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Published: 2022-08-15
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PyroGenesis Canada Inc.
Condensed Consolidated Interim
Financial Statements
Three and six months ended June 30, 2022 and 2021
(Unaudited)
The accompanying unaudited condensed consolidated financial statements of PyroGenesis Canada Inc. have been prepared by and are the responsibility of the Company’s management. The Company’s independent auditor has not performed a review of these unaudited condensed consolidated interim financial statements for the period ended June 30, 2022.
June 30, 2022.
PyroGenesis Canada Inc.Condensed Consolidated Interim Statements of Financial Position(Unaudited)
June 30,December 31,
20222021
$$
AssetsCurrent assetsCash and cash equivalents
1,291,50812,202,513
Accounts receivable19,205,76217,639,616
Costs and profits in excess of billings on uncompleted contracts4,195,4744,922,710
Inventory171,549,038887,590
Investment tax credits receivable9271,564256,513
Income taxes receivable45,098117,029
Current portion of deposits937,2021,328,452
Current portion of royalties receivable329,823311,111
Contract assets  280,439375,789
Prepaid expenses2,100,820717,661
Total current assets30,206,72838,758,984
Non-current assetsDeposits
1141,176248,756
Strategic investments 9,251,70214,901,659
Property and equipment3,613,7613,712,937
Right-of-use assets5,336,1055,765,993
Royalties receivable967,743947,543
Intangible assets2,399,6482,774,198
Goodwill2,660,6072,660,607
Total assets54,477,47069,770,677
LiabilitiesCurrent liabilitiesBank indebtedness
941,180–
Accounts payable and accrued liabilities9,404,54210,069,177
Billings in excess of costs and profits on uncompleted contracts6,540,1099,400,231
Current portion of term loans1481,80583,004
Current portion of lease liabilities3,134,4212,934,236
Balance due on business combination2,100,1102,242,503
Income taxes payable186,80123,048
Total current liabilities22,388,96824,752,199
Non-current liabilitiesLease liabilities
3,067,3762,389,729
Term loans14308,950107,901
Balance due on business combination1,761,4031,709,700
Deferred income taxes–42,394
Total liabilities27,526,69729,001,923
Shareholders’ equity15
Common shares and warrants82,104,08682,104,086
Contributed surplus23,169,72519,879,055
Accumulated other comprehensive income51,9153,444
Deficit(78,374,953)(61,217,831)
Total shareholders’ equity26,950,77340,768,754
Total liabilities and shareholders’ equity54,477,47069,770,677
Contingent liabilities, Note 22
PyroGenesis Canada Inc.1
PyroGenesis Canada Inc.Condensed Consolidated Interim Statements of Comprehensive Income (Loss)(Unaudited)
 
Three months ended June 30,Six months ended June 30,
2022202120222021
$$$$
Revenues55,847,1808,280,57210,053,94214,545,075
Cost of sales and services173,347,9073,347,0916,502,9477,468,584
Gross profit2,499,2734,933,4813,550,9957,076,491
ExpensesSelling, general and administrative
177,091,5356,660,57312,703,90310,386,009
Research and development, net804,564710,7341,286,996997,041
7,896,0997,371,30713,990,89911,383,050
Net loss from operations(5,396,826)(2,437,826)(10,439,904)(4,306,559)
Changes in fair value of strategic investments
10
(7,477,865)(17,884,293)(6,301,110)(12,249,571)
Finance costs, net18(156,113)(40,086)(340,013)(93,172)
Net earnings (loss) before income taxes (13,030,804)(20,362,205)(17,081,027)(16,649,302)
Income taxes19,542–76,095–
Net earnings (loss)(13,050,346)(20,362,205)(17,157,122)(16,649,302)
Other comprehensive income (loss)
Items that will be reclassified subsequently to profit of loss
Foreign currency translation gain on investments in foreign operations
10,815–48,471–
Comprehensive income (loss)(13,039,531)(20,362,205)(17,108,651)(16,649,302)
Earnings (loss) per shareBasic
19(0.08)(0.12)(0.10)
Diluted19(0.08)(0.11)(0.09)
The accompanying notes form an integral part of the condensed consolidated interim financial statements.
Q2 2022PyroGenesis Canada Inc.2
PyroGenesis Canada Inc.Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity(Unaudited)
 
Number ofCommonEquity other
portion
commonshares andContributed of convertiblecomprehensive
shareswarrantsSurplusdebenturesincomeDeficitTotal
$$$$$$
Balance - December 31, 202182,104,08619,879,055–3,444(61,217,831)40,768,754
Share-based payments 15 ––3,290,670–––3,290,670
Other comprehensive income for the period––––48,471–48,471
Net loss and comprehensive loss–––––(17,157,122)(17,157,122)
Balance – June 30, 202282,104,08623,169,725–51,915(78,374,953)26,950,773
Balance - December 31, 202067,950,06910,480,310––(19,007,273)59,423,106
Shares issued upon exercise of stock options 15 444,500657,845(253,400)–––404,445
Shares issued upon exercise of warrants   and compensation options
 15 8,337,89713,085,197––––13,085,197
Share-based payments 15 ––4,211,024–––4,211,024
Shares purchased for cancellation(166,684)(347,019)(863,440)(1,210,459)
Net earnings and comprehensive income–––––(16,649,302)(16,649,302)
Balance – June 30, 202181,346,09214,437,934––(36,520,015)59,264,011
The accompanying notes form an integral part of the condensed consolidated interim financial statements.
