of the effectiveness of its internal control
 
over
financial reporting under Section 404(b) of the Sarbanes-Oxley
 
Act (15 U.S.C. 7262(b)) by the registered public accounting
 
firm that prepared or issued its audit report.
 
2
EXPLANATORY
 
NOTE
PyroGenesis
 
Canada Inc.
 
(the
 
“Company”
 
or
 
the
 
“Registrant”)
 
is
 
a
 
Canadian
 
issuer
 
that
 
is
 
permitted,
 
under
 
the
multijurisdictional disclosure system adopted in the
 
United States, to prepare this Annual Report
 
on Form 40-F pursuant to
Section 13
 
of
 
the
 
Securities
 
Exchange
 
Act
 
of
 
1934,
 
as
 
amended
 
(the
 
“Exchange
 
Act”),
 
in
 
accordance
 
with
 
Canadian
disclosure requirements. The Company is a “foreign private issuer” as defined in
 
Rule 3b-4 under the Exchange Act. Equity
securities
 
of
 
the
 
Company
 
are
 
accordingly
 
exempt
 
from
 
Sections
 
14(a),
 
14(b),
 
14(c),
 
14(f) and
 
16
 
of
 
the
 
Exchange
 
Act
pursuant to Rule 3a12-3.
FORWARD LOOKING
 
STATEMENTS
This
 
Annual
 
Report,
 
including
 
the
 
exhibits
 
attached
 
hereto
 
and
 
incorporated
 
herein
 
may
 
contain
 
“forward-looking
statements”
 
within
 
the
 
meaning
 
of
 
applicable
 
Canadian
 
and
 
United
 
States
 
securities
 
laws.
 
All
 
statements
 
other
 
than
statements of historical
 
fact are
 
forward-looking statements. The
 
forward-looking statements contained
 
in this
 
Annual Report
are made
 
only as
 
of the
 
date hereof.
 
The forward-looking
 
statements contained
 
in the
 
exhibits incorporated
 
by reference
into this Annual
 
Report are made
 
only as of
 
the respective dates
 
set forth in
 
such exhibits. The
 
Registrant does
 
not have,
or undertake,
 
any obligation
 
to update
 
or revise
 
any forward
 
-looking statements
 
whether as
 
a result
 
of new
 
information,
subsequent events or otherwise, unless otherwise required
 
by law.
Generally, forward-looking information can be
 
identified by the
 
use of forward-looking terminology
 
such as “plans”,
 
“expects”
or
 
“does
 
not
 
expect”,
 
“is
 
expected”,
 
“budget”,
 
“scheduled”,
 
“estimates”,
 
“forecasts”,
 
“intends”,
 
“anticipates”
 
or
 
“does
 
not
anticipate”, or “believes”,
 
or variations of
 
such words and
 
phrases or statements
 
that certain actions,
 
events or results
 
“may”,
“could”, “would”, “might” or “will be taken”, “occur”
 
or “be achieved”. Forward-looking statements are
 
based on a number of
material
 
assumptions,
 
which
 
management
 
of
 
the
 
Registrant
 
believe
 
to
 
be
 
reasonable,
 
including,
 
but
 
not
 
limited
 
to,
 
the
Registrant’s ability to generate sufficient
 
cash flow from operations and obtain financing,
 
if needed, on acceptable terms or
at
 
all;
 
the
 
general
 
economic,
 
financial
 
market,
 
regulatory
 
and
 
political
 
conditions
 
in
 
which
 
the
 
Registrant
 
operates;
 
the
interest of potential purchasers in
 
the Registrant’s products; anticipated and unanticipated costs; the government
 
regulation
of the Registrant’s activities and products; the timely receipt of any required regulatory
 
approvals; the Registrant’s ability to
obtain
 
qualified
 
staff,
 
equipment
 
and
 
services
 
in
 
a
 
timely
 
and
 
cost
 
efficient
 
manner;
 
the
 
Registrant’s
 
ability
 
to
 
conduct
operations in a safe,
 
efficient and effective
 
manner; and the Registrant’s
 
expansion plans and
 
timeframe for completion
 
of
such plans
Forward-looking
 
information
 
is subject
 
to
 
known
 
and
 
unknown
 
risks,
 
uncertainties
 
and
 
other
 
factors
 
that
 
may
 
cause
 
the
actual
 
results,
 
level
 
of
 
activity,
 
performance
 
or
 
achievements
 
of
 
the
 
Registrant
 
to
 
be
 
materially
 
different
 
from
 
those
expressed
 
or
 
implied
 
by
 
such
 
forward-looking
 
information.
 
Although
 
the
 
Registrant
 
has
 
attempted
 
to
 
identify
 
important
factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be
other factors that cause results not to be as
 
anticipated, estimated, intended or projected. There
 
is no assurance that such
statements will
 
prove to
 
be accurate,
 
as actual
 
results
 
and future
 
events could
 
differ materially
 
from those
 
anticipated
 
in
such
 
statements.
 
Accordingly,
 
readers
 
should
 
not
 
place
 
undue
 
reliance
 
on
 
forward-looking
 
statements.
 
Readers
 
should
carefully consider the maters as
 
further discussed under the heading "Risk
 
Factors" in the Registrant’s Annual
 
Information
Form for the year ended December 31, 2020, which is
 
filed as Exhibit 99.1 hereto and incorporated by reference
 
herein
The forward-looking statements
 
contained in, or incorporated
 
by reference into, this
 
Form 40-F are made as
 
of the date of
this Form
 
40-F or
 
as
 
otherwise
 
specified.
 
Except as
 
required
 
by
 
applicable
 
securities
 
law,
 
the
 
Registrant
 
undertakes
 
no
obligation
 
to
 
update
 
publicly
 
or otherwise
 
revise
 
any forward
 
-looking
 
statements
 
or the
 
foregoing
 
list
 
of
 
factors
 
affecting
those statements, whether as
 
a result of
 
new information, future events
 
or otherwise or
 
the foregoing lists of
 
factors affecting
this information. All
 
forward-looking statements
 
contained in this
 
Form 40-F are
 
expressly qualified
 
in their entirety
 
by this
cautionary statement.
DIFFERENCES IN UNITED STATES
 
AND CANADIAN REPORTING PRACTICES
The
 
Registrant
 
is
 
permitted,
 
under
 
a
 
multijurisdictional
 
disclosure
 
system
 
adopted
 
by
 
the
 
United
 
States,
 
to
 
prepare
 
this
report
 
in
 
accordance
 
with
 
Canadian
 
disclosure
 
requirements,
 
which
 
are
 
different
 
from
 
those
 
of
 
the
 
United
 
States.
 
The
Registrant prepares its
 
financial statements, which
 
are filed with
 
this Form 40-F in
 
accordance with International
 
Financial
Reporting Standards as issued by the International Accounting
 
Standards Board.
 
3
PRINCIPAL DOCUMENTS
Annual Information Form
The
 
Registrant’s
 
Annual
 
Information
 
Form for
 
the
 
fiscal year
 
ended
 
December 31,
 
2022
 
is
 
filed
 
as
 
Exhibit 99.1
 
and
incorporated by reference in this Annual Report on Form 40-
F.
Audited Annual Financial Statements
The audited consolidated financial statements of the Registrant for the fiscal year
 
ended December 31, 2022, including the
Independent Auditor’s
 
Report with
 
respect thereto,
 
are filed
 
as Exhibit 99.3
 
and incorporated
 
by reference
 
in this
 
Annual
Report on Form 40-
F.
Management Discussion and Analysis
The Registrant’s Management Discussion and Analysis for the fiscal year ended
 
December 31, 2022 is filed as Exhibit 99.2
and incorporated by reference in this Annual Report
 
on Form 40-
F.
CERTIFICATIONS AND
 
DISCLOSURES REGARDING CONTOLS AND
 
PROCEDURES
Certifications
The required certifications are attached hereto as Exhibits
 
99.4, 99.5, 99.6, and 99.7.
Disclosure Controls and Procedures
The information provided in the section entitled “Controls and Procedures” under the sub-heading “Disclosure Controls and
Procedures”
 
contained
 
in
 
the
 
2022
 
MD&A
 
filed
 
as
 
Exhibit 99.2
 
to
 
this
 
Annual
 
Report
 
on
 
Form 40-F is
 
incorporated
 
by
reference herein.
Management’s Annual Report on Internal Control
 
over Financial Reporting
The information provided in the section entitled “Controls and Procedures” under the sub-headings “Management’s
 
Annual
Report
 
on
 
Internal
 
Controls
 
over
 
Financial
 
Reporting
 
and
 
Remediation
 
Plan”
 
contained
 
in
 
the
 
2022
 
MD&A
 
filed
 
as
Exhibit 99.2 to this Annual Report on Form 40-F is incorporated
 
by reference herein.
Attestation Report of Independent Auditor
In accordance
 
with the
 
United States
 
Jumpstart Our
 
Business Startup
 
Act (the
 
“JOBS Act”)
 
enacted on
 
April 5, 2012,
 
the
Registrant qualifies as
 
an “emerging growth
 
company” (an “EGC”),
 
which entitles the
 
Registrant to take
 
advantage of certain
exemptions
 
from
 
various
 
reporting
 
requirements
 
that
 
are
 
applicable
 
to
 
other
 
public
 
companies
 
that
 
are
 
not
 
EGCs.
Specifically,
 
the JOBS
 
Act defers
 
the
 
requirement
 
to
 
have
 
the
 
Registrant’s
 
independent
 
auditor
 
assess
 
the
 
Registrant’s
internal
 
control
 
over
 
financial
 
reporting
 
under
 
Section 404(b) of
 
the
 
Sarbanes-Oxley
 
Act.
 
As
 
such,
 
the
 
Registrant
 
is
exempted
 
from
 
the
 
requirement
 
to
 
include
 
an
 
auditor
 
attestation
 
report
 
in
 
this
 
Form 40-F
 
for
 
so
 
long
 
as
 
the
 
Registrant
remains an EGC, which may be for as long as five years
 
following its initial registration in the United States.
Changes in Internal Control over Financial Reporting
The
 
information
 
provided
 
in
 
the
 
section
 
entitled
 
“Controls
 
and
 
Procedures”
 
under
 
the
 
sub-heading
 
“Changes
 
in
 
Internal
Controls over Financial Reporting” contained in the 2022 MD&A filed as Exhibit 99.2 to this
 
Annual Report on Form 40-F is
incorporated by reference herein.
NOTICES PURSUANT TO REGULATION
 
BTR
The Registrant
 
was
 
not required
 
by Rule
 
104 of Regulation
 
BTR to
 
send
 
any notices
 
to
 
any
 
of its
 
directors
 
or executive
officers during the fiscal year ended December
 
31, 2022.
AUDIT COMMITTEE FINANCIAL EXPERT
The
 
board
 
of
 
directors
 
of
 
the
 
Registrant
 
has
 
determined
 
that
 
Mr. Andrew
 
Abdalla,
 
the
 
chair
 
of
 
the
 
Registrant’s
 
audit
committee,
 
qualifies
 
as
 
an
 
audit
 
committee
 
financial
 
expert
 
for
 
purposes
 
of
 
paragraph
 
(8) of
 
General
 
Instruction
 
B
 
to
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Form 40-F.
 
The board
 
of directors
 
has further
 
determined that
 
Mr. Abdalla
 
is also
 
independent, as
 
that term
 
is defined
 
in
the corporate governance
 
requirements of the
 
Nasdaq Capital Market
 
(“Nasdaq”). The Commission
 
has indicated that the
designation of Mr.
 
Abdalla as an audit
 
committee financial expert
 
does not make
 
him an "expert"
 
for any purpose,
 
impose
any duties, obligations or liabilities on him that are greater than those imposed on
 
members of the audit committee and the
board of directors who do not carry this designation or affect
 
the duties, obligations or liabilities of any other member of
 
the
audit committee or the board of directors.
CODE OF ETHICS
The Registrant has adopted a
 
written Code of Business Conduct
 
and Ethics (the "Code")
 
that is applicable to
 
all employees,
contractors,
 
consultants,
 
officers
 
and
 
directors
 
of
 
the
 
Registrant,
 
and
 
is
 
filed
 
as
 
an
 
exhibit
 
to
 
this
 
Annual
 
Report
 
on
Form 40-
F.
All departures
 
from,
 
all
 
amendments
 
to
 
the Code,
 
and
 
all waivers
 
of the
 
Code
 
with respect
 
to any
 
of the
 
senior officers
covered by it,
 
which waiver may
 
be made only
 
by the board
 
of directors of
 
the Registrant in
 
respect of senior
 
officers, will
be disclosed as required. The Code is located on the Registrant’s website at www.pyrogenesis.com.
 
Information contained
in or
 
otherwise accessible
 
through the
 
Registrant’s website
 
does not
 
form part
 
of this
 
Form 40-F,
 
and is
 
not incorporated
into this Form 40-F by reference.
PRINCIPAL ACCOUNTANT
 
FEES AND SERVICES
The
 
fees
 
paid
 
to
 
the
 
independent
 
auditor
 
are
 
included
 
under
 
the
 
heading
 
"Audit
 
Committee -
 
External
 
Fees
 
by
 
Audit
Category" in the AIF,
 
which is filed as Exhibit 99.1 hereto and incorporated
 
by reference herein.
The Registrant’s audit committee
 
has adopted a pre-approval
 
policy.
 
Under this policy,
 
all non-audit services must
 
be pre-
approved
 
by
 
the
 
Audit
 
Committee.
 
The
 
Registrant
 
did
 
not
 
rely
 
on
 
the
 
de
 
minimis
 
exemption
 
provided
 
by
Section (c)(7) (i)(C) of Rule 2-01 of Regulation S-X.
OFF-BALANCE SHEET ARRANGEMENTS
The Registrant
 
has
 
not
 
entered
 
into any
 
“off-balance
 
sheet arrangements”,
 
that
 
have or
 
are reasonably
 
likely
 
to
 
have
 
a
current or
 
future effect
 
on the Registrant’s
 
financial condition,
 
changes in
 
financial condition,
 
revenues, expenses,
 
results
of operations, liquidity,
 
capital expenditures or capital resources that are
 
material to investors.
CONTRACTUAL OBLIGATIONS
Below is a tabular disclosure of the Registrant’s
 
contractual obligations at December 31, 2022:
Total
Carrying
contractual
Less than
 
Over 5
value
amount
one year
2-3 years
4-5 years
 
years
$
$
$
$
$
$
Bank indebtedness
991,902
991,902
991,902
Accounts payable and
accrued liabilities
9,620,591
9,620,591
9,620,591
Term
 
loans
389,987
520,444
59,917
190,587
180,000
89,940
Balance due on
business combination
3,907,775
4,137,820
2,177,800
1,960,020
Lease liabilities
5,533,694
6,745,329
2,984,243
1,165,281
703,816
1,891,989
20,443,949
22,016,086
15,834,453
3,315,888
883,816
1,981,929
IDENTIFICATION OF
 
THE AUDIT COMMITTEE
The Registrant’s Board of Directors has a separately
 
designated standing Audit Committee established in accordance
 
with
Section 3(a)(58)(A) of
 
the
 
Exchange
 
Act.
 
The
 
members
 
of
 
the
 
Audit
 
Committee
 
are
 
Andrew
 
Abdalla
 
(Chair
 
of
 
the
Committee), Robert Radin and Ben Naccarato.
 
5
MINE SAFETY DISCLOSURE
Not applicable
NASDAQ STATEMENT
 
OF CORPORATE
 
GOVERNANCE DIFFERENCES
The Registrant is
 
a “foreign private
 
issuer” as defined
 
in Rule 3b-4
 
under Exchange Act
 
and its common
 
shares are listed
on Nasdaq
 
and the
 
Toronto
 
Stock Exchange
 
(the “TSX”).
 
Rule 5615(a)(3)
 
of Nasdaq
 
Stock Market
 
Rules permits
 
foreign
private issuers to follow
 
home country practices in
 
lieu of certain provisions of
 
Nasdaq Stock Market Rules. A
 
foreign private
issuer that follows home country practices in lieu of certain provisions of Nasdaq Stock
 
Market Rules must disclose ways in
which its corporate
 
governance practices
 
differ from
 
those followed
 
by domestic
 
companies either
 
on its website
 
or in the
annual report
 
that
 
it distributes
 
to shareholders
 
in the
 
United States.
 
A description
 
of the
 
ways in
 
which
 
the Registrant’s
governance practices
 
differ
 
from those
 
followed
 
by domestic
 
companies
 
pursuant
 
to Nasdaq
 
Stock
 
Market Rules
 
are as
follows:
Majority Independent
 
Directors
: The
 
Registrant
 
does not
 
follow Nasdaq
 
Stock
 
Market Rule
 
5605(b)(1),
 
which requires
listed companies
 
to have
 
a majority
 
of the
 
board of
 
directors comprised
 
of “Independent
 
Directors” as
 
defined in
 
Nasdaq
Stock Market Rule 5605(a)(2). In lieu of following Nasdaq Stock Market Rule 5605(b)(1),
 
the Registrant follows the rules of
the TSX.
Executive
 
Sessions
:
 
The
 
Registrant
 
does
 
not
 
follow
 
Nasdaq
 
Stock
 
Market
 
Rule
 
5605(b)(2),
 
which
 
requires
 
listed
companies
 
to
 
have
 
their
 
Independent
 
Directors
 
regularly
 
schedule
 
meetings
 
at
 
which
 
only
 
Independent
 
Directors
 
are
present. In lieu of following Nasdaq Stock Market Rule 5605(b)(2),
 
the Registrant follows the rules of the TSX.
Audit
 
Committee
 
Charter
: The
 
Registrant
 
does
 
not
 
follow
 
Nasdaq
 
Stock
 
Market
 
Rule 5605(c)(1),
 
which requires
 
listed
companies to adopt
 
a formal written
 
audit committee charter
 
that specifies the
 
scope of its
 
responsibilities and the
 
means
by
 
which
 
it
 
carries
 
out
 
those
 
responsibilities;
 
the
 
outside
 
auditor's
 
accountability
 
to
 
the
 
audit
 
committee;
 
and
 
the
 
audit
committee's responsibility to ensure the independence of the outside auditor. In lieu of following Nasdaq Stock Market Rule
5605(c)(1), the Registrant follows the rules of the TSX.
Compensation Committee Charter
: The Registrant does not follow
 
Nasdaq Stock Market Rule 5605(d)(1), which requires
listed companies
 
to adopt
 
a formal
 
written compensation
 
committee charter
 
and have
 
a compensation
 
committee review
and reassess
 
the adequacy
 
of the
 
charter on
 
an annual
 
basis. In
 
lieu of
 
following Nasdaq
 
Stock Market
 
Rule 5605(d)(1),
the Registrant follows the rules of the TSX.
Composition of Compensation Committee
: The Registrant does not follow Rule Nasdaq Stock Market 5605(d)(2), which
requires listed companies to have a compensation committee comprised of at least two
 
members, with each member being
an Independent Director as defined under
 
Nasdaq Stock Market Rule 5605(a)(2).
 
In lieu of following Nasdaq Stock Market
Rule 5605(d)(2), the Registrant follows the rules of the
 
TSX.
Independent
 
Director Oversight
 
of Director
 
Nominations
: The
 
Registrant does
 
not follow
 
Nasdaq Stock
 
Market Rule
5605(e)(1), which requires Independent Director involvement
 
in the selection of
 
director nominees, by having a
 
nominations
committee
 
comprised
 
solely
 
of
 
Independent
 
Directors.
 
In
 
lieu
 
of
 
following
 
Nasdaq
 
Stock
 
Market
 
Rule
 
5605(e)(1),
 
the
Registrant follows the rules of the TSX.
Nominations Committee
 
Charter
: The Registrant
 
does not follow
 
Nasdaq Stock
 
Market Rule 5605(e)(2),
 
which requires
listed companies to adopt a
 
formal written nominations committee charter or
 
board resolution, as applicable, addressing the
director
 
nomination
 
process
 
and
 
such
 
related
 
matters
 
as
 
may
 
be
 
required
 
under
 
the
 
federal
 
securities
 
laws.
 
In
 
lieu
 
of
following Nasdaq Stock Market Rule 5605(e)(2), the Registrant
 
follows the rules of the TSX.
Shareholder Meeting Quorum
 
Requirements
: The Registrant does
 
not follow Nasdaq Stock
 
Market Rule 5620(c) which
requires
 
that
 
the
 
minimum
 
quorum
 
requirement
 
for
 
a
 
meeting
 
of
 
shareholders
 
be
 
33
 
1/3
 
%
 
of
 
the
 
outstanding
 
common
shares. In
 
addition, Nasdaq Stock
 
Market Rule
 
5620(c) requires
 
that an
 
issuer listed on
 
Nasdaq state
 
its quorum
 
requirement
in its by-laws.
 
In lieu of following Nasdaq Stock Market Rule 5620(c), the
 
Registrant follows the rules of the TSX.
The foregoing is consistent with applicable laws, customs
 
and practices in Canada.
UNDERTAKING
The Registrant
 
undertakes to make
 
available, in
 
person or by
 
telephone, representatives
 
to respond
 
to inquiries
 
made by
the Commission
 
staff, and
 
to furnish
 
promptly,
 
when requested
 
to do
 
so by
 
the Commission
 
staff, information
 
relating to:
 
 
 
 
6
the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an Annual Report on
Form 40-F arises; or transactions in said securities.
DISCLOSURE REGARDING FOREIGN JURISDICTION
 
THAT PREVENT
 
INSPECTIONS
Not applicable.
CONSENT TO SERVICE OF PROCESS
The Registrant has previously filed with the Commission
 
a written irrevocable consent and power
 
of attorney on Form F-X.
Any change
 
to the name
 
or address of
 
the Registrant’s agent
 
for service shall
 
be communicated promptly
 
to the Commission
by amendment to the Form F-X referencing the file
 
number of the Registrant.
The following documents are being filed with the Commission
 
as exhibits to this Form 40-
F.
EXHIBIT INDEX
Exhibit Number
 
Exhibit Description
99.1
99.2
99.3
99.4
99.5
99.6
99.7
99.8
99.9
101
Interactive Data File
SIGNATURES
Pursuant to the requirements
 
of the Exchange Act, the
 
Registrant certifies that it
 
meets all of the requirements
 
for filing on
Form 40-F and has
 
duly caused this
 
Annual Report to
 
be signed on
 
its behalf by
 
the undersigned, thereunto duly
 
authorized.
Date: March 31, 2023
PYROGENESIS CANADA INC.
 
 
 
 
By:
/s/ P.
 
Peter Pascali
 
 
P.
 
Peter Pascali
 
 
Chief Executive Officer
pyrex99d1
 
pyrex99d1p1i0
Exhibit 99.1
PYROGENESIS CANADA INC.
ANNUAL INFORMATION FORM
FOR THE YEAR ENDED DECEMBER 31, 2022
Dated March 30, 2023
 
 
 
 
 
 
 
 
 
3
TABLE OF CONTENTS
5
5
6
6
6
7
7
Year Ended December 31, 2020
7
5.2.
Year Ended December 31, 2021
9
Year Ended December 31, 2022
10
11
12
12
12
16
16
16
20
20
21
21
21
23
23
23
23
8.
Description of Capital Structure
24
24
24
24
24
25
25
25
28
30
31
32
32
32
32
33
33
33
33
33
34
34
34
43
45
47
 
5
1.
 
Explanatory Notes
The
 
information
 
in
 
this
 
annual
 
information
 
form
 
(this
 
AIF
”)
 
of
 
PyroGenesis
 
is
 
stated
 
as
 
at
 
December
 
31,
 
2022,
unless otherwise indicated.
For an explanation
 
of the capitalized
 
terms and expressions and
 
certain defined terms, please
 
refer to the
 
“Glossary
of Terms”
 
at the end of this AIF.
In
 
this
 
AIF,
 
unless
 
the
 
context
 
otherwise
 
requires,
 
references
 
to
 
the
 
“Company”
 
or
 
“PyroGenesis”
 
refer
 
to
PyroGenesis Canada Inc. together with its subsidiaries.
In this AIF,
 
unless otherwise indicated,
 
all references to
 
“$” are to Canadian
 
dollars, all references to
 
“US$” are to
U.S. dollars, and all references to “€” are to euros. Amounts
 
are stated in Canadian dollars unless otherwise indicated.
This
 
AIF
 
should
 
be
 
read
 
in
 
conjunction
 
with
 
the
 
information
 
contained
 
in
 
the
 
Company’s
 
consolidated
 
financial
statements
 
and
 
related
 
notes
 
for
 
the
 
year
 
ended
 
December
 
31,
 
2022,
 
and
 
the
 
management’s
 
discussion
 
and
 
analysis
thereon.
The Company has certain proprietary or
 
contractual rights to certain company names, product
 
names, trade names
and
 
trademarks
 
used
 
in
 
this
 
AIF
 
that
 
are
 
important
 
to
 
its
 
business,
 
including
 
PyroGenesis,
 
PYROGENESIS
 
(LOGO),
PYROGENESIS
 
ADDITIVE,
 
PYROGENESIS
 
ADDITIVE
 
(LOGO)
 
PYROGENESIS
 
ALUMINUM,
 
PYRO
 
GREEN-GAS,
PYRO
 
GREEN-GAS
 
(LOGO),
 
SPHEROGENESIS,
 
NEXGEN,
 
DROSRITE,
 
PUREVAP,
 
SPARC,
 
APT,
 
APT-HP,
 
RPT,
MINIGUN, SPT,
 
PPRS and,
 
PAGV.
 
The Company
 
has omitted
 
the registered
 
trademark (®)
 
and trademark
 
(™) symbols
and any other related symbols
 
for such trademarks and
 
all related trademarks, including
 
those related to specific
 
products
or services, when used in this AIF.
2.
 
Forward-Looking Statements
This
 
AIF
 
contains
 
forward-looking
 
statements
 
and
 
forward-looking
 
information
 
(collectively,
 
forward-looking
statements
”) within the meaning
 
of applicable securities
 
legislation. All statements
 
other than statements of
 
historical fact
contained in this AIF
 
are forward-looking statements,
 
including, without limitation,
 
the Company’s statements
 
regarding its
products and services; the execution of its growth strategy; relations with suppliers and
 
customers; future financial position;
business strategy; potential acquisitions; potential
 
business partnering; litigation; and plans
 
and objectives. In certain
 
cases,
forward-looking
 
statements
 
can
 
be
 
identified
 
by
 
the
 
use
 
of
 
words
 
such
 
as
 
“plans”,
 
“expects”
 
or
 
“does
 
not
 
expect”,
 
“is
expected”, “budget”, “scheduled”,
 
“estimates”, “forecasts”, “intends”,
 
“anticipates” or “does
 
not anticipate”, or
 
“believes”, or
variations of such words and phrases
 
or state that certain actions,
 
events or results “may”, “could”,
 
“would”, “might” or “will
be taken”, “occur” or “be achieved” and similar words or the negative
 
thereof. These forward-looking statements are based
on
 
management’s
 
current
 
expectations
 
and
 
are
 
subject
 
to
 
a
 
number
 
of
 
risks,
 
uncertainties,
 
and
 
assumptions,
 
including
market
 
and
 
economic
 
conditions,
 
business
 
prospects
 
or
 
opportunities,
 
future
 
plans
 
and
 
strategies,
 
projections
 
and
anticipated events
 
and trends
 
that affect
 
the Company
 
and its
 
industry.
 
Although management
 
of the
 
Company believes
that
 
the
 
expectations
 
reflected
 
in
 
such
 
forward-looking
 
statements
 
are
 
reasonable
 
and
 
are
 
based
 
on
 
reasonable
assumptions
 
and
 
estimates
 
as
 
of
 
the
 
date
 
hereof,
 
there
 
can
 
be
 
no
 
assurance
 
that
 
these
 
assumptions
 
or
 
estimates
 
are
accurate or that any of these expectations will prove accurate.
Actual
 
results
 
and
 
developments
 
are
 
likely
 
to
 
differ,
 
and
 
may
 
differ
 
materially,
 
from
 
those
 
anticipated
 
by
 
the
Company and expressed or implied by
 
the forward-looking statements contained in this AIF. Such statements are based on
a number of assumptions and risks which may prove to be incorrect.
 
Important assumptions relating to the forward-looking
statements contained in this AIF include, among other things,
 
assumptions concerning:
 
the Company’s business strategies, strategic objectives
 
and growth strategy;
 
the Company’s expected production volumes, rates
 
and costs;
 
the Company’s current and future capital resources
 
and the need for additional financing;
 
the Company’s ability to increase sales from new and existing customers, and the results of the successful
completion of the Company’s current projects;
 
management’s expectation that the Company will achieve
 
growth and profitability;
 
6
 
the Company’s overall financial performance;
 
the Company continuing to maintain sufficient
 
and effective production and research and development;
 
there being no significant reduction in the availability of
 
qualified and cost-effective human resources;
 
there will be adequate liquidity available to the Company
 
to carry out its operations;
 
the Company’s ability to obtain and retain key
 
personnel; and
 
the success of intellectual property applications.
By their nature, forward-looking statements require assumptions and are subject to inherent risks and
 
uncertainties
including
 
those
 
discussed
 
herein.
 
There
 
is
 
significant
 
risk
 
that
 
predictions
 
and
 
other
 
forward-looking
 
statements
 
will
 
not
prove
 
to
 
be
 
accurate.
 
Readers
 
are
 
cautioned
 
to
 
not
 
place
 
undue
 
reliance
 
on
 
forward-looking
 
statements
 
made
 
herein
because a
 
number
 
of factors
 
could cause
 
actual future
 
results, conditions,
 
actions
 
or events
 
to differ
 
materially from
 
the
targets, expectations, estimates or intentions expressed in the
 
forward-looking statements.
The future
 
outcomes that
 
relate to
 
forward-looking statements
 
may be
 
influenced by
 
many factors,
 
including, but
not limited to, the risk
 
factors described under
 
the heading “Risk Factors”.
 
The Company cautions that
 
the foregoing list of
factors
 
is
 
not
 
exhaustive,
 
and
 
that,
 
when
 
relying
 
on
 
forward-looking
 
statements
 
to
 
make
 
decisions
 
with
 
respect
 
to
 
the
Company, investors
 
and others should carefully consider these factors, as well as other uncertainties and potential events,
and the inherent uncertainty of forward-looking statements.
Although the forward-looking statements
 
contained in this AIF
 
are based upon
 
what management currently believes
to be reasonable assumptions, the Company cannot assure investors that actual results, performance or achievements will
be
 
consistent
 
with
 
these
 
forward-looking
 
statements
 
and
 
additional
 
risks
 
and
 
uncertainties
 
discussed
 
in
 
the
 
Company’s
materials filed with the
 
Canadian securities regulatory
 
authorities from time
 
to time, available
 
under the Company’s
 
profile
on SEDAR at
 
www.sedar.com and on EDGAR at www.sec.gov. There can be no
 
assurance that forward-looking statements
will prove
 
to be
 
accurate, as actual
 
results and
 
future events
 
could differ materially
 
from those
 
anticipated in
 
such statements.
Accordingly,
 
readers
 
should
 
not
 
place
 
undue
 
reliance
 
on
 
forward-looking
 
statements.
 
Forward-looking
 
statements
 
are
provided
 
as
 
of
 
the
 
date
 
of
 
this
 
AIF,
 
and
 
the
 
Company
 
assumes
 
no
 
obligation
 
to
 
update
 
or
 
revise
 
such
 
forward-looking
statements to reflect new events or circumstances except as
 
required under applicable securities laws.
The
 
forward-looking
 
statements
 
contained
 
in
 
this
 
AIF
 
are
 
expressly
 
qualified
 
in
 
their
 
entirety
 
by
 
this
 
cautionary
statement and are made as of the date of this AIF or such
 
other date specified herein.
3.
 
Market and industry data
Unless otherwise indicated, information contained in
 
this AIF concerning the industry and the
 
markets in which the
Company operates, including
 
its general expectations, market
 
position and market
 
opportunity, is based on information
 
from
industry publications and
 
reports generated by
 
several third parties
 
and management estimates.
 
Unless otherwise indicated,
management estimates are derived from
 
publicly available information released by independent industry
 
analysts and third-
party sources, as well
 
as data from the
 
Company’s internal research, and are
 
based on assumptions made by
 
the Company
based on such data and its knowledge of
 
such industry and markets, which the Company believes to be
 
reasonable. These
industry
 
publications
 
and
 
reports
 
generally
 
indicate
 
that
 
the
 
information
 
contained
 
therein
 
was
 
obtained
 
from
 
sources
believed to
 
be reliable,
 
but do
 
not guarantee
 
the accuracy
 
and completeness
 
of such
 
information. The
 
Company has
 
not
independently verified the
 
data in such
 
publications, reports
 
or resources, and
 
such information is
 
inherently imprecise. In
addition, projections,
 
assumptions and estimates
 
of the Company’s
 
future performance
 
and the future
 
performance of the
industry in which the Company operates are necessarily subject
 
to a high degree of uncertainty and risk due to a variety of
factors, including those described under “Forward-Looking
 
Statements” and “Risk Factors”.
4.
 
Corporate Structure
4.1.
 
Name, Address and Incorporation
PyroGenesis is a corporation
 
governed by the provisions
 
of the Canada Business
 
Corporations Act (“
CBCA
”) and
results from an amalgamation
 
completed on July 11,
 
2011,
 
under the CBCA, of Industrial
 
Growth Income Corporation
 
and
PyroGenesis
 
Canada
 
Inc.,
 
a
 
predecessor
 
entity
 
incorporated
 
on
 
June
 
5,
 
2006,
 
to
 
form
 
the
 
Company.
 
Prior
 
to
 
the
 
7
amalgamation,
 
which
 
constituted
 
its
 
qualifying
 
transaction,
 
Industrial
 
Growth
 
Income
 
Corporation
 
was
 
a
 
capital
 
pool
company listed on the TSX-
V.
The Company’s head and registered
 
office is located at 1744
 
William Street, Suite 200,
 
Montréal, Québec, Canada,
H3J 1R4.
4.2.
 
Subsidiaries
On
 
August
 
11,
 
2021,
 
PyroGenesis
 
acquired
 
all
 
of
 
the
 
issued
 
and
 
outstanding
 
shares
 
of
 
Pyro
 
Green-Gas
 
Inc.
(formerly AirScience Technologies
 
Inc.) (“
Pyro Green-Gas
”), a private corporation incorporated under the laws of Canada.
Pyro Green-Gas has three subsidiaries: 1) AirScience
 
Technologies
 
Pvt. Ltd., a private corporation incorporated under the
laws of India;
 
2) AirScience Italia
 
S.r.l., a
 
private corporation incorporated
 
under the laws of
 
Italy; and 3)
 
Alga-Labs Inc., a
private corporation
 
incorporated under
 
the laws
 
of Canada.
 
Pyro Green-Gas
 
owns 99.99%
 
of the
 
issued and
 
outstanding
shares of
 
AirScience
 
Technologies
 
Pvt. Ltd.
 
and
 
90.00%
 
of the
 
issued
 
and outstanding
 
shares
 
of AirScience
 
Italia
 
S.r.l.
Alga-Labs Inc. is a wholly owned subsidiary of Pyro Green-Gas.
5.
 
General Development of the Business
The following is a summary of the significant events
 
that have influenced the general development
 
of the business
of the Company over the last three completed years.
5.1.
 
Year Ended December 31,
 
2020
Business Highlights and Milestones
On
 
March
 
4,
 
2020,
 
the
 
Company
 
announced
 
the
 
successful
 
completion
 
testing
 
of
 
a
 
900
 
kilowatts
 
plasma
 
torch
system valued
 
at more
 
than
 
$1,000,000
 
which had
 
been installed
 
pursuant
 
to an
 
agreement
 
entered
 
into
 
on January
 
7,
2019, between the Company and RISE Energy Technology
 
Center AB, a Swedish company.
On March 24,
 
2020, the Company announced it
 
had received the first
 
payment of approximately $1.44
 
million under
the
 
Drosrite
 
International
 
Exclusive
 
Agreement
 
dated
 
August
 
29,
 
2019,
 
between
 
Drosrite
 
International
 
LLC
 
(“
Drosrite
International
”), a US-based company,
 
and PyroGenesis (the “
Drosrite International Exclusive
 
Agreement
”). Under the
terms
 
of
 
this
 
agreement,
 
Drosrite
 
International
 
had
 
received
 
the
 
required
 
rights
 
from
 
PyroGenesis
 
to
 
perform
 
Drosrite
International’s obligations under a 2019 agreement it had entered into with
 
Radian Oil & Gas Services Company, an oil and
gas services company
 
operating in the
 
Middle East (the
 
Dross Processing Service
 
Agreement
”). For more
 
information
on the Drosrite
 
International Exclusive Agreement, the
 
Dross Processing Services Agreement,
 
and the relationship
 
between
Drosrite International and PyroGenesis, see “Directors
 
and Executive Officers - Conflicts of Interest”.
 
On April 30, 2020, PyroGenesis announced it
 
had successfully completed the first phase of
 
a multi-phase modeling
contract with a
 
client that
 
aimed at
 
evaluating the
 
performance of
 
PyroGenesis’ proprietary
 
torches in an
 
existing iron
 
ore
industrial furnace. On
 
September 1,
 
2020, the
 
Company announced the
 
completion and acceptance
 
of its
 
modeling contract,
which demonstrated that replacing fossil fuel burners with PyroGenesis’ proprietary
 
plasma torches could play a significant
role
 
in
 
reducing
 
the
 
client’s
 
greenhouse
 
gas
 
(“
GHG
”)
 
emissions
 
and
 
assist
 
the
 
client
 
in
 
attaining
 
its
 
GHG
 
reduction
objectives.
On June 11, 2020, the Company
 
announced it had signed a second multi-phase torch modeling contract, aimed
 
at
evaluating the
 
performance of
 
PyroGenesis’ proprietary
 
torches in
 
an existing
 
iron ore
 
industrial furnace
 
with the
 
goal of
replacing existing fossil fuel burners with PyroGenesis’ plasma
 
torches.
On August 18, 2020, the Company announced the realization of a development agreement with HPQ Nano Silicon
Powders Inc.
 
(“
HPQ Nano
”), a
 
wholly owned
 
subsidiary of
 
HPQ Silicon
 
Resources Inc.
 
(“
HPQ
”), which
 
aims to
 
transform
silicon
 
into
 
spherical
 
silicon
 
nano
 
powders
 
and
 
nanowires
 
for
 
use
 
in
 
lithium-ion
 
batteries.
 
The
 
agreement,
 
valued
 
at
approximately
 
$3,000,000,
 
includes
 
royalty
 
rights
 
on
 
the
 
future
 
sales
 
of
 
nano
 
silicon
 
powders
 
and
 
wires
 
by
 
HPQ
 
Nano,
royalty rights that can be converted by PyroGenesis into
 
a 50% ownership stake in HPQ Nano.
On September
 
4, 2020,
 
the Company
 
announced an
 
$11.5
 
million contract
 
to provide
 
waste destruction
 
systems
for two US Navy ships.
 
8
On
 
September
 
22,
 
2020,
 
the
 
Company
 
announced
 
a
 
business
 
initiative
 
to
 
increases
 
its
 
presence
 
as
 
an
 
on-site
processor of aluminum dross, with the aim to reduce landfill waste, reduce harmful GHG emissions, and recover aluminum
while minimizing the creations of potentially toxic minerals.
On November
 
24, 2020,
 
the Company
 
announced it
 
had signed
 
a plasma
 
torch contract
 
to provide
 
one high
 
powered
(approximately one
 
megawatt) plasma
 
torch with
 
ancillary equipment
 
to a
 
major iron
 
ore producer
 
in connection
 
with the
pelletization process.
On December 16,
 
2020, the Company
 
announced it had
 
signed an addition
 
al contract with
 
a US-based
 
tunneling
client to design, manufacture, test, and supply a plasma torch system
 
tailored for tunneling.
Corporate Developments and Financings
On March
 
18, 2020,
 
the Company
 
completed a
 
$903,000 non-brokered
 
secured convertible
 
loan with
 
Fiducie de
Crédit Mellon Trust (the “
Pascali Trust
”), a trust of which Company’s Chief Executive Officer, P.
 
Peter Pascali, is a trustee,
officer
 
and
 
beneficiary
 
(the
 
2020 Convertible
 
Loan
”).
 
The
 
2020
 
Convertible
 
Loan
 
bore
 
interest
 
at
 
the
 
rate
 
of
 
12%
 
per
annum, with interest
 
payable in cash
 
on a quarterly
 
basis, had a
 
September 17, 2021,
 
maturity date,
 
and was convertible
into common
 
shares of
 
the Company
 
at a
 
conversion price
 
of $0.28
 
per common
 
share. The
 
2020 Convertible
 
Loan was
secured
 
by
 
a
 
hypothec
 
on
 
the
 
universality
 
of
 
all
 
of
 
the
 
present
 
and
 
after
 
acquired
 
moveable
 
property
 
and
 
assets
 
of
 
the
Company.
 
The
 
2020
 
Convertible
 
Loan
 
was
 
subsequently
 
converted
 
in
 
common
 
shares
 
in
 
accordance
 
with
 
its
 
terms
 
on
September 30, 2020, resulting
 
in 3,225,000 common shares
 
being issued. As the
 
2020 Convertible Loan was
 
provided by
the Pascali Trust,
 
the 2020 Convertible Loan
 
constituted a “related party
 
transaction” as defined in
 
MI 61 101. The
 
related
party transaction was exempt from
 
the formal valuation and minority
 
approval requirements of MI 61-101,
 
as the transaction
had
 
a
 
value
 
of
 
less
 
than
 
25%
 
of
 
the
 
Company’s
 
market
 
capitalization
 
(calculated
 
in
 
accordance
 
with
 
MI
 
61-101).
 
The
transaction was unanimously
 
approved by the
 
board of directors
 
of the Company.
 
See “Directors and
 
Executive Officers -
Conflicts of Interest”.
On July 28,
 
2020, the Company
 
requested that
 
the Pascali Trust
 
convert the
 
2020 Convertible
 
Loan on or
 
before
September 30, 2020.
 
The Pascali Trust
 
agreed to such
 
request subject to
 
the prepayment of
 
5 years rent,
 
plus estimated
yearly municipal taxes, no
 
later than December 31,
 
2020, for a
 
total prepayment of $1,438,530.
 
As a result
 
of the conversion
of the 2020 Convertible Loan, the Company saved approximately $110,000 of interest payments that would otherwise have
been
 
required
 
to
 
be
 
paid
 
under
 
the
 
2020
 
Convertible
 
Loan.
 
The
 
agreement
 
with
 
the
 
Pascali
 
Trust
 
in
 
respect
 
of
 
the
prepayment
 
of
 
rent
 
constituted
 
a
 
“related
 
party
 
transaction”
 
as
 
defined
 
in
 
MI
 
61101.
 
The
 
related
 
party
 
transaction
 
was
exempt from the formal
 
valuation and minority
 
approval requirements of
 
MI 61-101, as
 
the transaction had
 
a value of less
than
 
25%
 
of
 
the
 
Company’s
 
market
 
capitalization
 
(calculated
 
in
 
accordance
 
with
 
MI
 
61-101).
 
The
 
transaction
 
was
unanimously
 
approved
 
by
 
the
 
board
 
of
 
directors
 
of
 
the
 
Company.
 
See
 
“Directors
 
and
 
Executive
 
Officers
 
-
 
Conflicts
 
of
Interest”.
On September 1,
 
2020, PyroGenesis announced that it
 
had acquired 4,000,000 units
 
of HPQ in
 
a private placement
at a
 
price of
 
$0.60 per
 
unit for
 
a total
 
investment $2.4
 
million. Each
 
unit consists
 
of one
 
common share
 
of HPQ
 
and one
common share of HPQ purchase warrant. Each warrant entitles the Company to purchase one common share of HPQ at a
price of $0.61 for a period of 36 months following the
 
issue date.
On September
 
22, 2020,
 
at the
 
Company’s
 
annual general
 
meeting, the
 
five then
 
current members
 
of the
 
Board
were
 
re-elected
 
and
 
two
 
additional
 
nominees,
 
Ms.
 
Rodayna
 
Kafal
 
and
 
Mr.
 
Rodney
 
Beveridge,
 
were
 
also
 
elected
 
to
 
the
Board.
On
 
November
 
10,
 
2020,
 
the
 
Company
 
closed
 
a
 
bought-deal
 
short
 
form
 
prospectus
 
offering
 
(the
 
2020
 
Public
Offering
”) pursuant to an underwriting agreement dated October 20, 2020, entered into between the
 
Company and Mackie
Research
 
Capital
 
Corporation,
 
as
 
sole
 
underwriter
 
and
 
sole
 
bookrunner.
 
Under
 
the
 
2020
 
Public
 
Offering,
 
the
 
Company
issued 3,354,550 units of the
 
Company (“
2020 Units
”) at a price of
 
$3.60 per unit for
 
aggregate proceeds of $12,076,380,
including the
 
full exercise
 
of the
 
over-allotment option
 
by the
 
underwriter.
 
Each unit
 
is comprised
 
of one
 
Common Share
and one-half of one Common Share
 
purchase warrant. Each whole warrant (a
 
2020 Public Offering Warrant
”) entitles the
holder thereof to purchase one additional Common Share at an exercise price of $4.50. The 2020 Public Offering Warrants
are governed by
 
a warrant indenture
 
dated November 10,
 
2020 (the “
2020 Warrant
 
Indenture
”). On March
 
15, 2021, the
Company announced
 
its exercise
 
of its
 
right under
 
the 2020
 
Warrant
 
Indenture to
 
accelerate the
 
expiry date
 
of the
 
2020
Public Offering
 
Warrants
 
to April
 
14, 2021.
 
The Company
 
paid the
 
underwriter
 
a
 
cash commission
 
equal to
 
6.5% of
 
the
gross proceeds of the 2020 Public
 
Offering and issued it an
 
aggregate of 191,414 non-transferable
 
compensation options,
which were
 
exercisable into
 
2020 Units
 
at a
 
price of
 
$3.60 per
 
unit at
 
any time
 
up to
 
24 months
 
from closing
 
of the
 
2020
Public Offering.
 
9
On November 20, 2020, the
 
Common Shares commenced trading
 
on the TSX under the
 
trading symbol “PYR”, at
which time the Common Shares were delisted from the
 
TSX-
V.
On December 22,
 
2020, PyroGenesis announced
 
it had submitted
 
a formal application
 
to list its
 
Common Shares
on the NASDAQ.
5.2.
 
Year Ended December 31,
 
2021
Business Highlights and Milestones
On March 17, 2021, PyroGenesis announced that it
 
had received a grant from the Quebec
 
Ministry of the Economy
and Innovation to fund a project aimed at developing
 
a solution to recover residues of spent pot lining,
 
which are produced
in the primary aluminum industry and are considered harmful.
On April 8, 2021, PyroGenesis announced the appointment of
 
Ms. Nannette Ramsey as an independent director.
On
 
April
 
19,
 
2021,
 
PyroGenesis
 
unveiled
 
that
 
its
 
additive
 
manufacturing
 
NEXGEN
 
powder
 
production
 
line
 
was
operational and
 
producing
 
powders. PyroGenesis’
 
NEXGEN
 
plasma
 
atomization
 
system has
 
recorded
 
a production
 
rate
exceeding 25 kg/h, surpassing all published plasma-atomized
 
production rates for titanium known to the Company.
On May 27, 2021, PyroGenesis announced that it had received a
 
grant from Sustainable Development Technology
Canada for
 
the financing
 
of the
 
development of
 
a novel
 
production
 
process to
 
transform
 
quartz into
 
fumed silica
 
using a
plasma
 
reactor,
 
reducing
 
hazardous
 
waste
 
and
 
GHG
 
emissions
 
attributed
 
to
 
the
 
established
 
fumed
 
silica
 
production
process.
 
On July 6, 2021, PyroGenesis
 
announced the signature of a
 
contract valued at approximately
 
$4 million with HPQ
Silica Polvere
 
Inc. (“
HPQ Polvere
”), a
 
wholly owned
 
subsidiary of
 
HPQ. Under
 
this contract,
 
PyroGenesis was
 
tasked to
design, develop and manufacture a
 
novel one-step plasma-based reactor and
 
process for the conversion
 
of quartz to fumed
silica.
 
The
 
contract
 
includes
 
annual
 
royalty
 
payments
 
by
 
HPQ
 
Polvere
 
to
 
PyroGenesis
 
on
 
future
 
sales
 
arising
 
from
 
the
project and PyroGenesis may,
 
at any time, convert said royalties into a 50% ownership stake
 
in HPQ Polvere.
On August 17,
 
2021, the Company
 
announced the signing
 
of a
 
$1.2 million contract
 
for two
 
air plasma torch
 
systems
with an existing Asian client. These torches are to be incorporated
 
into the client’s medical waste destruction
 
systems.
On
 
September
 
22,
 
2021,
 
PyroGenesis
 
announced
 
that
 
Pyro
 
Green-Gas
 
had
 
been
 
selected
 
to
 
supply
 
its
 
landfill
biogas purification system
 
to Carbonaxion Bioénergies Inc.,
 
the promoter of
 
the GNR Neuville
 
project, which is
 
being carried
out at the environmental complex of the Régie régionale
 
de gestion des matières résiduelles de Portneuf.
On October 19, 2021, PyroGenesis announced that
 
it had been awarded an Innovative Solutions Canada
 
phase 2
(prototype development) contract to develop a unique hybrid ceramic powder processing system for the National Research
Council Canada, Canada’s largest federal research
 
and development organization.
On
 
October
 
20,
 
2021,
 
PyroGenesis
 
announced
 
the
 
creation
 
PyroGenesis
 
Aluminum,
 
a
 
new
 
division
 
bringing
together PyroGenesis’
 
aluminum industry
 
offerings to
 
provide the
 
following primary
 
products and
 
services:
 
i) DROSRITE
sales and tolling services; ii) conversion
 
of dross residues into valuable chemicals; iii)
 
upstream applications where plasma-
based solutions
 
are expected
 
to reduce
 
GHG emissions;
 
iv) high
 
powered plasma
 
torches geared
 
to replacing
 
fossil fuel
burners; and v) conversion of spent pot lining residues
 
into a valuable end-product.
On October
 
28, 2021,
 
PyroGenesis announced that
 
it had
 
been selected
 
to provide
 
a $9.2
 
million land-based system
to destroy
 
perfluoroalkyl and
 
polyfluoroalkyl substances.
 
The Company
 
would provide
 
its plasma
 
based thermal
 
process
equipment in a two-phase
 
project geared toward providing
 
a land-based system
 
to destroy these substances.
 
On October
7, 2022, the Company announced that contract negotiations had
 
been suspended and discontinued.
On December
 
8, 2021,
 
PyroGenesis announced
 
the launch
 
of a
 
new zero-carbon
 
emission hydrogen
 
production
project
 
which
 
aims
 
to
 
compete
 
with
 
conventional
 
technologies
 
to
 
produce
 
an
 
environmentally
 
friendly
 
hydrogen.
 
If
successful,
 
PyroGenesis’
 
new
 
hydrogen
 
production
 
technology
 
would
 
convert
 
methane
 
to
 
hydrogen,
 
thereby
 
creating
 
a
zero-carbon emission hydrogen.
 
10
Corporate Developments and Financings
During the year, the Company repurchased and cancelled 840,094 common shares at a weighted average price of
$4.96 per share, for total cash considerations of $4,183,617,
 
including commissions of $16,678.
On January 12, 2021, PyroGenesis announced
 
that it intended to implement a normal
 
course issuer bid according
to which the Company could purchase
 
over a twelve-month period up
 
to 5,000,000 common shares (approximately
 
3.14%
of the then issued and outstanding).
On March 3, 2021, PyroGenesis announced the appointment
 
of Mr. Ben Naccarato
 
as an independent director.
On March 10,
 
2021, the Company
 
announced that
 
its application to
 
list its Common
 
Shares on the
 
NASDAQ had
been approved. Trading commenced on March 11, 2021, under the ticker symbol “PYR” and trading of its Common Shares
ceased to be traded on the OTCQB. In connection with the NASDAQ listing, the Company
 
announced that, to maintain the
overall
 
independence
 
of
 
the
 
Board
 
of
 
Directors,
 
Mr.
 
Michael
 
Blank
 
resigned
 
as
 
a
 
director
 
and
 
member
 
of
 
the
 
Audit
Committee but would continue to serve as the Company’s
 
acting Chief Financial Officer.
On August
 
11,
 
2021, PyroGenesis
 
finalized
 
its strategic
 
acquisition
 
of Pyro
 
Green-Gas
 
and its
 
subsidiaries
 
for a
total cash
 
consideration of approximately
 
$4.4 million. Montreal-based
 
Pyro Green-Gas designs
 
and builds
 
(i) gas upgrading
systems to convert
 
biogas into renewable
 
natural gas (“RNG”), (ii)
 
pyrolysis-gas purification systems, (iii)
 
biogas and landfill-
gas flares
 
and thermal
 
oxidizers, and
 
(iv) systems
 
for the
 
purification of
 
coke-oven gas
 
(a by-product
 
in the
 
primary steel
industry arising from
 
the conversion of coal
 
into coke) into high
 
purity hydrogen. Pyro
 
Green-Gas is also known
 
for its line
of landfill gas flares which reduce GHG emissions from
 
landfills.
On September 20, 2021, PyroGenesis announced that it had been added to the FTSE
 
Global Total
 
Cap Index and
FTSE Global
 
Micro Cap
 
Index. The
 
FTSE Global
 
Total
 
Cap Index
 
is a
 
market-capitalization
 
weighted index
 
representing
the performance of
 
large, mid and
 
small cap stocks,
 
across emerging and
 
developed companies.
 
The FTSE Global
 
Micro
Cap
 
Index
 
provides
 
deep
 
representation
 
of
 
micro
 
cap
 
stocks.
 
Both
 
indexes
 
are
 
used
 
as
 
the
 
basis
 
for
 
performance
benchmarks and investment products, such as funds, derivatives, and
 
exchange-traded funds by investment professionals
globally.
On September 27,
 
2021, PyroGenesis announced the
 
appointment of Mr. Andre Mainella,
 
as Chief Financial
 
Officer
(CFO) of the Company.
5.3.
 
Year Ended December 31,
 
2022
Business Highlights and Milestones
On February 2, 2022,
 
PyroGenesis announced the
 
receipt of a US$3,000,000
 
purchase order for
 
the first of
 
three
10-tonne DROSRITE systems from an existing client.
On February 7,
 
2022, PyroGenesis
 
announced that
 
it had signed
 
an agreement
 
with a European
 
research center
for the
 
sale
 
of a
 
plasma
 
torch
 
system which
 
will
 
be used
 
to develop
 
a process
 
to convert
 
hydrocarbons,
 
including GHG
producing gases such as methane, into non-hazardous
 
chemicals.
On April
 
25, 2022,
 
PyroGenesis confirmed
 
that the
 
Company’s DROSRITE
 
dross recovery
 
technology (a
 
total of
seven DROSRITE systems) had been successfully commissioned
 
for Ma’aden Aluminum.
On May
 
19, 2022,
 
PyroGenesis announced
 
that it
 
had completed
 
a commercial
 
order for
 
titanium powders.
 
The
order
 
derived
 
from
 
the
 
Company’s
 
partnership
 
agreement
 
with
 
Aubert
 
&
 
Duval,
 
a
 
multinational
 
specializing
 
in
 
upscale
metallurgy,
 
and
 
the
 
powder
 
in
 
question
 
was
 
produced
 
at
 
PyroGenesis’
 
production
 
facility
 
using
 
its
 
NexGen
 
plasma
atomization system.
On
 
September
 
7,
 
2022,
 
the
 
Company
 
announced
 
that
 
it
 
had
 
been
 
selected
 
by
 
an
 
international
 
producer
 
of
magnesium metal, to
 
test PyroGenesis’
 
zero-emission plasma torches as
 
part of their
 
process for transforming mining
 
waste
and recycled minerals into high-value metal.
On October
 
6, 2022,
 
PyroGenesis
 
confirmed
 
that
 
its Gen3
 
PUREVAP
 
Quartz
 
Reduction
 
Reactor pilot
 
plant had
completed the
 
month-long power-up
 
process and
 
was initiating
 
the testing
 
phase of
 
its transformation
 
of quartz
 
into high
 
11
purity
 
silicon.
 
The
 
plant
 
is
 
designed
 
to
 
produce
 
multiple
 
systems
 
that
 
can
 
operate
 
under
 
harsh
 
conditions,
 
including
 
at
extremely high temperatures and under vacuum.
On November 2, 2022, PyroGenesis announced that it had passed its annual quality audit for two key international
standards: ISO 9001:2015, and AS9100D.
 
The audits encompassed all of
 
PyroGenesis’ facilities for the purpose
 
of meeting
compliance with the existing quality management designations.
On November 10, 2022, PyroGenesis
 
announced that it had successfully
 
produced hydrogen from methane
 
using
zero-carbon emission hydrogen production technology.
Corporate Developments and Financings
On October
 
19, 2022, PyroGenesis
 
announced the
 
completion of
 
a non-brokered
 
private placement
 
consisting of
the issuance and
 
sale of 1,014,600
 
units of the
 
Corporation at a
 
price of $1.30
 
per unit, for
 
gross proceeds of
 
$1,318,980
to the Company.
 
Each unit consisted
 
of one Common
 
Share and one
 
warrant entitling the
 
holder thereof to
 
purchase one
Common Share at a price of $1.75 until October 19, 2024.
On November 22,
 
2022, PyroGenesis received
 
a notice (“Notice”)
 
from the NASDAQ
 
stating that the
 
Company is
not in compliance
 
with the
 
minimum bid
 
price requirement
 
(“Minimum Bid
 
Requirement”) of
 
US$1.00 per
 
share under
 
the
NASDAQ Listing
 
Rule 5550(a)(2) based
 
upon the
 
closing bid
 
price of
 
the Company’s Common
 
Shares for
 
the 30
 
consecutive
business days prior
 
to the date
 
of the Notice.
 
The Notice has
 
no immediate effect
 
on the listing
 
or trading of
 
the Common
Shares on NASDAQ,
 
and the Company’s
 
operations are not
 
affected by the
 
receipt of the
 
Notice. Under NASDAQ
 
Listing
Rule
 
5810(c)(3)(A),
 
the
 
Company
 
had
 
180
 
calendar
 
days
 
from
 
the
 
date
 
of
 
the
 
Notice,
 
or
 
until
 
May
 
22,
 
2023,
 
to
 
regain
compliance with the Minimum Bid Requirement, during which time the Common Shares will continue to trade on NASDAQ.
If at
 
any time
 
before May 22,
 
2023, the bid
 
price of
 
the Common Shares
 
closes at
 
or above
 
US$1.00 per share
 
for a minimum
of 10 consecutive business days, the Company will regain compliance with the Minimum Bid Requirement.
 
If the Company
does
 
not
 
regain
 
compliance
 
with
 
the
 
Minimum
 
Bid
 
Requirement
 
by
 
May
 
22,
 
2023,
 
the
 
Company
 
may
 
be
 
eligible,
 
upon
satisfaction of certain NASDAQ listing
 
requirements, for an additional
 
period of 180 calendar days
 
to regain compliance or
the
 
Common
 
Shares
 
may
 
be
 
subject
 
to
 
delisting
 
from
 
NASDAQ.
 
The
 
Company
 
will
 
closely
 
monitor
 
the
 
situation
 
and
 
is
considering various strategies to regain compliance with the Minimum
 
Bid Requirement under the Nasdaq Listing Rules.
5.4.
 
Recent Developments
On January
 
10,
 
2023,
 
PyroGenesis
 
announced
 
a contract
 
to provide
 
its SPARC™
 
refrigerant
 
waste destruction
system to
 
a subsidiary
 
of The
 
Trust
 
for the
 
Destruction of
 
Synthetic Refrigerants,
 
a New
 
Zealand government
 
-mandated
organization. The project,
 
initially valued at $6
 
million, aims to assist
 
New Zealand in its
 
stated goals of reducing
 
synthetic
gas emissions by 25% no later than 2035.
 
On January 12, 2023, PyroGenesis announced
 
an initial contract with a
 
major European multinational chemical, oil,
and gas conglomerate to assess the
 
applicability of PyroGenesis’ plasma torches for use
 
in the client’s chemical production
process.
On
 
January
 
17,
 
2023,
 
PyroGenesis
 
announced
 
that
 
Pyro
 
Green-Gas
 
signed
 
a
 
contract
 
with
 
a
 
North
 
American
lithium-ion battery
 
recycler
 
for the
 
delivery of
 
a system
 
to decontaminate
 
the dust
 
generated during
 
the battery
 
recycling
process.
On February
 
8, 2023,
 
PyroGenesis announced
 
that Mr.
 
Alan Curleigh
 
is returning
 
to lead
 
PyroGenesis’ Board
 
of
Directors
 
as
 
Chair.
 
Mr.
 
P.
 
Peter
 
Pascali
 
stepped
 
down
 
as
 
Chair
 
and
 
will
 
continue
 
to
 
serve
 
as
 
Chief
 
Executive
 
Officer,
President and Director of PyroGenesis. The Board now
 
has eight directors, of whom six are independent.
On March 8, 2022,
 
PyroGenesis announced the
 
completion of a non-brokered
 
private placement consisting
 
of the
issuance and sale
 
of 5,000,000 units
 
of the Company
 
at a price of
 
$1.00 per unit, for
 
gross proceeds of $5,000,000
 
to the
Company. Mr. Pascali subscribed to 2,500,000
 
Units under the
 
private placement. Each
 
unit consists of
 
one Common Share
and one warrant entitling the holder to purchase one Common Share at a price of $1.25
 
until March 7, 2025. The Common
Shares
 
and
 
warrants
 
issued
 
in
 
connection
 
with
 
the
 
private
 
placement
 
as
 
well
 
as
 
the
 
Common
 
Shares
 
underlying
 
the
warrants are subject to a hold period of four months and one day
 
from the date of closing.
 
12
6.
 
Business of the Company
6.1.
 
General
 
PyroGenesis
 
is
 
a
 
high-tech
 
company
 
and
 
a
 
leader
 
in
 
the
 
design,
 
development,
 
manufacture,
 
and
commercialization
 
of
 
advanced
 
plasma
 
processes
 
and
 
sustainable
 
solutions
 
aimed
 
at
 
reducing
 
GHG
 
and
 
providing
economically
 
attractive
 
alternatives
 
to
 
conventional
 
“dirty”
 
processes.
 
PyroGenesis
 
has
 
created
 
proprietary,
 
patented,
advanced
 
plasma
 
technologies
 
that
 
are
 
being
 
vetted
 
and
 
adopted
 
by
 
industry
 
leaders
 
in
 
five
 
markets:
 
(i)
 
iron
 
ore
pelletization; (ii) aluminum; (iii) waste management; (iv)
 
steel making; and (v) additive manufacturing.
With a team of experienced engineers, scientists and technicians working at its Montreal head office and 3,800 m2
and 2,940 m2
 
manufacturing facilities, the
 
Company endeavours to
 
continuously innovate and provide
 
original and inventive
cleantech products to the marketplace. Its core competencies allow PyroGenesis to provide plasma torches, plasma waste
processes, high-temperature metallurgical
 
processes, and additive manufacturing
 
powders to the global
 
marketplace. The
operations of PyroGenesis are ISO 9001 and AS9100D
 
certified.
6.2.
 
Products and Services
The Company’s specialized products and
 
services are commercialized to
 
customers operating in a
 
wide range of industries,
including
 
the
 
defense,
 
metallurgical,
 
mining,
 
advanced
 
materials
 
(including
 
3D
 
printing),
 
oil
 
&
 
gas,
 
and
 
environmental
industries. The products and services of PyroGenesis
 
include:
 
Plasma torches systems, used for, among other things, replacing conventional burners in pelletizing of iron
ore furnaces (mining sector) and other industrial furnaces
 
(mainly metallurgy sector);
 
Waste destruction and waste-to-energy systems,
 
offered predominantly to customers in the environmental
and defense industries, and for the destruction of end-of-life
 
refrigerants;
 
Systems for
 
the recovery
 
of aluminum
 
and other
 
metal from
 
dross (a
 
residue
 
generated by
 
primary and
secondary metal producers), offered mainly to customers
 
in the mining and metallurgical industries;
 
Production
 
of
 
high
 
purity
 
spherical
 
metal
 
powders,
 
which
 
are
 
predominantly
 
offered
 
to
 
customers
 
in
 
the
additive manufacturing (also known sometimes as 3D printing)
 
industry;
 
Development
 
of
 
processes
 
to
 
produce
 
high
 
purity
 
silicon
 
metals,
 
nano
 
powders
 
and
 
nanowires,
 
offered
predominantly
 
to
 
customers
 
in
 
the
 
mining
 
and
 
metallurgical
 
industries
 
as
 
well
 
as
 
those
 
in
 
the
 
battery
manufacturing and/or disposal business;
 
Systems
 
for
 
upgrading
 
of
 
biogas
 
and
 
landfill
 
gas
 
into renewable
 
natural
 
gas,
 
used
 
in
 
the
 
environmental
industry;
 
Systems
 
used
 
in
 
the
 
petrochemical
 
and
 
metallurgical
 
industries
 
for
 
the
 
purification
 
of
 
industrial
 
gases,
including
 
the
 
extraction
 
of
 
hydrogen
 
from
 
coke
 
oven
 
gas,
 
the
 
purification
 
of
 
natural
 
gas
 
into
 
high
 
purity
methane, and the purification of pyrolytic gases;
 
Development of a process to produce fumed silica, used
 
in the polymer, cosmetics,
 
and paint industries;
 
Installation, commissioning, and start-up services; and
 
Internally and externally funded research and development
 
projects.
Plasma Torches for Iron Ore Pelletization
PyroGenesis
 
manufactures
 
and
 
commercializes
 
proprietary
 
plasma
 
torches
 
and
 
plasma
 
torch
 
systems
 
used
 
to
replace fossil
 
fuel burners
 
in industrial
 
iron ore
 
pelletization process.
 
The Company’s
 
plasma torches
 
can heat
 
gas up
 
to
10,000°F,
 
which is as hot as the surface of the sun.
Pelletization is the
 
process in which
 
iron ore fines
 
are agglomerated into
 
small balls with
 
some additives and
 
then
heated
 
at
 
high
 
temperatures
 
in
 
an
 
induration
 
furnace
 
to
 
make
 
them
 
more
 
resistant.
 
The
 
resulting
 
pellets
 
are
 
then
 
used
 
 
 
 
13
downstream and typically on a different site to make iron and steel in blast furnaces
 
and in direct reduction of iron (DRI). In
conventional technology,
 
the process
 
heat is
 
provided by
 
fuel oil or
 
natural gas
 
burners. The
 
combustion of
 
fossil fuels
 
in
these burners results in the production
 
of GHGs, notably carbon dioxide. Because plasma
 
torches use renewable electricity
to generate heat, they offer an environmentally
 
attractive alternative to fossil fuel burners.
The objective of
 
the Company is
 
to be
 
a significant player
 
in the
 
world-wide movement to
 
reduce the carbon
 
footprint
in mining and
 
manufacturing. PyroGenesis
 
offers a patented
 
process to replace
 
fossil fuel burners
 
with electrically heated
plasma torches, thereby reducing GHG emissions for
 
the iron ore pelletization industry. The Company believes its solutions
can be economically attractive
 
with greater environment
 
benefits than the traditional
 
alternatives. By using
 
the Company’s
solutions, companies
 
can convert
 
their existing
 
burners
 
and systems
 
often without
 
needing to
 
shut down
 
their facility
 
for
installation and with minimal changes to their processes.
Waste Destruction and Waste-to-Energy
 
Systems
PyroGenesis manufactures and
 
commercializes a broad
 
range of waste destruction
 
and waste-to-energy systems
to customers in the environmental and defense industries. At the core of these systems are the Company’s plasma torches
and
 
plasma
 
gasification
 
reactors.
 
The
 
Company
 
believes
 
it
 
offers
 
one
 
of
 
the
 
most
 
complete,
 
easy-to-operate,
 
high
temperature,
 
plasma-based
 
treatment
 
systems.
 
The
 
waste
 
destruction
 
and
 
waste-to-energy
 
systems
 
offered
 
by
 
the
Company include the following:
 
Plasma Arc Waste Destruction Systems
 
(“
PAWDS
”) for waste destruction onboard ships;
 
Steam
 
Plasma
 
Arc
 
Refrigerant
 
Cracking
 
(“
SPARC
”)
 
systems
 
for
 
the
 
destruction
 
of
 
certain
 
refrigerants,
including
 
chlorofluorocarbons
 
(“
CFCs
”),
 
hydrofluorocarbons
 
(“
HFCs
”)
 
and
 
hydrochlorofluorocarbons
(“
HCFCs
”);
 
Plasma Arc Chemical
 
Warfare Agent
 
Destruction Systems
 
(“
PACWADS
”), which
 
are mobile platforms
 
for
the onsite destruction of chemical warfare agents;
 
Plasma
 
Resource
 
Recovery
 
Systems
 
(“
PRRS
”)
 
for
 
land-based
 
waste
 
destruction
 
and
 
waste-to-energy
applications;
 
Plasma torches for waste gasification and combustion; and
 
Plasma Arc Gasification and Vitrification (“
PAGV
”).
Plasma Arc Waste Destruction System (PAWDS)
Originally
 
developed
 
by
 
the
 
Company
 
in
 
the
 
late
 
1990s
 
for
 
the
 
gasification
 
of
 
waste
 
onboard
 
US
 
Navy
 
aircraft
carriers, PAWDS
 
was the
 
first plasma
 
destruction system
 
for marine
 
use on
 
US Navy
 
aircraft carriers.
 
PAWDS
 
uses the
plasma eductor for the fast gasification
 
of milled waste. Navy waste
 
is comparable to the combustible
 
fraction of municipal
solid
 
waste,
 
comprised
 
of
 
paper,
 
cardboard,
 
plastics,
 
wood
 
and
 
rags.
 
Since
 
launching
 
PAWDS
 
in
 
1999,
 
the
 
Company
received orders
 
for four
 
PAWDS
 
for the
 
US Navy,
 
two of
 
which have
 
been delivered
 
and installed
 
on the
 
Gerald R.
 
Ford
(CVN-78) and the
 
John F.
 
Kennedy (CVN-79) aircraft
 
carriers, and two
 
of which are
 
to be installed
 
in two planned
 
aircraft
carriers during
 
the construction
 
of those
 
vessels. Developed
 
in collaboration
 
with the
 
US Navy,
 
at 1/5th
 
the size
 
and half
the weight of a
 
typical marine incinerator, the patented PAWDS has a capacity of 3.5
 
tons/day. PAWDS
 
is a highly compact,
inherently safe and efficient alternative to the shipboard
 
waste incinerators.
Steam Plasma Arc Refrigerant Cracking (SPARC)
The SPARC
 
process is
 
the Company’s
 
patented technology
 
for the
 
destruction of
 
old refrigerants
 
such as
 
CFCs,
HFC and HCFCs. The system is pre-assembled on skids
 
and has demonstrated high destruction and removal efficiency
 
of
more
 
than
 
99.9999%.
 
The
 
SPARC
 
system
 
uses
 
a
 
water
 
vapour
 
(steam)
 
torch
 
to
 
destroy
 
the
 
refrigerants
 
quickly
 
and
efficiently. The system is designed to handle wastes that have very high
 
chlorine and fluorine content. An integrated caustic
scrubber ensures that
 
hydrochloric acid (HCl)
 
and hydrofluoric acid (HF)
 
emissions are well
 
below accepted limits. The
 
base
system is designed for a destruction capacity of 50 kilograms
 
per hour based on the refrigerant R12.
Plasma Arc Chemical Warfare Agent
 
Destruction System (PACWADS)
PACWADS
 
was developed by the Company
 
for the US and UK
 
special forces to destroy
 
chemical warfare agents
on site. The system
 
is installed on
 
two trailers and
 
can be deployed
 
quickly in areas
 
where chemical warfare
 
agents must
 
 
 
 
14
be immediately destroyed. Performance tests
 
on simulants have demonstrated destruction
 
and removal efficiency
 
of more
than 99.99999%.
 
The system
 
is designed
 
to destroy
 
the equivalent
 
of two
 
barrels (or
 
approximately 318
 
litres) per
 
day of
sarin, a deadly nerve gas, and is also suitable for the destruction
 
of a variety of other chemical warfare agents.
Plasma Resource Recovery System (PRRS)
The PRRS is used to convert waste to syngas (synthesis
 
gas) and inert slag (a glass-like by-product left
 
over after
a desired
 
metal
 
has
 
been
 
separated
 
(i.e.,
 
smelted)
 
from
 
its
 
raw ore).
 
The
 
PRRS
 
combines
 
a direct
 
current
 
graphite
 
arc
furnace, where the
 
inorganic portion of
 
waste is vitrified,
 
and the organic
 
portion is gasified.
 
The produced
 
syngas is then
cleaned up in a
 
plasma-fired eductor, similar to the one used
 
in the PAWDS technology, where tars are converted into clean
syngas (i.e. carbon monoxide and hydrogen).
 
The resulting syngas is further cleaned
 
of contaminants (such as HCl, sulfur
compounds, particulates
 
and volatile heavy
 
metals) using filters
 
and scrubbers.
 
The resulting syngas
 
can be used
 
as fuel
in a gas engine. The inert slag can be used as construction
 
material.
Plasma Torches
 
for Waste Gasification Systems
PyroGenesis’
 
plasma
 
torch
 
systems
 
are
 
used
 
in
 
waste-to-energy
 
applications,
 
advanced
 
material
 
production,
metallurgical
 
processing,
 
thermal
 
treatment
 
and
 
nanotechnology
 
manufacturing.
 
As
 
a
 
cleantech
 
alternative
 
to
 
fossil
 
fuel
burning, PyroGenesis’ electricity-driven plasma torch systems are easy to operate and offer a high level of safety, reliability
and service life of wear components.
Plasma Arc Gasification and Vitrification (PAGV)
PAGV systems convert incinerator ash and other hazardous inorganic material to
 
an inert, non-toxic slag. Slag is a
glass like
 
material, composed
 
of several
 
oxides, typically
 
silica
 
based. Using
 
the Company’s
 
unique furnace
 
design, the
proprietary arc plasma technology uses graphite electrodes and an electrical current to create arcs between the electrodes
and the melt, generating a high
 
temperature environment (typically above 1500°C) and melting the mineral matter into
 
slag.
This slag can be
 
used in a wide
 
range of applications, namely as
 
a building material for construction (e.g.
 
aggregate asphalt
and flooring as
 
well as partial
 
replacement for
 
cement in
 
concrete). The
 
PAGV
 
systems minimize
 
future legacy
 
issues for
operators of
 
incinerators (notably
 
municipalities
 
as well
 
as managers
 
of incineration
 
operations
 
for industrial,
 
hazardous,
biomedical, and animal
 
(slaughterhouse) waste) with a
 
relatively simple melting
 
process for their
 
grate and fly
 
ash. Asbestos
waste from decommissioning operations is also an excellent use
 
for this technology.
Systems for the Recovery of Aluminum and Other
 
Metal from Dross
Dross, a by-product of the
 
smelting process for aluminum and other metals, presents
 
the metallurgical industry with
challenges
 
and
 
opportunities.
 
A
 
dross
 
is
 
normally
 
composed
 
of
 
roughly
 
60%
 
metal
 
and
 
40%
 
residue.
 
Traditional
 
dross
treatment techniques
 
typically contaminate
 
the residues
 
with salt.
 
Metallurgical companies
 
aim to
 
recover metal
 
found in
dross while properly disposing of the oft-contaminated
 
residue.
PyroGenesis produces
 
systems for
 
the recovery
 
of aluminum
 
and other
 
metal from
 
dross through
 
its DROSRITE
process. This
 
process is
 
a salt-free,
 
cost-effective, sustainable
 
process for
 
maximizing metal
 
recovery from
 
dross without
any hazardous by-products. By using the DROSRITE technology, the residues can be converted into high-margin chemical
and metallurgical
 
products, including ammonium
 
sulphate and
 
aluminum sulphate. DROSRITE
 
allows the
 
treatment of dross
at its
 
source of
 
generation in a
 
controlled atmosphere,
 
tilting rotary furnace,
 
and minimizes
 
costly loss
 
of metal
 
while reducing
a smelter’s carbon footprint and energy consumption.
 
pyrex99d1p15i1 pyrex99d1p15i0
15
The following images compare the traditional
 
process for the recovery and treatment
 
of dross with the DROSRITE
process:
These systems are predominantly offered to customers in the metallurgical industry, targeting mainly the aluminum
and zinc industries.
Production of High Purity Spherical Metal Powders
The Company
 
produces
 
high purity
 
spherical
 
metal
 
powders
 
through
 
its plasma
 
atomization
 
process,
 
which
 
are
predominantly offered to customers in the additive
 
manufacturing (also known as 3D printing) industry.
PyroGenesis’
 
plasma
 
atomization
 
process
 
(known
 
as
 
NEXGEN
 
plasma
 
atomization)
 
allows
 
the
 
Company
 
to
produce and
 
sell high purity
 
spherical metal powders,
 
including titanium alloy
 
powders. Many existing
 
reactive metals cannot
easily
 
be
 
transformed
 
into
 
high
 
purity
 
spherical
 
powders,
 
especially
 
not
 
in
 
finer
 
size
 
cuts
 
such
 
as
 
-45μm/+15μm.
PyroGenesis’ NEXGEN process
 
offers an
 
improved yield
 
in the
 
finer size
 
cuts along
 
with a
 
higher production
 
rate. In
 
addition,
PyroGenesis can
 
convert a
 
wider variety
 
of metals
 
and alloys
 
into high
 
purity spherical
 
powders since
 
its plasma
 
torches
use argon gas and the reactor is backfilled with argon. This ensures the powders produced are
 
not exposed to any oxygen
during the
 
production process
 
and, as
 
a result,
 
PyroGenesis is
 
able to
 
produce high
 
purity powder
 
such as
 
titanium alloy
powders (Ti 6Al-4V grade 23).
Development of Processes to Produce High Purity
 
Silicon Metals, Nano Powders and Nanowires
The Company
 
is developing
 
processes
 
to produce
 
high purity
 
silicon metals
 
through
 
its PUREVAP
 
process
 
and
nano powders and
 
nanowires through
 
its PUREVAP
 
NSiR process.
 
These applications are
 
expected to be
 
predominantly
offered to
 
customers in
 
the mining
 
and metallurgical
 
industries, including
 
those involved
 
in the
 
making and/or
 
disposal of
batteries.
PUREVAP is a patent pending, one-step proprietary process being developed by the Company that uses a plasma
arc within
 
a vacuum furnace
 
to produce
 
high purity metallurgical
 
grade silicon and
 
solar grade silicon
 
from quartz. PUREVAP
reduces the
 
quartz with
 
carbon using
 
a plasma
 
submerged
 
arc. Under
 
vacuum,
 
and at
 
very low
 
operating
 
pressure, the
silicon is
 
refined in
 
a one-step
 
process removing
 
impurities and
 
transforming
 
it to
 
a purer
 
form, resulting
 
in a
 
high purity
silicon.
 
The
 
Company
 
expects
 
that
 
the
 
silicon
 
grades
 
produced
 
by
 
PUREVAP
 
will,
 
when
 
commercialized,
 
be
 
used
 
for
different applications, including solar energy.
The PUREVAP
 
NSiR process
 
is designed to
 
transform silicon
 
into spherical
 
silicon nano
 
powders and
 
nanowires
for use
 
in lithium-ion
 
batteries. This proprietary
 
process is
 
designed to
 
be highly
 
scalable and
 
is hoped
 
to allow
 
the production
of silicon
 
nano
 
powders
 
in
 
large
 
quantities
 
at
 
a competitive
 
cost
 
with
 
other
 
materials
 
used
 
in
 
the
 
lithium-ion
 
space.
 
The
PUREVAP NSiR can
 
use different purities of silicon as feedstock.
HPQ
 
Nano
 
acquired
 
the
 
intellectual
 
property
 
rights
 
to
 
the
 
PUREVAP
 
NSiR
 
system
 
in
 
2020
 
and
 
PyroGenesis
 
is
entitled to a royalty of 10% on the future sales of nano silicon powders and wires by
 
HPQ Nano, subject to the terms of the
contract.
 
The
 
royalty
 
stream
 
can,
 
at
 
any
 
time,
 
be
 
converted
 
by
 
PyroGenesis
 
into
 
a
 
50%
 
ownership
 
of
 
HPQ
 
Nano.
PyroGenesis has retained
 
a royalty-free, exclusive,
 
irrevocable, worldwide
 
license to use
 
the new system
 
for all purposes
other than the manufacturing of nano silicon powders and wires.
 
 
16
Upgrading of Biogas and Landfill Gas Into Renewable
 
Natural Gas (RNG)
Through Pyro
 
Green-Gas, the
 
Company offers
 
equipment for
 
the upgrading
 
of biogas
 
and landfill
 
gas into
 
RNG.
Pyro
 
Green-Gas'
 
equipment
 
combines
 
different
 
technologies
 
and
 
effects
 
the
 
removal
 
of
 
contaminants
 
from
 
biogas
 
and
landfill gas,
 
such as
 
hydrogen sulfide,
 
oxygen nitrogen,
 
volatile organic
 
compounds,
 
and moisture.
 
Pyro Green
 
-Gas can
offer both individual equipment and fully integrated
 
turnkey systems to its customers.
Systems for the Purification of Industrial Gases
Through Pyro
 
Green-Gas, the Company
 
offers equipment for
 
gas purification and
 
air emission
 
controls. Pyro Green-
Gas can
 
offer
 
both individual
 
equipment
 
and fully
 
integrated
 
turnkey systems
 
to its
 
customers. The
 
technologies
 
can be
used,
 
for
 
example,
 
for
 
coke
 
oven
 
gas
 
purification,
 
natural
 
gas
 
purification
 
into
 
high
 
quality
 
methane,
 
and
 
purification
 
of
pyrolytic gas and syngas (similar to the substances produced
 
during the application of the Company’s PRRS).
Development of a Process to Produce Fumed Silica
 
From Quartz
This plasma-based process allows a direct quartz-to-fumed silica transformation, removing the
 
usage of hazardous
chemical in the conventional making of fumed silica
 
and eliminating the hydrogen chloride gas normally
 
associated with its
manufacturing.
 
