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Published: 2023-03-31 08:34:01 ET
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pyrex99d3
 
1
Exhibit 99.3
PyroGenesis Canada Inc.
Consolidated Financial Statements
December 31, 2022 and 2021
 
 
 
3
Management’s Responsibility
Management is
 
responsible for
 
the preparation
 
and presentation
 
of the
 
accompanying consolidated
 
financial statements,
including
 
responsibility
 
for
 
significant
 
accounting
 
judgments
 
and
 
estimates
 
in
 
accordance
 
with
 
International
 
Financial
Reporting
 
Standards
 
as
 
issued
 
by
 
the
 
International
 
Accounting
 
Standards
 
Board.
 
This
 
responsibility
 
includes
 
selecting
appropriate accounting principles
 
and methods, and
 
making decisions affecting
 
the measurement of transactions
 
in which
objective judgment is required.
The
 
Board
 
of
 
Directors
 
and
 
Audit
 
Committee
 
are
 
composed
 
primarily
 
of
 
Directors
 
who
 
are
 
neither
 
management
 
nor
employees of
 
the Company.
 
The Board
 
of Directors
 
is responsible
 
for overseeing
 
management in
 
the performance
 
of its
financial reporting responsibilities, and
 
for approving the
 
financial information included in
 
the annual report.
 
The Board fulfills
these responsibilities by reviewing the financial information prepared by management and
 
discussing relevant matters with
management and
 
the external
 
auditor.
 
The Audit
 
Committee has
 
the responsibility
 
of meeting
 
with management
 
and the
external auditors to
 
discuss the internal
 
controls over the
 
financial reporting process, auditing
 
matters and financial
 
reporting
issues. The Audit Committee is also responsible for recommending
 
the appointment of the Company's external auditor.
Raymond Chabot
 
Grant Thornton
 
LLP, an Independent Registered Public
 
Accounting Firm,
 
is appointed
 
by the
 
shareholders
to audit the
 
consolidated financial statements
 
and report directly
 
to them; their
 
report follows. The
 
external auditor has
 
full
and free access to, and meets periodically and
 
separately with, both the Audit Committee and management to discuss their
audit findings.
March 30, 2023
[Signed by P.
 
Peter Pascali]
 
[Signed by Andre Mainella]
P.
 
Peter Pascali, Chief Executive Officer
 
Andre Mainella, Chief Financial Officer
 
pyrex99d3p4i0 pyrex99d3p4i1
4
Raymond Chabot
Grant Thornton LLP
Suite 2000
National Bank Tower
600 De La Gauchetière Street West
Montréal, Quebec
H3B 4L8
T
514-878-2691
Report of Independent Registered Public Accounting Firm
To
 
the Shareholders and Directors of PyroGenesis Canada Inc.
Opinion on the consolidated financial statements
We have
 
audited the
 
accompanying consolidated
 
statements of
 
financial position
 
of PyroGenesis
 
Canada Inc.
 
(the "Company")
 
as of
December 31,
 
2022 and
 
2021, the
 
related consolidated
 
statements of
 
comprehensive loss,
 
changes in
 
shareholders’ equity
 
and cash
flows for the years then ended,
 
and the related notes (collectively referred
 
to as the "consolidated financial statements"). In
 
our opinion,
the consolidated
 
financial statements present
 
fairly,
 
in all
 
material respects,
 
the financial position
 
of the
 
Company as
 
of December
 
31,
2022 and
 
2021, and
 
the results
 
of its
 
operations and
 
its cash
 
flows for
 
the years
 
then ended
 
in conformity
 
with International
 
Financial
Reporting Standards as issued by the International Accounting Standards Board.
Going concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as
 
a going concern.
As discussed
 
in Note
 
2 to
 
the consolidated
 
financial statements,
 
the Company
 
has incurred
 
operating losses
 
and negative
 
cash flows
from operations and, as a result, has an accumulated deficit as of
 
December 31, 2022. These conditions, along with other matters as set
forth in
 
Note 2,
 
indicate the existence
 
of a material
 
uncertainty that
 
may cast significant
 
doubt about
 
the Company’s
 
ability to continue
operating as a
 
going concern. Management's
 
plans in regard
 
to these matters
 
are also described
 
in Note 2.
 
The consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for opinion
These consolidated financial statements are
 
the responsibility of the Company’s
 
management. Our responsibility is to
 
express an opinion
on the
 
Company's consolidated
 
financial statements
 
based on
 
our audits.
 