Q2 2022PyroGenesis Canada Inc.3
PyroGenesis Canada Inc.Condensed Consolidated Interim Statements of Cash Flows(Unaudited)
 
Three months ended June 30,Six months ended June 30,
2022202120222021
$$$$
Cash flows provided by (used in)Operating activitiesNet earnings (loss)
(20,362,205)(17,157,122)(16,649,302)
Adjustments for:Share-based payments
17 1,621,0403,288,6853,290,6704,211,025
Depreciation of property and equipment 17 148,41284,061291,402160,378
Depreciation of right-of-use assets 17 155,398149,217321,622251,011
Amortization and write-off of intangible assets 17 218,7596,779437,51813,559
Amortization of contract assets 54,221171,20695,350306,069
Finance costs17 156,11340,085340,01393,172
Change in fair value of investments7,477,86517,884,2936,301,11012,249,571
Income taxes 19,542–76,095–
Unrealized foreign exchange 9,716–42,212–
(3,189,280)1,262,121(5,961,130)635,483
Net change in balances related to operations16 437,164(8,544,450)(4,528,614)(14,552,934)
(2,752,116)(7,282,329)(10,489,744)(13,917,451)
Investing activitiesAdditions to property and equipment 
(66,054)(635,312)(192,226)(1,184,888)
Additions to right-of-use assets–(36,903)–(36,903)
Additions to intangible assets (38,280)(31,484)(62,968)(107,152)
Purchase of strategic investments 10 (3,604,000)(5,804,327)(3,604,000)(9,196,511)
Disposal of strategic investments 1,555,8461,507,7462,952,84712,374,048
(2,152,488)(5,000,280)(906,347)1,848,594
Financing activitiesBank indebtedness
(2,295)–941,180–
Interest paid(141,946)(101,427)(239,456)(151,636)
Repayment of term loans (8,223)(3,025)(16,389)(5,998)
Repayment of lease liabilities (145,415)(25,965)(192,575)(81,051)
Repayment of balance due on business combination(217,778)–(217,778)–
Proceeds from issuance of other term loans 96,157–203,857–
Proceeds from issuance of shares upon exercise of warrants –5,027,616–13,085,197
Proceeds from issuance of shares upon exercise of stock options 
–398,065–404,445
Shares purchased for cancellation–(1,210,459)–(1,210,459)
(419,500)4,084,805478,83912,040,498
Effect of exchange rate changes on cash denominated in foreign currencies
2,988–6,247–
Net increase (decrease) in cash and cash equivalents  (5,321,116)(8,197,805)(10,911,005)(28,360)
Cash and cash equivalents - beginning of period6,612,62426,274,34412,202,51318,104,899
Cash and cash equivalents - end of period1,291,50818,076,5391,291,50818,076,539
Supplemental cash flow disclosureNon-cash transactions:
Purchase of intangible assets included in accounts payable–136,101–40,092
Purchase of property and equipment included in accounts payable
–2,263–55,539
Addition of right-of-use assets and lease liabilities–2,120,892–2,120,892
Accretion of balance purchase price payable44,115–127,088–
Accretion interest on royalties receivable37,549–38,913–
Accretion on term loan7,601–12,382–
The accompanying notes form an integral part of the condensed consolidated interim financial statements
Q2 2022PyroGenesis Canada Inc.4
PyroGenesis Canada Inc. Notes to the Condensed Consolidated Interim Financial StatementsFor the three and six month periods ended June 30, 2022 and 2021(Unaudited) 
1. Nature of operations
PyroGenesis Canada Inc. and its subsidiaries (collectively, the “Company”), incorporated under the laws of the Canada Business  Corporations  Act,  was  formed  on  July 11,  2011.  The  Company  owns  patents  of  advanced  waste  treatment systems  technology  and  designs,  develops,  manufactures  and  commercialises  advanced  plasma  processes  and sustainable solutions to reduce greenhouse gases. The Company is domiciled at 1744 William Street, Suite 200, Montreal, Quebec. The Company is publicly traded on the TSX Exchange under the Symbol “PYR”  on NASDAQ in the USA under the symbol "PYR" and on the Frankfurt Stock Exchange (FSX) under the symbol “8PY “.
2. Basis of preparation
(a) Statement of compliance
These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued  by  the  International  Accounting  Standards  Board  ("IASB").  These  condensed  consolidated  interim  financial statements do not include all of the necessary information required for full annual financial statements in accordance with IFRS and should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2021.
These financial statements were approved and authorized for issuance by the Board of Directors on August 15, 2022.
(b) Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars, which is the Company’s functional currency.
(c) Basis of measurement
These financial statements have been prepared on the historical cost basis except for:
(i) strategic investments which are accounted for at fair value,(ii) stock-based payment arrangements, which are measured at fair value on the grant date pursuant to IFRS 2, 
Share-based Payment; and
(iii) lease liabilities, which are initially measured at the present value of minimum lease payments
(d) Basis of consolidation
For financial reporting purposes, subsidiaries are defined as entities controlled by the Company. The Company controls an entity when it has power over the investee; it is exposed to, or has rights to, variable returns from its involvement with the entity; and it has the ability to affect those returns through its power over the entity.