Furthermore,
 
the
 
process
 
requires
 
15,000
 
kWh
 
to
 
produce
 
a
 
metric
 
ton
 
of
 
fumed
 
silica,
 
representing
 
a
significant reduction in the energy footprint normally associated
 
with manufacturing fumed silica. And because the process
uses quartz as
 
feedstock, it is
 
expected that capital
 
requirements to build
 
a plant using
 
this plasma-based
 
process will be
significantly less than the capital requirements required to
 
build a traditional fumed silica plant.
HPQ Polvere acquired the intellectual property
 
rights to the fuming silica
 
patent in 2021 and PyroGenesis is
 
entitled
to a royalty
 
of 10% on
 
the future
 
annual gross
 
sales of fumed
 
silica by HPQ
 
Polvere, subject
 
to the terms
 
of the contract.
The royalty stream can,
 
at any time, be
 
converted by PyroGenesis
 
into a 50% ownership
 
of HPQ Nano.
 
PyroGenesis has
retained
 
a
 
royalty-free,
 
exclusive,
 
irrevocable,
 
worldwide
 
license
 
to
 
use
 
the
 
new
 
system
 
for
 
all
 
purposes
 
other
 
than
 
the
manufacturing of nano fumed silica.
6.3.
 
Installation & Servicing
PyroGenesis
 
offers
 
to
 
its
 
client
 
installation,
 
commissioning,
 
and
 
start-up
 
services.
 
These
 
services
 
are
 
typically
quoted
 
as
 
an
 
option
 
in
 
equipment
 
sales
 
contracts.
 
Separately,
 
PyroGenesis
 
offers
 
aftersales
 
services
 
to
 
its
 
customers,
including the sale of spare and replacement parts, consumable
 
parts, and onsite or remote service on installed systems.
6.4.
 
Internally and Externally Funded Research and Development
 
Projects
The
 
Company
 
relies
 
on
 
a
 
combination
 
of
 
internally
 
funded
 
and
 
externally
 
funded
 
R&D
 
to
 
grow
 
its
 
intellectual
property portfolio.
 
For externally
 
funded R&D,
 
the company
 
typically retains
 
intellectual property
 
rights for
 
the developed
technology,
 
while providing
 
licensing rights
 
to the client
 
in the sector
 
of application
 
and the
 
geographic area
 
of interest
 
to
the client.
6.5.
 
Markets and Opportunities
Waste Destruction and Waste-to-Energy
 
Systems
Marine Waste Treatment
 
Market (PAWDS)
Marine waste has been
 
an issue for lawmakers
 
and corporations for decades.
 
The disposal of waste
 
overboard is
harmful
 
to
 
the
 
marine
 
environment.
 
National
 
governments
 
and
 
international
 
organizations
 
(such
 
as
 
the
 
International
Maritime Organization) have adopted
 
rules to minimize the discharge
 
of harmful waste and
 
effluents from commercial
 
and
non-commercial ships.
 
At the
 
same time,
 
onboard storage
 
of waste
 
takes up
 
valuable space
 
within the
 
hull of
 
a ship
 
and
the eventual disposal in port is
 
costly and, if not handled properly, harmful to the environment. To mitigate this, modern ship
builders have incorporated onboard marine incinerators
 
to treat waste. However, these incinerators
 
also occupy significant
space, sometimes ascending through several decks of
 
a ship.
 
 
 
 
17
PyroGenesis’ PAWDS
 
provides an innovative
 
solution to these
 
issues. The
 
entire system
 
can fit in
 
the headroom
of a single
 
deck. It
 
is also
 
capable of
 
being started
 
up or
 
shut down
 
in a matter
 
of minutes.
 
Finally,
 
it does
 
not create
 
the
same level of GHG and other harmful emissions associated
 
with traditional incinerators.
At present, the
 
most attractive target
 
market for the
 
PAWDS
 
is military navies.
 
PyroGenesis has and
 
continues to
do
 
business
 
with
 
the
 
US
 
Navy
 
and
 
its
 
contractors.
 
PyroGenesis
 
has
 
already
 
outfitted
 
US
 
Navy
 
aircraft
 
carriers
 
with
 
its
PAWDS
 
and will
 
continue
 
aggressively
 
exploring this
 
market. The
 
price of
 
each
 
PAWDS
 
built for
 
the US
 
Navy
 
currently
ranges between US$5 to 6 million and new US aircraft carriers
 
are built every five to seven years.
In addition to new navy vessels, PyroGenesis also sees a potential market in the retrofitting of existing ships. As of
March 2023,
 
the U.S.
 
Navy fleet
 
comprises approximately
 
240 active
 
in commission
 
ships, including
 
11
 
aircraft carriers.
1
 
The Company
 
believes some
 
or all
 
of these
 
existing aircraft
 
carriers may
 
be candidates
 
for retrofitting
 
their legacy
 
waste
management systems with a PAWDS.
Waste-to-Energy Market (PRRS)
Waste management is a large and
 
growing market on a global scale. The methods
 
of managing waste are shifting
from disposal towards recycling and
 
resource recovery.
 
Governments, industries, and society
 
in general are seeking more
sustainable waste management
 
practices that have
 
lower environmental impacts
 
than traditional solutions
 
such as landfill
or incineration.
Just as
 
responsible waste
 
treatment systems
 
are seen
 
as an environment
 
and societal
 
priority,
 
solutions that
 
are
capable of
 
transforming waste
 
into energy
 
has also
 
seen major
 
growth on
 
a global
 
scale. Recent
 
research identified
 
the
global waste to energy
 
market as valued in excess of
 
US$35 billion in 2019, with
 
projections that it will
 
exceed US$50 billion
by 2027.
2
 
PyroGenesis looks to continue to expand its business in this fast-growing area. The Company believes its PRRS is
already a viable and economic alternative for small capacity projects compared to conventional
 
incinerators.
 
The system is
well suited for the
 
decentralized treatment of industrial, hazardous, and
 
clinical waste. As such, in
 
the short to medium
 
term,
the
 
Company
 
is
 
targeting
 
markets
 
that
 
are
 
readily
 
accessible
 
for
 
plasma
 
waste-to-energy
 
conversion,
 
which
 
include
industrial, hazardous, non-hazardous remote communities, military bases, and
 
medical wastes. In the medium
 
to long term,
the Company also intends to target the municipal solid
 
waste market with larger system capacities of up to 100
 
tons/day.
PyroGenesis is currently engaged in pilot testing of its PRRS technology with two
 
Canadian clients. The aim of the
testing is to
 
establish the design
 
basis for larger
 
commercial systems
 
that will be
 
proposed to the
 
customers following
 
the
end of pilot
 
testing. PyroGenesis
 
is working with
 
one such client,
 
Aluminerie Alouette,
 
to create a
 
plasma solution to
 
treat
the
 
hazardous
 
solid
 
wastes
 
produced
 
by
 
this
 
industrial
 
client.
 
The
 
Aluminerie
 
Alouette
 
project
 
aims
 
to
 
not
 
only
 
produce
energy rich
 
syngas that
 
the client
 
will use
 
to reduce
 
its consumption
 
of purchased
 
fuels, but
 
also to
 
generate a
 
valuable,
safe material from the client’s waste.
End-of-Life Refrigerant Destruction (SPARC)
The
 
international
 
community
 
has
 
long
 
recognized
 
that
 
certain
 
substances
 
have
 
been
 
having
 
harmful
 
effects
 
of
ozone depleting substances (“ODS”) as well
 
as impacting climate change. These substances
 
often attack the ozone layer,
the protective shield
 
that covers
 
earth’s atmosphere
 
and protects its
 
ecologies and inhabitants
 
from harmful solar
 
UV and
UVC
 
radiation.
 
They
 
also
 
can
 
lead
 
the
 
emission
 
of
 
GHGs,
 
which
 
alters
 
the
 
global
 
climate.
 
Refrigerants
 
used
 
in
 
the
refrigeration
 
cycle
 
of air
 
conditioning
 
systems
 
and
 
heat
 
pumps
 
have
 
played
 
a significant
 
factor
 
in
 
both.
 
CFC
 
and HCFC
refrigerants are potent ODSs, while CFC, HCFC, and HFC
 
refrigerants all contribute to GHG emissions.
 
While emissions
 
from ODS
 
have started
 
to fall
 
and the
 
ozone layer
 
slowly heal,
 
there remains
 
an active
 
need for
safe
 
and
 
effective
 
means
 
of
 
controlling
 
and
 
disposing
 
of
 
these
 
harmful
 
refrigerants.
 
PyroGenesis’
 
SPARC
 
system
 
uses
plasma technology
 
to destroy
 
CFCs, HCFCs
 
and HFCs,
 
including from
 
end-of-life cooling
 
apparatus. These
 
gases must
typically be destroyed when they cannot be recycled.
1
 
https://www.nvr.navy.mil/NVRSHIPS/FLEETSIZE.HTML.
2
 
https://www.alliedmarketresearch.com/waste-to-energy-
market#:~:text=The%20global%20waste%20to%20energy,4.6%25%20from%202020%20to%202027.
 
 
 
18
PyroGenesis
 
continues
 
to
 
explore
 
potential
 
applications
 
for
 
the
 
SPARC
 
technology,
 
especially
 
in
 
markets
 
with
limited conventional incineration capacity.
 
An example is the project initiated with The Trust for the Destruction of Synthetic
Refrigerants,
 
a
 
New
 
Zealand
 
government-mandated
 
organization,
 
in
 
which
 
the
 
SPARC
 
system
 
will
 
be
 
used
 
to
 
destroy
refrigerants and assist New Zealand in its ambitious goals
 
to reduce synthetic gas emissions.
Plasma Torch Market
A plasma
 
torch
 
is a
 
device
 
for generating
 
a
 
directed
 
flow
 
of
 
plasma
 
and,
 
as indicated
 
in
 
numerous
 
parts
 
of
 
this
document,
 
can
 
be
 
used
 
in
 
several
 
applications.
 
PyroGenesis’
 
plasma
 
torches
 
are
 
used
 
in,
 
among
 
other
 
things,
 
waste
treatment systems
 
(waste gasification
 
and vitrification),
 
its PAWDS
 
and PRRS
 
systems,
 
thermal spray
 
(plasma spray)
 
in
advanced materials production, and metallurgical applications.
Plasma torches can
 
be effective
 
and relatively
 
safe replacements
 
to conventional
 
fuel or gas
 
burners in industrial
furnaces. For
 
example, customers
 
use PyroGenesis’
 
patented pelletizing
 
apparatus
 
to perform
 
the induration
 
of iron
 
ore
concentrate pellets in
 
a tunnel
 
furnace heated by
 
plasma torches. By
 
using PyroGenesis’ electricity powered
 
plasma torches
instead of
 
burning natural
 
gas, heavy
 
oil, or
 
pulverized
 
coal to
 
power burners,
 
the generation
 
of harmful
 
GHGs
 
(notably
carbon dioxide) is greatly reduced relative to conventional iron ore
 
pelletizing processes.
The Company
 
sees excellent
 
potential for growth
 
in the
 
sale of plasma
 
torch systems.
 
The global
 
iron ore
 
pellets
market alone
 
already exceeds
 
US$45 billion
 
and the
 
demand for
 
iron ore
 
pellets is
 
expected to
 
near 540,000
 
kilotons by
2027.
3
 
To date, PyroGenesis
 
occupies only a fraction of this market. But given the global appetite for more environmentally
sustainable and economically viable industrial solutions, the Company expects more new and existing customers to look to
refit existing burners with its plasma torch systems and
 
considers itself well placed to see growth in this area.
 
Systems for the Recovery of Aluminum and Other
 
Metal from Dross
Dross is a by-product of the smelting process for aluminum
 
and other metals. As described early in this document,
dross presents
 
both a challenge
 
and an opportunity
 
for those in
 
the metallurgical
 
industry.
 
Dross is typically
 
composed of
both metal
 
and residue
 
and companies
 
want to
 
recover the
 
valuable metal
 
while treating
 
and/or disposing
 
of the residue,
which is usually contaminated.
Aluminum is one of the most popular metals in
 
the world. Global annual production of aluminum exceeds 65 million
metric tons
 
and, from
 
that aluminum
 
production, nearly
 
5 metric tons
 
of dross
 
is generated
 
annually.
4
 
While this
 
presents
exciting opportunities
 
for PyroGenesis,
 
it is
 
important to
 
note that
 
more than
 
half of
 
all aluminium
 
is produced
 
in China,
 
a
market that the Company
 
does not do much
 
business in and which
 
is traditionally complicated
 
to enter (for reasons
 
which
include
 
a
 
relative
 
lack
 
of
 
intellectual
 
property
 
protection,
 
restricted
 
market
 
conditions,
 
and
 
a
 
sometimes
 
politicized
commercial environment).
Over the past several years,
 
PyroGenesis has shifted its
 
DROSRITE marketing strategy from
 
a model focused on
selling
 
equipment
 
to
 
one
 
in
 
which
 
DROSRITE
 
is
 
offered
 
as
 
a
 
service
 
via
 
a
 
tolling
 
agreement.
 
In
 
a
 
tolling
 
arrangement,
PyroGenesis would build, own and operate the DROSRITE system and associated equipment for the aluminum smelter on
the smelter plant location. Although tolling revenues can vary widely
 
depending on the sector and geographic location, this
tolling model offers PyroGenesis the opportunity to
 
create recurring revenues.
Because the DROSRITE technology not only
 
allows users to recover valuable metal
 
but also treat dross and
 
create
valuable residues, PyroGenesis has the
 
opportunity to become a leader
 
as an onsite dross processor
 
that delivers a zero-
landfill/reduced carbon solution.
Production of High Purity Silicon Metals, Nano Powders and
 
Nanowires
Solar Industry
Solar photovoltaic (PV) systems have grown at a
 
tremendous rate. The International Energy Agency estimates that
Solar PV generation increased by a
 
record 179 TWh (up 22%)
 
in 2021 to exceed 1
 
000 TWh and already accounts for
 
3.6%
3
 
Iron Ore Pellets Market Size, Share & Trends Analysis Report By Product (Blast Furnace, Direct Reduced), By Trade (Captive,
Seaborne), By Region, And Segment Forecasts, 2020 – 2027. See https://www.grandviewresearch.com/industry-analysis/iron-ore-
pellets-market.
4
 
On trending technologies of aluminium dross recycling: A review, by Ankur Srivastava and Arunabh Meshram (March 2023). See
https://www.sciencedirect.com/science/article/abs/pii/S0957582023000113
 
 
 
19
of global
 
electricity
 
generation5. Solar
 
grade silicon
 
metal (SOG
 
Si), used
 
in manufacturing
 
solar cells,
 
is a
 
key material
needed to meet the growing demand for solar energy. Each new gigawatt of solar energy capacity requires 5,000 tonnes of
solar grade silicon metal and strong demand is expected to fuel
 
growth.
Battery Industry
Battery manufacturing is another
 
high-growth industry. The lithium-ion battery market size
 
is estimated to grow
 
from
US$44.2
 
billion
 
in
 
2020 to
 
US$94.4
 
billion
 
by
 
2025,
 
equivalent
 
to
 
a
 
compound
 
annual
 
growth
 
rate
 
of
 
16.4%.
6
 
Research
indicates that
 
replacing graphite
 
with nano
 
silicon powders
 
could allow the
 
manufacturing of
 
high-performance lithium-ion
batteries with the capability of delivering an almost
 
tenfold (10x) increase in anode capacity,
 
inducing a 20-40% gain in the
energy density of
 
the next generation
 
of lithium-ion batteries
7
.
Manufacturing of silicon
 
nano powders is
 
not yet commercially
feasible with selling prices of US$30,000/kg.
8
Production of Fuming Silica
Fumed
 
silica
 
(pyrogenic
 
silica)
 
is
 
a
 
white
 
microscopic
 
powder
 
with
 
high
 
surface
 
area
 
and
 
low
 
bulk
 
density.
 
Its
commercial applications encompass various industries including personal care, pharmaceuticals,
 
agriculture (food & feed),
adhesives, sealants, construction, batteries and automotive to name a few. Demand for fumed silica is growing but present
manufacturing processes are hindering its growth potential
9
.
Production of High Purity Spherical Metal Powders
The
 
global
 
metal
 
additive
 
manufacturing
 
(also
 
known
 
as
 
the
 
3D
 
printing)
 
continues
 
to
 
see
 
strong
 
growth
 
and
 
is
expected to
 
continue to
 
expand. The
 
market size
 
reached US$
 
6.36 billion
 
in 2022
 
and is
 
expected to
 
reach US$
 
22.60
billion by 2030.
10
At present, PyroGenesis
 
focuses its additive
 
manufacturing sales and
 
marketing efforts on
 
titanium and its
 
alloys.
Titanium is a
 
highly sought-after material
 
in the aeronautical, biomedical,
 
and high-end automotive
 
industry due to its
 
high
strength, low density, high fracture toughness, excellent corrosion resistance and superior biocompatibility. Titanium
 
is also
a high margin
 
material (in part
 
because of its
 
attributes and desirability).
 
PyroGenesis will consider
 
additional high margin
materials to maximize the potential of its NEXGEN technology.
While plasma atomized powders can be of a higher
 
quality than gas atomized powders, their widespread
 
adoption
has so far been limited
 
by their higher price.
 
In addition to PyroGenesis,
 
some of the key
 
players in the making
 
of additive
manufacturing powders through plasma
 
atomization are 6K Additive,
 
Tekna
 
Advanced Materials, and AP&C,
 
which is part
of GE. With its
 
NEXGEN technology,
 
PyroGenesis aims to
 
gain a competitive advantage
 
in the market by
 
producing high-
quality powder by
 
plasma atomization
 
at rates comparable
 
to gas atomization,
 
all while maximizing
 
the yield of
 
powder in
the preferred size range for additive manufacturing.
PyroGenesis’ additive manufacturing sales
 
and marketing efforts are
 
done on an international footing.
 
Through an
exclusive
 
distribution
 
agreement,
 
Aubert
 
&
 
Duval
 
supports
 
PyroGenesis’
 
sales
 
in
 
the
 
European
 
market.
 
PyroGenesis
continues
 
its
 
own
 
sales
 
efforts
 
in
 
the
 
North
 
American
 
and
 
Asian
 
markets
 
and
 
is
 
in
 
frequent
 
discussions
 
with
 
potential
customers,
 
including
 
well-established
 
aerospace
 
companies.
 
PyroGenesis
 
draws
 
on
 
its
 
plasma
 
torch
 
and
 
powder
production expertise to design and develop its own torches
 
and equipment for additive manufacturing.
Renewable Natural Gas
The biogas industry
 
is well established
 
on a
 
global level and
 
remains strong in
 
North America. Investments
 
in biogas
production and purification represent approximately $20 billion.
 
There are many RNG plants in operation or in development
and the market for RNG purification remains highly competitive.
5
 
Solar PV Report, by Piotr Bojek (September 2022). See https://www.iea.org/reports/solar-pv
6
 
Markets and Markets: “Lithium-Ion Battery Market – Global Forecast to 2025”.
7
 
Chemical Engineering News: “In the Battery Materials World, the Anode’s Time Has Come”, Volume
 
97, Issue 14 (2019).
8
 
HPQ-Silicon Resources Inc.: Innovative Silicon Solutions, 2020.
9
 
https://hpqsilicon.com/press-release/hpq-silicon-and-pyrogenesis-sign-an-agreement-to-develop-a-new-environmentally-friendly-
process-to-manufacture-fumed-silica/
10
 
“Metal 3D Printing Market Size to Hit $22.60 Billion by 2030”, by Grand View Research, Inc. (September 13, 2022). See:
https://www.prnewswire.com/news-releases/metal-3d-printing-market-size-to-hit-22-60-billion-by-2030---grand-view-research-inc-
301623035.html
 
pyrex99d1p20i0
20
6.6.
 
Growth Strategy
As interest in the Company’s products and services
 
has increased and the variety of uses for its core technologies
has
 
expanded,
 
the
 
Company
 
has
 
evolved
 
its
 
strategy
 
to
 
concentrate
 
its
 
solution
 
set
 
under
 
three
 
categories.
 
These
categories represent economic drivers that are key to
 
global heavy industry:
Energy Transition & Emission Reduction:
 
fuel
 
switching,
 
utilizing
 
the
 
Company’s
 
electrically
 
powered
 
plasma
 
torches
 
and
 
biogas
 
upgrading
technology to help reduce fossil fuel use and greenhouse
 
gas emissions.
Commodity Security & Optimization:
 
recovery of viable metals, and optimization
 
of production to increase output, to
 
maximize raw materials and
improve availability of critical minerals.
Waste Remediation:
 
safe destruction of
 
hazardous materials, and
 
the recovery and
 
valorization of underlying
 
substances such
as chemicals and minerals.
Currently,
 
within
 
each
 
category
 
the
 
Company
 
offers
 
several
 
solutions
 
in
 
different
 
stages
 
leading
 
up
 
to
commercialization, including the partial list in the diagram
 
below:
Going forward,
 
the Company’s
 
efforts will
 
be focused
 
around helping
 
customers overcome
 
challenges within
 
this
spectrum. More
 
information
 
can be
 
found on
 
each of
 
these solutions
 
and the
 
markets in
 
which they
 
operate above
 
(see
“Products and Services” and “Markets and Opportunities”)
Levering off its expertise in ultra-high temperature industrial processes, the Company typically aims to introduce its
products to markets by selling to, or partnering with,
 
industry-leading companies. These industry leaders not
 
only bring the
credibility sought when introducing new
 
technology but also valuable insight into
 
the market and potential
 
customers as well
as important market
 
feedback. This corporate
 
strategy of
 
leveraging off
 
these strategic partnerships
 
seeks growth
 
geared
at (i) broadening the customer base and (ii)
 
increasing sales to existing customers. Each of the Company’s existing product
lines has been, or
 
is in the process
 
of being, vetted or
 
adopted by industry
 
leaders. The Company
 
also seeks eco-friendly
business, primarily targeting offerings that reduce GHGs as opposed
 
to those who do not. As
 
part of its growth strategy, the
Company
 
will
 
also
 
selectively
 
consider
 
opportunities
 
to
 
broaden
 
and
 
enhance
 
its
 
product
 
and
 
market
 
scope
 
through
acquisitions.
6.7.
 
Employees
The Company had, as of December
 
31, 2022, 107 part-time and
 
full-time employees. Pyro Green-Gas
 
has 9 part-
time and full-time employees.
 
21
The Company prides
 
itself in hiring
 
talented individuals
 
with a complementary
 
mix of professional
 
experience and
industry
 
knowledge.
 
The
 
Company
 
continues
 
to
 
develop
 
a
 
working
 
environment
 
wherein
 
everyone
 
is
 
valued
 
for
 
their
contribution
 
to
 
the
 
team
 
and
 
rewarded
 
for
 
their
 
accomplishments.
 
The
 
Company
 
believes
 
that
 
it
 
has
 
one
 
of
 
the
 
highest
concentrations of plasma expertise under one roof in the world. As of December 31, 2022, all of the Company’s employees
were non-unionized.
6.8.
 
Facilities
The headquarters of the Company
 
are located at 1744 William
 
Street, Suite 200, Montréal, Québec,
 
Canada, H3J
1R4
 
in
 
leased
 
premises,
 
which
 
are
 
leased
 
from
 
the
 
Pascali
 
Trust,
 
a
 
related
 
party
 
of
 
which
 
P.
 
Peter
 
Pascali,
 
the
 
Chief
Executive Officer of the
 
Company,
 
is a trustee, officer
 
and beneficiary.
 
See “Directors and Executive
 
Officers - Conflicts
 
of
Interest”.
The Company operates two manufacturing facilities, one facility which is 40,902 sq. ft. (3,800 m2) and is located at
5655 Philippe-Turcot,
 
Montréal, Québec,
 
Canada, H4C
 
3K8 (the “Turcot
 
Facility”) and
 
the second
 
facility which
 
is 31,632
sq.
 
ft.
 
(2,939
 
m2)
 
and
 
is
 
located
 
at
 
9371
 
Wanklyn
 
Street,
 
LaSalle,
 
Québec,
 
Canada,
 
H8R
 
1Z2
 
(the
 
“Wanklyn
 
Facility”).
These facilities are used
 
to manufacture systems, produce metal
 
powders, and host various
 
pilot systems for demonstration
and testing, as well as to provide spare parts to the Company’s
 
existing client base.
The
 
Company
 
leases
 
the
 
Wanklyn
 
Facility.
 
Although
 
the
 
Company
 
continues
 
to
 
pay
 
rent
 
pursuant
 
to
 
a
 
lease
agreement for the Turcot
 
Facility,
 
it exercised its contractual
 
option to purchase the
 
property in 2022. The
 
exercise of said
option
 
and
 
the
 
ownership
 
of
 
the
 
Turcot
 
Facility
 
are
 
the
 
subject
 
of
 
legal
 
proceedings
 
described
 
below
 
(see
 
“Legal
Proceedings”).
The Company’s subsidiaries Pyro Green-Gas, Air Science
 
Technologies
 
Private Limited and Air Science
 
Italia S.r.l.
lease office premises in Montreal (Québec, Canada),
 
India and Italy,
 
respectively.
6.9.
 
Distribution Methods
The
 
Company
 
sells
 
its
 
products
 
and
 
systems
 
primarily
 
through
 
direct
 
sales
 
by
 
its
 
own
 
internal
 
sales
 
team.
 
The
marketing of the Company’s products is provided
 
by its internal sales and marketing group located
 
in Montréal, Canada.
Under a mutual exclusive agreement with Aubert &
 
Duval, PyroGenesis supplies plasma atomized titanium powder
to Aubert & Duval for distribution to the additive
 
manufacturing market in Europe. In addition, Drosrite
 
International has the
right to
 
manufacture,
 
market,
 
sell
 
and
 
distribute
 
DROSRITE
 
systems
 
and
 
the
 
DROSRITE
 
technology
 
in
 
the
 
Kingdom
 
of
Saudi Arabia and certain other countries in the Middle
 
East, on an exclusive basis. See “Directors and
 
Executive Officers -
Conflicts of Interest”.
The business
 
of the
 
Company is
 
neither cyclical
 
nor seasonal.
 
The Company’s
 
products have
 
long sales
 
cycles,
which are generally unaffected by seasonal variations.
The Company’s agreements are
 
typically for the
 
sale of equipment. The
 
Company gets paid on
 
milestone payments
that reflect progress on the projects. Usually,
 
the Company tries to also obtain advance payments. For the sale of powders
and parts, the Company generally invoices and gets paid
 
upon delivery.
6.10.
 
Intellectual Property and Research and Development
The intellectual property and proprietary rights of
 
PyroGenesis as well as its research and development
 
efforts are
important
 
to
 
its
 
business.
 
Considering
 
the
 
time
 
and
 
investment
 
required
 
to
 
develop
 
new
 
products
 
and
 
obtain
 
marketing
authorization,
 
the
 
Company
 
places
 
considerable
 
importance
 
on
 
protecting
 
its
 
research
 
findings,
 
trade
 
secrets
 
and
technologies.
Intellectual Property
In
 
efforts
 
to
 
secure,
 
maintain,
 
and
 
protect
 
its
 
intellectual
 
property,
 
proprietary
 
rights
 
and
 
exclusive
 
technology,
PyroGenesis
 
relies
 
on
 
a
 
combination
 
of
 
patents,
 
trademarks,
 
trade
 
secrets,
 
and
 
other
 
rights
 
as
 
well
 
as
 
licenses,
 
non-
disclosure agreements, and various other contractual arrangements. Nothing, however,
 
can guarantee that the Company’s
protective measures are sufficient to prevent illicit or wrongful appropriation or misuse of its technology or the development
of the same or similar technology by a third part
y.
 
 
 
pyrex99d1p1i0 pyrex99d1p22i1 pyrex99d1p22i0
22
Tradenames and Trademarks
PyroGenesis uses
 
the following
 
tradenames and trademarks
 
in connection
 
with the
 
sale of
 
its services
 
and products,
some of which are registered:
 
PYROGENESIS
 
PYROGENESIS ADDITIVE
 
PYROGENESIS ALUMINUM
 
PYRO GREEN-GAS
 
AIRSCIENCE TECHNOLOGIES
 
NEXGEN
 
DROSRITE
 
PUREVAP
 
SPARC
 
APT
 
APT-HP
 
RPT
 
MINIGU
 
SPT
 
PAWDS
 
PACWADS
 
PPRS
 
PAGV
 
AVITA
The tradenames and logos are used
 
everywhere the Company does business and the
 
common law trademarks are or have
been used
 
in connection
 
to the
 
sale of
 
specific products.
 
In addition,
 
PyroGenesis has
 
registered trademarks
 
or filed
 
for
registered
 
trademark
 
protection
 
in
 
the
 
following
 
jurisdictions:
 
Australia,
 
Brazil,
 
Canada,
 
China,
 
European
 
Union,
 
United
Kingdom, Indonesia, Israel,
 
India, Japan,
 
Korea (Republic
 
of), Mexico, New
 
Zealand, Russian
 
Federation, Turkey,
 
United
States and Vietnam.
Patents
As of March 1, 2023, the
 
Company owned a total of
 
148 patents (32 granted,
 
116 pending)
 
relating to its products
and processes.
Research & Development
The
 
Company’s
 
competitive
 
strategy
 
includes
 
a
 
strong
 
innovation
 
culture
 
and
 
a
 
long-standing
 
commitment
 
to
performing research and development.
 
The Company’s research
 
and development projects in various
 
areas, including but
 
23
not limited
 
to, the
 
production
 
of metallic
 
powders and
 
the development
 
of plasma
 
torches, are
 
performed and
 
conducted
internally out of its Montréal facility.
As
 
of
 
February
 
27,
 
2023,
 
the
 
Company
 
employed
 
twelve
 
engineers,
 
scientists
 
and
 
technicians
 
who
 
are
 
fully
dedicated to research and development projects. Separately, the Engineering and Process Startup and Optimization teams
are also involved
 
in research
 
and development
 
projects. Most
 
research and
 
development projects
 
are funded
 
by external
customers or government
 
grants and are
 
initiated to respond
 
to a specific
 
customer need. Follow
 
-on work and
 
equipment
sales can often result from these initial
 
research and development projects. Research and development projects are mainly
focused on product extension.
 
Internal research and
 
development expenses vary
 
widely from year to
 
year and depend on
Company priorities.
6.11.
 
Environmental Protection
The Company currently has active permits, including from the City
 
of Montréal, to carry out manufacturing activities
at the Wanklyn Facility and conduct research
 
and development and operate production systems at the
 
Turcot Facility.
The Company usually needs to
 
apply for a new permit each time
 
a new project involving testing occurs.
 
There are
no costs to these permits except the time required to
 
prepare the documentation for the City of Montréal. The time to
 
obtain
a permit is usually between two and four months.
6.12.
 
Foreign Operations
The Company, through its subsidiaries Air
 
Science Technologies Private Limited and Air Science
 
Italia S.r.l., carries
out operations in
 
India and Italy, respectively. The Company is in
 
the process of developing
 
a European operational strategy
to produce titanium metal powders
 
on the European continent. The
 
Company continues to consider expanding its
 
corporate
footprint in other jurisdictions, including the United States.
6.13.
 
Competition
PyroGenesis competes with
 
a substantial number
 
of companies in
 
the industries in
 
which it operates,
 
some of which
have greater technical and financial resources.
 
There can be no assurance that such
 
competitors are not already devoting
(or will not
 
devote in the
 
future) substantially
 
more resources
 
to the development
 
and marketing
 
of products
 
and services
that compete
 
with
 
those
 
of
 
the Company
 
or that
 
new
 
or existing
 
competitors
 
will
 
not enter
 
the
 
various
 
markets
 
in which
PyroGenesis is
 
active. There
 
can be
 
no assurance
 
that competitors
 
will not
 
develop new
 
and unknown
 
technologies with
which
 
the
 
Company
 
may
 
have
 
difficulty
 
competing.
 
Furthermore,
 
failure
 
to
 
remain
 
cost
 
competitive
 
may
 
result
 
in
PyroGenesis losing business to its competitors.
For
 
example,
 
the
 
Company
 
faces
 
competition
 
from
 
Europlasma
 
in
 
the
 
waste
 
destruction
 
and
 
waste-to-energy
systems markets, the Company faces competition from Altek, a division of Harsco Corp., in the systems for the recovery of
aluminum and
 
other metal
 
from dross
 
market, and
 
the Company
 
faces competition
 
from AP&C,
 
a GE
 
Additive company,
and Tekna,
 
a portfolio company
 
of Arendals Fossekompani
 
ASA, in the
 
production of high
 
purity spherical
 
metal powders
market.
Several companies
 
in the
 
world develop
 
and promote
 
thermal plasma
 
torches, most
 
notably Europlasma
 
S.A. in
France, Scanarc Plasma
 
Technologies
 
AB in Sweden,
 
Tetronics
 
Technologies
 
Ltd. in the
 
UK, Phoenix Solution
 
Company
in the USA, and Plazarium in Russia and Germany.
7.
 
Dividends and Distributions
The Company has
 
not paid any
 
dividends, has no
 
policy on paying
 
dividends or distributions,
 
and has no
 
present
intention to pay dividends. The Company currently intends
 
to reinvest any earnings to fund the development
 
and growth of
its
 
business.
 
Any
 
future
 
payments
 
of
 
dividends
 
will
 
be
 
at
 
the
 
discretion
 
of
 
the
 
Board
 
and
 
will
 
depend
 
on
 
many
 
factors,
including, among other things, the Company’s
 
financial condition, current and anticipated capital
 
requirements, contractual
requirements, solvency tests imposed by applicable corporate
 
law and other factors it may deem relevant.
8.
 
Description of Capital Structure
 
 
 
 
 
 
 
 
 
 
 
 
24
8.1.
 
Share Capital and Issued and Outstanding Shares
The sections
 
below describe some
 
of the
 
material terms of
 
the Common Shares
 
and the
 
number of
 
Common Shares
issued and outstanding. These descriptions are not
 
meant to be exhaustive and are
 
subject to, and qualified in their
 
entirety
by reference to, the terms and provisions of the Company’s
 
articles of incorporation (the “
Articles
”).
Description of Common Shares
The Company
 
is authorized
 
to
 
issue
 
an
 
unlimited
 
number
 
of
 
Common
 
Shares
 
without
 
par
 
value.
 
Subject
 
to the
rights,
 
privileges,
 
restrictions
 
and
 
conditions
 
attaching
 
to
 
any
 
preferred
 
shares
 
authorized
 
in
 
the
 
future,
 
the
 
rights
 
of
 
the
holders of Common Shares, as a class, are equal in all respects
 
and include the following rights:
 
Voting: The right to vote at
 
any meeting of shareholders;
 
Dividends:
 
The
 
right
 
to
 
receive,
 
as
 
and
 
when
 
declared
 
by
 
the
 
directors
 
of
 
the
 
Company,
 
any
 
dividends
payable on such dates, for
 
such amounts and at such
 
place or places as the
 
Board may from time to
 
time
determine; and
 
Liquidation
 
or
 
Dissolution:
 
The
 
right
 
to
 
receive
 
the
 
remaining
 
property
 
of
 
the
 
Company
 
on
 
liquidation
 
or
dissolution.
Outstanding Common Shares
As at the date of this AIF,
 
there were 178,580,395 Common Shares issued and
 
outstanding.
8.2.
 
Stock Options and Warrants
The following table sets forth, as of the
 
date of this AIF,
 
the aggregate number of exchangeable securities
 
that are
outstanding.
Number of exchangeable
Number of listed
Description of Security
securities
 
securities
Stock Options
(1)
9,815,500
9,815,500
Warrants
(2)
6,014,600
6,014,600
Notes:
(1)
 
Details
 
of stock
 
options outstanding:
 
(i) 300,000
 
stock options
 
exercisable at
 
a price
 
of
 
$0.51 until
 
July 3,
 
2023, (ii)
 
100,000 stock
 
options
exercisable at a price
 
of $0.51 until September
 
29, 2024, (iii) 100,000
 
stock options exercisable at
 
a price of
 
$0.45 until January 2,
 
2025, (iv)
2,195,500 stock options exercisable at a price of
 
$4.41 until July 16, 2025 (v) 50,000 stock options
 
exercisable at a price of $4.00 until October
26, 2025, (vi) 550,000 stock options exercisable
 
at a price of $8.47 until April
 
6, 2026, (vii) 200,000 stock options
 
exercisable at a price of $6.59
until June 1, 2026,
 
(viii) 100,000 stock options
 
exercisable at a price of
 
$6.70 until June 14,
 
2026, (ix) 100,000 stock
 
options exercisable at a
price of $5.04 until
 
October 14, 2026, (x) 1,920,000
 
stock options exercisable at a
 
price of $3.13 until December
 
17, 2026, (xi) 100,000 stock
options exercisable at a price
 
of $3.61 until December 30,
 
2026, (xi) 450,000 stock
 
options exercisable at a
 
price of $3.33 until January
 
3, 2027,
(xii) 400,000 stock options exercisable at a
 
price of $2.96 until April 5,
 
2027, (xiii) 1,500,000 stock options exercisable at
 
a price of $3.88 until
June 2, 2027, (xiv) 125,000 stock options exercisable
 
at a price of $2.14 until July 20, 2027, (xv)
 
1,625,000 stock options exercisable at a price
of $1.03 until January 2, 2028.
(2)
 
For more
 
details on
 
the share
 
purchase warrants
 
outstanding, please
 
refer to
 
the Company’s
 
audited consolidated
 
financial statements
 
and
related notes thereto for the year ended December
 
31, 2022.
9.
 
Market for Securities
9.1.
 
Trading Price and Volume
The Common Shares are listed on the
 
TSX under the symbol “PYR”. The
 
following table sets forth, for the periods
indicated, the reported
 
high and low
 
prices and the
 
aggregate volume
 
of trading
 
of the Common
 
Shares on
 
the TSX. The
Common Shares are also
 
listed on the
 
NASDAQ since March 11, 2021, under the symbol
 
“PYR” and on
 
the Frankfurt (FRA)
exchange under the symbol “8PY”.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25
Period
High ($)
Low ($)
Average Daily
Trading Volume
January 2022
3.89
2.19
424,821
February 2022
3.90
2.20
402,998
March 2022
3.23
2.02
199,866
April 2022
3.13
2.30
219,418
May 2022
3.35
2.16
250,945
June 2022
3.89
2.30
284,496
July 2022
2.61
1.54
267,611
August 2022
2.42
1.74
194,559
September 2022
2.08
1.51
167,318
October 2022
1.68
0.94
324,916
November 2022
1.39
0.97
268,102
December 2022
1.14
0.84
221,204
9.2.
 
Prior Sales
The following table summarizes
 
the issuances of
 
unlisted securities of the
 
Company during the financial year ended
December 31, 2022.
Number of
Price
Securities
 
Per
Total
Date of Grant
Type of Security
 
Issued
Issued
Security
 
Consideration
January 3, 2022
Stock Options
450,000
$
3.36
n/a
April 5, 2022
Stock Options
400,000
$
2.96
n/a
June 2, 2022
Stock Options
1,500,000
$
3.88
n/a
July 13, 2022
Stock Options
125,000
$
2.14
n/a
October 19, 2022
Warrants
1,014,600
$
1.75
n/a
 
10.
 
Directors and Executive Officers
The Articles of the
 
Company provide for a minimum
 
of three directors and a
 
maximum of 15 directors. Each
 
director
holds office until the close of
 
the next annual general meeting of
 
the Company,
 
or until his or her successor
 
is duly elected
or appointed, unless his or her office is earlier vacated.
10.1.
 
Name and Occupation
The following table lists the names of the directors and executive officers of the Company as of the date of this AIF
and
 
their
 
province/state
 
and
 
country
 
of
 
residence,
 
their
 
positions
 
and
 
offices
 
held
 
with
 
the
 
Company,
 
their
 
principal
occupations during
 
the past
 
five years,
 
the date
 
on which
 
they first
 
became officers
 
or directors
 
of the Company,
 
and the
number
 
and
 
percentage
 
of
 
Common
 
Shares
 
which
 
is
 
beneficially
 
owned,
 
directly
 
or
 
indirectly,
 
or
 
over
 
which
 
control
 
or
direction is exercised, by each of them.
 
 
 
 
 
 
 
 
 
26
Name,
Positions
Committee
Director or
Principal
Number (and
Province/State
and Offices
(s) of the
Officer of
Occupation for the
Percentage) of
and Country
Held with
Board of
the
Previous Five Years
Common
the
Directors
Company
Shares Owned
Company
Since/Until
or Controlled
P.
 
Peter Pascali
President
None
2006
President and Chief
Executive Officer of the
Company since 2006.
 
80,925,698
(1)
Chief Executive Officer
Chair of the Board of
Directors
 
(45.32)%
Québec, Canada
Pierre Carabin
Chief Technology
Officer & Chief
Strategist
None
2006
Chief Technology
Officer & Chief Strategist
of the Company since
2018. Previously, Chief
Technology officer from
2016 to 2018.
 
506,500
 
(0.28)%
Québec, Canada
Alan Curleigh
Independent Director –
Board of Directors
Chair of the Board of
Directors
2023 (Also a
Director and
Chair from
2010 until 2019
Corporate director (was
Chair of the Board of
Directors of the Company
from 2010 until 2019)
 
60,000
 
(0.03)%
Québec, Canada
Robert M. Radin
Lead Independent
Director – Board of
Directors
Member of the Audit
Committee
2012
President of Radin &
Associates Consulting,
LLC since 2011.
 
673,500
Chair of the
Compensation
Committee
Member of the
Nominating and
Corporate Governance
Committee
Member of the
Strategic Initiatives
Committee
 
(0.38)%
South Carolina, USA
Andrew Abdalla, CPA, CA
Independent Director –
Board of Directors
Chair of the Audit
Committee
2018
Senior Partner at
chartered accountancy
and business advisory
firm MNP LLP.
 
107,800
Member of the
Compensation
Committee
Member of the
Nominating and
Corporate Governance
Committee
 
(0.06)%
Québec, Canada
Dr. Virendra Jha
Independent Director –
Board of Directors
Chair of the
Nominating and
Corporate Governance
Committee
2019
Corporate director
 
100,000
 
 
 
 
 
 
 
 
 
27
Member of the
Compensation
Committee
 
(0.06)%
Québec, Canada
Rodayna Kafal
Vice President,
Investor Relations and
Strategic Business
Development
Officer since
2016
Vice President, Investor
Relations and Strategic
Business Development of
the Company.
 
17,407
Director – Board of
Directors
Director since
2020
 
(0.01)%
Québec, Canada
Nannette Ramsey
Independent Director -
Board of Directors
Member of the
Compensation
Committee
2021
Corporate director
 
1,000
Member of the
Nominating and
Corporate Governance
Committee
Chair of the Strategic
Initiatives Committee
 
(0.001)%
Florida, USA
Ben Naccarato
Independent Director –
Board of Directors
Member of the Audit
Committee
2021
Executive Vice President
and Chief Financial
Officer at Perma-Fix
Environmental
Services Inc.
 
350
Member of the
Compensation
Committee
Member of the
Strategic Initiatives
Committee
 
(0.0002)%
Georgia, USA
Andre Mainella
Chief Financial Officer
None
2021
Chief Financial Officer
since 2021
7500
Director of Consolidation
and Corporate
accounting, Cogeco
Communications Inc. until
2021
 
(0.004)%
Québec, Canada
Mark Paterson
General Counsel
None
2023
General Counsel since
2023
0
General Counsel of Tanet
Fintech Group Inc. from
2021-2022
Director - Legal Affairs of
Future Electronics Inc.
from 2010-2021
 
(0.00)%
Québec, Canada
Notes:
 
Mr.
 
Pascali
 
holds
 
66,642,941
 
Common
 
Shares
 
directly,
 
and
 
indirectly
 
holds
 
or
 
controls
 
(i)
 
7,251,000
 
Common
Shares
 
through
 
a
 
holding
 
company,
 
8339856
 
Canada
 
Inc.,
 
of
 
which
 
he
 
is
 
the
 
sole
 
shareholder,
 
(ii)
 
4,000,000
Common
 
Shares through
 
a foundation,
 
The
 
2 Percent
 
Solution
 
Foundation,
 
and
 
(ii)
 
3,031,757
 
Common
 
Shares
 
28
through the
 
Pascali Trust,
 
a family
 
trust of
 
which he
 
is a
 
trustee, officer
 
and a
 
beneficiary.
 
“Description of
 
Capital
Structure - Stock Options ”.
All
 
executive
 
officers
 
of
 
the
 
Company
 
are
 
full
 
time
 
employees
 
of
 
the
 
Company
 
and
 
none
 
are
 
independent
contractors.
As of the date of
 
this AIF, the directors and executive officers of the Company, as a group, beneficially own, directly
or indirectly, or exercise control or direction over,
 
an aggregate of 82,399,755 Common Shares representing 46.14% of the
issued and outstanding Common Shares.
10.2.
 
Biographies
The following
 
biographies provide certain
 
selected information in
 
respect of
 
the persons who
 
are serving
 
as directors
and executive officers of the Company:
P.
 
Peter Pascali – President and, Chief Executive Officer
 
and Director
Mr. P.
 
Peter Pascali, after
 
graduating with an
 
MBA from McGill
 
University in 1983,
 
became an investment
 
banker
specializing in
 
mergers and
 
acquisitions and
 
public offerings.
 
He initially
 
worked for
 
the Bank of
 
Nova Scotia
 
and then,
 
in
1987,
 
joined
 
Westpac
 
Banking
 
Company.
 
In
 
1989,
 
he
 
joined
 
DeGeorge
 
Financial
 
Company
 
as
 
a
 
strategic
 
advisor.
 
Mr.
Pascali
 
has
 
been
 
with
 
the
 
Company
 
since
 
its
 
incorporation
 
in
 
2006
 
where
 
he
 
has
 
been
 
responsible
 
for
 
developing
 
the
business
 
strategy
 
and
 
marketing
 
focus
 
for
 
commercializing
 
the
 
Company’s
 
technologies
 
and
 
running
 
the
 
business.
 
Mr.
Pascali continues to develop the Company’s strategy and oversee the operational management as the President and Chief
Executive Officer.
 
In his leadership role, Mr.
 
Pascali spearheads the Strategic Management
 
Team
 
which is responsible for
the strategic planning and execution of the Company’s
 
business plans.
Alan Curleigh – Director and Chair of the Board of Directors
Alan Curleigh
 
has a
 
wealth
 
of experience
 
in
 
international
 
business,
 
capital
 
projects,
 
and board
 
governance.
 
For
many years
 
he was
 
a senior
 
executive and
 
Board member
 
of a
 
leading Canadian
 
engineering contracting
 
company.
 
Mr.
Curleigh subsequently served
 
as a
 
representative on multiple
 
corporate boards and
 
associations. Most notably, Mr. Curleigh
was
 
federally
 
appointed
 
by
 
Canada’s
 
International
 
Trade
 
Minister
 
to
 
Chair
 
the
 
Board
 
of
 
Directors
 
of
 
the
 
Canadian
Commercial Corporation,
 
a crown
 
corporation mandated
 
to support
 
the growth
 
of international
 
trade by helping
 
Canadian
exporters
 
gain
 
access
 
to,
 
and
 
negotiate
 
with,
 
foreign
 
government
 
procurement
 
markets
 
 
a
 
role
 
he
 
held
 
for
 
7
 
years.
Additionally, Mr.
 
Curleigh was Chair of the Audit Committee for Veterans
 
Affairs Canada, was the Chair of the Board of the
Canadian Manufacturers
 
and Exporters, Canada’s
 
largest industry
 
association, was a
 
board member and
 
treasurer of the
Canadian Exporters Association;
 
and a
 
Board Member for
 
NorthStar Trade Finance. Mr. Curleigh
 
has been a
 
visiting Faculty
Member at
 
the Directors
 
College, a
 
joint initiative
 
between The
 
Conference
 
Board of
 
Canada and
 
McMaster
 
University’s
DeGroote School
 
of Business
 
and Canada’s
 
premier school
 
of governance,
 
where he
 
has lectured
 
extensively on
 
Board
governance issues since
 
the school’s
 
inauguration. For his
 
many contributions to
 
leadership and business
 
in Canada, Mr.
Curleigh is the
 
recipient of numerous awards,
 
including the Queen Elizabeth
 
II Diamond Jubilee Medal
 
for dedicated service
to peers and country in building a stronger export sector
 
for Canada.
Robert M. Radin – Director,
 
Member of the Audit
 
Committee, Member of the
 
Nominating and Corporate Governance
Committee,
 
Chair of the Compensation Committee, and Member
 
of the Strategic Initiatives Committee
Robert M. Radin retired from
 
the U.S. Army in 2011
 
after serving for over 35
 
years and attaining the rank
 
of Major
General.
 
His
 
last
 
assignment
 
was
 
as
 
the
 
U.S.
 
Army
 
Assistant
 
Deputy
 
Chief
 
of
 
Staff,
 
G-4,
 
(Logistics),
 
the
 
Pentagon,
Washington,
 
DC. In
 
this position
 
he was
 
responsible for
 
policy development,
 
strategic planning
 
and budget
 
programming
for distribution,
 
logistics force structure,
 
readiness reporting, Army
 
pre-positions stocks, contingency
 
contracting and
 
support
of U.S. Army worldwide operations. Prior to
 
joining the Army Staff, he served as
 
the Commanding General of the U.S. Army
Sustainment Command
 
at Rock
 
Island, Illinois.
 
Other key
 
assignments include:
 
Deputy Chief
 
of Staff
 
for Operations
 
and
Logistics for the U.S. Army Materiel Command
 
from 2005 to 2007; Commanding
 
General of the Joint Munitions Command
from
 
2004
 
to
 
2005;
 
and
 
from
 
2003
 
to
 
2004
 
was
 
deployed
 
to
 
Kuwait
 
as
 
the
 
Commanding
 
General,
 
U.S.
 
Army
 
Materiel
Command-SWA and was responsible for support of U.S. land forces in Kuwait, Iraq, Afghanistan and Djibouti. After retiring
from the Army in
 
June 2011,
 
he founded Radin
 
& Associates Consulting,
 
LLC, a firm that
 
assists clients with
 
supply chain
related issues.
 
Mr.
 
Radin has
 
graduated from
 
the U.S.
 
Military Academy
 
at West
 
Point and
 
holds postgraduate
 
degrees
from the Florida Institute of Technology
 
and the National Defense University.
 
29
Dr. Virendra
 
Jha – Director,
 
Member of the Compensation
 
Committee,
 
and Chair of the Nominating
 
and Corporate
Governance Committee
Dr. Virendra Jha, member of the order
 
of Canada, has over 42
 
years of experience in the
 
Canadian Space Program
ranging from in-depth engineering work
 
to senior management positions in both
 
the private and the public
 
sectors. Dr. Jha
began his
 
space career
 
in 1972 when
 
he joined
 
the aerospace
 
group of
 
RCA Limited
 
Montréal, which
 
later became
 
Spar
Aerospace Limited. In 1988, he became the
 
Director of Engineering at Spar Aerospace
 
Limited. In 1991 Dr.
 
Jha joined the
Canadian Space Agency as
 
Director of the Space Mechanics
 
Group. In 1996, he
 
was promoted to the
 
position of Director
General, Space Technologies
 
Branch of the CSA. From 2003 till 2008, he was the
 
Vice-President responsible for Science,
Technology
 
and Programs
 
at the Canadian
 
Space Agency.
 
As Vice
 
President, Dr.
 
Jha provided strategic
 
direction, vision
and leadership to all
 
core technical sectors of
 
the Agency.
 
From November 2005 until
 
February 2006, Dr.
 
Jha also served
as the Acting President of the Canadian Space Agency.
 
He was Chief Engineering Adviser at the Canadian Space Agency
until his retirement in 2014.
Dr. Jha received his B. Tech. degree in Mechanical Engineering from the Indian Institute of Technology Delhi India,
his
 
Master’s
 
degree
 
in
 
Mechanical
 
engineering
 
from
 
McMaster
 
University,
 
Hamilton,
 
Canada,
 
and
 
his
 
Ph.D.
 
degree
 
in
Mechanical
 
Engineering
 
from
 
Concordia
 
University,
 
Montréal,
 
Canada
 
and
 
the
 
C.Dir.
 
(Chartered
 
Director)
 
Degree
 
from
McMaster
 
University,
 
Hamilton,
 
Canada.
 
Dr.
 
Jha’s
 
technical
 
contributions
 
in
 
Canadian
 
Space
 
Program
 
as
 
well
 
as
 
in
International
 
Space activities
 
have been
 
significant.
 
His leadership
 
and commitment
 
to the
 
profession
 
is reflected
 
by his
recognition and active participation in many groups, committees
 
and advisory boards.
Dr.
 
Jha currently
 
serves as
 
a director
 
on the
 
Board of
 
the Atomic
 
Energy of
 
Canada Limited,
 
a Canadian
 
federal
Crown corporation and Canada’s largest nuclear science
 
and technology laboratory.
Andrew Abdalla
 
– Director
 
,
 
Member of
 
the Compensation
 
Committee,
 
Member of
 
the Nominating
 
and Corporate
Governance Committee and Chair of the Audit Committee
Andrew Abdalla,
 
CPA,
 
CA, is
 
a partner
 
at MNP
 
LLP,
 
a leading
 
national accounting,
 
tax and
 
business
 
consulting
firm in Canada. Mr.
 
Abdalla brings to the Board
 
of Directors more than 20
 
years of strategic planning,
 
and tax advice, with
a specific focus on sales and income tax, acquisitions and divestitures, business valuations,
 
corporate reorganizations and
spinoffs. Mr. Abdalla
 
received his Chartered Professional Accountant
 
(CPA, CA)
 
designation in 1987. He holds a Bachelor
of Commerce and a graduate diploma in public accounting
 
from Concordia University in Montréal.
Rodayna Kafal – Director and Vice
 
President, Investor Relations and Strategic Business Development
Upon graduating
 
from McGill
 
University in
 
2009 (Bachelor’s
 
degree in
 
Chemical Engineering),
 
Ms. Kafal
 
took on
lead roles in process engineering at
 
the Natural Gas Technologies Centre in Montréal, Québec, where she was responsible
for
 
managing
 
a
 
number
 
of
 
high-level
 
projects.
 
Thereafter,
 
she
 
enrolled
 
in
 
a
 
two-year
 
graduate
 
program
 
in
 
Industrial
Engineering
 
and
 
Project
 
Management
 
at
 
École
 
Polytechnique
 
de
 
Montréal.
 
Ms.
 
Kafal
 
joined
 
PyroGenesis
 
with
 
a
 
strong
background
 
in
 
process
 
engineering,
 
combined
 
with
 
practical
 
experience
 
in
 
sales,
 
promotional
 
activities
 
and
 
business
relations. Ms.
 
Kafal has
 
been a
 
member of
 
PyroGenesis’ Strategic
 
Management
 
Group since
 
2016 where
 
she has
 
been
instrumental in providing input
 
into all aspects
 
of PyroGenesis’ growth and
 
represented the views of
 
the investor community.
As Vice President,
 
Investor Relations and
 
Strategic Business Development,
 
Ms. Kafal continues
 
to oversee PyroGenesis’
complete investor relations program, while managing the Company’s
 
marketing team.
Ben Naccarato – Director,
 
Member of the Compensation Committee, Member of the Audit Committee,
 
and Member
of the Strategic Initiatives Committee
Mr. Naccarato, CPA, CMA, is the Executive Vice-President and Chief Financial Officer at Perma-Fix Environmental
Services Inc., a NASDAQ-listed environmental
 
services company,
 
providing unique radioactive mixed and
 
industrial waste
management services. Mr.
 
Naccarato brings to the Board more
 
than 30 years of experience
 
in senior financial positions in
the environmental industry.
 
Mr. Naccarato
 
is a graduate
 
from the University
 
of Toronto
 
with a Bachelor
 
of Commerce and
Finance Degree as well
 
as being a Chartered Professional
 
Accountant and Certified Management Accountant (CPA, CMA).
Nannette
 
Ramsey –
 
Director,
 
Member
 
of
 
the
 
Compensation
 
Committee,
 
and
 
Chair
 
of
 
the
 
Strategic
 
Initiatives
Committee
Ms.
 
Ramsey
 
holds
 
undergraduate
 
degrees
 
in
 
Economics,
 
Engineering
 
and
 
an
 
MBA.
 
She
 
brings
 
process
engineering and machining and
 
materials expertise from Caterpillar
 
Tractor Company,
 
J.I. Case and more recently
 
served
as the
 
Site Manager
 
and Associate
 
Director
 
of Engineering
 
for Edgewood
 
Chemical
 
Biological Center’s
 
site at
 
the Rock
 
30
Island Arsenal
 
in Illinois.
 
She was
 
responsible for
 
strategic planning,
 
budgeting, industrial
 
base analysis,
 
engineering and
testing, quality assurance and information technology solutions
 
to a variety of customers.
Pierre Carabin – Chief Technology
 
Officer and Chief Strategist
Mr.
 
Pierre
 
Carabin,
 
P.
 
Eng.,
 
has
 
over
 
thirty
 
years
 
of
 
experience
 
in
 
process
 
engineering
 
and
 
environmental
technologies. Throughout
 
his 23
 
years at
 
PyroGenesis,
 
he has
 
been instrumental
 
in the
 
development
 
of the
 
Company’s
various
 
technology
 
platforms.
 
He
 
is
 
the
 
inventor
 
or
 
co-inventor
 
of
 
more
 
than
 
one
 
hundred
 
pending
 
and
 
issued
 
patents
relating to high temperature chemical processes.
 
As Chief Technology
 
Officer,
 
he leads PyroGenesis’ engineering team in
the design and development of plasma systems and is also member of the Company’s Strategic Management Team
 
which
is responsible for the strategic planning and execution
 
of the Company’s business plan.
Prior
 
to
 
joining
 
PyroGenesis
 
in
 
1998,
 
Mr.
 
Carabin
 
worked
 
in
 
the
 
pulp
 
and
 
paper
 
industry
 
for
 
8
 
years,
 
notably
developing
 
paper
 
recycling
 
machinery.
 
Mr.
 
Carabin
 
holds
 
a
 
Master’s
 
degree
 
in
 
Chemical
 
Engineering
 
with
 
honors
 
from
McGill University,
 
and, to
 
date, he
 
has contributed
 
to more
 
than 50
 
technical communications
 
for various
 
journals and
 
at
technical conferences. Mr.
 
Carabin also volunteers
 
for the Air
 
and Waste
 
Management Association
 
(AWMA)
 
and Ecotech
Québec, the cleantech cluster in Québec.
Andre Mainella – Chief Financial Officer
Upon graduating from Concordia University,
 
Mr. Mainella has since then accumulated
 
over 20 years of experience
in accounting.
 
Andre began his
 
career at Raymond
 
Chabot Grant Thornton.
 
As a senior
 
audit manager,
 
he worked on
 
a
diverse
 
list
 
of
 
audit
 
and
 
non-audit
 
related
 
mandates
 
for
 
private
 
and
 
publicly-traded
 
companies.
 
His
 
broad
 
experience
includes clients in various business sectors such as
 
manufacturing, distribution, retail, real estate and airlines.
 
Mr. Mainella
had
 
the
 
opportunity
 
to
 
assist
 
in
 
the
 
implementation
 
of
 
accounting
 
standards,
 
initial
 
public
 
offerings
 
as
 
well
 
as
 
business
acquisitions and divestitures.
From 2013
 
to
 
2015,
 
Mr.
 
Mainella
 
occupied
 
the
 
role
 
of
 
finance manager
 
for the
 
Canadian
 
operations
 
of
 
Orica,
 
a
provider of
 
commercial explosives
 
and blasting
 
systems for
 
the mining
 
and construction
 
sectors.
 
Andre was
 
responsible
for the
 
financial information,
 
budgeting &
 
forecasting, in
 
addition to
 
advising on
 
new sales
 
contracts and
 
capital projects,
among others.
Subsequently,
 
Mr.
 
Mainella
 
joined
 
Cogeco,
 
a
 
telecommunications
 
and
 
media
 
company,
 
as
 
their
 
director
 
of
consolidation
 
and
 
corporate
 
accounting.
 
He
 
managed
 
the
 
activities
 
of
 
corporate
 
accounting,
 
shared
 
services,
 
and
 
the
consolidation of
 
the Canadian
 
and American
 
financial results.
 
Mr.
 
Mainella was
 
part of
 
the Cogeco
 
corporate team
 
for 6
years
 
and
 
contributed
 
in
 
various
 
manners
 
to
 
the
 
implementation
 
of
 
the
 
company’s
 
numerous
 
acquisitions,
 
enterprise
resource planning implementation, new accounting standards,
 
and involvement in the corporate insurance policies.
Mr.
 
Mainella
 
received
 
his
 
Chartered
 
Professional
 
Accountant
 
designation
 
in
 
2001.
 
He
 
holds
 
a
 
Bachelor
 
of
Commerce and a graduate diploma in public accounting
 
from Concordia University in Montreal.
Mark Paterson – General Counsel
Mark Paterson is a senior business lawyer with comprehensive corporate
 
and commercial experience, including in
senior in-house roles as
 
well as private practice.
 
He has an
 
extensive legal understanding in
 
a wide array of
 
areas, including
in contract negotiations,
 
M&A management, conflict
 
resolution, human resources,
 
and corporate and
 
regulatory compliance.
Prior
 
to
 
joining
 
PyroGenesis,
 
Mr.
 
Paterson
 
was
 
General
 
Counsel
 
for
 
Tenet
 
Fintech
 
Group,
 
a
 
publicly
 
traded
 
company
specialized in
 
innovative fintech
 
and AI
 
applications. From
 
2010 to
 
2021, he
 
served as
 
Director –
 
Legal Affairs
 
for Future
Electronics, a large, multinational distributor of electronic components. Before joining
 
Future Electronics, Mr. Paterson was
General
 
Counsel
 
and
 
Vice-President
 
of
 
Strategic
 
Alliances
 
for
 
Luxury
 
Retreats,
 
a
 
provider
 
of
 
high-end
 
vacation
accommodations.
 
He began
 
his
 
legal career
 
at Fasken,
 
one
 
of the
 
leading business
 
law firms
 
in Canada,
 
working in
 
its
corporate
 
law
 
department.
 
Mr.
 
Paterson
 
is
 
a
 
member
 
of
 
the
 
Quebec
 
bar
 
and
 
holds
 
BCL
 
and
 
LLB
 
degrees
 
from
 
McGill
University. He also
 
holds a B.A. from Bishop’s University.
10.3.
 
Cease Trade Orders, Bankruptcies,
 
Penalties or Sanctions
Except as
 
indicated below,
 
to the knowledge
 
of the Company,
 
no director
 
or executive
 
officer of
 
the Company
 
is,
as
 
at
 
the
 
date
 
of
 
this
 
AIF,
 
or
 
was
 
within
 
10
 
years
 
before
 
the
 
date
 
of
 
this
 
AIF,
 
a
 
director,
 
chief
 
executive
 
officer
 
or
 
chief
financial officer of any company (including the Company), that: (a) was subject
 
to a cease trade order, an order
 
similar to a
cease trade
 
order,
 
or an
 
order that
 
denied such
 
company access
 
to any
 
exemption under
 
securities legislation
 
(each an
 
31
Order
”) that was issued while the director or executive officer was acting in the capacity as director, chief executive officer
or chief financial officer, or (b) was subject to an Order that was issued after the director or executive officer ceased to be a
trustee, director,
 
chief executive
 
officer or
 
chief financial
 
officer and
 
which resulted
 
from an
 
event that
 
occurred while
 
that
person was
 
acting in
 
the capacity
 
as director,
 
chief executive
 
officer or
 
chief financial
 
officer.
 
As announced
 
on February
23, 2023
 
by the
 
Company,
 
the AMF
 
issued an
 
order suspending
 
a private
 
placement of
 
units of
 
the Company.
 
The AMF
alleged in the order that the Company did not satisfy all of the requirements
 
necessary to complete the financing under the
listed issuer financing exemption under Part 5A of National
 
Instrument 45-106 – Prospectus Exemptions.
To
 
the knowledge
 
of the
 
Company,
 
no
 
director
 
or executive
 
officer
 
of the
 
Company,
 
or a
 
shareholder
 
holding
 
a
sufficient number of securities
 
of the Company to
 
affect materially the
 
control of the Company,
 
(a) is, as at
 
the date of this
AIF,
 
or has been
 
within the
 
10 years
 
before the date
 
of this
 
AIF,
 
a director or
 
executive officer
 
of any company
 
(including
the
 
Company)
 
that,
 
while
 
that
 
person
 
was
 
acting
 
in
 
that
 
capacity,
 
or
 
within
 
a
 
year
 
of
 
that
 
person
 
ceasing
 
to
 
act
 
in
 
that
capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or
instituted
 
any
 
proceedings,
 
arrangement
 
or
 
compromise
 
with
 
creditors
 
or
 
had
 
a
 
receiver,
 
receiver
 
manager
 
or
 
trustee
appointed to hold its assets; or (b) has, within
 
the 10 years before the date of this
 
AIF,
 
become bankrupt, made a proposal
under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement
or compromise
 
with creditors,
 
or had a
 
receiver,
 
receiver manager
 
or trustee
 
appointed to
 
hold the
 
assets of
 
the director,
executive officer or shareholder.
To
 
the knowledge
 
of the
 
Company,
 
no
 
director
 
or executive
 
officer
 
of the
 
Company,
 
or a
 
shareholder
 
holding
 
a
sufficient
 
number
 
of
 
securities
 
of
 
the
 
Company
 
to
 
affect
 
materially
 
the
 
control
 
of
 
the
 
Company
 
has
 
been
 
subject
 
to
 
any
penalties
 
or
 
sanctions
 
imposed
 
by
 
a
 
court
 
relating
 
to
 
securities
 
legislation
 
or
 
by
 
a
 
securities
 
regulatory
 
authority
 
or
 
has
entered into
 
a settlement
 
agreement with
 
a securities
 
regulatory authority,
 
or has
 
been subject
 
to any
 
other
 
penalties or
sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable
 
investor making
an investment decision.
10.4.
 
Conflicts of Interest
There are
 
potential
 
conflicts
 
of interest
 
to
 
which
 
the
 
directors
 
and officers
 
of the
 
Company
 
may be
 
subject
 
to
 
in
connection
 
with
 
the
 
operations
 
of
 
the
 
Company.
 
In
 
particular,
 
the
 
Pascali
 
Trust,
 
of
 
which
 
P.
 
Peter
 
Pascali,
 
the
 
Chief
Executive
 
Officer
 
of
 
the
 
Company,
 
is
 
a
 
trustee,
 
officer
 
and
 
beneficiary
 
is
 
the
 
landlord
 
under
 
the
 
lease
 
regarding
 
the
Company’s corporate headquarters. See “Business of the
 
Company - Facilities” and “General
 
Development of the Business
-
 
Year
 
Ended
 
December
 
31,
 
2020
 
-
 
Corporate
 
Developments
 
and
 
Financings”.
 
Over
 
the
 
past
 
three
 
completed
 
financial
years, P.
 
Peter Pascali has also participated in financings of the Company, and he may continue to do so in the future. See
“General Development
 
of the
 
Business -
 
Year
 
Ended December
 
31, 2020
 
- Corporate
 
Developments and
 
Financings”. In
addition
 
to
 
being
 
the
 
Chief
 
Executive
 
Officer
 
of
 
the
 
Company,
 
P.
 
Peter
 
Pascali
 
is
 
also
 
a
 
controlling
 
shareholder
 
of
 
the
Company. See “Risk
 
Factors - Influence of the Significant Shareholders”.
On October 9,
 
2019, Drosrite International, a
 
US-based private company owned
 
by Alex Pascali,
 
the son of
 
P. Peter
Pascali, entered
 
into the
 
Dross Processing
 
Service Agreement
 
with Radian
 
Oil &
 
Gas Services
 
Company,
 
an oil
 
and gas
services company operating in
 
the Middle East (the
 
“Dross Processing Service Agreement”). The
 
Dross Processing Service
Agreement
 
was
 
structured
 
as a
 
“BOOT”
 
agreement
 
(build,
 
own,
 
operate
 
and
 
transfer)
 
having
 
a
 
20-year
 
term
 
and
 
using
PyroGenesis’
 
DROSRITE
 
technology.
 
The Dross
 
Processing
 
Service Agreement
 
provides that
 
Drosrite
 
International
 
will
manufacture and
 
deliver to
 
Radian Oil
 
& Gas
 
DROSRITE TPY
 
systems which
 
will be
 
installed at
 
the aluminium
 
smelting
facility
 
of
 
Ma’aden
 
Aluminum
 
Company
 
located
 
at
 
Ras
 
Al-Khair,
 
in
 
Saudi
 
Arabia.
 
In
 
addition,
 
Drosrite
 
International
 
will
oversee the
 
installation of
 
the systems
 
at the
 
Ras Al-Khair
 
facility.
 
Drosrite International
 
will also
 
supply spare
 
parts over
the 20-year
 
duration of
 
the
 
Dross Processing
 
Service Agreement
 
and be
 
entitled to
 
receive
 
an annual
 
royalty.
 
The
 
total
value of
 
the
 
project
 
exceeds
 
US$17 million.
 
The amount
 
remaining
 
to be
 
collected
 
is approximately
 
US$9
 
million of
 
the
initial US$17 million purchase order with remaining billings of roughly US$1 million to be issued. There is also an additional
approximately
 
US$450,000
 
to
 
be
 
collected
 
for
 
transportation,
 
storage,
 
and
 
insurance
 
fees.
 
See
 
also
 
the
 
Company’s
consolidated
 
financial
 
statements
 
and
 
related
 
notes
 
for
 
the
 
year
 
ended
 
December
 
31,
 
2022,
 
and
 
the
 
management’s
discussion and analysis thereon.
In connection with the Dross Processing Service Agreement between
 
Drosrite International and Radian Oil & Gas,
the Drosrite International Exclusive
 
Agreement was entered into
 
between PyroGenesis and Drosrite
 
International on August
29, 2019, under which Drosrite International received the required rights from PyroGenesis
 
to perform its obligations under
its
 
agreement
 
with
 
Radian
 
Oil
 
&
 
Gas.
 
Under
 
the
 
Drosrite
 
International
 
Exclusive
 
Agreement,
 
PyroGenesis
 
will
 
receive
payments
 
equal
 
to
 
the
 
payments
 
received
 
by
 
Drosrite
 
International
 
under
 
its
 
Dross
 
Processing
 
Service
 
Agreement
 
with
Radian Oil & Gas.
 
32
The sole
 
director,
 
officer,
 
and shareholder
 
of Drosrite
 
International is
 
Alex Pascali,
 
an employee
 
of the
 
Company
and
 
the
 
son
 
of
 
P.
 
Peter
 
Pascali,
 
Chief
 
Executive
 
Officer
 
of
 
the
 
Company.
 
Drosrite
 
International
 
does
 
not
 
receive
 
any
management, administration or other fee from the Company.
 
Drosrite International is, on an accounting basis, a subsidiary
of the Company and
 
not a client, as
 
under applicable accounting standards the
 
Company is considered to effectively control
Drosrite
 
International.
 
The
 
Company
 
has
 
to
 
indemnify
 
Drosrite
 
International
 
for
 
any
 
claims
 
and
 
liabilities
 
incurred
 
in
connection with
 
the Drosrite
 
systems. The
 
Company’s
 
Drosrite technology
 
was protected
 
by patents
 
until 2017
 
and new
patent applications pertaining to the technology have been
 
filed before 2017, which patent applications are pending.
 
To the best of
 
the Company’s knowledge,
 
other than
 
as disclosed
 
in this
 
AIF, there are no
 
known existing
 
or potential
conflicts of interest among the Company, the directors and officers of the Company or other members of management or of
any proposed
 
promoter,
 
director,
 
officer
 
or other
 
member
 
of
 
management
 
as a
 
result of
 
their
 
outside
 
business
 
interests
except that
 
certain of the
 
directors and officers
 
serve as directors
 
and officers of
 
other companies, and
 
therefore it is
 
possible
that
 
a
 
conflict
 
may
 
arise
 
between
 
their
 
duties
 
to
 
the
 
Company
 
and
 
their
 
duties
 
as
 
a
 
director
 
or
 
officer
 
of
 
such
 
other
companies.
A director who has a
 
material interest in a matter
 
before the Board or any
 
committee on which he
 
or she serves is
required to disclose such interest as soon as the director becomes aware of it. In situations where a director has a material
interest
 
in
 
a
 
matter
 
to
 
be
 
considered
 
by
 
the
 
Board
 
or
 
any
 
committee
 
on
 
which
 
he
 
or
 
she
 
serves,
 
such
 
director
 
may
 
be
required to
 
absent himself
 
or herself
 
from the
 
meeting while
 
discussions and
 
voting with
 
respect to
 
the matter
 
are taking
place. Directors are also required
 
to comply with the relevant
 
provisions of applicable corporate
 
laws regarding conflicts of
interest. Under the CBCA, directors who have a
 
material interest in any person or entity that is a party
 
to a material contract
or a proposed material contract
 
with the Company are required under
 
the CBCA, subject to certain
 
exceptions, to disclose
that
 
interest
 
and
 
generally
 
abstain
 
from
 
voting
 
on
 
any
 
resolution
 
to
 
approve
 
such
 
a
 
contract.
 
In
 
addition,
 
directors
 
and
executive officers are required to act honestly
 
and in good faith with a view to the best interests of the
 
Company.
10.5.
 
Board Independence
The Board believes that sound
 
corporate governance practices
 
are essential to the effective,
 
efficient and prudent
operation of the Company and to the enhancement of
 
shareholder value.
Under National Instrument
 
58-101 - Disclosure
 
of Corporate Governance
 
Practices, a director
 
is considered to
 
be
independent if the director is independent
 
within the meaning of section 1.4
 
of
NI 52-110
. Pursuant to section 1.4 of NI
 
52-
110, an independent
 
director is a director who is free
 
from any direct or indirect relationship
 
which could, in the view of
 
the
board, be reasonably expected to interfere with a director’s independent judgment. Based on information provided by each
director concerning their background, employment
 
and affiliations, the Board has
 
determined that, of the eight directors on
the Company’s
 
Board, P.
 
Peter Pascali
 
and Rodayna
 
Kafal are
 
not independent
 
under section
 
1.4 of
 
NI 52-110
 
because
they are executive officers of the Company.
11.
 
Audit Committee and Other Committees
11.1.
 
Audit Committee
The
 
Company’s
 
Audit
 
Committee
 
is
 
responsible
 
for
 
assisting
 
the
 
Board
 
in
 
monitoring
 
the
 
performance
 
of
management in ensuring that
 
the Company is operating
 
in an ethical
 
manner and encouraging management
 
to demonstrate
a strong commitment to integrity.
The Audit Committee is also responsible for providing assistance to the Board in fulfilling
 
its financial reporting and
control
 
responsibilities
 
to
 
the
 
shareholders
 
of
 
the
 
Company
 
and
 
to
 
the
 
investment
 
community.
 
The
 
Audit
 
Committee’s
primary responsibilities in this regard are to: (i) oversee the accounting and financial reporting process of the Company and
the audit of its financial statements; (ii) monitor the Company’s financial reporting process and internal control systems; (iii)
review and
 
appraise
 
the audit
 
activities of
 
the Company’s
 
independent
 
auditors;
 
(iv) meet
 
periodically
 
with
 
management
and with the independent auditors; and (v) assess the relevance and reliability of the Company’s financial reports to ensure
they accurately portray the underlying economic circumstances
 
and financial performance of the Company.
Audit Committee Charter
The
 
Audit
 
Committee’s
 
mandate
 
is
 
to
 
promote
 
and
 
ensure
 
that
 
the
 
Company
 
complies
 
with
 
high
 
standards
 
of
financial reporting,
 
risk management
 
and ethical
 
behavior.
 
The Audit
 
Committee Charter
 
is attached
 
hereto as
 
Schedule
“A”.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
33
Composition of the Audit Committee
The Audit Committee
 
is comprised of
 
three directors,
 
Messrs. Abdalla (Chair
 
of the Audit
 
Committee), Naccarato,
and Radin.
 
Each of
 
the three
 
members meets the
 
independence requirements for
 
members of
 
the Audit
 
Committee pursuant
to NI 52-110,
 
NASDAQ Rule
 
5605 and Rule
 
10A-3 under the
 
Securities Exchange
 
Act of 1934,
 
as amended.
 
Each of the
three members is financially literate within the meaning of NI 52-
11
0 and NASDAQ Rule 5605, has an understanding of the
accounting
 
principles
 
used
 
to
 
prepare
 
financial
 
statements
 
and
 
varied
 
experience
 
as
 
to
 
the
 
general
 
application
 
of
 
such
accounting principles, and
 
has an understanding
 
of the internal
 
controls and procedures
 
necessary for financial
 
reporting.
For additional details regarding the
 
education and experience of each
 
member of the Audit Committee,
 
see “Directors and
Executive Officers”.
Pre-Approval Policies and Procedures
The
 
Audit
 
Committee
 
must
 
pre-approve
 
all
 
non-audit
 
services
 
to
 
be
 
provided
 
to
 
the
 
Company
 
by
 
its
 
external
auditors.
External Fees by Audit Category
Fees incurred with the
 
auditors for audit and
 
non-audit services in the
 
last two fiscal years
 
for audit fees are
 
outlined
in the following table.
Fees paid to RCGT LLP in Fiscal
Fees paid to RCGT LLP in Fiscal
Year ended December 31,
 
2022
Year ended December 31,
 
2021
Audit Fees
(1)
$
531,818
$
325,500
Audit-Related Fees
(2)
$
13,000
$
Tax
 
-Related Fees
(3)
$
$
9,975
All Other Fees
$
57,725
$
21,000
Total
 
Fees
$
602,543
$
356,475
Notes:
(1) “Audit
 
Fees” include
 
fees necessary
 
to perform
 
the annual
 
audit of
 
the Company’s
 
consolidated financial
 
statements,
and for services that are normally
 
provided in connection with statutory
 
and regulatory filings or engagement
 
related to the
annual consolidated financial statements.
(2)
 
“Audit-Related
 
Fees”
 
include
 
translation
 
services
 
and
 
fees
 
for
 
accounting
 
consultations
 
on
 
matters
 
reflected
 
in
 
the
financial statements.
(3) “Tax
 
-Related Fees” includes fees for tax compliance, tax planning and tax advice. Tax planning and tax advice includes
assistance with tax audits and Research and Development
 
tax credits.
11.2.
 
Other Committees
In
 
addition
 
to
 
the
 
Audit
 
Committee,
 
the
 
Board
 
has
 
established
 
three
 
other
 
standing
 
committees,
 
namely
 
the
Nominating and Governance Committee, the Compensation
 
Committee, and the Strategic Initiatives Committee.
Nominating and Corporate Governance Committee
The Company’s
 
Nominating and
 
Corporate Governance
 
Committee consists
 
of four
 
directors, each
 
of whom
 
is a
person determined by
 
the Board to
 
be an independent
 
director, and
 
is charged with
 
reviewing, overseeing and
 
evaluating
the
 
Company’s
 
corporate
 
governance
 
and
 
nominating
 
policies.
 
The
 
Nominating
 
and
 
Corporate
 
Governance
 
Committee
comprises Dr.
 
Virendra Jha
 
(Chair), Andrew
 
Abdalla, Robert
 
M. Radin,
 
and Nannette
 
Ramsey.
 
The Board
 
has adopted
 
a
written
 
charter
 
setting
 
forth
 
the
 
purpose,
 
composition,
 
authority
 
and
 
responsibility
 
of
 
the
 
Nominating
 
and
 
Corporate
Governance Committee.
 
34
Compensation Committee
The Company’s Compensation
 
Committee consists of
 
five directors, each
 
of whom is a
 
person determined by
 
the
Board
 
to
 
be
 
an
 
independent
 
director,
 
and
 
is
 
charged
 
with
 
reviewing,
 
overseeing
 
and
 
evaluating
 
the
 
Company’s
compensation policies.
 
The Compensation
 
Committee comprises
 
Robert M.
 
Radin (Chair),
 
Andrew Abdalla,
 
Dr.
 
Virendra
Jha, Ben Naccarato and
 
Nannette Ramsey. The Board has adopted
 
a written charter setting
 
forth the purpose, composition,
authority and responsibility of the Compensation Committee.
Strategic Initiatives Committee
The Company’s
 
Strategic Initiatives
 
Committee consists
 
of three
 
directors, each
 
of whom
 
is a person
 
determined
by the Board to be an independent director and is charged with
 
assisting the Board by providing input to strategic decisions
and
 
their
 
implementation.
 
The
 
Strategic
 
Initiatives
 
Committee
 
comprises
 
Nannette
 
Ramsey
 
(Chair),
 
Ben
 
Naccarato
 
and
Robert M.
 
Radin. The
 
Board has
 
adopted a
 
written charter setting
 
forth the
 
purpose, composition, authority
 
and responsibility
of the Strategic Initiatives Committee.
12.
 
Risk Factors
The Company has identified below
 
certain significant risks relating to
 
the business of the
 
Company and the industry
in which
 
it operates.
 
The following
 
information
 
is only
 
a summary
 
of certain
 
risk
 
factors and
 
is qualified
 
in its
 
entirety by
reference to,
 
and must
 
be read
 
in conjunction
 
with, the
 
detailed information
 
appearing elsewhere
 
in this
 
AIF.
 
These risks
and uncertainties
 
are not the
 
only ones facing
 
the Company.
 
Additional risks
 
and uncertainties
 
not currently
 
known to the
Company, or that the Company currently considers immaterial, may also impair the operations of the Company. If any such
risks
 
materialize
 
into
 
actual
 
events
 
or
 
circumstances,
 
the
 
Company’s
 
assets,
 
liabilities,
 
financial
 
condition,
 
results
 
of
operations (including future
 
results of
 
operations), business and
 
business prospects, are
 
likely to
 
be materially
 
and adversely
affected. There is no assurance
 
that risk management steps
 
taken will avoid future loss due
 
to the uncertainties described
below
 
or
 
other
 
unforeseen
 
risks.
 
An
 
investment
 
in
 
the
 
Common
 
Shares
 
or
 
other
 
securities
 
of
 
the
 
Company
 
is
 
highly
speculative
 
and
 
involves
 
a
 
high
 
degree
 
of
 
risk.
 
Before
 
making
 
any
 
investment
 
decision,
 
prospective
 
investors
 
should
carefully consider all the information contained in this document
 
including, in particular,
 
the risk factors described below.
12.1.
 
Risks Related to the Company’s Business
 
and Industry
Operating Income (Loss) and Negative Operating Cash
 
Flow
The Company
 
has a
 
history
 
of
 
losses
 
and
 
negative
 
cash
 
flows.
 
