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Exhibit 99.1
PYROGENESIS CANADA INC.
ANNUAL INFORMATION FORM
FOR THE YEAR ENDED DECEMBER 31, 2022
Dated March 30, 2023
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Year Ended December 31, 2021
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8.
Description of Capital Structure
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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;
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• 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
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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.
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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.
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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.
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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
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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.
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6. Business of the Company
6.1. General
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
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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
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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.
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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.
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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.
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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.
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
2
market#:~:text=The%20global%20waste%20to%20energy,4.6%25%20from%202020%20to%202027.
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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
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
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
Seaborne), By Region, And Segment Forecasts, 2020 – 2027. See https://www.grandviewresearch.com/industry-analysis/iron-ore-
pellets-market.
4
https://www.sciencedirect.com/science/article/abs/pii/S0957582023000113
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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
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
6
7
8
9
process-to-manufacture-fumed-silica/
10
https://www.prnewswire.com/news-releases/metal-3d-printing-market-size-to-hit-22-60-billion-by-2030---grand-view-research-inc-
301623035.html
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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.
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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.
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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:
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
●
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
Table of Contents
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
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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
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 $1.03 until January 2, 2028.
(2) For more details on the share purchase warrants outstanding, please refer to the Company’s audited consolidated financial statements and
related notes thereto for the year ended December 31, 2022.
9. Market for Securities
9.1. Trading Price and Volume
The Common Shares are listed on the TSX under the symbol “PYR”. The following table sets forth, for the periods
indicated, the reported high and low prices and the aggregate volume of trading of the Common Shares on the TSX. The
Common Shares are also listed on the NASDAQ since March 11, 2021, under the symbol “PYR” and on the Frankfurt (FRA)
exchange under the symbol “8PY”.
Table of Contents
25
Period
High ($)
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
Total
Date of Grant
Type of Security Issued
Issued
Security
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.
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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.
(1)
Chief Executive Officer
Chair of the Board of
Directors
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.
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)
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.
Chair of the
Compensation
Committee
Member of the
Nominating and
Corporate Governance
Committee
Member of the
Strategic Initiatives
Committee
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.
Member of the
Compensation
Committee
Member of the
Nominating and
Corporate Governance
Committee
Québec, Canada
Dr. Virendra Jha
Independent Director –
Board of Directors
Chair of the
Nominating and
Corporate Governance
Committee
2019
Corporate director
Table of Contents
27
Member of the
Compensation
Committee
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.
Director – Board of
Directors
Director since
2020
Québec, Canada
Nannette Ramsey
Independent Director -
Board of Directors
Member of the
Compensation
Committee
2021
Corporate director
Member of the
Nominating and
Corporate Governance
Committee
Chair of the Strategic
Initiatives Committee
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.
Member of the
Compensation
Committee
Member of the
Strategic Initiatives
Committee
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
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
Québec, Canada
Notes:
●
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
Table of Contents
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.
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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
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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
Table of Contents
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.
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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”.
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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.
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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
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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:
●
●
●
●
●
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.
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.
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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
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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
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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
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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.
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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.
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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
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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.
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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;
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• 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.
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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
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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
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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”.
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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”.
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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.
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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”.
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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.
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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.
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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.
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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.
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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.