In instances where the Company does not hold a majority of the voting rights, further analysis is performed to determine whether or not the Company has control of the entity. The Company is deemed to have control when, according to the terms of the shareholder’s and/or other agreements, it makes most of the decisions affecting relevant activities.
These consolidated financial statements include the accounts of the Company and its subsidiaries, Drosrite International LLC and Pyro Green-Gas Inc. and its subsidiaries. Drosrite International LLC is owned by a member of the Company’s key management personnel and close member of the Chief Executive Officer ("CEO") and controlling shareholder’s family and is deemed to be controlled by the Company.  Pyro Green-Gas (formerly AirScience Technologies Inc. until the renaming on September 14,  2021)  was  acquired  by  the  Company  on  August 11,  2021  (see  note  5).  All  transactions  and  balances between the Company and its subsidiaries have been eliminated upon consolidation.
The accounting policies set out below have been applied consistently in the preparation of the financial statements of all years presented. Finance costs and changes in fair value of strategic investments are excluded from the loss from operations in the consolidated statement of comprehensive income (loss).
Q2 2022PyroGenesis Canada Inc.5
PyroGenesis Canada Inc. Notes to the Condensed Consolidated Interim Financial StatementsFor the three and six month periods ended June 30, 2022 and 2021(Unaudited) 
3.  Significant accounting judgments, estimates and assumptions
The significant judgments, estimates and assumptions applied by the Company’s in these condensed consolidated interim financial statements are the same as those applied by the Company in its audited annual financial statements as at and for the year ended December 31, 2021.
4. Business combination in fiscal 2021
On  August 11,  2021,  the  Company  completed  the  acquisition  of  Pyro  Green-Gas  Inc.  and  its  subsidiaries  (formerly AirScience  Technologies  Inc.  prior  to  its  renaming  on  September 14,  2021),  a  Montreal-based  company  which  offers technologies, equipment, and expertise in the area of biogas upgrading, as well as air pollution controls, for a maximum purchase  price  consideration  of  $4.4 million  in  cash,  subject  to  customary  post-closing  adjustments.  In  addition,  the Company settled a pre-existing loan receivable from Pyro Green-Gas Inc. of approximately $1.7 million. The transaction was executed essentially through a purchase of the entirety of the common class “A” shares of Pyro Green-Gas Inc. This acquisition  enables  the  Company  to  springboard  into  the  renewable  natural  gas  market  and  provides  an  advantage compared to building its own operations.  In addition, the Company will now have a presence in Italy and India, and the acquisition will provide potential synergies with the Company’s land-based waste destruction offerings. The purchase price will  be  paid  upon  the  achievement  of  various  contract  and  business-related  milestones  by  Pyro  Green-Gas  Inc.    The Company’s  assessment  is  that  these  milestones  will  be  realized  at  various  moments  during  the  next  30  months.    The contingent consideration was estimated using a discount rate of 8%.
The acquisition was accounted for using the purchase method and the final allocation of the purchase price is as follows: 
$
Total considerationConsideration paid at closing
1
Contingent consideration3,841,999
Consideration paid at closing and continent consideration3,842,000
Settlement of pre-existing loan receivable from Pyro Green-Gas1,744,4005,586,400
December 31, 2021
Final
$
Net assets acquiredCurrent assets 1
5,186,086
ROU asset477,608
Property and equipment42,552
Intangible assets and Goodwill 24,780,607
Deferred income tax asset79,360
Current liabilities(4,507,907)
Non-current liabilities(471,906)
5,586,400
1 Includes $807,946 of cash and trade receivables with a net fair value of $3.3 million, including an allowance for doubtful accounts of $0.5 million.
2 The goodwill of $2.7 million recorded on the transaction is mainly attributable to the expected growth in biogas upgrading market and the expertise of the workforce,          
   and it is not expected to be deductible for tax purposes.
The  maximum  purchase  price  consideration  of  $4,355,600  was  discounted  to  $3,842,000,  at  August 11,  2021  and  an accretion  expense  of  $127,088  was  recognized  in  Net  finance  costs  in  the  Consolidated  Statement  of  Comprehensive Income for the six month period ended June 30, 2022.
Q2 2022PyroGenesis Canada Inc.6
PyroGenesis Canada Inc. Notes to the Condensed Consolidated Interim Financial StatementsFor the three and six month periods ended June 30, 2022 and 2021(Unaudited) 
5. Revenues
The following is a summary of the Company’s revenues by product line:
June 30,June 30,
20222021
$$
Revenue from contracts with customers by product line:PUREVAP™
1,168,9834,521,539
DROSRITE™1,336,6174,389,606
Development and support related to systems supplied to the U.S. Navy1,336,3594,719,208
Torch related sales2,591,909752,835
Biogas upgrading and pollution controls3,171,152–
Other sales and services448,922161,887
10,053,94214,545,075
The following is a summary of the Company’s revenues by revenue recognition method:
June 30,June 30,
20222021
$$
Revenue from contracts with customers:Sales of goods under long-term contracts recognized over time
9,408,59110,717,275
Sales of goods at a point of time645,351527,800
Other revenue: Sale of intellectual properties
–3,300,000
10,053,94214,545,075
See note 24 for sales by geographic area.