The
 
Company’s
 
operations
 
have
 
not
 
generated
sufficient
 
earnings
 
and
 
cash
 
flows
 
to
 
date
 
to
 
result
 
in
 
consistent
 
profitability
 
or
 
positive
 
cash
 
flows.
 
For
 
the
 
year
 
ended
December 31,
 
2022, the
 
Company had
 
net losses
 
of $32,167.027,
 
cash flows
 
used in operations
 
of $11,128,885,
 
and an
accumulated deficit
 
of $93,384,858.
 
To
 
the extent
 
that the
 
Company has
 
net losses
 
and negative
 
operating cash
 
flows in
future periods, it may
 
need to allocate
 
a portion of its
 
cash reserves to
 
fund such negative
 
cash flows. The
 
Company may
also be required
 
to raise additional
 
funds through the
 
issuance of equity
 
or debt securities,
 
or otherwise. There
 
can be no
assurance that the Company will be able to generate positive cash flows from its operations, that additional capital or other
types of financing will be available when needed or that
 
these financings will be on terms favourable to the Company.
The Company’s ability to continue as a going
 
concern is dependent upon its ability in
 
the future to grow its revenue,
achieve
 
profitable
 
operations,
 
successfully
 
develop
 
and
 
introduce
 
new
 
products
 
and,
 
in
 
the
 
meantime,
 
to
 
obtain
 
the
necessary financing
 
to meet
 
its obligations
 
and repay
 
its liabilities
 
when they
 
become due.
 
While the
 
Company has
 
been
successful
 
in
 
securing
 
financing
 
in
 
the
 
past,
 
raising
 
additional
 
funds
 
is
 
dependent
 
on
 
a
 
number
 
of
 
factors
 
outside
 
the
Company’s control, and as such there is no assurance that it will be able to do so in the future. If the Company
 
is unable to
obtain sufficient additional financing,
 
it may have to curtail operations
 
and development activities, any of which
 
could harm
the business,
 
financial
 
condition and
 
results of
 
operations. In
 
addition, the
 
Company may
 
not generate
 
significant
 
gains,
and may suffer losses, from the value of its strategic
 
investments in the future.
Actual Financial Position and Results of Operations May Differ Materially from
 
the Expectations of the Company’s
Management
The
 
Company’s
 
actual
 
financial
 
position
 
and
 
results
 
of
 
operations
 
may
 
differ
 
materially
 
from
 
management’s
expectations. The
 
Company has
 
from time to
 
time experienced
 
changes in
 
its operating
 
plans and delays
 
in the timing
 
of
its plans. As
 
a result, the Company’s revenue,
 
net income and cash
 
flow may differ materially from
 
the Company’s projected
revenue, net income and cash flow. The process for estimating the Company’s revenue, net income and cash flow requires
the use of judgment in determining the appropriate assumptions
 
and estimates. These estimates and assumptions may be
 
35
revised as additional information becomes available
 
and as additional analyses are
 
performed. In addition, the assumptions
used in planning may not prove to be accurate, and other factors may affect the Company’s financial condition
 
or results of
operations.
Revenue Risks
PyroGenesis
 
may
 
experience
 
delays
 
in
 
achieving
 
revenues,
 
particularly
 
with
 
plasma
 
gasification
 
projects
 
which
have a long
 
sales cycle. Revenues
 
may be delayed
 
or negatively
 
impacted by issues
 
encountered by the
 
Company or its
clients including:
 
unforeseen engineering and/or environmental problems;
 
delays or inability to obtain required financing, licenses, permits
 
and/or regulatory approvals;
 
supply interruptions and/or labour disputes;
 
foreign exchange fluctuations and/or collection risk; and
 
competition from other suppliers and/or alternative energy
 
solutions that are less capital intensive.
There is no assurance that the business of the
 
Company will perform as expected or that returns from the
 
business
will support the expenditures needed to develop it.
Concentration Risk
To
 
date, a
 
small number
 
of customers
 
have accounted
 
for a
 
majority of
 
PyroGenesis’ revenues.
 
As its
 
business
expands, the Company
 
expects that revenue
 
distribution will be
 
over a larger
 
number of different
 
customers. For
 
the year
ended December 31, 2022, sales
 
of PyroGenesis to its
 
two principal customers accounted for approximately
 
52% of its total
revenue. For
 
the year
 
ended December
 
31, 2021,
 
sales to
 
two principal
 
customers
 
accounted for
 
approximately 79%
 
of
PyroGenesis’
 
total
 
revenue.
 
The
 
loss
 
of,
 
or
 
a
 
reduction
 
in,
 
purchase
 
orders
 
or
 
anticipated
 
purchase
 
orders
 
from
PyroGenesis’ principal
 
customers could
 
have a
 
material adverse
 
effect
 
on its
 
business, financial
 
condition and
 
results of
operations.
 
Additionally,
 
if
 
one
 
of
 
PyroGenesis’
 
customers
 
is
 
unable
 
to
 
meet
 
its
 
commitments
 
to
 
PyroGenesis,
 
the
Company’s business, financial condition and results
 
of operations could be adversely affected.
As
 
a
 
result
 
of
 
the
 
Drosrite
 
International
 
Exclusive
 
Agreement
 
and
 
the
 
Dross
 
Processing
 
Service
 
Agreement,
significant
 
revenues
 
may
 
be
 
generated
 
by the
 
Company
 
from payments
 
made to
 
Drosrite
 
International
 
under
 
the Dross
Processing
 
Service
 
Agreement.
 
The
 
Company
 
will
 
no
 
longer
 
receive
 
payments
 
under
 
such
 
arrangement
 
if
 
the
 
Dross
Processing
 
Service
 
Agreement,
 
which
 
involves
 
a
 
third
 
party
 
in
 
a
 
foreign
 
jurisdiction,
 
is
 
terminated,
 
which
 
could
 
have
 
a
material adverse effect on the business, financial
 
condition and results of operations of the Company.
Technology Development and Manufacturing
 
Capability Risks
PyroGenesis recently expanded into new
 
areas of business and, as a result,
 
many of the Company’s products
 
are
at various
 
stages of
 
the development
 
cycle. The
 
Company may
 
be unable
 
to commercialize
 
such products,
 
or it
 
may be
unable
 
to
 
manufacture
 
such
 
products
 
in
 
a
 
commercially
 
viable
 
manner.
 
Whilst
 
management
 
is
 
confident
 
in
 
both
 
the
Company’s technology and in
 
its team of
 
experienced engineers, scientists and
 
technicians, management cannot know with
certainty
 
which
 
of
 
the
 
Company’s
 
products
 
will
 
be
 
commercialized,
 
when
 
any
 
such
 
products
 
will
 
be
 
commercialized,
 
or
whether any such products will be manufactured and distributed
 
profitably.
Additional financing and dilution
PyroGenesis may require additional financing. There
 
can be no assurance
 
that additional financing will be
 
available
to the Company when needed, or on terms acceptable to the Company.
 
PyroGenesis’ inability to raise financing to support
ongoing operations or
 
to fund capital
 
expenditures could limit
 
the Company’s growth and
 
may have a
 
material adverse effect
upon the Company.
 
The Company
 
does not
 
exclude raising
 
additional funds
 
by equity
 
financing. In
 
addition,
 
as of
 
the date
 
of this
AIF,
 
9,815,500 stock
 
options and 6,014,600
 
warrants are
 
currently issued
 
and outstanding.
 
The exercise
 
of stock
 
options
and/or warrants, as well as any new equity financings,
 
represents dilution factors for present and future shareholders.
 
36
Reliance on Third Party Suppliers, Service Providers
 
,
 
Distributors and Manufacturers
The Company’s
 
direct and
 
indirect suppliers,
 
service providers,
 
distributors and
 
manufacturers
 
may elect,
 
at any
time,
 
to
 
breach
 
or
 
otherwise
 
cease
 
to
 
participate
 
in
 
supply,
 
service,
 
distribution
 
or
 
manufacturing
 
agreements,
 
or
 
other
relationships,
 
on
 
which
 
the
 
Company’s
 
operations
 
rely.
 
Loss
 
of
 
its
 
suppliers,
 
service
 
providers,
 
distributors
 
and
manufacturers
 
could
 
have
 
a
 
material
 
adverse
 
effect
 
on
 
the
 
Company’s
 
business
 
and
 
operational
 
results.
 
Further,
 
any
disruption
 
in
 
the
 
manufacturing
 
process
 
done
 
by
 
third
 
party
 
manufacturers
 
could
 
have
 
a
 
material
 
adverse
 
effect
 
on
 
the
business,
 
financial
 
condition
 
and
 
results
 
of
 
operations
 
of
 
the
 
Company.
 
The
 
Company
 
cannot
 
ensure
 
that
 
alternative
production capacity would
 
be available in
 
the event
 
of a disruption,
 
or if it
 
would be available,
 
that it could
 
be obtained on
favorable terms.
Manufacturing Facilities
The
 
vast
 
majority
 
of
 
the
 
Company’s
 
products
 
are
 
manufactured
 
in
 
its
 
two
 
manufacturing
 
facilities
 
located
 
in
Montréal,
 
Québec.
 
Accordingly,
 
the
 
Company
 
is
 
highly
 
dependent
 
on
 
the
 
uninterrupted
 
and
 
efficient
 
operation
 
of
 
its
manufacturing facility.
 
If for
 
any reason
 
the Company
 
is required
 
to discontinue
 
production at
 
its facility,
 
it could
 
result in
significant delays in
 
production of the
 
Company’s products
 
and interruption of
 
the Company’s
 
sales as it
 
seeks to resume
production. The
 
Company
 
may be
 
unable to
 
resume production
 
on a
 
timely basis.
 
If operations
 
at the
 
facility
 
were to
 
be
disrupted
 
as
 
a
 
result
 
of
 
equipment
 
failures,
 
natural
 
disasters,
 
fires,
 
accidents,
 
work
 
stoppages,
 
power
 
outages
 
or
 
other
reasons, the Company’s business, financial condition
 
and/or results of operations could be materially adversely
 
affected.
Sales Cycle and Fixed Price Contracts
PyroGenesis sales cycle is long and the signing of
 
new contracts is subject to delay,
 
over which the Company has
little control. The Company also enters
 
into sales contracts with fixed pricing,
 
which may be impacted by changes
 
over the
period of implementation. There is no assurance that delays or problems in fulfilling contracts with clients will not adversely
affect the Company’s activities, operating
 
results or financial position.
Reliance on Technology
PyroGenesis
 
depends
 
upon
 
continuous
 
improvements
 
in
 
technology
 
to
 
meet
 
client
 
demands
 
with
 
respect
 
to
performance and cost, and to explore additional
 
business opportunities. There can be no assurance
 
that the Company will
be successful in its
 
efforts in this regard or
 
that it will have
 
the resources available to
 
meet this demand. Whilst
 
management
anticipates that
 
its research
 
and development
 
efforts will
 
allow the
 
Company to
 
explore additional
 
business opportunities,
there
 
is
 
no
 
guarantee
 
that
 
such
 
business
 
opportunities
 
will
 
be
 
presented
 
or
 
realized.
 
The
 
commercial
 
advantage
 
of
 
the
Company will depend to a significant extent on the intellectual property and proprietary
 
technology of PyroGenesis and the
ability
 
of
 
the
 
Company
 
to
 
prevent
 
others
 
from
 
copying
 
such
 
proprietary
 
technologies.
 
PyroGenesis
 
currently
 
relies
 
on
intellectual property rights and
 
other contractual or proprietary
 
rights, including (without limitation)
 
copyright, trade secrets,
confidential
 
procedures,
 
contractual
 
provisions,
 
licenses
 
and
 
patents,
 
to
 
protect
 
its
 
proprietary
 
technology.
 
PyroGenesis
may have to engage in
 
litigation in order to protect
 
its patents or other
 
intellectual property rights, or to
 
determine the validity
or
 
scope
 
of
 
the
 
proprietary
 
rights
 
of
 
others.
 
This
 
type
 
of
 
litigation
 
can
 
be
 
expensive
 
and
 
time
 
consuming,
 
regardless
 
of
whether or
 
not the
 
Company is successful.
 
PyroGenesis may seek
 
patents or
 
other similar
 
protections in
 
respect of
 
particular
technology; however, there can be no assurance that any future patent applications
 
will actually result in issued patents, or
that,
 
even
 
if
 
patents
 
are
 
issued,
 
they
 
will
 
be
 
of
 
sufficient
 
scope
 
or
 
strength
 
to
 
provide
 
meaningful
 
protection
 
or
 
any
commercial
 
advantage
 
to
 
the
 
Company.
 
Moreover,
 
the
 
process
 
of
 
seeking
 
patent
 
protection
 
can
 
itself
 
be
 
long
 
and
expensive. In the meantime, competitors may develop technologies that are similar or superior to PyroGenesis’ technology
or design around the patents owned by the Company, thereby adversely affecting the Company’s competitive advantage in
one or more of its areas of business. Despite the efforts
 
of the Company, its intellectual
 
property rights may be invalidated,
circumvented, challenged, infringed or
 
required to be licensed to others.
 
It cannot be assured that
 
any steps the Company
may take
 
to protect
 
its intellectual
 
property rights
 
and other
 
rights to
 
such proprietary
 
technologies that
 
are central
 
to the
Company’s operations will prevent misappropriation
 
or infringement of its technology.
Changes to Contracts
PyroGenesis
 
is
 
dependent
 
upon
 
its
 
ability
 
to
 
establish
 
and
 
develop
 
new
 
relationships
 
and
 
to
 
build
 
on
 
existing
relationships
 
with
 
current
 
clients.
 
The
 
Company
 
cannot
 
provide
 
assurance
 
that
 
it
 
will
 
be
 
successful
 
in
 
maintaining
 
or
advancing
 
its
 
relationships
 
with
 
current
 
clients
 
or
 
procure
 
additional
 
clients.
 
In
 
addition,
 
PyroGenesis
 
cannot
 
provide
assurance that its customers and the
 
end users of its products will
 
continue to provide the Company
 
with business, or that
existing customers
 
and end
 
users will
 
not seek
 
to renegotiate
 
or terminate
 
existing contracts
 
providing for
 
the sale
 
of the
Company’s products and
 
technology based on
 
circumstances on which
 
the Company is
 
not currently
 
aware. Any termination
 
37
or amendment of
 
a contract under
 
which the Company
 
derives an important
 
portion of its
 
revenues, including
 
the Drosrite
International
 
Exclusive
 
Agreement
 
and
 
the
 
Dross
 
Processing
 
Service
 
Agreement,
 
and
 
any
 
adverse
 
change
 
in
 
the
relationship
 
of the
 
Company
 
with its
 
customers
 
and end
 
users, will
 
have an
 
adverse
 
effect
 
on the
 
Company’s
 
business,
financial condition and results of operations.
Sales to governments and governmental
 
entities are subject to specific
 
additional risks, such as delays
 
in funding,
termination of
 
contracts
 
or sub-contracts
 
at the
 
convenience
 
of the
 
government,
 
termination, reduction
 
or modification
 
of
contracts or sub-contracts in
 
the event of changes
 
in the government’s policies
 
or as a result of budgetary
 
constraints and
increased or unexpected costs resulting in losses or reduced
 
profits under fixed price contracts.
Foreign Exchange Exposure
PyroGenesis’ products
 
and services
 
are increasingly
 
being sold
 
in markets
 
outside of
 
Canada, whilst
 
most of
 
its
operating expenses
 
and capital
 
expenditures are
 
denominated in
 
Canadian dollars.
 
As a result,
 
the Company
 
is exposed
to
 
fluctuations
 
in
 
the
 
foreign
 
exchange
 
rates
 
between
 
Canadian
 
dollar
 
and
 
the
 
currency
 
in
 
which
 
a
 
particular
 
sale
 
is
transacted,
 
which
 
may
 
result
 
in
 
foreign
 
exchange
 
losses
 
that
 
could
 
affect
 
earnings.
 
Foreign
 
sales
 
are
 
predominantly
denominated in U.S. dollars. The Company has not to date sought to hedge the risks associated with fluctuations in
 
foreign
exchange rates.
Competition
The industry in which the Company
 
operates is competitive and PyroGenesis
 
competes with a substantial number
of companies which have
 
greater technical and
 
financial resources. There can
 
be no assurance that
 
such competitors will
not substantially increase the resources devoted to the development
 
and marketing of products and services
 
that compete
with those of
 
the Company
 
or that new
 
or existing
 
competitors will
 
not enter
 
the various
 
markets in which
 
PyroGenesis is
active. There
 
can be
 
no assurance
 
that competitors
 
will not
 
develop new
 
and unknown
 
technologies with which
 
the Company
may have difficulty
 
competing. Furthermore,
 
failure to
 
remain cost competitive
 
may result in
 
PyroGenesis losing
 
business
to its competitors.
The plasma
 
technology
 
of
 
PyroGenesis
 
competes
 
against
 
other
 
plasma
 
and
 
conventional
 
technologies.
 
Without
limitation,
 
the
 
demand
 
for
 
the
 
plasma
 
technology
 
of
 
PyroGenesis,
 
particularly
 
in
 
waste
 
destruction
 
and
 
waste-to-energy
systems, can be impacted by the commodity prices of the energy source used for the process and the price at which waste
is accepted by
 
landfills and
 
traditional waste
 
processing plants.
 
While the Company
 
believes that
 
demand for sustainable
waste management practices
 
that have
 
lower environmental impacts
 
than traditional solutions
 
such as landfill
 
or incineration
is
 
increasing,
 
the
 
high
 
flows
 
of
 
electricity
 
necessary
 
to
 
operate
 
the
 
waste
 
destruction
 
and
 
waste-to-energy
 
systems
 
of
PyroGenesis have an
 
impact on the
 
operational costs
 
of the Company’s
 
systems, and traditional
 
solutions may
 
constitute
lower-cost solutions, particularly if commodity prices (including
 
of oil and natural gas) are low or experience a decline.
Management and Key Personnel
PyroGenesis
 
depends
 
on
 
the
 
skills
 
and
 
experience
 
of
 
its
 
executive
 
and
 
management
 
team
 
and
 
other
 
key
employees.
 
The
 
Company
 
relies
 
heavily
 
on
 
its
 
ability
 
to
 
attract
 
and
 
retain
 
highly
 
skilled
 
personnel
 
in
 
a
 
competitive
environment. PyroGenesis may be
 
unable to recruit, retain, and
 
motivate highly skilled executives
 
and employees in order
to assist the Company’s
 
business, especially activities
 
that are essential to
 
the success of
 
the Company.
 
Failure to recruit
and retain
 
highly skilled
 
executives
 
and
 
employees
 
may adversely
 
affect
 
PyroGenesis’
 
business, financial
 
condition
 
and
results of operations.
Implementation of a Strategic Plan
PyroGenesis’ commercial strategy aims to leverage its products, consumables, and services whilst focusing on the
resolution of problems
 
within niche markets within
 
the industries served by
 
the Company.
 
There can be no
 
assurances as
to the
 
success
 
of the
 
Company’s
 
strategic
 
plan,
 
which
 
should
 
be considered
 
under
 
the risks
 
perspective
 
and
 
difficulties
frequently encountered by a developing business.
Adverse Decisions of Sovereign Governments
PyroGenesis
 
conducts
 
an
 
increasing
 
portion
 
of
 
its
 
business
 
internationally.
 
There
 
is
 
no
 
assurance
 
that
 
any
sovereign government, including Canada’s, will not establish laws or regulations that may be detrimental to the Company’s
interests or
 
that PyroGenesis
 
will continue
 
to have
 
access to
 
the regulatory
 
agencies in
 
the countries
 
in which
 
it sells
 
or
seeks
 
to
 
sell,
 
directly
 
or
 
indirectly,
 
its
 
products
 
and
 
services.
 
Governments
 
have,
 
from
 
time
 
to
 
time,
 
established
 
foreign
 
38
exchange controls, which could
 
have a material adverse effect
 
on the Company’s business,
 
financial condition and results
of operations.
Risks Related to International Operations
A substantial
 
portion of the
 
Company’s sales
 
are made to
 
customers and
 
end users
 
outside Canada,
 
including in
the United States, the European Union and
 
the Middle East. The Company conducts
 
its international operations directly or
through distributors
 
or other
 
agents or
 
intermediaries, including
 
Drosrite International.
 
The Company
 
plans to
 
continue to
expand its international sales and marketing
 
efforts. International operations are subject
 
to a number of inherent risks, and
the Company’s future results could be adversely affected
 
by a number of factors, including:
 
unfavorable political or economic environments;
 
requirements
 
or
 
preferences
 
for
 
domestic
 
products
 
or
 
solutions,
 
which
 
could
 
reduce
 
demand
 
for
 
the
Company’s products;
 
differing existing or future regulatory and certification
 
requirements;
 
unexpected legal or regulatory changes;
 
greater difficulty in collecting accounts receivable
 
and longer collection periods;
 
difficulties in enforcing contracts;
 
any inability to effectively protect intellectual property;
 
tariffs
 
and
 
trade
 
barriers,
 
export
 
regulations
 
and
 
other
 
regulatory
 
and
 
contractual
 
limitations
 
on
 
the
Company’s ability to sell its products; and
 
potentially adverse tax consequences, including multiple and
 
possibly overlapping tax structures.
Fluctuations
 
in currency
 
exchange rates
 
could materially
 
adversely
 
affect
 
sales denominated
 
in currencies
 
other
than the Canadian dollar
 
and cause a reduction
 
in revenues derived from
 
sales in a particular country.
 
Financial instability
in
 
foreign
 
markets
 
could
 
also
 
affect
 
the
 
sale
 
of
 
the
 
Company’s
 
products
 
in
 
international
 
jurisdictions.
 
In
 
addition,
 
the
Company may be denied
 
access to its end
 
customers as a result
 
of a closing of
 
the borders of the
 
countries in which it
 
its
products are sold due to economic, legislative, political, military
 
and other conditions in such countries.
There can be
 
no assurance
 
that such factors
 
will not materially
 
adversely affect
 
the operations,
 
growth prospects
and sales of
 
the Company
 
and, consequently,
 
its results
 
of operations. In
 
addition, revenues
 
the Company earns
 
in other
jurisdictions may be
 
subject to taxation by
 
more than one
 
jurisdiction, which could materially
 
adversely affect the Company’s
earnings. Each of these factors could have an adverse effect on the Company’s business, financial condition and results of
operations.
Governmental Regulation
PyroGenesis is subject to a variety of federal, provincial, state, local and international laws and regulations relating
namely to
 
the environment,
 
health and
 
safety,
 
export controls,
 
currency exchange,
 
labour and
 
employment and
 
taxation.
These laws and regulations
 
are complex, change frequently
 
and have tended to become
 
more stringent over time. Failure
to comply with these
 
laws and regulations may
 
result in a variety
 
of administrative, civil and
 
criminal enforcement measures,
including assessment
 
of monetary
 
penalties, imposition
 
of remedial
 
requirements and
 
issuance of
 
injunctions as
 
to future
compliance. The Company
 
may be subject to
 
compliance audits by regulatory
 
authorities in the various countries
 
in which
it operates.
Government-funded Defense and Security Programs
Like most
 
companies that
 
supply products
 
and services
 
to governments,
 
the Company
 
is subject
 
to routine
 
audit
and investigation procedures
 
of government agencies.
 
These agencies may
 
review the Company’s
 
performance under its
contracts,
 
business
 
processes,
 
cost
 
structure,
 
and
 
compliance
 
with
 
applicable
 
laws,
 
regulations
 
and
 
standards.
 
The
Company’s incurred costs for
 
each year are
 
subject to audit
 
by government agencies, which
 
can result in
 
payment demands
related to costs
 
they believe
 
should be
 
disallowed. The
 
Company works
 
with governments
 
to assess
 
the merits
 
of claims
and
 
where
 
appropriate
 
reserve
 
for
 
amounts
 
disputed.
 
The
 
Company
 
could
 
be
 
required
 
to
 
provide
 
repayments
 
to
 
39
governments, which may have a negative effect on its results of operations. Contrary to cost-reimbursable contracts, some
costs may not
 
be reimbursed or
 
allowed under fixed-price
 
contracts, which may
 
have a negative
 
effect on the
 
Company’s
results of operations if it experiences costs overruns.
Environmental Liability
PyroGenesis
 
is
 
subject
 
to
 
various
 
environmental
 
laws
 
and
 
regulations
 
enacted
 
in
 
the
 
jurisdictions
 
in
 
which
 
it
operates,
 
which
 
govern
 
the
 
manufacturing,
 
processing,
 
importation,
 
transportation,
 
handling
 
and
 
disposal
 
of
 
certain
materials used
 
in the
 
Company’s
 
operations. Management
 
believes that
 
it has
 
adequate procedures
 
in place
 
to address
compliance with current environmental laws and regulations. Furthermore, management monitors the Company’s practices
concerning the handling of environmentally hazardous materials. However,
 
there can be no assurance that the Company’s
procedures
 
will
 
prevent
 
environmental
 
damage
 
occurring
 
from
 
spills
 
of
 
materials
 
handled
 
by
 
the
 
Company
 
or
 
that
 
such
damage has not
 
already occurred.
 
On occasion, substantial
 
liabilities to third
 
parties may be
 
incurred. The Company
 
may
have
 
the
 
benefit
 
of
 
insurance
 
maintained
 
by
 
it
 
or
 
the
 
operator,
 
however
 
the
 
Company
 
may
 
become
 
liable
 
for
 
damages
against which it cannot adequately
 
insure or against which it
 
may elect not to
 
insure because of high costs
 
or other reasons.
The Company’s
 
clients are
 
subject to similar
 
environmental laws
 
and regulations,
 
as well as
 
limits on emissions
 
to the air
and discharges
 
into surface
 
and sub-surface
 
waters. While
 
regulatory developments
 
that may
 
follow in subsequent
 
years
could have
 
the effect
 
of reducing
 
industry activity,
 
the Company
 
cannot predict
 
the nature
 
of the
 
restrictions that
 
may be
imposed. The
 
Company may
 
be required
 
to increase
 
operating expenses
 
or capital
 
expenditures in
 
order to
 
comply with
any new restrictions or regulations.
Product Liability and Other Lawsuits
PyroGenesis is
 
subject to
 
a variety
 
of potential
 
product liabilities claims
 
and other
 
lawsuits related with
 
its operations,
including
 
liabilities
 
and
 
expenses
 
associated
 
with
 
product
 
defects.
 
The
 
Company
 
maintains
 
product
 
liability
 
and
 
other
insurance coverage that management believes is generally
 
in accordance with the market practice in its industry,
 
but there
can be no assurance that the Company will always be
 
adequately insured against all potential liabilities.
A
 
malfunction
 
or
 
the
 
inadequate
 
design
 
of
 
the
 
Company’s
 
products
 
could
 
result
 
in
 
product
 
liability
 
or
 
other
 
tort
claims.
 
Accidents
 
involving
 
the
 
Company’s
 
products
 
could
 
lead
 
to
 
personal
 
injury
 
or
 
physical
 
damage.
 
Any
 
liability
 
for
damages resulting
 
from malfunctions
 
could be
 
substantial and
 
could materially
 
adversely affect
 
the Company’s
 
business
and
 
results
 
of
 
operations.
 
In
 
addition,
 
a
 
well-publicized
 
actual
 
or
 
perceived
 
problem
 
could
 
adversely
 
affect
 
the
 
market’s
perception of the Company’s products and affect
 
its reputation. This could result in a decline in demand for the
 
Company’s
products, which would materially adversely affect
 
the Company’s financial condition and results
 
of operations.
The sale
 
and use
 
of products
 
and processes
 
developed or
 
sold by
 
the Company
 
may entail
 
potential liability
 
and
possible
 
warranty
 
claims.
 
The Company
 
is also
 
required
 
to
 
indemnify
 
Drosrite
 
International
 
for any
 
claims
 
and
 
liabilities
incurred in
 
connection with the
 
Drosrite systems. The
 
Company may be
 
subject to personal
 
injury claims for
 
injuries resulting
from use of its products. Although the
 
Company maintains product liability insurance,
 
there can be no assurance that such
insurance will
 
continue to
 
be available
 
on commercially
 
reasonable terms
 
or that
 
the risks
 
covered or
 
coverage amounts
will be sufficient to cover all claims.
Information Systems Disruptions
The Company
 
relies
 
on various
 
information
 
technology
 
systems
 
to manage
 
its operations.
 
Over
 
the last
 
several
years,
 
the
 
Company
 
has
 
implemented,
 
and
 
it
 
continues
 
to
 
implement,
 
modifications
 
and
 
upgrades
 
to
 
such
 
systems,
including changes
 
to legacy
 
systems, replacing
 
legacy systems
 
with successor
 
systems with
 
new functionality, and acquiring
new systems with
 
new functionality.
 
These types
 
of activities subject
 
the Company
 
to inherent costs
 
and risks
 
associated
with replacing and
 
changing these systems,
 
including impairment of
 
the Company’s ability
 
to fulfill
 
customer orders, potential
disruption of
 
its internal
 
control structure, substantial
 
capital expenditures, additional
 
administration and operating
 
expenses,
retention of
 
sufficiently skilled
 
personnel to
 
implement and
 
operate the
 
new systems,
 
demands on management
 
time and
other
 
risks
 
and
 
costs
 
of
 
delays
 
or
 
difficulties
 
in
 
transitioning
 
to
 
or
 
integrating
 
new
 
systems
 
into
 
the
 
Company’s
 
current
systems. These
 
implementations, modifications,
 
and upgrades
 
may not result
 
in productivity
 
improvements at
 
a level that
outweighs the costs of implementation, or at all. In addition, the difficulties with implementing new technology systems may
cause
 
disruptions
 
in
 
the
 
Company’s
 
business
 
operations
 
and
 
have
 
a
 
material
 
adverse
 
effect
 
on
 
its
 
business,
 
financial
condition, or results of operations.
 
40
Security Breaches
As part
 
of its
 
day-to-day business,
 
the Company
 
stores its
 
data and
 
certain data
 
about its customers
 
in its global
information technology system.
 
Unauthorized access to
 
the Company’s data,
 
including any regarding
 
its customers, could
expose the Company to a risk of
 
loss of this information, loss of
 
business, litigation and possible liability. Security measures
may
 
be
 
breached
 
by
 
intentional
 
misconduct
 
by
 
computer
 
hackers,
 
as
 
a
 
result
 
of
 
third-party
 
action,
 
employee
 
errors,
malfeasance
 
or
 
otherwise.
 
Additionally,
 
third
 
parties
 
may
 
attempt
 
to
 
fraudulently
 
induce
 
employees
 
or
 
customers
 
into
disclosing sensitive information
 
such as usernames,
 
passwords or other
 
information in order
 
to gain access
 
to the data
 
of
the
 
Company’s
 
customers
 
or
 
the
 
Company’s
 
data,
 
including
 
the
 
Company’s
 
intellectual
 
property
 
and
 
other
 
confidential
business
 
information,
 
or
 
the
 
Company’s
 
information
 
technology
 
systems.
 
Because
 
the
 
techniques
 
used
 
to
 
obtain
unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a
target, the Company may
 
be unable to anticipate
 
these techniques or
 
to implement adequate preventative
 
measures. Any
security breach could
 
result in a
 
loss of
 
confidence by the
 
Company’s customers, damage its
 
reputation, disrupt its
 
business,
lead to legal liability and negatively impact its future sales,
 
business, operations and financial results.
Public Health Crises
Public
 
health
 
crises,
 
including
 
local,
 
regional,
 
national
 
or
 
international
 
outbreak
 
of
 
a
 
contagious
 
disease,
 
could
 
have
 
an
adverse effect on
 
local economies, the
 
global economy,
 
and the markets
 
in which the
 
Company operates
 
and markets its
products, and may
 
adversely impact the
 
price and demand
 
for the Company’s
 
products and the
 
ability of the
 
Company to
operate and market
 
its products. Any
 
such alterations or
 
modifications could cause
 
substantial interruption to
 
the Company’s
business, any
 
of which
 
could have
 
a material
 
adverse effect
 
on the
 
Company’s operations
 
or financial
 
results, and
 
could
include temporary closures of
 
one or more
 
of the Company’s or
 
its partner’s offices or
 
facilities; temporary or long-term
 
labor
shortages; temporary or long-term adverse impacts on the Company’s supply chain and distribution channels; the potential
of increased network vulnerability and
 
risk of data loss resulting
 
from increased use of remote
 
access and removal of data
from the Company’s facilities.
2020
 
and
 
2021
 
saw
 
The
 
global
 
outbreak
 
of
 
COVID-19
 
have
 
devasting
 
effects
 
on
 
populations
 
and
 
led
 
to
 
governments
worldwide enacting emergency
 
measures to protect
 
against the spread of
 
the virus. In 2022,
 
the detrimental effects
 
of the
COVID-19 pandemic
 
on economies
 
and businesses
 
lessened with
 
the lifting
 
of most
 
public health
 
restrictions
 
during the
year. Like most businesses, PyroGenesis was affected
 
by the pandemic. However, the Company took measures to protect
its
 
employees
 
and
 
the
 
company
 
in
 
general
 
and
 
continued
 
its
 
operations
 
throughout
 
the
 
pandemic.
 
Notwithstanding
 
the
foregoing, there
 
is no
 
guarantee that
 
the global
 
effects of the
 
pandemic will
 
continue to improve
 
and if
 
new strains, outbreaks,
or other adverse
 
effects arise,
 
the Company and
 
its vendors and
 
suppliers may
 
be unable to
 
continue operations
 
or keep
up with increasing
 
demands as
 
a result
 
of COVID-19
 
and customers
 
may experience
 
delays or interruptions
 
in service
 
or
the delivery
 
of products, which
 
may be detrimental
 
to the
 
Company’s reputation, business, results
 
of operations and
 
financial
position.
 
The
 
Company
 
cautions
 
that
 
it
 
is
 
impossible
 
to
 
fully
 
anticipate
 
or
 
quantify
 
the
 
effect
 
and
 
ultimate
 
impact
 
of
 
the
COVID-19 pandemic as the situation still continues to evolve.
Litigation
The Company may from time
 
to time become party
 
to litigation, including 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 and
 
the market price for
the Common Shares
 
and could use
 
significant resources.
 
Even if the
 
Company is
 
involved in litigation
 
and wins, litigation
can redirect significant Company resources. Litigation may also create a negative perception of the Company’s
 
brand. See
“Legal Proceedings”.
Trade Secrets May Be Difficult to Protect
The
 
Company’s
 
success
 
depends
 
upon
 
the
 
skills,
 
knowledge
 
and
 
experience
 
of
 
its
 
scientific
 
and
 
technical
personnel,
 
consultants
 
and
 
advisors,
 
as
 
well
 
as
 
contractors.
 
Because
 
the
 
Company
 
operates
 
in
 
a
 
highly
 
competitive
industry,
 
it
 
relies
 
in
 
part
 
on
 
trade
 
secrets
 
to
 
protect
 
its
 
proprietary
 
products
 
and
 
processes.
 
However,
 
trade
 
secrets
 
are
difficult
 
to
 
protect.
 
The
 
Company
 
generally
 
enters
 
into
 
confidentiality
 
or
 
non-disclosure
 
agreements
 
with
 
its
 
corporate
partners,
 
employees,
 
consultants,
 
outside
 
scientific
 
collaborators,
 
developers
 
and
 
other
 
advisors.
 
These
 
agreements
generally
 
require
 
that
 
the
 
receiving
 
party
 
keep
 
confidential,
 
and
 
not
 
disclose
 
to
 
third
 
parties,
 
confidential
 
information
developed by the receiving
 
party or made known to
 
the receiving party by
 
the Company during the course
 
of the receiving
party’s relationship with the Company. These agreements also generally provide that inventions conceived by the receiving
party
 
in
 
the
 
course
 
of
 
rendering
 
services
 
to
 
the
 
Company
 
will
 
be
 
its
 
exclusive
 
property,
 
and
 
the
 
Company
 
enters
 
into
assignment agreements to perfect its rights.
 
41
These
 
confidentiality,
 
inventions
 
and
 
assignment
 
agreements,
 
where
 
in
 
place,
 
may
 
be
 
breached
 
and
 
may
 
not
effectively
 
assign intellectual
 
property rights
 
to the
 
Company.
 
The Company’s
 
trade secrets
 
also could
 
be independently
discovered by
 
competitors, in
 
which case
 
the Company
 
would not
 
be able
 
to prevent
 
the use
 
of such
 
trade secrets
 
by its
competitors. The enforcement of a claim alleging that a party illegally obtained and was using the Company’s trade secrets
could be difficult, expensive and time consuming and the outcome could be unpredictable. The failure to obtain or maintain
meaningful trade secret protection could adversely affect
 
the Company’s competitive position.
Risks Related to Acquiring Companies
The Company
 
has in
 
the past
 
and may
 
in the
 
future acquire
 
other companies
 
and there
 
are risks
 
inherent in
 
any
such acquisition.
 
Specifically,
 
there could
 
be unknown
 
or undisclosed
 
risks or
 
liabilities of
 
such companies
 
for which
 
the
Company is not sufficiently indemnified. Any such unknown or undisclosed risks or liabilities could materially and adversely
affect the Company’s financial performance and results of
 
operations. The Company could encounter additional transaction
and integration
 
related costs
 
or other factors
 
such as
 
the failure to
 
realize all
 
of the
 
benefits from
 
such acquisitions.
 
All of
these factors could cause dilution
 
to the Company’s earnings per
 
share or decrease or
 
delay the anticipated accretive effect
of the acquisition and cause a decrease in the market price of the Company’s
 
securities. The Company may not be able to
successfully integrate and combine the operations, personnel and technology infrastructure of any such acquired company
with its existing operations.
 
If integration is not
 
managed successfully by
 
the Company’s
 
management, the Company
 
may
experience interruptions in its business activities, deterioration in its employee and customer relationships, increased costs
of
 
integration
 
and
 
harm
 
to
 
its reputation,
 
all
 
of which
 
could
 
have
 
a
 
material
 
adverse
 
effect
 
on
 
the
 
Company’s
 
business,
financial
 
condition
 
and
 
results
 
of
 
operations.
 
The
 
Company
 
may
 
experience
 
difficulties
 
in
 
combining
 
corporate
 
cultures,
maintaining
 
employee
 
morale
 
and
 
retaining
 
key
 
employees.
 
The
 
integration
 
of
 
any
 
such
 
acquired
 
companies
 
may
 
also
impose substantial demands on
 
the management. There is no
 
assurance that any acquisition will
 
be successfully integrated
in a timely manner or at all.
Global Economic Uncertainty
Demand
 
for
 
the
 
Company’s
 
products
 
and
 
services
 
are
 
influenced
 
by
 
general
 
economic
 
and
 
consumer
 
trends
beyond
 
the
 
Company’s
 
control.
 
There
 
can
 
be
 
no
 
assurance
 
that
 
the
 
Company’s
 
business
 
and
 
corresponding
 
financial
performance
 
will
 
not
 
be
 
adversely
 
affected
 
by
 
general
 
economic
 
or
 
consumer
 
trends.
 
In
 
particular,
 
global
 
economic
conditions are still tight, and if such conditions continue, recur or worsen, there can be no assurance that they will not have
a material adverse effect on the Company’s
 
business, financial condition and results of operations.
Furthermore, economic conditions may produce downward pressure on
 
stock prices and on the availability
 
of credit
for financial
 
institutions and
 
corporations. If
 
any market
 
disruption and
 
volatility continue,
 
the Company
 
might experience
reductions
 
in
 
business
 
activity,
 
increased
 
funding
 
costs
 
and
 
funding
 
pressures,
 
as applicable,
 
a decrease
 
in
 
the
 
market
price
 
of
 
the
 
Common
 
Shares,
 
a
 
decrease
 
in
 
asset
 
values,
 
additional
 
write-downs
 
and
 
impairment
 
charges
 
and
 
lower
profitability.
Inability to Renew Leases
The
 
Company
 
may
 
be
 
unable
 
to
 
renew
 
or
 
maintain
 
its
 
leases
 
(commercial
 
or
 
real
 
property)
 
on
 
commercially
acceptable
 
terms
 
or
 
at
 
all.
 
Any
 
inability
 
to
 
renew
 
a
 
lease,
 
or
 
any
 
renewal
 
of
 
a
 
lease
 
with
 
a
 
rental
 
rate
 
higher
 
than
 
the
prevailing rate
 
under the
 
applicable lease
 
prior to
 
expiration, may
 
have an
 
adverse impact
 
on the
 
Company’s operations,
including disruption of its operations
 
or an increase in its cost
 
of operations. In addition, in the
 
event of non-renewal of any
of the Company’s
 
leases, the Company
 
may be unable
 
to locate suitable
 
replacement properties
 
for its facilities
 
or it may
experience delays in relocation that could lead to a disruption in its operations. Any disruption in the Company’s operations
could have an adverse effect on its financial condition
 
and results of operations.
Financial Reporting and Other Public Issuer Requirements
As
 
a
 
public
 
company,
 
the
 
Company
 
is
 
subject
 
to
 
the
 
reporting
 
requirements
 
of
 
the
 
Canadian
 
Securities
Administrators, or the
 
CSA, and
 
the U.S. Securities
 
Exchange Act
 
of 1934, as
 
amended, and the
 
rules and regulations
 
of
the listing standards of the TSX
 
and NASDAQ and the U.S. Sarbanes-Oxley Act.
 
The requirements of these laws, rules and
regulations have increased and will continue
 
to increase the Company’s legal,
 
accounting, and financial compliance costs,
make some activities
 
more difficult,
 
time-consuming, and
 
costly,
 
and place significant
 
strain on the
 
Company’s personnel,
systems, and resources. The Company is continuing to
 
develop and refine its disclosure controls and other
 
procedures that
are designed to ensure that information required to
 
be disclosed by the Company in the reports
 
that it will file with the CSA
is
 
recorded,
 
processed,
 
summarized,
 
and
 
reported
 
within
 
the
 
time
 
periods
 
specified
 
in
 
CSA
 
rules
 
and
 
forms
 
and
 
that
 
42
information required
 
to be
 
disclosed in
 
reports under
 
applicable securities
 
laws is
 
accumulated and
 
communicated to
 
the
Company’s principal
 
executive and
 
financial officers.
 
The Company
 
is also
 
continuing to
 
improve its
 
internal control
 
over
financial reporting. In order to
 
improve the effectiveness
 
of its disclosure controls and
 
procedures and internal control over
financial reporting, the
 
Company has expended,
 
and anticipate
 
that it
 
will continue to
 
expend, significant
 
resources, including
accounting-related costs and significant management oversight.
The
 
Company
 
has
 
identified
 
certain
 
material
 
weaknesses
 
in
 
its
 
internal
 
controls,
 
as
 
more
 
fully
 
explained
 
in
 
its
management’s
 
discussion
 
and
 
analysis
 
for
 
the
 
year
 
ended
 
December
 
31,
 
2022,
 
under
 
“Disclosure
 
Controls
 
and
Procedures”. Additional weaknesses in the Company’s disclosure
 
controls and internal control over financial reporting may
also be discovered in the future. Any failure
 
to develop or maintain effective controls
 
or any difficulties encountered in their
implementation or improvement
 
could harm
 
the Company’s
 
results of operations
 
or cause the
 
Company to fail
 
to meet its
reporting obligations and may result in a restatement of the Company’s financial statements for prior periods. Any failure to
improve and
 
maintain
 
effective
 
internal
 
control over
 
financial
 
reporting
 
also could
 
adversely
 
affect
 
the results
 
of periodic
management
 
evaluations
 
and
 
annual
 
independent
 
registered
 
public
 
accounting
 
firm
 
attestation
 
reports
 
regarding
 
the
effectiveness
 
of
 
the
 
Company’s
 
internal
 
control
 
over
 
financial
 
reporting
 
that
 
the
 
Company
 
will
 
eventually
 
be
 
required
 
to
include
 
in
 
its periodic
 
reports
 
that will
 
be
 
filed
 
with
 
the
 
CSA.
 
Ineffective
 
disclosure
 
controls
 
and
 
procedures
 
and
 
internal
control over financial reporting could also cause investors to lose confidence in the Company’s reported financial and other
information, which could have
 
a negative effect
 
on the trading price
 
of the Common Shares.
 
In addition, if the
 
Company is
unable to continue to meet these requirements, it may not be able
 
to remain listed on the TSX and/or NASDAQ.
Influence of the Significant Shareholders
To
 
the Company’s
 
knowledge, no
 
shareholder beneficially
 
owns, or controls
 
or directs,
 
directly or indirectly,
 
more
than
 
10%
 
of
 
the
 
voting
 
rights
 
attached
 
to
 
the
 
Company’s
 
outstanding
 
voting
 
securities,
 
except
 
for
 
Mr.
 
P.
 
Peter
 
Pascali,
President and
 
Chief Executive
 
Officer of
 
the Company,
 
who holds
 
or controls,
 
directly or
 
indirectly,
 
80,925,698 Common
Shares,
 
representing
 
in
 
aggregate
 
45.32%
 
of
 
the
 
total
 
voting
 
rights
 
attached
 
to
 
the
 
outstanding
 
Common
 
Shares,
 
and
2,500,000 share
 
purchase warrants
 
and options
 
to acquire
 
an additional
 
4,270,000 Common
 
Shares (increasing
 
the total
number of Common
 
Shares held or
 
controlled, directly
 
or indirectly,
 
by him to
 
87,695,698 Common
 
Shares, or 47.31%
 
or
the Common
 
Shares, on
 
a fully
 
diluted basis).
 
In addition,
 
from time
 
to time,
 
the Company
 
may have
 
other shareholders
who
 
have
 
the
 
ability
 
to
 
exercise
 
significant
 
influence
 
over
 
matters
 
submitted
 
to
 
the
 
shareholders
 
of
 
the
 
Company
 
for
approval, whether subject to approval by a
 
majority of the shareholders of the
 
Company or subject to a class
 
vote or special
resolution. See “Directors and Executive Officers
 
- Conflicts of Interest”.
Joint Venture/Partnership Arrangements
The Company
 
may participate
 
in joint
 
ventures and
 
partnerships
 
with third
 
parties. A
 
joint venture
 
or partnership
arrangement involves
 
certain additional
 
risks including:
 
(i) the possibility
 
that a partner
 
may at any
 
time have economic
 
or
business interests
 
or goals
 
that are
 
inconsistent with
 
those of
 
the Company
 
or take
 
actions contrary
 
to the instructions
 
or
requests of
 
the Company
 
or contrary
 
to the
 
Company’s objectives;
 
(ii) the
 
risk that
 
the partner
 
could experience
 
financial
difficulties or seek the protection of bankruptcy, insolvency or other laws, which could result in additional financial demands
on the Company;
 
and (iii) the
 
need to obtain
 
the partner’s consent
 
with respect to
 
certain major decisions.
 
In addition, the
sale or transfer of an interest in joint ventures and partnerships will generally
 
be subject to rights of first refusal or first offer
and certain other joint
 
venture or partnership agreements may provide
 
for buy-sell or similar
 
arrangements. Such rights may
be triggered at a time
 
when the Company may not desire the
 
sale but may be forced to
 
do so because it does not
 
then have
the financial
 
resources
 
with
 
which
 
to purchase
 
the other
 
parties’
 
interests. The
 
terms
 
of any
 
joint venture
 
or partnership
arrangement
 
may
 
not
 
allow
 
the
 
Company
 
to
 
realize
 
anticipated
 
benefits
 
and
 
may
 
adversely
 
affect
 
the
 
Company
 
and
 
its
business.
Limited Control Over the Company’s Operations
Holders of the Common Shares have limited
 
control over changes in the Company’s policies and operations, which
increases
 
the
 
uncertainty
 
and
 
risks
 
of
 
an
 
investment
 
in
 
the
 
Company.
 
The
 
Board
 
determines
 
major
 
policies,
 
including
policies regarding
 
financing, growth,
 
debt capitalization and
 
any future
 
dividends to
 
shareholders of
 
the Company. Generally,
the Board may amend or revise these and other policies without a vote of the holders
 
of the Common Shares. The Board’s
broad
 
discretion
 
in
 
setting
 
policies
 
and
 
the
 
limited
 
ability
 
of
 
holders
 
of
 
the
 
Common
 
Shares
 
to
 
exert
 
control
 
over
 
those
policies increases the uncertainty and risks of an investment
 
in the Company.
 
43
Change in Tax Laws
New income, sales, use
 
or other tax laws,
 
statutes, rules, regulations or
 
ordinances could be enacted
 
at any time.
Further,
 
existing
 
tax
 
laws,
 
statutes,
 
rules,
 
regulations
 
or
 
ordinances
 
could
 
be
 
interpreted,
 
changed,
 
modified
 
or
 
applied
adversely to the
 
Company.
 
These enactments and
 
events could require
 
the Company to
 
pay additional tax
 
amounts on a
prospective or
 
retroactive basis,
 
thereby substantially
 
increasing the
 
amount of
 
taxes the
 
Company is
 
liable to
 
pay in
 
the
relevant tax jurisdictions.
 
Accordingly,
 
these events could
 
decrease the capital
 
that the Company
 
has available to
 
operate
its business. Any or all of these events could harm the
 
business and financial performance of the Company.
Forward-Looking Information
The forward-looking information
 
included in this AIF relating
 
to, among other things,
 
the Company’s future
 
results,
performance, achievements, prospects, targets, intentions or opportunities or the markets in which it operates (including, in
particular, the information contained under “Business of the Company”, and
 
the other statements listed in
 
“Forward-Looking
Statements”)
 
is
 
based
 
on
 
opinions,
 
assumptions
 
and
 
estimates
 
made
 
by
 
the
 
Company’s
 
management
 
in
 
light
 
of
 
its
experience and
 
perception of
 
historical trends,
 
current conditions and
 
expected future developments,
 
as well
 
as other
 
factors
that the Company believes are appropriate and reasonable in the circumstances. However, there can be no assurance that
such estimates and assumptions will
 
prove to be correct. The Company’s
 
actual results in the future may
 
vary significantly
from the historical and estimated results and those variations may
 
be material. The Company makes no representation that
its actual
 
results
 
in the
 
future
 
will be
 
the same,
 
in whole
 
or in
 
part, as
 
those
 
included in
 
this AIF.
 
See “Forward
 
-Looking
Statements”.
Credit Facilities
The Company’s credit facilities and
 
financing agreements mature on
 
various dates. There can
 
be no assurance that
such credit facilities or financing agreements will be renewed or refinanced, or if renewed or refinanced, that the renewal or
refinancing will
 
occur on
 
equally favourable
 
terms to
 
the Company.
 
The Company’s
 
ability to
 
continue operating
 
may be
adversely
 
affected
 
if
 
the
 
Company
 
is
 
not
 
able
 
to
 
renew
 
its
 
credit
 
facilities
 
or
 
arrange
 
refinancing,
 
or
 
if
 
such
 
renewal
 
or
refinancing, as the case may
 
be, occurs on terms
 
materially less favorable to the
 
Company than at present. The
 
Company’s
current credit
 
facilities and
 
financing agreements
 
impose covenants
 
and obligations
 
on the
 
Company.
 
There is
 
a risk
 
that
such loans may go into
 
default if there is a
 
breach in complying with such
 
covenants and obligations, which
 
could result in
the lenders realizing on their security and causing the
 
Company’s shareholders to lose some or all of
 
their investment.
12.2.
 
Risks Related to the Company’s
 
Securities
Potential Volatility of Common Share
 
Price
The market price of the
 
Common Shares could be
 
subject to significant fluctuations.
 
Some of the factors
 
that may
cause the market price of the Common Shares to fluctuate
 
include:
 
the
 
public’s
 
reaction
 
to
 
the
 
Company’s
 
press
 
releases,
 
announcements
 
and
 
filings
 
with
 
regulatory
authorities and those of its competitors;
 
fluctuations in broader stock market prices and volumes;
 
changes in market valuations of similar companies;
 
investor perception of the Company,
 
its prospects or the industry in general;
 
additions or departures of key personnel;
 
commencement of or involvement in litigation;
 
announcements
 
by
 
the
 
Company
 
or
 
its
 
competitors
 
of
 
strategic
 
alliances,
 
significant
 
contracts,
 
new
technologies, acquisitions, commercial relationships, joint
 
ventures or capital commitments;
 
variations
 
in
 
the
 
Company’s
 
quarterly
 
results
 
of
 
operations
 
or
 
cash
 
flows
 
or
 
those
 
of
 
other
 
comparable
companies;
 
revenues
 
and
 
operating
 
results
 
failing
 
to
 
meet
 
the
 
expectations
 
of
 
securities
 
analysts
 
or
 
investors
 
in
particular quarter;
 
44
 
changes in the Company’s pricing policies or the pricing
 
policies of its competitors;
 
future issuances and sales of Common Shares;
 
sales of Common Shares by insiders of the Company;
 
third party disclosure of significant short positions;
 
demand for and trading volume of Common Shares;
 
changes
 
in
 
securities
 
analysts’
 
recommendations
 
and
 
their
 
estimates
 
of
 
the
 
Company’s
 
financial
performance;
 
short-term fluctuation in
 
stock price caused
 
by changes in
 
general conditions in
 
the domestic and
 
worldwide
economies or financial markets; and
 
the other risk factors described under this heading of the AIF.
The realization of any of these risks and other factors
 
beyond the Company’s control could cause
 
the market price
of the Common Shares to decline significantly.
In addition, broad market and industry factors may harm the market price of the Common Shares. Hence, the price
of the
 
Common Shares
 
could fluctuate
 
based upon
 
factors that
 
have little
 
or nothing
 
to do
 
with the
 
Company,
 
and these
fluctuations could materially reduce the
 
price of the Common Shares regardless
 
of the Company’s operating performance.
In
 
the
 
past,
 
following
 
a
 
significant
 
decline
 
in
 
the
 
market
 
price
 
of
 
a
 
company’s
 
securities,
 
there
 
have
 
been
 
instances
 
of
securities class action
 
litigation having
 
been instituted
 
against that company.
 
If the Company
 
were involved
 
in any similar
litigation, it
 
could incur
 
substantial costs,
 
management’s
 
attention and
 
resources could
 
be diverted
 
and it
 
could harm
 
the
Company’s business, operating results and financial
 
condition.
In addition, the Company
 
may face the risk
 
of being delisted from
 
the TSX and/or NASDAQ
 
if decreases in the
 
price
of the Common Shares do not allow the Company to
 
meet certain conditions of the listing exchange(s).
Market Liquidity
The market price for the Common
 
Shares could be subject to wide
 
fluctuations. Factors such as the announcement
of significant
 
contracts,
 
technological
 
innovations,
 
new
 
commercial
 
products,
 
patents,
 
a change
 
in
 
regulations,
 
quarterly
financial results,
 
future sales
 
of Common
 
Shares by
 
the Company
 
or current
 
shareholders, and
 
many other
 
factors could
have considerable
 
repercussions on
 
the price
 
of the
 
Common Shares.
 
In addition,
 
the financial
 
markets may
 
experience
significant price
 
and value
 
fluctuations that
 
affect the
 
market prices
 
of equity
 
securities of
 
companies that
 
sometimes are
unrelated
 
to
 
the
 
operating
 
performance
 
of
 
these
 
companies.
 
Broad
 
market
 
fluctuations,
 
as
 
well
 
as
 
economic
 
conditions
generally may adversely affect the market price of
 
the Common Shares.
Dividends to Shareholders
The Company
 
does not
 
anticipate paying
 
cash dividends
 
on the
 
Common Shares
 
in the
 
foreseeable future.
 
The
Company currently intends to retain all future earnings to fund the development and growth
 
of its business. Any payment of
future dividends will be at
 
the discretion of the
 
directors and will depend
 
on, among other things, the
 
Company’s earnings,
financial
 
condition,
 
capital
 
requirements,
 
level
 
of
 
indebtedness,
 
statutory
 
and
 
contractual
 
restrictions
 
applying
 
to
 
the
payment of dividends, and other considerations that the directors
 
deem relevant.
Impact of Future Sales by Existing Shareholders
If the
 
Company’s
 
shareholders sell
 
substantial amounts
 
of the
 
Common Shares
 
in the
 
public market,
 
the market
price of the
 
Common Shares could
 
decrease. The perception
 
among investors that
 
these sales will
 
occur could also
 
produce
this effect.
 
All currently
 
outstanding Common
 
Shares other
 
than those subject
 
to lock-up
 
agreements, if
 
any,
 
executed by
certain
 
existing
 
shareholders
 
are, subject
 
to
 
applicable
 
securities
 
laws,
 
generally
 
immediately
 
available
 
for
 
resale
 
in
 
the
public markets.
 
45
Subject to compliance with applicable securities laws, the Company’s officers, directors and their affiliates may sell
some or all
 
of their Common
 
Shares in the
 
future. No
 
prediction can be
 
made as
 
to the effect,
 
if any,
 
such future sales
 
of
Common Shares will have on
 
the market price of
 
the Common Shares prevailing from
 
time to time. However, the future sale
of a substantial number
 
of Common Shares
 
by the Company’s
 
officers, directors
 
and their affiliates,
 
or the perception
 
that
such sales could occur, could
 
materially adversely affect prevailing market prices
 
for the Common Shares.
Additional Common Shares issuable upon
 
the exercise of stock options
 
or warrants may also be available
 
for sale
in
 
the
 
public
 
market,
 
which
 
may
 
also
 
cause
 
the
 
market
 
price
 
of
 
the
 
Common
 
Shares
 
to
 
fall.
 
Accordingly,
 
if
 
substantial
amounts of Common Shares are sold in the public market,
 
the market price could fall.
Working Capital and Future Issuances
The Company may issue additional Common Shares in the future which may dilute
 
a shareholder’s holdings in the
Company. The Articles
 
permit the issuance of an unlimited number of Common Shares,
 
and shareholders of the Company
will have no pre-emptive rights in connection
 
with any further issuances. The directors
 
of the Company have the discretion
to
 
determine
 
the
 
provisions
 
attaching
 
to
 
the
 
Common
 
Shares
 
and
 
the
 
price
 
and
 
the
 
terms
 
of
 
issue
 
of
 
further
 
Common
Shares.
Additional equity
 
financing may
 
be dilutive to
 
holders of
 
Common Shares.
 
Debt financing
 
may involve
 
restrictions
on the Company’s financing
 
and operating activities. Debt
 
financing may be
 
convertible into other securities
 
of the Company
which may result in immediate or
 
resulting dilution. In either case, additional financing may
 
not be available to the Company
on acceptable terms
 
or at all.
 
If the Company
 
is unable to
 
raise additional funds
 
as needed, the
 
scope of its
 
operations or
growth may
 
be reduced
 
and, as
 
a result,
 
the Company
 
may be
 
unable to
 
fulfil its
 
long-term goals.
 
In this
 
case, investors
may lose
 
all or part
 
of their
 
investment. Any
 
default under
 
such debt
 
instruments could
 
have a
 
material adverse
 
effect on
the Company,
 
its business or the results of operations.
Securities or Industry Analysts
The
 
trading
 
market
 
for
 
Common
 
Shares
 
could
 
be
 
influenced
 
by
 
the
 
research
 
and
 
reports
 
that
 
industry
 
and/or
securities analysts, or
 
others, may publish
 
about the Company, its business,
 
the market or
 
competitors. If any
 
of the analysts
who may
 
cover the
 
Company’s business change their
 
recommendation regarding the
 
Common Shares adversely, or
 
provide
more favourable
 
relative recommendations
 
about its
 
competitors, the
 
share price
 
would likely
 
decline. If
 
any analyst
 
who
may cover
 
the Company’s
 
business were
 
to cease
 
coverage or
 
fail to
 
regularly publish
 
reports on
 
the Company,
 
it could
lose visibility in the financial markets, which in turn could
 
cause the share price or trading volume to decline.
12
.3.
Risks Related to the Company’s
 
Status as a Foreign Private Issuer
Information Publicly Available to the Company’s U.S.
 
Shareholders
The Company
 
is a
 
foreign private
 
issuer under
 
applicable U.S.
 
federal securities
 
laws. As
 
a result,
 
the Company
does not
 
file the
 
same reports
 
that a
 
U.S. domestic
 
issuer would
 
file with
 
the U.S.
 
Securities and
 
Exchange Commission
(the “
SEC
”), although the Company
 
is required to file
 
with or furnish to
 
the SEC the continuous
 
disclosure documents that
the Company is required to file in
 
Canada under Canadian Securities Laws, in certain respects the reporting obligations are
less
 
detailed
 
and
 
less
 
frequent
 
than
 
those
 
of
 
U.S.
 
domestic
 
reporting
 
companies.
 
In
 
addition,
 
the
 
Company’s
 
officers,
directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16
of the U.S. Exchange Act. Therefore, the
 
Company’s shareholders may not know on as timely a
 
basis when the Company’s
officers,
 
directors
 
and
 
principal
 
shareholders
 
purchase
 
or
 
sell
 
Common
 
Shares
 
as
 
the
 
reporting
 
periods
 
under
 
the
corresponding Canadian insider reporting requirements
 
are longer.
As a foreign private issuer, the Company
 
is exempt from the rules and regulations under the Exchange
 
Act related
to the furnishing and
 
content of proxy statements.
 
The Company is also
 
exempt from Regulation FD,
 
which prohibits issuers
from making selective disclosures of
 
material non-public information. While
 
the Company complies with the
 
corresponding
requirements
 
relating
 
to
 
proxy
 
statements
 
and
 
disclosure
 
of
 
material
 
non-public
 
information
 
under
 
Canadian
 
Securities
Laws, these requirements differ from
 
those under the Exchange Act
 
and Regulation FD and
 
shareholders should not expect
to receive the same information at the same time as such information is provided
 
by U.S. domestic companies. In addition,
the Company may not be required under the Exchange Act to file
 
annual and quarterly reports with the SEC as promptly as
U.S. domestic companies whose securities are registered
 
under the Exchange Act.
In addition,
 
as a
 
foreign private
 
issuer, the Company has
 
the option
 
to follow
 
certain Canadian corporate
 
governance
practices, except
 
to the
 
extent that
 
such laws
 
would be
 
contrary to
 
U.S. securities
 
laws, and
 
provided that
 
the Company
 
46
discloses the requirements it is not following and describe the Canadian practices it follows instead. The Company plans to
rely
 
on
 
this
 
exemption.
 
As
 
a
 
result,
 
the
 
Company’s
 
shareholders
 
may
 
not
 
have
 
the
 
same
 
protections
 
afforded
 
to
shareholders of U.S. domestic companies that are subject
 
to all U.S. corporate governance requirements.
Loss of Foreign Private Issuer Status in the Future
In order
 
to maintain
 
its status
 
as a
 
foreign private
 
issuer,
 
a majority
 
of the
 
Company's
 
Common Shares
 
must be
either
 
directly
 
or
 
indirectly
 
owned
 
by
 
non-residents
 
of
 
the
 
U.S.
 
unless
 
the
 
Company
 
also
 
satisfies
 
one
 
of
 
the
 
additional
requirements necessary
 
to preserve
 
this status.
 
The Company
 
may in
 
the future
 
lose its
 
foreign private
 
issuer status
 
if a
majority of the
 
Common Shares
 
are held
 
in the United
 
States and
 
the Company
 
fails to
 
meet the
 
additional requirements
necessary to avoid
 
loss of foreign
 
private issuer
 
status. The
 
regulatory and compliance
 
costs to the
 
Company under
 
U.S.
federal
 
securities
 
laws
 
as
 
a
 
U.S.
 
domestic
 
issuer
 
may
 
be
 
significantly
 
more
 
than
 
the
 
costs
 
the
 
Company
 
incurs
 
as
 
a
Canadian foreign private
 
issuer eligible to use
 
the multi-jurisdictional disclosure
 
system ("
MJDS
"). If the Company
 
is not a
foreign private
 
issuer,
 
it would
 
not be eligible
 
to use
 
the MJDS
 
or other
 
foreign issuer
 
forms and
 
would be
 
required to
 
file
periodic
 
and
 
current
 
reports
 
and
 
registration
 
statements
 
on
 
U.S.
 
domestic
 
issuer
 
forms
 
with
 
the
 
SEC,
 
which
 
are
 
more
detailed and extensive than the forms available
 
to a foreign private issuer.
 
In addition, the Company may lose the
 
ability to
rely upon exemptions from Nasdaq corporate governance
 
requirements that are available to foreign private issuers.
Inability for U.S. Investors to Enforce Certain Judgments
The Company is a corporation existing under the Canada
 
Business Corporations Act. A number of the Company’s
directors and officers are residents of Canada, and substantially all of the Company’s assets are located outside the United
States. As a result, it may be difficult
 
to effect service within the United
 
States upon the Company or upon its
 
directors and
officers.
 
Execution
 
by
 
United
 
States
 
courts
 
of
 
any
 
judgment
 
obtained
 
against
 
the
 
Company
 
or
 
any
 
of
 
the
 
Company’s
directors or officers
 
in United
 
States courts may
 
be limited to
 
the assets
 
of such companies
 
or such persons,
 
as the case
may be,
 
located in
 
the United
 
States. It
 
may also
 
be
 
difficult
 
for holders
 
of securities
 
who reside
 
in the
 
United
 
States to
realize in the United States upon judgments of courts of the United
 
States predicated upon civil liability and the civil liability
of the Company’s directors and executive officers
 
under the United States federal securities laws. The
 
Company has been
advised that
 
a judgment
 
of a
 
U.S. court
 
predicated solely upon
 
civil liability
 
under U.S.
 
federal securities
 
laws or
 
the securities
or “blue sky” laws of any
 
state within the United States,
 
would likely be enforceable
 
in Canada if the United
 
States court in
which the judgment was obtained has a basis
 
for jurisdiction in the matter that would be recognized
 
by a Canadian court for
the same purposes. However, there may be doubt
 
as to the enforceability in Canada
 
against these non-U.S. entities or their
controlling persons,
 
directors
 
and officers
 
who are
 
not residents
 
of the
 
United States,
 
in original
 
actions or
 
in actions
 
for
enforcement of judgments of courts of the United States, of liabilities predicated solely upon U.S. federal or state securities
laws.
Risks Relating to the Company’s Status as
 
an "Emerging Growth Company" Under U.S. Securities
 
Laws
The Company
 
is an
 
“emerging growth
 
company” as
 
defined in
 
section 3(a)
 
of the
 
Exchange Act
 
(as amended
 
by
the JOBS
 
Act, enacted
 
on April
 
5, 2012),
 
and the Company
 
will continue
 
to qualify
 
as an emerging
 
growth company
 
until
the earliest
 
to occur
 
of: (a)
 
the last
 
day of
 
the fiscal
 
year during
 
which the
 
Company
 
has total
 
annual gross
 
revenues of
US$1,070,000,000 (as
 
such amount
 
is indexed
 
for inflation
 
every five
 
years by
 
the SEC)
 
or more;
 
(b) the
 
last day
 
of the
fiscal year
 
of the
 
Company
 
following the
 
fifth anniversary
 
of the
 
date of
 
the first
 
sale of
 
common
 
equity securities
 
of the
Company pursuant to
 
an effective
 
registration statement
 
under the United
 
States Securities
 
Act of 1933,
 
as amended; (c)
the date
 
on which
 
the Company
 
has, during
 
the previous
 
three year
 
period, issued
 
more than
 
US$1,000,000,000 in
 
non-
convertible debt; and (d) the
 
date on which the
 
Company is deemed to be
 
a "large accelerated filer", as
 
defined in Rule 12b-
2 under the
 
Exchange Act. The
 
Company will qualify as
 
a large accelerated filer
 
(and would cease to
 
be an emerging growth
company) at
 
such time
 
when on
 
the last
 
business
 
day of
 
its second
 
fiscal quarter
 
of such
 
year the
 
aggregate worldwide
market value of its common equity held by non-affiliates
 
will be US$700,000,000 or more.
For
 
so
 
long
 
as
 
the
 
Company
 
remains
 
an
 
emerging
 
growth
 
company,
 
it
 
is
 
permitted
 
to
 
and
 
intends
 
to
 
rely
 
upon
exemptions from certain
 
disclosure requirements that are
 
applicable to other
 
public companies that are
 
not emerging growth
companies. These exemptions include
 
not being required to
 
comply with the auditor attestation
 
requirements of Section 404
of the
 
JOBS Act.
 
The Company
 
takes advantage
 
of some,
 
but not
 
all, of
 
the available
 
exemptions available
 
to emerging
growth companies.
 
The Company
 
cannot predict
 
whether investors
 
will find
 
the Common
 
Shares less
 
attractive because
the Company relies upon certain
 
of these exemptions. If some
 
investors find the Common Shares less
 
attractive as a result,
there may be a less active trading market
 
for the Common Shares and the Common
 
Share price may be more volatile. On
the other
 
hand, if
 
the Company
 
no longer
 
qualifies as
 
an emerging
 
growth company,
 
the Company
 
would be
 
required to
divert additional management time
 
and attention from the
 
Company's development and
 
other business activities and
 
incur
 
47
increased legal and financial costs to comply with the additional associated
 
reporting requirements, which could negatively
impact the Company's business, financial condition and
 
results of operations.
13.
 
Legal Proceedings
The Company may,
 
from time to
 
time be involved
 
in legal proceedings.
 
The Company
 
is not involved
 
in any legal
proceedings which, individually or in the aggregate, would be material to the Company’s consolidated financial condition or
results of operations, except as follows:
The Company filed
 
an originating
 
application on
 
August 11,
 
2022, petitioning
 
the Quebec
 
Superior Court to
 
order
P. Riopel (1993) Inc. to convey title
 
of the property
 
bearing civic address
 
5655 Philippe-Turcot, Montreal, Quebec, H4C
 
3K8.
The
 
property
 
is
 
the
 
location
 
of
 
one
 
of
 
the
 
Company’s
 
two
 
manufacturing
 
facilities.
 
The
 
petition
 
followed
 
the
 
Company’s
exercise of
 
its contractual
 
option to
 
purchase the
 
property for
 
$2,750,000. On
 
December 23,
 
2022, P.
 
Riopel (1993)
 
Inc.
filed a counterclaim in which it
 
sought damages in the
 
amount of $415,425, alleging that
 
the Company breached the lease
agreement between the parties.
On July 28, 2021,
 
an application for a
 
safeguard order and permanent
 
injunction was filed by
 
AirScience Systems
Inc. (“
ASSI
”) before the
 
Quebec Superior
 
Court against
 
Gas RNG Systems
 
Inc. (“
RNG Canada
”), RNG Investments
 
Inc.,
Glauber Equipment
 
Corporation, Mr.
 
Peter Glauber
 
and Mr.
 
Shivaji Ramalingam
 
(collectively,
 
the “Defendants”).
 
ASSI is
seeking
 
an
 
oppression
 
remedy,
 
alleging
 
the
 
wrongful
 
expulsion
 
of
 
ASSI
 
as
 
a
 
shareholder
 
and
 
Mr.
 
Gérard
 
Magnin
 
as
 
a
director from RNG Canada. On April 29,
 
2022, the Defendants filed a defence and a
 
counterclaim against ASSI, AirScience
Technologies
 
Inc.
 
(“
AST
”)
 
(now
 
Pyro
 
Green-Gas
 
Inc.,
 
a
 
wholly-owned
 
subsidiary
 
of
 
the
 
Company)
 
and
 
Mr.
 
Magnin
 
for
allegedly breaching their
 
obligations with respect
 
to a unanimous
 
shareholder agreement
 
governing RNG Canada
 
as well
as an operating agreement governing another entity, Gas RNG Systems LLC (“
RNG US
”). The Defendants, by way of their
counterclaim, seek damages in the amount of $4.9 million. PyroGenesis has maintained that AST was never a shareholder
of either RNG Canada or RNG US nor was it a party to
 
the disputed shareholders and operating agreements.
On October
 
6, 2021,
 
AST filed
 
an action
 
for damages
 
and unpaid
 
invoices against
 
RNG Canada,
 
RNG
 
US, Mr.
Shivaji Ramalingam, Mr. Peter Glauber, Mr. Paul-Louis Crouzat and Mr. Tarlok Nandhra before the Quebec Superior Court.
On February 13, 2022, a defence and
 
counterclaim was filed against AST and two former shareholders of
 
AST (Mr. Magnin
and Mr. Paul
 
D. Singh), seeking approximately
 
$712,000 in alleged compensatory
 
damages. The counterclaim also
 
seeks
a condemnation for legal fees, moral damages and punitive
 
damages for approximately $771,333.
On February 17,
 
2023, the
 
Company received
 
a motion from
 
the securities regulatory
 
authority in the
 
Province of
Québec,
 
filed
 
with
 
the
 
Superior
 
Court
 
of
 
Québec,
 
pursuant
 
to
 
which
 
the
 
AMF
 
is
 
asking
 
the
 
Court
 
to
 
determine
 
whether
certain documents previously requested
 
by the AMF from the
 
Company are subject to
 
solicitor-client privilege. The
 
motion
was filed by the
 
AMF in connection
 
with an investigation
 
being conducted in
 
the context of
 
applicable securities laws.
 
The
Company understands
 
the AMF
 
is investigating
 
certain actions
 
taken by
 
the President
 
and Chief
 
Executive Officer
 
of the
Company,
 
Mr.
 
P.
 
Peter
 
Pascali, in
 
connection
 
with
 
a
 
settlement
 
agreement
 
entered
 
into on
 
April
 
30, 2018,
 
between the
Company and Phoenix Haute Technology
 
Inc. (“
Phoenix
”), a company controlled by the father of Mr. P.
 
Peter Pascali, and
ancillary transactions.
 
Pursuant
 
to the
 
terms
 
of a
 
board-approved
 
settlement
 
agreement,
 
and
 
as further
 
disclosed
 
in the
annual information form of the Company for the year
 
ended December 31, 2020, available under the Company’s
 
profile on
SEDAR at www.sedar.com, under “Interest of Management and Others in Material Transactions – Settlement of Claim”,
 
the
Company issued $3.7 million of units
 
comprised of common shares and warrants to Phoenix in
 
2018, to settle a $5.5 million
claim
 
of
 
Phoenix
 
with
 
respect
 
to
 
the
 
unpaid
 
portion
 
of
 
the
 
consideration
 
payable
 
by
 
the
 
Company
 
to
 
Phoenix
 
for
 
an
acquisition of
 
intellectual
 
property
 
rights completed
 
in
 
2011.
 
To
 
the
 
Company’s
 
knowledge, the
 
investigation
 
of the
 
AMF
does not
 
involve any
 
allegations of
 
wrongdoing by
 
the Company.
 
The AMF
 
has neither
 
announced any
 
proceedings
 
nor
filed
 
any
 
charges.
 
The
 
Company
 
believes
 
that
 
no
 
corporate
 
or
 
securities
 
laws
 
have
 
been
 
breached
 
but
 
cannot
 
predict
whether any enforcement action will result from the investigation.
14.
 
Interest of Management and Others in Material Transactions
Other than
 
as described
 
elsewhere in
 
this AIF
 
and as
 
described below, there is
 
no material interest,
 
direct or indirect,
of: (i)
 
any director
 
or executive
 
officer
 
of the
 
Company;
 
(ii) any
 
person or
 
company
 
that beneficially
 
owns, or
 
controls or
directs,
 
directly
 
or indirectly,
 
more than
 
10% of
 
the
 
Company’s
 
outstanding
 
voting
 
securities;
 
or (iii)
 
an associate
 
or any
affiliate of any persons or companies referred to above in (i) or (ii), in any transaction within the three years before the date
of
 
this
 
AIF
 
that
 
has
 
materially
 
affected
 
or
 
is
 
reasonably
 
expected
 
to
 
materially
 
affect
 
the
 
Company.
 
See
 
“Directors
 
and
Executive Officers - Conflicts of Interest”.
 
48
15.
 
Transfer Agent and Registrar
The transfer
 
agent and
 
registrar
 
of the
 
Company’s
 
Common Shares
 
is TSX
 
Trust
 
Company (Canada)
 
having an
office at
 
2001, Robert-Bourassa
 
Boulevard, Suite
 
1600, Montréal,
 
Québec, H3A
 
2A6. The
 
transfer agent
 
and registrar
 
of
the Company’s Common Shares
 
in the United States
 
is American Stock Transfer
 
& Trust Company,
 
LLC, having an office
at
 
6201 15th Ave, Brooklyn, NY 11219,
 
United States.
16.
 
Auditors
The auditors
 
of the
 
Company
 
are RCGT
 
at its
 
office
 
located at
 
600
 
de
 
la Gauchetiere
 
Street
 
West,
 
Suite
 
2000,
Montréal, Québec. RCGT has informed
 
the Company that it
 
is independent with respect to
 
the Company within the
 
meaning
of the relevant rules and related interpretations prescribed
 
by the relevant professional bodies in Canada.
17.
 
Material Contracts
This
 
AIF
 
includes
 
a
 
summary
 
description
 
of
 
certain
 
material
 
contracts.
 
Each
 
summary
 
description
 
discloses
 
all
material attributes
 
of the
 
applicable contract
 
but is
 
not complete
 
and is
 
qualified by
 
reference to
 
the terms
 
of the
 
material
contracts, which
 
are available
 
under the
 
Company’s SEDAR
 
profile at
 
www.sedar.com.
 
The following
 
are the
 
Company’s
only material contracts, other than
 
those contracts entered into in
 
the ordinary course of business,
 
which have been entered
into since the beginning of its last financial year, or entered into prior to such date, but which
 
are still in effect and which are
required to be filed with Canadian securities regulatory
 
authorities:
 
contract
 
between
 
PyroGenesis
 
and
 
HPQ
 
Silica
 
Polvere
 
Inc.,
 
a
 
wholly
 
owned
 
subsidiary
 
of
 
HPQ
 
Silicon
Resources
 
Inc.,
 
dated
 
June
 
30,
 
2021
 
whereby
 
HPQ
 
Silica
 
Polvere
 
Inc.
 
purchased
 
certain
 
intellectual
property and the Company contracted to advance the development of a green reactor and process used to
produce fumed silica directly from quartz in consideration for
 
$3,300,000, as described under “Business of
the Company - Development of a Process to Produce Fuming
 
Silica from Quartz”; and
 
contract between PyroGenesis and HPQ Silicon
 
Resources dated July 29, 2016 whereby HPQ
 
purchased
certain intellectual
 
property
 
and the
 
Company
 
contracted
 
to build
 
a PUREVAP
 
system
 
for C$7,070,000,
which
 
contract
 
refers
 
to
 
certain
 
terms
 
in
 
a
 
development
 
contract
 
between
 
HPQ
 
(f/k/a
 
Uragold
 
Bay
Resources Inc.) dated February 26,
 
2015, as amended from
 
time to time, as
 
described under the “Business
of
 
the
 
Company
 
-
 
Development
 
of
 
Processes
 
for
 
the
 
Production
 
of
 
High
 
Purity
 
Silicon
 
Metals,
 
Nano
Powders and Nanowires”;
18.
 
Additional Information
Additional information,
 
including with respect
 
to directors’ and
 
executive officers’
 
remuneration and
 
indebtedness,
principal holders
 
of the Company’s
 
securities, and
 
securities authorized
 
for issuance
 
under equity
 
compensation plans,
 
is
contained
 
in
 
the
 
Company’s
 
management
 
information
 
circular
 
for
 
its
 
most
 
recent
 
annual
 
meeting
 
of
 
shareholders
 
that
involved
 
the
 
election
 
of
 
directors
 
which
 
is
 
available
 
under
 
the
 
Company’s
 
SEDAR
 
profile
 
at
 
www.sedar.com.
 
Additional
financial information
 
is contained
 
in the
 
Company’s consolidated
 
financial statements
 
and management’s
 
discussion and
analysis for
 
the year
 
ended December
 
31,
 
2022. Further
 
information
 
about the
 
Company,
 
filed with
 
Canadian
 
securities
regulators,
 
is
 
available
 
online
 
under
 
the
 
Company’s
 
SEDAR
 
profile
 
at
 
www.sedar.com
 
or
 
filed
 
with
 
the
 
Securities
 
and
Exchange Commission at www.sec.gov.
19.
 
Glossary of Terms
2020 Convertible Loan
” has the meaning given to such term under “General Development of the Business – Year
 
Ended
December 31, 2022 – Corporate Developments and Financings”.
2020 Public
 
Offering
” has
 
the meaning
 
given to
 
such term
 
under “General
 
Development of
 
the Business
 
– Year
 
Ended
December 31, 2022 – Corporate Developments and Financings”.
2020 Public Offering Warrant
” has the meaning given to such term under “General Development
 
of the Business – Year
Ended December 31, 2022 – Corporate Developments
 
and Financings”.
2020 Units
” has the
 
meaning given to
 
such term
 
under “General Development
 
of the Business
 
– Year
 
Ended December
31, 2022 – Corporate Developments and Financings”.
 
49
AIF
” means this annual information form.
AMF
” means Autorité des marchés financiers.
Articles
” has the meaning given to such term under
 
“Description of Capital Structure”.
ASSI
” means AirScience Systems Inc.
AST
” means AirScience Technologies
 
Inc., now Pyro Green-Gas Inc., a wholly-owned subsidiary
 
of the Company.
Audit Committee
” means the Company’s audit committee.
Board
” or “
Board of Directors
” means the board of directors of the Company.
business day
” means
 
a day
 
other than
 
a Saturday,
 
Sunday or
 
a day
 
on which
 
the principal
 
chartered banks
 
located at
Toronto
 
are not open for business.
Canadian Securities Laws
” means the securities legislation or ordinance and
 
regulations thereunder of each province of
Canada and the rules, instruments, policies and orders
 
of each Canadian securities regulator made thereunder.
CBCA
” means the Canada Business Corporations Act.
CFC
” means chlorofluorocarbons.
Common
 
Share
 
means
 
a
 
common
 
share
 
in
 
the
 
capital
 
of
 
the
 
Company,
 
as
 
described
 
under
 
“Description
 
of
 
Capital
Structure - Share Capital and Issued and Outstanding
 
Shares”.
Company
” has the meaning given to such term under “Explanatory
 
Notes”.
diluted basis
” means the
 
number of Common
 
Shares outstanding
 
assuming the exercise
 
of all outstanding
 
Options and
other rights to acquire Common Shares.
Drosrite International
” means Drosrite International LLC, a US-based
 
private company.
Drosrite International
 
Exclusive Agreement
” has
 
the meaning
 
given to
 
such term
 
under “Directors and
 
Executive Officers
- Conflicts of Interest”.
Dross Processing
 
Service Agreement
” has
 
the meaning
 
given to
 
such term
 
under “Directors
 
and
 
Executive Officers
 
-
Conflicts of Interest”.
forward-looking statements
” has the meaning given to such term under “Forward
 
-Looking Statements”.
GHG
” means greenhouse gas.
HCFC
” means hydrochlorofluorocarbons.
HFC
” means hydrofluorocarbons.
HPQ
” means HPQ Silicon Resources Inc., a corporation listed
 
for trading on the TSX-
V.
HPQ Nano
” means HPQ Nano Silicon Powders Inc., a wholly
 
owned subsidiary of HPQ.
ISO
” means International Organization for Standardization.
MI 61-101
” means Multilateral Instrument 61-101 – Protection of
 
Minority Security Holders in Special Transactions.
NASDAQ
” means the NASDAQ Capital Market.
NI 52-110
” means National Instrument 52-110
 
— Audit Committees.
 