We
 
are a
 
public accounting
 
firm registered
 
with the
 
Public
Company Accounting
 
Oversight Board (United
 
States) ("PCAOB") and
 
are required to
 
be independent with
 
respect to the
 
Company in
accordance with the
 
U.S. federal securities
 
laws and the
 
applicable rules and
 
regulations of the
 
Securities and Exchange
 
Commission
and the PCAOB.
We conducted our
 
audits in accordance with
 
the standards of the
 
PCAOB. Those standards require
 
that we plan and
 
perform the audit
to obtain reasonable
 
assurance about whether
 
the consolidated financial
 
statements are free
 
of material misstatement,
 
whether due to
error
 
or
 
fraud.
 
The
 
Company is
 
not
 
required
 
to
 
have,
 
nor
 
were
 
we engaged
 
to
 
perform, an
 
audit
 
of
 
its internal
 
control
 
over
 
financial
reporting. As
 
part of
 
our audits,
 
we are
 
required to
 
obtain an
 
understanding of
 
internal control
 
over financial
 
reporting but
 
not for
 
the
purpose of expressing an opinion
 
on the effectiveness of the
 
Company's internal control over financial
 
reporting. Accordingly, we express
no such opinion.
Our audits included performing
 
procedures to assess the
 
risks of material misstatement
 
of the consolidated financial
 
statements, whether
due
 
to
 
error
 
or
 
fraud,
 
and performing
 
procedures
 
that
 
respond to
 
those
 
risks. Such
 
procedures included
 
examining,
 
on
 
a
 
test basis,
evidence
 
regarding
 
the
 
amounts
 
and
 
disclosures
 
in
 
the
 
consolidated
 
financial
 
statements.
 
Our
 
audits
 
also
 
included
 
evaluating
 
the
accounting
 
principles
 
used
 
and
 
significant
 
estimates
 
made
 
by
 
management,
 
as
 
well
 
as
 
evaluating
 
the
 
overall
 
presentation
 
of
 
the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
 
We have served as the Company’s auditor since 2021.
Montréal, Canada
March 30, 2023
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
PyroGenesis Canada Inc.
Consolidated Statements of Financial Position
December 31, 2022 and 2021
(In Canadian dollars)
 
December 31,
December 31,
2022
2021
$
$
Assets
Current assets
Cash and cash equivalents [note 8]
3,445,649
12,202,513
Accounts receivable [note 9]
18,624,631
17,639,616
Costs and profits in excess of billings on uncompleted contracts [note 10]
1,051,297
4,922,710
Inventory [note 24]
1,876,411
887,590
Investment tax credits receivable [note 11]
276,404
256,513
Income taxes receivable
14,169
117,029
Current portion of deposits [note 14]
432,550
1,328,452
Current portion of royalties receivable [note 13]
455,556
311,111
Contract assets
 
499,912
375,789
Prepaid expenses
771,603
717,661
Total current assets
27,448,182
38,758,984
Non-current assets
Deposits [note 14]
46,053
248,756
Strategic investments [note 12]
6,242,634
14,901,659
Property and equipment [note 15]
3,393,452
3,712,937
Right-of-use assets [note 16]
4,818,744
5,765,993
Royalties receivable [note 13]
952,230
947,543
Intangible assets [note 17]
2,104,848
2,774,198
Goodwill [note 18]
2,660,607
2,660,607
Total assets
47,666,750
69,770,677
Liabilities
Current liabilities
Bank indebtedness [note 28]
991,902
—
Accounts payable and accrued liabilities [note 19]
10,115,870
10,069,177
Billings in excess of costs and profits on uncompleted contracts [note 20]
9,670,993
9,400,231
Current portion of term loans [note 21]
69,917
83,004
Current portion of lease liabilities [note 16]
2,672,212
2,934,236
Balance due on business combination [note 6]
2,088,977
2,242,503
Income taxes payable
187,602
23,048
Total current liabilities
25,797,473
24,752,199
Non-current liabilities
Lease liabilities [note 16]
2,861,482
2,389,729
Term
 
loans [note 21]
320,070
107,901
Balance due on business combination [note 6]
1,818,798
1,709,700
Deferred income taxes [note 31]
—
42,394
Total liabilities
30,797,823
29,001,923
Shareholders’ equity
[note 22]
Common shares
85,483,223
82,104,086
Warrants
223,200
—
Contributed surplus
24,546,960
19,879,055
Accumulated other comprehensive income
402
3,444
Deficit
(93,384,858)
(61,217,831)
Total shareholders’ equity
16,868,927
40,768,754
Total liabilities and shareholders’ equity
47,666,750
69,770,677
Contingent liabilities, subsequent events [notes 29 and
 
33].
The accompanying notes form an integral part of the consolidated
 
financial statements.
Approved on behalf of the Board:
[Signed by P.
 