Transaction price allocated to remaining performance obligations
As at June 30, 2022, revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or  partially  satisfied)  at  the  reporting  date  is  $35,282,425  (2021  -  $43,458,148).  Revenue  will  be  recognized  as  the Company satisfies its performance obligations under long-term contracts, which is expected to occur over the next 3 years.
6. Cash and cash equivalents
As at June 30, 2022, there are no restrictions on cash and cash equivalents. Cash and cash equivalents include the following components: 
June 30,December 31,
20222021
$$
Cash 646,7513,568,561
Guaranteed investment certificates644,7578,633,952
Cash and cash equivalents 1,291,50812,202,513
 
Q2 2022PyroGenesis Canada Inc.7
PyroGenesis Canada Inc. Notes to the Condensed Consolidated Interim Financial StatementsFor the three and six month periods ended June 30, 2022 and 2021(Unaudited) 
7. Accounts receivable
Details of accounts receivable were as follows: 
June 30,December 31,
20222021
$$
1 – 30 days2,180,2642,260,428
31 – 60 days496,11344,838
61 – 90 days554,3516,855,822
Greater than 90 days14,301,0537,357,825
Total trade accounts receivable17,531,78116,518,913
Other receivables85,633270,536
Sales tax receivable1,588,348850,167
19,205,76217,639,616
As  at  June 30,  2022  the  allowance  for  expected  credit  loss  is  $520,000  ($520,000  at  December  31,  2021),  which  was included through the business combination and has not changed throughout this six-month period of fiscal 2022.
8. Costs and profits in excess of billings on uncompleted contracts
As at June 30, 2022, the Company had eighteen contracts with total billings of $24,137,608 which were less than total costs incurred and had recognized cumulative revenue of $28,333,082 since those projects began. This compares with fourteen contracts with total billings of $16,676,700 which were less than total costs incurred and had recognized cumulative revenue of $21,599,410 as at December 31, 2021.
Changes in costs and profits in excess of billings on uncompleted contracts during the six month period are explained by $2,080,367  (2021  -  $983,819)  recognized  at  the  beginning  of  the  period  being  transferred  to  accounts  receivable,  and $1,353,131 (2021 - $4,832,968) resulting from changes in the measure of progress.
9. Investment tax credits
An amount recognized in 2022 included $71,433 (2021 - $202,472) of investment tax credits earned in the year, as well as $Nil (2021 - $706,000) of investment tax credits earned in prior years that no longer met the criteria for recognition in 2021. $24,388 (2021 - $148,695) of the investment tax credits recognized in the year was recorded against cost of sales and services, $32,045 (2021 - ($684,709)) against research and development expenses and $15,000 (2021 - $32,486) against selling general and administrative expenses.
10. Strategic investments 
June 30,December 31,
20222021
$$
Beauce Gold Fields (“BGF”) shares – level 171,806123,095
HPQ Silicon Resources Inc. (“HPQ”) shares - level 18,067,33812,306,196
HPQ warrants – level 31,112,5582,472,368
9,251,70214,901,659
Q2 2022PyroGenesis Canada Inc.8
PyroGenesis Canada Inc. Notes to the Condensed Consolidated Interim Financial StatementsFor the three and six month periods ended June 30, 2022 and 2021(Unaudited) 
The change in the strategic investments is summarized as follows: 
(“BGF”) shares – level 1(“HPQ”) shares - level 1HPQ warrants – level 3
Quantity$Quantity$Quantity$
Balance, December 31, 20201,025,79412309514,990,20016,489,22025,844,60023,379,435
Additions – –8,268,0008,070,109––
Exercised  – –16,250,00011,700,000(16,250,000)(9,181,250)
Disposed – –(12,755,600)(14,252,732)––
Change in the fair value – ––(9,700,401)–(11,725,817)
Balance, December 31, 20211,025,794123,09526,752,60012,306,1969,594,6002,472,368
Additions1 – –6,800,0003,196,0006,800,000408,000
Disposed – –(7,942,000)(2,952,847)––
Change in the fair value – (51,289)–(4,482,011)–(1,767,810)
Balance, June 30, 20221,025,79471,80625,610,6008,067,33816,394,6001,112,558
1On April 20, 2022 the Company participated in an HPQ non-brokered private placement by acquiring 6,800,000 units at a price of $0.53 per unit for a 
total investment of $3,604,000.  Each unit consists of one common share of HPQ and one common share purchase warrant.  Each of these warrants entitles the Company to purchase one common share at a price of $0.60 for a period of 24 months from the closing date of the private placement.
At June 30, 2022 and December 31, 2021, the fair value of the HPQ warrants was measured using the Black-Scholes option pricing model using the following assumptions: 
June 30, 2022December 31, 2021
Number of warrants1,200,0004,394,6004,000,0006,800,0001,200,0004,394,6004,000,000
Date of issuance29-Apr-202-Jun-203-Sep-2020-Apr-2229-Apr-202-Jun-203-Sep-20
Exercise price ($)0.100.100.610.600.100.100.61
Assumptions under the Back Sholes model: 
Fair value of the shares ($)0.320.320.320.320.460.460.46
Risk free interest rate (%)3.123.123.123.121.221.221.22
Expected volatility (%)73.2876.6176.788.689.8894.01110.47
Expected dividend yield–––––––
Contractual remaining life (in months)10111422161720
As at June 30, 2022, a gain from initial recognition of the warrants of $925,366 ($510,573 at December 31, 2021) has been deferred off balance sheet until realized.