50
ODS
” means ozone depleting substances.
Option
” means an option to acquire a Common Share granted pursuant
 
to the Company’s option plan.
PACWADS
” means the Company’s Plasma Arc Chemical
 
Warfare Agent Destruction System.
PAGV
” means plasma arc gasification and vitrification.
Pascali Trust
” means Fiducie de
 
Crédit Mellon Trust, a trust
 
of which Company’s Chief
 
Executive Officer, P.
 
Peter Pascali,
is a trustee, officer and beneficiary.
PAWDS
” means the Company’s Plasma Arc Waste
 
Destruction System.
Phoenix
” has the meaning given to such term under “Legal
 
Proceedings”.
RCGT
” means Raymond Chabot Grant Thornton LLP,
 
the Company’s external auditors.
RGN
” means renewable natural gas.
RNG Canada
” means Gas RNG Systems Inc.
RNG US
” means Gas RNG Systems LLC.
PRRS
” means the Company’s Plasma Resource Recovery
 
System.
R&D
” means research and development.
SEC
” means the U.S. Securities Exchange Commission.
SEDAR
” means the System for Electronic Document
 
Analysis and Retrieval.
SPARC
” means Steam Plasma Arc Refrigerant Cracking.
TSX
” means the Toronto
 
Stock Exchange.
TSX-V
” means the TSX Venture
 
Exchange.
Turcot Facility
” means the facility located at 5655 Philippe-Turcot,
 
Montréal, Québec, Canada, H4C 3K8, as described in
“Business of the Company - Facilities”.
Wanklyn Facility
” means the
 
facility located at
 
9371 Wanklyn
 
Street, LaSalle, Québec,
 
Canada, H8R 1Z2,
 
as described
in “Business of the Company - Facilities”.
 
51
SCHEDULE “A” CHARTER OF THE AUDIT COMMITTEE
PYROGENESIS CANADA INC.
AUDIT COMMITTEE CHARTER
Approved by the Board of Directors
and effective as of October 25th, 2011
PREAMBLE
The
 
Audit
 
Committee’s
 
(the
 
“Committee”)
 
Charter
 
clarifies
 
its
 
responsibilities
 
delegated
 
by
 
the
 
Board
 
of
 
Directors
 
(the
“Board”). The
 
Charter is
 
used by
 
the Committee
 
to guide
 
the planning
 
and the
 
performance of
 
its work.
 
The Charter
 
also
clarifies the understanding the Committee has with the Company’s auditors and with management about the nature of their
involvement with the Committee and its work.
OVERALL MANDATE
Generally,
 
the
 
Committee
 
promotes
 
and
 
ensures
 
a
 
high
 
standard
 
of
 
financial
 
reporting,
 
risk
 
management
 
and
 
ethical
behavior for the Company and in doing so shall carry out the duties
 
and responsibilities as set out in this Charter.
COMPOSITION
The Committee shall consist
 
of at least three Directors
 
appointed by the Board who will
 
serve at the pleasure of
 
the Board
and, in any event, only so
 
long as he/she shall be a Board
 
member. The Committee will have an appropriate representation
of independent directors as required by law.
 
The composition of the Committee shall comply
 
with the rules and regulations
of the
 
stock exchange
 
on which
 
the shares
 
of the
 
Company are
 
listed as
 
well as
 
the Canadian
 
Securities Administrators
“Instruments”.
 
The
 
Board
 
may
 
fill
 
vacancies
 
in
 
the
 
Committee
 
by
 
election
 
from
 
their
 
number.
 
The
 
Board
 
shall
 
elect
 
the
Chairperson of the Committee.
 
In the absence
 
of the Chairperson, the
 
members of the Committee
 
shall appoint an
 
Acting
Chairperson. The
 
President of
 
the Company
 
shall not
 
be an
 
ex-officio
 
member of
 
the Committee,
 
but the
 
Chairperson of
the Board may,
 
at his/her discretion,
 
attend meetings
 
as an ex-officio
 
member.
 
An ex-officio
 
member shall be
 
vested with
all the rights and powers of appointed members.
To
 
ensure
 
the
 
Committee’s
 
effectiveness,
 
each
 
member
 
will
 
be
 
financially
 
literate
 
and
 
be
 
prepared
 
to
 
spend
 
the
 
time
necessary to address complex issues and to challenge
 
both management and the auditors, where necessary.
A quorum of
 
the Committee shall
 
consist of at
 
least two members
 
of the Committee
 
(for this purpose
 
the Committee shall
be deemed to consist of at
 
least three members, two being appointed by
 
the Board as aforesaid and one
 
being an ex-officio
member
 
as
 
aforesaid).
 
Notwithstanding
 
any
 
vacancy
 
on
 
the
 
Committee,
 
a
 
quorum
 
may
 
exercise
 
all
 
the
 
powers
 
of
 
the
Committee.
The Secretary
 
shall be
 
selected from
 
its members
 
or shall
 
be the
 
Corporate
 
Secretary.
 
The Secretary
 
of the
 
Committee
shall ensure that minutes of meetings are prepared for
 
distribution to Committee members.
DUTIES AND RESPONSIBILITIES
The Committee shall have the following duties and responsibilities:
OVERSEEING STANDARDS
 
OF INTEGRITY AND BEHAVIOUR
Management
 
is
 
responsible
 
for
 
the
 
Company’s
 
standards
 
of
 
behavior.
 
The
 
Committee
 
assists
 
the
 
Board
 
in
 
obtaining
assurances that management is
 
operating the Company in
 
an ethical manner and
 
encourages management to demonstrate
a strong commitment to integrity.
The
 
Committee
 
requests
 
that
 
management
 
report
 
periodically
 
on
 
how
 
the
 
Company’s
 
systems,
 
practices
 
and
 
controls
encourage, monitor and provide assurance of compliance with
 
laws, regulations and standards of ethical conduct, including
the control of expenses such as perquisites, expense
 
accounts and out-of-pocket expenses for officers
 
and directors.
 
52
The Committee seeks the views
 
of the auditors about the
 
Company’s standards of
 
behavior. It discusses
 
with the auditors
the adequacy of the
 
systems and controls, and
 
the details of any
 
practices or transactions identified by
 
the auditors as being
in
 
potential
 
violation
 
of
 
the
 
legal
 
authorities,
 
as
 
well
 
as
 
the
 
details
 
of
 
any
 
“other
 
matters”
 
they
 
consider
 
bringing
 
to
 
the
attention
 
of
 
the
 
Board.
 
The
 
committee
 
seeks
 
the
 
views
 
of
 
auditors
 
on
 
remedies
 
to
 
curtail
 
inappropriate
 
practices
 
and
behaviors, as well as alternative remedies to rectify those
 
matters that are not in the Company’s best interest.
The Committee values financial integrity
 
and credibility.
 
It actively promotes an overall corporate
 
“tone” for quality financial
reporting, sound business risk practices, and ethical behavior.
OVERSEEING FINANCIAL REPORTING
Management is responsible for the Company’s financial
 
reporting. This includes preparation of accurate,
 
fair and complete
financial
 
reports,
 
the
 
selection
 
of
 
the
 
most
 
appropriate
 
accounting
 
principles
 
and
 
practices,
 
formulation
 
of
 
accounting
judgments and estimates,
 
and preparation of
 
the annual report
 
including its management’s
 
discussion and analysis
 
(MD&A),
budgets and other such reports.
The Committee
 
shall
 
provide
 
assistance
 
to
 
the
 
Board
 
in fulfilling
 
its financial
 
reporting
 
and control
 
responsibilities
 
to the
shareholders of the Company and to the
 
investment community. The Committee’s primary duties and responsibilities in this
regard are to:
(a)
 
oversee the accounting and financial
 
reporting processes of the Company
 
and the audit of its financial
 
statements
including:
i.
 
the integrity of the Company’s financial statements;
ii.
 
the compliance with legal and regulatory requirements;
 
and,
iii.
 
the independent auditor’s qualifications and independence;
(b)
 
serve
 
as
 
an
 
independent
 
and
 
objective
 
party
 
to
 
monitor
 
the
 
Company’s
 
financial
 
reporting
 
process
 
and
 
internal
control systems;
(c)
 
review and appraise the audit activities of the Company’s
 
independent auditors;
(d)
 
provide open
 
lines of
 
communication among
 
the independent
 
auditors, financial
 
and senior
 
management and
 
the
Board for financial reporting and control matters and meet periodically with management
 
and with the independent
auditors.
The Committee assesses the relevance and the reliability of the financial reports to ensure that they portray, in the clearest
light possible, the underlying economic circumstances and financial
 
performance of the Company.
The Committee promotes accuracy,
 
truthfulness, integrity and credibility in financial reporting.
The Committee
 
discusses
 
with management
 
and auditors
 
the inherent
 
fairness,
 
accuracy
 
and completeness
 
of financial
disclosures as
 
well as
 
the Company’s
 
compliance with
 
legal and
 
regulatory requirements
 
and may
 
request attestation
 
to
this effect from them.
The Committee reviews
 
the key accounting
 
principles and the
 
significant judgments
 
and estimates with
 
management and
auditors. It seeks
 
their views with
 
respect to the
 
appropriateness and consistency of
 
the accounting principles and
 
practices,
not just their acceptability,
 
and the degree of aggressiveness or conservatism in
 
determining estimates.
As integral
 
components
 
of its
 
financial
 
review
 
processes,
 
the Committee
 
reviews
 
the operating
 
and
 
capital
 
budgets,
 
the
borrowing plan, summaries of the corporate
 
plan and budgets, the annual and
 
quarterly financial statements, including
 
the
MD&A
 
sections,
 
and
 
any
 
other
 
financial
 
information
 
which
 
will
 
be
 
distributed
 
to
 
the
 
public
 
and
 
requiring
 
approval
 
of
 
the
Board.
The Committee
 
assesses
 
how
 
well
 
the
 
Company’s
 
financial
 
information
 
reporting
 
package
 
meets
 
the
 
Board’s
 
needs
 
by
reviewing its form, content and level of details.
 
53
OVERSEEING MANAGEMENT CONTROL PRACTICES
Management is responsible for
 
maintaining records and financial
 
management and control systems
 
that provide reasonable
assurance that assets
 
are safeguarded and maintained,
 
that Intellectual Property
 
(IP) is identified, protected
 
and secured,
that transactions
 
are in accordance
 
with regulations
 
and any
 
government directives
 
issued and
 
that financial,
 
human and
physical resources are managed economically and efficiently
 
and that operations are carried out effectively.
Management is responsible for identifying the principal
 
business risks facing the Company and formulating
 
the Company’s
risk tolerance levels and risk management policies for consideration and approval by
 
the Board. The Committee assists the
Board in this function, focusing on the financial risks.
The Committee holds management
 
accountable for the design
 
and functioning of the
 
Company’s control framework in order
to
 
monitor,
 
assess
 
and
 
mitigate
 
the
 
Company’s
 
business
 
risks
 
and
 
uncertainty,
 
as
 
well
 
as
 
legal,
 
environmental,
 
social
responsibility
 
and
 
ethical
 
compliance.
 
Periodically,
 
the
 
Committee
 
requests
 
that
 
management
 
provides
 
it
 
with
 
an
assessment of the effectiveness of the internal control structure and procedures, and, if warranted, with plans for improving
its effectiveness.
The Committee reviews
 
with the auditors
 
(internal, external and
 
special examiners
 
when applicable) their
 
assessments of
the
 
design
 
and
 
functioning
 
of
 
the
 
control
 
framework
 
and
 
the
 
systems
 
in
 
place
 
for
 
ensuring
 
that
 
the
 
business
 
risks
 
are
identified, monitored,
 
controlled and
 
within the
 
Company’s
 
limit of
 
tolerance, and
 
their views
 
on management’s
 
plans for
improvements.
OVERSEEING WORK OF AUDITORS
The Committee
 
recognizes
 
that the
 
Company’s
 
auditors
 
possess
 
substantial expertise
 
and
 
have significant
 
professional
responsibilities. It holds the auditors accountable for fulfilling
 
their respective responsibilities.
The Internal auditor (when established) will be accountable
 
to the Committee, in its capacity as a committee
 
of the Board.
The Committee demands independent and objective assessments of the Company’s standards of behavior,
 
its compliance
with authorities, its financial reporting, and its business risks
 
systems, practices and controls from the auditors.
The Committee oversees audit activities with respect to the
 
following two (2) types of audits:
(a)
 
the
 
annual
 
audit
 
deals
 
with
 
the
 
fairness
 
of
 
the
 
statements,
 
compliance
 
of
 
transactions
 
with
 
specified
 
legal
 
authorities, and any other matter identified by the external
 
auditor as important,
(b)
 
the internal audit
 
(when established), which is
 
a part of
 
management’s system of internal
 
control, deals with
 
matters
similar to those of the annual audit.
The Committee reviews and follows the five (5) generic
 
phases of each of the two (2) types of audits:
1.
 
establishing the purpose and terms of reference for the audit;
2.
 
selection and organization of a team of experienced professionals
 
to plan and conduct the audit;
3.
 
conduct of the audit; and
4.
 
reviews all the audit results and findings, and reports to the
 
Board.
The Committee
 
shall review
 
management’s
 
plans to
 
correct any
 
significant
 
problems raised
 
by the
 
internal
 
and external
auditors. It shall monitor and review management’s
 
progress in implementing its response plan.
The Committee ensures that management has not placed any inappropriate restrictions on the audits and confirms that the
external auditor is independent and able to maintain
 
its objectivity.
The Committee approves the mandate of the internal audit function, monitors the long term internal
 
audit plan and ensures
that the internal auditor has adequate resources to perform its responsibilities and has direct and open communication with
the Committee. It
 
reviews the reporting
 
relationship of the
 
internal auditor to
 
ensure that an
 
appropriate segregation of
 
duties
is maintained and
 
that the internal
 
auditor has an
 
obligation to report
 
directly to the
 
Committee on matters
 
affecting its duties,
irrespective of his or her reporting relationships.
The Committee
 
evaluates the
 
work of
 
each of
 
the auditors
 
with a
 
view to
 
determining the
 
level of
 
assurance that
 
can be
derived from their work.
 
54
Periodically, the Committee
 
evaluates the performance of each auditor.
The Committee shall establish effective communication processes with management and the Company’s auditors, to
 
assist
it in monitoring objectively the quality and
 
effectiveness of the relationship among
 
the auditors, management and the Audit
Committee. It shall be responsible for the resolution of
 
disagreements between management and auditors.
OPERATIONAL RESPONSIBILITIES
Each
 
new
 
member
 
will
 
receive
 
an
 
orientation
 
about
 
the
 
Committee’s
 
work
 
and
 
responsibilities
 
and
 
all
 
members
 
are
encouraged to keep current about
 
accounting, auditing and financial reporting standards
 
and practices. In recognition of
 
the
importance of the
 
financial literacy skills
 
of its members,
 
the Committee relies
 
on the full support
 
of the Board
 
in acquiring
and in developing an approach to improve the necessary
 
skills, when required.
Annually,
 
the Committee
 
reviews the
 
Charter setting
 
out the
 
scope of
 
its responsibilities,
 
and, where
 
in the
 
opinion of
 
the
Committee, amendments
 
to the Charter
 
are required,
 
may propose such
 
amendments to
 
the Board for
 
consideration and
approval.
Annually, the Committee
 
will consider the appropriateness of preparing a report
 
to the Board describing its work.
OTHER RESPONSIBILITIES
Periodically,
 
in consultation
 
with the Chief
 
Financial Officer
 
and the auditors,
 
the Committee seeks
 
reasonable assurance
of the quality and sufficiency of the Company’s
 
accounting and financial personnel and other resources.
The Committee shall discuss or review in advance the
 
appointment of the Chief Financial Officer.
The Committee shall review procedures established by management for dealing with complaints from employees related to
financial reporting, controls and corporate conduct.
The Committee may investigate any matters that, at the
 
Committee’s discretion, fall within its duties.
The Committee shall perform such other functions as are
 
assigned to it by law or by the Board.
The Committee shall review with the general
 
counsel, legal and regulatory matters that, in the
 
opinion of management, may
have
 
a
 
material
 
impact
 
on
 
the
 
financial
 
statements,
 
related
 
organization
 
compliance
 
policies,
 
and
 
program
 
and
 
reports
received from regulators.
OPERATING PROCEDURES
The Committee shall meet quarterly, or more frequently as appropriate, in advance of regularly scheduled Board meetings.
Committee meetings shall be
 
called by the Committee
 
Chair or requested
 
by any Committee member
 
or by the Board
 
Chair.
Notice of each meeting of the
 
Committee shall be given to each member of
 
the Committee (including the Chair of the Board
as an ex-officio member of the Committee), and except in the case of an in-camera meeting, also to the Auditors, the Chief
Executive Officer
 
and the
 
Chief Financial
 
Officer of
 
the Company.
 
Notice of
 
the meeting
 
shall be
 
given either
 
orally or
 
by
electronic mail, not less than 48 hours before the time fixed for
 
the meeting. Members may waive notice of a meeting.
Meeting discussions may take place face to face, by teleconference
 
or through a reciprocal interchange of emails.
The agenda for each meeting will be established by the Chair
 
of the Committee.
Any decision made by
 
the Committee shall be
 
determined by a majority
 
vote of the members
 
of the Committee present.
 
A
member will be deemed to have consented
 
to any resolution passed or action
 
taken at a meeting of the Committee
 
unless
the member dissents.
The Chief Executive Officer and the Chief Financial Officer of the Company shall attend all Audit Committee meetings, with
the exception of in-camera meetings.
A matter put to vote
 
at a meeting of the
 
Committee shall be decided
 
by a majority of
 
the votes cast, and in
 
the event of an
equality of votes, the Chair has a deciding vote.
 
55
The Secretary of the Committee
 
shall ensure that minutes of meetings
 
are prepared for distribution to Committee members,
and,
 
except
 
for
 
in-camera
 
meetings,
 
to
 
the
 
Auditors,
 
the
 
Chief
 
Executive
 
Officer
 
and
 
the
 
Chief
 
Financial
 
Officer
 
of
 
the
Company.
The Chair of the
 
Committee will report
 
to the Board
 
on proceedings and
 
deliberations of the
 
Committee, either orally
 
or in
writing, at the first subsequent meeting of the Board
 
or at such earlier time as the Committee in its discretion
 
may consider
advisable.
The Committee may retain at the
 
Company’s expense, with prior
 
Board approval, independent consultants
 
and such other
persons as the Committee shall determine necessary
 
to fulfill its duties and responsibilities.
LIMITATION
 
ON THE COMMITTEE’S DUTIES
In contributing
 
to
 
the
 
Committee’s
 
discharging
 
of
 
its
 
duties
 
under
 
this
 
Charter,
 
each
 
member
 
of
 
the
 
Committee
 
shall
 
be
obliged
 
only
 
to
 
exercise
 
the
 
care,
 
diligence
 
and
 
skill
 
that
 
a
 
reasonably
 
prudent
 
person
 
would
 
exercise
 
in
 
comparable
circumstances. Nothing
 
in this
 
mandate is
 
intended, or
 
may be
 
construed, to
 
impose on
 
any member
 
of the
 
Committee a
standard of care
 
or diligence that
 
is in any
 
way more onerous
 
or extensive than
 
the standard to
 
which all Board
 
members
are subject. The essence of the
 
Committee’s purpose is
 
to monitor, review
 
and when appropriate, recommend
 
changes to
financial
 
and
 
corporate
 
operating
 
standards
 
as
 
they
 
are
 
practiced
 
by
 
the
 
Company’s
 
management
 
to
 
gain
 
reasonable
assurance (but not to ensure) about fundamental activities
 
of the Company.
pyrex99d2
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
1
 
| Page
Exhibit 99.2
This
 
management’s
 
discussion
 
and
 
analysis
 
(“MD&A”)
 
is
 
intended
 
to
 
assist
 
readers
 
in
 
understanding
 
the
 
business
environment, strategies, performance and
 
risk factors of PyroGenesis
 
Canada Inc. (“PyroGenesis”, the “Company” or
 
“we”).
The MD&A provides the reader with a view
 
and analysis, from the perspective of
 
management, of the Company’s financial
results for the fourth quarter and for the year ended
 
December 31, 2022. The MD&A has been prepared in accordance with
National
 
Instrument
 
51-102,
 
Continuous
 
Disclosure
 
Requirements,
 
and
 
should
 
be
 
read
 
in
 
conjunction
 
with
 
the
 
audited
consolidated financial
 
statements and
 
related notes
 
thereto of
 
the Company
 
for the year
 
ended December 31,
 
2022. (the
“2022 consolidated
 
financial
 
statements”)
 
and
 
the Company’s
 
annual
 
information
 
form for
 
the year
 
ended December
 
31,
2022 (the “Annual Information Form”).
The 2022
 
consolidated financial
 
statements and
 
MD&A have
 
been reviewed
 
by PyroGenesis’
 
Audit Committee
 
and were
approved by its Board of Directors on
 
March 30, 2023. The Board of Directors is responsible
 
for ensuring that the Company
fulfills its
 
responsibilities
 
for financial
 
reporting
 
and is
 
ultimately responsible
 
for reviewing
 
and approving
 
the MD&A.
 
The
Board of Directors carries out this responsibility
 
principally through its Audit Committee.
 
The Audit Committee is appointed
by the Board of Directors and is comprised of independent
 
directors. The Audit Committee reports its findings
 
to the Board
of
 
Directors
 
for
 
its
 
consideration
 
when
 
it
 
approves
 
the
 
MD&A
 
and
 
consolidated
 
financial
 
statements
 
for
 
issuance
 
to
shareholders.
The following information takes
 
into account all material events
 
that took place up
 
until March 30, 2023, the
 
date on which
the Company’s Board of
 
Directors approved this MD&A.
 
Unless otherwise indicated, all
 
amounts are presented in
 
Canadian
dollars. The Company’s functional and reporting currency
 
is the Canadian dollar.
Additional information
 
regarding PyroGene
 
sis is
 
available on
 
the System
 
for Electronic
 
Document Analysis
 
and Retrieval
(“SEDAR) at www.sedar.com,
 
the Electronic Data
 
Gathering, Analysis,
 
and Retrieval system
 
(“EDGAR”) at
 
www.sec.gov,
and on the Company’s website at www.pyrogenesis.com
 
.
FORWARD-LOOKING
 
STATEMENTS
This MD&A
 
contains forward-looking statements
 
and forward-looking information
 
(collectively, “forward-looking statements”)
within the
 
meaning of
 
applicable securities
 
legislation. All
 
statements other
 
than statements
 
of historical
 
fact contained
 
in
this MD&A are
 
forward-looking statements,
 
including, without
 
limitation, the
 
Company’s statements
 
regarding its products
and
 
services;
 
relations
 
with
 
suppliers
 
and
 
clients;
 
future
 
financial
 
position;
 
business
 
strategies;
 
potential
 
acquisitions;
potential
 
business
 
partnering;
 
litigation;
 
and
 
plans
 
and
 
objectives.
 
In
 
certain
 
cases,
 
forward-looking
 
statements
 
can
 
be
identified
 
by
 
the
 
use
 
of
 
words
 
such
 
as
 
“plans”,
 
“expects”
 
or
 
“does
 
not
 
expect”,
 
“is
 
expected”,
 
“budget”,
 
“scheduled”,
“estimates”,
 
“forecasts”,
 
“intends”,
 
“anticipates”
 
or
 
“does
 
not
 
anticipate”,
 
or
 
“believes”,
 
or
 
variations
 
of
 
such
 
words
 
and
phrases
 
or
 
state
 
that
 
certain
 
actions,
 
events
 
or
 
results
 
“may”,
 
“could”,
 
“would”,
 
“might”
 
or
 
“will
 
be
 
taken”,
 
“occur”
 
or
 
“be
achieved” and similar words or the negative thereof. Although management of the Company
 
believes that the expectations
represented
 
in
 
such
 
forward-looking
 
statements
 
are
 
reasonable,
 
there
 
can
 
be
 
no
 
assurance
 
that
 
such
 
expectations
 
will
prove to be correct.
In particular, this MD&A contains
 
forward-looking statements that relate, but are not limited,
 
to:
 
the Company’s business strategies, strategic objectives
 
and growth strategy;
 
the Company’s current and future capital resources
 
and the need for additional financing;
 
the Company’s
 
ability to
 
increase sales,
 
including the
 
results of
 
the successful
 
completion
 
of the
 
Company’s
current projects;
 
management’s
 
expectation
 
that the
 
Company will
 
achieve sustained
 
annual growth
 
and profitability,
 
and that
gross margins will increase resulting in a decrease in cost
 
of sales as a percentage of revenue; and
 
the Company’s overall financial performance.
By their
 
nature, forward-looking statements
 
require assumptions and
 
are subject
 
to inherent
 
risks and uncertainties
 
including
those discussed herein. In particular,
 
forward-looking statements relating to future sales,
 
growth and profitability are based
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
2
 
| Page
on the assumption that
 
current projects will
 
be completed, and
 
the Company will
 
be awarded certain
 
anticipated contracts
pursuant to
 
recent negotiations
 
with, and
 
statements
 
made by,
 
third parties.
 
There is
 
significant risk
 
that predictions
 
and
other
 
forward-looking
 
statements
 
will
 
not
 
prove
 
to
 
be
 
accurate.
 
Readers
 
are
 
cautioned
 
to
 
not
 
place
 
undue
 
reliance
 
on
forward-looking statements made herein because a number of factors could cause actual future results, conditions, actions
or
 
events
 
to
 
differ
 
materially
 
from
 
the
 
targets,
 
expectations,
 
estimates
 
or
 
intentions
 
expressed
 
in
 
the
 
forward-looking
statements.
Many factors could
 
cause the Company
 
’s actual
 
results, performance
 
or achievements
 
to be materially
 
different from
 
any
future results,
 
performance or
 
achievements that
 
may be
 
expressed or
 
implied by
 
forward-looking statements,
 
including,
without limitation,
 
risks
 
and uncertainties
 
relating to:
 
the strength
 
of the
 
Canadian,
 
US, European
 
and Asian
 
economies;
operational, funding,
 
and liquidity
 
risks; unforeseen
 
engineering and
 
environmental problems;
 
delays or
 
inability to
 
obtain
required
 
financing
 
and/or
 
anticipated
 
contracts;
 
risks
 
associated
 
with
 
licenses,
 
permits
 
and
 
regulatory
 
approvals;
 
supply
interruptions or labour disputes;
 
the impact of the Coronavir
 
us (COVID-19) pandemic on
 
our business and our operations;
foreign
 
exchange
 
fluctuations
 
and
 
collection
 
risk;
 
competition
 
from
 
other
 
suppliers,
 
or
 
alternative,
 
less
 
capital
 
intensive,
energy
 
solutions;
 
and
 
risk
 
factors
 
described
 
elsewhere
 
under
 
the
 
heading
 
“Risk
 
Factors”
 
in
 
this
 
MD&A
 
and
 
the
 
Annual
Information Form, and
 
elsewhere in this
 
MD&A and other
 
filings that the
 
Company has
 
made and may
 
make in the
 
future
with
 
applicable
 
securities
 
regulatory
 
authorities.
 
We
 
caution
 
that
 
the
 
foregoing
 
list
 
of factors
 
is not
 
exhaustive,
 
and
 
that,
when relying
 
on forward-looking
 
statements to
 
make decisions
 
with respect
 
to the Company,
 
investors and
 
others should
carefully consider these factors, as well
 
as other uncertainties and potential events, and
 
the inherent uncertainty of forward-
looking statements.
Although
 
the
 
Company
 
has
 
attempted
 
to
 
identify
 
significant
 
factors
 
that
 
could
 
cause
 
actions,
 
events
 
or
 
results
 
to
 
differ
materially
 
from
 
those
 
described
 
in
 
forward-looking
 
statements,
 
there
 
may be
 
other
 
factors
 
that
 
cause
 
actions,
 
events
 
or
results
 
not
 
to
 
be
 
as anticipated,
 
estimated
 
or
 
intended.
 
There
 
can be
 
no
 
assurance
 
that
 
forward-looking
 
statements
 
will
prove to be accurate,
 
as actual results
 
and future events
 
could differ materially
 
from those anticipated in
 
such statements.
Accordingly,
 
readers
 
should
 
not
 
place
 
undue
 
reliance
 
on
 
forward-looking
 
statements.
 
Forward-looking
 
statements
 
are
provided as
 
of the
 
date of
 
this MD&A,
 
and the
 
Company assumes
 
no obligation
 
to update
 
or revise
 
such forward-looking
statements to reflect new events or circumstances except as
 
required under applicable securities laws.
The forward-looking statements
 
contained herein are expressly
 
qualified in their entirety
 
by this cautionary statement.
 
The
forward-looking statements included in
 
this MD&A are made
 
as of the
 
date of this
 
MD&A or such
 
other date specified
 
herein.
BASIS OF PRESENTATION
For reporting purposes, we prepared the 2022 consolidated financial
 
statements in accordance with International Financial
Reporting
 
Standards
 
(“IFRS”)
 
as
 
issued
 
by
 
the
 
International
 
Accounting
 
Standards
 
Board.
 
The
 
financial
 
information
contained
 
in
 
this
 
MD&A
 
was
 
derived
 
from
 
the
 
2022
 
consolidated
 
financial
 
statements.
 
Unless
 
otherwise
 
indicated,
 
all
references to “$” are to Canadian dollars. Unless otherwise indicated, all references to a
 
specific “note” refer to the notes to
the
 
2022
 
consolidated
 
financial
 
statements.
 
Certain
 
totals,
 
subtotals
 
and percentages
 
throughout
 
this
 
MD&A
 
may
 
not
reconcile due to rounding.
NON-IFRS MEASURES
This MD&A
 
makes reference
 
to certain
 
non-IFRS measures.
 
These measures
 
are not
 
recognized measures
 
under IFRS
and
 
do
 
not
 
have
 
a
 
standardized
 
meaning
 
prescribed
 
by
 
IFRS
 
and
 
are
 
therefore
 
unlikely
 
to
 
be
 
comparable
 
to
 
similar
measures presented
 
by other
 
companies. Rather,
 
these measures
 
are provided
 
as additional
 
information to
 
complement
those
 
IFRS
 
measures
 
by
 
providing
 
further
 
understanding
 
of
 
our
 
results
 
of
 
operations
 
from
 
management’s
 
perspective.
Accordingly, these measures should
 
not be
 
considered in isolation
 
nor as
 
a substitute for
 
analysis of our
 
financial information
reported under IFRS.
We use
 
non-IFRS measures,
 
including EBITDA
 
and Modified
 
EBITDA, both
 
of which are
 
not considered
 
an alternative
 
to
income or loss from operations, or to net earnings or loss,
 
in the context of measuring a company’s performance.
 
EBITDA
is used by
 
management in order
 
to facilitate operating
 
performance comparisons from
 
period to period,
 
to prepare annual
operating budgets and forecasts and to determine components of management compensation.
 
Management believes that
EBITDA is used
 
by investors
 
as it provides
 
supplemental measures
 
of operating performance
 
and thus highlight
 
trends in
our business that may not otherwise be apparent when relying solely on IFRS measures, and to compare the results of our
operations with other entities with
 
similar structures. Modified EBITDA is used
 
my management as it
 
brings additional clarity
to operating performance, as it eliminates variations in the fair value of strategic investments,
 
among others, which may be
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
3
 
| Page
beyond
 
the
 
control
 
of
 
the
 
Company.
 
Management
 
believes
 
that
 
investors
 
use
 
Modified
 
EBITDA
 
for
 
similar
 
purposes
 
as
management and to evaluate performance while adjusting for non-cash discretionary expenses. Modified EBITDA allows a
more appropriate
 
comparison to
 
other companies
 
whose earnings
 
or loss
 
is not
 
adjusted by
 
fair value
 
adjustments from
strategic investments.
 
The Company also uses
 
Backlog
” or “
Backlog of signed
 
and/or awarded contracts
” interchangeably,
as a non-IFRS measure. Backlog figures allow management
 
of the Company to foresee and predict their future
 
needs and
resource
 
planning.
 
Management
 
believes
 
that
 
“Backlog”
 
is
 
used
 
by
 
investors
 
to
 
evaluate
 
the
 
Company,
 
their
 
future
performance and better understand the production capacity.
 
EBITDA:
 
We define EBITDA as net earnings before net
 
financing costs, income taxes, depreciation and
 
amortization. See
“Results of Operations - Reconciliation of Non-IFRS measures
 
(EBITDA and Modified EBITDA)”.
Modified EBITDA:
We defined Modified EBITDA as EBITDA and adjust for non-cash items namely share-based payments
expenses
 
and
 
Changes
 
in
 
fair
 
value
 
of
 
strategic
 
investments.
 
See
 
“Results
 
of
 
Operations
 
-
 
Reconciliation
 
of
 
Non-IFRS
measures (EBITDA and Modified EBITDA)”.
Backlog
or
 
Backlog
 
of
 
signed
 
and/or awarded
 
contracts:
This
 
measure
 
is
 
defined
 
as
 
contracts
 
with
 
customers,
 
firm
purchase
 
order
 
and
 
contracts
 
agreed
 
between
 
us
 
and
 
the
 
customer,
 
whereby
 
we
 
can
 
determine
 
the
 
proceeds
 
and
 
the
obligations to perform.
OVERVIEW
PyroGenesis Canada Inc. is a leader in the design, development, manufacture and commercialization
 
of advanced plasma
processes. We provide
 
engineering and
 
manufacturing expertise, cutting-edge
 
contract research, as
 
well as
 
turnkey process
equipment
 
packages
 
to the
 
defense,
 
metallurgical,
 
mining,
 
additive
 
manufacturing
 
(including
 
3D printing),
 
oil &
 
gas, and
environmental
 
industries.
 
With a
 
team
 
of
 
experienced
 
engineers,
 
scientists
 
and
 
technicians
 
working
 
out
 
of
 
our
 
Montreal
office
 
and
 
our 40,902
 
sq.
 
ft.
 
(3,800
 
m²)
 
and
 
31,632
 
sq.
 
ft. (2,940
 
m²) manufacturing
 
facilities,
 
PyroGenesis
 
maintains
 
its
competitive
 
advantage
 
by
 
remaining
 
at
 
the
 
forefront
 
of
 
technology
 
development
 
and
 
commercialization.
 
Our
 
core
competencies allow
 
PyroGenesis to
 
lead the
 
way in
 
providing innovative
 
plasma torches,
 
plasma waste
 
processes, high-
temperature
 
metallurgical
 
processes,
 
and
 
engineering
 
services
 
to
 
the
 
global
 
marketplace.
 
Our
 
operations
 
are
 
ISO
9001:2015 and AS9100D certified, having
 
been ISO certified since 1997.
 
Since our acquisition of
 
Pyro Green-Gas (formerly
AirScience Technologies
 
Inc), we
 
now offer
 
technologies, equipment,
 
and expertise
 
in the
 
area of
 
biogas upgrading,
 
and
air pollution control
 
.
 
As a result,
 
we have extended
 
our presence
 
to Italy and
 
India, and this
 
acquisition provides
 
potential
synergies
 
with
 
our
 
current
 
land-based
 
waste
 
destruction
 
offerings.
 
Our
 
common
 
shares
 
are
 
listed
 
on
 
the
 
Toronto
 
Stock
Exchange (TSX)
 
(Ticker Symbol:
 
PYR), NASDAQ (Ticker
 
Symbol: PYR) and
 
the Frankfurt
 
Stock Exchange (FSX)
 
(Ticker
symbol: 8PY).
This MD&A
 
includes the
 
accounts of
 
the Company,
 
Pyro Green-Gas
 
Inc (including
 
the subsidiaries
 
in Italy
 
and India)
 
as
well as Drosrite
 
International LLC (“Drosrite
 
International). Drosrite International
 
is owned by
 
a member of
 
the Company’s
key management
 
personnel and
 
close family
 
member of
 
the Chief
 
Executive Officer
 
(“CEO”) and
 
controlling shareholder
and is
 
deemed for
 
the purposes
 
of the
 
2022 consoli
 
dated financial
 
statements to
 
be controlled
 
by the
 
Company.
 
Unless
otherwise
 
stated,
 
reference
 
to
 
subsidiaries
 
in
 
the
 
2022
 
consolidated
 
financial
 
statements
 
and
 
this
 
MD&A
 
shall
 
include
Drosrite International and/or Pyro Green-Gas Inc. All transactions and balances between the Company and its subsidiaries
have been eliminated upon consolidation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
4
 
| Page
INFORMATION
 
FROM
 
CONSOLIDATED
 
STATEMENT
 
S
 
OF
 
COMPREHENSIVE
 
LOSS
 
FOR
 
THE
 
QUARTERS
AND YEARS ENDED DECEMBER 31:
Three months ended Dec 31
% Change
Twelve months ended Dec 31
% Change
2022
2021
2022vs2021
2022
2021
2022vs2021
Revenues
$
3,301,777
$
7,205,349
(54)
%
$
19,013,503
$
31,068,350
(39)
%
Cost of sales and services
2,822,062
5,902,560
(52)
%
10,869,616
18,636,539
(42)
%
Gross margin
479,715
1,302,789
(63)
%
8,143,887
12,431,811
(34)
%
Expenses
Selling, general and administrative (not
including share-based expenses)
9,093,820
7,071,471
29
%
23,486,971
17,474,390
34
%
Research and development
740,603
1,149,140
(36)
%
2,317,973
2,535,987
(9)
%
Total expenses (not including share-based
expenses)
9,834,423
8,220,611
20
%
25,804,944
20,010,377
29
%
Net (loss) income from operations (not
including share-based expenses)
(9,354,708)
(6,917,822)
35
%
(17,661,057)
(7,578,566)
133
%
Share-based expenses
(1,316,221)
(4,878,526)
(73)
%
(5,538,463)
(9,762,745)
(43)
%
Net loss from operations
(10,670,929)
(11,796,348)
(10)
%
(23,199,520)
(17,341,311)
34
%
Changes in fair market value of strategic
investments and financial expenses
(264,231)
(11,349,913)
(98)
%
(8,891,523)
(21,830,588)
(59)
%
Income taxes
(189,069)
(739,960)
(74)
%
75,984
(739,960)
(110)
%
Net loss
$
(10,746,091)
$
(22,406,301)
(52)
%
$
(32,167,027)
$
(38,431,939)
16
%
Foreign currency translation gain (loss) on
investments in foreign operations
(72,664)
3,444
2,210
%
(3,042)
3,444
188
%
Comprehensive loss
$
(10,818,755)
$
(22,402,857)
(52)
%
$
(32,170,069)
$
(38,428,495)
(16)
%
Loss per share
Basic
$
(0.06)
$
(0.13)
$
(0.19)
$
(0.23)
Diluted
$
(0.06)
$
(0.13)
$
(0.19)
$
(0.02)
Modified EBITDA
(1)
$
(8,549,513)
$
(6,522,877)
31
%
$
(15,546,347)
$
(6,182,695)
151
%
1
 
See “Non-IFRS Measures”
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
5
 
| Page
INFORMATION
 
FROM
 
CONSOLIDATED
 
STATEMENT
 
S
 
OF
 
COMPREHENSIVE
 
LOSS
 
FOR
 
THE YEARS
 
ENDED
DECEMBER 31:
Dec 31, 2022
Dec 31, 2021
Dec 31, 2020
Revenues
$
19,013,503
$
31,068,350
$
17,775,029
Cost of sales and services
10,869,616
18,636,539
7,472,361
Gross margin
8,143,887
12,431,811
10,302,668
Expenses
Selling, general and administrative (not including share-
based expenses)
23,486,971
17,474,390
8,089,945
Research and development
2,317,973
2,535,987
(731,077)
Total
 
expenses (not including share-based expenses)
25,804,944
20,010,377
7,358,868
Net (loss) income from operations (not including
share-based expenses)
(17,661,057)
(7,578,566)
2,943,800
Share-based expenses
(5,538,463)
(9,762,745)
(4,244,608)
Net loss from operations
(23,199,520)
(17,341,311)
(1,300,808)
Changes in fair market value of strategic investments and
financial expenses
(8,891,523)
(21,830,588)
44,102,624
Income taxes
75,984
(739,960)
1,033,412
Net income (loss) and comprehensive income (loss)
$
(32,167,027)
$
(38,431,939)
$
41,768,404
Foreign currency translation gain (loss) on investments
 
in
foreign operations
(3,042)
3,444
Comprehensive income (loss)
$
(32,170,069)
$
(38,428,495)
$
41,768,404
Earnings (loss) per share
Basic
$
(0.19)
$
(0.23)
$
0.28
Diluted
$
(0.19)
$
(0.23)
$
0.27
Modified EBITDA
(1)
$
(15,546,347)
$
(6,182,695)
$
3,442,443
1
 
See “Non-IFRS Measures”
SELECTED FINANCIAL INFORMATION
Dec 31, 2022
Dec 31, 2021
Dec 31, 2020
Current assets
27,448,182
38,758,984
25,336,787
Non-current assets
20,218,568
31,011,693
49,194,591
Total assets
$
47,666,750
$
69,770,677
$
74,531,378
Current liabilities
25,797,473
24,752,199
11,539,208
Non-current liabilities
5,000,350
4,249,724
3,569,064
Total liabilities
$
30,797,823
$
29,001,923
$
15,108,272
Shareholders' equity
$
16,868,927
$
40,768,754
$
59,423,106
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
6
 
| Page
FINANCIAL CONDITION
December 31,
$ Change
2022
2021
2022vs2021
Current Assets
Cash and cash equivalents
$
3,445,649
$
12,202,513
(8,756,864)
Accounts receivable
18,624,631
17,639,616
985,015
Costs and profits in excess of billings on uncompleted contracts
1,051,297
4,922,710
(3,871,413)
Inventory
1,876,411
887,590
988,821
Investment tax credits receivable
276,404
256,513
19,891
Income tax receivable
14,169
117,029
(102,860)
Current portion of deposits
432,550
1,328,452
(895,902)
Current portion of royalties receivable
455,556
311,111
144,445
Contract assets
499,912
375,789
124,123
Prepaid expenses
771,603
717,661
53,942
Total Current Assets
$
27,448,182
$
38,758,984
(11,310,802)
Non-Current assets
Deposits
46,053
248,756
(202,703)
Strategic investments
6,242,634
14,901,659
(8,659,025)
Property and equipment
3,393,452
3,712,937
(319,485)
Right-of-use-assets
4,818,744
5,765,993
(947,249)
Royalties receivable
952,230
947,543
4,687
Intangible assets
2,104,848
2,774,198
(669,350)
Goodwill
2,660,607
2,660,607
Total Non-Current Assets
$
20,218,568
31,011,693
(10,793,125)
Current Liabilities
Bank indebtedness
991,902
991,902
Accounts payable and accrued liabilities
10,115,870
10,069,177
46,693
Billings in excess of costs and profits on uncompleted contracts
9,670,993
9,400,231
270,762
Current portion of term loans
69,917
83,004
(13,087)
Current portion of lease liabilities
2,672,212
2,934,236
(262,024)
Balance due on business combination
2,088,977
2,242,503
(153,526)
Income tax payable
187,602
23,048
164,554
Total Current Liabilities
$
25,797,473
24,752,199
1,045,274
Non-current Liabilities
Lease liabilities
2,861,482
2,389,729
471,753
Term
 
loans
320,070
107,901
212,169
Balance due on business combination
1,818,798
1,709,700
109,098
Deferred income taxes
42,394
(42,394)
Total Non-Current Liabilities
$
5,000,350
$
4,249,724
750,626
Working capital, (expressed as current assets less current liabilities)
 
varied year-over-year by $12.4 million, mainly a result
of:
 
a decrease of cash and cash equivalents of $8.8 million, explained
 
in the section Summary of Cash Flows,
 
an
 
increase
 
of
 
$1.0
 
million
 
of
 
accounts
 
receivable
 
as
 
the
 
Company
 
has
 
reached
 
the
 
invoicing
 
milestones
 
on
contracts in progress and offset by $4.15 million as
 
a result of the increased allowance for credit loss,
 
a decrease of $3.6 million in costs and profits
 
in excess of billings on uncompleted contracts related
 
to invoicing to
customers upon successfully reaching contract milestones
 
and such amounts are converted
 
to accounts receivable
and $0.3 million as a result of
 
the allowance for credit loss on costs and profits
 
in excess of billings on uncompleted
contracts,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
7
 
| Page
 
an increase
 
in $1 million
 
of inventory
 
as the
 
Company continues
 
to source
 
materials for
 
production and
 
minimize
the risks of transport delays and reduce lead time to its
 
customers,
 
a decrease of $0.9 million in current portion of deposits due to
 
the timing of deposits with suppliers,
 
an increase of $1
 
million in bank indebtedness,
 
due to the usage
 
of the credit facilities
 
by Pyro Green-Gas and
 
its
Italian subsidiary,
 
and
 
an
 
increase
 
of
 
$0.3
 
million
 
in
 
billings
 
in
 
excess
 
of
 
costs
 
and
 
profits
 
in
 
uncompleted
 
contracts
 
due
 
to
 
proceeds
received on a contract signed close to the December 31, 2022,
 
year-end.
Non-current assets varied year-over-year by $10.8 million
 
,
 
mainly a result of:
 
a decrease of $8.7
 
million in strategic investments is
 
mainly attributable to the $8.3
 
million decrease in the
 
fair value
of the common shares
 
and warrants owned
 
of HPQ Silicon Inc.
 
and the net result
 
of purchases and disposition
 
of
common share of HPQ Silicon Inc. during the year 2022,
 
a
 
decrease
 
of
 
property
 
and
 
equipment
 
of
 
$0.3
 
million
 
due
 
to
 
annual
 
depreciation
 
including
 
the
 
assets
 
under
construction placed in service,
 
a decrease of $0.9 million in right-of-use-assets due to timing
 
of lease maturity dates, and
 
a decrease of
 
$0.7 million in
 
intangible assets due
 
to the amortization
 
of the intangible
 
asset from the
 
2021 business
combination as well as the HP Torch
 
and SPARC
 
patents,
 
Non-current liabilities varied year-over-year by $0.8 million
 
,
 
mainly a result of:
Reimbursement of lease
 
payments made in
 
advance, an increase
 
in the Economic
 
Development Agency loan,
 
and timing
of the expected payments related to the balance due on
 
business combination.
RESULTS OF OPERATIONS
Revenues
PyroGenesis recorded
 
revenue of
 
$3.3 million
 
in the fourth
 
quarter of
 
2022 (“Q4,
 
2022”), representing
 
a decrease
 
of $3.9
million compared with
 
$7.2 million recorded
 
in the fourth
 
quarter of 2021
 
(“Q4, 2021”). Revenue
 
for fiscal 2022
 
was $19.0
million a decrease of $12.1 million over revenue of $31
 
.1 million compared to fiscal 2021.
Revenues recorded in fiscal 2022 were generated primarily
 
from:
Three months ended Dec 31
% Change
Twelve months ended Dec 31
% Change
2022
2021
2022vs2021
2022
2021
2022vs2021
High purity metallurgical grade
silicon & solar grade silicon from
quartz (PUREVAP™)
$
824,894
$
938,211
(113,317)
$
6,272,697
$
6,138,111
134,586
Aluminium and zinc dross
recovery (DROSRITE™)
504,760
1,567,641
(1,062,881)
1,912,807
7,940,771
(6,027,964)
Development and support
related to systems supplied to
the U.S. Navy
(468,812)
845,621
(1,314,433)
1,288,356
7,522,809
(6,234,453)
Torch-related sales
2,110,497
651,661
1,458,836
5,558,210
2,084,511
3,473,699
Biogas upgrading and pollution
controls
86,593
3,152,524
(3,065,931)
3,347,443
6,800,090
(3,452,647)
Other sales and services
243,845
49,691
194,154
633,990
582,058
51,932
Revenue
$
3,301,777
$
7,205,349
(3,903,572)
$
19,013,503
31,068,350
(12,054,847)
Q4, 2022 revenues decreased by $3.9 million, mainly
 
as a result of:
 
PUREVAP™
 
related sales
 
decreased by
 
$0.1 million
 
due to
 
the project
 
nearing its
 
completion, with
 
the phase
 
of
the project being mainly testing,
 
DROSRITE™
 
related sales
 
decreased by
 
$1 million
 
due to customer
 
delays in
 
funding for
 
the construction
 
of the
onsite facility,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
8
 
| Page
 
Support services
 
related to
 
systems supplied
 
for the
 
US Navy
 
decreased by
 
$1.3 million
 
due to
 
a revision
 
in the
cost
 
budget
 
which
 
effects
 
the
 
revenue
 
recognized
 
by
 
percentage
 
completion.
 
As
 
of
 
December
 
31,
 
2022
 
the
customer has not provided
 
a firm purchase order
 
for the change in
 
project scope, however,
 
the Company expects
to do so in 2023
 
and
 
Biogas upgrading and pollution controls related sales decreased by $3.1
 
million due to clients requesting additional
modifications prior to installation and commissioning, as
 
well as continuous testing to achieve desired results.
Fiscal 2022 revenues decreased by $12.1 million, mainly as a result
 
of:
 
DROSRITE™
 
related
 
sales
 
decreased
 
by $6.0
 
million
 
due
 
to
 
client
 
delays
 
in
 
funding
 
for
 
the
 
construction
 
of the
onsite facility,
 
Support services related to systems supplied for the US Navy
 
decreased by $6.2 million due to the project nearing
its completion with remaining
 
milestones based largely
 
on inspections and shipment
 
of the equipment,
 
as well as,
additional out of scope work costs incurred and not yet reflected
 
in receipt of purchase order modifications,
 
and
 
Biogas upgrading and pollution controls
 
decreased by $3.4 million due to
 
the continuous effort in reaching
 
desired
results in order to advance to final steps, such as, commissioning.
PUREVAP™
 
related
 
sales
 
includes
 
revenue
 
from
 
the
 
sale
 
of
 
technologies
 
in
 
the
 
amount
 
of
 
$3.6
 
million
 
($3.3
 
million
 
in
2021). See note 7 to the 2022 consolidated financial statements.
As of
 
March 30, 2023,
 
revenue expected to
 
be recognized
 
in the
 
future related
 
to backlog
 
of signed
 
and/or awarded
 
contracts
is $32.4
 
million.
 
Revenue will
 
be recognized
 
as the
 
Company satisfies its
 
performance obligations under
 
long-term contracts,
which is expected to occur over a maximum period of
 
approximately 3 years.
Cost of Sales and Services
Three months ended Dec 31
% Change
Twelve months ended Dec 31
% Change
2022
2021
2022vs2021
2022
2021
2022vs2021
Employee compensation
$
1,014,363
$
769,322
32
%
$
3,668,261
$
2,650,739
38
%
Subcontracting
113,610
210,848
(46)
%
1,323,092
872,933
52
%
Direct materials
1,005,318
4,498,835
(78)
%
4,698,982
14,252,205
(67)
%
Manufacturing overhead & other
265,579
434,778
(39)
%
1,371,462
1,111,975
23
%
Foreign exchange charge on
materials
224,880
(306,918)
(173)
%
(999,548)
(568,531)
76
%
Investment tax credits
(23,440)
(65,326)
(64)
%
(70,663)
(148,695)
(52)
%
Amortization of intangible assets
221,752
361,021
(39)
%
878,030
465,913
88
%
Total Cost of Sales and
Services
$
2,822,062
$
5,902,560
(52)
%
$
10,869,616
$
18,636,539
(42)
%
Gross Margin
Three months ended Dec 31
Twelve months
 
ended Dec 31
2022
2021
2022
2021
Revenues
$
3,301,777
$
7,205,349
$
19,013,503
$
31,068,350
Cost of Sales and Services
2,822,062
5,902,560
10,869,616
18,636,539
Gross Margin
$
479,715
$
1,302,789
$
8,143,887
$
12,431,811
Gross Margin %
14.5
%
18.1
%
42.8
%
40.0
%
Cost of sales
 
and services was
 
$2.8 million in
 
Q4, 2022, representing
 
a decrease of
 
52% compared to
 
$5.9 million in
 
Q4,
2021, primarily due to
 
decreases in subcontracting
 
$0.1 million (Q4, 2021
 
- $0.2 million),
 
direct materials $1.0
 
million (Q4,
2021 -
 
$4.5 million
 
), manufacturing
 
overhead &
 
other $0.3
 
million (Q4,
 
2021 - $0.4
 
million), foreign
 
exchange
 
charge on
materials
 
$0.2
 
million,
 
(Q4,
 
2021
 
 
($0.3
 
million),
 
which
 
is
 
largely
 
due
 
to
 
the
 
decrease
 
in
 
product
 
and
 
service-related
revenues, as well as being negatively
 
impacted by the foreign exchange charge
 
on materials, and a decrease in
 
investment
tax credits ($0.02 million)
 
due to a lower levels of qualifying projects.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
9
 
| Page
Fiscal 2022,
 
cost of
 
sales and
 
services
 
was $10.9
 
million,
 
representing
 
a decrease
 
of 42%
 
compared to
 
$18.6 million
 
in
2021, primarily due
 
to the
 
decrease of product
 
and service-related revenues
 
in the Company
 
and its
 
subsidiaries.
 
Decreases
in direct materials $4.7 million (2021 - $14.3 million)
 
and investment tax credits ($0.07 million)
 
(2021 – ($0.1 million)), were
offset by the increases
 
in employee compensation $3.7
 
million (2021
 
- $2.6 million), subcontracting $1.3
 
million (2021 - $0.9
million),
 
manufacturing
 
overhead &
 
other
 
$1.4
 
million
 
(2021 -
 
$1.1
 
million),
 
foreign
 
exchange
 
charge
 
on
 
materials
 
($1.0
million) (2021
 
– ($0.6
 
million), totaling
 
an increase
 
of $5.4
 
million compared
 
to $4.1 million
 
in 2021.
 
The increase in
 
employee
compensation,
 
subcontracting,
 
and
 
manufacturing
 
overhead
 
& other
 
is primarily
 
related to
 
an
 
increase
 
in labour
 
intense
projects,
 
which require additional engineering hours,
 
as well as specific subcontracting work
 
related to equipment capacity
improvements, mainly for
 
torch-related sales, and
 
the increase to
 
manufacturing and
 
other was due
 
to higher utility
 
costs,
and
 
equipment
 
rentals,
 
such
 
as
 
cranes
 
and
 
power
 
generators.
 
These
 
increases
 
were
 
offset
 
by
 
the
 
decrease
 
in
 
direct
materials and by the foreign exchange charge on materials.
The gross margin for Q4,
 
2022 was $0.5 million or
 
14.5%
 
of revenue compared to a gross
 
margin of $1.3 million or
 
18.1%
of revenue for Q4,
 
2021, the decrease
 
in gross margin
 
was mainly attributable
 
to the negative
 
impact in foreign exchange
charge on materials of $0.5
 
million.
 
Fiscal 2022,
 
gross margin
 
was $8.1
 
million or
 
42.8% of
 
revenue compared
 
to a
 
gross margin
 
of $12.4
 
million or
 
40% for
fiscal 2021. As a result of the type of contracts being executed, the nature of the project activity, as well as the composition
of the
 
cost of
 
sales and
 
services, the
 
mix between
 
labour,
 
materials and
 
subcontracts
 
may be
 
significantly different.
 
The
cost of sales and services for 2022 and 2021 are
 
in line with management’s expectations and with the nature
 
of revenue.
Investment tax
 
credits recorded
 
against cost
 
of sales
 
are related
 
to projects
 
that qualify
 
for tax
 
credits from
 
the provincial
government of Quebec.
 
Qualifying tax credits
 
decreased in Q4,
 
2022 to $0.02
 
million compared to
 
$0.07 million for
 
Q4,2021.
In 2022,
 
$0.07 million
 
compared to
 
$0.1 million
 
in 2021.
 
The decrease
 
in fiscal
 
2022 is
 
primarily related
 
to less
 
contracts
being eligible for qualifying tax credits.
The amortization
 
of intangible
 
assets
 
for Q4,
 
2022 was
 
$0.2 million
 
compared
 
to $0.4
 
million for
 
Q4, 2021.
 
In 2022,
 
the
amortization of intangible
 
assets was
 
$0.9 million compared
 
to $0.5 million
 
for 2021. The
 
increase in 2022,
 
relates mainly
to the intangible assets in connection with
 
the Pyro Green-Gas acquisition, patents and deferred development costs. These
expenses are non-cash items
 
and will be amortized over the duration of the patent lives.
Selling, General and Administrative Expenses
Three months ended Dec 31
% Change
 
 
Twelve months ended Dec 31
% Change
2022
2021
2022vs2021
2022
2021
2022vs2021
Employee compensation
$
2,458,487
$
4,648,952
(47)
%
$
8,094,226
$
8,664,603
(7)
%
Share-based expenses
1,316,221
4,878,526
(73)
%
5,538,463
9,762,745
(43)
%
Professional fees
1,473,164
998,098
48
%
5,129,384
3,884,734
32
%
Office and general
454,881
125,224
263
%
1,154,327
609,353
89
%
Travel
79,875
37,193
115
%
283,142
114,206
148
%
Depreciation of property
and equipment
157,011
102,024
54
%
603,894
356,103
70
%
Depreciation of ROU
assets
156,362
166,223
(6)
%
635,828
570,411
11
%
Investment tax credits
(7,500)
(9,007)
(17)
%
(30,000)
(32,486)
(8)
%
Government grants
(67,268)
(32,612)
106
%
(204,791)
(76,845)
166
%
Other expenses
(91,191)
1,035,375
(109)
%
3,340,961
3,384,311
(1)
%
Bad debt provision
4,480,000
–—
100
%
4,480,000
–—
100
%
Total selling, general and
administrative
$
10,410,042
$
11,949,996
(13)
%
$
29,025,434
$
27,237,135
7
%
Included within Selling, General and Administrative expenses (“SG&A”) are costs associated with corporate administration,
business development, project proposals, operations
 
administration, investor relations and employee training.
SG&A expenses for Q4, 2022 were $10.4 million, representing a decrease
 
of 13%
 
compared to $11.9 million
 
for Q4, 2021.
The decrease is mainly a result of employee compensation decreasing to $2.5 million (Q4, 2021
 
– 4.6 million), due to lower
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
10
 
| Page
levels of eligible commissions and bonuses, a decrease in share-based compensation of $3.6 million
 
(a non- cash expense
related
 
to
 
a
 
Q4
 
2021
 
grant
 
not
 
repeated
 
in
 
2022),
 
and
 
a
 
decrease
 
in
 
other
 
expenses,
 
which
 
in
 
Q4
 
2021
 
comprised
 
of
insurances, taxes, interest, and bank charges.
 
Professional fees for Q4 2022 were greater due
 
to an increase in legal fees,
accounting fees,
 
investor relation
 
fees and
 
patent expenses. In
 
addition, in
 
Q4 2022
 
a credit
 
loss of
 
$4.5 million
 
was recorded
related to collection of accounts receivable, also a non-cash
 
expense.
 
SG&A expenses
 
for fiscal
 
2022 were
 
$29.0
 
million,
 
representing
 
an
 
increase
 
of
 
7% compared
 
to
 
$27.2
 
million for
 
fiscal
2021. The SG&A expense now includes
 
those of Pyro Green-Gas for the full year, versus approximately 5 months for fiscal
2021, increased due to the following:
 
i)
 
a
 
decrease
 
of
 
$0.6
 
million
 
in
 
employee
 
compensation
 
primarily
 
due
 
to
 
a
 
decrease
 
in
 
commissions
 
and
bonuses,
ii)
 
an increase of $1.3 million
 
for professional fees, primarily due
 
to an increase in consulting fees,
 
accounting
and audit fees, legal fees, investor relation fees and public
 
listing fees,
iii)
 
an
 
increase
 
of
 
$0.5
 
million
 
in
 
office
 
and
 
general
 
expenses,
 
is
 
primarily
 
due
 
to
 
information
 
technology
expenses including those related to the new ERP system
 
,
iv)
 
depreciation on property
 
and equipment increased
 
by $0.2 million
 
due to higher
 
amounts
 
of property and
equipment being depreciated,
v)
 
Bad debt
 
provision increased
 
by $4.5
 
million, of
 
which $4.2
 
million is
 
attributable to
 
accounts receivable
and $0.3 million related to costs and profits in excess
 
of billings on uncompleted contracts.
Separately,
 
share-based
 
payments
 
decreased
 
to
 
$1.3
 
million
 
for
 
Q4,
 
2022
 
(Q4,
 
2021
 
-
 
$4.9
 
million)
 
and
 
decreased
 
to
$5,538,463
 
in
 
2022,
 
compared
 
to
 
$9,762,745
 
over
 
the
 
same
 
period
 
in
 
2021.
 
This
 
was
 
directly
 
impacted
 
by
 
the
 
vesting
structure of
 
the stock
 
option plan
 
with options
 
vesting between
 
10% and
 
100% on
 
the grant
 
date requiring
 
an immediate
recognition of that cost.
Depreciation on Property and Equipment
Three months ended Dec 31
% Change
Twelve months ended Dec 31
% Change
2022
2021
2022vs2021
2022
2021
2022vs2021
Depreciation of property
and equipment
$
157,011
$
102,024
54
%
$
603,894
$
356,103
70
%
During
 
the
 
three
 
months
 
ended
 
December
 
31,
 
2022,
 
deprecation
 
on
 
property
 
and
 
equipment
 
increased
 
to
 
$0.2
 
million
compared to $0.1 million
 
for the same period in
 
the prior year. The 54% increase
 
is due to the
 
equipment under construction
placed in service.
The depreciation on property and equipment
 
increased to $0.6 million in 2022, compared
 
to $0.4 million in 2021. The 70%
increase is due to higher amounts of property and equipment
 
being depreciated.
Research and Development (“R&D”) Expenses
Three months ended Dec 31
% Change
Twelve months ended Dec 31
% Change
2022
2021
2022vs2021
2022
2021
2022vs2021
Employee compensation
$
201,756
$
186,677
8
%
$
814,334
$
777,870
5
%
Investment tax credits
(22,637)
757,946
103
%
(68,771)
684,709
110
%
Subcontracting
50,590
14,356
252
%
142,027
135,066
5
%
Materials and equipment
288,315
136,982
110
%
1,033,235
912,456
13
%
Other expenses
222,579
68,956
223
%
397,148
175,461
126
%
Sub-total before
government grants
$
740,603
$
1,164,917
(36)
%
$
2,317,973
$
2,685,562
(14)
%
Government grants
(16,115)
(100)
%
(149,575)
(100)
%
Total net R&D expenses
$
740,603
$
1,148,802
(36)
%
$
2,317,973
$
2,535,987
(9)
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
11
 
| Page
During
 
the
 
three
 
months
 
ended
 
December
 
31,
 
2022,
 
the
 
Company
 
incurred
 
$0.7
 
million
 
of
 
R&D
 
expenses,
 
net
 
of
government grants, on internal projects in Q4 2022, a decrease of 36% compared to $1.1 million for the same period in the
prior year.
 
The Company
 
incurred $2.3 million
 
of R&D expenses,
 
net of government
 
grants, on
 
internal projects in
 
2022, a
 
decrease
of 9% compared to $2.5 million in 2021. The
 
decrease in 2022 is due to a decrease
 
in R&D activities, the type of contracts
being executed, the nature of the project activity,
 
and the decrease in government grants of $Nil compared to ($0.1 million)
reported in 2021.
In addition to internally funded
 
R&D projects, the Company also
 
incurred R&D expenditures during
 
the execution of client-
funded projects. These expenses are
 
eligible for Scientific Research and
 
Experimental Development (“SR&ED”) tax credits.
SR&ED tax credits on client-funded projects are applied against
 
cost of sales and services (see “Cost of Sales”
 
above).
Financial Expenses
Three months ended Dec 31
% Change
Twelve months ended Dec 31
% Change
2022
2021
2022vs2021
2022
2021
2022vs2021
Interest on term loans
160
84,203
(100)
%
3,198
87,775
(97)
%
Interest on lease liabilities
94,421
86,177
10
%
378,611
307,691
23
%
Interest on balance due
on business combination
3,040
110,203
(97)
%
173,350
110,203
57
%
Interest accretion of
royalty receivable
(40,278)
16,283
(347)
%
(118,290)
(132,808)
(11)
%
Interest accretion of term
loan
8,032
3,219
250
%
28,229
12,185
232
%
Penalties and other
interest
(38,340)
4,320
(802)
%
85,644
19,324
489
%
Financial expenses
$
27,035
$
304,405
(91)
%
$
550,742
$
404,370
36
%
During the three
 
months ended December 31,
 
2022, financial expenses decreased
 
to $0.03 million
 
compared to $0.3 million
for the same period in the prior year. The decrease is due to the various decreases
 
in interest on term loans, penalties, and
other interest expenses,
 
not repeated in 2022.
Financial expenses for
 
2022 totaled $0.6
 
million as compared
 
with $0.4 million
 
for 2021, representing
 
an increase of
 
$0.1
million year-over-year.
 
The increase
 
in finance
 
costs, is
 
primarily attributable
 
to the
 
increase
 
in accretion
 
on the
 
balance
due on business combination and interest on the increased
 
lease liability balance.
Strategic Investments
Three months ended Dec 31
% Change
Twelve months ended Dec 31
% Change
2022
2021
2022vs2021
2022
2021
2022vs2021
Changes to fair value
of strategic
investments
$
(237,194)
$
(11,045,508)
98
%
$
(8,340,781)
$
(21,426,218)
61
%
During the
 
three months ended
 
December 31, 2022,
 
the adjustment to
 
the fair market
 
value of
 
strategic investments resulted
in a loss of $0.2
 
million compared to $11
 
.0 million for the same
 
period in the prior
 
year. The
 
98% increase is primarily
 
due
to the closing share price of the HPQ common shares,
 
used in determining the fair value.
The adjustment to the fair market
 
value of strategic investments in 2022 resulted
 
in a loss of $8.3
 
million compared to a loss
in the
 
amount of
 
$21.4
 
million in
 
2021,
 
representing
 
a variation
 
of $13
 
.1 million
 
.
 
The variation
 
is primarily
 
attributable to
closing share price of the HPQ common shares, used in determining
 
the fair value of common shares and warrants owned
by the Company of HPQ Silicon Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
12
 
| Page
Comprehensive loss
Three months ended Dec 31
% Change
Twelve months ended Dec 31
% Change
2022
2021
2022vs2021
2022
2021
2022vs2021
Comprehensive
loss
$
(10,818,755)
$
(22,402,857)
(52)
%
$
(32,170,069)
$
(38,428,495)
(16)
%
The comprehensive
 
loss for
 
2022 of
 
$32.2 million
 
compared to
 
a loss
 
of $38.4
 
million,
 
in 2021,
 
represents a
 
decrease of
16% year-over-year.
 
The variation
 
of $6.3 million
 
in the comprehensive
 
loss in 20
 
22 is primarily
 
attributable to
 
the factors
described above, which have been summarized as follows, and includes
 
the profit and loss items of Pyro Green-Gas since
the acquisition date:
(i)
 
a decrease in product and service-related revenue of
 
$12.1 million arising in 2022,
(ii)
 
a
 
decrease
 
in
 
cost
 
of
 
sales
 
and
 
services
 
of
 
$7.8
 
million,
 
primarily
 
due
 
to
 
a
 
decrease
 
in
 
direct
 
materials,
 
and
investment tax credits,
(iii)
 
an increase in
 
SG&A expenses
 
of $1.8 million
 
arising in 2022
 
primarily due to
 
an increase in
 
professional fees,
office & general, travel, depreciation of property and
 
equipment, depreciation of ROU assets, government grants,
other expenses, and the allowance for credit loss of $4.5 million
 
,
(iv)
 
a
 
decrease
 
in
 
R&D
 
expenses
 
of
 
$0.2
 
million
 
primarily
 
related
 
to
 
the
 
decrease
 
in
 
government
 
grants
 
and
 
an
increase in investment tax credits,
(v)
 
a decrease in share-based expenses of $4.2 million,
(vi)
 
a decrease in changes in fair market value of strategic investments
 
and net finance costs of $12.9 million,
(vii)
 
a decrease in income taxes of $815,944.
In Q4 2022,
 
the comprehensive
 
loss is
 
$11.6
 
million favorable,
 
compared to
 
Q4 2021,
 
due to the
 
reasons detailed
 
above
and summarized
 
mainly as
 
the reduction
 
is revenue
 
of $3.9
 
million,
 
favorable impact
 
of SG&A
 
salaries and
 
share-based
expenses, offset
 
by the
 
allowance
 
for credit
 
loss
 
of $4.48
 
million and
 
an adjustment
 
for change
 
in fair
 
value of
 
strategic
investment which is $10.8 million favorable versus Q4 2021.
Reconciliation of Non-IFRS measures (EBITDA,
 
Adjusted and Modified)
Three months ended Dec 31
% Change
Twelve months ended Dec 31
% Change
2022
2021
2022vs2021
2022
2021
2022vs2021
Comprehensive loss
$
(10,818,755)
$
(22,402,857)
(52)
%
$
(32,170,069)
$
(38,428,495)
(16)
%
Depreciation of property and
equipment
157,011
102,024
54
%
603,894
356,103
70
%
Depreciation of ROU assets
156,362
166,223
(6)
%
635,828
570,411
11
%
Amortization of intangible
assets
218,760
353,333
(38)
%
878,030
465,913
88
%
Financial expenses
183,694
74,326
147
%
550,742
404,370
36
%
Income taxes
(739,960)
(100)
%
75,984
(739,960)
110
%
EBITDA
(1)
$
(10,102,928)
$
(22,446,911)
(55)
%
$
(29,425,591)
$
(37,371,658)
(21)
%
Other non-cash items:
Share-based expenses
1,316,221
4,878,526
(73)
%
5,538,463
9,762,745
(43)
%
Change in fair value of
investments
237,194
11,045,508
(98)
%
8,340,781
21,426,218
(61)
%
Modified EBITDA
(1)
$
(8,549,513)
$
(6,522,877)
31
%
$
(15,546,347)
$
(6,182,695)
151
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
13
 
| Page
1
 
See “Non-IFRS Measures”
The
 
EBITDA
 
in
 
2022
 
was
 
a
 
$29.4
 
million
 
loss
 
compared
 
to
 
an
 
EBITDA
 
loss
 
of
 
$37.4
 
million
 
for
 
2021,
 
representing
 
n
decrease
 
of
 
21% year-over-year.
 
The
 
variation
 
in
 
the
 
EBITDA
 
in
 
2022
 
compared
 
to
 
2021
 
is
 
due
 
to
 
the
 
decrease
 
in
comprehensive
 
loss
 
of
 
$6.2
 
million,
 
offset
 
by
 
an
 
increase
 
in
 
depreciation
 
on
 
property
 
and
 
equipment
 
of
 
$0.2
 
million,
 
an
increase
 
in
 
depreciation
 
on
 
right-of-use
 
assets
 
of
 
$0.07
 
million,
 
an
 
increase
 
in
 
amortization
 
of
 
intangible
 
assets
 
of
 
$0.4
million, an increase in
 
finance charges of $0.1
 
million and an increase in
 
income taxes of $0.8
 
million.
 
The 2022 Q4 EBITDA
varied by $12.3 million mainly
 
due to the reduced
 
comprehensive loss in the
 
quarter, and
 
to the income tax reversal
 
in Q4
2021, which was not repeated in 2022.
The
 
Modified
 
EBITDA
 
in
 
2022
 
was
 
a
 
$15.5
 
million
 
loss
 
compared
 
to
 
a
 
Modified
 
EBITDA
 
loss
 
of
 
$6.2
 
million
 
for
 
2021,
representing
 
an
 
increased
 
loss
 
of
 
$9.3
 
million.
 
The
 
increase
 
in
 
the
 
Modified
 
EBITDA
 
loss
 
in
 
2022
 
is
 
attributable
 
to
 
the
decrease as mentioned above in the
 
EBITDA of $7.9 million and
 
a decrease in share-based expenses
 
of $4.2 million from
an expense not recurring
 
in 2022 and a decrease
 
in the change of
 
fair value of investments
 
of $13.1 million, based
 
on the
fair value of such
 
investment. The 2022
 
Q4 Modified EBITDA
 
is a loss of
 
$8.55 million which
 
is $2 million greater
 
than Q4
2021, due to the quarterly EBITDA variation explained above, a
 
decreased share-based expense in the current quarter and
a fair value of the strategic investment which remained stable,
 
based on the share price of the investment.
 
SUMMARY OF QUARTERLY
 
RESULTS
2022
2021
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Revenues
$
3,301,777
$
5,657,783
$
5,847,180
$
4,206,762
$
7,205,349
$
9,317,926
$
8,280,572
$
6,264,503
Gross margin
479,715
4,113,176
2,499,273
1,051,723
1,302,789
4,052,531
4,933,481
2,143,010
Gross margin %
14.5
%
72.7
%
42.7
%
25.0
%
18.1
%
43.5
%
59.6
%
34.2
%
Comprehensive
income (loss)
(10,818,755)
(4,053,706)
(13,039,531)
(4,069,119)
(22,402,857)
623,664
(20,362,205)
3,712,903
Earnings (loss) per
share
Basic
(0.06)
(0.02)
(0.08)
(0.02)
(0.13)
(0.12)
0.02
Diluted
(0.06)
(0.02)
(0.08)
(0.02)
(0.13)
(0.12)
0.02
The majority of PyroGenesis’
 
revenue is recognised over the time of
 
the contract and is dependent on the
 
timing of project
initiation and execution, including project
 
engineering, manufacturing, and testing. Revenues in
 
2022 include revenues from
the sale
 
of intellectual
 
property
 
and
 
royalties
 
of $3.6
 
million ($3.3
 
million
 
in 2021)
 
and
 
$280,842.14
 
($315,846
 
in
 
2021),
respectively.
LIQUIDITY AND CAPITAL
 
RESOURCES
As at December 31, 2022, the Company had cash of $3.4
 
million, included in the net working capital of $1.7 million.
 
Certain
working capital
 
items such
 
as
Billings in
 
excess
 
of costs
 
and profits
 
on uncompleted
 
contracts
 
do not
 
represent
 
a direct
outflow
 
of
 
cash.
 
The
 
Company
 
expects
 
that
 
with
 
its
 
cash,
 
liquidity
 
position,
 
the
 
proceeds
 
available
 
from
 
the
 
strategic
investment and access to capital markets it will be able
 
to finance its operations for the foreseeable future.
The Company’s
 
term
 
loan
 
balance
 
at December
 
31,
 
2022 was
 
$389,987,
 
and
 
the
 
increase
 
since
 
January
 
1, 2022,
 
was
mainly attributable to the additional proceeds received on the Economic Development
 
Agency of Canada loan. This loan is
interest free and will remain so, until
 
the balance is paid over the 60
 
month period ending March 2029. The average interest
expense on the other term loans was 7.2% in 2022 and in 2021. The Company does not expect changes to the structure of
term loans in
 
the next fiscal
 
year. The Company maintained two
 
credit facilities which
 
bear interest at
 
variable rates of
 
7.45%
and
 
8%
 
at
 
December
 
31,
 
2022.
 
The
 
Company
 
expects
 
to
 
reimburse
 
a
 
portion
 
of
 
the
 
credit
 
facilities
 
during
 
2023,
 
and
extending the due date of the remaining balance, while
 
maintaining the similar conditions.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
14
 
| Page
Total
 
Less
 
Carrying
contractual
 
than 1
 
Over 5
Value
amount
year
2-3 years
4-5 years
 
years
$
$
$
$
$
$
Bank indebtedness
991,902
991,902
991,902
Accounts payable and accrued
liabilities
1
9,620,591
9,620,591
9,620,591
Term
 
loans
389,987
520,444
59,917
190,587
180,000
89,940
Balance due on business combination
3,907,775
4,137,820
2,177,800
1,960,020
Lease liabilities
5,533,694
6,745,329
2,984,243
1,165,281
703,816
1,891,989
20,443,949
22,016,086
15,834,453
3,315,888
883,816
1,981,929
1
Accounts payable and accrued liabilities exclude amounts
 
which are not financial liabilities.
SUMMARY OF CASH FLOWS
Three months ended Dec 31
Twelve months
 
ended Dec 31
2022
2021
2022
2021
Cash used in operating activities
$
(1,226,224)
$
(1,763,488)
$
(11,128,885)
$
(18,113,432)
Cash provided by (used in)
investing activities
(111,458)
1,299,358
(368,180)
2,722,957
Cash provided by (used in)
financing activities
2,346,316
(3,128,952)
2,641,007
9,474,022
Effect of exchange rate changes on
cash denominated in foreign
currency
72,154
14,067
99,194
14,067
Increase (decrease) in cash
1,080,788
(3,579,015)
(8,756,864)
(5,902,386)
Cash - end of period
3,445,649
12,202,513
3,445,649
12,202,513
On a year-to-date
 
basis, cash
 
flow used
 
by operating
 
activities was
 
$11.1
 
million compared
 
to $18.1
 
million for
 
the same
period in the
 
prior year. During the three months ended December
 
31, 2022, cash flow
 
used by operating activities
 
was $1.2
million compared to $1.8 million
 
for the same period in
 
the prior year.
 
The use of cash during
 
2022 consists of the net loss
of $32.2
 
million (2021
 
– net
 
loss of
 
$38.4
 
million) plus
 
adjustments
 
for operating
 
activities of
 
$16.6
 
million (2021
 
- $32.9
million), including
 
a net
 
change
 
in
 
non-cash
 
operating
 
working capital
 
items
 
of $4.2
 
million (20
 
21 –
 
net change
 
of $12.6
million). During the three
 
months ended December
 
31, 2022, the use
 
of cash consisted of
 
net losses of $10.7
 
million (Q4,
2021 – net loss of $22.4 million) plus adjustments
 
for operating activities of $1.9 million (Q4, 2021 - $15.9 million), including
a net change in non-cash operating working capital items
 
of $7.8 million (Q4, 2021 – net change of $4.3 million).
Investing activities
 
resulted in
 
a use
 
of funds
 
of $0.4
 
million in
 
2022, compared
 
to a
 
net source
 
of funds
 
of $2.7
 
million in
2021
 
resulting
 
from
 
the
 
additions
 
to
 
property
 
and
 
equipment,
 
intangible
 
assets,
 
purchased
 
and
 
disposals
 
of
 
strategic
investments and
 
cash
 
acquired
 
through
 
the business
 
combination.
 
During
 
the
 
three
 
months ended
 
December
 
31, 2022,
investing activities resulted in
 
a use of cash of
 
$0.1 million, compared to
 
a net source of funds
 
of $1.3 million for the
 
same
period
 
in
 
the
 
prior
 
year.
 
For
 
Q4
 
2022
 
and
 
fiscal
 
2022,
 
the
 
variation
 
was
 
mainly
 
due
 
to
 
less
 
purchases
 
of
 
property
 
and
equipment as
 
equipment under construction
 
was complete, and
 
also from
 
the variation of
 
purchases and disposals
 
of shares
of the strategic investment.
Financing activities
 
in 2022
 
resulted in
 
a net
 
source of
 
funds of
 
$2.6 million,
 
compared with
 
a net
 
source of
 
funds of
 
$9.5
million for the same period in 2021.
 
In 2022, the Company issued common shares for net
 
cash proceeds of $2.7 million and
repaid an
 
amount of
 
$0.7 million
 
in loans
 
and lease
 
liabilities. In
 
2021, the
 
Company issued
 
common shares
 
for net cash
proceeds of $14.2
 
million, repaid an
 
amount of $0.3
 
million in loans
 
and lease liabilities
 
and repurchased 0.8
 
million common
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
15
 
| Page
shares for an amount of $4.2 million.
 
Financing activities also include interest paid of $0.5 million in 2022 compared
 
to $0.3
million in 2021. In
 
fiscal 2022, the proceeds
 
from the credit facilities
 
represent a cash inflow
 
of $1 million. During
 
the three
months ended
 
December
 
31, 2022,
 
financing activities
 
resulted in
 
a net
 
source of
 
funds of
 
$2.3 million
 
due partly
 
to the
private placement, compared with a use of funds of $3.1 million
 
for the same period in the prior year.
The net cash position of the Company decreased by $8.8 million for 2022
 
compared to an increase of $5.9 million for 2021.
USE OF PROCEEDS FROM FINANCINGS
Description of intended use of funds from financings
in the past 12 months
Proposed use of proceeds from financings
completed in the past 12 months
Use of funds
to Date
October 19, 2022: Private Placement for total gross
proceeds of $1,318,980
 
 
Proceeds were intended and used for working capital
and general corporate purposes
 
$
1,318,980
CAPITAL STOCK
 
INFORMATION
The authorized
 
share capital
 
of the
 
Company consists
 
of an
 
unlimited number
 
of common
 
shares. As
 
at March 30,
 
2023
PyroGenesis had 178,580,395 Common Shares, 6,014,600 share purchase warrants, 9,815,000 outstanding stock options
issued, and 6,473,000 exercisable options issued.
GOING CONCERN
These
 
consolidated
 
financial
 
statements
 
have
 
been
 
prepared
 
on
 
the
 
going
 
concern
 
basis,
 
which
 
presumes
 
that
 
the
Company will be
 
able to continue
 
its operations for
 
the foreseeable and
 
will be able
 
to realize its
 
assets and
 
discharge its
liabilities in the normal course of business for the foreseeable
 
future.
The Company is
 
subject to certain
 
risks and uncertainty
 
associated with the
 
achievement of profitable
 
operations such
 
as
the successful signing and delivery of contracts and access
 
to adequate financing.
The Company
 
has incurred,
 
in the
 
last years,
 
operating losses
 
and negative
 
cash flows
 
from operations,
 
and as
 
a result,
the Company has
 
an accumulated deficit of
 
$93,384,858 as at
 
December 31, 2022 ($61,217,831
 
as at December
 
31, 2021).
Furthermore, there have been unexpected delays in the collection of certain accounts receivable from contracts closed in a
prior year. This has
 
resulted in a
 
shortfall in cash
 
flows from operating
 
activities that would
 
be used in
 
funding the Company’s
operations.
 