Peter Pascali] P.
 
Peter Pascali
[Signed by Andrew Abdalla] Andrew Abdalla
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
PyroGenesis Canada Inc.
Consolidated Statements of Comprehensive Loss
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
 
2022
2021
$
$
Revenues
[note 7]
19,013,503
31,068,350
Cost of sales and services [note 24]
10,869,616
18,636,539
Gross profit
8,143,887
12,431,811
Expenses
Selling, general and administrative [note 24]
29,025,434
27,237,135
Research and development, net [note 11]
2,317,973
2,535,987
31,343,407
29,773,122
Net loss from operations
(23,199,520)
(17,341,311)
Changes in fair value of strategic investments [note 12]
(8,340,781)
(21,426,218)
Finance costs, net [note 25]
(550,742)
(404,370)
Loss before income taxes
 
(32,091,043)
(39,171,899)
Income taxes [note 31]
75,984
(739,960)
Net loss
(32,167,027)
(38,431,939)
Other comprehensive income (loss)
Items that will be reclassified subsequently to profit or loss
Foreign currency translation gain (loss) on investments
 
in foreign
 
operations
(3,042)
3,444
Comprehensive loss
(32,170,069)
(38,428,495)
Loss per share
[note 26]
Basic
(0.19)
(0.23)
Diluted
(0.19)
(0.23)
The accompanying notes form an integral part of the consolidated
 
financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7
PyroGenesis Canada Inc.
Consolidated Statements of Changes in Shareholders’
 
Equity
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
 
Accumulated
Number of
other
common
Common
Contributed
comprehensive
shares
shares
Warrants
Surplus
income
Deficit
Total
$
$
$
$
$
$
Balance - December 31, 2021
170,125,795
82,104,086
—
19,879,055
3,444
(61,217,831)
40,768,754
Shares issued upon exercise of stock
options [note 22]
2,440,000
2,283,357
—
(870,558)
—
—
1,412,799
Private placement [note 22]
1,014,600
1,095,780
223,200
—
—
—
1,318,980
Share-based payments
—
—
—
5,538,463
—
—
5,538,463
Other comprehensive loss for the year
—
—
—
—
(3,042)
—
(3,042)
Net loss
—
—
—
—
—
(32,167,027)
(32,167,027)
Balance – December 31, 2022
173,580,395
85,483,223
223,200
24,546,960
402
(93,384,858)
16,868,927
Balance - December 31, 2020
159,145,992
67,950,069
—
10,480,310
—
(19,007,273)
59,423,106
Shares issued upon exercise of stock
options [note 22]
3,482,000
1,473,818
—
(364,000)
—
—
1,109,818
Shares issued upon exercise of purchase
warrants and compensation options [note
22]
8,337,897
13,085,197
—
—
—
—
13,085,197
Share redemptions for cancellation [note
22]
(840,094)
(404,998)
—
—
—
(3,778,619)
(4,183,617)
Share-based payments
—
—
—
9,762,745
—
—
9,762,745
Other comprehensive income for the year
—
—
—
—
3,444
—
3,444
Net loss
—
—
—
—
—
(38,431,939)
(38,431,939)
Balance – December 31, 2021
170,125,795
82,104,086
—
19,879,055
3,444
(61,217,831)
40,768,754
The accompanying notes form an integral part of the consolidated
 
financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
PyroGenesis Canada Inc.
Consolidated Statements of Cash Flows
 