11. Deposits 
June 30,December 31,
20222021
$$
Current portion:Suppliers
896,9611,236,211
Security deposit on leased premises40,24192,241
Total current937,2021,328,452
Non-current portion:Suppliers
2,3731,952
Security deposit on leased premises38,803246,804
Total non-current41,176248,756
Total Deposits 978,3781,577,208
 
Q2 2022PyroGenesis Canada Inc.9
PyroGenesis Canada Inc. Notes to the Condensed Consolidated Interim Financial StatementsFor the three and six month periods ended June 30, 2022 and 2021(Unaudited) 
12. Accounts payable and accrued liabilities 
June 30,December 31,
20222021
$$
Accounts payable7,003,2005,457,259
Accrued liabilities1,519,5283,730,048
Sale commissions payable1737,364737,364
Accounts payable to the controlling shareholder and CEO144,450144,506
9,404,54210,069,177
1 Sale commissions payable relate to the costs to obtain long-term contracts with clients.
13. Billings in excess of costs and profits on uncompleted contracts
The amount to date of costs incurred and recognized profits less recognized losses for construction projects in progress amounted to $23,173,751 (2021 - $21,834,137).
Payments to date received were $29,713,860 on contracts in progress (2021 - $31,234,368).
Changes in billings in excess of costs and profits on uncompleted contracts during the six month period are explained by $3,430,725 (2021 - $6,268,910) recognized at the beginning of the period being recognized as revenue, and an increase of $570,603 (2021 - $9,076,169) resulting from cash received excluding amounts recognized as revenue.
14. Term loans 
Economic Canada
Development AgencyOther TermOther TermEmergency Business
of Canada Loan1Loans2Loans3Account Loan4Total
$$$$$
Balance, December 31, 202187,98524,70028,22050,000190,905
Addition292,942–––292,942
Financing costs (89,085)–––(89,085)
Accretion12,382–––12,382
Payments–(6,429)(9,960)–(16,389)
Balance, June 30, 2022304,22418,27118,26050,000390,755
Less current portion–(13,545)(18,260)(50,000)(81,805)
Balance, June 30, 2022304,2244,726––308,950
1 Maturing in 2029, non-interest bearing, payable in 60 equal instalments from April 2024 to March 2029.  In January 2022 and April 2022, the Company received additional 
contributions of $155,735 and $137,207, respectively, which were discounted using the effective interest method using a rate of 8%. 
2 Maturing October 23, 2023 bearing interest at a rate of 6.95% per annum, payable in monthly instalments of $1,200 (including interest in capital) secured by automobile 
(carrying amount of $17,272 at June 30, 2022). 
3 Maturing in May 2023, payable in monthly instalments of $1,660, bearing interest at 7.45%. 
4 Loan bearing no interest and no minimum repayment, if repaid by December 2023.
15. Shareholders’ equity
Common shares and warrants
Authorized: 
The Company is authorized to issue an unlimited number of common shares without par value.
Q2 2022PyroGenesis Canada Inc.10
PyroGenesis Canada Inc. Notes to the Condensed Consolidated Interim Financial StatementsFor the three and six month periods ended June 30, 2022 and 2021(Unaudited) 
The following table sets out the activity in stock options: 
Weighted
Number ofaverage
optionsexercise price
$
Balance – December 31, 20209,040,0001.57
Granted2,970,0004.55
Exercised1(3,482,000)0.32
Forfeited(125,000)4.41
Balance, December 31, 20218,403,0003.10
Granted2,350,0003.62
Exercised––
Forfeited(220,000)4.04
Balance, June 30, 202210,533,0003.20
(1) The weighted fair market value of the share price for options exercised in 2021 was $5.48.
As at June 30, 2022, the outstanding options, as issued under the stock option plan to directors, officers, employees and consultants for the purchases of one common share per option, are as follows: 
Number ofNumber ofNumber of
stockstockstockExercise
optionsoptionsoptionsprice
Issuance date31-Dec-21GrantedExercisedForfeitures30-Jun-22vested -1per optionExpiry date
$
3-Nov-172,400,000–––2,400,0002,400,0000.583-Nov-22
3-Jul-18300,000–––300,000300,0000.513-Jul-23
29-Oct-1840,000–––40,00040,0000.5229-Oct-23
29-Sep-19100,000–––100,000100,0000.5129-Sep-24
2-Jan-20100,000–––100,000100,0000.452-Jan-25
16-Jul-202,243,000––(20,000)2,223,0001,343,0004.4116-Jul-25
26-Oct-20250,000––(200,000)50,000125,0004.0026-Oct-25
6-Apr-21550,000–––550,000320,0008.476-Apr-26
1-Jun-21200,000–––200,00050,0006.591-Jun-26
14-Jun-21100,000–––100,00025,0006.7014-Jun-26
14-Oct-21100,000–––100,00010,0005.0414-Oct-26
17-Dec-211,920,000–––1,920,0001,920,0003.1317-Dec-26
30-Dec-21100,000–––100,000100,0003.6130-Dec-26
3-Jan-22–450,000––450,000450,0003.363-Jan-27
5-Apr-22–400,000––400,00030,0002.962-Apr-27
2-Jun-22–1,500,000––1,500,000375,0003.882-Jun-27
8,403,0002,350,000–(220,000)10,533,0007,688,0003.20
(1) At June 30, 2022, the weighted average exercise price for options outstanding which are exercisable was $3.62.