As
 
at
 
December
 
31,
 
2022,
 
the
 
Company
 
has
 
working
 
capital
 
of
 
$1,650,709
 
($14,006,785
 
as
 
at
 
December
 
31,
 
2021)
including cash and
 
cash equivalents
 
of $3,445,649 ($12,202,513
 
as at December
 
31, 2021). The
 
working capital
 
is net of
an allowance for credit losses amounting to $5,023,283
 
($520,000 as at December 31, 2021) as further
 
described in notes
9 and 10. The Company’s
 
business plan is dependent
 
upon the successful completion
 
of contracts and also
 
the receipt of
payments from certain contracts
 
closed in a prior year and expects
 
these payments to be made
 
during fiscal 2023, as well
as
 
the
 
achievement
 
of
 
profitable
 
operations
 
through
 
the
 
signing,
 
completion
 
and
 
delivery
 
of
 
additional
 
contracts
 
or
 
a
reduction in certain operating expenses. In the absence of this, the Company is dependent upon raising additional funds to
finance operations within
 
and beyond the next
 
twelve months. The Company
 
has been successful
 
in securing financing in
the past
 
and has
 
relied upon
 
external financing
 
to fund
 
its operations,
 
primarily
 
through the
 
issuance of
 
equity,
 
debt and
convertible debentures.
 
The Company
 
completed a
 
private placement
 
in October
 
2022 for
 
an amount
 
of $1,318,980
 
and
also
 
completed
 
another
 
private
 
placement
 
in
 
March
 
2023
 
for
 
$5,000,000
 
(see
 
note
 
33).
 
While
 
the
 
Company
 
has
 
been
successful in securing
 
financing, raising
 
additional funds
 
is dependent
 
on a number
 
of factors, some
 
of which
 
are outside
the Company’s
 
control, and therefore
 
there is no
 
assurance that
 
it will be
 
able to do
 
so in the
 
future or that
 
these sources
will
 
be
 
available
 
to
 
the
 
Company
 
or
 
that
 
they
 
will
 
be
 
available
 
on
 
terms
 
which
 
are
 
acceptable
 
to
 
the
 
Company.
 
These
conditions indicate
 
the existence
 
of a
 
material uncertainty
 
that may
 
cast significant
 
doubt about
 
the Company’s
 
ability to
continue operating as a going concern.
 
The consolidated financial
 
statements have been
 
prepared on a
 
going concern
 
basis and do
 
not include
 
any adjustments
to the amounts and to classifications of the assets and liabilities that might be necessary should the Company be unable to
achieve its plan and continue in business. If the going concern assumption were not appropriate, adjustments,
 
which could
be material, would be necessary to the carrying value of assets and liabilities, the reported expenses, and the classification
of items on the consolidated statement of financial position.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
16
 
| Page
RELATED PARTY
 
TRANSACTIONS
During
 
the year
 
ended
 
December 31,
 
2022
 
and
 
2021,
 
the
 
Company
 
concluded
 
the
 
following
 
transactions
 
with
 
related
parties:
In 2022, rent
 
and property taxes
 
were charged by
 
a trust whose beneficiary
 
is the controlling
 
shareholder and CEO
 
of the
Company
 
in the
 
amount
 
of
 
$277,389 (2021
 
- $274,934).
 
On January
 
1, 2022,
 
a
 
lease for
 
rent of
 
a property
 
with a
 
trust
whose beneficiary
 
is the
 
controlling
 
shareholder
 
and
 
CEO of
 
the
 
Company,
 
was
 
modified to
 
extend
 
the
 
lease
 
term until
December 2026. The lessor also reimbursed an amount of $1,070,264 representing the balance at the date of modification
of
 
the
 
original
 
prepayment
 
amount
 
of
 
$1,178,530
 
made
 
in
 
2020.
 
At
 
the
 
date
 
of
 
modification,
 
the
 
lease
 
liability
 
was
remeasured using a discount rate of 4%.
 
As a result, the lease liability was
 
increased by an amount of $1,070,264
 
and the
right-of-use assets was decreased by an amount of $108,267.
These
 
expenses
 
are
 
recorded
 
in
 
captions
 
cost
 
of
 
sales
 
and
 
selling
 
and
 
general
 
in
 
the
 
consolidated
 
statements
 
of
comprehensive
 
loss.
 
As
 
at
 
December
 
31,
 
2022
 
the
 
right-of-use
 
asset
 
and
 
the
 
lease
 
liabilities
 
amount
 
to
 
$680,980
 
and
$799,090 respectively (2021 - $1,107,131 and $Nil).
A balance due
 
to the controlling shareholder
 
and CEO of
 
the Company amounted to
 
$254,097 (2021 - $144,506)
 
is included
in accounts payable and accrued liabilities.
The key management personnel
 
of the Company,
 
in accordance with IAS
 
24 Related Party Disclosures,
 
are the members
of the Board of Directors and certain officers. Total
 
compensation
 
to key management consisted of the following:
Three months ended Dec 31
% Change
Twelve months ended Dec 31
% Change
2022
2021
2022vs2021
2022
2021
2022vs2021
Salaries - key
management
$
359,932
$
2,335,482
(85)
%
$
1,204,306
$
3,049,501
(61)
%
Pension contributions
6,838
46,335
(85)
%
22,479
59,377
(62)
%
Fees - Board of Directors
23,200
40,200
(42)
%
157,900
187,600
(16)
%
Share-based
compensation - officers
245,915
4,125,512
(94)
%
2,017,348
6,182,573
(67)
%
Share-based
compensation - Board of
Directors
313,757
375,333
(16)
%
2,293,167
2,338,650
(2)
%
Other benefits - key
management
222,686
61,684
261
%
244,621
237,903
3
%
Total compensation
$
1,172,328
$
6,984,546
(83)
%
$
5,939,821
$
12,055,604
(51)
%
CORPORATE HIGHLIGHTS
On February 2, 2022, PyroGenesis announced the receipt of a US$3,000,000 purchase order for the first of three 10-tonne
DROSRITE systems from an existing client.
On February
 
7, 2022,
 
PyroGenesis announced
 
that it
 
had signed
 
an agreement
 
with a
 
European research
 
center for
 
the
sale of a plasma torch system
 
which will be used to develop
 
a process to convert hydrocarbons,
 
including GHG producing
gases such as methane, into non-hazardous chemicals.
On
 
April
 
25,
 
2022,
 
Pyrogenesis
 
confirmed
 
that
 
the
 
Company’s
 
DROSRITE
 
dross
 
recovery
 
technology
 
(a
 
total
 
of
 
seven
DROSRITE systems) has been successfully commissioned
 
for Ma’aden Aluminum.
On
 
May
 
19,
 
2022,
 
PyroGenesis
 
announced
 
that
 
it
 
had
 
completed
 
a
 
commercial
 
order
 
for
 
titanium
 
powders.
 
The
 
order
derived from the Company’s partnership agreement with Aubert & Duval, a multinational specializing in upscale
 
metallurgy,
and the powder in question was produced at PyroGenesis’
 
production facility using its NexGen plasma atomization system.
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
17
 
| Page
On
 
September
 
7,
 
2022,
 
the
 
Company
 
announced
 
that
 
it
 
has
 
been
 
selected
 
by
 
an
 
international
 
producer
 
of
 
magnesium
metal,
 
to
 
test
 
PyroGenesis’
 
zero-emission
 
plasma
 
torches
 
as
 
part
 
of
 
their
 
process
 
for
 
transforming
 
mining
 
waste
 
and
recycled minerals into high-value metal.
On October 6, 2022, PyroGenesis confirmed that its Gen3
 
PUREVAP Quartz
 
Reduction Reactor pilot plant had completed
the month-long power-up process and was initiating the testing phase of its transformation
 
of quartz into high purity silicon.
The plant
 
is designed
 
to
 
produce
 
multiple
 
systems
 
that can
 
operate
 
under
 
harsh conditions,
 
including at
 
extremely
 
high
temperatures and under vacuum.
On October
 
19, 2022,
 
PyroGenesis announced
 
that it
 
has completed
 
a non-brokered
 
private placement
 
consisting of
 
the
issuance and sale of 1,014,600 units of the Corporation at a
 
price of $1.30 per unit, for gross proceeds of
 
$1,318,980 to the
Company. Each unit consisted of
 
one Common Share
 
and one warrant
 
entitling the holder
 
thereof to purchase
 
one Common
Share at a price of $1.75 until October 19, 2024.
On
 
November
 
2,
 
2022,
 
PyroGenesis
 
announced
 
that
 
it
 
has
 
passed
 
its
 
annual
 
quality
 
audit
 
for
 
two
 
key
 
international
standards: ISO 9001:2015, and AS9100D.
 
The audits encompassed all of
 
PyroGenesis’ facilities for the purpose
 
of meeting
compliance with the existing quality management designations.
On November
 
10, 2022,
 
PyroGenesis
 
announced that
 
it has
 
successfully
 
produced
 
hydrogen from
 
methane
 
using zero-
carbon emission hydrogen production technology.
SUBSEQUENT EVENTS
On March 8, 2023, the Company announced it had completed a non-brokered private placement consisting of the issuance
and sale of
 
5,000,000 units of
 
the Company at
 
a price of
 
$1.00 per unit,
 
for gross proceeds
 
of $5,000,000. Each
 
unit consists
of one common share of the
 
Company and one common share
 
purchase warrant. Each warrant entitles
 
the holder thereof
to purchase
 
one
 
common
 
share at
 
a price
 
of
 
$1.25
 
until
 
March
 
7,
 
2025.
 
The
 
entire amount
 
is allocated
 
to
 
the common
shares as the fair value of the common shares on March
 
8, 2023, was $1.38.
CRITICAL
 
ACCOUNTING
 
ESTIMATES,
 
NEW
 
AND
 
FUTURE
 
ACCOUNTING
 
POLICIES
 
AND
 
FINANCIAL
INSTRUMENTS
For a
 
discussion of
 
significant accounting
 
policies, judgements,
 
estimates assumptions
 
and financial
 
instruments, please
refer to notes 4, 5 and 28 of the 2022 consolidated financial
 
statements.
CONTROLS AND PROCEDURES
The Company’s
 
shares
 
are traded
 
on the
 
Toronto
 
Stock
 
Exchange (“TSX”)
 
since
 
November
 
2020 and
 
on the
 
NASDAQ
since March 2021. Prior to November 2020, the Company’s shares traded on the TSX Venture Exchange (“TSXV”), and all
requirements of the TSXV were attainted by the
 
Company. The
 
Company acknowledged that being listed
 
on the TSX, and
NASDAQ would require more stringent disclosure controls, and
 
started implementing such before the NASDAQ listing.
As a
 
result of
 
the
 
graduation
 
to the
 
TSX and
 
NASDAQ,
 
the Company
 
became
 
subject
 
to additional
 
requirements
 
under
applicable securities
 
laws relating
 
to the
 
establishment and
 
maintenance of
 
disclosure controls
 
and procedures
 
(“DC&P”)
and internal control over financial reporting (“ICFR”),
 
as defined in NI 52-109 and the applicable rules of the U.S. Securities
and Exchange Commission.
 
Such requirements also
 
include the assessment
 
and evaluation of
 
both DC&P and
 
ICFR, which
was not required
 
while the Company was
 
listed on the
 
TSXV. Consequently,
 
the Company continues to
 
take several actions
to improve
 
its DC&P
 
and ICFR,
 
in accordance
 
with the
 
thresholds provided
 
by the
 
regulators. The
 
Company
 
is currently
implementing measures
 
designed to
 
improve its
 
ICFR environment
 
and remediate
 
the control
 
deficiencies that
 
led to
 
the
material weaknesses identified below.
In accordance with the provisions of National Instrument 52-109
 
– Issuers’
 
annual and interim filings (“NI 52-109”) adopted
by Canadian securities regulators and in Rule 13a-15(e) and 15d-15(e) under the U.S.
 
Securities Exchange Act of 1934, as
amended (the “Exchange Act”), the Company has filed certificates signed by the Chief Executive Officer (“CEO”) and Chief
Financial Officer
 
(“CFO”) that
 
report on,
 
among other
 
items, i)
 
their responsibility
 
for establishing
 
and maintaining
 
DC&P
and ICFR for the Company,
 
ii) the design of DC&P and the design of ICFR, and the effecti
 
veness of DC&P and ICFR.
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
18
 
| Page
Disclosure controls and procedures
The
 
Company
 
under
 
the
 
supervision
 
of
 
the
 
CEO
 
and
 
CFO,
 
have
 
designed
 
DC&P
 
(as
 
defined
 
in
 
NI-52-109
 
and
Rule 13a-15(e) and 15d-15(e) under the Exchange Act),
 
in order to provide reasonable assurance that:
 
material information relating to the Company is made
 
known to the CEO and CFO by others; and
 
information required to
 
be disclosed by
 
the Company in
 
its filings, under
 
applicable securities legislation is
 
recorded,
processed, summarized and reported within the time periods
 
specified in securities legislation.
As of
 
December 31, 2022,
 
an evaluation
 
was carried
 
out under
 
the supervision
 
of the
 
CEO and
 
CFO, of
 
the design
 
and
operating effectiveness
 
of the
 
Company’s DC&P.
 
Based on
 
this evaluation,
 
the CEO
 
and CFO
 
concluded that
 
due to
 
the
material weaknesses in our
 
ICFR as described below
 
in Management’s
 
Annual Report on Internal
 
Controls over Financial
Reporting, the Company’s DC&P were not effective
 
as of December 31, 2022.
Management’s Annual Report on Internal Controls
 
over Financial Reporting
The Company
 
under the
 
supervision of
 
the CEO
 
and CFO,
 
are responsible
 
to design
 
ICFR (as
 
defined in
 
NI-52-109 and
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) in order to provide
 
reasonable assurance regarding the reliability of
financial reporting and the
 
preparation of consolidated financial
 
statements for external purposes
 
in accordance with IFRS
as issued by the IASB.
As
 
of
 
December 31,
 
2022,
 
an
 
evaluation
 
was
 
carried
 
out,
 
under
 
the
 
supervision
 
of
 
the
 
CEO
 
and
 
the
 
CFO,
 
of
 
the
effectiveness of the Company’s ICFR.
 
Based on this
 
evaluation, the CEO and
 
the CFO concluded that
 
material weaknesses
exist, as described below, and due to these material weaknesses, the Company’s ICFR is not effective as of December 31,
2022. The
 
control framework
 
used to
 
design and
 
evaluate effectiveness
 
of the
 
Company’s ICFR
 
is established
 
under the
criteria set forth by the Committee of Sponsoring
 
Organizations of the Treadway Commission (COSO) on Internal Control –
Integrated Framework (2013 framework). A
 
material weakness is a
 
deficiency, or combination of deficiencies, in ICFR, such
that there is a reasonable possibility that a material
 
misstatement of the Company’s annual or interim consolidated financial
statements will not be prevented or detected on a timely
 
basis.
In connection with the Company’s
 
evaluation of ICFR, the following
 
are the control deficiencies that
 
were considered to be
material weaknesses in the current year,
 
and in 2021 and any remediation that occurred during fiscal
 
2022:
Control
 
environment:
 
The
 
Company
 
did
 
not
 
maintain
 
an
 
effective
 
control
 
environment
 
and
 
has
 
identified
deficiencies relating
 
to appropriate
 
organizational structure
 
and authority
 
and responsibilities
 
.
 
The Company
 
did
not
 
have
 
a
 
sufficient
 
number
 
of
 
trained
 
resources
 
with
 
the
 
appropriate
 
skills
 
and
 
knowledge
 
with
 
assigned
responsibilities and accountability for the design and operation of ICFR and for holding
 
individuals accountable for
their internal control-related responsibilities.
 
Nonetheless, during
 
a portion
 
of 2022,
 
the deficiencies
 
related to
 
the control
 
environment over
 
reporting lines
 
as
well as authority
 
and responsibilities were
 
improved with the
 
implementation of additional
 
controls. Oversight
 
and
governance
 
of
 
financial
 
reporting
 
and
 
related
 
party
 
transactions,
 
including
 
the
 
oversight
 
executed
 
by
 
Board
 
of
Directors
 
and
 
the
 
Audit
 
Committee
 
was
 
not
 
indicative
 
of
 
a
 
control
 
environment
 
deficiency.
 
The
 
Company
 
has
financial
 
reporting
 
resources
 
internally,
 
or
 
at
 
their
 
disposal
 
to
 
ensure
 
they
 
can
 
deal
 
with
 
complex
 
accounting
matters, as well as period-end controls to mitigate the risk
 
of misstatement in the financial information.
Control activities:
The Company
 
did not fully
 
design and implement
 
effective control
 
activities and has
 
identified
deficiencies
 
relating
 
to:
 
(i) selecting
 
and
 
developing
 
control
 
activities
 
that
 
contribute
 
to
 
the
 
mitigation
 
of
 
risks
 
to
acceptable
 
levels,
 
and
 
(ii) deploying
 
control
 
activities
 
through
 
policies
 
that
 
establish
 
what
 
is
 
expected
 
and
procedures that put policies into action.
 
During 2022, the Company continued to implement numerous internal controls, including compensating
 
controls to
mitigate these risks
 
as well as adding
 
sufficient levels
 
of review and approval
 
in order to reduce
 
the risk related to
control activities thereby improving the quality of financial
 
information.
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
19
 
| Page
Journal
 
Entries:
 
The
 
Company
 
did
 
not
 
effectively
 
design
 
and
 
maintain
 
appropriate
 
segregation
 
of
 
duties
 
and
controls
 
over
 
the
 
effective
 
preparation,
 
review
 
and
 
approval,
 
and
 
associated
 
documentation
 
of
 
journal
 
entries,
across
 
its
 
ERP
 
platform.
 
The
 
Company
 
did
 
not
 
have
 
adequate
 
review
 
procedures
 
for
 
the
 
recording
 
of
 
manual
entries.
Throughout
 
2022
 
however,
 
the
 
Company
 
continues
 
to
 
modify
 
their
 
processes
 
to
 
ensure
 
that
 
journal
 
entries
 
are
sufficiently reviewed
 
and approved,
 
and compensating
 
controls exist
 
to ensure
 
the financial
 
information is
 
free of
misstatement.
Complex
 
Spreadsheet
 
Controls:
 
The Company
 
did
 
not implement
 
and
 
maintain
 
effective
 
controls
 
surrounding
certain
 
complex
 
spreadsheets,
 
including
 
addressing
 
all
 
identified
 
risks
 
associated
 
with
 
manual
 
data
 
entry,
completeness of data entry,
 
and the accuracy of mathematical
 
formulas, impacting complex spreadsheets
 
used in
fixed
 
asset
 
continuity
 
schedules,
 
production
 
and
 
revenue
 
forecasting,
 
and
 
the
 
calculation
 
of
 
the
 
fair
 
value
 
of
investments.
During the course of 2022, the
 
Company continued to improve the safeguarding of spreadsheets and data,
 
through
various
 
controls,
 
password
 
protections
 
and
 
improved
 
segregation
 
of
 
duties
 
with
 
the
 
objective
 
of
 
reducing
 
the
possibility of error.
 
User Access
 
Controls:
 
The Company
 
did not maintain
 
effective user
 
access controls
 
to adequately
 
restrict user
access to financial applications and related data in accordance
 
with job responsibilities,
 
for the entirety of 2022.
In
 
response
 
to
 
this,
 
the
 
Company
 
has
 
continued
 
to
 
implement
 
controls
 
to
 
limit
 
the
 
access
 
to
 
financial
 
and
 
non-
financial
 
applications,
 
based
 
on
 
employee
 
profile.
 
The
 
Company
 
continues
 
to
 
implement
 
IT
 
environment
 
best
practices
 
for
 
access
 
controls,
 
including
 
prompt
 
changes,
 
access
 
limitation
 
to
 
appropriate
 
users
 
and
 
systematic
periodic reviews of account privileges. Automated access
 
controls are being integrated into the new ERP system.
As a
 
consequence, the Company
 
did not have
 
effective control activities
 
related to the
 
design, implementation and operation
of process-level
 
and management
 
review control
 
activities related
 
to order-to-cash
 
(including revenue
 
trade
 
receivables,
and billings
 
in excess
 
of cost/cost
 
in excess
 
of billings), procure-to-pay
 
(including operating
 
expenses, prepaid
 
expenses,
accounts payable, and
 
accrued liabilities), hire-to-pay
 
(including compensation
 
expense and accrued
 
liabilities), long-lived
assets,
 
significant
 
unusual
 
transactions,
 
related
 
party
 
transactions
 
and
 
other
 
financial
 
reporting
 
processes
 
for
 
the
 
entire
year.
 
Aside from these material weaknesses, management has concluded that the Company’s consolidated financial statements
as at and for
 
the year ended December
 
31, 2022, present
 
fairly,
 
in all material
 
respects, the Company’s
 
financial position,
results of operations,
 
changes in shareholders’
 
equity and cash
 
flows in accordance
 
with IFRS as
 
issued by the
 
IASB. There
were no material adjustments to
 
the Company’s consolidated financial
 
statements for the year ended
 
December 31, 2022,
and
 
there
 
were
 
no
 
changes
 
to
 
previously
 
released
 
financial
 
results.
 
However,
 
because
 
the
 
deficiencies
 
and
 
material
weaknesses create a reasonable possibility that
 
a material misstatement to our
 
consolidated financial statements would not
be prevented
 
or detected
 
on a
 
timely basis,
 
the CEO
 
and CFO concluded
 
that as
 
of December 31,
 
2022, the
 
Company’s
design and operation of ICFR and DC&P were not effective.
Management’s Ongoing Remediation
 
Measures
During the year
 
ended December
 
31, 2022,
 
and beyond,
 
management
 
initiated
 
and continues
 
to implement
 
remediation
measures
 
as
 
outlined
 
above,
 
in
 
the
 
2021
 
annual
 
MD&A
 
as
 
well
 
as
 
the
 
quarterly
 
MD&A’s
 
of
 
2022.
 
Management
 
has
performed
 
an
 
initial
 
risk
 
assessment
 
using
 
a
 
top-down,
 
risk-based
 
approach
 
with
 
respect
 
to
 
the
 
risks
 
of
 
material
misstatement of the
 
consolidated financial
 
statements. In
 
addition, compensating
 
controls have been
 
applied to the
 
areas
where the
 
risks of
 
material misstatement
 
are considered
 
moderate to
 
high, as
 
throughout the
 
various accounting
 
cycles.
The Company is
 
using and plans
 
to continue to
 
use outside resources
 
to strengthen the
 
business process documentation
and help with
 
management’s self-assessment
 
and testing
 
of internal controls.
 
In 2023, the
 
Company’s management,
 
with
oversight of the Audit Committee expects to
 
advance the documenting, testing, and refining the internal
 
controls, in addition
with the upgrade to the ERP system, which inherently will add additional automated controls.
 
As a result, the Company will
improve
 
the
 
design
 
of
 
control
 
activities
 
and
 
strengthen
 
process
 
controls
 
surrounding
 
sales,
 
purchases,
 
payroll,
 
among
others, and will be call for fewer compensating controls.
 
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
20
 
| Page
Although
 
the
 
Company
 
can
 
give
 
no
 
assurance
 
that
 
these
 
actions
 
will
 
remediate
 
these
 
material
 
weaknesses
 
in
 
internal
controls or
 
that additional
 
material weaknesses
 
in our
 
ICFR will
 
not be
 
identified in
 
the future,
 
management believes
 
the
foregoing efforts will,
 
when implemented, strengthen
 
our ICFR and DC&P
 
and effectively remediate
 
the identified material
weaknesses.
Management
 
will
 
take
 
additional
 
remedial
 
actions
 
as
 
necessary
 
as
 
they
 
continue
 
to
 
evaluate
 
and
 
work
 
to
 
improve
 
the
Company’s ICFR environment.
Changes in internal controls over financial reporting
Other
 
than
 
the
 
material
 
weaknesses
 
described
 
above,
 
and
 
the
 
remediation
 
process
 
described
 
above,
 
there
 
were
 
no
changes to the
 
Company’s ICFR during the year ended December 31,
 
2022 that have materially
 
affected, or are reasonably
likely to materially affect, the Company’s ICFR.
Limitations on Effectiveness of Disclosure Controls and Procedures
 
and Internal Control over Financial Reporting
The Company’s management recognizes
 
that any DC&P
 
and ICFR, no
 
matter how well
 
designed and operated, can
 
provide
only reasonable
 
assurance
 
of achieving
 
their objectives.
 
Because of
 
their
 
inherent limitations,
 
DC&P
 
and ICFR
 
may not
prevent or detect all errors or misstatements on a timely
 
basis.
RISK FACTORS
The Company has
 
identified below certain
 
significant risks relating to
 
the business of
 
the Company and the
 
industry in which
it operates. The following information is only a summary of certain risk factors and is qualified in its entirety by reference to,
and
 
must
 
be
 
read
 
in
 
conjunction
 
with,
 
the
 
detailed
 
information
 
appearing
 
elsewhere
 
in
 
this
 
MD&A.
 
These
 
risks
 
and
uncertainties
 
are
 
not
 
the
 
only
 
ones
 
facing
 
the
 
Company.
 
Additional
 
risks
 
and
 
uncertainties
 
not
 
currently
 
known
 
to
 
the
Company, or that the Company currently considers immaterial, may also impair the operations of the Company. If any such
risks
 
materialize
 
into
 
actual
 
events
 
or
 
circumstances,
 
the
 
Company’s
 
assets,
 
liabilities,
 
financial
 
condition,
 
results
 
of
operations (including future
 
results of
 
operations), business and
 
business prospects, are
 
likely to
 
be materially
 
and adversely
affected. There is no assurance
 
that risk management steps
 
taken will avoid future loss due
 
to the uncertainties described
below
 
or
 
other
 
unforeseen
 
risks.
 
An
 
investment
 
in
 
the
 
Common
 
Shares
 
or
 
other
 
securities
 
of
 
the
 
Company
 
is
 
highly
speculative
 
and
 
involves
 
a
 
high
 
degree
 
of
 
risk.
 
Before
 
making
 
any
 
investment
 
decision,
 
prospective
 
investors
 
should
carefully consider all the information contained in this document
 
including, in particular, the
 
risk factors described below.
Certain factors may
 
have a material
 
adverse effect on
 
the Company’s business, financial
 
condition and results
 
of operations.
Current and prospective
 
investors should carefully
 
consider the risks
 
and uncertainties and
 
other information contained
 
in
this MD&A,
 
the 2022
 
consolidated Financial
 
Statements and
 
the Annual
 
Information Form,
 
particularly under
 
the heading
“Risk Factors” in the Annual Information Form, and in other filings that the Company has made and may make in the future
with applicable securities
 
authorities, Company’s
 
website at www.pyrogenesis.com.
 
The risks and
 
uncertainties described
herein and
 
therein are
 
not the
 
only ones
 
the Company
 
may face.
 
Additional risks
 
and uncertainties
 
that the
 
Company is
unaware of,
 
or that
 
the Company currently
 
believes are not
 
material, may also
 
become important
 
factors that
 
could adversely
affect the Company
 
’s business.
 
If any of
 
such risks actually
 
occur,
 
the Company’s
 
business, financial condition,
 
results of
operations, and future prospects could be materially and adversely affected. In that event, the trading price of the Common
Shares (or the value of any
 
other securities of the Company)
 
could decline, and the Company
 
’s securityholders could lose
part or all of their investment.
Risks Related to the Company’s Business and
 
Industry
Operating Income (Loss) and Negative Operating Cash
 
Flow
Prior
 
to
 
December 31,
 
2022,
 
the
 
Company
 
had
 
a
 
history
 
of
 
losses
 
and
 
negative
 
cash
 
flows.
 
For
 
the year
 
ended
December 31, 2022,
 
the Company
 
has net
 
losses of
 
$32.2 million,
 
cash flows
 
used in operations
 
of $11.1
 
million, and an
accumulated deficit
 
of $93.4
 
million at
 
December 31, 2022.
 
To
 
the extent
 
that the
 
Company has
 
net losses
 
and negative
operating cash flow in future periods, it may need to allocate a portion of its cash reserves to fund such negative cash flow.
The Company may
 
also be required
 
to raise additional
 
funds through the
 
issuance of equity
 
or debt securities.
 
There can
be no assurance that
 
the Company will be
 
able to generate a
 
positive cash flow
 
from its operations,
 
that additional capital
or
 
other
 
types
 
of
 
financing
 
will
 
be
 
available
 
when
 
needed
 
or
 
that
 
these
 
financings
 
will
 
be
 
on
 
terms
 
favourable
 
to
 
the
Company.
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
21
 
| Page
The Company’s ability to continue as
 
a going concern is dependent
 
upon its ability in the
 
future to grow its revenue,
 
achieve
profitable operations, successfully developing and introducing
 
new products and, in the meantime, to obtain
 
the necessary
financing to meet its obligations and repay its liabilities when they become due. While the
 
Company has been successful in
securing financing in the past, raising additional funds is dependent
 
on a number of factors outside the Company’s
 
control,
and as such
 
there is no
 
assurance that it
 
will be able
 
to do so
 
in the future.
 
External financing, predominantly by
 
the issuance
of equity and debt,
 
might be, sought to finance
 
the operations of the Company;
 
however, there can be no certainty that such
funds will be available at terms acceptable to the
 
Company, or at all. If the Company is unable to obtain sufficient additional
financing,
 
it
 
may
 
have
 
to
 
curtail
 
operations
 
and
 
development
 
activities,
 
any
 
of
 
which
 
could
 
harm
 
the
 
business,
 
financial
condition and results of operations.
Actual Financial Position and Results of Operations May Differ
 
Materially from the Expectations of the Company’s
Management
The Company’s
 
actual financial
 
position and
 
results of
 
operations may
 
differ materially
 
from management’s
 
expectations.
The Company has experienced
 
some changes in its
 
operating plans and certain
 
delays in the timing
 
of its plans. As
 
a result,
the Company’s revenue, net income and
 
cash flow may differ materially from
 
the Company’s projected revenue, net income
and cash flow. The process for estimating the Company
 
’s revenue, net income and cash flow requires the use of judgment
in determining the appropriate assumptions and estimates. These estimates and assumptions
 
may be revised as additional
information
 
becomes
 
available and
 
as additional
 
analyses
 
are performed.
 
In addition,
 
the assumptions
 
used in
 
planning
may not prove to be accurate, and other factors may affect
 
the Company’s financial condition or results
 
of operations.
Revenue Risks
PyroGenesis may experience delays in achieving
 
revenues, particularly with plasma gasification projects which
 
have a long
sales
 
cycle.
 
Revenues
 
may
 
be
 
delayed
 
or
 
negatively
 
impacted
 
by
 
issues
 
encountered
 
by
 
the
 
Company
 
or
 
its
 
clients
including:
(i)
 
unforeseen engineering and/or environmental problems;
(ii)
 
delays or inability to obtain required financing, licenses, permits
 
and/or regulatory approvals;
(iii)
 
supply interruptions and/or labour disputes;
(iv)
 
foreign exchange fluctuations and/or collection risk; and
(v)
 
competition from other suppliers and/or alternative energy
 
solutions that are less capital intensive.
There
 
is
 
no
 
assurance
 
that
 
the
 
business
 
will
 
perform
 
as
 
expected
 
or
 
that
 
returns
 
from
 
the
 
business
 
will
 
support
 
the
expenditures needed to develop it.
Concentration Risk and Credit Risk
To
 
date, a small
 
number of customers
 
have accounted for
 
a majority of
 
PyroGenesis’
 
revenues. As its
 
business expands,
the
 
Company
 
expects
 
that
 
revenue
 
distribution
 
will
 
be
 
over
 
a
 
larger
 
number
 
of
 
different
 
customers.
 
For
 
the year
 
ended
December 31,
 
2022,
 
sales
 
of
 
PyroGenesis
 
to
 
its
 
two
 
principal
 
customers
 
accounted
 
for
 
approximately
 
52%
 
of
 
its
 
total
revenue. For
 
the year
 
ended
 
December 31,
 
2021, sales
 
to two
 
principal
 
customers
 
accounted for
 
approximately
 
79% of
PyroGenesis’
 
total
 
revenue.
 
The
 
loss
 
of,
 
or
 
a
 
reduction
 
in,
 
purchase
 
orders
 
or
 
anticipated
 
purchase
 
orders
 
from
PyroGenesis’ principal
 
customers could
 
have a
 
material adverse
 
effect
 
on its
 
business, financial
 
condition and
 
results of
operations.
 
Additionally,
 
if
 
one
 
of
 
PyroGenesis’
 
customers
 
is
 
unable
 
to
 
meet
 
its
 
commitments
 
to
 
PyroGenesis,
 
the
Company’s business, financial condition and results
 
of operations could be adversely affected.
As a result of the Drosrite
 
International Exclusive Agreement
 
and the Dross Processing
 
Service Agreement, the Company
generates
 
significant
 
revenues
 
from
 
payments
 
made
 
to
 
Drosrite
 
International
 
under
 
the
 
Dross
 
Processing
 
Service
Agreement.
 
The
 
Company
 
will
 
no
 
longer
 
receive
 
payments
 
under
 
such
 
arrangement
 
if
 
the
 
Dross
 
Processing
 
Service
Agreement, which involves
 
a third party
 
in a foreign
 
jurisdiction, is
 
terminated, which
 
could have a
 
material adverse
 
effect
on the business, financial condition and results of operations
 
of the Company.
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
22
 
| Page
Credit
 
risk
 
is
 
the
 
risk
 
that
 
one
 
party
 
to
 
a
 
financial
 
instrument
 
will
 
cause
 
a
 
financial
 
loss
 
for
 
the
 
other
 
party
 
by
 
failing
 
to
discharge an obligation.
 
The maximum credit
 
risk to which
 
the Company is
 
exposed as at
 
December 31, 2022
 
represents
the carrying amount
 
of cash
 
and cash equivalents,
 
accounts receivable
 
(except sales
 
tax receivable),
 
costs and
 
profits in
excess of billings on uncompleted contracts, deposits
 
and royalties receivable.
 
Cash and cash equivalents,
 
which only comprise guaranteed
 
investment certificates redeemable
 
on relatively short
 
notice
by the Company,
 
are held with major reputable financial institutions.
 
Management has established
 
a credit policy
 
under which each
 
new customer is
 
analysed individually
 
for creditworthiness
before
 
the
 
Company’s
 
payment
 
and
 
delivery
 
terms
 
and
 
conditions
 
are
 
offered.
 
The
 
Company’s
 
review
 
could
 
include
reviewing external ratings, if they are available,
 
financial statements, credit agency information,
 
industry information and in
some cases bank
 
references. The Company’s
 
exposure to credit
 
risk is mainly
 
influenced by the
 
individual characteristics
of each customer. In monitoring customer
 
credit risk, customers are
 
identified according to their
 
characteristics such as their
geographic location, industry,
 
trading history with the Company and existence of previous
 
financial difficulties.
The Company does not generally
 
require collateral or other security
 
from customers on accounts
 
receivable, however,
 
the
contract terms may include the
 
possibility of recourse in the
 
event of late payment. The
 
Company believes that there
 
is no
unusual exposure associated with the collection of these
 
receivables.
The credit risk associated with costs and profits in excess of billings on uncompleted contracts is similar to that of accounts
receivable, as these amounts are accumulated and converted to
 
accounts receivable as invoicing milestones are reached.
The royalties receivable
 
are due from
 
a company in
 
which the Company
 
has a strategic
 
investments. The Company
 
does
not have
 
collateral or
 
other security
 
associated with
 
the collection
 
of this
 
receivable. The
 
carrying amount
 
of the
 
royalties
receivable have been discounted to reflect the time value
 
of money and credit risk of the counterparty.
 
The deposits are
 
payments made
 
to suppliers
 
and entities from
 
which the Company
 
leases property.
 
The Company
 
does
not have collateral
 
or other security
 
associated with
 
the collection
 
of these deposits.
 
As at December
 
31, 2022 and
 
2021,
no loss
 
allowance has been
 
recognized in
 
connection with these
 
deposits and
 
the maximum exposure
 
is the
 
carrying amount
of these deposits.
During the
 
years 2022
 
and 2021,
 
provisions for
 
expected credit
 
losses were
 
recorded, however,
 
no amounts
 
of financial
assets have been written off. The accounts provisioned by
 
the loss are still subject to
 
enforcement activity in order to collect
the balances due.
Technology Development and Manufacturing
 
Capability Risks
PyroGenesis recently expanded into
 
new areas of
 
business and, as
 
a result, many
 
of the Company’s
 
products are at
 
various
stages of
 
the
 
development
 
cycle. The
 
Company
 
may be
 
unable to
 
commercialise
 
such products,
 
or it
 
may be
 
unable to
manufacture such products in a commercially viable manner.
 
Whilst management is confident in both its technology and in
its team
 
of experienced
 
engineers,
 
scientists and
 
technicians,
 
it cannot
 
know with
 
certainty,
 
which of
 
its products
 
will be
commercialised, when such products will be
 
commercialised, or whether such products will be
 
able to be manufactured and
distributed profitably.
Product Revenues/History of Losses
PyroGenesis has incurred losses in the majority of years since its inception. In
 
the past the Company’s operations have not
generated sufficient
 
earnings and
 
cash flows
 
to date
 
to result
 
in consistent
 
profitability or
 
positive cash
 
flow.
 
For the year
ended December 31, 2022, the Company
 
has a net loss of $32.2 million
 
which includes a loss from
 
the change in value of
strategic investment of $8.3 million and cash flows used
 
in operations of $11.1
 
million. There can be no assurance that the
Company will be able to continue to generate significant gains
 
from the value of its strategic investments in the
 
future.
Additional financing and dilution
PyroGenesis may require additional
 
financing. There can be
 
no assurance that additional
 
financing will be available
 
to the
Company when needed, or on terms acceptable to the
 
Company.
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
23
 
| Page
PyroGenesis’
 
inability
 
to
 
raise
 
financing
 
to
 
support
 
ongoing
 
operations
 
or
 
to
 
fund
 
capital
 
expenditures
 
could
 
limit
 
the
Company’s growth and may have a material adverse
 
effect upon the Company.
The Company does not
 
exclude raising additional funds by equity
 
financing. In addition, at March 30,
 
2023, 9,815,500 stock
options
 
are
 
currently
 
issued
 
and
 
outstanding,
 
together
 
with
 
6,014,600
 
share
 
purchase
 
warrants.
 
The
 
exercise
 
of
 
stock
options
 
and/or
 
warrants,
 
as
 
well
 
as
 
any
 
new
 
equity
 
financings,
 
represents
 
dilution
 
factors
 
for
 
present
 
and
 
future
shareholders.
Reliance on Third Party Suppliers, Service Providers, Distributors
 
and Manufacturers
The Company’s
 
direct and
 
indirect suppliers,
 
service providers,
 
distributors and
 
manufacturers may
 
elect, at
 
any time,
 
to
breach or otherwise cease
 
to participate in supply, service, distribution or
 
manufacturing agreements, or other relationships,
on which the Company’s operations rely. Loss of its suppliers, service providers, distributors and manufacturers could have
a material adverse effect
 
on the Company’s business
 
and operational results. Further,
 
any disruption in the manufacturing
process done
 
by third-party
 
manufacturers could
 
have a
 
material adverse
 
effect
 
on the
 
business, financial
 
condition and
results of operations of the Company.
 
The Company cannot ensure that alternative production
 
capacity would be available
in the event of a disruption, or if it would be available,
 
it could be obtained on favorable terms.
Manufacturing Facilities
The vast majority of the
 
Company’s products are
 
manufactured in its manufacturing
 
facilities located in Montreal,
 
Quebec,
as well as in
 
Italy and India.
 
Accordingly,
 
the Company is
 
highly dependent on the
 
uninterrupted and efficient
 
operation of
its manufacturing facilities. If for any reason
 
the Company is required to discontinue production at its
 
facilities, it could result
in significant delays in production of
 
the Company’s products and interruption of the Company’s sales as it
 
seeks to resume
production. The Company
 
may be unable
 
to resume production
 
on a timely
 
basis. If operations
 
at the facilities
 
were to be
disrupted
 
as
 
a
 
result
 
of
 
equipment
 
failures,
 
natural
 
disasters,
 
fires,
 
accidents,
 
work
 
stoppages,
 
power
 
outages
 
or
 
other
reasons, the Company’s business, financial condition
 
and/or results of operations could be materially adversely
 
affected.
Sales Cycle and Fixed Price Contracts
PyroGenesis sales
 
cycle is
 
long and
 
the signing
 
of new
 
contracts is
 
subject to
 
delay,
 
over which
 
the Company
 
has little
control. The Company
 
also enters into
 
sales contracts with fixed
 
pricing, which may be
 
impacted by changes
 
over the period
of implementation. There is no
 
assurance that delays or problems
 
in fulfilling contracts with clients will
 
not adversely affect
the Company’s activities, operating results or financial
 
position.
Reliance on Technology
PyroGenesis will depend
 
upon continuous improvements
 
in technology to
 
meet client demands
 
in respect of
 
performance
and cost, and to explore additional business opportunities. There can be no
 
assurance that the Company will be successful
in its efforts
 
in this regard or
 
that it will have
 
the resources available
 
to meet this demand.
 
Whilst management anticipates
that
 
the
 
research
 
and
 
development
 
will
 
allow
 
the
 
Company
 
to
 
explore
 
additional
 
business
 
opportunities,
 
there
 
is
 
no
guarantee that such
 
business opportunities
 
will be presented
 
or realized. The
 
commercial advantage
 
of the Company
 
will
depend to a
 
significant extent on
 
the intellectual property
 
and proprietary technology
 
of PyroGenesis and
 
the ability of
 
the
Company to
 
prevent others from
 
copying such proprietary
 
technologies. PyroGenesis currently
 
relies on intellectual
 
property
rights
 
and
 
other
 
contractual
 
or
 
proprietary
 
rights,
 
including
 
(without
 
limitation)
 
copyright,
 
trade
 
secrets,
 
confidential
procedures, contractual
 
provisions, licenses
 
and patents,
 
to protect
 
its proprietary
 
technology.
 
PyroGenesis may
 
have to
engage in litigation in order to protect its patents or other intellectual property rights, or to determine the validity or scope of
the proprietary rights
 
of others. This
 
type of litigation
 
can be expensive
 
and time consuming,
 
regardless of
 
whether or not
the Company is successful. PyroGenesis
 
may seek patents or other
 
similar protections in respect of particular
 
technology;
however, there can be no assurance that any future patent applications will actually result in issued patents, or that, even if
patents are issued,
 
they will be
 
of sufficient scope
 
or strength to
 
provide meaningful protection or
 
any commercial advantage
to the Company.
Moreover,
 
the process
 
of seeking
 
patent protection
 
can itself
 
be long
 
and expensive.
 
In the
 
meantime, competitors
 
may
develop technologies
 
that are
 
similar or
 
superior to
 
PyroGenesis’
 
technology or
 
design around
 
the patents
 
owned by
 
the
Company,
 
thereby
 
adversely
 
affecting
 
the
 
Company’s
 
competitive
 
advantage
 
in
 
one
 
or
 
more
 
of
 
its
 
areas
 
of
 
business.
Despite the efforts
 
of the Company,
 
its intellectual property
 
rights may be
 
invalidated, circumvented, challenged,
 
infringed
or required
 
to be
 
licensed to
 
others. It
 
cannot be
 
assured that
 
any steps
 
the Company
 
may take
 
to protect
 
its intellectual
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
24
 
| Page
property rights
 
and other rights
 
to such
 
proprietary technologies
 
that are central
 
to the Company
 
’s operations
 
will prevent
misappropriation or infringement of its technology.
Changes to Contracts
PyroGenesis is dependent upon its
 
ability to establish and develop
 
new relationships and to build
 
on existing relationships
with
 
current
 
clients.
 
The
 
Company
 
cannot
 
provide
 
assurance
 
that
 
it
 
will
 
be
 
successful
 
in
 
maintaining
 
or
 
advancing
 
its
relationships with
 
current clients
 
or procure
 
additional clients.
 
In addition,
 
PyroGenesis cannot
 
provide assurance
 
that its
customers and the end users of its products will continue to provide the Company with business, or that existing customers
and end users will not seek
 
to renegotiate or terminate existing
 
contracts providing for the sale
 
of the Company’s products
and technology based on circumstances on which the Company is not currently aware. Any termination or amendment of a
contract
 
under
 
which
 
the
 
Company
 
derives
 
an
 
important
 
portion
 
of
 
its
 
revenues,
 
including
 
the
 
Drosrite
 
International
Exclusive
 
Agreement
 
and
 
the
 
Dross
 
Processing
 
Service
 
Agreement,
 
and
 
any
 
adverse
 
change
 
in
 
the
 
relationship
 
of
 
the
Company with its customers and end users,
 
will have an adverse effect on the
 
Company’s business, financial condition and
results of operations.
Sales
 
to
 
governments
 
and
 
governmental
 
entities
 
are
 
subject
 
to
 
specific
 
additional
 
risks,
 
such
 
as
 
delays
 
in
 
funding,
termination of
 
contracts or
 
sub-contracts at
 
the convenience
 
of the
 
government,
 
termination, reduction
 
or modification
 
of
contracts or sub-contracts in
 
the event of changes
 
in the government’s
 
policies or as a result
 
of budgetary constraints and
increased or unexpected costs resulting in losses or reduced
 
profits under fixed price contracts.
Foreign Exchange Exposure
PyroGenesis’ products and
 
services are increasingly being
 
sold in markets outside
 
of Canada, whilst most
 
of its operating
expenses
 
and
 
capital
 
expenditures
 
are
 
denominated
 
in
 
Canadian
 
dollars.
 
As
 
a
 
result,
 
the
 
Company
 
is
 
exposed
 
to
fluctuations in the foreign
 
exchange rates between Canadian
 
dollar and the currency
 
in which a
 
particular sale is transacted,
which may
 
result in
 
foreign exchange
 
losses that
 
could affect
 
earnings. Foreign
 
sales are
 
predominantly denominated
 
in
U.S. dollars,
 
as well as the Euro
 
and Indian Rupee. The Company has
 
not to date sought to
 
hedge the risks associated with
fluctuations in foreign exchange rates.
Competition
The
 
industry
 
is
 
competitive
 
and
 
PyroGenesis
 
competes
 
with
 
a
 
substantial
 
number
 
of
 
companies
 
which
 
have
 
greater
technical
 
and
 
financial
 
resources.
 
There
 
can
 
be
 
no
 
assurance
 
that
 
such
 
competitors
 
will
 
not
 
substantially
 
increase
 
the
resources devoted to the development and marketing of products and services that compete
 
with those of the Company or
that
 
new
 
or
 
existing
 
competitors
 
will
 
not
 
enter
 
the
 
various
 
markets
 
in
 
which
 
PyroGenesis
 
is
 
active.
 
There
 
can
 
be
 
no
assurance that
 
competitors will
 
not develop
 
new and
 
unknown technologies
 
with which
 
the Company
 
may have
 
difficulty
competing. Furthermore, failure to remain cost competitive
 
may result in PyroGenesis losing business to its competitors.
The plasma technology of
 
PyroGenesis competes against other
 
plasma and conventional technologies.
 
Without limitation,
the demand for the plasma technology of PyroGenesis, particularly in waste destruction and waste-to-energy systems, can
be impacted by the
 
commodity prices of
 
the energy source
 
used for the process
 
and the price at
 
which waste is
 
accepted
by
 
landfills
 
and
 
traditional
 
waste
 
processing
 
plants.
 
While
 
the
 
Company
 
believes
 
that
 
demand
 
for
 
sustainable
 
waste
management practices
 
that have
 
lower environmental
 
impacts than
 
traditional solutions
 
such as
 
landfill or
 
incineration
 
is
increasing,
 
the
 
high
 
flows
 
of
 
electricity
 
necessary
 
to
 
operate
 
the
 
waste
 
destruction
 
and
 
waste-to-energy
 
systems
 
of
PyroGenesis have an
 
impact on the
 
operational costs
 
of the Company’s
 
systems, and traditional
 
solutions may
 
constitute
lower-cost solutions, particularly if commodity prices (including
 
of oil and natural gas) remain low or experience a decline.
Management and Key Personnel
PyroGenesis depends on the skills and experience of
 
its management team and other key employees. The
 
Company relies
heavily on its ability to attract and retain highly skilled personnel in a competitive environment. PyroGenesis may be unable
to recruit, retain, and motivate highly skilled employees in order to assist the Company’s
 
business, especially activities that
are essential
 
to the
 
success of
 
the Company.
 
Failure
 
to recruit
 
and retain
 
highly skilled
 
employees may
 
adversely affect
PyroGenesis’ business, financial condition and results of operations.
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
25
 
| Page
Implementation of a strategic plan
PyroGenesis’
 
commercial
 
strategy
 
aims
 
to
 
leverage
 
its
 
products,
 
consumables,
 
and
 
services
 
whilst
 
focusing
 
on
 
the
resolution of problems
 
within niche markets within
 
the industries served by
 
the Company.
 
There can be no
 
assurances as
to the
 
success
 
of the
 
Company’s
 
strategic
 
plan,
 
which
 
should
 
be considered
 
under
 
the risks
 
perspective
 
and
 
difficulties
frequently encountered by a developing business.
Adverse Decisions of Sovereign Governments
PyroGenesis
 
conducts
 
an
 
increasing
 
portion
 
of
 
its
 
business
 
internationally.
 
There
 
is
 
no
 
assurance
 
that
 
any
 
sovereign
government, including Canada’s, will
 
not establish laws or
 
regulations that will not
 
be detrimental to
 
the Company’s interests
or that, as a foreign corporation, it will continue
 
to have access to the regulatory agencies
 
in other countries. Governments
have,
 
from
 
time
 
to
 
time,
 
established
 
foreign
 
exchange
 
controls,
 
which
 
could
 
have
 
a
 
material
 
adverse
 
effect
 
on
 
the
Company’s business, financial condition and results
 
of operations.
Risks Related to International Operations
A
 
substantial
 
portion
 
of
 
the
 
Company’s
 
sales
 
are
 
made
 
to
 
customers
 
and
 
end
 
users
 
outside
 
Canada.
 
The
 
Company
conducts
 
its
 
international
 
operations
 
directly
 
or
 
through
 
distributors
 
or
 
other
 
agents
 
or
 
intermediaries,
 
including
 
Drosrite
International.
 
The
 
Company
 
plans
 
to
 
continue
 
to
 
expand
 
its
 
international
 
sales
 
and
 
marketing
 
efforts.
 
International
operations are
 
subject to
 
a number
 
of inherent
 
risks, and
 
the Company’s
 
future results
 
could be
 
adversely
 
affected by
 
a
number of factors, including:
 
unfavorable political
 
or economic
 
environments;
 
requirements
 
or preferences
 
for domestic
 
products or
 
solutions,
which could reduce demand for the Company’s products;
 
differing existing or future regulatory and certification
 
requirements;
 
unexpected legal or regulatory changes;
 
greater difficulty in collecting accounts receivable
 
and longer collection periods;
 
difficulties in enforcing contracts; an inability to
 
effectively protect intellectual property;
 
tariffs and trade
 
barriers, export regulations
 
and other
 
regulatory and
 
contractual limitations on
 
the Company’s ability
to sell its products; and
 
potentially adverse tax consequences, including multiple and
 
possibly overlapping tax structures.
Fluctuations in
 
currency exchange
 
rates could
 
materially adversely
 
affect sales
 
denominated in
 
currencies other
 
than the
Canadian dollar and cause a reduction in revenues derived from sales in a particular country. Financial instability in foreign
markets could
 
also affect
 
the sale
 
of the
 
Company’s
 
products in
 
international jurisdictions.
 
In addition,
 
the Company
 
may
be denied access to its
 
end customers as a result
 
of a closing of the
 
borders of the countries in which
 
it its products are sold
due to economic, legislative, political and military conditions
 
in such countries.
There can be no assurance that such factors will not materially adversely affect the operations, growth prospects and sales
of the Company and, consequently, its results of operations. In addition, revenues the Company earns in other jurisdictions
may be subject to
 
taxation by more than
 
one jurisdiction, which
 
could materially adversely
 
affect the Company’s
 
earnings.
Each of
 
these factors could
 
have an
 
adverse effect on
 
the Company’s business,
 
financial condition and
 
results of
 
operations.
Governmental Regulation
PyroGenesis is subject to a variety of federal, provincial, state, local
 
and international laws and regulations relating namely
to the
 
environment,
 
health
 
and safety,
 
export
 
controls,
 
currency
 
exchange, labour
 
and employment
 
and
 
taxation.
 
These
laws
 
and
 
regulations
 
are
 
complex,
 
change
 
frequently
 
and
 
have
 
tended
 
to
 
become
 
more
 
stringent
 
over
 
time.
 
Failure
 
to
comply with these laws
 
and regulations may
 
result in a variety
 
of administrative, civil
 
and criminal enforcement
 
measures,
including assessment
 
of monetary
 
penalties, imposition
 
of remedial
 
requirements and
 
issuance of
 
injunctions as
 
to future
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
26
 
| Page
compliance. The Company
 
may be subject to
 
compliance audits by regulatory
 
authorities in the various countries
 
in which
it operates.
Government-funded Defense and Security Programs
Like
 
most
 
companies
 
that
 
supply
 
products
 
and
 
services
 
to
 
governments,
 
government
 
agencies
 
routinely
 
audit
 
and
investigate government contractors. These agencies may review the Company’s performance under its contracts, business
processes, cost structure, and compliance
 
with applicable laws, regulations and
 
standards. The Company’s incurred
 
costs
for each year
 
are subject
 
to
 
audit
 
by government
 
agencies,
 
which
 
can
 
result
 
in
 
payment
 
demands
 
related
 
to costs
 
they
believe should be disallowed. The Company works with governments to assess the merits of claims and where appropriate
reserve for
 
amounts
 
disputed. The
 
Company
 
could
 
be required
 
to provide
 
repayments
 
to governments
 
and
 
may have
 
a
negative effect on its results of operations.
Contrary to cost-reimbursable
 
contracts, some costs
 
may not be reimbursed
 
or allowed under fixed
 
-price contracts, which
may have a negative effect on the Company’s
 
results of operations if it experiences costs
 
overruns.
Environmental Liability
PyroGenesis is subject to
 
various environmental laws and
 
regulations enacted in the
 
jurisdictions in which it
 
operates, which
govern the
 
manufacturing,
 
processing, importation,
 
transportation,
 
handling and
 
disposal of
 
certain materials
 
used in
 
the
Company’s operations. Management believes that it has adequate procedures
 
in place to address compliance with current
environmental laws and regulations. Furthermore, management monitors the
 
Company’s practices concerning the handling
of environmentally hazardous materials. However,
 
there can be no assurance that the
Company’s procedures
 
will prevent
 
environmental damage
 
occurring from
 
spills of
 
materials handled
 
by the
 
Company or
that
 
such
 
damage
 
has
 
not
 
already
 
occurred.
 
On
 
occasion,
 
substantial
 
liabilities
 
to
 
third
 
parties
 
may
 
be
 
incurred.
 
The
Company may
 
have the
 
benefit of
 
insurance maintained
 
by it
 
or the
 
operator,
 
however,
 
the Company
 
may become
 
liable
for damages against which it cannot
 
adequately insure or against which it may
 
elect not to insure because of
 
high costs or
other
 
reasons.
 
The
 
Company’s
 
clients
 
are
 
subject
 
to
 
similar
 
environmental
 
laws
 
and
 
regulations,
 
as
 
well
 
as
 
limits
 
on
emissions to the air and discharges into surface and sub-surface waters. While regulatory
 
developments that may follow in
subsequent years
 
could
 
have
 
the
 
effect
 
of
 
reducing
 
industry
 
activity,
 
the
 
Company
 
cannot
 
predict
 
the
 
nature
 
of
 
the
restrictions that may be imposed. The Company may be required to increase operating expenses or capital
 
expenditures in
order to comply with any new restrictions or regulations.
Product Liability and Other Lawsuits
PyroGenesis
 
is
 
subject
 
to
 
a
 
variety
 
of
 
potential
 
product
 
liabilities
 
claims
 
and
 
other
 
lawsuits
 
related
 
with
 
its
 
operations,
including
 
liabilities
 
and
 
expenses
 
associated
 
with
 
product
 
defects.
 
The
 
Company
 
maintains
 
product
 
liability
 
and
 
other
insurance coverage that management believes is generally
 
in accordance with the market practice in its industry,
 
but there
can be no assurance that the Company will always be adequately
 
insured against all such potential liabilities.
A
 
malfunction
 
or
 
the
 
inadequate
 
design
 
of
 
the
 
Company’s
 
products
 
could
 
result
 
in
 
product
 
liability
 
or
 
other
 
tort
 
claims.
Accidents involving
 
the Company
 
’s
 
products
 
could lead
 
to personal
 
injury or
 
physical damage.
 
Any liability
 
for damages
resulting from malfunctions could be substantial
 
and could materially adversely
 
affect the Company’s business
 
and results
of operations.
 
In addition,
 
a well-publicized
 
actual or
 
perceived problem
 
could adversely
 
affect the
 
market’s
 
perception of
the
 
Company’s
 
products.
 
This
 
could
 
result
 
in
 
a
 
decline
 
in
 
demand
 
for
 
the
 
Company’s
 
products,
 
which
 
would
 
materially
adversely affect the Company’s financial condition
 
and results of operations.
The sale and use of products and processes developed by the Company may entail potential liability and
 
possible warranty
claims. The Company
 
may be subject
 
to personal injury
 
claims for injuries
 
resulting from use
 
of its products.
 
Although the
Company maintains product liability insurance, there can be no assurance that such insurance will continue to be available
on commercially reasonable terms or that the risks covered,
 
or coverage amounts will be sufficient to cover
 
all claims.
Information systems disruptions
The Company relies on various
 
information technology systems to
 
manage its operations. Over
 
the last several years, the
Company has implemented, and it
 
continues to implement, modifications and
 
upgrades to such systems, including
 
changes
to legacy
 
systems,
 
replacing legacy
 
systems
 
with successor
 
systems with
 
new functionality,
 
and acquiring
 
new systems
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
27
 
| Page
with new functionality.
 
These types of activities
 
subject the Company to
 
inherent costs and
 
risks associated with replacing
and changing these systems, including impairment of the Company’s ability to fulfill customer orders, potential disruption of
its internal control structure, substantial capital expenditures, additional administration and
 
operating expenses, retention of
sufficiently skilled
 
personnel to
 
implement and
 
operate the
 
new systems,
 
demands on
 
management time
 
and other
 
risks
and costs of delays or difficulties
 
in transitioning to or integrating new systems
 
into the Company’s current systems. These
implementations,
 
modifications,
 
and
 
upgrades
 
may not
 
result
 
in
 
productivity
 
improvements
 
at
 
a
 
level
 
that
 
outweighs
 
the
costs
 
of
 
implementation,
 
or
 
at
 
all.
 
In
 
addition,
 
the
 
difficulties
 
with
 
implementing
 
new
 
technology
 
systems
 
may
 
cause
disruptions in
 
the Company’s
 
business operations
 
and have
 
a material
 
adverse effect
 
on its business,
 
financial condition,
or results of operations.
Security Breaches
As part of its
 
day-to-day business, the Company stores its
 
data and certain data
 
about its customers in its
 
global information
technology system. Unauthorized
 
access to the
 
Company’s data, including
 
any regarding its customers,
 
could expose the
Company to a risk of loss of this
 
information, loss of business, litigation and possible liability. These security measures may
be breached by intentional misconduct by computer hackers, as a result of third-party action, employee error,
 
malfeasance
or otherwise. Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive
information
 
such
 
as
 
usernames,
 
passwords
 
or
 
other
 
information
 
in
 
order
 
to
 
gain
 
access
 
to
 
the
 
data
 
of
 
the
 
Company’s
customers or
 
the Company’s data,
 
including the
 
Company’s intellectual property
 
and other
 
confidential business information,
or
 
the
 
Company’s
 
information
 
technology
 
systems.
 
Because
 
the
 
techniques
 
used
 
to
 
obtain
 
unauthorized
 
access,
 
or
 
to
sabotage systems, change
 
frequently and generally are
 
not recognized until launched
 
against a target, the
 
Company may
be unable to
 
anticipate these techniques or to
 
implement adequate preventative measures. Any
 
security breach could result
in a loss of
 
confidence by the
 
Company’s customers,
 
damage its reputation,
 
disrupt its business,
 
lead to legal
 
liability and
negatively impact its future sales.
Public Health Crises
Public
 
health
 
crises,
 
including
 
local,
 
regional,
 
national
 
or
 
international
 
outbreak
 
of
 
a
 
contagious
 
disease,
 
could
 
have
 
an
adverse effect on
 
local economies, the
 
global economy,
 
and the markets
 
in which the
 
Company operates
 
and markets its
products, and may
 
adversely impact the
 
price and demand
 
for the Company’s
 
products and the
 
ability of the
 
Company to
operate and market
 
its products. Any
 
such alterations or
 
modifications could cause
 
substantial interruption to
 
the Company’s
business, any
 
of which
 
could have
 
a material
 
adverse effect
 
on the
 
Company’s operations
 
or financial
 
results, and
 
could
include temporary closures of
 
one or more
 
of the Company’s or
 
its partner’s offices or
 
facilities; temporary or long-term
 
labor
shortages; temporary or long-term adverse impacts on the Company’s supply chain and distribution channels; the potential
of increased network vulnerability and
 
risk of data loss resulting
 
from increased use of remote
 
access and removal of data
from the Company’s facilities.
Subsequent
 
to
 
December 31,
 
2019,
 
the
 
global
 
emergence
 
of
 
coronavirus
 
(COVID-19)
 
occurred.
 
The
 
global
 
outbreak
 
of
COVID-19 has resulted in governments
 
worldwide enacting emergency measures to protect
 
against the spread of the
 
virus.
These
 
measures,
 
which
 
include,
 
among
 
other
 
things,
 
limitations
 
on
 
travel,
 
self-imposed
 
quarantine
 
periods
 
and
 
social
distancing measures,
 
have caused
 
material disruption
 
to businesses
 
globally resulting
 
in an
 
economic slowdown.
 
Global
equity markets
 
have
 
experienced
 
significant
 
volatility
 
and weakness.
 
Governments
 
and central
 
banks
 
have reacted
 
with
significant
 
monetary
 
and
 
fiscal
 
interventions
 
designed
 
to
 
stabilize
 
economic
 
conditions.
 
The
 
duration
 
and
 
impact
 
of
 
the
COVID-19 outbreak is unknown at this time, as is the efficacy of any government and/or central bank interventions. It is not
possible
 
to
 
reliably
 
estimate
 
the
 
length
 
and
 
severity
 
of
 
these
 
developments
 
and
 
the
 
impact
 
on
 
the
 
financial
 
results
 
and
condition of the Company in future periods.
As of
 
the date
 
of this
 
MD&A, the
 
Company has
 
successfully continued
 
operations under
 
COVID-19 protocols.
 
COVID-19
has
 
not
 
resulted
 
in
 
any
 
material
 
delays
 
in
 
the
 
development
 
or
 
testing
 
of
 
the
 
Company’s
 
products
 
or
 
any
 
other
 
material
development projects. The Company is not currently experiencing any delays or
 
interruptions in service or product delivery.
At the
 
outset of
 
the COVID-19
 
pandemic, certain
 
of the
 
Company’s operations
 
were negatively
 
impacted, but
 
have since
normalized.
 
The
 
Company
 
has
 
not
 
experienced
 
any
 
material
 
disruption
 
in
 
its
 
supply
 
chain,
 
and
 
the
 
pandemic
 
has
 
not
materially impacted the Company’s business
 
or delivery of services or products.
The Company’s
 
production schedule
 
has continued throughout
 
COVID-19 on
 
a modified
 
employee schedule,
 
with certain
non-production employees working remotely.
 
The Company has been able to
 
operate largely unaffected
 
by the COVID-19
pandemic. Notwithstanding the foregoing, if the Company or its vendors and suppliers are unable to continue operations or
keep up with increasing demands as a result of COVID-19, customers
 
may experience delays or interruptions in service or
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
28
 
| Page
the delivery
 
of products, which
 
may be detrimental
 
to the
 
Company’s reputation, business, results
 
of operations and
 
financial
position.
 
The
 
Company
 
cautions
 
that
 
it
 
is
 
impossible
 
to
 
fully
 
anticipate
 
or
 
quantify
 
the
 
effect
 
and
 
ultimate
 
impact
 
of
 
the
COVID-19 pandemic as the situation is rapidly evolving. The extent to which COVID
 
-19 impacts the Company’s results will
depend on
 
future developments,
 
which are
 
highly uncertain
 
and cannot
 
be predicted,
 
including new
 
information that
 
may
emerge concerning the
 
severity of COVID-19
 
and the actions
 
taken by governments
 
to contain it
 
or treat its
 
impact, including
shelter in place
 
directives, which,
 
if extended, may
 
impact the economies
 
in which the
 
Company now
 
operates, or may
 
in
the future operate,
 
key markets
 
into which the
 
Company sells
 
products and delivers
 
services, and markets
 
through which
the Company’s key suppliers source their products.
Litigation
The Company
 
may from
 
time to
 
time become
 
party to
 
litigation 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
 
and the
 
market price
 
for the
 
Common
Shares and
 
could use
 
significant resources.
 
Even if
 
the Company
 
is involved
 
in litigation
 
and wins,
 
litigation can
 
redirect
significant Company resources. Litigation may also create a
 
negative perception of the Company’s brand.
Trade Secrets May Be Difficult to Protect
The
 
Company’s
 
success
 
depends
 
upon
 
the
 
skills,
 
knowledge
 
and
 
experience
 
of
 
its
 
scientific
 
and
 
technical
 
personnel,
consultants and advisors,
 
as well as contractors.
 
Because the Company operates
 
in a highly competitive
 
industry,
 
it relies
in part on trade
 
secrets to protect its proprietary
 
products and processes. However, trade secrets are difficult to protect. The
Company
 
generally
 
enters
 
into
 
confidentiality
 
or
 
non-disclosure
 
agreements
 
with
 
its
 
corporate
 
partners,
 
employees,
consultants, outside
 
scientific collaborators,
 
developers and
 
other advisors.
 
These agreements
 
generally,
 
require that
 
the
receiving party keep confidential, and not disclose to third parties, confidential information developed by the receiving party
or
 
made
 
known
 
to
 
the
 
receiving
 
party
 
by
 
the
 
Company
 
during
 
the
 
course
 
of
 
the
 
receiving
 
party’s
 
relationship
 
with
 
the
Company.
 
These
 
agreements
 
also
 
generally
 
provide
 
that
 
inventions
 
conceived
 
by
 
the
 
receiving
 
party
 
in
 
the
 
course
 
of
rendering services to the
 
Company will be
 
its exclusive property,
 
and the Company
 
enters into assignment
 
agreements to
perfect its rights.
These confidentiality,
 
inventions, and
 
assignment agreements,
 
where in
 
place, may
 
be breached
 
and may
 
not effectively
assign intellectual
 
property rights
 
to the Company.
 
The Company’s
 
trade secrets
 
could also be
 
independently discovered
by competitors, in which
 
case the Company would
 
not be able to
 
prevent the use of
 
such trade secrets by
 
its competitors.
The enforcement
 
of a
 
claim alleging
 
that a
 
party illegally
 
obtained
 
and was
 
using the
 
Company’s
 
trade secrets
 
could be
difficult,
 
expensive
 
and
 
time
 
consuming
 
and
 
the
 
outcome
 
could
 
be
 
unpredictable.
 
The
 
failure
 
to
 
obtain
 
or
 
maintain
meaningful trade secret protection could adversely affect
 
the Company’s competitive position.
Risks Related to Acquiring Companies
The Company may acquire other companies
 
in the future and there are risks
 
inherent in any such acquisition.
 
Specifically,
there
 
could
 
be
 
unknown
 
or
 
undisclosed
 
risks
 
or
 
liabilities
 
of
 
such
 
companies
 
for
 
which
 
the
 
Company
 
is
 
not
 
sufficiently
indemnified.
 
Any
 
such
 
unknown
 
or
 
undisclosed
 
risks
 
or
 
liabilities
 
could
 
materially
 
and
 
adversely
 
affect
 
the
 
Company’s
financial
 
performance
 
and
 
results
 
of
 
operations.
 
The
 
Company
 
could
 
encounter
 
additional
 
transaction
 
and
 
integration-
related costs or other
 
factors such as the
 
failure to realize all
 
of the benefits from
 
such acquisitions. All of
 
these factors could
cause dilution to the Company’s
 
earnings per share or decrease
 
or delay the anticipated accretive
 
effect of the acquisition
and
 
cause
 
a
 
decrease
 
in
 
the
 
market
 
price
 
of
 
the
 
Company’s
 
securities.
 
The
 
Company
 
may
 
not
 
be
 
able
 
to
 
successfully
integrate
 
and
 
combine
 
the
 
operations,
 
personnel
 
and
 
technology
 
infrastructure
 
of
 
any
 
such
 
acquired
 
company
 
with
 
its
existing
 
operations.
 
If
 
integration
 
is
 
not
 
managed
 
successfully
 
by
 
the
 
Company’s
 
management,
 
the
 
Company
 
may
experience interruptions in its business activities, deterioration of its employee and customer relationships, increased costs
of
 
integration
 
and
 
harm
 
to
 
its reputation,
 
all
 
of which
 
could
 
have
 
a
 
material
 
adverse
 
effect
 
on
 
the
 
Company’s
 
business,
financial
 
condition
 
and
 
results
 
of
 
operations.
 
The
 
Company
 
may
 
experience
 
difficulties
 
in
 
combining
 
corporate
 
cultures,
maintaining
 
employee
 
morale
 
and
 
retaining
 
key
 
employees.
 
The
 
integration
 
of
 
any
 
such
 
acquired
 
companies
 
may
 
also
impose
 
substantial
 
demands
 
on
 
the
 
management.
 
There
 
is
 
no
 
assurance
 
that
 
these
 
acquisitions
 
will
 
be
 
successfully
integrated in a timely manner.
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
29
 
| Page
Global Economic Uncertainty
Demand for
 
the Company’s
 
products and
 
services are
 
influenced by
 
general economic
 
and consumer
 
trends beyond
 
the
Company’s control. There can be no assurance that the Company’s business and corresponding financial performance will
not be adversely affected
 
by general economic or consumer
 
trends. In particular,
 
global economic conditions are still
 
tight,
and if such conditions continue,
 
recur or worsen, there can
 
be no assurance that they
 
will not have a
 
material adverse effect
on the Company’s business, financial condition and results
 
of operations.
Furthermore, such economic conditions have produced downward pressure on stock
 
prices and on the availability of credit
for financial
 
institutions
 
and corporations.
 
If these
 
levels of
 
market disruption
 
and
 
volatility continue,
 
the Company
 
might
experience reductions in business activity, increased funding costs and funding pressures, as applicable, a decrease in the
market price of the
 
Common Shares, a decrease in asset
 
values, additional write-downs and impairment charges and lower
profitability.
Inability to Renew Leases
The Company
 
may be
 
unable to
 
renew or
 
maintain its
 
leases (commercial
 
or real
 
property)
 
on commercially
 
acceptable
terms or
 
at all.
 
An inability
 
to renew
 
its leases,
 
or a
 
renewal of
 
its leases
 
with a
 
rental rate
 
higher than
 
the prevailing
 
rate
under
 
the
 
applicable
 
lease
 
prior
 
to
 
expiration,
 
may
 
have
 
an
 
adverse
 
impact
 
on
 
the
 
Company’s
 
operations,
 
including
disruption of
 
its operations
 
or an
 
increase in
 
its cost
 
of operations.
 
In addition,
 
in the
 
event of
 
non-renewal
 
of any
 
of the
Company’s
 
leases,
 
the
 
Company
 
may
 
be
 
unable
 
to
 
locate
 
suitable
 
replacement
 
properties
 
for
 
its
 
facilities
 
or
 
it
 
may
experience delays in relocation that could lead to a disruption in its operations. Any disruption in the Company’s operations
could have an adverse effect on its financial condition
 
and results of operations.
Financial Reporting and Other Public Issuer Requirements
As a public
 
company,
 
the Company is
 
subject to the
 
reporting requirements
 
of the Canadian
 
Securities Administrators,
 
or
the CSA, and the U.S. Securities Exchange Act of 1934,
 
as amended, and the rules and regulations of the listing standards
of the
 
TSX and
 
NASDAQ and
 
the U.S.
 
Sarbanes-Oxley Act.
 
The requirements
 
of these
 
laws, rules and
 
regulations have
increased
 
and
 
will
 
continue
 
to
 
increase
 
the
 
Company’s
 
legal,
 
accounting,
 
and
 
financial
 
compliance
 
costs,
 
make
 
some
activities more difficult, time-consuming, and costly, and place significant strain on the Company’s personnel, systems, and
resources. The Company is continuing to develop and refine its disclosure controls and other procedures that
 
are designed
to ensure that
 
information required to
 
be disclosed by
 
the Company in
 
the reports that
 
it will file with
 
the CSA is recorded,
processed, summarized, and
 
reported within the
 
time periods specified
 
in CSA rules and
 
forms and that
 
information required
to be
 
disclosed in
 
reports under
 
applicable securities
 
laws is
 
accumulated and
 
communicated to
 
the Company’s
 
principal
executive and
 
financial officers.
 
The Company
 
is also
 
continuing to improve
 
its internal
 
control over
 
financial reporting.
 
In
order to improve the effectiveness of its disclosure controls and procedures and internal
 
control over financial reporting, the
Company has
 
expended, and
 
anticipate that
 
it will continue
 
to expend,
 
significant resources,
 
including accounting-related
costs and significant management oversight.
The Company
 
has identified certain
 
material weaknesses in
 
its internal
 
controls, as more
 
fully explained in
 
its management’s
discussion and
 
analysis for
 
the year ended
 
December 31,
 
2022, under
 
“Disclosure
 
Controls and
 
Procedures”.
 
Additional
weaknesses in
 
the Company’s
 
disclosure controls
 
and internal
 
control over
 
financial reporting
 
may also
 
be discovered
 
in
the future.
 
Any failure
 
to
 
develop
 
or maintain
 
effective
 
controls
 
or any
 
difficulties
 
encountered
 
in their
 
implementation
 
or
improvement could harm the Company’s results of operations or cause
 
the Company to fail to meet its reporting
 
obligations
and may result in
 
a restatement of the Company’s consolidated financial
 
statements for prior periods. Any
 
failure to improve
and maintain effective
 
internal control over
 
financial reporting also
 
could adversely affect
 
the results of
 
periodic management
evaluations and annual independent registered public accounting firm attestation reports regarding
 
the effectiveness of the
Company’s
 
internal control
 
over financial
 
reporting that
 
the Company
 
will eventually
 
be required
 
to include
 
in its
 
periodic
reports
 
that
 
will
 
be
 
filed
 
with
 
the
 
CSA.
 
Ineffective
 
disclosure
 
controls
 
and
 
procedures
 
and
 
internal
 
control
 
over
 
financial
reporting could
 
also cause
 
investors to
 
lose confidence
 
in the
 
Company’s reported
 
financial and
 
other information,
 
which
could have a negative effect
 
on the trading price of the
 
Common Shares. In addition, if
 
the Company is unable to
 
continue
to meet these requirements, it may not be able to remain
 
listed on the TSX and/or NASDAQ.
Influence of the Significant Shareholders
To the Company’s
 
knowledge, no shareholder beneficially owns, or controls or directs, directly or indirectly, more than 10%
of the voting rights attached to the Company’s
 
outstanding voting securities, except for
 
Mr. Photis Peter
 
Pascali, President
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
30
 
| Page
and
 
Chief
 
Executive
 
Officer
 
of
 
the
 
Company,
 
who
 
holds
 
or
 
controls,
 
directly
 
or
 
indirectly,
 
80,925,698
 
Common
 
Shares,
representing in
 
aggregate 45.32
 
%
 
of the
 
total voting
 
rights attached
 
to the
 
outstanding Common
 
Shares, and
 
2,500,000
share purchase warrants
 
and options
 
to acquire an
 
additional 6,770,000
 
Common Shares
 
(increasing the
 
total number
 
of
Common Shares held or controlled, directly or
 
indirectly, by him to 87,695,698 Common Shares, or 47.31%
 
or the Common
Shares, on
 
a fully
 
diluted basis).
 
In addition,
 
from time
 
to time,
 
the Company
 
may have
 
other shareholders
 
who have
 
the
ability to
 
exercise significant
 
influence over
 
matters submitted
 
to the
 
shareholders of
 
the Company
 
for approval,
 
whether
subject to approval by a majority of the shareholders of
 
the Company or subject to a class vote or special resolution.
Limited Control Over the Company’s Operations
Holders
 
of
 
the
 
Common
 
Shares
 
have
 
limited
 
control
 
over
 
changes
 
in
 
the
 
Company’s
 
policies
 
and
 
operations,
 
which
increases
 
the
 
uncertainty
 
and
 
risks
 
of
 
an
 
investment
 
in
 
the
 
Company.
 
The
 
Board
 
determines
 
major
 
policies,
 
including
policies regarding
 
financing, growth,
 
debt capitalization and
 
any future
 
dividends to
 
shareholders of
 
the Company. Generally,
the Board may amend or revise these and other policies without a vote of the holders
 
of the Common Shares. The Board’s
broad
 
discretion
 
in
 
setting
 
policies
 
and
 
the
 
limited
 
ability
 
of
 
holders
 
of
 
the
 
Common
 
Shares
 
to
 
exert
 
control
 
over
 
those
policies increases the uncertainty and risks of an investment
 
in the Company.
Change in Tax Laws
New income, sales, use or other
 
tax laws, statutes, rules, regulations
 
or ordinances could be enacted at
 
any time. Further,
existing tax laws, statutes, rules, regulations or ordinances could be
 
interpreted, changed, modified or applied adversely to
the Company. These enactments and events could require the Company to pay additional tax amounts on a prospective or
retroactive
 
basis,
 
thereby
 
substantially
 
increasing
 
the
 
amount
 
of
 
taxes
 
the
 
Company
 
is
 
liable
 
to
 
pay
 
in
 
the
 
relevant
 
tax
jurisdictions. Accordingly,
 
these events could decrease the capital
 
that the Company has available to operate
 
its business.
Any or all of these events could harm the business and
 
financial performance of the Company.
Forward-Looking Information
The
 
forward-looking
 
information
 
included
 
in
 
this
 
MD&A
 
relating
 
to,
 
among
 
other
 
things,
 
the
 
Company’s
 
future
 
results,
performance, achievements, prospects, targets, intentions or opportunities
 
or the markets in which
 
it operates and the
 
other
statements listed
 
are based
 
on opinions,
 
assumptions and
 
estimates made
 
by the
 
Company’s management
 
in light
 
of its
experience and
 
perception of
 
historical trends,
 
current conditions and
 
expected future developments,
 
as well
 
as other
 
factors
that the Company believes are appropriate and reasonable in the circumstances. However, there can be no assurance that
such estimates and assumptions will
 
prove to be correct. The Company’s
 
actual results in the future may
 
vary significantly
from the historical and estimated results and those variations may
 
be material. The Company makes no representation that
its actual results in the future will be the same, in whole or
 
in part, as those included in this MD&A.
Credit Facilities
The Company’s
 
credit facilities and
 
financing agreements
 
mature on various
 
dates. There
 
can be no
 
assurance that such
credit
 
facilities
 
or
 
financing
 
agreements
 
will
 
be
 
renewed
 
or
 
refinanced,
 
or
 
if
 
renewed
 
or
 
refinanced,
 
that
 
the
 
renewal
 
or
refinancing will
 
occur on
 
equally favourable
 
terms to
 
the Company.
 
The Company
 
’s ability
 
to continue
 
operating may
 
be
adversely
 
affected
 
if
 
the
 
Company
 
is
 
not
 
able
 
to
 
renew
 
its
 
credit
 
facilities
 
or
 
arrange
 
refinancing,
 
or
 
if
 
such
 
renewal
 
or
refinancing, as the case may
 
be, occurs on terms
 
materially less favorable to the
 
Company than at present. The
 
Company’s
current credit facilities and financing agreements have no imposed financial covenants and obligations on the Company.
 
In
the event
 
of the
 
contrary,
 
there is
 
a risk
 
that such
 
loans
 
may go
 
into default
 
if there
 
is a
 
breach in
 
complying
 
with
 
such
covenants and obligations, which could result in the lenders realizing on
 
their security and causing our shareholders to lose
some or all of their investment.
Risks Related to the Company’s Securities
Potential Volatility of Common Share
 
Price
The market
 
price of
 
the Common
 
Shares could
 
be subject
 
to significant
 
fluctuations. Some
 
of the
 
factors that
 
may cause
the market price of the Common Shares to fluctuate include:
(i)
 
the
 
public’s
 
reaction
 
to
 
the
 
Company’s
 
press
 
releases,
 
announcements
 
and
 
filings
 
with
 
regulatory
authorities and those of its competitors;
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
31
 
| Page
(ii)
 
fluctuations in broader stock market prices and volumes;
(iii)
 
changes in market valuations of similar companies;
(iv)
 
investor perception of the Company,
 
its prospects or the industry in general;
(v)
 
additions or departures of key personnel;
(vi)
 
commencement of or involvement in litigation;
(vii)
 
announcements
 
by
 
the
 
Company
 
or
 
its
 
competitors
 
of
 
strategic
 
alliances,
 
significant
 
contracts,
 
new
technologies, acquisitions, commercial relationships, joint
 
ventures or capital commitments;
(viii)
 
variations in the Company’s quarterly results of operations
 
or cash flows or those of other comparable
companies;
(ix)
 
revenues and
 
operating results
 
failing to
 
meet the
 
expectations of
 
securities analysts
 
or investors
 
in
particular quarter;
(x)
 
changes in the Company’s pricing policies or the pricing
 
policies of its competitors;
(xi)
 
future issuances and sales of Common Shares;
(xii)
 
sales of Common Shares by insiders of the Company;
(xiii)
 
third party disclosure of significant short positions;
(xiv)
 
demand for and trading volume of Common Shares;
(xv)
 
changes
 
in
 
securities
 
analysts’
 
recommendations
 
and
 
their
 
estimates
 
of
 
the
 
Company’s
 
financial
performance;
(xvi)
 
short-term
 
fluctuation
 
in
 
stock
 
price
 
caused
 
by
 
changes
 
in
 
general
 
conditions
 
in
 
the
 
domestic
 
and
worldwide economies or financial markets; and
(xvii)
 
the other risk factors described under this heading of the MD&A.
The realization
 
of any
 
of these
 
risks and
 
other factors
 
beyond the Company
 
’s control
 
could cause
 
the market
 
price of the
Common Shares to decline significantly.
In addition, broad
 
market and industry
 
factors may harm
 
the market price
 
of the Common
 
Shares. Hence, the
 
price of the
Common Shares
 
could fluctuate based
 
upon factors
 
that have
 
little or
 
nothing to
 
do with
 
the Company, and these
 
fluctuations
could materially reduce the price
 
of the Common Shares
 
regardless of the Company’s
 
operating performance. In the past,
following a significant
 
decline in the
 
market price of
 
a company’s
 
securities, there
 
have been instances
 
of securities class
action litigation having been instituted against that
 
company. If
 
the Company were involved in any similar
 
litigation, it could
incur substantial
 
costs, management’s attention
 
and resources could
 
be diverted
 
and it
 
could harm the
 
Company’s business,
operating results and financial condition.
Market Liquidity
The
 
market
 
price
 
for
 
the
 
Common
 
Shares
 
could
 
be
 
subject
 
to
 
wide
 
fluctuations.
 