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
 
2022
2021
$
$
Cash flows provided by (used in)
Operating activities
Net loss
(32,167,027)
(38,431,939)
Adjustments for:
Share-based payments
5,538,463
9,762,745
Depreciation of property and equipment
603,894
356,103
Depreciation of right-of-use assets
635,828
570,411
Amortization and write-off of intangible assets
878,030
465,913
Amortization of contract assets
243,626
513,572
Net finance costs
550,742
404,370
Change in fair value of investments
8,340,781
21,426,218
Deferred income taxes
(42,394)
(584,246)
Unrealized foreign exchange
(102,236)
(10,623)
(15,520,293)
(5,527,476)
Net change to working capital items [note 23]
4,391,408
(12,585,956)
(11,128,885)
(18,113,432)
Investing activities
Additions to property and equipment
(396,051)
(1,502,231)
Additions to intangible assets
(290,373)
(246,630)
Purchase of strategic investments
(3,604,000)
(10,588,857)
Disposal of strategic investments
3,922,244
14,252,730
Business combination, net of cash acquired
—
807,945
(368,180)
2,722,957
Financing activities
Increase in bank indebtedness
991,902
—
Interest paid
(467,453)
(253,791)
Repayment of term loans
(33,003)
(20,507)
Repayment of lease liabilities
(657,381)
(263,078)
Repayment of balance due on business combination
(217,778)
—
Proceeds from issuance of term loans
292,941
—
Proceeds from issuance of shares upon exercise
 
of warrants
—
13,085,197
Proceeds from issuance of shares upon exercise
 
of stock options
1,412,799
1,109,818
Proceeds from private placement [note 22]
1,318,980
—
Shares repurchased for cancellation
—
(4,183,617)
2,641,007
9,474,022
Effect of exchange rate changes on cash denominated in
 
foreign currencies
99,194
14,067
Net decrease in cash and cash equivalents
 
(8,756,864)
(5,902,386)
Cash and cash equivalents - beginning of year
12,202,513
18,104,899
Cash and cash equivalents - end of year
3,445,649
12,202,513
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9
2022
2021
$
$
Supplemental cash flow disclosure
Non-cash transactions:
Purchase of intangible assets included in accounts payable
—
81,693
Purchase of property and equipment included in
 
accounts payable
—
22,557
Addition to contract assets included in accounts
 
payable
—
195,060
Settlement of accounts receivable on business acquisition
—
1,744,400
Accretion interest on balance due on business
 
combination
173,350
110,204
Accretion interest on royalties receivable
118,290
132,809
Accretion on term loan
28,236
12,185
Fair value of HPQ warrants exercised
—
9,181,250
Initial recognition or modification of lease liabilities
 
and right-of-use assets [note 16]:
Right-of-use assets
(311,421)
2,157,796
Prepaid rent expense
—
(36,903)
Lease liabilities
867,110
2,120,893
The accompanying notes form an integral part of the consolidated
 
financial statements.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
10
1.
 
Nature of operations
PyroGenesis Canada Inc.
 
(“PyroGenesis”) and
 
its subsidiaries
 
(collectively,
 
the “Company”),
 
incorporated under
 
the laws
of the Canada
 
Business Corporations
 
Act, was formed
 
on July 11,
 
2011.
 
The Company
 
owns patents
 
of advanced waste
treatment systems technology and designs,
 
develops, manufactures, and commercialises advanced plasma processes and
sustainable solutions to reduce greenhouse gases. The Company is domiciled at 1744 William Street, Suite 200, Montreal,
Quebec. The Company
 
is publicly traded
 
on the TSX
 
Exchange under
 
the Symbol “PYR”,
 
on NASDAQ
 
in the USA
 
under
the symbol “PYR” and on the Frankfurt Stock Exchange (FSX)
 
under the symbol “8PY”.
2.
 
Going concern
These
 
consolidated
 
financial
 
statements
 
have
 
been
 
prepared
 
on
 
the
 
going
 
concern
 
basis,
 
which
 
presumes
 
that
 
the
Company will be
 
able to continue
 
its operations
 
for the foreseeable
 
and will be
 
able to realize
 
its assets and
 
discharge its
liabilities in the normal course of business for the foreseeable
 
future.
The Company is
 
subject to certain
 
risks and uncertainty
 
associated with the
 
achievement of profitable
 
operations such
 
as
the successful signing and delivery of contracts and access
 
to adequate financing.
The Company
 
has incurred,
 
in the
 
last years,
 
operating losses
 
and negative
 
cash flows
 
from operations,
 
and as
 
a result,
the Company has
 
an accumulated deficit of
 
$
93,384,858
 
as at December
 
31, 2022 ($
61,217,831
 
as at December
 
31, 2021).
Furthermore, there have been unexpected delays in the collection of certain accounts receivable from contracts closed in a
prior year. This has
 
resulted in a
 
shortfall in cash
 
flows from operating
 
activities that would
 
be used in
 
funding the Company’s
operations.
 