For the three-month and six-month periods ended June 30, 2022, a stock-based compensation expense of $1,621,040 and $3,290,670, respectively, was recorded in Selling, general and administrative expenses in the Condensed Consolidated Statements of Comprehensive income (loss), ($3,288,685 and $4,211,025 for the three-month and six-month periods ended June 30, 2021). 
At June 30, 2022, an amount of $4,798,849 ($2,719,354 at December 31, 2021) remains to be amortized until June 2027 related to the grant of stock options.
Q2 2022PyroGenesis Canada Inc.11
PyroGenesis Canada Inc. Notes to the Condensed Consolidated Interim Financial StatementsFor the three and six month periods ended June 30, 2022 and 2021(Unaudited) 
16. Supplemental disclosure of cash flow information 
Three months ended June 30,Six months ended June 30,
2022202120222021
$$$$
Accounts receivable(2,028,735)(6,266,190)(1,566,146)(9,465,070)
Costs and profits in excess of billings on uncompleted contracts
1,668,461(718,009)727,236(209,280)
Inventory(275,877)(356,455)(661,448)(356,455)
Investment tax credits receivable(60,936)384,745(15,051)358,095
Income taxes receivable117,195–117,195–
Deposits2,838,936565,7141,777,516(816,386)
Contract assets & other assets––––
Prepaid expenses796,997766,553(1,383,159)(2,045,341)
Accounts payable and accrued liabilities(82,365)(4,057,666)(664,635)(496,581)
Billings in excess of costs and profits on uncompleted contracts
(2,536,512)1,136,858(2,860,122)(1,521,916)
437,164(8,544,450)(4,528,614)(14,552,934)
 17. Supplemental disclosure on statements of comprehensive income 
Three months ended June 30,Six months ended June 30,
2022202120222021
$$$$
Inventories recognized in cost of sales201,547–414,142–
Amortization of intangible assets218,7596,779437,51813,559
Depreciation of property and equipment148,41284,061291,402160,378
Depreciation of ROU assets155,398149,217321,622251,011
Employee benefits2,991,2232,049,5145,702,0924,021,075
Share-based expenses1,621,0403,288,6853,290,6704,211,025
Awarded grants55,07787,56594,511146,744
 
Q2 2022PyroGenesis Canada Inc.12
PyroGenesis Canada Inc. Notes to the Condensed Consolidated Interim Financial StatementsFor the three and six month periods ended June 30, 2022 and 2021(Unaudited) 
18. Net finance costs 
Three months ended June 30,Six months ended June 30,
2022202120222021
$$$$
Financial expensesInterest on term loans
7522,9871,6039,438
Interest on lease liabilities111,99390,947189,458136,928
Interest accretion on balance due on business combination
44,115–127,088–
Penalties and other interest expenses36,80210,48160,77711,135
193,662104,415378,926157,501
Financial incomeAccretion interest on royalty receivable
(37,549)(64,329)(38,913)(64,329)
Net finance costs 156,11340,086340,01393,172
 19. Earnings (loss) per share
The following table provides a reconciliation between the number of basic and fully diluted shares outstanding for the three-month and six-month periods ended June 30: 
Three months ended June 30,Six months ended June 30,
2022202120222021
$$$$
Weighted daily average of Common shares170,125,795166,289,320170,125,795163,769,415
Dilutive effect of stock options––––
Dilutive effect of warrants––––
Weighted average number of diluted shares170,125,795166,289,320170,125,795163,769,415
Number of anti-dilutive stock options and warrants excluded from fully diluted earnings per share calculation
10,533,0009,405,50010,533,0009,405,500
 20. Related party transactions
During the three month and six-month period ended June 30, 2022, the Company concluded the following transactions with related parties: 
In January 2020, the Company entered into a lease agreement for the rental of a property with a trust whose beneficiary is the controlling shareholder and CEO of the Company. At June 30, 2022 the carrying amount of the ROU asset and lease liabilities are $898,977 and $976,874 ($1,107,131 and $Nil, respectively, at December 31, 2021).
Rent and property taxes charged by a trust whose beneficiary is the controlling shareholder and CEO of the Company, for the  three  and  six-month  periods  ended  June  30,  2022  amount  to  $70,226  and  $139,280,  respectively  ($68,825  and $137,284 for the three and six-month periods ended June 30, 2021, respectively.
A balance due to the controlling shareholder and CEO of the Company amounted to $144,450 ($144,506 at December 31, 2021) and is included in accounts payable and accrued liabilities.