Factors
 
such
 
as
 
the
 
announcement
 
of
significant
 
contracts,
 
technological
 
innovations,
 
new
 
commercial
 
products,
 
patents,
 
a
 
change
 
in
 
regulations,
 
quarterly
financial results,
 
future sales
 
of Common
 
Shares by
 
the Company
 
or current
 
shareholders, and
 
many other
 
factors could
have considerable
 
repercussions on
 
the price
 
of the
 
Common Shares.
 
In addition,
 
the financial
 
markets may
 
experience
significant price
 
and value
 
fluctuations that
 
affect the
 
market prices
 
of equity
 
securities of
 
companies that
 
sometimes are
unrelated
 
to
 
the
 
operating
 
performance
 
of
 
these
 
companies.
 
Broad
 
market
 
fluctuations,
 
as
 
well
 
as
 
economic
 
conditions
generally may adversely affect the market price of
 
the Common Shares.
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
32
 
| Page
Dividends to Shareholders
The Company does not anticipate
 
paying cash dividends on the
 
Common Shares in the foreseeable
 
future. The Company
currently intends
 
to retain
 
all future
 
earnings to
 
fund the
 
development and
 
growth of
 
its business.
 
Any payment
 
of future
dividends will be at
 
the discretion of the
 
directors and will depend
 
on, among other
 
things, the Company’s earnings, financial
condition,
 
capital
 
requirements,
 
level
 
of
 
indebtedness,
 
statutory
 
and
 
contractual
 
restrictions
 
applying
 
to
 
the
 
payment
 
of
dividends, and other considerations that the directors
 
deems relevant.
Impact of Future Sales by Existing Shareholders
If the Company’s shareholders sell substantial amounts of
 
the Common Shares in the public market,
 
the market price of the
Common Shares could decrease. The
 
perception among investors that these
 
sales will occur could also
 
produce this effect.
All
 
currently
 
outstanding
 
Common
 
Shares
 
other
 
than
 
those
 
subject
 
to
 
lock-up
 
agreements
 
executed
 
by
 
certain
 
existing
shareholders will, subject to applicable securities laws,
 
generally be immediately available for resale in the public
 
markets.
Subject to compliance
 
with applicable
 
securities laws,
 
the Company’s
 
officers, directors
 
and their affiliates
 
may sell some
or all of their Common
 
Shares in the future. No prediction can
 
be made as to the
 
effect, if any, such future sales of Common
Shares will
 
have on
 
the market
 
price of
 
the Common
 
Shares prevailing
 
from time
 
to time.
 
However,
 
the future
 
sale of
 
a
substantial number of Common Shares by the Company’s
 
officers, directors and their affiliates, or the
 
perception that such
sales could occur, could materially
 
adversely affect prevailing market prices for the
 
Common Shares.
Additional Common Shares issuable upon the exercise of stock options may also be available for sale in the public market,
which
 
may
 
also
 
cause
 
the
 
market
 
price
 
of
 
the
 
Common
 
Shares
 
to
 
fall.
 
Accordingly,
 
if
 
substantial
 
amounts
 
of
 
Common
Shares are sold in the public market, the market price could
 
fall.
Working Capital and Future Issuances
The
 
Company
 
may
 
issue
 
additional
 
Common
 
Shares
 
in
 
the
 
future
 
which
 
may
 
dilute
 
a
 
shareholder’s
 
holdings
 
in
 
the
Company. The Articles
 
permit the issuance of an unlimited number of Common Shares,
 
and shareholders of the Company
will have no pre-emptive
 
rights in connection with
 
any further issuances The
 
directors of the Company
 
have the discretion
to
 
determine
 
the
 
provisions
 
attaching
 
to
 
the
 
Common
 
Shares
 
and
 
the
 
price
 
and
 
the
 
terms
 
of
 
issue
 
of
 
further
 
Common
Shares.
Additional equity
 
financing may
 
be dilutive
 
to holders
 
of Common
 
Shares. Debt
 
financing may
 
involve restrictions
 
on the
Company’s financing and operating activities. Debt financing
 
may be convertible into other
 
securities of the Company which
may result
 
in immediate
 
or resulting
 
dilution. In
 
either case,
 
additional financing
 
may not
 
be available
 
to the
 
Company on
acceptable
 
terms
 
or at
 
all.
 
If the
 
Company
 
is unable
 
to
 
raise
 
additional
 
funds
 
as needed,
 
the
 
scope
 
of its
 
operations
 
or
growth may
 
be reduced
 
and, as
 
a result,
 
the Company
 
may be
 
unable to
 
fulfill
 
its long-term
 
goals. In
 
this case,
 
investors
may lose
 
all or part
 
of their
 
investment. Any
 
default under
 
such debt
 
instruments could
 
have a
 
material adverse
 
effect on
the Company,
 
its business or the results of operations.
Securities or Industry Analysts
The trading
 
market
 
for Common
 
Shares
 
could
 
be
 
influenced
 
by the
 
research
 
and
 
reports
 
that
 
industry
 
and/or
 
securities
analysts may publish about the Company, its business, the market or competitors. If any of the analysts who may cover the
Company’s business change
 
their recommendation regarding
 
the Common Shares
 
adversely,
 
or provide more favourable
relative
 
recommendations
 
about
 
its
 
competitors,
 
the
 
share
 
price
 
would
 
likely
 
decline.
 
If
 
any
 
analyst
 
who
 
may
 
cover
 
the
Company’s business
 
were to
 
cease coverage
 
or fail to
 
regularly publish
 
reports on
 
the Company,
 
it could
 
lose visibility
 
in
the financial markets, which in turn could cause the share price
 
or trading volume to decline.
Risks Related to the Company’s Status as a Foreign
 
Private Issuer
Information Publicly Available to the Company’s U.S.
 
shareholders
The Company is
 
a foreign private
 
issuer under applicable
 
U.S. federal securities
 
laws. As a result,
 
the Company does
 
not
file the same reports that a U.S. domestic
 
issuer would file with the U.S. Securities and Exchange Commission (the
 
“SEC”),
although the Company is required to file with or furnish to the SEC the continuous disclosure documents that the Company
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
33
 
| Page
is required to file in Canada under Canadian Securities Laws, in certain
 
respects the reporting obligations are less detailed
and
 
less
 
frequent
 
than
 
those
 
of
 
U.S.
 
domestic
 
reporting
 
companies.
 
In
 
addition,
 
the
 
Company’s
 
officers,
 
directors
 
and
principal shareholders
 
are exempt
 
from the
 
reporting and
 
short-swing profit
 
recovery provisions
 
of Section 16
 
of the
 
U.S.
Exchange Act.
 
Therefore, the
 
Company’s shareholders
 
may not know
 
on as
 
timely a
 
basis when
 
the Company’s
 
officers,
directors and
 
principal shareholders
 
purchase or
 
sell
 
Common Shares
 
as the
 
reporting
 
periods under
 
the corresponding
Canadian insider reporting requirements are longer.
As a foreign
 
private issuer,
 
the Company is
 
exempt from
 
the rules and
 
regulations under
 
the Exchange
 
Act related to
 
the
furnishing and content of proxy statements. The Company is also exempt from Regulation FD, which prohibits issuers from
making
 
selective
 
disclosures
 
of
 
material
 
non-public
 
information.
 
While
 
the
 
Company
 
complies
 
with
 
the
 
corresponding
requirements relating to proxy
 
statements and disclosure of
 
material non-public information under
 
Canadian securities laws,
these requirements
 
differ from
 
those under
 
the Exchange
 
Act and
 
Regulation FD
 
and shareholders
 
should not
 
expect to
receive the
 
same information
 
at the
 
same time
 
as such
 
information is
 
provided by
 
U.S. domestic
 
companies. In
 
addition,
the Company may not be required under the Exchange Act to file annual
 
and quarterly reports with the SEC as promptly as
U.S. domestic companies whose securities are registered
 
under the Exchange Act.
In
 
addition,
 
as
 
a
 
foreign
 
private
 
issuer,
 
the
 
Company
 
has
 
the
 
option
 
to
 
follow
 
certain
 
Canadian
 
corporate
 
governance
practices, except
 
to the
 
extent that
 
such laws
 
would be
 
contrary to
 
U.S. securities
 
laws, and
 
provided that
 
the Company
discloses the requirements it is not following and describe the Canadian practices it follows instead. The Company plans to
rely
 
on
 
this
 
exemption.
 
As
 
a
 
result,
 
the
 
Company’s
 
shareholders
 
may
 
not
 
have
 
the
 
same
 
protections
 
afforded
 
to
shareholders of U.S. domestic companies that are subject
 
to all U.S. corporate governance requirements.
Loss of Foreign Private Issuer Status in the Future
In
 
order
 
to
 
maintain
 
its
 
status
 
as
 
a
 
foreign
 
private
 
issuer,
 
a
 
majority
 
of
 
the
 
Company’s
 
Common
 
Shares
 
must
 
be
 
either
directly
 
or
 
indirectly
 
owned
 
by
 
non-residents
 
of
 
the
 
U.S.
 
unless
 
the
 
Company
 
also
 
satisfies
 
one
 
of
 
the
 
additional
requirements necessary
 
to preserve
 
this status.
 
The Company
 
may in
 
the future
 
lose its
 
foreign private
 
issuer status
 
if a
majority of the
 
Common Shares
 
are held
 
in the United
 
States and
 
the Company
 
fails to meet
 
the additional
 
requirements
necessary to avoid
 
loss of foreign
 
private issuer
 
status. The
 
regulatory and compliance
 
costs to the
 
Company under
 
U.S.
federal
 
securities
 
laws
 
as
 
a
 
U.S.
 
domestic
 
issuer
 
may
 
be
 
significantly
 
more
 
than
 
the
 
costs
 
the
 
Company
 
incurs
 
as
 
a
Canadian foreign private
 
issuer eligible to
 
use the multi-jurisdictional
 
disclosure system ("MJDS").
 
If the Company
 
is not a
foreign private
 
issuer,
 
it would
 
not be eligible
 
to use
 
the MJDS
 
or other
 
foreign issuer
 
forms and
 
would be
 
required to
 
file
periodic
 
and
 
current
 
reports
 
and
 
registration
 
statements
 
on
 
U.S.
 
domestic
 
issuer
 
forms
 
with
 
the
 
SEC,
 
which
 
are
 
more
detailed and extensive than the forms available
 
to a foreign private issuer.
 
In addition, the Company may lose the
 
ability to
rely upon exemptions from NASDAQ corporate governance
 
requirements that are available to foreign private
 
issuers.
Inability for U.S. Investors to Enforce Certain Judgments
The Company is a corporation existing
 
under the Canada Business Corporations Act. A number of
 
the Company’s directors
and officers are
 
residents of Canada,
 
and substantially all
 
of the Company’s
 
assets are located
 
outside the United
 
States.
As a result, it may be difficult to effect service within the United States upon the Company or upon its directors and officers.
Execution by
 
United States
 
courts of
 
any judgment
 
obtained
 
against the
 
Company
 
or any
 
of the
 
Company’s
 
directors or
officers
 
in
 
United
 
States
 
courts
 
may
 
be
 
limited
 
to
 
the
 
assets
 
of
 
such
 
companies
 
or
 
such
 
persons,
 
as
 
the
 
case
 
may
 
be,
located in the United States. It may also be difficult for holders of securities who reside in the United States to realize in the
United
 
States
 
upon
 
judgments
 
of
 
courts
 
of
 
the
 
United
 
States
 
predicated
 
upon
 
civil
 
liability
 
and
 
the
 
civil
 
liability
 
of
 
the
Company’s directors and
 
executive officers under
 
the United States
 
federal securities laws.
 
The Company has
 
been advised
that a
 
judgment of
 
a U.S.
 
court predicated
 
solely upon
 
civil liability
 
under U.S.
 
federal securities
 
laws or
 
the securities
 
or
“blue sky”
 
laws of
 
any state
 
within the
 
United States,
 
would likely
 
be enforceable
 
in Canada
 
if the
 
United States
 
court in
which the judgment was obtained has a basis
 
for jurisdiction in the matter that would be recognized
 
by a Canadian court for
the same purposes. However, there may be doubt
 
as to the enforceability in Canada
 
against these non-U.S. entities or their
controlling persons,
 
directors
 
and officers
 
who are
 
not residents
 
of the
 
United States,
 
in original
 
actions or
 
in actions
 
for
enforcement of judgments of courts of the United States, of liabilities predicated solely upon U.S. federal or state securities
laws.
Risks Relating to the Company’s Status as
 
an "Emerging Growth Company" Under U.S. Securities
 
Laws
The Company is an "emerging growth company" as defined in section 3(a) of the Exchange Act (as amended by the JOBS
Act, enacted on April 5, 2012),
 
and the Company will
 
continue to qualify as an
 
emerging growth company until
 
the earliest
 
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
34
 
| Page
to
 
occur
 
of:
 
(a) the
 
last
 
day
 
of
 
the
 
fiscal year
 
during
 
which
 
the
 
Company
 
has
 
total
 
annual
 
gross
 
revenues
 
of
US$1,070,000,000 (as
 
such amount
 
is indexed
 
for inflation
 
every five
 
years by
 
the SEC)
 
or more;
 
(b) the last
 
day of
 
the
fiscal year
 
of the
 
Company
 
following the
 
fifth anniversary
 
of the
 
date of
 
the
 
first sale
 
of common
 
equity securities
 
of the
Company
 
pursuant
 
to
 
an
 
effective
 
registration
 
statement
 
under
 
the
 
United
 
States
 
Securities
 
Act
 
of
 
1933,
 
as
 
amended;
(c) the date on which the
 
Company has, during the previous three year period, issued
 
more than US$1,000,000,000 in non-
convertible debt;
 
and (d) the date
 
on which
 
the Company is
 
deemed to
 
be a
 
"large accelerated filer",
 
as defined
 
in Rule 12b-2
under the Exchange Act. The Company will qualify as a large, accelerated filer (and would
 
cease to be an emerging growth
company) at
 
such time
 
when on
 
the last
 
business day
 
of its
 
second fiscal
 
quarter of
 
such year
 
the aggregate
 
worldwide
market value of its common equity held by non-affiliates
 
will be US$700,000,000 or more.
For so long as the Company
 
remains an emerging growth company,
 
it is permitted to and intends
 
to rely upon exemptions
from certain disclosure
 
requirements that are applicable
 
to other public
 
companies that are not
 
emerging growth companies.
These exemptions include
 
not being
 
required to comply
 
with the auditor
 
attestation requirements of
 
Section 404 of the
 
JOBS
Act.
 
The
 
Company
 
takes
 
advantage
 
of
 
some,
 
but
 
not
 
all,
 
of
 
the
 
available
 
exemptions
 
available
 
to
 
emerging
 
growth
companies.
 
The
 
Company
 
cannot
 
predict
 
whether
 
investors
 
will
 
find
 
the
 
Common
 
Shares
 
less
 
attractive
 
because
 
the
Company relies
 
upon certain
 
of these
 
exemptions. If
 
some investors
 
find the
 
Common Shares
 
less attractive
 
as a
 
result,
there may be a less active trading market
 
for the Common Shares and the Common
 
Share price may be more volatile. On
the other
 
hand, if
 
the Company
 
no longer
 
qualifies as
 
an emerging
 
growth company,
 
the Company
 
would be
 
required to
divert additional management time
 
and attention from the Company
 
’s development and other
 
business activities and incur
increased legal and financial costs to comply with the additional associated
 
reporting requirements, which could negatively
impact the Company’s business, financial condition
 
and results of operations.
OUTLOOK
In 2022, PyroGenesis
 
remained focused
 
on driving
 
its major
 
lines of business
 
toward widespread
 
acceptance, moving
 
its
newer innovations closer to commercialization, finding efficiencies,
 
and maintaining margin – all while providing the type of
superior service and solutions that have endeared the
 
Company to large global public, private, and government
 
partners.
The information below represents important highlights
 
from the past year, followed
 
by an outline of the company’s strategy
and outlook for 2023.
Key Strategic Actions
Major Deliverables
Titanium Powder Commercial Orders:
 
During 2022, the Company announced
 
it had received and completed its
first two commercial orders for
 
Titanium powders using its NexGen™ plasma atomization process.
 
The first, for 100
 
kg, was
under
 
its mutually
 
exclusive
 
partnership
 
agreement
 
with
 
Aubert
 
& Duval,
 
a major
 
supplier of
 
metal
 
powders
 
for additive
manufacturing serving the
 
Aerospace, Energy,
 
Transport, Medical,
 
Defense, and Automotive
 
sectors; the second, also
 
for
100 kg, was to a confidential customer.
Iron
 
Ore
 
Pelletization
 
Torches:
 
During
 
2022,
 
the
 
Company
 
continued
 
to
 
progress
 
its
 
major
 
initiative to
 
supply
electric
 
plasma
 
torch
 
systems
 
to
 
large
 
iron
 
ore
 
companies
 
for
 
first-ever
 
trials
 
in
 
this
 
important
 
upstream
 
part
 
of
 
the
steelmaking process.
 
In July
 
2022, the
 
first plasma
 
system plus
 
required components
 
was completed
 
and delivered
 
to a
client. Subsequent to year
 
-end 2022, in January
 
2023, four electric plasma
 
torch systems plus
 
required components were
delivered to
 
a second
 
client. These
 
clients are
 
two of
 
the largest
 
iron ore
 
companies
 
in the
 
world and
 
each has
 
made a
significant
 
financial
 
and
 
logistical
 
commitment
 
over
 
the
 
past two
 
years
 
to test
 
plasma
 
as a
 
possible
 
replacement
 
for the
diesel and/or natural gas furnace
 
burners needed for iron
 
ore pellet baking. Live
 
onsite trials and testing
 
will be conducted
per client-defined scheduling,
 
based on the Client’s
 
own resourcing and
 
logistical decisions of which
 
the Company has no
input.
Metal Powder
 
Aerospace Client
 
Qualification:
 
In September
 
2022, the
 
Company announced
 
it had
 
completed
the
 
in-house
 
quality
 
audit
 
of
 
its
 
NexGen™
 
metal
 
powder
 
production
 
facility
 
and
 
process,
 
which
 
it
 
also
 
later
 
passed
subsequent to year-end
 
2022, by a
 
large global aerospace
 
client. The in-house
 
audit was part
 
of an almost
 
two year long
process of qualification
 
by the client,
 
towards an end-goal
 
of being a
 
certified supplier of
 
titanium metal powders to
 
the client,
its suppliers, and service centers. With the audit completed,
 
the last step is a testing of the Company’s
 
powders, which will
be conducted per client-defined scheduling.
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
35
 
| Page
Innovations
Aluminum Scrap
 
Remelting:
 
in May
 
2022, the
 
Company announced
 
it had
 
undertaken a
 
joint evaluation
 
with a
major manufacturer to
 
test PyroGenesis’ zero-emission
 
plasma torches in
 
the Client’s aluminum
 
scrap remelting and
 
holding
furnaces. This was one
 
of several secondary or
 
tertiary aluminum producers
 
who are investigating the
 
Company’s electric
plasma torches to replace fossil fuels in recycled aluminum
 
production, holding tank heating, or cast houses.
Carbon-anode baking:
 
The Company
 
announced in
 
June 2022 it
 
had undertaken
 
a joint initiative
 
with a premier
applied engineering and process optimization
 
firm in the global aluminum industry,
 
focused on utilizing PyroGenesis’ zero-
emission
 
plasma
 
torches
 
in
 
carbon
 
anode
 
baking
 
 
a
 
vital
 
upstream
 
step
 
in
 
the
 
aluminum
 
production
 
process.
 
Carbon
anodes, which
 
are used
 
as an
 
electrical conductor
 
during the
 
aluminum smelting
 
process but
 
constantly
 
consumed,
 
are
traditionally produced
 
using natural
 
gas baking;
 
reducing fossil
 
fuel use
 
while optimizing
 
the anode
 
baking process
 
is an
objective in the industry for manufacturers of high-grade
 
anodes.
 
Spent-pot linings:
 
The Company continues
 
to progress
 
the previously announced
 
initiative to develop
 
a solution
to recover residues of aluminum pot linings, in conjunction
 
with project partner Aluminerie Alouette (co-owned
 
by Rio Tinto
and Norsk
 
Hydro), the
 
largest primary
 
aluminum smelter
 
in the
 
Americas. The
 
solution under
 
development is
 
intended to
safely
 
recover
 
valuable
 
metals
 
and
 
various
 
compounds
 
from
 
the
 
heavily
 
contaminated
 
carbon-lined
 
cells
 
or
 
“pots”
 
from
inside a smelter, which degrade over time
 
and must be removed
 
and safely disposed. The project
 
evolved throughout 2022,
with
 
additional
 
technology
 
benchmarks
 
being
 
met,
 
and
 
with
 
the
 
Company
 
and
 
Aluminerie
 
Alouette
 
deepening
 
their
relationship with a further commitment.
Magnesium
 
Recovery and
 
Valourization:
 
in September
 
2022, the
 
Company
 
announced it
 
was
 
selected
 
by an
international
 
producer
 
of magnesium
 
metal to
 
develop
 
two processes:
 
a method
 
to clean
 
and decontaminate
 
particulate
matter produced
 
during primary
 
magnesium production,
 
and to
 
process the
 
metal waste
 
stream known
 
as dross,
 
for the
purpose of recovering valuable
 
metal. Dross recovery is
 
not widespread in the
 
magnesium industry,
 
due to the complexity
of the process and the
 
inherent challenges of working with magnesium – a
 
very combustible and volatile metal that is highly
reactive
 
to
 
oxygen.
 
With
 
PyroGenesis’
 
expertise
 
in
 
recovering
 
high-value
 
metal
 
from
 
dross
 
in
 
other
 
industries
 
(such
 
as
aluminum), the Company believes it has the solution to the specific challenges posed by magnesium, potentially opening a
large opportunity for growth, while decreasing the Client’s
 
environmental impact.
Turquoise
 
Hydrogen
 
Production:
 
The
 
Company
 
continues
 
to
 
progress
 
the
 
previously
 
announced
 
initiative
 
to
produce
 
an
 
environmentally
 
friendly
 
hydrogen.
 
In
 
November
 
2022,
 
the
 
Company
 
successfully
 
produced
 
hydrogen
 
from
methane using
 
this ZCE
 
hydrogen production
 
technology
 
which, because
 
it uses
 
electricity in
 
the form
 
of plasma,
 
rather
than combustion
 
of fossil
 
fuels, is
 
typically referred
 
to as
 
“Turquoise
 
Hydrogen”. A
 
solid carbon
 
byproduct that
 
has many
industrial applications (including the production of
 
car tires, coatings, plastics, and
 
batteries), and is considered an
 
essential
raw material, is also produced through the process.
Operational
European
 
Metal
 
Powders
 
Production:
 
Throughout
 
2022,
 
the
 
Company
 
continued
 
to
 
evolve
 
its
 
strategy,
 
first
announced in
 
July 2022,
 
for European
 
market expansion
 
for its
 
titanium metal
 
powder
 
line of
 
business. With
 
the goal
 
to
eventually build
 
and operate
 
a metal
 
powder production
 
facility in
 
Europe. Subsequent
 
to year-end
 
2022, in
 
Q1 2023
 
the
Company announced
 
expansion
 
of its
 
strategy
 
team,
 
with the
 
hiring of
 
a key
 
Europe-based
 
executive with
 
a long
 
track-
record across sales,
 
marketing, and business
 
process in the
 
metals industry, particularly the aerospace,
 
space, and defense
markets.
Quality Management Process Certification:
 
In November 2022, the Company passed its annual quality audit for
two key international standards: ISO 9001:2015, and AS9100D, the latter being a quality management designation specific
to the
 
aerospace
 
industry.
 
The audits
 
encompassed
 
all of
 
PyroGenesis’
 
facilities
 
for the
 
purpose of
 
meeting
 
compliance
with
 
the
 
existing
 
quality
 
management
 
designations.
 
Additionally,
 
as
 
a
 
result
 
of
 
this
 
audit,
 
the
 
Company’s
 
newest
 
facility
located at
 
9371 Wanklyn
 
St. in
 
LaSalle, Quebec,
 
was officially
 
added to
 
the ISO
 
9001:2015 certification.
 
Separately,
 
the
Company continues
 
its path to
 
become ISO 13485:2016
 
certified, a Quality
 
Management System
 
designation required by
most manufacturers within the medical devices and related services
 
industry.
Financial
 
 
 
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
36
 
| Page
Private Placement:
 
In October
 
2022, the
 
Company announced the
 
completion of a
 
non-brokered private placement
consisting of the issuance and sale of 1,014,600 units of the Corporation
 
at a price of $1.30 per Unit, for gross proceeds of
$1,318,980 to the Company. The closing price of the common shares of the
 
Company on October 18, 2022, the last
 
trading
day prior to the closing of the Private Placement, was $1.17. Each Unit
 
consists of one common share of the Company and
one Common Share purchase warrant. Each Warrant entitles the holder thereof to purchase one Common Share at a price
of $1.75 until October 19,
 
2024. The Common Shares
 
and Warrants issued
 
in connection with the Private
 
Placement, and
the Common
 
Shares underlying
 
the Warrants,
 
are subject
 
to a statutory
 
hold period
 
of four months
 
and one
 
day from the
date of closing, in accordance with applicable securities
 
legislation.
Outlook
Consistent with the Company’s past
 
practice, and in view of
 
the early stage of
 
market adoption of our
 
core lines of business,
we are not providing specific revenue or net income (loss)
 
guidance for 2023.
In 2023,
 
we continue
 
our plan
 
to increase
 
sales, marketing,
 
and R&D
 
efforts in-line
 
– and
 
in some
 
cases ahead
 
of –
 
the
growth curve for industrial change related to greenhouse gas reduction efforts. This includes expanded technology offering
and capabilities across the industrial value chain, using
 
an updated strategy that sees the Company bundle
 
its solution-set
into verticals that represent key economic drivers for
 
heavy industry.
Overall Strategy
 
PyroGenesis’
 
provides
 
technology
 
solutions
 
to
 
heavy
 
industry
 
that
 
leverage
 
off
 
the
 
Company’s
 
proprietary
 
position
 
and
expertise
 
in
 
ultra-high
 
temperature
 
processes.
 
The
 
Company
 
has
 
evolved
 
from
 
its
 
early
 
roots
 
of
 
being
 
a
 
speciality-
engineering firm to being a
 
provider of a robust technology
 
eco-system for heavy industry
 
that helps address key
 
strategic
goals.
Aligning Business Lines to Economic Drivers
 
 
As interest in
 
the Company’s
 
products has increased,
 
and the variety
 
of uses for
 
its core technologies
 
has expanded,
 
the
Company
 
has
 
evolved
 
its
 
strategy
 
to
 
concentrate
 
its
 
solution
 
set
 
under
 
three
 
categories.
 
These
 
categories
 
represent
economic drivers that are key to global heavy industry:
1.
Energy Transition & Emission
 
Reduction:
 
fuel switching,
 
utilizing the
 
Company’s electric-powered
 
plasma torches
 
and biogas
 
upgrading technology
 
to help
heavy industry reduce fossil fuel use and greenhouse gas
 
emissions.
2.
Commodity Security & Optimization:
 
recovery of viable
 
metals, and optimization of
 
production to increase output,
 
to maximize raw materials
 
and improve
availability of critical minerals.
3.
Waste Remediation:
 
safe
 
destruction
 
of
 
hazardous
 
materials,
 
and
 
the
 
recovery
 
and
 
valorization
 
of
 
underlying
 
substances
 
such
 
as
chemicals and minerals.
 
 
 
 
pyrex99d2p37i0 pyrex99d2p37i1 pyrex99d2p37i2
PyroGenesis Canada Inc.
Management’s Discussion and Analysis
For the years ended December 31, 2022, and
 
2021
37
 
| Page
Within each
 
category the
 
Company offers
 
several solutions
 
at different
 
stages leading
 
up to
 
commercialization,
 
including
the partial list in the diagram below:
The Company’s
 
believes its
 
strategy to
 
be timely,
 
as multiple
 
heavy industries
 
are committing
 
to major
 
carbon and
 
waste
reduction
 
targets
 
at
 
the
 
same
 
time
 
as
 
many
 
governments
 
are
 
increasingly
 
funding
 
environmental
 
technologies
 
and
infrastructure
 
projects
 
– all
 
while both
 
are making
 
efforts
 
to ensure
 
the
 
availability
 
of critical
 
minerals
 
during
 
the coming
decades of increased output demand.
While there can
 
be no guarantee,
 
the Company believes
 
this evolution of
 
its strategy beyond
 
a greenhouse
 
gas emission
reduction emphasis, to an
 
expanded focus that encapsulates
 
the key verticals listed above,
 
both improves the Company’s
chances for success while also providing a clearer
 
picture of how the Company’s wide array
 
of offerings work in tandem to
support heavy industry goals.
PyroGenesis’ market
 
opportunity remains
 
large, as
 
major industries
 
such as
 
aluminum, steelmaking,
 
manufacturing, and
government require factory-ready, technology-based solutions
 
to help steer
 
through the paradoxical
 
landscape of
 
increasing
demand and tightening regulations and material availability.
As more of the Company’s
 
offerings reach full commercialization,
 
PyroGenesis will remain focused on
 
attracting influential
customers in broad markets and ensuring that operating
 
expenses are controlled to achieve profitable growth.
FURTHER INFORMATION
Additional
 
information
 
relating
 
to
 
Company
 
and
 
its
 
business,
 
including
 
the
 
2022
 
consolidated
 
financial
 
statements,
 
the
Annual Information Form and
 
other filings that
 
the Company has
 
made and may
 
make in the
 
future with applicable
 
securities
authorities, may be found on or through SEDAR
 
at www.sedar.com,
 
EDGAR at www.sec.gov
 
or the Company’s website at
www.pyrogenesis.com.
Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders
 
of the Company’s
securities and securities authorized
 
for issuance under equity
 
compensation plans, is also
 
contained in the Company’s
 
most
recent management information circular for the most recent
 
annual meeting of shareholders of the Company.
pyrex99d3
 
1
Exhibit 99.3
PyroGenesis Canada Inc.
Consolidated Financial Statements
December 31, 2022 and 2021
 
 
 
3
Management’s Responsibility
Management is
 
responsible for
 
the preparation
 
and presentation
 
of the
 
accompanying consolidated
 
financial statements,
including
 
responsibility
 
for
 
significant
 
accounting
 
judgments
 
and
 
estimates
 
in
 
accordance
 
with
 
International
 
Financial
Reporting
 
Standards
 
as
 
issued
 
by
 
the
 
International
 
Accounting
 
Standards
 
Board.
 
This
 
responsibility
 
includes
 
selecting
appropriate accounting principles
 
and methods, and
 
making decisions affecting
 
the measurement of transactions
 
in which
objective judgment is required.
The
 
Board
 
of
 
Directors
 
and
 
Audit
 
Committee
 
are
 
composed
 
primarily
 
of
 
Directors
 
who
 
are
 
neither
 
management
 
nor
employees of
 
the Company.
 
The Board
 
of Directors
 
is responsible
 
for overseeing
 
management in
 
the performance
 
of its
financial reporting responsibilities, and
 
for approving the
 
financial information included in
 
the annual report.
 
The Board fulfills
these responsibilities by reviewing the financial information prepared by management and
 
discussing relevant matters with
management and
 
the external
 
auditor.
 
The Audit
 
Committee has
 
the responsibility
 
of meeting
 
with management
 
and the
external auditors to
 
discuss the internal
 
controls over the
 
financial reporting process, auditing
 
matters and financial
 
reporting
issues. The Audit Committee is also responsible for recommending
 
the appointment of the Company's external auditor.
Raymond Chabot
 
Grant Thornton
 
LLP, an Independent Registered Public
 
Accounting Firm,
 
is appointed
 
by the
 
shareholders
to audit the
 
consolidated financial statements
 
and report directly
 
to them; their
 
report follows. The
 
external auditor has
 
full
and free access to, and meets periodically and
 
separately with, both the Audit Committee and management to discuss their
audit findings.
March 30, 2023
[Signed by P.
 
Peter Pascali]
 
[Signed by Andre Mainella]
P.
 
Peter Pascali, Chief Executive Officer
 
Andre Mainella, Chief Financial Officer
 
pyrex99d3p4i0 pyrex99d3p4i1
4
Raymond Chabot
Grant Thornton LLP
Suite 2000
National Bank Tower
600 De La Gauchetière Street West
Montréal, Quebec
H3B 4L8
T
514-878-2691
Report of Independent Registered Public Accounting Firm
To
 
the Shareholders and Directors of PyroGenesis Canada Inc.
Opinion on the consolidated financial statements
We have
 
audited the
 
accompanying consolidated
 
statements of
 
financial position
 
of PyroGenesis
 
Canada Inc.
 
(the "Company")
 
as of
December 31,
 
2022 and
 
2021, the
 
related consolidated
 
statements of
 
comprehensive loss,
 
changes in
 
shareholders’ equity
 
and cash
flows for the years then ended,
 
and the related notes (collectively referred
 
to as the "consolidated financial statements"). In
 
our opinion,
the consolidated
 
financial statements present
 
fairly,
 
in all
 
material respects,
 
the financial position
 
of the
 
Company as
 
of December
 
31,
2022 and
 
2021, and
 
the results
 
of its
 
operations and
 
its cash
 
flows for
 
the years
 
then ended
 
in conformity
 
with International
 
Financial
Reporting Standards as issued by the International Accounting Standards Board.
Going concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as
 
a going concern.
As discussed
 
in Note
 
2 to
 
the consolidated
 
financial statements,
 
the Company
 
has incurred
 
operating losses
 
and negative
 
cash flows
from operations and, as a result, has an accumulated deficit as of
 
December 31, 2022. These conditions, along with other matters as set
forth in
 
Note 2,
 
indicate the existence
 
of a material
 
uncertainty that
 
may cast significant
 
doubt about
 
the Company’s
 
ability to continue
operating as a
 
going concern. Management's
 
plans in regard
 
to these matters
 
are also described
 
in Note 2.
 
The consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for opinion
These consolidated financial statements are
 
the responsibility of the Company’s
 
management. Our responsibility is to
 
express an opinion
on the
 
Company's consolidated
 
financial statements
 
based on
 
our audits.
 
We
 
are a
 
public accounting
 
firm registered
 
with the
 
Public
Company Accounting
 
Oversight Board (United
 
States) ("PCAOB") and
 
are required to
 
be independent with
 
respect to the
 
Company in
accordance with the
 
U.S. federal securities
 
laws and the
 
applicable rules and
 
regulations of the
 
Securities and Exchange
 
Commission
and the PCAOB.
We conducted our
 
audits in accordance with
 
the standards of the
 
PCAOB. Those standards require
 
that we plan and
 
perform the audit
to obtain reasonable
 
assurance about whether
 
the consolidated financial
 
statements are free
 
of material misstatement,
 
whether due to
error
 
or
 
fraud.
 
The
 
Company is
 
not
 
required
 
to
 
have,
 
nor
 
were
 
we engaged
 
to
 
perform, an
 
audit
 
of
 
its internal
 
control
 
over
 
financial
reporting. As
 
part of
 
our audits,
 
we are
 
required to
 
obtain an
 
understanding of
 
internal control
 
over financial
 
reporting but
 
not for
 
the
purpose of expressing an opinion
 
on the effectiveness of the
 
Company's internal control over financial
 
reporting. Accordingly, we express
no such opinion.
Our audits included performing
 
procedures to assess the
 
risks of material misstatement
 
of the consolidated financial
 
statements, whether
due
 
to
 
error
 
or
 
fraud,
 
and performing
 
procedures
 
that
 
respond to
 
those
 
risks. Such
 
procedures included
 
examining,
 
on
 
a
 
test basis,
evidence
 
regarding
 
the
 
amounts
 
and
 
disclosures
 
in
 
the
 
consolidated
 
financial
 
statements.
 
Our
 
audits
 
also
 
included
 
evaluating
 
the
accounting
 
principles
 
used
 
and
 
significant
 
estimates
 
made
 
by
 
management,
 
as
 
well
 
as
 
evaluating
 
the
 
overall
 
presentation
 
of
 
the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
 
We have served as the Company’s auditor since 2021.
Montréal, Canada
March 30, 2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
PyroGenesis Canada Inc.
Consolidated Statements of Financial Position
December 31, 2022 and 2021
(In Canadian dollars)
 
December 31,
December 31,
2022
2021
$
$
Assets
Current assets
Cash and cash equivalents [note 8]
3,445,649
12,202,513
Accounts receivable [note 9]
18,624,631
17,639,616
Costs and profits in excess of billings on uncompleted contracts [note 10]
1,051,297
4,922,710
Inventory [note 24]
1,876,411
887,590
Investment tax credits receivable [note 11]
276,404
256,513
Income taxes receivable
14,169
117,029
Current portion of deposits [note 14]
432,550
1,328,452
Current portion of royalties receivable [note 13]
455,556
311,111
Contract assets
 
499,912
375,789
Prepaid expenses
771,603
717,661
Total current assets
27,448,182
38,758,984
Non-current assets
Deposits [note 14]
46,053
248,756
Strategic investments [note 12]
6,242,634
14,901,659
Property and equipment [note 15]
3,393,452
3,712,937
Right-of-use assets [note 16]
4,818,744
5,765,993
Royalties receivable [note 13]
952,230
947,543
Intangible assets [note 17]
2,104,848
2,774,198
Goodwill [note 18]
2,660,607
2,660,607
Total assets
47,666,750
69,770,677
Liabilities
Current liabilities
Bank indebtedness [note 28]
991,902
Accounts payable and accrued liabilities [note 19]
10,115,870
10,069,177
Billings in excess of costs and profits on uncompleted contracts [note 20]
9,670,993
9,400,231
Current portion of term loans [note 21]
69,917
83,004
Current portion of lease liabilities [note 16]
2,672,212
2,934,236
Balance due on business combination [note 6]
2,088,977
2,242,503
Income taxes payable
187,602
23,048
Total current liabilities
25,797,473
24,752,199
Non-current liabilities
Lease liabilities [note 16]
2,861,482
2,389,729
Term
 
loans [note 21]
320,070
107,901
Balance due on business combination [note 6]
1,818,798
1,709,700
Deferred income taxes [note 31]
42,394
Total liabilities
30,797,823
29,001,923
Shareholders’ equity
[note 22]
Common shares
85,483,223
82,104,086
Warrants
223,200
Contributed surplus
24,546,960
19,879,055
Accumulated other comprehensive income
402
3,444
Deficit
(93,384,858)
(61,217,831)
Total shareholders’ equity
16,868,927
40,768,754
Total liabilities and shareholders’ equity
47,666,750
69,770,677
Contingent liabilities, subsequent events [notes 29 and
 
33].
The accompanying notes form an integral part of the consolidated
 
financial statements.
Approved on behalf of the Board:
[Signed by P.
 
Peter Pascali] P.
 
Peter Pascali
[Signed by Andrew Abdalla] Andrew Abdalla
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
PyroGenesis Canada Inc.
Consolidated Statements of Comprehensive Loss
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
 
2022
2021
$
$
Revenues
[note 7]
19,013,503
31,068,350
Cost of sales and services [note 24]
10,869,616
18,636,539
Gross profit
8,143,887
12,431,811
Expenses
Selling, general and administrative [note 24]
29,025,434
27,237,135
Research and development, net [note 11]
2,317,973
2,535,987
31,343,407
29,773,122
Net loss from operations
(23,199,520)
(17,341,311)
Changes in fair value of strategic investments [note 12]
(8,340,781)
(21,426,218)
Finance costs, net [note 25]
(550,742)
(404,370)
Loss before income taxes
 
(32,091,043)
(39,171,899)
Income taxes [note 31]
75,984
(739,960)
Net loss
(32,167,027)
(38,431,939)
Other comprehensive income (loss)
Items that will be reclassified subsequently to profit or loss
Foreign currency translation gain (loss) on investments
 
in foreign
 
operations
(3,042)
3,444
Comprehensive loss
(32,170,069)
(38,428,495)
Loss per share
[note 26]
Basic
(0.19)
(0.23)
Diluted
(0.19)
(0.23)
The accompanying notes form an integral part of the consolidated
 
financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7
PyroGenesis Canada Inc.
Consolidated Statements of Changes in Shareholders’
 
Equity
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
 
Accumulated
Number of
other
common
Common
Contributed
comprehensive
shares
shares
Warrants
Surplus
income
Deficit
Total
$
$
$
$
$
$
Balance - December 31, 2021
170,125,795
82,104,086
19,879,055
3,444
(61,217,831)
40,768,754
Shares issued upon exercise of stock
options [note 22]
2,440,000
2,283,357
(870,558)
1,412,799
Private placement [note 22]
1,014,600
1,095,780
223,200
1,318,980
Share-based payments
5,538,463
5,538,463
Other comprehensive loss for the year
(3,042)
(3,042)
Net loss
(32,167,027)
(32,167,027)
Balance – December 31, 2022
173,580,395
85,483,223
223,200
24,546,960
402
(93,384,858)
16,868,927
Balance - December 31, 2020
159,145,992
67,950,069
10,480,310
(19,007,273)
59,423,106
Shares issued upon exercise of stock
options [note 22]
3,482,000
1,473,818
(364,000)
1,109,818
Shares issued upon exercise of purchase
warrants and compensation options [note
22]
8,337,897
13,085,197
13,085,197
Share redemptions for cancellation [note
22]
(840,094)
(404,998)
(3,778,619)
(4,183,617)
Share-based payments
9,762,745
9,762,745
Other comprehensive income for the year
3,444
3,444
Net loss
(38,431,939)
(38,431,939)
Balance – December 31, 2021
170,125,795
82,104,086
19,879,055
3,444
(61,217,831)
40,768,754
The accompanying notes form an integral part of the consolidated
 
financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
PyroGenesis Canada Inc.
Consolidated Statements of Cash Flows
 
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
 
2022
2021
$
$
Cash flows provided by (used in)
Operating activities
Net loss
(32,167,027)
(38,431,939)
Adjustments for:
Share-based payments
5,538,463
9,762,745
Depreciation of property and equipment
603,894
356,103
Depreciation of right-of-use assets
635,828
570,411
Amortization and write-off of intangible assets
878,030
465,913
Amortization of contract assets
243,626
513,572
Net finance costs
550,742
404,370
Change in fair value of investments
8,340,781
21,426,218
Deferred income taxes
(42,394)
(584,246)
Unrealized foreign exchange
(102,236)
(10,623)
(15,520,293)
(5,527,476)
Net change to working capital items [note 23]
4,391,408
(12,585,956)
(11,128,885)
(18,113,432)
Investing activities
Additions to property and equipment
(396,051)
(1,502,231)
Additions to intangible assets
(290,373)
(246,630)
Purchase of strategic investments
(3,604,000)
(10,588,857)
Disposal of strategic investments
3,922,244
14,252,730
Business combination, net of cash acquired
807,945
(368,180)
2,722,957
Financing activities
Increase in bank indebtedness
991,902
Interest paid
(467,453)
(253,791)
Repayment of term loans
(33,003)
(20,507)
Repayment of lease liabilities
(657,381)
(263,078)
Repayment of balance due on business combination
(217,778)
Proceeds from issuance of term loans
292,941
Proceeds from issuance of shares upon exercise
 
of warrants
13,085,197
Proceeds from issuance of shares upon exercise
 
of stock options
1,412,799
1,109,818
Proceeds from private placement [note 22]
1,318,980
Shares repurchased for cancellation
(4,183,617)
2,641,007
9,474,022
Effect of exchange rate changes on cash denominated in
 
foreign currencies
99,194
14,067
Net decrease in cash and cash equivalents
 
(8,756,864)
(5,902,386)
Cash and cash equivalents - beginning of year
12,202,513
18,104,899
Cash and cash equivalents - end of year
3,445,649
12,202,513
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9
2022
2021
$
$
Supplemental cash flow disclosure
Non-cash transactions:
Purchase of intangible assets included in accounts payable
81,693
Purchase of property and equipment included in
 
accounts payable
22,557
Addition to contract assets included in accounts
 
payable
195,060
Settlement of accounts receivable on business acquisition
1,744,400
Accretion interest on balance due on business
 
combination
173,350
110,204
Accretion interest on royalties receivable
118,290
132,809
Accretion on term loan
28,236
12,185
Fair value of HPQ warrants exercised
9,181,250
Initial recognition or modification of lease liabilities
 
and right-of-use assets [note 16]:
Right-of-use assets
(311,421)
2,157,796
Prepaid rent expense
(36,903)
Lease liabilities
867,110
2,120,893
The accompanying notes form an integral part of the consolidated
 
financial statements.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
10
1.
 
Nature of operations
PyroGenesis Canada Inc.
 
(“PyroGenesis”) and
 
its subsidiaries
 
(collectively,
 
the “Company”),
 
incorporated under
 
the laws
of the Canada
 
Business Corporations
 
Act, was formed
 
on July 11,
 
2011.
 
The Company
 
owns patents
 
of advanced waste
treatment systems technology and designs,
 
develops, manufactures, and commercialises advanced plasma processes and
sustainable solutions to reduce greenhouse gases. The Company is domiciled at 1744 William Street, Suite 200, Montreal,
Quebec. The Company
 
is publicly traded
 
on the TSX
 
Exchange under
 
the Symbol “PYR”,
 
on NASDAQ
 
in the USA
 
under
the symbol “PYR” and on the Frankfurt Stock Exchange (FSX)
 
under the symbol “8PY”.
2.
 
Going concern
These
 
consolidated
 
financial
 
statements
 
have
 
been
 
prepared
 
on
 
the
 
going
 
concern
 
basis,
 
which
 
presumes
 
that
 
the
Company will be
 
able to continue
 
its operations
 
for the foreseeable
 
and will be
 
able to realize
 
its assets and
 
discharge its
liabilities in the normal course of business for the foreseeable
 
future.
The Company is
 
subject to certain
 
risks and uncertainty
 
associated with the
 
achievement of profitable
 
operations such
 
as
the successful signing and delivery of contracts and access
 
to adequate financing.
The Company
 
has incurred,
 
in the
 
last years,
 
operating losses
 
and negative
 
cash flows
 
from operations,
 
and as
 
a result,
the Company has
 
an accumulated deficit of
 
$
93,384,858
 
as at December
 
31, 2022 ($
61,217,831
 
as at December
 
31, 2021).
Furthermore, there have been unexpected delays in the collection of certain accounts receivable from contracts closed in a
prior year. This has
 
resulted in a
 
shortfall in cash
 
flows from operating
 
activities that would
 
be used in
 
funding the Company’s
operations.
 
As
 
at
 
December
 
31,
 
2022,
 
the
 
Company
 
has
 
working
 
capital
 
of
 
$
1,650,709
 
($
14,006,785
 
as
 
at
 
December
 
31,
 
2021)
including cash and
 
cash equivalents
 
of $
3,445,649
 
($
12,202,513
 
as at December
 
31, 2021). The
 
working capital
 
is net of
an allowance for credit losses amounting to $
5,023,283
 
($
520,000
 
as at December 31, 2021) as further described
 
in notes
9 and 10. The Company’s
 
business plan is dependent
 
upon the successful completion
 
of contracts and also
 
the receipt of
payments from certain contracts
 
closed in a prior year and expects
 
these payments to be made
 
during fiscal 2023, as well
as
 
the
 
achievement
 
of
 
profitable
 
operations
 
through
 
the
 
signing,
 
completion
 
and
 
delivery
 
of
 
additional
 
contracts
 
or
 
a
reduction in certain operating expenses. In the absence of this, the Company is dependent upon raising additional funds to
finance operations within
 
and beyond the next
 
twelve months. The Company
 
has been successful
 
in securing financing in
the past
 
and has
 
relied upon
 
external financing
 
to fund
 
its operations,
 
primarily
 
through the
 
issuance of
 
equity,
 
debt and
convertible debentures.
 
The Company
 
completed a
 
private placement
 
in October
 
2022 for
 
an amount
 
of $
1,318,980
 
and
also
 
completed
 
another
 
private
 
placement
 
in
 
March
 
2023
 
for
 
$
5,000,000
 
(see
 
note
 
33).
 
While
 
the
 
Company
 
has
 
been
successful in securing
 
financing, raising
 
additional funds
 
is dependent
 
on a number
 
of factors, some
 
of which
 
are outside
the Company’s
 
control, and therefore
 
there is no
 
assurance that
 
it will be
 
able to do
 
so in the
 
future or that
 
these sources
will
 
be
 
available
 
to
 
the
 
Company
 
or
 
that
 
they
 
will
 
be
 
available
 
on
 
terms
 
which
 
are
 
acceptable
 
to
 
the
 
Company.
 
These
conditions indicate
 
the existence
 
of a
 
material uncertainty
 
that may
 
cast significant
 
doubt about
 
the Company’s
 
ability to
continue operating as a going concern.
 
The consolidated financial
 
statements have
 
been prepared on
 
a going concern
 
basis and do
 
not include
 
any adjustments
to the amounts and to classifications of the assets and liabilities that might be necessary should the Company be unable to
achieve its plan and continue in business. If the going concern assumption were not appropriate, adjustments,
 
which could
be material, would be necessary to the carrying value of assets and liabilities, the reported expenses, and the classification
of items on the consolidated statement of financial position.
3.
 
Basis of preparation
(a)
 
Statement of compliance
These financial statements have been prepared
 
in accordance with International Financial Reporting Standards (“IFRS”) as
issued by
 
the International Accounting
 
Standards Board (“IASB”).
 
These financial statements
 
were approved and
 
authorized
for issuance by the Board of Directors on March 30, 2023.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
11
(b)
 
Functional and presentation currency
These consolidated financial
 
statements are presented
 
in Canadian dollars,
 
which is the
 
functional currency of
 
PyroGenesis,
Drosrite International
 
LLC and
 
Pyro Green-Gas
 
Inc. The
 
functional currency
 
of Airscience
 
Italia SRL
 
is the
 
Euro whereas
the functional currency of Airscience Technologies
 
Private Limited is the Indian
 
rupee.
(c)
 
Basis of measurement
These financial statements have been prepared on the historical
 
cost basis except for:
(i)
 
strategic investments which are accounted for at fair value,
(ii)
 
share-based payment arrangements, which are measured at
 
fair value on the grant date pursuant to IFRS
2, Share-based Payment; and
(iii)
 
lease liabilities, which are initially measured at the present
 
value of minimum lease payments
(d)
 
Basis of consolidation
For financial reporting purposes, subsidiaries are defined as entities controlled by the Company.
 
The Company controls an
entity when it
 
has power over
 
the investee; it
 
is exposed to,
 
or has rights to,
 
variable returns from
 
its involvement with
 
the
entity; and it has the ability to affect those returns through
 
its power over the entity.
In instances
 
where the
 
Company does
 
not hold
 
a majority
 
of the
 
voting rights,
 
further analysis
 
is performed
 
to determine
whether or not
 
the Company has
 
control of the
 
entity. The Company is deemed to
 
have control when, according
 
to the terms
of the shareholder’s and/or other agreements, it makes most of
 
the decisions affecting relevant activities.
These consolidated
 
financial
 
statements
 
include the
 
accounts
 
of PyroGenesis
 
and
 
its subsidiaries,
 
Drosrite
 
International
LLC and Pyro Green-Gas Inc. and its subsidiaries. Drosrite International LLC is owned by a member of the Company’s key
management personnel and close member of
 
the Chief Executive Officer (“CEO”)
 
and controlling shareholder’s family and
is deemed to be controlled by the Company.
 
Pyro Green-Gas Inc. and its subsidiaries Airscience Italia SRL and Airscience
Technologies Private Limited were acquired
 
by the
 
Company on August
 
11, 2021 (see note
 
6). All
 
transactions and balances
between the Company and its subsidiaries have been eliminated
 
upon consolidation.
The
 
accounting
 
policies
 
set
 
out
 
below
 
have
 
been
 
applied
 
consistently
 
in
 
the
 
preparation
 
of
 
the
 
consolidated
 
financial
statements of all years
 
presented. Finance costs
 
and changes in fair
 
value of strategic
 
investments are excluded
 
from the
loss from operations in the consolidated statements of
 
comprehensive loss.
4.
 
Significant accounting policies
(a)
 
Business combinations
Business combinations are accounted
 
for using the
 
acquisition method. Goodwill is
 
measured as the
 
excess of the
 
fair value
of the consideration transferred over the
 
net recognized amount of the identifiable
 
assets acquired and liabilities assumed,
all measured at the acquisition date.
The consideration transferred is measured as the net of the fair values of assets transferred,
 
liabilities assumed, and equity
instruments
 
issued
 
by
 
the
 
Company
 
at
 
the
 
acquisition
 
date,
 
including
 
any
 
asset
 
or
 
liability
 
resulting
 
from
 
a
 
contingent
consideration arrangement, in exchange of the acquiree.
The obligation to pay the contingent consideration
 
is classified as a liability and measured as a financial
 
instrument or as a
provision. Changes in fair values that qualify as measurement period adjustments of preliminary purchase price allocations
are adjusted in the current period and such changes are
 
applied on a retroactive basis.
Acquisition costs
 
that the
 
Company incurs
 
in connection
 
with a
 
business
 
combination
 
are recognized
 
in profit
 
or loss
 
as
incurred, except for costs associated with the issuance
 
of debt or equity securities.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
12
(b)
 
Revenue recognition
Revenue from
 
contracts
 
is recognized
 
for each
 
performance obligation
 
either over
 
a period
 
of time
 
or at
 
a point
 
in time,
depending on which method reflects the transfer of control of the goods and services underlying the particular performance
obligation.
i)
 
Long-term contracts
Long-term contracts
 
involve made-to-order
 
customized equipment
 
and machines
 
and are
 
generally priced
 
on a
 
fixed fee
basis.
 
Under
 
these
 
contracts,
 
the
 
equipment
 
or
 
machines
 
are
 
made
 
to
 
a
 
customer’s
 
specifications
 
and
 
if
 
a
 
contract
 
is
terminated by the customer, the Company
 
is entitled to the greater of the amounts invoiced at the termination
 
date and the
reimbursement of the costs
 
incurred to date of
 
termination, including a reasonable margin.
 
Agreements that contain multiple
deliverables require the Company to determine whether they contain separately identifiable performance obligations and to
allocate the consideration received to each performance
 
obligation.
Revenue
 
relating
 
to
 
long-term
 
contracts
 
is
 
recognized
 
over
 
time
 
based
 
on
 
the
 
measure
 
of
 
progress
 
determined
 
by
 
the
Company’s efforts or inputs
 
towards satisfying the performance obligation
 
relative to the total expected inputs.
 
The degree
of completion
 
is assessed
 
based on
 
the
 
proportion
 
of
 
total costs
 
and/or
 
hours
 
incurred
 
to date,
 
compared
 
to
 
total costs
and/or hours anticipated
 
to provide the
 
service under the
 
entire contract,
 
excluding the effects
 
of inputs that
 
do not depict
performance,
 
e.g.
 
uninstalled
 
materials.
 
For
 
long-term
 
contracts
 
with
 
uninstalled
 
materials,
 
the
 
Company
 
adjusts
 
the
transaction price and
 
recognizes revenue on
 
uninstalled materials to the
 
extent of those
 
costs incurred, i.e.
 
at a zero percent
profit margin, when certain conditions are met.
Estimates are required
 
to determine anticipated
 
costs and/or hours
 
on long-term contracts. A
 
provision is made
 
for the entire
amount of expected loss, if any,
 
in the period in which they are first determinable.
Contract modifications are changes in scope and/or price that are approved by the parties to the contract. Approval may
 
be
written,
 
oral
 
or
 
implied
 
by
 
customary
 
business
 
practices,
 
and
 
are
 
legally
 
enforceable.
 
The
 
Company
 
accounts
 
for
modifications as a separate
 
contract if the modifications
 
add distinct goods or
 
services that are priced
 
commensurate with
stand-alone
 
selling
 
prices
 
or
 
if
 
the
 
remaining
 
goods
 
or
 
services
 
are
 
distinct
 
from
 
those
 
already
 
transferred,
 
otherwise
modifications are accounted for as part of the original contract.
Costs and
 
profits in
 
excess of
 
billings on
 
uncompleted contracts
 
and trade
 
receivables are
 
both rights
 
to consideration
 
in
exchange for
 
goods or
 
services that
 
the Company
 
has transferred
 
to a
 
customer,
 
however the
 
classification
 
depends on
whether such right is only
 
conditional on the passage of time
 
(trade receivables) or if it is
 
also conditional on something else
(costs and profits
 
in excess of
 
billings on uncompleted contracts),
 
such as the
 
satisfaction of further performance
 
obligations
under the contract. Billings in excess of costs and
 
profits on uncompleted contracts is the cumulative
 
amount received and
contractually receivable by the Company that exceeds the right
 
to consideration resulting from the Company’s performance
under a given contract.
The costs
 
to obtain
 
long-term contracts
 
such as
 
sale commissions
 
are recognized
 
as Contract
 
assets and
 
recognized as
selling expenses over time based on degree of completion
 
of the related contract.
ii)
 
Sales of goods
Revenue related to sales of goods, which may
 
include powders and spare parts are measured
 
based on the consideration
specified in contracts
 
with customers. The
 
Company recognizes
 
revenue at a
 
point in time
 
when it transfers
 
control of the
goods to
 
the buyer.
 
This is
 
generally at
 
the time
 
the customer
 
obtains legal
 
title to
 
the product
 
and when
 
it is
 
physically
transferred to the custody transfer point agreed with the customer.
iii)
 
Sale of intellectual property
Sale of
 
intellectual property is
 
recognized at the
 
date the recipient
 
obtains control of
 
the asset. Variable consideration related
to the sale of intellectual property is recognized to the extent that it
 
is highly probable that a reversal will not occur when the
uncertainty associated with the variable consideration
 
is subsequently resolved.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
13
(c)
 
Foreign currency translation
i)
 
Foreign currency transactions
Revenue and expense transactions in foreign
 
currencies are translated into the functional
 
currency of the respective entity
using the
 
average exchange
 
rates prevailing
 
at the
 
time of
 
the transaction.
 
Foreign currency
 
balances are
 
translated into
the functional
 
currency of
 
the respect
 
ive entity
 
at year
 
end exchange
 
rates for
 
monetary items
 
and at
 
historical
 
rates for
non-monetary items. Translation gains
 
or losses are included in the determination of net loss.
ii)
 
Foreign operations
The assets and
 
liabilities of foreign
 
operations are translated
 
into Canadian dollars
 
using exchange rates
 
prevailing at the
end
 
of
 
the
 
reporting
 
period.
 
Revenue
 
and
 
expense
 
items
 
are
 
translated
 
at
 
the
 
average
 
exchange
 
rates
 
for
 
the
 
period.
Exchange
 
differences
 
arising
 
from
 
the
 
translation
 
process
 
of
 
foreign
 
operations
 
are
 
recognized
 
as
 
foreign
 
currency
translation adjustments in other comprehensive income and
 
accumulated in equity.
(d)
 
Cash and cash equivalents
Cash and
 
cash equivalents
 
are financial
 
instruments readily
 
convertible to
 
a known
 
amount of
 
cash and
 
not subject
 
to a
significant risk of
 
changes in fair
 
value. Cash equivalents
 
include instruments with
 
a maturity of
 
three months or
 
less from
the date of
 
acquisition and
 
instruments with
 
an original
 
term longer than
 
three months if
 
there is
 
no significant
 
penalty for
withdrawal within a three-month period from the date
 
of acquisition.
(e)
 
Inventory
Inventory is composed of spare
 
parts for resale. Inventory
 
is valued at the
 
lower of cost and net
 
realizable value. The
 
cost
of
 
inventory
 
is
 
based
 
on
 
the
 
first-in,
 
first-out
 
principle
 
and
 
comprises
 
all
 
costs
 
of
 
purchases.
 
Net
 
realizable
 
value
 
is
 
the
estimated selling price in the ordinary course of business,
 
less estimated costs of completion and selling costs.
(f)
 
Income taxes
i)
 
Current tax
Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from
or paid
 
to the
 
taxation authorities.
 
The tax
 
rates and
 
tax laws
 
used to
 
compute the
 
amount are
 
those that
 
are enacted
 
or
substantively enacted by the date of the consolidated statements
 
of financial position.
iii)
 
Deferred tax
Deferred tax is provided using the liability method, providing for temporary differences between the tax
 
bases of assets and
liabilities and their carrying
 
amounts in the consolidated
 
financial statements. The
 
temporary difference
 
is not provided for
if it arises from the initial recognition
 
of goodwill or the initial recognition
 
of an asset or liability in
 
a transaction other than
 
a
business combination that at the time of the transaction affects neither accounting
 
nor taxable profit or loss. The amount of
deferred tax
 
provided is
 
based on
 
the expected
 
manner of
 
realization or
 
settlement of
 
the carrying
 
amount of
 
assets and
liabilities, using tax
 
rates enacted or
 
substantively enacted at
 
the financial position
 
reporting date and
 
whose implementation
is expected over the period in which the deferred tax is
 
realized or recovered. A deferred tax asset is recognized only to the
extent that it is probable that future taxable profits will
 
be available against which the asset can be used.
Deferred tax assets
 
and liabilities are
 
presented as non-current. Assets
 
and liabilities are
 
offset where the
 
entity has a
 
legally
enforceable right
 
to offset current
 
tax assets and
 
liabilities or
 
deferred tax assets
 
and liabilities,
 
and the respective
 
assets
and liabilities
 
relate to
 
income taxes
 
levied by
 
the same
 
taxation authority
 
on the
 
same taxable
 
entity or
 
different
 
taxable
entities which intend to settle the liabilities and assets on a net
 
basis.
(g)
 
Earnings (loss) per share
The Company
 
presents basic
 
earnings (loss)
 
per share data
 
for its common
 
shares. Basic
 
loss per share
 
is computed
 
by
dividing net earnings
 
(loss) by the
 
weighted average
 
number of common
 
shares outstanding
 
during the year.
 
Diluted loss
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
14
per share is
 
computed similarly to
 
basic earnings per
 
share, except that
 
the weighted average
 
number of shares
 
outstanding
is increased
 
to include
 
shares from
 
the assumed
 
exercise of
 
stock options
 
and share
 
purchase warrants,
 
if dilutive.
 
The
number of additional shares
 
is calculated by assuming
 
that outstanding share options and
 
warrants were exercised and that
the
 
proceeds
 
from
 
such
 
exercises
 
were
 
used
 
to
 
acquire
 
common
 
shares
 
at
 
the
 
average
 
market
 
price
 
during
 
the year.
Potential shares from
 
all outstanding stock
 
options and share
 
purchase warrants are excluded
 
from the calculation of
 
diluted
loss per share as their inclusion is considered anti-dilutive in
 
years when a loss is incurred.
(h)
 
Property and equipment
Property
 
and
 
equipment
 
are
 
measured
 
at
 
cost
 
less
 
accumulated
 
depreciation
 
and
 
accumulated
 
impairment
 
losses
 
if
applicable. Cost includes expenditures that
 
are directly attributable to the
 
acquisition of the asset
 
and bringing the asset into
operation. Borrowing
 
costs capitalized
 
to asset
 
under development
 
represents the
 
interest expense
 
calculated under
 
the
effective interest
 
method and
 
does not include
 
any fair value
 
adjustments of
 
investments designated
 
at fair
 
value through
profit and loss. Government assistance
 
and investment tax credits related to
 
the purchase or development of
 
property and
equipment
 
are recorded
 
in reduction
 
of the
 
cost.
 
When major
 
parts
 
of an
 
item of
 
property
 
and
 
equipment
 
have different
useful lives, they are accounted for separately. Property and equipment are depreciated from the acquisition date
 
over their
respective useful life.
 
Depreciation of
 
an asset under
 
construction begins
 
when it is
 
available for
 
use, i.e. when
 
it is in
 
the
location and condition necessary for it to be capable of
 
operating in the manner intended by the Company.
Depreciation is calculated using the following methods
 
and rates:
Computer equipment
Straight line over
3 years
Machinery and equipment
Straight line over
10 years
Automobiles
Straight line over
7 years
Leasehold improvements
Lesser of the lease term or the useful life (
20 years
)
Impairment losses recognized in prior
 
periods are assessed at each reporting
 
date as to whether there are
 
any indications
that the previously recognized losses may no longer exist or may be decreased. An impairment loss is reversed only to the
extent
 
that
 
the
 
asset’s
 
carrying
 
amount
 
does
 
not
 
exceed
 
the
 
carrying
 
amount
 
that
 
would
 
have
 
been
 
determined,
 
net
 
of
depreciation, had no impairment loss been recognized for the
 
asset in prior years.
Property and equipment are assessed for impairment
 
whenever there is an indication of impairment.
Depreciation methods, useful lives and residual
 
values are reviewed at each financial
 
year end and adjusted prospectively
if appropriate.
(i)
 
Leases
Under IFRS 16 Leases, at
 
inception, the Company assesses
 
whether a contract is, or contains,
 
a lease based on whether
the contract conveys the right to control the use of an identified
 
asset for a period of time in exchange for consideration.
The Company recognizes a right-of-use asset and
 
a lease liability at the
 
commencement date of the lease, i.e., the date
 
the
underlying asset is available for use.
Right-of-use assets
Right-of-use
 
assets
 
are measured
 
at cost,
 
less
 
any
 
accumulated
 
depreciation
 
and
 
accumulated
 
impairment
 
losses,
 
and
adjusted for any remeasurement of lease liabilities. Cost
 
of right-of-use assets is comprised of:
-
 
the initial measurement amount of the lease liabilities recognized
 
;
-
 
any lease payments made at or before the commencement
 
date, less any lease incentives received;
-
 
any initial direct costs incurred; and
-
 
an estimate of costs to dismantle and remove the underlying
 
asset, restore the site on which it is located or
 
restore the underlying asset to the condition required by
 
the terms and conditions of the lease contract.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
15
Right-of-use assets are
 
depreciated over the
 
shorter period of
 
the lease term
 
and the useful
 
life of the underlying
 
asset. If
a lease transfers ownership
 
of the underlying asset
 
or the cost of the
 
right-of-use asset reflects
 
that the Company expects
to exercise a purchase option,
 
the related right-of-use asset is
 
depreciated over the useful life
 
of the underlying asset based
on
 
periods
 
detailed
 
above.
 
The
 
depreciation
 
starts
 
at
 
the
 
commencement
 
date
 
of
 
the
 
lease.
 
Right-of-use
 
assets
 
are
assessed for impairment whenever there is an indication that
 
the right-of-use assets may be impaired.
Lease liabilities
Lease liabilities are
 
initially measured at
 
the present value
 
of the lease
 
payments that
 
are not paid
 
at the commencement
date over the lease term. The present value of the lease payments is determined
 
using the lessee’s incremental borrowing
rate at
 
the commencement date
 
if the
 
interest rate implicit
 
in the
 
lease is
 
not readily determinable.
 
The incremental borrowing
rate is
 
a function
 
of the
 
lessee’s incremental
 
borrowing rate,
 
the nature
 
of the
 
underlying asset,
 
the location
 
of the
 
asset,
the
 
length
 
of
 
the
 
lease
 
and
 
the
 
currency
 
of
 
the
 
lease
 
contract.
 
Generally,
 
the
 
Company
 
uses
 
the
 
lessee’s
 
incremental
borrowing rate
 
for the
 
present value.
 
At the commencement
 
date, lease
 
payments generally
 
include fixed
 
payments, less
any
 
lease
 
incentives
 
receivable,
 
variable
 
lease
 
payments
 
that
 
depend
 
on
 
an
 
index
 
(e.g.,
 
based
 
on
 
inflation
 
index)
 
or
 
a
specified rate, and payments of
 
penalties for terminating the lease,
 
if the lease term
 
reflects the lessee exercising the
 
option
to terminate the lease. Lease payments also include amounts expected to be
 
paid under residual value guarantees and the
exercise price of a purchase option if the Company is reasonably
 
certain to exercise that option.
Variable
 
lease payments that
 
do not depend on
 
an index or a
 
specified rate are not
 
included in the measurement
 
of lease
liabilities but
 
instead are
 
recognized
 
as expenses
 
in the
 
period in
 
which the
 
event or
 
condition that
 
triggers the
 
payment
occurs.
After the
 
commencement date,
 
the carrying
 
amount of
 
lease liabilities
 
is increased
 
to reflect
 
the accretion
 
of interest
 
and
reduced to reflect lease payments made.
 
In addition, the carrying amount of
 
lease liabilities is remeasured when
 
there is a
change in future
 
lease payments arising
 
from a change
 
in an index
 
or specified rate,
 
if there is a
 
modification to the
 
lease
terms and conditions, a change in the estimate of
 
the amount expected to be payable under residual
 
value guarantee, or if
the
 
Company
 
changes
 
its
 
assessment
 
of
 
whether
 
it
 
will
 
exercise
 
a
 
termination,
 
extension
 
or
 
purchase
 
option.
 
The
remeasurement amount of
 
the lease liabilities
 
is recognized as an
 
adjustment to the right-of-use
 
asset, or in the
 
profit and
loss statement when the carrying amount of the right-
 
of-use asset is reduced to zero.
Classification and presentation of lease-related expenses
Depreciation charge for right-of-use assets, expenses
 
related to variable lease payments not included in the measurement
of lease
 
liabilities and
 
loss (gain)
 
related to
 
lease modifications
 
are allocated
 
in the
 
Company’s
 
profit and
 
loss statement
based on their function within the Company,
 
while interest expense on lease liabilities is presented within
 
finance costs.
Cash flow classification
Lease payments related
 
to the principal
 
portion of the
 
lease liabilities are
 
classified as
 
cash flows from
 
financing activities
while lease
 
payments related
 
to the
 
interest portion
 
of the
 
lease liabilities
 
are classified
 
as interest
 
paid within
 
cash flows
from
 
financing
 
activities.
 
Lease
 
incentives
 
received
 
are
 
classified
 
as
 
cash
 
flows
 
from
 
investing
 
activities.
 
Variable
 
lease
payments not included in the measurement of lease
 
liabilities are classified as cash flows from operating activities.
(j)
 
Government assistance and investment tax credits
Investment
 
tax
 
credits
 
are
 
comprised
 
of
 
scientific
 
research
 
and
 
experimental
 
development
 
tax
 
credits.
 
Government
assistance and investment
 
tax credits are
 
recognized when there
 
is reasonable assurance
 
of their recovery
 
and recorded
as a reduction of the related expense or cost
 
of the asset acquired, as applicable. Investment
 
tax credits are subject to the
customary
 
approvals
 
by
 
the
 
pertinent
 
tax
 
authorities.
 
Adjustments
 
required,
 
if
 
any,
 
are
 
reflected
 
in
 
the year
 
when
 
such
assessments are received.
(k)
 
Intangible assets and Goodwill
Intangible
 
assets
 
acquired
 
separately
 
are
 
measured
 
at
 
cost
 
on
 
initial
 
recognition.
 
Following
 
initial
 
recognition,
 
intangible
assets are carried at cost less any accumulated amortization
 
and any accumulated impairment losses.
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
16
Identifiable intangible assets
 
acquired in a
 
business combination
 
are recognized separately
 
from goodwill if
 
they meet the
definition of an intangible
 
asset and if their fair
 
value can be measured
 
reliably.
 
The cost of these
 
intangible assets equals
their acquisition-date fair value.
Subsequent to initial recognition, identifiable intangible assets acquired in a business combination are
 
recorded at cost less
accumulated
 
amortization
 
and
 
impairment
 
losses,
 
if
 
they
 
are
 
amortizable,
 
otherwise
 
only
 
at
 
cost
 
net
 
of
 
accumulated
impairment losses. The useful lives of intangible assets
 
are assessed as either finite or indefinite.
Intangible assets with finite
 
lives are amortized over
 
the useful life of
 
the asset and assessed for
 
impairment whenever there
is
 
an
 
indication
 
of
 
impairment.
 
Amortization
 
expense
 
on
 
the
 
intangible
 
assets
 
with
 
finite
 
lives
 
is
 
recognized
 
in
 
the
consolidated statements of comprehensive loss.
Research
 
costs
 
are
 
charged
 
to
 
comprehensive
 
loss
 
in
 
the year
 
they
 
are
 
incurred,
 
net
 
of
 
related
 
investment
 
tax
 
credits.
Development costs
 
are charged
 
to comprehensive
 
loss in
 
the year they
 
are incurred
 
net of
 
related investment
 
tax credits
unless they meet specific criteria related to technical, market and financial feasibility in order to be recognized as intangible
assets which include:
-
 
the technical feasibility of completing the intangible asset so that
 
it will be available for use or sale;
-
 
the Company has the intention to complete and the ability to
 
use or sell the asset;
-
 
the asset will generate future economic benefits;
-
 
the Company has the resources to complete the asset; and
-
 
ability to measure reliably the expenditure during development.
Costs
 
to
 
establish
 
patents
 
for
 
internally
 
developed
 
technology
 
are
 
considered
 
development
 
costs
 
and
 
are
 
charged
 
to
comprehensive loss in the year they are
 
incurred unless they meet specific criteria related to
 
technical, market and financial
feasibility. Patent costs
 
include legal and other advisor fees to obtain patents,
 
and patent application fees.
Amortization
 
of
 
the
 
development
 
costs
 
is calculated
 
on
 
a straight
 
-line
 
basis
 
over
 
the
 
remaining
 
useful
 
life
 
of
 
the
 
related
patent
 
and
 
begins
 
when
 
development
 
is
 
complete.
 
During
 
the
 
period
 
of
 
development,
 
the
 
asset
 
is
 
tested
 
annually
 
for
impairment. Residual values and useful lives are reviewed
 
at each reporting date.
Amortization is calculated on a straight-line basis:
Useful life
Production backlog
30 months
Patents and development costs
1
 
to
21 years
Goodwill represents the future
 
economic benefits arising from
 
a business combination that are
 
not individually identified and
separately
 
recognized.
 
Goodwill
 
is carried
 
at cost
 
less
 
accumulated
 
impairment
 
losses.
 
Goodwill
 
is not
 
amortized
 
but
 
is
tested for impairment
 
annually or if
 
there is an indication
 
of impairment. Impairment
 
losses recognized for
 
goodwill cannot
be reversed.
(l)
 
Impairment testing of goodwill, other intangible assets,
 
property and equipment and right-of-use assets
The carrying
 
amounts of
 
the Company’s
 
non-financial
 
assets are
 
assessed at
 
each reporting
 
date to
 
determine
 
whether
there is an indication of impairment. If any such indication
 
exists, then the asset’s recoverable amount
 
is estimated.
For impairment assessment purposes, assets are
 
grouped at the lowest levels
 
for which there are largely independent
 
cash
inflows (cash
 
-generating
 
units).
 
As
 
a result,
 
some
 
assets
 
are tested
 
individually
 
for impairment
 
,
 
and some
 
are tested
 
at
cash-generating unit level. Goodwill is allocated to those
 
cash-generating units that are expected to benefit from
 
synergies
of
 
a
 
related
 
business
 
combination
 
and
 
represents
 
the
 
lowest
 
level
 
within
 
the
 
Company
 
at
 
which
 
management
 
monitors
goodwill.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
17
Cash-generating units to which goodwill
 
has been allocated are tested for
 
impairment at least annually.
 
All other individual
assets
 
or
 
cash-generating
 
units
 
are
 
tested
 
for
 
impairment
 
whenever
 
events
 
or
 
changes
 
in
 
circumstances
 
indicate
 
the
carrying amount may not be recoverable.
The recoverable amount
 
of an asset
 
or cash-generating unit
 
(CGU) is the
 
greater of its
 
value in use and
 
its fair value
 
less
costs to sell.
 
In assessing
 
value in use,
 
the estimated
 
future cash flows
 
are discounted to
 
their present value
 
using a pre-
tax discount
 
rate that
 
reflects current
 
market assessments
 
of the
 
time value
 
of money
 
and the
 
risks specific
 
to the
 
asset.
For the purposes of testing non-financial assets for
 
impairment, management has identified
one
 
CGU.
An impairment loss is
 
recognized if the carrying amount of
 
an asset or its
 
CGU exceeds its recoverable amount. Impairment
losses are
 
recognized in
 
the consolidated
 
statements
 
of comprehensive
 
loss. Impairment
 
losses recognized
 
in respect
 
of
the CGU are allocated first to reduce the carrying amount of goodwill allocated to the units, and then to reduce the carrying
amounts on a pro-rata basis of the other assets in the
 
unit.
(m)
 
Provisions and contingent liabilities
Provisions for legal
 
disputes, onerous contracts
 
or other claims
 
are recognized when
 
the Company has
 
a present legal
 
or
constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from
the Company and amounts can be estimated reliably.
 
The timing or amount of the outflow may still be uncertain.
Provisions are measured at the estimated
 
expenditure required to settle the
 
present obligation, based on the
 
most reliable
evidence available at the reporting date, including the risks and uncertainties associated with the
 
present obligation. Where
there
 
are
 
a
 
number
 
of
 
similar
 
obligations,
 
the
 
likelihood
 
that
 
an
 
outflow
 
will
 
be
 
required
 
in
 
settlement
 
is
 
determined
 
by
considering the class
 
of obligations as a
 
whole. Provisions are discounted
 
to their present values,
 
where the time value
 
of
money is material.
No
 
liability
 
is
 
recognized
 
if
 
an
 
outflow
 
of
 
economic
 
resources
 
as
 
a
 
result
 
of
 
present
 
obligations
 
is
 
not
 
probable.
 
Such
situations are disclosed as contingent liabilities unless
 
the outflow of resources is remote.
(n)
 
Employee benefits
Share-based payments
The Company applies a fair
 
value-based method of accounting to
 
all share-based payments. Employee
 
and director stock
options are measured
 
at their fair
 
value of each
 
tranche on the
 
grant date and
 
recognized in its
 
respective vesting period.
Non-employee stock options
 
are measured when
 
the services are
 
rendered by the
 
consultant at the
 
fair value of
 
the services
received if the
 
fair value can
 
be measured reliably.
 
In the case
 
the fair value
 
of the services
 
cannot be measured
 
reliably,
the services are measured
 
indirectly using the fair
 
value of the equity
 
instruments granted at
 
grant date. The
 
cost of stock
options is presented
 
as share-based
 
payment expense.
 
On the
 
exercise of stock
 
options, share
 
capital is
 
credited for
 
the
consideration received
 
and for
 
the fair
 
value amounts
 
previously credited
 
to contributed
 
surplus. The
 
Company uses
 
the
Black-Scholes option-pricing model to estimate the fair value
 
of share-based payments.
Deferred profit-sharing plan
The Company
 
established a
 
yearly Deferred
 
Profit-Sharing
 
Plan (“DPSP”)
 
for all
 
eligible employees
 
who have
 
materially
and
 
significantly
 
contributed
 
to
 
the
 
prosperity
 
and
 
profits
 
of
 
the
 
Company.
 
The
 
significance
 
of
 
any
 
contribution
 
of
 
any
employee to the prosperity and profits of the Company for purposes of eligibility in the DPSP is determined by the Board of
Directors of the Company
 
upon such relevant information
 
as the Board, in its
 
sole discretion, may find
 
relevant. All related
persons to the Company are excluded from participating in
 
the DPSP.
For all eligible
 
employees, the Company is
 
required to contribute to
 
the DPSP out
 
of the profits
 
of the Company. The amount
of the Company’s contribution will be such amount which, in the opinion of its Board of Directors, is
 
warranted by the profits
and overall financial
 
position of the
 
Company.
 
During the year,
 
the Company contributed
 
$
Nil
 
to the DPSP
 
($
Nil
 
in 2021).
Obligations for contributions
 
to the DPSP
 
are recognized as
 
an employee benefit
 
expense in the
 
consolidated statements
of comprehensive loss in the periods during which services
 
are rendered by employees.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
18
Short-term employee benefits
Short-term employee benefit obligations
 
are measured on an undiscounted
 
basis and are expensed as
 
the related service
is provided.
A liability is
 
recognized for the amount
 
expected to be
 
paid under the
 
short-term incentive plan if
 
the Company has a
 
present
legal or constructive obligation
 
to pay this amount as
 
a result of past service
 
provided by the employee,
 
and the obligation
can be estimated reliably.
(o)
 
Equity instruments
 
Issuance of equity instruments
Incremental
 
costs
 
directly
 
attributable
 
to
 
the
 
issue
 
of
 
equity-classified
 
shares
 
are
 
recognized
 
as
 
a
 
deduction
 
from
 
the
common
 
shares
 
and
 
warrants,
 
net
 
of
 
any
 
tax
 
effects.
 