Q2 2022PyroGenesis Canada Inc.13
PyroGenesis Canada Inc. Notes to the Condensed Consolidated Interim Financial StatementsFor the three and six month periods ended June 30, 2022 and 2021(Unaudited) 
The Key Management Personnel of the Company, in accordance with IAS 24, are the members of the Board of Directors and certain officers. Total compensation to key management consisted of the following:
Three months ended June 30,Six months ended June 30,
2022202120222021
$$$$
Salaries – key management257,871218,656573,842460,215
Pension contributions4,7873,97110,6808,407
Fees – Board of Directors69,00041,50089,00075,000
Share-based compensation – officers486,8411,312,708812,9141,792,325
Share-based compensation – Board of Directors1,106,0661,539,6341,758,2131,711,850
Other benefits – key management 7,59943,36314,03853,352
Total compensation1,932,1643,159,8323,258,6874,101,149
 21. Financial instruments
As  part  of  its  operations,  the  Company  carries  a  number  of  financial  instruments.  It  is  management's  opinion  that  the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments except as otherwise  disclosed.  The  Company's  overall  risk  management  program  focuses  on  the  unpredictability  of  the  financial market and seeks to minimize potential adverse effects on the Company's financial performance. The Company does not use derivative financial instruments to hedge these risks.
Foreign currency risk 
The  Company  enters  into  transactions  denominated  in  US  dollars  for  which  the  related  revenues,  expenses,  accounts receivable and accounts payable and accrued liabilities balances are subject to exchange rate fluctuations.
As at June 30, 2022 and December 31, 2021 the Company's exposure to foreign exchange risk for amounts denominated in US dollars is as follows: 
June 30,December 31,
20222021
$$
Cash795,5021,714,670
Accounts receivable15,399,01414,465,011
Accounts payable and accrued liabilities(1,367,570)(1,023,999)
Total14,826,94615,155,682
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
Sensitivity analysis 
At June 30, 2022, if the US Dollar changes by 10% against the Canadian dollar with all other variables held constant, the impact on pre-tax gain or loss and equity for the period ended June 30, 2022 would have been $1,482,695. 
Credit risk and credit concentration 
Credit  risk  is  the  risk  that  one  party  to  a  financial  instrument  will  cause  a  financial  loss  for  the  other  party  by  failing  to discharge an obligation. The maximum credit risk to which the Company is exposed as at June 30, 2022 represents the carrying amount of cash and cash equivalents, accounts receivable (except sales tax receivable), deposits and royalties receivable. Cash and cash equivalents, which only comprise guaranteed investment certificates redeemable on relatively short notice by the Company, are held with major reputable financial institutions. The Company manages its credit risk by 
Q2 2022PyroGenesis Canada Inc.14
PyroGenesis Canada Inc. Notes to the Condensed Consolidated Interim Financial StatementsFor the three and six month periods ended June 30, 2022 and 2021(Unaudited) 
performing credit assessments of its customers. The Company does not generally require collateral or other security from customers on accounts receivable. The Company believes that there is no unusual exposure associated with the collection of these receivables. Two customers accounted for 91% (one customer for 73% at December 31, 2021) of trade accounts receivable  with  amounts  owing  to  the  Company  of  $13,609,854  ($12,063,636  at  December 31,  2021),  representing  the Company's major credit risk exposure. 
The following table summarizes the Company’s concentration of credit risk as a percentage of revenue during the three-month and six-month periods ended June 30, 2022. 
Three months ended June 30,Six months ended June 30,
20222022
% of total% of total
RevenuesrevenuesRevenuesrevenues
$%$%
Customer 11,179,161201,773,30318
Customer 21,000,688171,371,79014
Customer 3855,009151,336,35913
Customer 4591,099101,211,03112
Customer 5557,438101,077,22511
Total4,183,395726,769,70868
Credit concentration is determined based on customers representing 10% or more of total revenues and/or total accounts receivable. 
The royalties receivables are due from a company in which the Company has a strategic investments. The Company does not have collateral or other security associated with the collection of this receivable.
Fair value of financial instruments 
The fair value represents the amount that would be received for the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants at the measurement date. The fair value estimates are calculated at a specific date taking into consideration assumptions regarding the amounts, the timing of estimated future cash flows and discount rates. Accordingly, due to its approximate and subjective nature, the fair value must not be interpreted as being realizable in an immediate settlement of the financial instruments. 
There  are  three  levels  of  fair  value  that  reflect  the  significance  of  inputs  used  in  determining  fair  values  of  financial instruments: 
Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities. 
Level 2 — inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 — inputs for the asset or liability that are not based on observable market data. The fair values of cash and cash equivalents,  trade  accounts  receivable,  deposits,  accounts  payable  and  accrued  liabilities  and  bank  indebtedness approximate their carrying amounts due to their short-term maturities.
Royalties receivable are discounted according to their corresponding agreements and are classified as Level 2. 
Investments in HPQ warrants are valued using the Black-Scholes pricing model and are classified as Level 3. 
The fair value of the term loans and the balance due on business combination as at June 30, 2022 is determined using the discounted future cash flows method and management's estimates for market interest rates for similar issuances. Given their recent issuance, their fair market values correspond to their carrying amount. 
Q2 2022PyroGenesis Canada Inc.15
PyroGenesis Canada Inc. Notes to the Condensed Consolidated Interim Financial StatementsFor the three and six month periods ended June 30, 2022 and 2021(Unaudited) 
Interest rate risk 
Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in interest rates. Changes in market interest rates may have an effect on the cash flows associated with some financial assets and liabilities, known as cash flow risk, and on the fair value of other financial assets or liabilities, known as price risk, and on the fair value of investments or liabilities, known as price risks. The Company is exposed to a risk of fair value on cash equivalents, and term loans as those financial instruments bear interest at fixed rates.
Price risk
Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market price (other than those arising from foreign currency risk and interest risk), whether those changes are caused by factors specific to the individual financial instrument or its issuers or factors affecting all similar financial instruments traded in the market. The most significant exposure to the price risk for the Company arises from its investments in shares and warrants of public companies quoted on the TSXV Exchange. If equity prices had increased or decreased by 25% as at June  30,  2022,  with  all  other  variables  held  constant,  the  Company’s  investments  would  have  increased  or  decreased respectively, by approximately $787,000 ($4,042,000 at December 31, 2021). 
Liquidity risk 
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivery of cash or another financial asset. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities. 
The following table summarizes the contractual amounts payable and maturities of financial liabilities and other liabilities at June 30, 2022: 
Total
CarryingcontractualLess than
valueamountone year2-3 years 4-5 yearsOver 5 years
$$$$$$
Bank indebtedness941,180941,180941,180–––
Accounts payable and accrued liabilities9,404,5429,404,5429,404,542–––
Term loans390,755538,12381,805142,377180,000133,941
Balance due on business combination3,861,5134,137,8202,177,8001,960,020––
Lease liabilities6,201,7977,414,4463,361,0531,187,589859,1492,006,655
20,799,78722,436,11115,966,3803,289,9861,039,1492,140,596
The Company's Canadian subsidiary benefits from a line of credit of $500,000, and the Italian subsidiary benefits from a 400,000 Euro ($539,020) line of credit, and security against these credit lines is provided only by the subsidiaries, and not PyroGenesis Canada Inc. At June 30, 2022, $436,378 was drawn on the Canadian facility and 374,844 Euro ($504,801) was drawn on the Italian facility.
22. Contingent liabilities 
The  Company  is  currently  a  party  to  various  legal  proceedings.  If  management  believes  that  a  loss  arising  from  these proceedings is probable and can reasonably be estimated, that amount of the loss is recorded. As additional information becomes  available,  any  potential  liability  related  to  these  proceedings  is  assessed  and  the  estimates  are  revised,  if necessary. Based on currently available information, management believes that the ultimate outcome of these proceedings, individually and in aggregate, will not have a material adverse effect on the Company’s financial position or overall trends in results of operations. 
The Company had received a government grant in prior years of approximately $800,000 to assist with the development of a new system of advanced waste treatment systems technology. The grant is potentially repayable at the rate of 3% of any consideration received as a result of the project, for which funding has been received, to a maximum of the actual grant 
Q2 2022PyroGenesis Canada Inc.16
PyroGenesis Canada Inc. Notes to the Condensed Consolidated Interim Financial StatementsFor the three and six month periods ended June 30, 2022 and 2021(Unaudited) 
received. This repayment provision will remain in effect until May 30, 2024. The Company abandoned the project in 2011 and accordingly, no amount is expected to be repaid.
23. Capital management 
The Company’s objectives in managing capital are: 
a) To ensure sufficient liquidity to support its current operations and execute its business plan; and 
b) To provide adequate return to the shareholders 
The Company’s primary objectives when managing capital is to ensure the Company continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. 
The Company currently funds these requirements from cash flows from operations and with financing arrangements with third parties and shareholders. The Company is not subject to any externally imposed capital requirements. 
The  Company  monitors  its  working  capital  in  order  to  meet  its  financial  obligations.  On  June  30,  2022,  the  Company’s working capital was $7,817,760 ($14,006,785 at December 31, 2021) 
The management of capital includes shareholders’ equity for a total amount of $26,950,773 and term loans of $390,755 ($40,768,754  and  $190,905  respectively  at  December 31,  2021),  as  well  as  cash  and  cash  equivalents  amounting  to $1,291,508 ($12,202,513 at December 31, 2021). 
There were no significant changes in the Company’s approach during the current six-month period and 2021 fiscal year, however, in order to maintain or adjust the capital structure, the Company may issue new shares, sell portions of its strategic investment and periodically purchase its own shares on the open market.
24. Segment information 
The Company operates in one segment, based on financial information that is available and evaluated by the Company’s Board of Directors. The Company’s head office is located in Montreal, Quebec. The operations of the Company are located in three geographic areas: Canada, Italy and India. 
The following is a summary of the Company’s revenue from external customers, by geography: 
Three months ended June 30,Six months ended June 30,
2022202120222021
$$$$
Canada2,601,8423,937,4623,969,6334,736,895
United States601,5872,131,8411,346,8744,725,806
Europe896,85442,2011,279,14262,243
Mexico82,884137,856259,392137,856
Asia269,43641,489585,26749,107
Saudi Arabia353,6541,466,3491,077,2254,199,455
Africa–3,679–3,679
South America40,235519,695162,706630,034
India1,000,688–1,373,703–
5,847,1808,280,57210,053,94214,545,075
Revenue by product line and revenues recognized by revenue recognition method are presented in note 5. 
Q2 2022PyroGenesis Canada Inc.17