Upon
 
issuance
 
of
 
units,
 
the
 
Company
 
uses
 
the
 
residual
 
value
 
to
allocate the net proceeds between common shares and
 
warrants.
Extinguishing financial liabilities with equity instruments
When
 
equity
 
instruments
 
issued
 
to
 
a
 
creditor
 
to
 
extinguish
 
all
 
or
 
part
 
of
 
a
 
financial
 
liability
 
are
 
recognized
 
initially,
 
the
Company
 
measures
 
them
 
at
 
the
 
fair
 
value
 
of
 
the
 
equity
 
instruments
 
issued,
 
unless
 
that
 
fair
 
value
 
cannot
 
be
 
reliably
measured. If the fair
 
value of the equity
 
instruments issued cannot
 
be reliably measured,
 
then the equity instruments
 
shall
be measured to reflect the fair value of the financial liability
 
extinguished.
Contributed surplus
Contributed
 
surplus
 
includes
 
amounts
 
related
 
to
 
equity-settled
 
share-based
 
payments
 
until
 
such
 
equity
 
instruments
 
are
exercised or settled, in which case the amounts are transferred
 
to common shares or reversed upon forfeiture if not vested.
It also includes the unexercised conversion option at the
 
maturity of the convertible debentures.
(p)
 
Financial Instruments
Recognition:
The Company
 
recognizes a
 
financial asset
 
or a
 
financial liability
 
when it
 
becomes a
 
party to
 
the contractual
 
provisions of
the instrument.
Purchases
 
or
 
sales
 
of
 
financial
 
assets
 
that
 
require
 
delivery
 
of
 
assets
 
within
 
the
 
time
 
frame
 
generally
 
established
 
by
regulation or
 
convention in
 
the marketplace
 
(regular way
 
trades) are
 
recognized on
 
the trade
 
date, i.e.,
 
the date
 
that the
Company commits to purchase or sell the asset.
Classification
Financial
 
assets
 
are
 
classified
 
at
 
amortized
 
cost,
 
fair
 
value
 
through
 
profit
 
or
 
loss
 
(“FVTPL”)
 
or
 
fair
 
value
 
through
 
other
comprehensive
 
income
 
(“FVOCI”)
 
based
 
on
 
the
 
Company’s
 
business
 
model
 
for
 
managing
 
the
 
financial
 
assets
 
and
 
the
contractual cash flow characteristics of these assets.
 
Assessment and decision on the business model
 
approach used is an
accounting judgment.
A financial
 
asset
 
is measured
 
at amortized
 
cost
 
if it
 
is held
 
within
 
a business
 
model
 
whose
 
objective
 
is to
 
hold financial
assets in order to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding. The Company
 
includes in this category cash
and cash equivalents, trade accounts receivable, other receivables,
 
royalties receivable and deposits.
A financial asset is measured at fair value through profit or
 
loss (“FVTPL”) if:
(a)
 
Its contractual terms do not give rise to
 
cash flows on specified dates that are
 
solely payments of principal and interest
(SPPI) on the principal amount outstanding; or
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
19
(b)
 
It
 
is
 
not
 
held
 
within
 
a
 
business
 
model
 
whose
 
objective
 
is
 
either
 
to
 
collect
 
contractual
 
cash
 
flows,
 
or
 
to
 
both
 
collect
contractual cash flows and sell; or
(c)
 
At
 
initial
 
recognition,
 
it
 
is
 
irrevocably
 
designated
 
as
 
measured
 
at
 
FVTPL
 
when
 
doing
 
so
 
eliminates
 
or
 
significantly
reduces a measurement or
 
recognition inconsistency that would
 
otherwise arise from
 
measuring assets or
 
liabilities or
recognizing the gains and losses on them on different
 
bases.
The Company includes in this category strategic investments
 
in equity instruments.
All financial liabilities,
 
other than
 
those measured
 
at fair
 
value through
 
profit or
 
loss, are
 
included in the
 
financial liabilities
measured at
 
amortized cost.
 
The Company
 
includes in
 
this category
 
bank indebtedness,
 
accounts payable
 
and accrued
liabilities and term loans. The balance due on business
 
combination is measured at FVTPL.
Initial measurement
Financial assets and
 
liabilities (other than
 
financial assets at
 
FVTPL) are measured
 
initially at
 
their fair value
 
plus any directly
attributable incremental costs of acquisition or issue.
Financial assets
 
and financial
 
liabilities at
 
FVTPL are
 
recorded in
 
the consolidated
 
statements
 
of financial
 
position at
 
fair
value. All transaction costs for such instruments are recognized
 
directly in profit or loss.
Subsequent measurement
Financial assets (other than financial assets at FVTPL) are measured at amortized
 
cost using the effective interest method
less
 
any
 
allowance
 
for
 
impairment.
 
Gains
 
and
 
losses
 
are
 
recognized
 
in
 
profit
 
or
 
loss
 
when
 
the
 
debt
 
instruments
 
are
derecognized or impaired, as well as through the amortization
 
process.
Financial liabilities are
 
measured at amortized
 
cost using the
 
effective interest
 
method except for
 
derivatives and financial
liabilities designated at
 
FVTPL. Gains and
 
losses are recognized
 
in profit or
 
loss when the
 
liabilities are derecognized,
 
as
well as through
 
the amortization
 
process. Changes
 
in fair value
 
of financial liabilities
 
attributable to changes
 
in the entity’s
own credit risk are to be presented in other comprehensive
 
income unless they affect amounts recorded
 
in income.
Fair value measurement principles
Fair value is the price that would be received to sell
 
an asset or paid to transfer a liability in an orderly
 
transaction between
market participants at the measurement date.
Where financial assets and
 
financial liabilities measured
 
at fair value though
 
profit or loss have
 
a quoted price in
 
an active
market at the reporting date,
 
the fair value is based
 
on this price. A financial
 
instrument is regarded as
 
quoted in an active
market if
 
quoted prices
 
are readily
 
and regularly
 
available from
 
a stock
 
exchange and
 
those prices
 
represent actual
 
and
regularly occurring market transactions on an arm’s
 
length basis.
Securities traded on stock exchanges are stated at market
 
price based on the closing price on the
 
relevant valuation day.
Derecognition
A financial asset is derecognized
 
where the rights to receive
 
cash flows from the asset
 
have expired, or the Company
 
has
transferred its
 
rights to receive
 
cash flows
 
from the asset.
 
The Company derecognizes
 
a financial liability
 
when the obligation
under the liability is discharged, cancelled,
 
or expired.
Offsetting of financial instruments
Financial assets and financial
 
liabilities are offset,
 
and the net amount
 
reported in the
 
consolidated statements
 
of financial
position if, and only if, there is a currently enforceable
 
legal right to offset the recognized amounts
 
and there is an intention
to settle on a net basis, or to realize the assets and settle
 
the liabilities simultaneously.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
20
Impairment of financial instruments
The
 
Company
 
applies
 
the
 
“expected
 
credit
 
loss”
 
(“ECL”)
 
model
 
to
 
financial
 
assets
 
measured
 
at
 
amortized
 
cost.
 
The
Company’s financial
 
assets subject to
 
this impairment model
 
are cash and
 
cash equivalents,
 
trade and other
 
receivables,
costs and profits in excess of billings on uncompleted
 
contracts, royalties receivable and deposits.
The trade accounts receivable have no financing component
 
and have maturities of less than 12 months
 
at amortized cost
and,
 
as
 
such,
 
the
 
Company
 
applies
 
the
 
simplified
 
approach
 
for
 
expected
 
credit
 
losses
 
(ECLs)
 
to
 
all
 
its
 
trade
 
accounts
receivable. Therefore, the Company recognizes a loss
 
allowance based on lifetime ECLs at each reporting date.
The Company’s
 
approach to
 
ECLs reflects
 
a probability-weighted
 
outcome, the
 
time value
 
of money
 
and reasonable
 
and
supportable
 
information
 
that
 
is
 
available
 
without
 
undue
 
cost
 
or
 
effort
 
at
 
the
 
reporting
 
date
 
about
 
past
 
events,
 
current
conditions, and forecasts of future economic conditions.
The Company
 
uses
 
the
 
provision
 
matrix
 
as a
 
practical
 
expedient
 
to
 
measure
 
ECLs
 
on
 
trade
 
receivables
 
and
 
costs
 
and
profits in excess of billings on uncompleted contracts, based on days past due for
 
groupings of receivables with similar loss
patterns. Contracts with particular
 
recovery history are analysed
 
separately from other accounts.
 
The loss rates are based
on historical observed loss rates over the expected life of the receivables and are adjusted for forward-looking estimates to
reflect differences between economic conditions
 
during the period over which the historical data has been collected.
Impairment
 
losses
 
are
 
recognized
 
in
 
profit
 
or
 
loss
 
and
 
reflected
 
in
 
an
 
allowance
 
account
 
presented
 
in
 
reduction
 
of
receivables and cost in excess of billings on uncompleted
 
contracts.
Write-off
The
 
gross
 
carrying
 
amount
 
of
 
a
 
financial
 
asset
 
is
 
written
 
off
 
when
 
the
 
Company
 
has
 
no
 
reasonable
 
expectations
 
of
recovering a financial asset in its entirety or a portion thereof.
Failure to engage and communicate with
 
the Company on alternative payment arrangements and
 
failure to make payments
within 90
 
days, amongst
 
others, are
 
considered possible
 
indicators of
 
no reasonable
 
expectation of
 
recovery of
 
accounts
receivable.
Effective Interest Method
The
 
effective
 
interest
 
method
 
is
 
a
 
method
 
of
 
calculating
 
the
 
amortized
 
cost
 
of
 
a
 
financial
 
asset/financial
 
liability
 
and
 
of
allocating
 
interest
 
income/expense
 
over
 
the relevant
 
period. The
 
effective
 
interest
 
rate is
 
the
 
rate
 
that
 
exactly
 
discounts
estimated
 
future
 
cash
 
receipts/payments
 
(including
 
all
 
fees
 
and
 
points
 
paid
 
or
 
received
 
that
 
form
 
an
 
integral
 
part
 
of
 
the
effective
 
interest
 
rate,
 
transaction
 
costs
 
and
 
other
 
premiums
 
or
 
discounts)
 
through
 
the
 
expected
 
life
 
of
 
the
 
financial
instrument, or (when appropriate) a shorter period, to the net
 
carrying amount on initial recognition.
(q)
 
Future Changes and Amendments to Accounting Standards
 
and Interpretations
i)
 
IAS 1
Presentation of Financial Statements - Accounting Policies
In
 
2021,
 
the
 
IASB
 
amended
 
IAS
 
1,
 
Presentation
 
of
 
Financial
 
Statements,
 
to
 
require
 
entities
 
to
 
disclose
 
their
 
material
accounting policy information rather than their significant accounting policies. Additional amendments to IAS 1 are made to
explain how an entity can identify
 
a material accounting policy.
 
The amendments are effective
 
for annual reporting periods
beginning on or after January 1, 2023, with earlier application
 
permitted.
ii)
 
IAS 1
Presentation of Financial Statements - Classification of Liabilities
The
 
IASB
 
released
 
Classification
 
of
 
Liabilities
 
as
 
Current
 
or
 
Non-current
 
(Amendments
 
to
 
IAS
 
1),
 
which
 
clarifies
 
the
guidance in IAS 1 Presentation
 
of Financial Statements on whether
 
a liability should be classified
 
as either current or non-
current
 
relating
 
to
 
the
 
right
 
to
 
defer
 
settlement
 
of
 
the
 
liability
 
for
 
at
 
least
 
twelve
 
months
 
after
 
the
 
reporting
 
date.
 
The
amendment is effective
 
for annual reporting
 
periods beginning on
 
or after January 1,
 
2023, with earlier
 
application permitted.
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
21
iii)
 
IAS 12
 
Income Taxes
The IASB released
 
Deferred Tax
 
Related to Assets
 
and Liabilities Arising
 
from a Single
 
Transaction (Amendments
 
to IAS
12). The amendment relates
 
to the recognition of deferred
 
tax when an entity
 
accounts for transactions, such
 
as leases or
decommissioning obligations, by recognizing both an asset and a liability. The objective of this amendment is to narrow the
initial recognition exemption
 
in paragraphs 15
 
and 24 of
 
IAS 12, so
 
that it would
 
not apply to
 
transactions that give
 
rise to
both taxable and deductible temporary differences,
 
to the extent the amounts recognized for the temporary
 
differences are
the
 
same.
 
The
 
amendment
 
is
 
effective
 
for
 
annual
 
reporting
 
periods
 
beginning
 
on
 
or
 
after
 
January 1,
 
2023,
 
with
 
earlier
application permitted.
iv)
 
IAS 37
Provisions, Contingent Liabilities and Contingent Assets
The IASB
 
released Onerous
 
Contracts -
 
Cost of
 
Fulfilling a
 
Contract (Amendments
 
to IAS
 
37). The
 
amendments specify
which costs an
 
entity includes in
 
determining the cost
 
of fulfilling a
 
contract for the
 
purpose of assessing
 
whether the contract
is onerous.
 
Costs
 
to be
 
included
 
comprise
 
the costs
 
that
 
relate directly
 
to the
 
contract,
 
which
 
includes
 
both
 
incremental
costs of fulfilling the contract and an allocation
 
of other costs that relate directly to
 
fulfilling the contract. The amendment
 
is
effective for annual reporting periods beginning
 
on or after January 1, 2023, with earlier application permitted.
The Company has determined that the adoption of these standards or amendments will not have a significant impact on its
consolidated financial statements as of the date of adoption.
5.
 
Significant accounting judgments, estimates and assumptions
The preparation of
 
consolidated financial statements requires management
 
to make judgments, estimates
 
and assumptions
based on
 
currently
 
available information
 
that affect
 
the
 
reported amounts
 
of assets,
 
liabilities and
 
contingent
 
assets and
liabilities at the
 
date of the
 
consolidated financial
 
statements and
 
reported amounts
 
of revenues and
 
expenses during the
reporting period.
 
Estimates and
 
judgments are
 
continuously evaluated
 
and are
 
based on
 
management’s
 
experience and
other factors, including expectations of future events
 
that are believed to be
 
reasonable under the circumstances. However,
actual
 
results
 
could
 
differ
 
from
 
those
 
estimated.
 
By
 
their
 
very
 
nature,
 
these
 
estimates
 
are
 
subject
 
to
 
measurement
uncertainty and the effect of any changes in estimates
 
on the financial statements of future periods could be
 
material.
In the process of applying the Company’s
 
accounting policies, management has made the following
 
judgments, estimates,
and assumptions which
 
have the most
 
significant effect on the
 
amounts recognized in the
 
consolidated financial statements.
Critical judgments in applying accounting policies
(a)
 
Assessment of
 
whether there
 
is any
 
indication that
 
property and
 
equipment, right-of-use
 
assets and
 
intangible assets
may be impaired
At each reporting date,
 
the Company reviews
 
the carrying amounts
 
of its property and
 
equipment, right-of-use assets
 
and
intangible assets
 
with a
 
finite useful
 
life to
 
determine whether
 
there is
 
any indication
 
of impairment.
 
If any
 
such indication
exists, then the
 
asset’s recoverable
 
amount is estimated.
 
Management’s judgment
 
is required in
 
assessing whether
 
there
is any indication that an asset may be impaired.
(b)
 
Intangible assets
The recognition of development costs as intangible
 
assets requires judgments to determine whether the
 
required criteria for
recognition are met including management estimates of future
 
economic benefits.
(c)
 
Sale of intellectual property and related royalties
The recognition
 
of variable
 
consideration related
 
to the
 
sale of
 
intellectual property
 
requires management’s
 
judgments to
determine
 
whether
 
it
 
is
 
highly
 
probable
 
that
 
a
 
reversal
 
will
 
not
 
occur
 
when
 
the
 
uncertainty
 
associated
 
with
 
the
 
variable
consideration is subsequently resolved.
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
22
(d)
 
Investment tax credits receivable
The investment tax credits are estimated
 
by management based on quantitative
 
and qualitative analysis and interpretation
of various government programs,
 
related restrictions, limitations,
 
definitions, and eligibility
 
conditions. Uncertainty over
 
the
eligibility and final assessment by taxation authorities of investment
 
tax credits requires judgment. Management involves its
technical staff
 
and external
 
specialists in
 
determining if
 
the expenditures
 
meet the
 
requirements of
 
the different
 
tax credit
claims.
Key sources of estimation uncertainty
(e)
 
Revenue recognition
Revenue recognition for long-term contracts completion requires the use of estimates to determine the recorded amount of
revenues, costs in excess of billings and billings in excess
 
of costs and profits on uncompleted contracts.
The determination of anticipated
 
costs for completing
 
a contract is based on
 
estimates that can
 
be affected by a
 
variety of
factors,
 
including
 
the
 
cost
 
of
 
materials,
 
labour
 
and
 
sub-contractors,
 
as
 
well
 
as
 
potential
 
claims
 
from
 
customers
 
and
subcontractors.
As risks and
 
uncertainties are different for
 
each project, the
 
sources of variations between
 
anticipated costs and actual
 
costs
incurred will also vary by project. The determination
 
of estimates is based on the Company’s
 
business practices as well as
its historical experience. Estimates are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in
the period in which the estimate is revised.
Given
 
this
 
estimation
 
process,
 
it
 
is
 
possible
 
that
 
changes
 
in
 
future
 
conditions
 
could
 
cause
 
a
 
material
 
change
 
in
 
the
recognized amount of revenues
 
and costs and
 
profits in excess of
 
billings on uncompleted contracts
 
and accrued expenses.
Agreements that
 
contain multiple
 
deliverables require
 
the use
 
of judgment
 
to determine
 
whether they
 
contain separately
identifiable performance obligations and to allocate the consideration
 
received to each performance obligation.
(f)
 
Share-based payments
The Company uses the
 
fair value method
 
of valuing compensation
 
cost associated with
 
the Company’s
 
stock option plan.
Estimating fair value
 
requires determining the
 
most appropriate valuation
 
model for a grant
 
of equity instruments,
 
which is
dependent
 
on
 
the
 
terms
 
and
 
conditions
 
of
 
the
 
grant.
 
This
 
also
 
requires
 
determining
 
the
 
most
 
appropriate
 
inputs
 
to
 
the
valuation model including the
 
expected life of the option
 
and volatility.
 
The assumptions and models
 
are discussed in note
22.
(g)
 
Useful lives of property and equipment and intangible
 
assets
The Company estimates
 
the useful lives
 
of property and
 
equipment and intangible
 
assets based on
 
the period over
 
which
the assets are expected to be available
 
for use. The estimated useful lives of property and equipment and intangible
 
assets
are reviewed periodically and are updated
 
if expectations differ from previous
 
estimates due to physical wear and tear
 
and
legal or other
 
limits on the
 
use of the
 
relevant assets. In addition,
 
the estimation of
 
the useful lives
 
of property and
 
equipment
and intangible assets are based
 
on management’s experience with similar assets. It
 
is possible, however, that future results
of
 
operations
 
could
 
be
 
materially
 
affected
 
by
 
changes
 
in
 
the
 
estimates
 
brought
 
about
 
by
 
changes
 
in
 
factors
 
mentioned
above. The
 
amounts and
 
timing of
 
recorded expenses
 
for any
 
period would
 
be affected
 
by changes
 
in these
 
factors and
circumstances. Useful lives, depreciation and amortization
 
rates and residual values are reviewed at least annually.
(h)
 
Impairment of non-financial assets and goodwill
In assessing impairment,
 
management estimates the
 
recoverable amount
 
of each asset or
 
cash generating unit
 
based on
expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about
future operating results and the determination of a suitable
 
discount rate (see note 4 (l)).
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
23
(i)
 
Fair value of strategic investments
Where the fair
 
values of investments
 
recorded in the
 
consolidated statements
 
of financial position
 
cannot be derived
 
from
active markets,
 
they
 
are
 
determined
 
using
 
valuation
 
techniques
 
including
 
the
 
Black-Scholes
 
model.
 
The
 
inputs
 
to
 
these
models are taken from observable markets where possible, but where
 
this is not feasible, a degree of judgment is required
in establishing the fair values. The judgments
 
include considerations of inputs such as the expected volatility
 
and the initial
allocation of the consideration paid between the fair value of the common shares and warrants
 
received. Should any of the
inputs to these models or changes in assumptions about
 
these factors occur,
 
this could affect the reported fair value of the
investments.
(j)
 
Right-of-use assets and lease liabilities
In determining
 
the carrying
 
amount of
 
the right-of-use
 
assets and
 
corresponding lease
 
liabilities, assumptions
 
include the
non-cancellable term of the lease
 
plus periods covered by an
 
option to renew or purchase
 
the assets, estimated useful lives
of the related assets, and incremental borrowing
 
rate. Renewal and purchase options are only
 
included in the lease term if
management is reasonably certain to renew.
 
Management considers factors such as market conditions, comparable
 
rental
rates and similar property values. The
 
Company is also required to estimate the incremental borrowing
 
rate specific to each
portfolio of leased assets with similar characteristics
 
if the interest rate in the lease is not readily
 
determined. Management
determines the incremental borrowing rate using the base
 
rate for similar loans plus a risk premium.
(k)
 
Income taxes
The Company has unused available tax
 
losses, deductible temporary differences and investment tax
 
credits. The Company
recognizes deferred income tax assets for these unused tax losses and deductible temporary differences only to the extent
that, in
 
management’s
 
opinion, it
 
is probable
 
that future
 
taxable profit
 
will be
 
available against
 
which these
 
available tax
losses and temporary differences
 
can be utilized. The Company recognizes
 
investment tax credits when it
 
has reasonable
assurance
 
that
 
it
 
has
 
complied
 
with
 
the
 
conditions
 
of
 
the
 
program
 
and
 
that
 
the
 
amounts
 
will
 
be
 
realized
 
(i.e.
 
that
 
it
 
will
generate future federal income taxes
 
payable against which the tax
 
credits can be applied). The
 
Company’s projections of
future taxable profit
 
involve the use
 
of significant assumptions
 
and estimates with
 
respect to a
 
variety of factors,
 
including
future sales
 
and operating
 
expenses. There
 
can be
 
no assurance
 
that the
 
estimates and
 
assumptions used in
 
our projections
of future
 
taxable
 
income will
 
prove to
 
be accurate
 
predictions
 
of the
 
future,
 
and in
 
the event
 
that
 
our assessment
 
of the
recoverability of these deferred tax
 
assets and investment tax credits
 
changes in the future, a
 
material increase or reduction
in the carrying value of
 
these deferred tax assets and
 
investment tax credits could be required, with
 
a corresponding charge
to net loss.
(l)
 
Business combinations
Fair value of assets acquired and liabilities assumed in a
 
business combination is estimated based on information available
at
 
the
 
date
 
of
 
acquisition
 
and
 
involves
 
considerable
 
judgment
 
in
 
determining
 
the
 
fair
 
values
 
assigned
 
to
 
the
 
identifiable
assets acquired and liabilities
 
assumed on acquisition. Among
 
other things, the determination
 
of these fair values involves
the
 
use
 
of
 
discounted
 
cash
 
flow
 
analyses
 
and
 
estimated
 
profit
 
margins
 
on
 
contracts
 
in
 
progress.
 
In
 
addition,
 
the
determination of the
 
contingent consideration due on
 
the business combination
 
is based on
 
the estimations of
 
the probability
and timing of completing the predetermined milestones
 
(see note 6);
(m) COVID-19 pandemic
The COVID-19
 
pandemic continues
 
to cause
 
significant financial
 
market and
 
social dislocation.
 
The situation
 
is dynamic
with various cities and
 
countries around the world responding
 
in different ways to address
 
the outbreak. While the
 
Company
has experienced
 
the impact
 
of the outbreak
 
of the Coronavirus
 
(COVID 19)
 
on its
 
operations, it
 
had continued
 
to operate
during the
 
current
 
pandemic.
 
In the
 
event of
 
a prolonged
 
continuation
 
of the
 
pandemic,
 
it is
 
not clear
 
what
 
the potential
impact may be on the Company’s business,
 
financial position and financial performance.
6.
 
Business combination
On August 11, 2021, the Company completed the
 
acquisition of Pyro Green-Gas
 
Inc. and its
 
subsidiaries, a Montreal-based
company
 
which
 
offers
 
technologies,
 
equipment,
 
and
 
expertise
 
in
 
the
 
area
 
of
 
biogas
 
upgrading,
 
as
 
well
 
as
 
air
 
pollution
controls, for
 
a maximum
 
purchase price
 
consideration of $
4,355,600
 
in cash,
 
subject to customary
 
post-closing adjustments.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
24
In addition, the Company settled
 
a pre-existing loan receivable from Pyro
 
Green-Gas Inc. of approximately $
1,744,000
. The
transaction was executed
 
through a purchase
 
of the entirety of
 
the common class
 
“A” shares of Pyro
 
Green-Gas Inc. This
acquisition
 
enables
 
the
 
Company
 
to
 
springboard
 
into
 
the
 
renewable
 
natural
 
gas
 
market
 
and
 
provides
 
an
 
advantage
compared
 
to building
 
its own
 
operations.
 
In addition,
 
the Company
 
will now
 
have
 
a presence
 
in Italy
 
and
 
India, and
 
the
acquisition will provide potential synergies with the Company’s land-based waste
 
destruction offerings. The purchase price
will
 
be
 
paid
 
upon
 
the
 
achievement
 
of
 
various
 
contract
 
and
 
business-related
 
milestones
 
by
 
Pyro
 
Green-Gas
 
Inc.
 
The
Company’s assessment
 
is that
 
these milestones
 
will be
 
realized at
 
various moments
 
during the
 
next
30 months
 
following
the date of the acquisition. The contingent consideration
 
was estimated using a discount rate of
8
%.
The acquisition was accounted for using the purchase
 
method and the final allocation of the purchase price is as
 
follows:
$
Total consideration
Consideration paid at closing
1
Contingent consideration
3,841,999
Consideration paid at closing and continent consideration
3,842,000
Settlement of pre-existing loan receivable from Pyro Green-Gas
1,744,400
5,586,400
Net assets acquired
Current assets
1
5,186,086
ROU asset
477,608
Property and equipment
42,552
Intangible assets and Goodwill
2
4,780,607
Deferred income tax asset
79,360
Current liabilities
(4,507,907)
Non-current liabilities
(471,906)
5,586,400
1
 
Includes $
807,946
 
of cash and trade receivables with a net fair value of $
3,255,000
, including an allowance for expected credit losses
of $
512,592
.
2
 
The goodwill of $
2,660,607
 
recorded on the transaction
 
is mainly attributable
 
to the expected growth
 
in biogas upgrading market
 
and
the expertise of the workforce, and it is not expected to be deductible for tax purposes.
During the
 
period ended
 
December 31, 2021,
 
the Company recognized
 
revenue of $
6,800,090
 
and net
 
earnings of
 
$807,395
related to the operations generated by Pyro Green-Gas
 
Inc. since the acquisition date.
In connection with
 
this acquisition, the
 
Company incurred acquisition-related
 
costs of $
101,157
, recognized within
 
Selling,
General and Administrative expenses in the 2021 consolidated
 
statements
 
of comprehensive loss.
The
 
maximum
 
purchase
 
price
 
consideration
 
of
 
$
4,355,600
 
was
 
discounted
 
to
 
$
3,841,999
,
 
at
 
August
 
11,
 
2021
 
and
 
an
accretion expense of $
173,350
 
was recognized in Net finance costs in
 
the consolidated statements of comprehensive
 
loss
for the year
 
ended December
 
31, 2022,
 
compared to
 
a recognized
 
accretion expense
 
of $
110,204
 
during the year
 
ended
December 31, 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
25
7.
 
Revenues
Revenues by product line:
The company’s revenues are generated primarily
 
from the following:
2022
2021
$
$
Revenue from contracts with customers by product
 
line:
High purity metallurgical grade silicon & solar grade silicon from
 
quartz
(PUREVAP™)
6,272,697
6,138,111
Aluminium and zinc dross recovery (DROSRITE™)
1,912,807
7,940,771
Development and support related to systems supplied to the
 
U.S. Navy
1,288,356
7,522,809
Torch
 
-related sales
5,558,210
2,084,511
Biogas upgrading and pollution controls
3,347,443
6,800,090
Other sales and services
633,990
582,058
19,013,503
31,068,350
The following is a summary of the Company’s
 
revenues by revenue recognition method:
2022
2021
$
$
Revenue from contracts with customers:
Sales of goods under long-term contracts recognized over
 
time
13,997,163
25,918,594
Sales of goods at a point of time
1,135,498
1,533,910
Other revenue:
 
Sale of intellectual properties (i)
3,600,000
3,300,000
Royalties
280,842
315,846
19,013,503
31,068,350
See note 32 for sales by geographic area.
(i)
 
Sale of intellectual properties
During the year, the Company sold
 
intellectual property to a subsidiary
 
of a company in
 
which it holds a
 
strategic investment
for
 
a
 
non-refundable
 
fee
 
of
 
$
3,600,000
.
 
Under
 
the
 
terms
 
of
 
the
 
sale
 
agreement,
 
control
 
of
 
the
 
intellectual
 
property
 
was
transferred
 
to
 
the
 
purchaser
 
and
 
the
 
Company
 
has
 
no
 
obligation
 
to
 
undertake
 
activities
 
that
 
will
 
significantly
 
affect
 
the
intellectual property.
In June 2021, the Company
 
sold intellectual property to
 
a subsidiary of a company
 
in which it holds a strategic
 
investment
for
 
a
 
non-refundable
 
fee
 
of
 
$
3,300,000
.
 
Under
 
the
 
terms
 
of
 
the
 
sale
 
agreement,
 
control
 
of
 
the
 
intellectual
 
property
 
was
transferred
 
to
 
the
 
purchaser
 
and
 
the
 
Company
 
has
 
no
 
obligation
 
to
 
undertake
 
activities
 
that
 
will
 
significantly
 
affect
 
the
intellectual property.
 
The terms of the agreement also include additional
 
variable consideration that can be received based
on the
 
greater of
10
% of
 
sales made
 
by the
 
purchaser,
 
and royalties
 
of $
50,000
 
in 2023,
 
$
100,000
 
in 2024,
 
$
150,000
 
in
2025, and $
200,000
 
in 2026 and every year thereafter.
Transaction price
 
allocated to remaining performance obligations
As
 
at
 
December 31,
 
2022,
 
revenue
 
expected
 
to
 
be
 
recognized
 
in
 
the
 
future
 
related
 
to
 
performance
 
obligations
 
that
 
are
unsatisfied (or partially satisfied) at the reporting
 
date is $
26,741,550
 
(2021 - $
34,258,148
, excluding a contract which was
terminated in the fall
 
of 2022). Revenue will
 
be recognized as the
 
Company satisfies its performance obligations
 
under long-
term contracts, which is expected to occur over the
 
next
3
 
years.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
26
8.
 
Cash and cash equivalents
As at
 
December 31, 2022
 
and 2021,
 
there are
no
 
restrictions on
 
cash and
 
cash equivalents.
 
Cash and
 
cash equivalents
include the following components:
2022
2021
$
$
Cash
 
3,445,649
3,568,561
Guaranteed investment certificates
8,633,952
Cash and cash equivalents
 
3,445,649
12,202,513
Guaranteed investment certificates were
 
instruments issued by Canadian
 
financial institutions, bore interest at
 
rates varying
from
0.08
% to
0.86
%, and held to maturity or were redeemed during the
 
year 2022.
9.
 
Accounts receivable
Details of accounts receivable based on past due terms
 
were as follows:
December 31,
December 31,
2022
2021
$
$
Current
6,578,269
1,919,786
1 – 30 days
15,959
32,028
31 – 60 days
57,944
7,006,652
61 – 90 days
718,239
788,330
Greater than 90 days
13,790,716
6,317,239
Holdback receivable
1,536,115
974,878
Total
 
trade accounts receivable
22,697,242
17,038,913
Allowance for expected credit loss
(4,693,283)
(520,000)
Other receivables
240,560
270,536
Sales tax receivable
380,112
850,167
18,624,631
17,639,616
As
 
at
 
December 31,
 
2022
 
the
 
allowance
 
for
 
expected
 
credit
 
loss
 
on
 
trade
 
accounts
 
receivable
 
is
 
$
4,693,283
 
(2021
 
-
$
520,000
), $
543,283
 
which was included
 
through the business
 
combination and only varied
 
due to foreign
 
exchange, and
$
4,150,000
 
recognized during 2022. The
 
portion recognized during the
 
year includes $
3,765,000
 
attributable to one specific
customer, whereby the carrying amount has been
 
reduced from $
12,810,231
 
to $
9,045,231
. The carrying value of all other
trade receivables was reduced from $
9,887,011
 
to $
8,958,728
. On the basis of the Company’s expected
 
credit loss policy,
the allowance was determined generally by applying a loss rate of
1
% on balances 1-30 days past the invoice date,
2
% for
31-60 days,
3
% for
 
61-90 days
 
and a
 
minimum of
10
% for
 
those beyond
 
90 days.
 
Specific consideration
 
was applied
 
for
situations where
 
the receivable
 
is a
 
holdback on
 
a contract,
 
and also
 
for customers
 
that have
 
exceeded normal
 
payment
terms.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
27
The closing balance of the trade
 
receivables credit loss allowance as at December 31,
 
reconciles with the trade receivables
credit loss allowance opening balance as follows:
Opening allowance January 1, 2021
Business combination
512,592
Foreign exchange
7,408
Loss allowance at December 31, 2021
520,000
Loss recognized during the year
4,150,000
Foreign exchange
23,283
Loss allowance at December 31, 2022
4,693,283
 
10.
 
Costs and profits in excess of billings on uncompleted
 
contracts
As at December 31, 2022, the Company had
eighteen
 
contracts with total billings of $
10,475,299
 
which were less than total
costs
 
incurred
 
and
 
had
 
recognized
 
cumulative
 
revenue
 
of
 
$
11,856,596
 
since
 
those
 
projects
 
began.
 
This compares
 
with
fourteen
 
contracts with total
 
billings of $
16,676,700
 
which were less
 
than total costs
 
incurred and had
 
recognized cumulative
revenue of $
21,599,410
 
as at December 31, 2021.
 
The net amount
 
of $
1,051,297
 
as at December
 
31, 2022 includes
 
an expected credit
 
loss allowance of
 
$
330,000
 
($
Nil
 
as
at December 31,
 
2021). On the basis
 
of the Company’s expected
 
credit loss policy, the allowance was
 
determined generally
by applying a
 
loss rate of
2
% on all
 
balances, and
 
adjusting for
 
specific situations,
 
such as
 
past due customers,
 
whereby
the loss rate varied from
25
% to
50
%.
Changes in
 
costs and
 
profits in
 
excess of
 
billings on
 
uncompleted contracts
 
during the
 
year are
 
explained by
 
$
4,164,109
(2021 -
 
$
983,891
)
 
recognized
 
at
 
the
 
beginning
 
of
 
the
 
year
 
being
 
transferred
 
to
 
accounts
 
receivable,
 
$
622,696
 
(2021 -
$
4,832,968
) resulting from changes in the measure of progress and the expected credit loss allowance of
 
$
330,000
 
($
Nil
 
in
2021).
11.
 
Investment tax credits
An amount recognized
 
in 2022 included
 
$
169,434
 
(2021 - $
202,472
) of investment
 
tax credits
 
earned in
 
the year,
 
as well
as $
Nil
 
(2021 -
 
$
706,000
) of
 
investment tax
 
credits earned
 
in prior years
 
that no
 
longer met
 
the criteria
 
for recognition
 
in
2021. $
70,258
 
(2021 -
 
$
148,695
) of
 
the investment
 
tax credits
 
recognized in
 
the year was
 
recorded against
 
cost of
 
sales
and
 
services,
 
$
69,176
 
(2021
 
-
 
($
684,709
))
 
against
 
research
 
and
 
development
 
expenses
 
and
 
$
30,000
 
(2021 -
 
$
32,486
)
against selling general and administrative expenses.
Eligible
 
scientific
 
research
 
and
 
experimental
 
development
 
(“SR&ED”)
 
expenses
 
for
 
the
 
year
 
amounted
 
to
 
$
2,783,450
(2021 – $
2,000,853
) less
 
investment
 
tax credits
 
of ($
169,434
) (2021
 
– ($
684,709
)), less
 
government grants
 
of $
296,043
(2021 – $
149,575
) totalling $
2,317,973
 
(2021 – $
2,535,987
).
12.
 
Strategic investments
December 31,
December 31,
2022
2021
$
$
Beauce Gold Fields (“BGF”) shares – level 1
56,419
123,095
HPQ Silicon Inc. (“HPQ”) shares - level 1
5,415,749
12,306,196
HPQ warrants – level 3
770,466
2,472,368
6,242,634
14,901,659
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
28
The change in the strategic investments is summarized as
 
follows:
(“BGF”) shares – level 1
(“HPQ”) shares - level 1
HPQ warrants – level 3
Quantity
$
Quantity
$
Quantity
$
Balance, December 31, 2020
1,025,794
123,095
14,990,200
16,489,220
25,844,600
23,379,435
Additions
8,268,000
8,070,109
Exercised
 
16,250,000
11,700,000
(16,250,000)
(9,181,250)
Disposed
(12,755,600)
(14,252,732)
Change in the fair value
(9,700,401)
(11,725,817)
Balance, December 31, 2021
1,025,794
123,095
26,752,600
12,306,196
9,594,600
2,472,368
Additions
6,800,000
3,196,000
6,800,000
408,000
Disposed
(11,447,500)
(3,922,244)
Change in the fair value
(66,676)
(6,164,203)
(2,109,902)
Balance, December 31, 2022
1,025,794
56,419
22,105,100
5,415,749
16,394,600
770,466
The Company owns
9.82
% on a
 
fully diluted basis
 
of HPQ as
 
at December 31, 2022 (2021 –
9.64
%) and has
 
other business
transactions with this entity– see notes 7(i) and 13.
The following table sets out the details and activity of the HPQ
 
warrants:
Number of
Number of
warrants
warrants
Exercise
Expiry date
Dec 31, 2021
Additions
Exercised
Dec 31, 2022
price ($)
 
April 29, 2023
1,200,000
1,200,000
0.10
June 2, 2023
4,394,600
4,394,600
0.10
September 3, 2023
4,000,000
4,000,000
0.61
April 20, 2024
6,800,000
6,800,000
0.60
9,594,600
6,800,000
16,394,600
2022 Transactions
6,800,000
 
common shares
 
and
6,800,000
 
warrants of
 
HPQ were purchased
 
in cash
 
for an amount
 
of $
3,604,000
 
in April
2022.
11,447,500
 
HPQ
 
common
 
shares
 
were
 
disposed
 
for
 
cash
 
amounts
 
totalling
 
$
3,922,244
 
resulting
 
in
 
a
 
realized
 
loss
 
of
$
225,527
.
2021 Transactions
12,755,600
 
HPQ
 
common
 
shares
 
were
 
disposed
 
for
 
cash
 
amounts
 
totalling
 
$
14,252,732
 
resulting
 
in
 
a
 
realized
 
gain
 
of
$
9,893,900
.
16,250,000
 
shares purchase warrants were
 
exercised in cash for a
 
total amount of $
2,518,750
. An amount of
$
9,181,250
 
was transferred to the share value on the exercise
 
of the warrants.
8,268,000
 
common shares of HPQ were purchased in cash
 
for an amount of $
8,070,109
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
29
At inception, the
 
fair value of
 
the HPQ warrants
 
purchased in
 
2022 was measured
 
using the Black-Scholes
 
option pricing
model using the following assumptions:
Number of warrants
6,800,000
Date of issuance
April 20, 2022
 
Exercise price ($)
0.60
Assumptions under the Black-Scholes model:
 
Fair value of the shares ($)
0.47
Risk-free interest rate (%)
2.47
Expected volatility (%)
107.60
Expected dividend yield
Contractual remaining life (number of months)
24
As
 
at
 
December 31,
 
2022
 
and
 
2021,
 
the
 
fair
 
value
 
of
 
the
 
HPQ
 
warrants
 
was
 
measured
 
using
 
the
 
Black-Scholes
 
option
pricing model using the following assumptions:
2022
2021
Number of warrants
1,200,000
4,394,600
4,000,000
6,800,000
1,200,000
4,394,600
4,000,000
Date of issuance
April 29, 2020
June 2, 2020
Sept. 3, 2020
April 20, 2022
April 29, 2020
June 2, 2020
Sept. 3, 2020
Exercise price ($)
0.1
0.1
0.61
0.60
0.1
0.1
0.61
Assumptions under the Black-
Scholes model:
Fair value of the shares ($)
0.25
0.25
0.25
0.25
0.46
0.46
0.46
Risk-free interest rate (%)
4.03
4.03
4.03
4.03
1.22
1.22
1.22
Expected volatility (%)
80.55
73.74
76.85
74.58
89.88
94.01
110.47
Expected dividend yield
Contractual remaining life (in
months)
4
5
8
16
16
17
20
As at December 31, 2022, a gain from
 
initial recognition of the warrants of $
280,926
 
($
510,573
 
– 2021) has been deferred
off balance sheet until realized.
13.
 
Royalties receivable
December 31
December 31
2022
2021
$
$
Opening balance
1,258,654
1,060,000
Accretion interest
118,290
132,809
Royalties recognized during the year
450,000
450,000
Discounting
(169,158)
(134,155)
Amounts received during the year
(250,000)
(250,000)
Balance at end of the year
1,407,786
1,258,654
Current portion
455,556
311,111
Non-current portion
952,230
947,543
1,407,786
1,258,654
The Company
 
sold intellectual
 
property to
 
HPQ Silicon
 
Inc. (“HPQ”)
 
in 2016
 
(“HPQ 2016
 
contract”) and
 
its wholly
 
owned
subsidiary,
 
HPQ Nano
 
Silicon Powders
 
Inc. in
 
2020 (“HPQ
 
Nano contract”),
 
and HPQ
 
Silica Polvere
 
Inc. (“HPQ
 
Polvere
contract”) in 2021. The
 
terms of those
 
sales contracts include,
 
in addition to the
 
purchase price amounts
 
already received
of $
1,000,000
 
in 2016 and $
2,400,000
 
in 2020 and $
3,300,000
 
in 2021, respectively, the following variable consideration in
the form of royalty payments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
30
HPQ 2016 contract:
Royalties
 
are
10
%
 
of
 
net
 
sales,
 
with
 
minimum
 
payments
 
of
 
$
200,000
 
in
 
2021
 
and
 
$
250,000
 
in
 
2022
 
and
 
every year
thereafter.
 
Payment is
 
due no later
 
than 30 days
 
after the year
 
end of HPQ
 
Silicon Inc. An
 
amount of
 
$
250,000
 
has been
received under this agreement in 2022 ($
200,000
 
was received in 2021).
HPQ Nano contract:
Royalties
 
are
10
% of
 
net
 
sales,
 
with
 
minimum
 
payments
 
of
 
$
50,000
 
in
 
2021,
 
$
100,000
 
in
 
2022,
 
$
150,000
 
in
 
2023,
 
and
$
200,000
 
in 2024 and
 
every year thereafter. Payments are due
 
no later than
 
10 days after
 
the year end of
 
HPQ Nano Silicon
Powders Inc. An amount of $
Nil
 
has been received under this agreement in 2022
 
($
50,000
 
was received in 2021).
HPQ Polvere contract:
Royalties
 
are
10
%
 
of
 
net
 
sales
 
with
 
minimum
 
payments
 
of
 
$
50,000
 
in
 
2023,
 
$
100,000
 
in
 
2024,
 
$
150,000
 
in
 
2025
 
and
$
200,000
 
in 2026
 
and every
 
year thereafter.
 
Royalty payments
 
are limited
 
to the
 
total net
 
sales for
 
the period.
 
Payments
are due no later than 10 days after the year end of HPQ
 
Silica Polvere Inc.
During the
 
year ended
 
December 31, 2022,
 
the Company
 
recognized an
 
additional $
250,000
 
and $
200,000
 
for the
 
HPQ
2016 contract
 
and
 
HPQ
 
Nano
 
contracts,
 
respectively,
 
of
 
royalties
 
receivable,
 
which
 
have
 
been
 
discounted
 
using
12.5
%
discount rate.
During the
 
year ended
 
December 31, 2021,
 
the Company
 
recognized an
 
additional $
250,000
 
and $
200,000
 
for the
 
HPQ
2016 contract
 
and
 
HPQ
 
Nano
 
contracts,
 
respectively,
 
of
 
royalties
 
receivable,
 
which
 
have
 
been
 
discounted
 
using
12.5
%
discount rate.
The Company
 
only recognizes
 
variable consideration,
 
including minimum
 
royalties, arising
 
from these
 
agreements in
 
the
period(s)
 
when
 
it
 
is
 
highly
 
probable
 
that
 
a
 
reversal
 
will
 
not
 
occur
 
when
 
the
 
uncertainty
 
associated
 
with
 
the
 
variable
consideration
 
is
 
subsequently
 
resolved.
 
Minimum
 
royalties
 
are
 
recognized
 
for
 
the
 
period
 
the
 
Company
 
evaluates
 
the
collectability of the minimum royalties is probable, which
 
the Company has estimated over four years.
The HPQ Nano contract
 
and the HPQ Polvere
 
contract each provide
 
the Company with the
 
option to convert, at
 
any time,
the future
 
royalties
 
that would
 
be owed
 
to it
 
into a
50
% equity
 
stake
 
in HPQ
 
Nano
 
Silicon
 
Powders Inc.
 
and HPQ
 
Silica
Polvere
 
Inc., respectively.
 
Each option
 
is considered
 
an embedded
 
derivative
 
that
 
is initially
 
measured
 
at
 
fair
 
value
 
and
subsequently remeasured
 
at fair value at
 
each reporting period.
 
The Company determined
 
that the embedded
 
derivatives
had a fair value of $
Nil
 
at the inception of the contracts and $
Nil
 
at each of the reporting dates.
14.
 
Deposits
December 31
December 31
2022
2021
$
$
Current portion:
Suppliers
392,309
1,236,211
Security deposit on leased premises
40,241
92,241
Total
 
current
432,550
1,328,452
Non-current portion:
Suppliers
7,250
1,952
Security deposit on leased premises
38,803
246,804
Total
 
non-current
46,053
248,756
Total
 
deposits
 
478,603
1,577,208
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
31
15. Property and equipment
Machinery
Equipment
Computer
and
Leasehold
under
equipment
equipment
Automobiles
improvements
construction
Total
$
$
$
$
$
$
Cost
Balance at December 31, 2020
549,659
1,621,899
306,164
180,901
1,940,234
4,598,857
Acquired through business
combination
13,585
28,967
42,552
Additions
245,984
384,092
30,495
752,204
84,143
1,496,918
Balance at December 31, 2021
809,228
2,034,958
336,659
933,105
2,024,377
6,138,327
Additions
(1)
164,059
(89,085)
209,435
284,409
Assets under construction put
in service
1,065,672
958,705
(2,024,377)
Balance at December 31, 2022
973,287
3,011,545
336,659
2,101,245
6,422,736
Accumulated depreciation
Balance at December 31, 2020
509,112
1,441,642
21,748
96,785
2,069,287
Depreciation
88,410
182,739
59,959
24,995
356,103
Balance at December 31, 2021
597,522
1,624,381
81,707
121,780
2,425,390
Depreciation
146,550
297,021
57,543
102,780
603,894
Balance at December 31, 2022
744,072
1,921,402
139,250
224,560
3,029,284
Carrying amounts
Balance at December 31, 2021
211,706
410,577
254,952
811,325
2,024,377
3,712,937
Balance at December 31, 2022
229,215
1,090,143
197,409
1,876,685
3,393,452
(1)
The adjustment to
 
additions to Machinery
 
and Equipment of
 
$
89,085
, relates to
 
the discounting of
 
the non-interest-bearing
loan from the Economic Development Agency of Canada,
 
representing government assistance (see note 21).
Equipment under
 
construction included
 
the leasehold
 
improvements of
 
a clean room
 
and the costs
 
related to
 
building the
new Plasma Powder Production equipment which have been
 
put in service during the year ended December
 
31, 2022.
 
16. Leases
The Company has entered into lease contracts mainly for buildings
 
and computer equipment, which expire at various dates
through
 
the
 
year
 
2036.
 
Some
 
leases
 
have extension
 
or purchase
 
options
 
for various
 
terms.
 
The
 
lease
 
contracts
 
do not
impose any financial covenants.
On January 1, 2022, a lease for rent
 
of a property with a trust whose
 
beneficiary is the controlling shareholder
 
and CEO of
the
 
Company,
 
was
 
modified
 
to
 
extend
 
the
 
lease
 
term
 
until
 
December
 
2026.
 
The
 
lessor
 
also
 
reimbursed
 
an
 
amount
 
of
$
1,070,264
 
representing the balance at
 
the date of modification
 
of the original prepayment
 
amount of $
1,178,530
 
made in
2020. At
 
the date
 
of modification,
 
the
 
lease
 
liability was
 
remeasured
 
using
 
a discount
 
rate
 
of
4
%. As
 
a result,
 
the
 
lease
liability was increased by an amount of $
1,070,264
 
and the right-of-use assets was decreased by an amount
 
of $
108,267
.
 
 
On September
 
1, 2022,
 
a lease
 
of a
 
property was
 
modified to
 
extend the
 
term, to
 
postpone the
 
exercise of
 
the purchase
option of the property,
 
and to factor a
 
deposit of $
275,000
 
required to exercise
 
the purchase option.
 
As a result, the
 
lease
liability was remeasured using a discount rate of
8.6
% and the lease liability and the right-of-use assets were decreased by
$
203,154
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
32
a) Right-of-use assets
Land and
Computer
building
equipment
Total
$
$
$
Balance at January 1, 2021
3,688,315
12,685
3,701,000
Additions - business combination
477,608
477,608
Additions
2,157,796
2,157,796
Depreciation
(566,182)
(4,228)
(570,411)
Balance at December 31, 2021
5,757,537
8,457
5,765,993
Modification of lease agreements
(311,421)
(311,421)
Depreciation
(631,600)
(4,228)
(635,828)
Balance at December 31, 2022
4,814,516
4,229
4,818,744
b) The table below summarizes changes to the lease liabilities:
$
Balance at January 1, 2021
2,988,542
Addition - business acquisition
477,608
Additions - other
2,120,893
Payments
(263,078)
Balance at December 31, 2021
5,323,965
Modification of lease agreements
867,110
Payments
(657,381)
Balance at December 31, 2022
5,533,694
Current portion
2,934,236
Non-current portion
2,389,729
Balance at December 31, 2021
5,323,965
Current portion
2,672,212
Non-current portion
2,861,482
Balance at December 31, 2022
5,533,694
c) Amount recognized in the consolidated statements of comprehensive
 
loss:
2022
2021
$
$
Depreciation of right-of-use assets
635,828
570,411
Interest on lease liabilities
378,611
307,691
Expense related to lease payments excluded in the measurement
 
of lease
liabilities
243,209
178,707
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
33
d) Maturity analysis – contractual undiscounted cash flows
 
of lease liabilities as at December 31, 2022
$
2023
2,984,243
2024
592,719
2025
572,562
2026
474,484
2027
229,332
Thereafter
1,891,989
6,745,329
 
17. Intangible assets
Production
Development
backlog
Patents
costs
Total
$
$
$
$
Cost
Balance at December 31, 2020
768,392
244,871
1,013,263
Acquired through business combination
2,120,000
2,120,000
Additions
214,497
214,497
Write-off
(85,544)
(85,544)
Balance at December 31, 2021
2,120,000
897,345
244,871
3,262,216
Additions
208,680
208,680
Balance at December 31, 2022
2,120,000
1,106,025
244,871
3,470,896
Accumulated amortization
Balance at December 31, 2020
58,125
49,524
107,649
Amortization
353,333
10,528
16,508
380,369
Balance at December 31, 2021
353,333
68,653
66,032
488,018
Amortization
848,000
13,522
16,508
878,030
Balance at December 31, 2022
1,201,333
82,175
82,540
1,366,048
Carrying amounts
Balance at December 31, 2021
1,766,667
828,692
178,839
2,774,198
Balance at December 31, 2022
918,667
1,023,850
162,331
2,104,848
The Company’s development costs have been incurred to develop plasma-related technologies and the patents protect the
design and specification of these technologies.
18. Goodwill
The
 
Company
 
tests
 
goodwill
 
for
 
impairment
 
annually,
 
or
 
more
 
frequently
 
when
 
an
 
indicator
 
of
 
impairment
 
is
 
identified.
Goodwill is considered impaired if the recoverable amount
 
is less than the carrying amount.
The recoverable
 
amount of
 
an operating
 
segment
 
is determined
 
based on
 
value-in-use
 
calculations,
 
covering a
 
detailed
five-year forecast, followed
 
by an
 
extrapolation of expected
 
cash flows for
 
the remaining useful
 
lives using a
 
declining growth
rate determined by management. The present value of the expected
 
cash flows of the operating segment is determined by
applying a suitable discount rate reflecting current market assessments of the time value of money and risks specific to the
segment.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
34
For
 
the
 
purpose
 
of
 
impairment
 
testing,
 
goodwill
 
is
 
allocated
 
to
 
the
 
sole
 
operating
 
segment,
 
Pyro
 
Green-Gas,
 
which
 
is
expected
 
to
 
benefit
 
from
 
the
 
synergies
 
of
 
the
 
business
 
combination
 
in
 
which
 
the
 
goodwill
 
arises
 
and
 
is compared
 
to
 
its
recoverable value.
At December
 
31,
 
2022
 
and
 
2021,
 
it
 
was
 
determined
 
that
 
the
 
recoverable
 
amounts
 
exceed
 
the
 
carrying
 
amount,
 
and
no
impairment was required.
 
The recoverable
 
amount in the
 
most recent
 
impairment test
 
performed was
 
determined using
 
a
pre-tax discount rate of
12.5
% and terminal growth rate of
2
% (2021 - pre-tax discount rate of
8
% and terminal growth rate
of
2
%).
19. Accounts payable and accrued liabilities
December 31
December 31
2022
2021
$
$
Accounts payable
6,065,996
5,457,259
Accrued liabilities
2,891,053
3,730,048
Sale commissions payable
1
904,724
737,364
Accounts payable to the controlling shareholder and CEO
254,097
144,506
10,115,870
10,069,177
1
Sale commissions payable relate to the costs to obtain long-term
 
contracts with clients.
20. Billings in excess of costs and
 
profits on uncompleted contracts
The amount
 
to date
 
of costs
 
incurred and
 
recognized profits
 
less recognized
 
losses for
 
construction projects
 
in progress
amounted to $
37,374,909
 
(2021 - $
21,834,137
).
Payments to date received were $
47,045,902
 
on contracts in progress (2021 - $
31,234,368
).
Changes in
 
billings in
 
excess of
 
costs and
 
profits on
 
uncompleted contracts
 
during the year
 
are explained
 
by $
2,416,229
(2021 - $
6,268,910
) recognized at
 
the beginning of
 
the year being recognized
 
as revenue, and
 
an increase of
 
$
2,686,991
(2021 - $
9,076,169
) resulting from cash received excluding amounts
 
recognized as revenue.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
35
21. Term
 
loans
Economic
Development Agency
Other Term
Other Term
Canada
Emergency Business
of Canada Loan
1
Loans
2
Loans
3
Account Loan
4
Total
$
$
$
$
$
Balance, December 31, 2020
75,800
36,907
112,707
Assumed through business combination
36,520
50,000
86,520
Accretion
12,185
12,185
Payments
(12,207)
(8,300)
(20,507)
Balance, December 31, 2021
87,985
24,700
28,220
50,000
190,905
Additions
292,941
292,941
Discounting
(89,085)
(89,085)
Accretion
28,229
28,229
Payments
(13,083)
(19,920)
(33,003)
Balance, December 31, 2022
320,070
11,617
8,300
50,000
389,987
Less current portion
(11,617)
(8,300)
(50,000)
(69,917)
Balance, December 31, 2022
320,070
320,070
1
 
maturing in 2029, non-interest bearing, payable
 
in equal instalments from April 2024 to March 2029.
2
maturing October 23, 2023
 
bearing interest at
 
a rate
 
of
6.95
% per
 
annum, payable in monthly
 
instalments of $
1,200
 
secured by
 
automobile (carrying
amount of $
10,795
 
as at December 31, 2022)
3
 
maturing in May 2023, payable in monthly instalments
 
of $
1,660
, bearing interest at
7.45
%
4
 
loan bearing
no
 
interest and
no
 
minimum repayment, if repaid by December 2023
Economic Development Agency of Canada Loan
On
 
March 5,
 
2020,
 
the
 
Company
 
entered
 
into
 
a
 
repayable
 
contribution
 
agreement
 
up
 
to
 
$
450,000
 
under
 
the
 
Regional
Economic
 
Growth
 
through
 
Innovation
 
program
 
from
 
the
 
Economic
 
Development
 
Agency
 
of
 
Canada
 
(“EDC”).
 
The
contribution is
 
repayable in
60
 
equal monthly instalments due
 
and payable
24 months
 
following the
 
completion of
 
the project.
During
 
the year
 
ended
 
December 31,
 
2022,
 
the
 
Company
 
received
 
contributions
 
totalling
 
$
292,941
.
 
The
 
loan
 
was
discounted using the effective
 
interest method using a
 
rate of
8
% as it is non-interest
 
bearing. The difference
 
between the
discounted
 
amount
 
and
 
the
 
proceeds
 
received
 
of $
89,085
 
represents
 
government
 
assistance
 
and
 
is accounted
 
for as
 
a
reduction of the property and equipment.
Canada Emergency Business Account ("CEBA") Loan
The Company's
 
subsidiary participated
 
in the
 
CEBA program
 
whereby it
 
obtained an
 
interest free
 
and partially
 
forgivable
loan. The loan
 
bears
no
 
interest and
no
 
minimum repayment
 
terms, and
 
one third of
 
the loan
 
amount is forgiven
 
if repaid
by December 31,
 
2023. The
 
unpaid balance,
 
if any,
 
at December 31,
 
2023 would
 
be converted
 
to a
24
-month term
 
loan
bearing interest at
5
% and be reimbursed entirely by December 31, 2025.
 
22. Shareholders’ equity
Common shares and warrants
Authorized:
The Company is authorized to issue an unlimited number
 
of common shares without par value.
Issuance of units
On October 19,
 
2022, the
 
Company completed
 
a non-brokered
 
private placement
 
consisting of
1,014,600
 
units at
 
a price
of $
1.30
 
per unit for
 
aggregate gross proceeds to
 
the Company of $
1,318,980
. Each unit
 
is comprised of
one
 
common share
of the Company
 
and
one
 
common share
 
purchase warrant
 
of the
 
company.
 
Each warrant
 
entitles the
 
holder to
 
purchase
one additional common
 
share at an
 
exercise price of
 
$
1.75
 
for a period
 
of
24 months
. The Company
 
allocated an amount
of $
1,095,780
 
to share
 
capital representing
 
the fair
 
value of
 
the shares
 
on October
 
19, 2022,
 
of $
1.08
 
per share
 
and the
residual amount of $
223,200
 
to warrants.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
36
Shares issued upon exercise of stock options, share
 
purchase warrants and compensation options
During the year
 
ended December 31,
 
2022,
2,440,000
 
(
3,482,000
 
- 2021)
 
stock options
 
and Nil
 
(
8,146,483
 
- 2021)
 
share
purchase
 
warrants
 
were
 
exercised
 
for
 
net
 
proceeds
 
of
 
$
1,412,799
 
and
 
$
Nil
 
($
1,109,818
 
and
 
$
12,396,107
 
 
2021)
respectively.
 
The
 
amounts
 
credited
 
to
 
share
 
capital
 
from
 
the
 
exercise
 
of
 
stock
 
options
 
include
 
an
 
ascribed
 
value
 
from
contributed surplus of $
870,558
 
($
364,000
 
– 2021). In addition, in
 
2021,
191,414
 
compensation options relating to a bought
deal in 2020, were exercised for net proceeds of $
689,090
.
Share redemptions for cancellation
In January
 
2021, the
 
Company announced
 
it had
 
been authorized
 
to repurchase
 
for cancellation,
 
on the
 
open market,
 
or
subject to the
 
approval of any
 
securities authority by
 
private agreements,
5,000,000
 
common shares from
 
January 14, 2021,
to January
 
13,
 
2022. In
 
February
 
2022, the
 
Company
 
announced
 
it had
 
been authorized
 
to repurchase
7,500,000
 
of its
common shares from February 15, 2022, to February 14, 2023.
During the year 2022, the
 
Company did
no
t repurchase any common shares for
 
purpose of cancellation. The Company was
under no obligation to repurchase its common shares as
 
at December 31, 2022.
During the year
 
2021, the
 
Company repurchased
 
and cancelled
840,094
 
Common shares
 
at a weighted
 
average price
 
of
$
4.96
 
per share,
 
for a
 
total cash
 
consideration of
 
$
4,183,617
 
including commissions
 
of $
16,678
. The
 
excess of
 
the total
consideration over the carrying amount of the shares,
 
in the amount of $
3,778,619
 
was applied against deficit.
The repurchases were made in the normal course of business at market prices through the
 
TSX. The Company was under
no obligation to repurchase its common shares as at December
 
31, 2021.
Stock options
The Company has
 
a stock option
 
plan authorizing the
 
Board of Directors
 
to grant options to
 
directors, officers,
 
employees
and consultants to acquire common shares of the Company at a price computed by reference
 
to the closing market price of
the shares of the
 
Company on the business day
 
before the Company notifies the
 
stock exchanges of the grant
 
of the option.
The number
 
of shares
 
which may
 
be granted
 
to any
 
one person
 
shall not
 
exceed
5
% (
2
% for
 
consultants) of
 
total share
capital over a twelve-month period.
The following table sets out the activity in stock options:
Weighted
Number of
average
options
exercise price
$
Balance – December 31, 2020
9,040,000
1.57
Granted
2,970,000
4.55
Exercised
(1)
(3,482,000)
0.32
Forfeited
(125,000)
4.41
Balance, December 31, 2021
8,403,000
3.10
Granted
2,475,000
3.55
Exercised
(1)
(2,440,000)
0.58
Forfeited
(242,500)
4.07
Balance, December 31, 2022
8,195,500
3.96
(1)
 
The weighted fair market value of the share price for
 
options exercised in 2022 was $
1.44
 
($
5.48
 
in 2021).
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
37
Grants in 2022
On
 
January 3,
 
2022,
 
the
 
Company
 
granted
150,000
 
stock
 
options
 
to
 
the
 
President
 
and
 
Chief
 
Executive
 
Officer
 
of
 
the
Company,
 
and
300,000
 
stock options
 
to members
 
of its
 
Board of
 
Directors. The
 
stock options
 
have an
 
exercise price
 
of
$
3.36
 
per common share, vest immediately and are exercisable
 
over a period of five (
5
) years.
On April 5,
 
2022, the
 
Company granted
400,000
 
stock options
 
to employees
 
of the Company.
 
The stock
 
options have
 
an
exercise price of $
2.96
 
per common share. The
400,000
 
options will vest as follows:
10
 
percent as of the day
 
of the grant,
20
 
percent at
 
the first
 
anniversary of
 
the date
 
of the
 
grant,
30
 
percent on
 
the second
 
anniversary of
 
the date
 
of the
 
grant
and
40
 
percent on the third anniversary of the date of the grant. All
 
options mentioned above are exercisable over a period
of five (
5
) years.
On June 2, 2022,
 
the Company granted
600,000
 
stock options to
 
the President and
 
Chief Executive Officer of
 
the Company,
and
900,000
 
stock options to members
 
of its Board of
 
Directors. The
1,500,000
 
options will vest
 
as follows:
25
 
percent as
of the day of the grant,
25
 
percent at the first anniversary of the
 
date of the grant,
25
 
percent on the second anniversary of
the date
 
of the grant
 
and
25
 
percent at
 
the third
 
anniversary of
 
the date
 
of the grant.
 
The stock
 
options have
 
an exercise
price of $
3.88
 
per common share and are exercisable over a period of five (
5
) years.
On July 3,
 
2022, the
 
Company granted
125,000
 
stock options
 
to employees
 
of the
 
Company.
 
The stock
 
options have
 
an
exercise price of $
2.14
 
per common share. The
125,000
 
options will vest as follows:
10
 
percent as of the day
 
of the grant,
20
 
percent at
 
the first
 
anniversary of
 
the date
 
of the
 
grant,
30
 
percent on
 
the second
 
anniversary of
 
the date
 
of the
 
grant
and
40
 
percent on the third anniversary of the date of the grant. All
 
options mentioned above are exercisable over a period
of five (
5
) years.
Subsequent to
 
year end, the
 
Company granted
150,000
 
stock options
 
to the President
 
and Chief
 
Executive Officer
 
of the
Company,
 
and
500,000
 
stock options
 
to members
 
of its
 
Board of
 
Directors. The
 
stock options
 
have an
 
exercise price
 
of
$
1.03
 
per common
 
share, vest
 
immediately and
 
are exercisable
 
over a period
 
of five
 
(
5
) years.
 
The Company
 
accounted
for an expense amounting to $
453,204
 
related to these options as the stock options granted related to the services in 2022
and there was a shared understanding of the terms and
 
conditions related to such grant prior to the grant
 
date.
 
The Company also granted
975,000
 
stock options to employees of the Company. The stock options have an exercise price
of $
1.03
 
per common share.
 
The
975,000
 
options will vest
 
as follows:
10
 
percent as of
 
the day of
 
the grant,
20
 
percent at
the first anniversary of the
 
date of the grant,
30
 
percent on the second
 
anniversary of the date
 
of the grant and
40
 
percent
on the third anniversary of the date
 
of the grant. All options mentioned above
 
are exercisable over a period of five (
5
) years.
There was no expense accounted for in 2022 relating to
 
these stock options.
Grants in 2021
On
 
December 30,
 
2021,
 
the
 
Company
 
granted
100,000
 
stock
 
options
 
to
 
a
 
member
 
of
 
its
 
Board
 
of
 
Directors
 
The
 
stock
options have an exercise
 
price of $
3.61
 
per common share, vest
 
immediately and are
 
exercisable over a period
 
of five (
5
)
years.
On December 17, 2021, the Company
 
granted
1,920,000
 
stock options to the President and
 
Chief Executive Officer of the
Company. The stock options have an exercise
 
price of $
3.13
 
per common share, vest
 
immediately and are exercisable over
a period of five (
5
) years.
On October 14, 2021, the
 
Company granted
100,000
 
stock options to the Chief
 
Financial Officer of the Company. The stock
options have an exercise
 
price of $
5.04
 
per common share. The
100,000
 
options will vest
 
as follows:
10
 
percent as of the
day of the grant,
20
 
percent at the first anniversary of
 
the date of the grant,
30
 
percent at the second anniversary of the
 
date
of the
 
grant, and
40
 
percent at
 
the third
 
anniversary of
 
the date
 
of the
 
grant and
 
are exercisable
 
over a
 
period of
 
five (
5
)
years.
On June 14,
 
2021, the Company
 
granted
100,000
 
stock options
 
to an
 
officer of
 
the Company.
 
The stock
 
options have an
exercise price of $
6.70
 
per common share. The
100,000
 
options will vest as follows:
25
 
percent at the date of the grant,
25
percent at the
 
first anniversary of
 
the date of
 
grant,
25
 
percent at the
 
second anniversary of the
 
date of grant,
 
and
25
 
percent
at the third anniversary of the date of grant and are exercisable
 
over a period of five (
5
) years.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
38
On June 1,
 
2021, the
 
Company granted
200,000
 
stock options
 
to a
 
member of
 
its Board
 
of Directors.
 
The stock
 
options
have an exercise price of
 
$
6.59
 
per common share. The
200,000
 
options will vest as follows:
25
 
percent at the date of
 
the
grant,
25
 
percent at the first anniversary of the date of grant,
25
 
percent at the second anniversary of the date of grant, and
25
 
percent at the third anniversary of the date of grant
 
and are exercisable over a period of five (
5
) years.
On April 6, 2021, the
 
Company granted
150,000
 
stock options to the
 
President and Chief Executive Officer of
 
the Company,
100,000
 
and
200,000
 
stock options to two members of the Board of Directors and
100,000
 
stock options to an employee of
the Company.
 
The stock
 
options have
 
an exercise
 
price of
 
$
8.47
 
per common
 
share. Of
 
these options,
250,000
 
will vest
immediately,
200,000
 
options will vest
 
as follows:
30
 
percent as of the
 
day of the
 
grant,
35
 
percent at the
 
first anniversary
of the date
 
of the grant
 
and
35
 
percent on the
 
second anniversary of the
 
date of the
 
grant and the
 
remaining
100,000
 
options
will vest
 
as follows:
10
 
percent as
 
of the
 
day of
 
the grant,
20
 
percent at
 
the first
 
anniversary of
 
the date
 
of the
 
grant,
30
percent at the second anniversary
 
of the date of the grant,
 
and
40
 
percent at the third anniversary
 
of the date of the grant.
All options mentioned above are exercisable over a period of
 
five (
5
) years.
The weighted average fair value of stock options granted
 
for the year ended December 31, 2022 was $
2.37
 
($
2.99
 
in 2021)
and $
2.02
 
per option for stock options granted subsequent to the year end. The weighted average fair value of each option
granted was
 
estimated at
 
the grant
 
date for
 
purposes of determining
 
share-based payment expense
 
using the Black-Scholes
option pricing model based on the following weighted-average
 
assumptions:
Years ended December 31,
2022
2021
Number of options granted or recognized
2,475,000
650,000
2,970,000
Exercise price ($)
3.55
3.02
4.55
Fair value of each option under the Black-Scholes pricing
 
model
($)
2.37
2.02
2.99
Assumptions under the Black-Scholes model:
Fair value of the shares ($)
3.54
3.02
4.52
Risk-free interest rate (%)
2.43
3.38
1.11
Expected volatility (%)
83.17
83.15
83.00
Expected dividend yield
Expected life (number of months)
60
60
60
The underlying expected volatility was determined by reference to historical
 
data of the Company’s share price. No special
features inherent to the stock options granted were incorporated
 
into the measurement of fair value.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
39
As at December 31, 2022,
 
the outstanding options,
 
as issued under the
 
stock option plan to
 
directors, officers, employees
and consultants for the purchases of one common share
 
per option, are as follows:
Number of
Number of
Number of
stock
stock
stock
Exercise
options
options
options
price
Dec 31, 2021
Granted
Exercised
Forfeitures
Dec 31, 2022
vested (1)
per option
Expiry date
$
November 3, 2017
2,400,000
(2,400,000)
0.58
November 3, 2022
July 3, 2018
300,000
300,000
300,000
0.51
July 3, 2023
October 29, 2018
40,000
(40,000)
0.52
October 29, 2023
September 29, 2019
100,000
100,000
100,000
0.51
September 29, 2024
January 2, 2020
100,000
100,000
100,000
0.45
January 2, 2025
July 16, 2020
2,243,000
(42,500)
2,200,500
1,775,500
4.41
July 16, 2025
October 26, 2020
250,000
(200,000)
50,000
37,500
4.00
October 26, 2025
April 6, 2021
550,000
550,000
410,000
8.47
April 6, 2026
June 1, 2021
200,000
200,000
100,000
6.59
June 1, 2026
June 14, 2021
100,000
100,000
50,000
6.70
June 14, 2026
October 14, 2021
100,000
100,000
30,000
5.04
October 14, 2026
December 17, 2021
1,920,000
1,920,000
1,920,000
3.13
December 17, 2026
December 30, 2021
100,000
100,000
30,000
3.61
December 30, 2026
January 3, 2022
450,000
450,000
450,000
3.36
January 3, 2027
April 5, 2022
400,000
400,000
40,000
2.96
April 5, 2027
June 2, 2022
1,500,000
1,500,000
375,000
3.88
June 2, 2027
July 13, 2022
125,000
125,000
12,500
2.14
July 13, 2027
8,403,000
2,475,000
(2,440,000)
(242,500)
8,195,500
5,730,500
3.96
(1)
 
At December 31, 2022, the weighted average exercise
 
price for options outstanding which are exercisable was
 
$
3.96
.
As at December 31, 2021,
 
the outstanding options,
 
as issued under the
 
stock option plan to
 
directors, officers, employees
and consultants for the purchases of one common share
 
per option, are as follows:
Number of
Number of
Number of
stock
stock
stock
Exercise
options
options
options
price
Dec 31, 2020
Granted
Exercised
Forfeitures
Dec 31, 2021
vested
per option
Expiry date
$
November 3, 2017
2,420,000
(20,000)
2,400,000
2,400,000
0.58
November 3, 2022
July 3, 2018
300,000
300,000
300,000
0.51
July 3, 2023
October 29, 2018
70,000
(30,000)
40,000
40,000
0.52
October 29, 2023
September 29, 2019
200,000
(100,000)
100,000
100,000
0.51
September 29, 2024
January 2, 2020
100,000
100,000
100,000
0.45
January 2, 2025
July 16, 2020
2,450,000
(82,000)
(125,000)
2,243,000
1,775,500
4.41
July 16, 2025
October 26, 2020
250,000
250,000
125,000
4.00
October 26, 2025
April 6, 2021
550,000
550,000
320,000
8.47
April 6, 2026
June 1, 2021
200,000
200,000
50,000
6.59
June 1, 2026
June 14, 2021
100,000
100,000
25,000
6.70
June 14, 2026
October 14, 2021
100,000
100,000
10,000
5.04
October 14, 2026
December 17, 2021
1,920,000
1,920,000
1,920,000
3.13
December 17, 2026
December 30, 2021
100,000
100,000
100,000
3.61
December 30, 2026
9,040,000
2,970,000
(3,482,000)
(125,000)
8,403,000
7,265,500
3.10
For
 
the year
 
ended
 
December 31,
 
2022,
 
a
 
share-based
 
compensation
 
expense
 
of
 
$
5,538,463
 
(2021
 
-
 
$
9,762,745
)
 
was
recorded in Selling, general and administrative expenses
 
to the consolidated statements of comprehensive
 
loss.
As at December 31,
 
2022, an amount
 
of $
3,184,866
 
(2021 - $
2,719,354
) remains to
 
be amortized until
 
October 2025 related
to the grant of stock options.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
40
Share purchase warrants
The following
 
table reflects
 
the activity
 
in warrants
 
during the year
 
ended December 31,
 
2022, and
 
the number
 
of issued
and outstanding share purchase warrants at December
 
31, 2022:
Number of
Number of
warrants
warrants
Exercise
Dec 31,
Dec 31,
price per
2021
Issued
Exercised
Expired
2022
warrant
Expiry date
Issuance of units – October 19, 2022
1,014,600
1,014,600
1.75
Oct 19, 2024
1,014,600
1,014,600
1.75
The following
 
table reflects
 
the activity
 
in warrants
 
during the year
 
ended December 31,
 
2021, and
 
the number
 
of issued
and outstanding share purchase warrants at December
 
31, 2021:
Number of
Number of
warrants
warrants
Exercise
Dec 31,
Dec 31,
price per
2020
Issued
Exercised
Expired
2021
warrant
Expiry date
$
Issuance of units – September 28, 2018
3,448,276
(3,448,276)
0.58
January 28, 2021
Issuance of units – October 19, 2018
100,000
(100,000)
0.58
February 13, 2021
Issuance of units – May 15, 2019
1,355,500
(1,355,500)
0.85
May 15, 2021
Issuance of units – May 28, 2019
750,000
(750,000)
0.85
May 24, 2021
Issuance of units – June 19, 2019
500,000
(500,000)
0.85
June 19, 2021
Issuance of units – October 25, 2019
225,000
(225,000)
0.75
October 25, 2021
Issuance of units – November 10, 2020
1,677,275
(1,672,000)
(5,275)
4.5
November 10, 2022
Issuance of warrants – November 10, 2020
(95,707)
4.5
November 10, 2022
8,056,051
(8,146,483)
(5,275)
23. Supplemental disclosure of
 
cash flow information
2022
2021
$
$
Accounts receivable
(985,015)
(12,372,139)
Costs and profits in excess of billings on uncompleted
 
contracts
3,871,413
(3,849,077)
Inventory
(988,821)
(839,352)
Investment tax credits receivable
(19,891)
1,015,862
Royalties receivable
(30,842)
(65,845)
Deposits
2,277,136
145,379
Contract assets
(562,809)
Prepaid expenses
(53,942)
39,111
Accounts payable and accrued liabilities
346,003
1,953,208
Billings in excess of costs and profits on uncompleted contracts
270,762
1,485,969
Income taxes
267,414
(99,072)
4,391,408
(12,585,956)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
41
24. Supplemental disclosure on
 
comprehensive income statement
The amount
 
of
 
inventories
 
recognized
 
in cost
 
of sales
 
is $
844,304
 
for the
 
year
 
ended December
 
31,
 
2022 ($
326,279
 
in
2021).
The aggregate amortization
 
and write-off of
 
intangible assets expense
 
for the
 
year ended December 31, 2022
 
was $
878,030
(2021 - $
465,913
) and was recorded in cost of sales and services.
Depreciation
 
on
 
property
 
and
 
equipment
 
amounted
 
to
 
$
603,894
 
and
 
ROU
 
assets
 
was
 
$
635,828
 
for
 
the year
 
ended
December 31, 2022, as
 
compared to (2021 -
 
$
356,103
 
and $
570,411
 
respectively) and is
 
recorded in selling,
 
general and
administrative.
 
Employee
 
benefits
 
totaled
 
$
18,115,284
 
in
 
the year
 
ended
 
December 31,
 
2022
 
(2021 -
 
$
21,855,957
)
 
and
 
include
 
share-
based compensation of $
5,538,463
 
(2021 - $
9,762,745
).
 
The Company
 
has been
 
awarded various
 
government grants
 
during the year,
 
which were
 
recognized when
 
they became
receivable. The
 
grants, received
 
in 2022,
 
are unconditional
 
and amounted
 
to $
204,791
 
(2021 - $
226,420
). An
 
amount of
$
Nil
 
(2021 - $
149,575
) was
 
recorded as
 
a reduction
 
to the
 
related expenses
 
in research
 
and development,
 
an amount
 
of
$
204,791
 
(2021 - $
76,845
) was recorded as a reduction to the related expenses
 
in selling, general and administrative.
25. Net finance costs
2022
2021
$
$
Financial expenses
Interest on term loans
3,198
87,775
Interest on lease liabilities
378,611
307,691
Interest accretion on balance due on business combination
173,350
110,204
Interest accretion on long term loans
28,229
12,185
Penalties and other interest expenses
85,644
19,324
669,032
537,179
Financial income
Interest accretion on royalty receivable
(118,290)
(132,809)
Net finance costs
 
550,742
404,370
 
26. Loss per share
The
 
following
 
table
 
provides
 
a
 
reconciliation
 
between
 
the
 
number
 
of
 
basic
 
and
 
fully
 
diluted
 
shares
 
outstanding
 
as
 
at
December 31, 2022 and 2021:
2022
2021
$
$
Weighted daily average of Common shares
170,953,374
166,645,546
Dilutive effect of stock options
Dilutive effect of warrants
Weighted average number of diluted shares
170,953,374
166,645,546
Number of anti-dilutive stock options and warrants excluded
 
from fully diluted loss
per share calculation
6,745,100
8,403,000
 
27. Related party transactions
During
 
the years
 
ended
 
December 31,
 
2022
 
and
 
2021,
 
the
 
Company
 
concluded
 
the
 
following
 
transactions
 
with
 
related
parties:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
42
In 2022, rent
 
and property taxes
 
were charged by
 
a trust whose beneficiary
 
is the controlling
 
shareholder and CEO
 
of the
Company
 
in the
 
amount
 
of
 
$
277,389
 
(2021
 
- $
274,934
). On
 
January
 
1, 2022,
 
a
 
lease for
 
rent of
 
a property
 
with a
 
trust
whose beneficiary
 
is the
 
controlling
 
shareholder
 
and
 
CEO of
 
the
 
Company,
 
was
 
modified to
 
extend
 
the
 
lease
 
term until
December 2026. The lessor also reimbursed an amount of $
1,070,264
 
representing the balance at the date of modification
of
 
the
 
original
 
prepayment
 
amount
 
of
 
$
1,178,530
 
made
 
in
 
2020.
 
At
 
the
 
date
 
of
 
modification,
 
the
 
lease
 
liability
 
was
remeasured using a discount rate of
4
%. As a result, the lease liability
 
was increased by an amount of $
1,070,264
 
and the
right-of-use assets was decreased by an amount of $
108,267
.
 
These
 
expenses
 
are
 
recorded
 
in
 
captions
 
cost
 
of
 
sales
 
and
 
selling
 
and
 
general
 
in
 
the
 
consolidated
 
statements
 
of
comprehensive
 
loss.
 
As
 
at
 
December 31,
 
2022
 
the
 
right-of-use
 
asset
 
and
 
the
 
lease
 
liabilities
 
amount
 
to
 
$
680,980
 
and
$
799,090
 
respectively (2021 - $
1,107,131
 
and $
Nil
).
A balance due
 
to the controlling
 
shareholder and CEO of
 
the Company amounted to
 
$
254,097
 
(2021 - $
144,506
) is included
in accounts payable and accrued liabilities.
The key management personnel
 
of the Company,
 
in accordance with IAS
 
24 Related Party Disclosures,
 
are the members
of the Board of Directors and certain officers. Total
 
compensation to key management consisted of the following:
2022
2021
$
$
Salaries – key management
1,204,306
3,049,501
Pension contributions
22,479
59,377
Fees – Board of Directors
157,900
187,600
Share-based compensation – officers
2,017,348
6,182,573
Share-based compensation – Board of Directors
2,293,167
2,338,650
Other benefits – key management
 
244,621
237,903
Total
 
compensation
5,939,821
12,055,604
 
28. Financial instruments
As
 
part
 
of
 
its
 
operations,
 
the
 
Company
 
carries
 
a
 
number
 
of
 
financial
 
instruments.
 
It
 
is
 
management's
 
opinion
 
that
 
the
Company is
 
not exposed
 
to significant
 
interest, currency
 
or credit risks
 
arising from
 
these financial
 
instruments except
 
as
otherwise
 
disclosed.
 
The
 
Company's
 
overall
 
risk
 
management
 
program
 
focuses
 
on
 
the
 
unpredictability
 
of
 
the
 
financial
market and seeks
 
to minimize potential
 
adverse effects
 
on the Company's
 
financial performance.
 
The Company
 
does not
use derivative financial instruments to hedge these risks.
Foreign currency risk
The
 
Company
 
enters
 
into
 
transactions
 
denominated
 
in
 
US
 
dollars
 
for
 
which
 
the
 
related
 
revenues,
 
expenses,
 
accounts
receivable and accounts payable and accrued liabilities
 
balances are subject to exchange rate fluctuations.
As at December 31, the Company's exposure
 
to foreign exchange risk for
 
amounts denominated in US dollars is
 
as follows:
2022
2021
$
$
Cash
2,871,062
1,714,670
Accounts receivable
13,537,912
14,465,011
Accounts payable and accrued liabilities
(1,713,717)
(1,023,999)
Total
14,695,257
15,155,682
Foreign currency
 
risk is
 
the risk
 
that the
 
fair value
 
or future
 
cash flows
 
of a
 
financial
 
instrument will
 
fluctuate because
 
of
changes in foreign exchange rates.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
43
Sensitivity analysis
At December 31, 2022, if the US Dollar changes by
10
% against the Canadian dollar with all other variables held constant,
the
 
impact
 
on
 
pre-tax
 
gain
 
or
 
loss
 
and
 
equity
 
for
 
the
 
year
 
ended
 
December 31,
 
2022
 
would
 
have
 
been
 
$
1,470,000
(December 31, 2021 - $
1,516,000
).
Credit concentration
During the year
 
ended December 31,
 
2022,
two
 
customers accounted
 
for
52
% (December 31,
 
2021 –
four
 
customers for
79
%) of revenues from operations.
2022
2021
% of total
% of total
Revenues
revenues
Revenues
revenues
$
%
$
%
Customer 1
5,598,653
29
7,308,191
24
Customer 2
4,314,225
23
7,019,953
23
Customer 3
6,417,373
21
Customer 4
3,551,900
11
Total
9,912,878
52
24,297,417
79
Three
 
customers accounted
 
for
56
%,
16
% and
11
%, respectively
 
(December 31, 2021
 
one
 
customer for
73
%) of
 
trade
accounts receivable with
 
amounts owing to
 
the Company of
 
$
18,894,727
 
(2021 - $
12,063,636
), representing the
 
Company's
major
 
credit
 
risk
 
exposure.
 
Credit
 
concentration
 
is
 
determined
 
based
 
on
 
customers
 
representing
10
%
 
or
 
more
 
of
 
total
revenues and/or total accounts receivable.
Credit risk
Credit
 
risk
 
is
 
the
 
risk
 
that
 
one
 
party
 
to
 
a
 
financial
 
instrument
 
will
 
cause
 
a
 
financial
 
loss
 
for
 
the
 
other
 
party
 
by
 
failing
 
to
discharge an obligation.
 
The maximum credit
 
risk to which
 
the Company is
 
exposed as at
 
December 31, 2022
 
represents
the carrying amount
 
of cash
 
and cash equivalents,
 
accounts receivable
 
(except sales
 
tax receivable),
 
costs and
 
profits in
excess of billings on uncompleted contracts, deposits and
 
royalties receivable.
 
Cash and cash equivalents,
 
which only comprise guaranteed
 
investment certificates redeemable
 
on relatively short
 
notice
by the Company,
 
are held with major reputable financial institutions.
 
Management has established
 
a credit policy
 
under which each
 
new customer
 
is analysed individually
 
for creditworthiness
before
 
the
 
Company’s
 
payment
 
and
 
delivery
 
terms
 
and
 
conditions
 
are
 
offered.
 
The
 
Company’s
 
review
 
could
 
include
reviewing external ratings, if they are available,
 
financial statements, credit agency information,
 
industry information and in
some cases bank
 
references. The Company’s
 
exposure to credit
 
risk is mainly
 
influenced by the
 
individual characteristics
of each customer. In monitoring customer
 
credit risk, customers are
 
identified according to their
 
characteristics such as their
geographic location, industry,
 
trading history with the Company and existence of previous
 
financial difficulties.
The Company does not generally
 
require collateral or other security
 
from customers on accounts
 
receivable,
 
however, the
contract terms may include the
 
possibility of recourse in the
 
event of late payment.
 
The Company believes that
 
there is
no
unusual exposure associated with the collection of these
 
receivables.
The credit risk associated with costs and profits in excess of billings on uncompleted contracts is similar to that of accounts
receivable, as these amounts are accumulated and converted to
 
accounts receivable as invoicing milestones are reached.
The royalties receivable
 
are due from
 
a company in
 
which the Company
 
has a strategic
 
investments. The Company
 
does
not have
 
collateral or
 
other security
 
associated with
 
the collection
 
of this
 
receivable. The
 
carrying amount
 
of the
 
royalties
receivable have been discounted to reflect the time value
 
of money and credit risk of the counterparty.
 
The deposits are
 
payments made
 
to suppliers
 
and entities from
 
which the Company
 
leases property.
 
The Company
 
does
not have collateral
 
or other security
 
associated with
 
the collection
 
of these deposits.
 
As at December
 
31, 2022 and
 
2021,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
44
no loss
 
allowance has been
 
recognized in
 
connection with these
 
deposits and
 
the maximum exposure
 
is the
 
carrying amount
of these deposits.
During the
 
years 2022
 
and 2021,
 
provisions for
 
expected credit
 
losses were
 
recorded, however,
no
 
amounts
 
of financial
assets have been written off. The accounts provisioned by
 
the loss are still subject to
 
enforcement activity in order to collect
the balances due.
Interest rate risk
Interest rate risk is the risk that the
 
value of a financial instrument might be adversely affected by a change in interest rates.
Changes in market interest rates may have an effect on
 
the cash flows associated with some financial assets and liabilities,
known as cash flow
 
risk, and on the
 
fair value of other
 
financial assets or liabilities, known as
 
price risk, and on the
 
fair value
of investments
 
or liabilities,
 
known as
 
price risks.
 
The Company
 
is exposed
 
to a
 
risk of
 
fair value
 
on term
 
loans as
 
those
financial instruments bear
 
interest at
 
fixed rates
 
and to
 
cash flow
 
risk from
 
the variable
 
interest rate
 
of the
 
bank indebtedness.
Price risk
Price risk
 
is the
 
risk that
 
the fair
 
value or
 
future cash
 
flows of
 
a financial
 
instrument will
 
fluctuate because
 
of changes
 
in
market price (other
 
than those arising
 
from foreign
 
currency risk
 
and interest risk),
 
whether those
 
changes are
 
caused by
factors specific to the individual financial instrument or its issuers or factors affecting
 
all similar financial instruments traded
in the
 
market. The
 
most significant
 
exposure to
 
the price
 
risk for
 
the Company
 
arises from
 
its investments
 
in shares
 
and
warrants of public
 
companies quoted
 
on the TSX
 
Venture Exchange.
 
If equity prices
 
had increased or
 
decreased by
25
%
as
 
at
 
December 31,
 
2022,
 
with
 
all
 
other
 
variables
 
held
 
constant,
 
the
 
Company’s
 
investments
 
would
 
have
 
increased
 
or
decreased respectively,
 
by approximately $
1,841,484
 
(December 31, 2021 - $
4,042,000
).
Liquidity risk
Liquidity risk is the
 
risk that the
 
Company will encounter
 
difficulty in meeting
 
obligations associated with
 
financial liabilities
that are settled
 
by delivery of
 
cash or another
 
financial asset. The
 
Company manages its
 
liquidity risk by forecasting
 
cash
flows from operations and anticipating any investing and financing
 
activities.
The following table summarizes the contractual amounts payable and maturities of financial liabilities and other
 
liabilities as
at December 31, 2022:
Total
Carrying
contractual
Less than
value
amount
one year
2-3 years
4-5 years
Over 5 years
$
$
$
$
$
$
Bank indebtedness
991,902
991,902
991,902
Accounts payable and accrued
liabilities
1
9,620,591
9,620,591
9,620,591
Term
 
loans
389,987
520,444
59,917
190,587
180,000
89,940
Balance due on business
combination
3,907,775
4,137,820
2,177,800
1,960,020
Lease liabilities
5,533,694
6,745,329
2,984,243
1,165,281
703,816
1,891,989
20,443,949
22,016,086
15,834,453
3,315,888
883,816
1,981,929
1
Accounts payable and accrued liabilities exclude amounts
 
which are not financial liabilities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
45
The following table summarizes the contractual amounts payable and maturities of financial liabilities and other
 
liabilities as
at December 31, 2021:
Total
Carrying
contractual
Less than
value
amount
one year
2-3 years
4-5 years
Over 5 years
$
$
$
$
$
$
Accounts payable and accrued
liabilities
1
9,586,423
9,586,423
9,586,423
Term
 
loans
190,905
263,232
85,731
67,561
62,823
47,117
Balance due on business
combination
3,952,203
4,355,600
2,395,580
1,960,020
Lease liabilities
5,323,965
6,614,192
3,220,750
710,493
561,628
2,121,321
19,053,496
20,819,447
15,288,484
2,738,074
624,451
2,168,438
1
Accounts payable and accrued liabilities exclude amounts
 
which are not financial liabilities.
The Company's
 
Canadian subsidiary
 
benefits from
 
a line
 
of credit
 
of $
500,000
, and
 
the Italian
 
subsidiary benefits
 
from a
400,000
 
Euros ($
576,000
) line of credit. At December 31, 2022, $
498,200
 
was drawn on the Canadian facility and
341,473
Euros ($
493,702
) was drawn on
 
the Italian facility. The credit facilities
 
both bear interest at
 
variable rates which is
 
the bank’s
prime rate plus 1%
, therefore,
7.45
% for the Canadian facility and
8
% for the Italian facility. There
 
are no imposed financial
covenants on the credit facilities.
 
Fair value of financial instruments
The fair value represents
 
the amount that
 
would be received
 
for the sale of
 
an asset or paid
 
for the transfer of
 
a liability in
an orderly transaction
 
between market
 
participants at the
 
measurement date.
 
The fair value
 
estimates are calculated
 
at a
specific date
 
taking into
 
consideration assumptions
 
regarding the
 
amounts, the
 
timing of
 
estimated future
 
cash flows
 
and
discount rates.
 
Accordingly,
 
due to
 
its approximate
 
and subjective
 
nature, the
 
fair value
 
must not
 
be interpreted
 
as being
realizable in an immediate settlement of the financial instruments.
There
 
are
 
three
 
levels
 
of
 
fair
 
value
 
that
 
reflect
 
the
 
significance
 
of
 
inputs
 
used
 
in
 
determining
 
fair
 
values
 
of
 
financial
instruments:
Level 1 — quoted prices (unadjusted) in active markets
 
for identical assets or liabilities.
Level 2 — inputs other than quoted prices included within Level
 
1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 — inputs for the asset or liability that are not based
 
on observable market data.
The fair values
 
of cash
 
and cash
 
equivalents, trade
 
accounts receivable,
 
other receivables,
 
deposits, bank
 
indebtedness,
accounts payable and accrued liabilities approximate their carrying
 
amounts
 
due to their short-term maturities.
Investments in BGF and HPQ shares are valued at quoted
 
market prices and are classified as Level 1.
Royalties receivable are discounted according to their corresponding
 
agreements and are classified as Level 2.
Investments in HPQ warrants are valued using the Black
 
-Scholes pricing model and are classified as Level 3 (note
 
11).
The fair value
 
of the term
 
loans and the
 
balance due on business
 
combination as at December 31,
 
2022 is determined using
the
 
discounted
 
future
 
cash
 
flows
 
method
 
and
 
management's
 
estimates
 
for
 
market
 
interest
 
rates
 
for
 
similar
 
issuances.
Accordingly, as a result
 
,
 
their fair market values correspond to their carrying amount. The term loans are classified
 
as level
2 and the balance due on business combination as Level 3.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
46
29.
 
Contingent liabilities
The
 
Company
 
is
 
currently
 
a
 
party
 
to
 
various
 
legal
 
proceedings.
 
If
 
management
 
believes
 
that
 
a
 
loss
 
arising
 
from
 
these
proceedings is
 
probable and
 
can reasonably
 
be estimated,
 
that amount
 
of the
 
loss is
 
recorded. As
 
additional information
becomes
 
available,
 
any
 
potential
 
liability
 
related
 
to
 
these
 
proceedings
 
is
 
assessed
 
and
 
the
 
estimates
 
are
 
revised,
 
if
necessary. Based on currently available information, management
 
believes that the ultimate
 
outcome of these proceedings,
individually and in
 
aggregate, will not
 
have a material
 
adverse effect on
 
the Company’s
 
financial position or
 
overall trends
in results of operations.
The Company had received a government grant in prior years of approximately $
800,000
 
to assist with the development of
a new system of advanced waste treatment systems technology. The grant
 
is potentially repayable at the rate of
3
% of any
consideration received
 
as a
 
result of
 
the project,
 
for which
 
funding has
 
been received,
 
to a
 
maximum of
 
the actual
 
grant
received. This repayment
 
provision will remain
 
in effect
 
until May 30,
 
2024. The Company
 
abandoned the
 
project in 2011
and accordingly,
no
 
amount is expected to be repaid.
30.
 
Capital management
The Company’s objectives in managing capital are:
a)
 
To
 
ensure sufficient liquidity to support its current
 
operations and execute its business plan; and
b)
 
To
 
provide adequate return to the shareholders
The Company’s primary objectives when managing capital is to ensure the Company continues as a going concern as well
as to maintain optimal returns to shareholders and benefits for
 
other stakeholders.
The Company
 
currently funds
 
these requirements
 
from cash
 
flows from
 
operations and
 
with financing
 
arrangements with
third parties and shareholders.
The Company is
 
not subject to
 
any externally imposed
 
capital requirements. The
 
Company monitors
 
its working capital
 
in
order to
 
meet its
 
financial obligations.
 
As at
 
December 31, 2022,
 
the Company’s
 
working capital
 
was $
1,650,709
 
(2021 -
$
14,006,785
).
The management of capital includes shareholders’ equity for a total amount of $
16,868,927
 
(2021 - $
40,768,754
) and term
loans of $
389,987
 
(2021 - $
190,905
), as well as cash and cash
 
equivalents amounting to $
3,445,649
 
(2021 - $
12,202,513
).
 
There were
 
no significant
 
changes in
 
the Company’s
 
approach during
 
the current
 
and preceding
 
fiscal year,
 
however,
 
In
order to
 
maintain or
 
adjust capital
 
structure, the
 
Company may
 
issue new
 
shares, sell
 
portions of
 
its strategic
 
investment
and periodically purchase its own shares on the open
 
market.
31.
 
Income taxes
a) Income tax expenses is comprised of the following:
2022
2021
$
$
Current tax
Current year
118,378
(155,714)
Deferred tax
Origination and reversal of temporary differences
(6,219,309)
(5,095,595)
Change in unrecognized deductible temporary differences
6,176,915
4,511,349
(42,394)
(584,246)
Income tax expense (recovery)
75,984
(739,960)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
47
b) Reconciliation of effective tax rate
2022
2021
$
$
Loss before income taxes
(32,091,043)
(39,171,899)
Income tax rates
26.5
%
26.5
%
Income tax recovery at the combined basic Federal and
 
Provincial tax rates
(8,504,126)
(10,380,553)
Permanent differences
2,165,385
5,079,805
Tax
 
rate changes
(826)
8,334
Prior year adjustment
115,118
60,533
Change in unrecognized deductible temporary differences
6,176,915
4,511,349
Other
123,518
(19,428)
Income tax expense (recovery)
 
75,984
(739,960)
The applicable statutory tax
 
rates are
26.5
% in 2022
 
and
26.5
% in 2021.
 
The Company's applicable tax
 
rate is the
 
Canadian
combined rates applicable in the jurisdiction in which the
 
Company operates.
c) Deferred tax assets and liabilities
Recognized deferred tax assets and liabilities:
As at December 31, 2022 and 2021, recognized deferred
 
tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
2022
2021
2022
2021
2022
2021
$
$
$
$
$
$
Non-capital losses
carried forward
772,343
1,705,073
772,343
1,705,073
Strategic investments
(656,507)
(656,507)
Royalties receivable
(373,063)
(333,543)
(373,063)
(333,543)
Property and equipment
(155,833)
(147,127)
(155,833)
(147,127)
Intangibles
(243,447)
(468,167)
(243,447)
(468,167)
Deferred income
(21,000)
(21,000)
Right-of-use assets net of liabilities
(121,123)
(121,123)
Tax
 
assets (liabilities)
772,343
1,705,073
(772,343)
(1,747,467)
(42,394)
Set off of tax
(772,343)
(1,705,073)
772,343
1,705,073
Net tax assets (liabilities)
(42,394)
(42,394)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
48
Deferred taxes from temporary differences and unused
 
tax losses and tax credits are summarized as follows:
Recognized
Recognized
 
Recognized
 
January 1,
on business
 
in profit or
December
January
in profit or
 
December
2021
combination
 
loss
 
31, 2021
1, 2022
loss
 
31, 2022
$
$
$
$
$
$
$
Non-capital
losses carried
forward
4,982,328
642,149
(3,919,404)
1,705,073
1,705,073
(932,730)
772,343
Strategic
investments
(4,919,499)
4,262,992
(656,507)
(656,507)
656,507
Investment tax
credits
(273,854)
273,854
Royalties
receivable
(280,900)
(52,643)
(333,543)
(333,543)
(39,520)
(373,063)
Property and
equipment
(25,273)
(2,840)
(119,014)
(147,127)
(147,127)
(8,706)
(155,833)
Intangibles
(559,949)
91,782
(468,167)
(468,167)
224,720
(243,447)
Deferred income
(21,000)
(21,000)
(21,000)
21,000
Right-of-use
assets net of
liabilities
(188,802)
67,679
(121,123)
(121,123)
121,123
(706,000)
79,360
584,246
(42,394)
(42,394)
42,394
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
49
As at December 31, 2022 and 2021, the amounts and expiry dates of tax attributes and temporary differences for which no
deferred tax assets were recognized are as follows:
December 31, 2022
December 31, 2021
Federal
Provincial
Federal
Provincial
$
$
$
$
Research and development expenses,
 
without time limitation:
11,917,963
12,150,617
11,399,104
11,023,013
Federal research and development
investment tax credits:
2029
299,881
299,881
2030
89,879
89,879
2031
223,759
223,759
2032
186,031
186,031
2033
105,216
105,216
2034
212,609
212,609
2035
488,555
488,555
2036
359,594
359,594
2037
253,885
253,885
2038
186,015
186,015
2039
340,728
465,535
2040
101,562
101,562
2041
167,461
359,115
2042
256,417
3,271,592
3,331,636
December 31, 2022
December 31, 2021
Federal
Provincial
Italy
Federal
Provincial
Italy
$
$
$
$
$
$
Tax
 
losses carried
forward:
2032
2,866,759
2,866,759
628,948
2033
2,047,643
2,047,643
2,047,643
1,490,639
2034
589,007
589,007
589,007
589,007
2035
703,664
416,827
703,664
416,827
2036
3,579,827
3,440,527
3,579,827
3,440,527
2037
1,577,876
1,568,739
1,577,876
1,568,739
2038
5,716,536
5,650,620
5,716,536
5,650,620
2039
4,772,060
4,079,919
4,163,315
4,079,919
2040
533,485
533,485
2041
3,818,898
3,773,941
2,710,255
2,659,255
2042
16,135,868
16,140,505
Indefinite
908,073
815,620
42,341,623
41,107,972
908,073
21,717,071
19,895,533
815,620
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
50
December 31, 2022
December 31, 2021
Federal
Provincial
Federal
Provincial
$
$
$
$
Other deductible temporary differences,
 
Without time limitation:
Right-of-use assets net of liabilities
687,896
687,896
Strategic investments
3,068,378
3,068,378
Financing costs
677,789
677,789
1,100,504
1,100,504
Intangible assets
3,460,822
3,194,890
3,712,181
3,431,133
Capital losses
464,768
464,768
7,894,885
7,628,953
5,277,453
4,996,405
Deferred tax assets and
 
investment tax credits have
 
not been recognized in respect
 
to these items because
 
it is uncertain
that future taxable
 
profit will be
 
available against which
 
the Company can
 
utilise the benefits
 
therefrom. The generation
 
of
future taxable profit depends on the successful commercialisation
 
of the Company’s products and technologies.
32.
 
Segment information
The Company operates
 
in
one
 
segment, based
 
on financial information
 
that is available
 
and evaluated
 
by the Company’s
Board of Directors. The Company’s head office is located in Montreal, Quebec. The operations of
 
the Company are located
in three geographic areas: Canada, Italy and India.
The following is a summary of the Company’s
 
total revenues by geography:
2022
2021
$
$
Brazil
162,797
1,475,608
Canada
11,933,904
7,383,884
England
634
Germany
11,606
3,867
India
91,699
698,837
Israel
27,360
126,246
Italy
1,309,478
2,514,665
Mexico
371,668
920,818
Netherlands
112,634
Poland
47,591
60,406
Saudi Arabia
1,511,142
7,019,953
South Africa
29,997
Spain
22,049
1,178
United States of America
2,661,071
10,567,741
Vietnam
720,507
294,513
19,013,503
31,068,350
Revenue by product line and revenues recognized by
 
revenue recognition method are presented in note 7.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
51
The following is a summary of selected asset categories
 
by geographic market, at December 31:
2022
2021
$
$
$
$
$
$
Canada
 
India
Total
Canada
 
India
Total
Property and equipment
3,372,356
21,096
3,393,452
3,685,974
26,963
3,712,937
Right-of-use assets
4,818,744
4,818,744
5,765,993
5,765,993
Intangible assets
2,104,848
2,104,848
2,774,198
2,774,198
Goodwill
2,660,607
2,660,607
2,660,607
2,660,607
12,956,555
21,096
12,977,651
14,886,772
26,963
14,913,735
In 2022 and 2021, none of the selected asset categories
 
above were located in Italy.
33.
 
Subsequent event
On March 8, 2023, the Company announced it had completed a non-brokered private placement consisting of the issuance
and sale of
5,000,000
 
units of the
 
Company at a
 
price of $
1.00
 
per unit, for
 
gross proceeds of
 
$
5,000,000
. Each unit
 
consists
of
one
 
common share of the Company
 
and
one
 
common share purchase warrant.
 
Each warrant entitles the holder
 
thereof
to purchase
one
 
common
 
share at
 
a price
 
of
 
$
1.25
 
until
 
March
 
7,
 
2025. The
 
entire amount
 
is allocated
 
to
 
the common
shares as the fair value of the common shares on March
 
8, 2023 was $
1.38
.
pyrex99d4
 
 
Exhibit 99.4
CERTIFICATION OF
 
PRINCIPAL
 
EXECUTIVE OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, P.
 
Peter Pascali,
 
certify that:
1.
 
I have reviewed this annual report on Form 40-F of PyroGenesis
 
Canada Inc.;
2.
 
Based
 
on my
 
knowledge,
 
this
 
report does
 
not contain
 
any untrue
 
statement
 
of
 
a
 
material fact
 
or omit
 
to state
 
a
material fact necessary
 
to make the
 
statements made,
 
in light of
 
the circumstances
 
under which such
 
statements
were made, not misleading with respect to the period covered
 
by this report;
3.
 
Based
 
on
 
my
 
knowledge,
 
the
 
financial
 
statements,
 
and
 
other
 
financial
 
information
 
included
 
in
 
this
 
report,
 
fairly
present in all
 
material respects
 
the financial condition,
 
results of operations
 
and cash flows
 
of the registrant
 
as of,
and for, the periods presented
 
in this report;
4.
 
The registrant's other certifying officer(s)
 
and I are responsible for establishing and maintaining
 
disclosure controls
and
 
procedures
 
(as
 
defined
 
in
 
Exchange
 
Act
 
Rules
 
13a-15(e)
 
and
 
15d-15e))
 
and
 
internal
 
control
 
over
 
financial
reporting (as defined in Exchange Act Rules 13a-15(f)
 
and 15d-15(f)) for the registrant and have:
a.
 
Designed such
 
disclosure controls
 
and procedures,
 
or caused
 
such disclosure
 
controls and
 
procedures to
be designed under our supervision, to ensure
 
that material information relating to the
 
registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b.
 
Designed
 
such
 
internal
 
control
 
over
 
financial
 
reporting,
 
or
 
caused
 
such
 
internal
 
control
 
over
 
financial
reporting to be designed under our supervision,
 
to provide reasonable assurance regarding the
 
reliability of
financial
 
reporting
 
and
 
the
 
preparation
 
of
 
financial
 
statements
 
for
 
external
 
purposes
 
in
 
accordance
 
with
generally accepted accounting principles;
c.
 
Evaluated
 
the
 
effectiveness
 
of
 
the
 
registrant's
 
disclosure
 
controls
 
and
 
procedures
 
and
 
presented
 
in
 
this
report our
 
conclusions about
 
the effectiveness
 
of the
 
disclosure controls
 
and procedures,
 
as of
 
the end
 
of
the period covered by this report based on such evaluation;
 
and
d.
 
Disclosed in this
 
report any change
 
in the registrant's
 
internal control over
 
financial reporting that
 
occurred
during the registrant's most
 
recent fiscal year that
 
has materially affected, or is
 
reasonably likely to materially
affect, the registrant's internal control over financial
 
reporting; and
5.
 
The
 
registrant's
 
other
 
certifying
 
officer(s)
 
and
 
I
 
have
 
disclosed,
 
based
 
on
 
our
 
most
 
recent
 
evaluation
 
of
 
internal
control
 
over
 
financial
 
reporting,
 
to
 
the
 
registrant's
 
auditors
 
and
 
the
 
audit
 
committee
 
of
 
the
 
registrant's
 
board
 
of
directors (or persons performing the equivalent functions):
a.
 
All
 
significant
 
deficiencies
 
and
 
material
 
weaknesses
 
in
 
the
 
design
 
or
 
operation
 
of
 
internal
 
control
 
over
financial reporting
 
which are reasonably
 
likely to adversely
 
affect the
 
registrant's ability
 
to record, process,
summarize and report financial information; and
b.
 
Any fraud,
 
whether or
 
not material,
 
that involves
 
management or
 
other employees
 
who have
 
a significant
role in the registrant's internal control over financial reporting.
Date: March 31
st
, 2023
By:
/s/ P.
 
Peter Pascali
P.
 
Peter Pascali
Chief Executive Officer
(Principal Executive Officer)
pyrex99d5
 
 
Exhibit 99.5
CERTIFICATION OF
 
PRINCIPAL FINANCIAL
 
OFFICER
I, Andre Mainella,
 
certify that:
1.
 
I have reviewed this annual report on Form 40-F of PyroGenesis
 
Canada Inc.;
2.
 
Based on
 
my knowledge,
 
this
 
report does
 
not contain
 
any untrue
 
statement
 
of a
 
material fact
 
or omit
 
to state
 
a
material fact necessary
 
to make the
 
statements made,
 
in light of
 
the circumstances
 
under which such
 
statements
were made, not misleading with respect to the period covered
 
by this report;
3.
 
Based
 
on
 
my
 
knowledge,
 
the
 
financial
 
statements,
 
and
 
other
 
financial
 
information
 
included
 
in
 
this
 
report,
 
fairly
present in all
 
material respects the
 
financial condition, results
 
of operations and
 
cash flows of
 
the registrant as
 
of,
and for, the periods presented
 
in this report;
4.
 
The registrant's other certifying officer(s) and
 
I are responsible for establishing and maintaining disclosure
 
controls
and
 
procedures
 
(as
 
defined
 
in
 
Exchange
 
Act
 
Rules
 
13a-15(e)
 
and
 
15d-15e))
 
and
 
internal
 
control
 
over
 
financial
reporting (as defined in Exchange Act Rules 13a-15(f)
 
and 15d-15(f)) for the registrant and have:
a.
 
Designed such
 
disclosure controls
 
and procedures,
 
or caused
 
such disclosure
 
controls and
 
procedures to
 
be
designed
 
under
 
our
 
supervision,
 
to
 
ensure
 
that
 
material
 
information
 
relating
 
to
 
the
 
registrant,
 
including
 
its
consolidated subsidiaries, is made known
 
to us by others within those
 
entities, particularly during the period
 
in
which this report is being prepared;
b.
 
Designed such internal control
 
over financial reporting, or
 
caused such internal control
 
over financial reporting
to
 
be
 
designed
 
under
 
our
 
supervision,
 
to
 
provide
 
reasonable
 
assurance
 
regarding
 
the
 
reliability
 
of
 
financial
reporting
 
and
 
the
 
preparation
 
of
 
financial
 
statements
 
for
 
external
 
purposes
 
in
 
accordance
 
with
 
generally
accepted accounting principles;
c.
 
Evaluated the effectiveness
 
of the registrant's disclosure
 
controls and procedures
 
and presented in this report
our conclusions about the
 
effectiveness of the
 
disclosure controls and procedures,
 
as of the end of
 
the period
covered by this report based on such evaluation; and
d.
 
Disclosed
 
in
 
this
 
report
 
any
 
change
 
in
 
the
 
registrant's
 
internal
 
control
 
over
 
financial
 
reporting
 
that
 
occurred
during the
 
registrant's most
 
recent fiscal year
 
that has
 
materially affected,
 
or is
 
reasonably likely
 
to materially
affect, the registrant's internal control over financial
 
reporting; and
5.
 
The
 
registrant's
 
other
 
certifying
 
officer(s)
 
and
 
I
 
have
 
disclosed,
 
based
 
on
 
our
 
most
 
recent
 
evaluation
 
of
 
internal
control
 
over
 
financial
 
reporting,
 
to
 
the
 
registrant's
 
auditors
 
and
 
the
 
audit
 
committee
 
of
 
the
 
registrant's
 
board
 
of
directors (or persons performing the equivalent functions):
a.
 
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are
 
reasonably likely
 
to adversely
 
affect the
 
registrant's ability
 
to record,
 
process, summarize
and report financial information; and
b.
 
Any fraud, whether or
 
not material, that involves
 
management or other
 
employees who have a significant
 
role
in the registrant's internal control over financial reporting.
 
Date: March 31
st
, 2023
By:
/s/ Andre Mainella
Andre Mainella
Chief Financial Officer
(Principal Financial Officer)
pyrex99d6
 
 
Exhibit 99.6
CERTIFICATION OF
 
PRINCIPAL
 
EXECUTIVE OFFICER TO
18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with
 
the Annual Report
 
of PyroGenesis
 
Canada Inc.
 
(the “Registrant”)
 
on Form 40
 
-F for the
 
annual
period ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”),
I, P.
 
Peter Pascali,
 
Chief Executive
 
Officer,
 
certify,
 
pursuant to
 
18 U.S.C.
 
Sec. 1350,
 
as adopted
 
pursuant to
 
Sec. 906
 
of
the Sarbanes-Oxley Act of 2002, that:
(1)
 
The Report fully
 
complies with
 
the requirements
 
of Section 13(a)
 
or Section 15(d)
 
of the Securities
 
Exchange Act
of 1934, as amended; and
(2)
 
The information contained
 
in the Report
 
fairly presents,
 
in all material
 
respects, the financial
 
condition and results
of operations of the Registrant.
Date: March 31
st
, 2023
By:
/s/ P.
 
Peter Pascali
P.
 
Peter Pascali
Chief Executive Officer
(Principal Executive Officer)
pyrex99d7
 
 
Exhibit 99.7
CERTIFICATION OF
 
PRINCIPAL
 
EXECUTIVE OFFICER TO
18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with
 
the Annual Report
 
of PyroGenesis
 
Canada Inc.
 
(the “Registrant”)
 
on Form 40
 
-F for the
 
annual
period ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”),
I, Andre Mainella,
 
Chief Financial Officer,
 
certify, pursuant
 
to 18 U.S.C. Sec. 1350, as adopted
 
pursuant to Sec. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1)
 
The Report fully
 
complies with
 
the requirements
 
of Section 13(a)
 
or Section 15(d)
 
of the Securities
 
Exchange Act
of 1934, as amended; and
(2)
 
The information contained
 
in the Report
 
fairly presents, in
 
all material respects,
 
the financial condition
 
and results
of operations of the Registrant.
Date: March 31
st
, 2023
By:
/s/ Andre Mainella
Andre Mainella
Chief Financial Officer
(Principal Financial Officer)
pyrex99d8
 
pyrex99d8p1i0 pyrex99d8p1i1
Exhibit 99.8
Raymond Chabot
Grant Thornton LLP
Consent of Independent
Suite 2000
Registered Public Accounting Firm
National Bank Tower
600 De La Gauchetière Street West
Montréal, Quebec
H3B 4L8
T 514-878-2691
We
 
have
 
issued
 
our
 
report
 
dated
 
March 30,
 
2023,
 
with
 
respect
 
to
 
the
 
consolidated
 
financial
 
statements
 
included
 
in
 
the
Annual Report of PyroGenesis Canada Inc. on Form 40-F for the
 
year ended December 31, 2022.
We hereby consent to
 
the inclusion of said
 
report in the Annual
 
Report of PyroGenesis Canada Inc.
 
for the fiscal year
 
ended
December 31, 2022.
Montreal, Canada
March 31, 2023
pyrex99d9
 
 
pyrex99d9p1i0
Exhibit 99.9
CODE OF BUSINESS CONDUCT AND ETHICS
Adopted by Resolution of the Board of Directors on:
 
March 30, 2021
 
- 1 -
CODE OF BUSINESS CONDUCT AND ETHICS
INTRODUCTION
Every employee, officer and director of PyroGenesis Canada Inc. (the “
Company
”) and its subsidiaries occupies a position
of trust. In varying measures, individuals, as
 
well as certain contractors and agents,
 
represent the Company in its relations
with
 
others
 
whether
 
with
 
customers,
 
suppliers,
 
employees,
 
competitors,
 
governments,
 
investors
 
or
 
the
 
general
 
public.
Whatever the area
 
of activity and
 
whatever the degree
 
of responsibility, such persons are
 
expected to act
 
honestly, ethically,
with integrity and in compliance with applicable laws and regulations.
This
 
Code
 
of
 
Business
 
Conduct
 
and
 
Ethics
 
(this
 
Code
”)
 
was
 
adopted
 
by
 
the
 
board
 
of
 
directors
 
of
 
the
 
Company
 
(the
Board
”) as a guide that is intended, among other things, to sensitize such individuals to significant legal
 
and ethical issues
that
 
arise
 
frequently
 
and
 
to
 
the
 
mechanisms
 
available
 
to report
 
illegal
 
or
 
unethical
 
conduct,
 
and
 
provide
 
assurance
 
that
reporting of questionable behavior
 
is protected and encouraged.
 
It does not purport to
 
address every legal or
 
ethical issue
that may be encountered.
 
Moreover, the
 
specific requirements of
 
applicable law in certain
 
jurisdictions where we
 
currently
operate or may operate in the future may impose a higher standard than is specifically
 
set forth in this Code. Ultimately,
 
no
code of conduct can replace the thoughtful behavior of
 
a person acting honestly,
 
ethically and with integrity.
Compliance
 
with
 
this
 
Code
 
is
 
mandatory
 
for
 
all
 
employees,
 
officers
 
and
 
directors
 
of
 
the
 
Company.
 
Certain
 
contractors,
agents and
 
other representatives
 
of the
 
Company may
 
also be
 
required to
 
comply with
 
this Code.
 
Failure to
 
comply with
this Code, including
 
a failure to
 
report a violation
 
of this Code,
 
can have severe
 
consequences.
 
Conduct that
 
violates this
Code may violate
 
applicable laws and
 
subject both
 
the Company and
 
its employees,
 
officers and
 
directors to
 
prosecution
and legal sanctions. The Company may discipline those who violate this Code, up to and including discharge from office or
termination of employment or engagement with the Company.
The Company
 
has set
 
forth
 
in
 
writing
 
numerous
 
policies,
 
procedures,
 
codes,
 
rules and
 
standards
 
of performance
 
(all
 
of
which
 
continue
 
in
 
force)
 
and
 
may
 
create
 
new
 
policies,
 
procedures,
 
codes,
 
rules and
 
standards
 
in
 
the
 
future.
 
This
 
Code
supplements, but does
 
not replace such
 
other policies, procedures, codes,
 
rules and standards of performance.
 
In the event
of a
 
conflict or
 
inconsistency
 
between this
 
Code and
 
any other
 
written policies,
 
procedures, codes,
 
rules or standards
 
of
performance of
 
the Company
 
this Code shall
 
prevail unless
 
the conflicting
 
or inconsistent
 
policy,
 
procedure, code,
 
rule or
standard
 
of
 
performance
 
imposes
 
an
 
additional
 
and/or
 
higher
 
obligation
 
or
 
standard,
 
in
 
which
 
case
 
the
 
conflicting
 
or
inconsistent policy,
 
procedure, code, rule or standard of performance shall control.
Employees, officers or directors with questions about this
 
Code or any policies, rules and employee performance standards
should consult
 
a senior
 
officer.
 
Any employee,
 
officer
 
or director
 
who is
 
concerned
 
about conduct
 
that they
 
believe may
violate
 
this
 
Code,
 
such
 
policies,
 
rules and
 
employee
 
performance
 
standards
 
or
 
applicable
 
law,
 
should
 
consult
 
a
 
senior
officer.
 
Procedures for reporting suspected violations of this Code
 
are set out under “Compliance” below.
NO RETALIATION
The Company will not permit any
 
form of retaliation (including discharge, demotion, suspension, threats,
 
harassment or any
other form of discrimination) against an employee who
 
has truthfully and in good faith:
(a)
 
reported violations of this Code;
(b)
 
lawfully
 
sought
 
advice
 
about
 
providing
 
information,
 
expressed
 
an
 
intention
 
to
 
provide
 
information
 
or
 
provided
information
 
or assistance
 
regarding
 
any conduct
 
which
 
the
 
employee
 
reasonably
 
believes
 
constitutes
 
a criminal
offense or other violation of law;
(c)
 
cooperated, filed, caused to be
 
filed, testified, participated in
 
or otherwise assisted in, or
 
expressed an intention to
do any of the foregoing, in an investigation or proceeding related
 
to a criminal offense or other violation of
 
law; or
(d)
 
provided a law enforcement officer
 
with truthful information regarding
 
the commission or possible commission
 
of a
criminal offence or other violation of law,
 
unless the individual reporting is one of the violators.
Any retaliation against an
 
employee who has truthfully
 
and in good faith
 
done any of the
 
foregoing in accordance
 
with this
Code will result in discipline, up to and including dismissal.
 
- 2 -
CONFLICT OF INTEREST AND DISCLOSURE ISSUES
Conflicts of Interest
Employees, officers and directors owe a duty to the Company to advance its legitimate
 
interests when the opportunity to do
so arises
 
and
 
to
 
refrain
 
from
 
activities
 
which
 
could
 
hinder
 
their
 
ability
 
to
 
act in
 
the
 
Company’s
 
best
 
interest
 
or have
 
the
potential or could be perceived
 
as doing so, including to
 
avoid all situations in which
 
their personal interests conflict,
 
might
conflict or
 
could be
 
perceived to
 
conflict with
 
their duties
 
to the
 
Company.
 
In particular,
 
employees, officers
 
and directors
should seek to avoid acquiring any interests or participating
 
in any activities that would tend to:
(a)
 
deprive the Company of the time or attention required to perform
 
their duties properly; or
(b)
 
create an obligation or
 
distraction which would affect their judgement or
 
ability to act solely
 
in the Company’s best
interest.
Employees
 
charged
 
with
 
executive,
 
managerial
 
or
 
supervisory
 
responsibility
 
are
 
required
 
to
 
see
 
that
 
actions
 
taken
 
and
decisions made
 
within their
 
jurisdiction are
 
free from
 
the influence
 
of any
 
interests that
 
might reasonably
 
be regarded
 
as
conflicting with those of the Company.
Employees, officers and directors owe a duty to the Company to advance its legitimate interests when
 
the opportunity to do
so arises
 
and
 
to
 
refrain
 
from
 
activities
 
which
 
could
 
hinder
 
their
 
ability
 
to
 
act in
 
the
 
Company’s
 
best
 
interest
 
or have
 
the
potential or
 
could
 
be perceived
 
as doing
 
so. Employees
 
are required
 
to disclose
 
in writing
 
to the
 
Company
 
all business,
commercial
 
or
 
financial
 
interests
 
or
 
activities
 
that
 
might
 
reasonably
 
be
 
regarded
 
or
 
perceived
 
as
 
creating
 
an
 
actual
 
or
potential conflict with
 
such duties. In addition,
 
directors and officers are
 
required under corporate law
 
to disclose any
 
interest
in and
 
refrain from
 
voting on
 
any material
 
contracts or
 
transactions relating
 
to the
 
Company in
 
which they
 
are a
 
party or
have a material
 
interest.
A
senior officer must
 
be contacted in
 
advance to co-ordinate
 
the approval of
 
such material contracts
or transactions.
Outside Employment and Business Activities
Employees may take on employment
 
and engage in or otherwise
 
invest in business ventures,
 
partnerships or enterprises,
but
 
only
 
outside
 
their
 
working
 
hours
 
and
 
with
 
the
 
approval
 
of
 
a
 
senior
 
officer.
 
However,
 
employees
 
must
 
avoid
 
outside
employment, businesses and
 
other activities
 
which would impair
 
their effective performance
 
as a
 
Company employee, which
could have an
 
adverse impact
 
on the business
 
or reputation
 
of the Company
 
or which might
 
create or
 
appear to create
 
a
conflict with the best interests of the Company.
For
 
these
 
reasons,
 
it
 
is
 
important
 
for
 
there
 
to
 
be
 
current
 
and
 
complete
 
disclosure
 
of
 
any
 
such
 
outside
 
employment
 
or
business ventures, partnerships or enterprises
 
that any employee, officer or
 
director may have. Such disclosure
 
should be
made promptly
 
to a
 
senior officer and
 
should also
 
be listed
 
in any
 
acknowledgement of this
 
Code requested
 
by the
 
Company.
See also “Personal Gain”, “Company
 
Confidential Information”, “Intellectual
 
Property”, “Use of Company
 
Assets” and “Use
of Technology”
 
below.
Community Activities
Employees,
 
officers
 
and
 
directors
 
may,
 
and
 
are
 
encouraged
 
to,
 
engage
 
in
 
community
 
and
 
volunteer
 
work
 
and
 
activities
outside
 
their
 
working
 
hours,
 
and
 
to
 
uphold
 
a
 
commitment
 
to
 
community
 
in
 
all
 
their
 
activities.
 
Requests
 
for
 
donation
 
or
sponsorship by
 
the Company
 
or from
 
Company assets,
 
including employee
 
work time,
 
must be
 
made only in
 
accordance
with
 
the
 
Company’s
 
applicable
 
established
 
policies,
 
procedures,
 
codes,
 
rules and
 
standards
 
and
 
within
 
any
 
established
budget therefor or, alternatively,
 
may be submitted to a senior officer and, in such case, may only be approved by the Chief
Executive
 
Officer,
 
Chief
 
Financial
 
Officer
 
or
 
another
 
senior
 
officer
 
designated
 
by
 
the
 
Chief
 
Executive
 
Officer
 
or
 
Chief
Financial Officer for such purpose. See also “Lobbying
 
Activities and Political and Charitable Contributions” below.
Board Appointments
An employee may
 
not sit
 
on the board
 
of a
 
publicly-traded company or
 
other entity (other
 
than the Company
 
and its
 
affiliates)
without
 
the
 
permission
 
of
 
a senior
 
officer
 
or
 
in
 
the
 
case
 
of
 
a
 
senior
 
officer,
 
the
 
Chief
 
Executive
 
Officer.
 
Membership
 
on
charitable or community
 
boards does not
 
require pre-approval but such
 
activity must not interfere
 
with duties and
 
obligations
to the Company and must not reflect negatively on the Company.
An employee
 
who sits
 
on the board
 
of a company
 
or other
 
entity (other
 
than the
 
Company and
 
its affiliates)
 
must abstain
from voting on any matter that directly or indirectly concerns the Company or would be contrary to the Company’s interests
or would give the appearance or perception of a conflict of interest.
 
- 3 -
Personal Gain
Employees,
 
officers
 
and
 
directors
 
must
 
not
 
directly
 
or
 
indirectly
 
use
 
their
 
status
 
or
 
position
 
with
 
the
 
Company
 
to
 
obtain
personal
 
gain
 
in
 
any
 
manner,
 
including
 
from
 
those
 
doing
 
or
 
seeking
 
to
 
do
 
business
 
with
 
the
 
Company.
 
Applicable
 
law
provides that
 
if personal
 
financial benefit
 
is improperly
 
gained by
 
an employee,
 
officer or
 
director directly
 
or indirectly, through
a spouse or child or a relative sharing the same residence as the
 
individual, as a result of his employment or position or by
the
 
use or
 
misuse
 
of
 
the
 
Company’s
 
property
 
or
 
of
 
information
 
that
 
is confidential
 
to
 
the
 
Company’s
 
business,
 
then the
employee, officer or director must account to
 
the Company for any benefit received.
Company Confidential Information
Employees,
 
officers
 
and
 
directors
 
must
 
safeguard
 
the
 
Company’s
 
Confidential
 
Information.
 
Confidential
 
Information
includes, but is not limited
 
to, trade secrets, know
 
how, records,
 
data, plans, strategies, processes,
 
business opportunities
and ideas relating to present
 
and contemplated products and services
 
and financial affairs of the
 
Company,
 
its customers,
its suppliers and/or employees, as well as information relating
 
to cybersecurity risks and incidents, which information is not
generally known to the public.
Employees, officers
 
and directors
 
are prohibited
 
from disclosing Confidential
 
Information or
 
other information
 
which might
impair the Company’s competitive position or which might
 
violate the private rights of individuals, enterprises or
 
institutions
without
 
appropriate
 
authorization
 
in
 
accordance
 
with
 
the
 
Company’s
 
Disclosure,
 
Confidentiality
 
and
 
Trading
 
Policy,
 
and
must
 
take
 
the
 
appropriate
 
steps
 
to
 
protect
 
such
 
information.
 
The
 
above
 
rules also
 
apply
 
to
 
confidential
 
information
 
of
 
a
Company customer or
 
supplier (or prospective customer
 
or supplier). These confidentiality
 
obligations continue even
 
after
an individual’s service as an employee, officer
 
or director of the Company has ceased.
If
 
the
 
decision
 
is
 
made
 
to
 
disclose
 
Confidential
 
Information
 
to
 
any
 
person
 
or
 
entity
 
outside
 
of
 
the
 
Company
 
(such
 
as
 
a
potential
 
vendor
 
or
 
business
 
partner),
 
it
 
should
 
be
 
done
 
only
 
after
 
appropriate
 
confidentiality
 
agreements
 
are
 
executed.
These agreements must document the need to maintain confidentiality of the Confidential
 
Information that is disclosed and
copies of all
 
confidentiality agreements must be
 
forwarded to a
 
senior officer. The amount of
 
Confidential Information shared
with any
 
person or
 
entity outside
 
of the
 
Company should,
 
in any
 
case, be
 
kept to
 
the minimum
 
necessary to
 
address the
applicable business need.
All employees, officers and directors
 
must also adhere to the Company’s
 
policies, procedures, and rules on confidentiality,
disclosure and
 
insider trading
 
as set
 
out in
 
the Company’s
 
Disclosure, Confidentiality
 
and Trading
 
Policy.
 
A copy
 
of such
policy is
 
available on
 
the Company’s
 
intranet, but
 
it may
 
also be
 
obtained from
 
a senior
 
officer.
 
Nothing in
 
such policy
 
or
this
 
Code
 
restricts
 
an
 
employee
 
from
 
reporting
 
potential
 
violations
 
of
 
law
 
to
 
securities
 
regulators
 
or
 
other
 
governmental
agencies
 
or self-regulatory
 
authorities
 
without
 
notice
 
or permission
 
from
 
the
 
Company,
 
or providing
 
disclosures
 
that are
protected or required under
 
applicable whistleblower laws and
 
cooperating voluntarily with or responding
 
to any inquiry from
securities regulators or other governmental agencies or self-regulatory
 
organizations.
Intellectual Property
Intellectual property refers to any creations
 
of the mind, such as inventions, literary
 
or artistic works, programs, databases,
designs,
 
symbols,
 
names
 
and
 
images.
 
Intellectual
 
property
 
is
 
protected
 
in
 
law
 
by
 
rights
 
such
 
as
 
patents,
 
copyright
 
and
trademarks,
 
which
 
enable
 
the
 
creations
 
to
 
be
 
protection
 
from
 
unauthorized
 
use
 
by
 
third
 
parties.
 
All
 
intellectual
 
property
developed by an employee
 
in his or her role
 
during the course
 
of his or her
 
employment with the Company
 
belongs to the
Company
 
and
 
all
 
employees
 
assign
 
to
 
the
 
Company
 
all rights
 
the
 
employee
 
may
 
have
 
in
 
such
 
intellectual
 
property.
 
All
materials
 
documenting
 
intellectual
 
property
 
must
 
remain
 
with
 
the
 
Company
 
following
 
termination
 
of
 
employment
 
and
employees must
 
delete copies
 
from personal
 
devices.
 
Employees must
 
take such
 
reasonable steps
 
as requested
 
by the
Company to confirm ownership of any intellectual property
 
in the Company and assist the
 
Company to perfect and maintain
its title to such
 
intellectual property and
 
bring or defend
 
cases involving such
 
intellectual property.
 
All employees waive
 
all
authors’ and moral rights which they may have in such
 
intellectual property.
Use of Company Assets
Each employee,
 
officer
 
and director
 
has a
 
responsibility
 
to prevent
 
misuse, loss,
 
unauthorized destruction
 
or damage
 
or
theft of the Company’s assets. Reasonable precautions
 
should be taken to secure the Company premises and assets.
Company
 
assets
 
should
 
be
 
used
 
solely
 
for
 
the
 
benefit
 
of
 
the
 
Company.
 
Use
 
of
 
the
 
Company’s
 
funds
 
or
 
assets
 
for
 
any
unlawful or
 
improper purpose
 
is prohibited.
 
Claims for
 
business expenses
 
must be
 
made consistent
 
with the
 
Company’s
expense polices. Excessive, fictitious or unnecessary claims
 
are prohibited.
 
- 4 -
Use of Technology
Improper use
 
of the
 
Company’s
 
IT resources
 
can create
 
legal liability
 
and these
 
resources
 
should generally
 
be used
 
for
Company purposes only.
Information
 
transmitted
 
through
 
Company
 
resources
 
implies
 
affiliation
 
with
 
the
 
Company
 
and
 
should
 
therefore
 
reflect
positively upon
 
the Company.
 
Sending, receiving,
 
displaying, printing,
 
or otherwise
 
engaging in
 
any communications
 
that
are in violation
 
of applicable law
 
or this Code,
 
or any other
 
the Company policy, including, but not
 
limited to, communications
that are
 
unlawful, libellous,
 
invasive of
 
another’s privacy,
 
threatening, fraudulent,
 
harassing, sexually
 
explicit, defamatory,
or
 
otherwise
 
objectionable,
 
or
 
that
 
infringe
 
or
 
may
 
infringe
 
the
 
intellectual
 
property
 
or
 
other
 
rights
 
of
 
another
 
person
 
or
company, are prohibited.
 
Employees are expected to discourage others from transmitting
 
such information.
Subject
 
to
 
applicable
 
laws,
 
all
 
information
 
of
 
any
 
kind
 
(including
 
without
 
limitation
 
voice
 
communications
 
and
 
electronic
messages) stored or
 
transmitted on
 
Company systems
 
is the property
 
of the Company
 
and the Company
 
has the right
 
to
monitor,
 
inspect
 
and/or
 
audit
 
any
 
communication
 
or
 
material
 
stored,
 
downloaded,
 
accessed,
 
posted,
 
transmitted
 
or
distributed on
 
an employee’s computer, phone
 
or voicemail
 
at any
 
time for
 
any purpose, without
 
prior notice
 
to the
 
employee.
Communications of any nature on these systems should not
 
be considered private communications.
WORK ENVIRONMENT
The Company is
 
committed to respecting
 
human rights both
 
within the Company
 
and with those
 
with whom the
 
Company
does business and the Board oversees this commitment and
 
the Company policies in which it is reflected.
The Company
 
respects
 
human rights
 
by seeking
 
to avoid
 
infringing on
 
the rights
 
of others
 
and seeks
 
to address
 
adverse
human
 
rights
 
impacts
 
with
 
which
 
the
 
Company
 
may
 
become
 
involved.
 
The
 
Company
 
prohibit
 
the
 
use
 
of
 
any
 
forced,
compulsory or child labor.
The Company respects the rights
 
of Company employees and
 
seeks to provide fair and
 
safe working conditions, including
a work environment
 
that is free from
 
discrimination and harassment
 
and affords equal
 
opportunity to all.
 
This commitment
is supported by a
 
broad range of programs
 
for employees and their
 
family members, including
 
employee benefits focused
on health, personal wellness, parental leave, diversity
 
and inclusion, and education.
Discrimination-
 
and Harassment-Free Work Environment
The Company strives to maintain
 
a work environment free of
 
violence, discrimination against and harassment of employees
or non-employees with whom the Company has a business service
 
or professional relationship and in which individuals are
accorded
 
equality
 
of
 
employment
 
opportunity
 
based
 
upon
 
merit
 
and
 
ability.
 
Discriminatory
 
practices
 
based
 
on
 
race,
ancestry,
 
place of origin, color,
 
national or ethnic origin,
 
citizenship, creed, sex, sexual
 
orientation, gender identity,
 
gender
expression, religion,
 
marital status,
 
family status,
 
same-sex partnership
 
status, age,
 
record of
 
offenses, disability
 
or other
prohibited grounds of discrimination under applicable law will
 
not be tolerated.
It
 
is
 
the
 
responsibility
 
of
 
each
 
employee,
 
officer
 
and
 
director
 
of
 
the
 
Company
 
to
 
help
 
the
 
Company
 
provide
 
a
 
work
atmosphere free
 
of harassing
 
(sexual or
 
otherwise), abusive,
 
disrespectful, disorderly,
 
violent, hostile,
 
disruptive or
 
other
non-professional conduct. Harassment in
 
any form, verbal
 
or physical, by
 
any employee, will
 
not be tolerated.
 
The Company
requires every person to show sound judgment and respect
 
for the feelings and sensibilities of all other employees
 
.
If
 
an
 
employee
 
feels
 
that
 
another
 
employee’s
 
conduct
 
is
 
discriminatory,
 
harassing,
 
improper
 
or
 
offensive,
 
the
 
offended
employee should promptly
 
and firmly tell the
 
offender that his
 
or her behavior is
 
unwelcome.
 
Doing so places
 
the offender
on notice
 
that
 
his or
 
her conduct
 
is inappropriate
 
.
 
However,
 
any employee
 
who
 
believes
 
he
 
or she
 
has been
 
subject
 
to
harassment or offensive conduct, or who believes he or she has been a witness to such conduct, may report the offense to
the Human Resources Department or pursuant to the mechanisms for reporting suspected violations of
 
this Code set out in
“Compliance”.
Equal Opportunity
The
 
Company
 
is
 
committed
 
to
 
fair
 
employment
 
practices,
 
including
 
equal
 
treatment
 
in
 
hiring,
 
promotion,
 
training
 
and
compensation, termination, and disciplinary action.
Employee Privacy and Personal Information
The Company
 
believes in
 
taking steps
 
to protect
 
the privacy
 
of its
 
employees, officers,
 
directors, contractors,
 
agents and
other representatives.
 
The Company will not
 
interfere in the personal
 
lives of such individuals unless
 
their conduct impairs
their work performance or adversely affects the work environment or business or reputation of the
 
Company or is otherwise
a violation of this Code.
 
- 5 -
The
 
Company
 
limits
 
the
 
collection
 
of
 
personal
 
information
 
to
 
that
 
which
 
is
 
necessary
 
for
 
business,
 
legal,
 
security
 
or
contractual purposes and collection of personal information is to be conducted by fair
 
and lawful means with the knowledge
and consent
 
of the
 
individual from
 
whom the
 
information
 
is being
 
collected.
 
Access
 
to employee
 
personnel
 
and medical
records and
 
the information contained
 
therein must
 
be limited
 
to those
 
with a
 
need to
 
know for
 
a legitimate
 
business purpose.
All employees
 
have the
 
right to
 
see their
 
own personnel
 
record.
 
Personal
 
information
 
must not
 
be used
 
or disclosed
 
for
purposes other than those for
 
which it was collected, except
 
with the knowledge and consent of
 
the individual or as required
by law.
 
Personal information must
 
be retained only
 
as long as
 
necessary for the fulfilment
 
of those purposes
 
and must be
kept sufficiently
 
accurate, complete
 
and up-to-date
 
to minimize
 
the possibility
 
that inappropriate
 
information may
 
be used
or disclosed.
 
The Company
 
and its
 
employees must
 
observe obligations
 
of confidentiality
 
and non-disclosure
 
of personal
information, including
 
information of
 
its employees
 
and customers,
 
with the
 
same degree
 
of diligence
 
that employees
 
are
expected to use in protecting
 
Confidential Information. All
 
employees must adhere to
 
the Company’s policies,
 
procedures,
codes, rules and
 
standards in
 
place to
 
protect personal
 
information against
 
loss or
 
theft, as
 
well as
 
unauthorized access,
disclosure, copying,
 
use or
 
modification of
 
personal information
 
of others,
 
as the
 
Company is
 
responsible for
 
all personal
information
 
in
 
its
 
possession
 
or
 
custody.
 
The
 
Company
 
and
 
all
 
employees
 
shall
 
also
 
comply
 
with
 
all
 
applicable
 
laws
regulating the disclosure of personal information.
Substance and Alcohol Abuse
The
 
use,
 
possession,
 
sale,
 
purchase
 
and
 
the
 
negotiation
 
for
 
sale
 
or
 
purchase
 
of
 
illegal
 
substances
 
or
 
alcohol
 
in
 
the
workplace or
 
on
 
or through
 
Company
 
property
 
is prohibited
 
unless
 
otherwise
 
authorized. The
 
abuse
 
or improper
 
use of
prescription
 
or
 
over-the-counter
 
drugs
 
while
 
in
 
the
 
workplace
 
or
 
on
 
or
 
through
 
Company
 
property
 
is
 
also
 
prohibited.
Employees are
 
prohibited
 
against using
 
drugs or
 
alcohol in
 
a manner,
 
whether before,
 
during or
 
after work
 
hours, which
adversely affects job performance or customer
 
or supplier relations or compromises the safety of other persons.
HEALTH, SAFETY &
 
THE ENVIRONMENT
The health and safety of employees
 
is a vital concern for the
 
Company and all Company employees
 
share a responsibility
to promote a workplace free of preventable safety
 
and health hazards that complies with all applicable laws
 
and regulations
governing workplace health and
 
safety. This commitment encompasses all of the
 
Company’s facilities and operations. Each
employee must be proactive
 
and follow all of
 
the Company’s safety
 
and health rules and report
 
possible safety and
 
health
issues and concerns to appropriate management personnel.
The Company
 
is committed
 
to conducting
 
operations and
 
activities in
 
a manner
 
that protects
 
the environment.
 
Company
policy
 
is
 
that
 
no
 
employee
 
shall
 
engage
 
in
 
conduct
 
that
 
violates
 
environmental
 
laws
 
or
 
regulations
 
or
 
is
 
otherwise
inconsistent
 
with
 
the
 
health
 
and
 
safety
 
needs
 
of
 
our
 
employees
 
and
 
the
 
environmental
 
needs
 
of
 
our
 
communities.
 
The
Company’s
 
employees are
 
expected to
 
take steps
 
to conserve
 
energy resources
 
to the
 
fullest extent
 
possible consistent
with sound business operations and
 
the Company encourages its
 
offices, employees, suppliers
 
and vendors to participate
in energy and water conservation and recycling programs
 
.
The
 
Company
 
is
 
also
 
committed
 
to
 
the
 
continuous
 
improvement
 
of
 
its
 
environmental
 
management
 
systems,
 
its
environmental, health and safety programs, and to the
 
prevention of pollution.
ETHICAL BUSINESS PRACTICES
Compliance with Laws
The Company conducts
 
business in jurisdictions
 
where laws, customs
 
and social requirements
 
vary considerably.
 
It is the
Company’s policy to operate in material compliance with all applicable domestic and foreign laws, including applicable anti-
corruption
 
and
 
anti-bribery
 
laws.
 
Any
 
employee,
 
officer
 
or
 
director
 
becoming
 
aware
 
of
 
a
 
conflict
 
between
 
foreign
 
laws,
customs or social requirements and applicable domestic
 
or other laws should consult a senior officer
 
promptly.
 
If there is a
conflict between laws, customs or social requirements, employees, officers and directors should in all cases always comply
with all legal
 
requirements. If there
 
are no directly
 
applicable legal requirements,
 
employees, officers
 
and directors should
always comply with applicable Company policies, guidance and
 
expectations.
Gifts, Benefits and Entertainment
Except
 
as
 
set
 
forth
 
herein
 
and
 
in
 
accordance
 
herewith,
 
employees,
 
officers
 
and
 
directors
 
are
 
strictly
 
prohibited
 
from
furnishing
 
or
 
providing,
 
directly
 
or
 
indirectly
 
on
 
behalf
 
of
 
the
 
Company,
 
gifts,
 
entertainment
 
or
 
benefits
 
to
 
other
 
persons
including public
 
officials (as
 
defined below).
 
Similarly,
 
employees, officers
 
and directors
 
must not
 
accept or
 
give anything
that will
 
compromise,
 
or
 
be
 
seen to
 
compromise
 
their
 
judgement
 
or inappropriately
 
influence
 
themselves
 
or
 
others. Any
 
- 6 -
gifts, entertainment
 
or other
 
benefits offered
 
or received
 
that do not
 
comply with
 
these restrictions
 
must be
 
disclosed to
 
a
senior officer and should be declined or returned
 
,
 
if possible.
Those individuals whose duties permit
 
them to do so may
 
furnish or accept certain gifts,
 
favors and entertainment to or
 
from
persons, other than public officials (as defined below),
 
if all the following tests are met:
(a)
 
the gift or other benefit is not cash,
 
a gift certificate or other negotiable instrument;
(b)
 
the gift, other benefit or entertainment cannot
 
reasonably be interpreted as an improper payment or inducement
and is of nominal value;
(c)
 
the gift, other benefit or entertainment does
 
not contravene any law and, in addition,
 
is made in accordance with
generally-accepted local ethical practices;
(d)
 
the gift, other
 
benefit or entertainment
 
does not influence
 
Company business decisions
 
or impact independent
judgement;
(e)
 
the gift, other benefit or entertainment occurs or is given
 
or accepted infrequently;
(f)
 
the gift, other benefit or entertainment arises out of the
 
ordinary course of business;
(g)
 
the gift, other benefit, or entertainment involves reasonable
 
expenditures; and
(h)
 
if
 
subsequently
 
disclosed
 
to
 
the
 
public,
 
the
 
provision
 
or
 
acceptance
 
of
 
the
 
relevant
 
gift,
 
other
 
benefit
 
or
entertainment would not
 
in any
 
way embarrass the
 
Company, its employees, officers or
 
directors or the
 
recipient.
For the
 
avoidance
 
of doubt,
 
this section
 
is not
 
intended
 
to apply
 
to planned
 
promotional or
 
other similar
 
activities
 
of the
Company, including the offering of incentives to customers of the Company,
 
which have been approved in accordance with
the
 
Company’s
 
applicable
 
policies
 
and
 
procedures.
 
Any
 
questions
 
regarding
 
the
 
interpretation
 
of
 
this
 
section
 
and
 
its
requirements
 
should
 
be
 
directed
 
to
 
a
 
senior
 
officer
 
prior
 
to
 
accepting
 
or
 
giving
 
the
 
gift
 
or
 
other
 
benefit
 
to
 
the
 
extent
reasonably practicable.
Recording of Transactions and
 
Reporting of Financial Information
The integrity of the Company’s record keeping
 
and reporting systems shall be maintained at
 
all times, as these systems are
required for the Company to meet its financial, legal and other
 
business obligations.
Employees must document
 
and record all transactions
 
in accordance with
 
the Company’s
 
internal control procedures
 
and
in compliance
 
with all
 
applicable accounting
 
principles, laws,
 
rules and regulations,
 
and employees
 
with responsibility
 
for
reporting
 
financial
 
information
 
must provide
 
information
 
that is
 
accurate,
 
complete,
 
objective, timely
 
and
 
understandable
and that complies
 
with all applicable
 
laws relating to
 
the recording and
 
disclosure of financial
 
information. Employees
 
and
managers are
 
forbidden to
 
use, authorize,
 
or condone
 
the use
 
of "off-the-books"
 
record-keeping or
 
any other
 
device that
could be utilized
 
to distort records
 
or reports
 
of the Company’s
 
true operating results
 
and financial conditions.
 
Employees
must not fraudulently
 
influence, coerce,
 
manipulate or
 
mislead any
 
independent public
 
or certified
 
accountant engaged
 
in
the performance of an audit,
 
review, compilation or other service
 
with respect to the financial statements for the purpose of
rendering such financial statements misleading.
Use of Written Agreements; No Side Deals or Side
 
Letters
The
 
Company
 
documents
 
business
 
transactions
 
with
 
full
 
and
 
complete
 
written
 
agreements
 
that
 
set
 
out
 
the
 
terms
 
and
conditions of
 
the agreement
 
and understandings
 
between the
 
parties. No
 
new agreement
 
can be
 
created, or
 
an existing
agreement
 
modified,
 
without
 
approval
 
of
 
a
 
senior
 
officer.
 
All
 
new
 
agreements
 
should
 
also
 
be
 
reviewed
 
by
 
the
 
relevant
functional areas, including finance, as the terms and
 
conditions of the agreement may affect how the
 
Company records and
reports
 
the
 
transaction
 
for
 
accounting
 
or
 
other
 
purposes.
 
No
 
oral
 
contracts,
 
informal
 
letters
 
of
 
understanding
 
or
 
intent,
“handshake deals” or side
 
letters are permitted. Where
 
the Company has developed
 
standard written agreements and
 
other
provisions, schedules,
 
riders
 
and appendices,
 
Company employees
 
must use
 
these standard
 
forms except
 
to the
 
extent
that changes are authorized by a senior officer.
Records Retention and Destruction
Legal and regulatory practice requires
 
the retention of certain records, such
 
as certain tax, personnel health
 
and safety, and
financial records,
 
for various
 
periods of
 
time and
 
employees, officers
 
and directors
 
are required
 
to comply
 
with Company
 
- 7 -
controls for
 
the retention
 
and timely
 
destruction of
 
records. In
 
addition, when
 
litigation or
 
a governmental
 
investigation or
audit
 
is
 
pending
 
or
 
imminent,
 
relevant
 
records
 
must
 
not
 
be
 
altered
 
or
 
destroyed
 
until
 
the
 
matter
 
is
 
closed.
 
Alteration
 
or
destruction of records in a legal or governmental proceeding
 
may constitute a criminal offense.
A senior
 
officer
 
will notify
 
employees when
 
records have
 
been placed
 
on a
 
“legal hold”.
 
Such records
 
cannot be
 
altered,
destroyed,
 
deleted
 
or modified
 
in any
 
manner
 
for the
 
duration of
 
the “legal
 
hold”.
 
Questions regarding
 
records
 
retention
should be addressed
 
to a senior
 
officer,
 
particularly if any
 
litigation, investigation, inquiry
 
or administrative action
 
involving
the Company or any of its employees, suppliers or customers
 
is pending or threatened.
Cybersecurity
Cyber-attacks may be
 
carried out by
 
third parties or
 
insiders using
 
techniques that
 
range from highly
 
sophisticated efforts
to electronically
 
circumvent
 
network security
 
or overwhelm
 
websites
 
to
 
more traditional
 
intelligence
 
gathering
 
and social
engineering aimed at obtaining
 
information necessary to
 
gain access. In addition,
 
third parties may attempt
 
to fraudulently
induce employees
 
or customers
 
to, or
 
the
 
Company’s
 
employees
 
or customers
 
themselves
 
may,
 
disclose information
 
in
order
 
to
 
gain
 
access
 
to
 
the
 
Company’s
 
data
 
or
 
its
 
customers’
 
information
 
and
 
potentially
 
use
 
such
 
data
 
or
 
information
improperly.
Employees
 
must
 
not
 
engage
 
in
 
or
 
otherwise
 
aid,
 
assist
 
or
 
ignore
 
any
 
potential
 
or
 
actual
 
cyber-attacks
 
or
 
other
 
cyber
incidents
 
or
 
otherwise
 
exploit
 
any
 
cybersecurity
 
vulnerabilities
 
of
 
the
 
Company,
 
and
 
employees
 
must
 
report
 
any
 
such
threatened or actual cyber-attacks or cybersecurity vulnerabilities.
Ethical Competitive Practices and Third-Party Intellectual
 
Property
The Company competes vigorously and creatively in its business activities, but does so in a fair, lawful and ethical manner.
Employees must
 
not use
 
improper or
 
illegal means
 
of gathering
 
information about
 
competitors or
 
other third
 
parties, and
must not exchange information
 
or agree with competitors
 
in connection with pricing
 
or other matters that
 
are prohibited by
applicable law.
 
Theft
 
or illegal
 
entry
 
and electronic
 
eavesdropping
 
are unacceptable
 
means of
 
searching
 
for competitive
intelligence. Employees
 
must neither offer
 
a bribe or
 
a gift in
 
exchange for a
 
competitor’s information
 
nor otherwise solicit
information from current or former employees of a competitor. Employees, officers and directors of the Company must also
not knowingly use or bring onto
 
the Company’s computer systems intellectual property belonging to third parties
 
without the
applicable third party’s consent, a license or
 
other legal right.
Crime and Money-Laundering Prevention
The
 
Company
 
is
 
committed
 
to
 
comply
 
fully
 
with
 
all
 
applicable
 
anti-money
 
laundering
 
laws,
 
both
 
domestically
 
and
internationally.
 
The Company will conduct
 
business only with reputable customers
 
who are involved in legitimate
 
business
activities and whose funds
 
are derived from legitimate
 
sources. All employees
 
are to take reasonable
 
steps to ensure that
the Company does not aid
 
or take part in any
 
illegal activities or accept
 
payments that have been
 
identified as a means
 
of
laundering money.
DEALINGS WITH PERSONS OUTSIDE THE COMPANY
The
 
honesty
 
and
 
integrity
 
of
 
those
 
who
 
represent
 
the
 
Company
 
must
 
underlie
 
all
 
of
 
the
 
Company’s
 
relationships
 
with
persons outside the Company.
Dealing with Public Officials
As a general
 
matter, all
 
dealings between
 
employees, officers
 
and directors of
 
the Company and
 
public officials
 
are to be
conducted
 
in
 
a
 
manner
 
that
 
will
 
not
 
compromise
 
the
 
integrity
 
or
 
impugn
 
the
 
reputation
 
of
 
the
 
Company,
 
its
 
employees,
officers
 
or
 
directors
 
or
 
any
 
public
 
official.
 
The
 
Company
 
specifically
 
prohibits
 
bribery
 
of
 
public
 
officials
 
and
 
third
 
parties
anywhere
 
in
 
the
 
world
 
and
 
requires
 
compliance
 
with
 
all
 
applicable
 
laws
 
in
 
the
 
countries
 
in
 
which
 
the
 
Company
 
does
business, including, without limitation, Canada’s Corruption
 
of Foreign Public Officials Act (“
CFPOA
”) and the U.S. Foreign
Corrupt Practices
 
Act (“
FCPA
”), which prohibit
 
bribery and corruption.
 
This legislation
 
also requires
 
the Company to
 
keep
accurate books and records and maintain effective internal controls.
 
The CFPOA and the FCPA
 
each have a broad scope,
and apply to
 
the activities of
 
the Company and
 
activities carried out
 
through its subsidiaries
 
and affiliates
 
anywhere in the
world.
Even the appearance of impropriety in
 
dealing with public officials is improper and unacceptable. Any participation,
 
whether
directly or indirectly, in any bribes, kickbacks, improper profit-sharing arrangements, illegal gratuities, indirect contributions,
improper
 
inducements,
 
“facilitation
 
payments”
 
or
 
similar
 
payments
 
to
 
any
 
public
 
official
 
is
 
expressly
 
forbidden,
notwithstanding that they might further the business interests of the Company and notwithstanding that such practices may
 
- 8 -
be considered to be a way of “doing business” or necessary
 
in a particular country in question,
 
including where the making
small “facilitation
 
payments”
 
to foreign
 
public officials
 
to secure
 
a routine
 
business
 
service or
 
have routine
 
administrative
actions performed by public officials is local custom. Furthermore, certain
 
laws, such as the CFPOA, apply to dealings with
foreign public officials in Canada and in the official
 
’s own state.
It is the
 
Company’s policy that no payments
 
or offers to make payments
 
whatsoever, regardless of amount or purpose, shall
be
 
made
 
either
 
directly
 
or
 
through
 
third
 
parties
 
to
 
officials
 
or
 
employees
 
of
 
government
 
agencies
 
or
 
instrumentalities
(including government
 
monopolies) without
 
an express
 
authorization
 
from a
 
senior
 
officer
 
following consultation
 
with
 
the
appropriate
 
compliance
 
personnel.
 
Any
 
approved
 
arrangements
 
must
 
be
 
documented
 
in
 
accordance
 
with
 
the
 
Company
legal and accounting requirements and ethical business
 
practices.
The Company
 
may hire
 
former public
 
officials
 
from time
 
to time,
 
but because
 
of the
 
restrictions that
 
applicable laws
 
can
place on
 
such
 
arrangements
 
in certain
 
circumstances,
 
employees,
 
officers
 
and
 
directors
 
must first
 
consult
 
with a
 
senior
officer
 
prior to
 
hiring
 
a current
 
or former
 
public official,
 
or their
 
family
 
members
 
and the
 
Company
 
will
 
not
 
hire any
 
such
official if he or she is participating in a matter reasonably
 
regarded as involving the Company’s
 
interests.
For
 
purposes
 
of
 
this
 
Code,
 
a
 
“public
 
official”
 
should
 
be
 
interpreted
 
broadly
 
and
 
includes
 
any
 
official
 
or
 
employee
 
of
 
a
government
 
or
 
of
 
a
 
department,
 
organization
 
or
 
agency
 
of
 
a
 
government
 
(or
 
any
 
department,
 
organization
 
or
 
agency
thereof); any employee of any company owned or controlled by a
 
government; any official who holds a legislative or judicial
position; any official of a public
 
international organization; any political
 
party or official of a political
 
party; any candidate for
political office;
 
and any
 
person or
 
firm acting
 
in an
 
official
 
capacity,
 
including for,
 
or on
 
behalf of,
 
any of
 
the
 
following:
 
a
government, a
 
department
 
or agency
 
of a
 
government,
 
a company
 
owned or
 
controlled by
 
a government,
 
a legislator,
 
a
judicial officer, a public
 
international organization, or any political party.
The Company and
 
its representatives
 
will not engage
 
in or undertake
 
lobbying activities
 
as defined under
 
applicable laws
unless all requirements
 
under such
 
applicable laws
 
have been
 
satisfied and
 
the prior
 
express approval
 
of a
 
senior officer
has been obtained following consultation with appropriate
 
compliance personnel.
Dealing with the Media and Communications Generally
The Company is committed
 
to providing, as appropriate,
 
full and prompt disclosure
 
to the public of
 
material developments
and events. However,
 
all media, public and investor relations and
 
communications are to be co-ordinated
 
through a senior
officer and the Investor Relations, as applicable, in accordance with the Company’s Disclosure, Confidentiality and Trading
Policy and applicable
 
laws. Employees
 
should not comment
 
on any inquiry
 
from the media,
 
no matter
 
how innocuous the
inquiry may appear. Any employee who is asked by the media or otherwise for a statement or to give a
 
presentation should
explain that he or she is subject
 
to this Code and the Disclosure,
 
Confidentiality and Trading
 
Policy and refer the matter
 
to
a senior officer.
Dealings with Suppliers, Agents and Representatives
Selection of suppliers to the Company will be based on merit
 
after due consideration of alternatives. The Company will only
deal
 
with
 
suppliers
 
who
 
comply
 
with
 
applicable
 
legal
 
requirements
 
(including
 
any
 
applicable
 
regulations
 
requiring,
 
for
example, the conduct of background checks) and
 
the Company’s standards relating to, among other things,
 
labor, including
not
 
using
 
child
 
or
 
forced
 
labor,
 
environment,
 
health
 
and
 
safety,
 
intellectual
 
property
 
rights
 
and
 
refraining
 
from
 
improper
payments.
 
Confidential
 
information
 
received
 
from
 
a
 
supplier
 
shall
 
be
 
treated
 
as
 
if
 
it
 
were
 
the
 
Company’s
 
Confidential
Information (see “Conflicts of Interest and Disclosure Issues
 
– Company Confidential Information”).
The Company will
 
enter into representation
 
agreements only with
 
companies or persons
 
believed to have
 
a record of
 
and
commitment
 
to
 
integrity.
 
Efforts
 
will
 
be
 
taken
 
by
 
the
 
Company
 
and
 
its
 
employees
 
to
 
ensure
 
that
 
agents,
 
consultants,
independent contractors,
 
representatives and
 
suppliers are
 
aware of this
 
Code. A senior
 
officer should
 
be contacted
 
prior
to
 
retaining
 
any
 
individual
 
who
 
is
 
to
 
act
 
as
 
an
 
agent,
 
consultant,
 
independent
 
contractor
 
or
 
representative,
 
and
 
such
individual should be retained only pursuant to a written
 
contract that has been approved by a senior officer
 
.
In
 
cases
 
where
 
an
 
agent,
 
consultant,
 
independent
 
contractor,
 
or
 
a
 
representative
 
is
 
engaged
 
to
 
provide
 
services
 
to
 
the
Company and that individual deals on behalf of the Company with public officials,
 
has access to Confidential Information or
where the
 
Company
 
otherwise
 
determines
 
it is
 
necessary
 
or advisable,
 
such person
 
will be
 
provided with
 
a copy
 
of this
Code and be required to acknowledge the same and be
 
bound by its terms.
Political and Charitable Contributions
The use of the Company’s funds, goods or services as
 
contributions to political parties, candidates, campaigns or charities
is forbidden,
 
unless authorized by
 
a senior
 
officer, and the
 
contribution is in
 
accordance with any
 
approved political donations
 
- 9 -
or
 
charitable
 
donations
 
budget.
 
Contributions
 
include
 
money
 
or
 
anything
 
having
 
value,
 
such
 
as
 
loans,
 
services,
entertainment, trips, employee work time and the use
 
of the Company’s facilities or assets.
No
 
corporate
 
action,
 
direct
 
or
 
indirect,
 
will
 
be
 
allowed
 
that
 
infringes
 
on
 
the
 
right
 
of
 
any
 
employee
 
individually
 
to
 
decide
whether, to whom,
 
and in what amount, he
 
or she will make personal
 
political or charitable contributions.
 
The same is true
of volunteer political or charitable donations of personal service time, so
 
long as it does not interfere with the
 
working status
of
 
employees
 
and
 
is
 
not
 
during
 
employee
 
work
 
time.
 
Employees,
 
officers
 
and
 
directors
 
who
 
participate
 
in
 
political
 
or
charitable activities on
 
their own behalf
 
and on their
 
own time must
 
not purport to
 
speak or act
 
for the Company
 
or in any
way use Company property or assets. It
 
is illegal for the Company to
 
reimburse an employee for a contribution in the
 
nature
of those listed above.
Investigations
The Company
 
will fully
 
cooperate with
 
any appropriate
 
governmental or
 
regulatory
 
investigation. Any
 
time an
 
employee,
officer or director receives information about a new government, regulatory or other investigation or inquiry, this information
should be communicated immediately to a senior officer
 
.
Employees, officers and directors should never,
 
under any circumstances:
(a)
 
destroy or alter any
 
the Company documents
 
or records in anticipation
 
of a request
 
for those documents
 
from
any government agency or a court;
(b)
 
lie or
 
make any
 
misleading statements to
 
any governmental investigator
 
(including routine as
 
well as
 
non-routine
investigations); or
(c)
 
attempt
 
to
 
cause
 
the
 
Company,
 
any
 
employee
 
or
 
any
 
other
 
person,
 
to
 
fail
 
to
 
provide
 
information
 
to
 
any
government investigator or to provide any false or misleading
 
information.
(d)
 
Should any governmental, regulatory or other inquiry be made through the issuance of a written or oral request
for information, such request
 
should immediately,
 
and before any
 
action is taken
 
or promised, be submitted
 
to
a senior officer.
COMPLIANCE
This Code
 
will be
 
posted to
 
the Company’s
 
website and
 
filed under
 
the Company’s
 
profile at
 
www.sedar.com.
A
 
copy of
this Code will also be made available to each Company employee and made available to each director as part of his or her
orientation materials.
From time to time as
 
may be requested by the
 
Company, each employee, officer and director, as applicable, must complete
an
 
acknowledgement
 
and
 
disclosure
 
statement
 
attesting
 
to
 
that
 
individual’s
 
compliance
 
with
 
this
 
Code.
 
All
 
such
acknowledgements will be
 
retained by the Human
 
Resources Department for
 
purposes of confirming that
 
each employee,
officer and director has acknowledged this Code.
The Company reserves the right to audit
 
compliance with this Code. Accordingly, all employees, officers and directors must
afford any
 
external or
 
internal auditors
 
full, free
 
and unrestricted
 
access to
 
all the
 
Company operations,
 
records, facilities
and personnel and will take appropriate measures to safeguard
 
information obtained through the audit process.
An employee, officer or director or other representative who becomes aware of a violation or possible violation of this Code
or any of the Company’s statements and policies must report that information immediately to a senior officer or a director of
the
 
Company.
 
Senior
 
officers
 
and
 
directors
 
may
 
be
 
subject
 
to
 
disciplinary
 
action
 
if
 
they
 
condone
 
misconduct
 
or
 
do
 
not
demonstrate the appropriate leadership to ensure compliance
 
with this Code.
An employee may report questionable
 
accounting or auditing matters, on
 
an anonymous basis, by sending
 
a letter to “The
Board
 
of
 
Directors
 
of
 
PyroGenesis
 
Canada Inc.
 
c/o
 
Chair,
 
Audit
 
Committee,
 
1744
 
William
 
Street,
 
Suite
 
200,
 
Montréal,
Québec H3J 1R4, Canada”. Employees, officers and directors must cooperate fully in any
 
Company investigation and must
take all reasonably steps necessary to safeguard the
 
integrity of the investigation.
WAIVER, AMENDMENTS
 
AND INTERPRETATION
 
OF THIS CODE
The Company retains sole discretion in interpreting
 
and applying this Code. The Company will
 
periodically review this Code
and make
 
appropriate additions
 
or changes.
 
This Code
 
may be
 
updated, modified
 
or withdrawn
 
by the
 
Company
 
at any
time in
 
its sole discretion.
 
Any waiver
 
of this
 
Code for
 
executive officers
 
or directors
 
may be made
 
only by
 
the Board
 
and
will be publicly
 
disclosed, together
 
with the
 
reasons for
 
such waiver,
 
in accordance
 
with all applicable
 
securities laws
 
and
 
- 10 -
stock exchange rules. Any waivers of this Code will only
 
be granted where such waiver is both necessary
 
and appropriate,
and
 
it
 
will
 
be
 
qualified
 
in
 
scope
 
so
 
as
 
to
 
protect
 
the
 
Company
 
to
 
the
 
greatest
 
extent
 
practicable.
 
Amendments
 
or
 
other
modifications
 
of
 
this
 
Code
 
will
 
also
 
be
 
publicly
 
disclosed
 
in
 
accordance
 
with
 
all
 
applicable
 
securities
 
laws
 
and
 
stock
exchange rules.
 
 
pyrex99d9p1i0
- 11 -