As
 
at
 
December
 
31,
 
2022,
 
the
 
Company
 
has
 
working
 
capital
 
of
 
$
1,650,709
 
($
14,006,785
 
as
 
at
 
December
 
31,
 
2021)
including cash and
 
cash equivalents
 
of $
3,445,649
 
($
12,202,513
 
as at December
 
31, 2021). The
 
working capital
 
is net of
an allowance for credit losses amounting to $
5,023,283
 
($
520,000
 
as at December 31, 2021) as further described
 
in notes
9 and 10. The Company’s
 
business plan is dependent
 
upon the successful completion
 
of contracts and also
 
the receipt of
payments from certain contracts
 
closed in a prior year and expects
 
these payments to be made
 
during fiscal 2023, as well
as
 
the
 
achievement
 
of
 
profitable
 
operations
 
through
 
the
 
signing,
 
completion
 
and
 
delivery
 
of
 
additional
 
contracts
 
or
 
a
reduction in certain operating expenses. In the absence of this, the Company is dependent upon raising additional funds to
finance operations within
 
and beyond the next
 
twelve months. The Company
 
has been successful
 
in securing financing in
the past
 
and has
 
relied upon
 
external financing
 
to fund
 
its operations,
 
primarily
 
through the
 
issuance of
 
equity,
 
debt and
convertible debentures.
 
The Company
 
completed a
 
private placement
 
in October
 
2022 for
 
an amount
 
of $
1,318,980
 
and
also
 
completed
 
another
 
private
 
placement
 
in
 
March
 
2023
 
for
 
$
5,000,000
 
(see
 
note
 
33).
 
While
 
the
 
Company
 
has
 
been
successful in securing
 
financing, raising
 
additional funds
 
is dependent
 
on a number
 
of factors, some
 
of which
 
are outside
the Company’s
 
control, and therefore
 
there is no
 
assurance that
 
it will be
 
able to do
 
so in the
 
future or that
 
these sources
will
 
be
 
available
 
to
 
the
 
Company
 
or
 
that
 
they
 
will
 
be
 
available
 
on
 
terms
 
which
 
are
 
acceptable
 
to
 
the
 
Company.
 
These
conditions indicate
 
the existence
 
of a
 
material uncertainty
 
that may
 
cast significant
 
doubt about
 
the Company’s
 
ability to
continue operating as a going concern.
 
The consolidated financial
 
statements have
 
been prepared on
 
a going concern
 
basis and do
 
not include
 
any adjustments
to the amounts and to classifications of the assets and liabilities that might be necessary should the Company be unable to
achieve its plan and continue in business. If the going concern assumption were not appropriate, adjustments,
 
which could
be material, would be necessary to the carrying value of assets and liabilities, the reported expenses, and the classification
of items on the consolidated statement of financial position.
3.
 
Basis of preparation
(a)
 
Statement of compliance
These financial statements have been prepared
 
in accordance with International Financial Reporting Standards (“IFRS”) as
issued by
 
the International Accounting
 
Standards Board (“IASB”).
 
These financial statements
 
were approved and
 
authorized
for issuance by the Board of Directors on March 30, 2023.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
11
(b)
 
Functional and presentation currency
These consolidated financial
 
statements are presented
 
in Canadian dollars,
 
which is the
 
functional currency of
 
PyroGenesis,
Drosrite International
 
LLC and
 
Pyro Green-Gas
 
Inc. The
 
functional currency
 
of Airscience
 
Italia SRL
 
is the
 
Euro whereas
the functional currency of Airscience Technologies
 
Private Limited is the Indian
 
rupee.
(c)
 
Basis of measurement
These financial statements have been prepared on the historical
 
cost basis except for:
(i)
 
strategic investments which are accounted for at fair value,
(ii)
 
share-based payment arrangements, which are measured at
 
fair value on the grant date pursuant to IFRS
2, Share-based Payment; and
(iii)
 
lease liabilities, which are initially measured at the present
 
value of minimum lease payments
(d)
 
Basis of consolidation
For financial reporting purposes, subsidiaries are defined as entities controlled by the Company.
 
The Company controls an
entity when it
 
has power over
 
the investee; it
 
is exposed to,
 
or has rights to,
 
variable returns from
 
its involvement with
 
the
entity; and it has the ability to affect those returns through
 
its power over the entity.
In instances
 
where the
 
Company does
 
not hold
 
a majority
 
of the
 
voting rights,
 
further analysis
 
is performed
 
to determine
whether or not
 
the Company has
 
control of the
 
entity. The Company is deemed to
 
have control when, according
 
to the terms
of the shareholder’s and/or other agreements, it makes most of
 
the decisions affecting relevant activities.
These consolidated
 
financial
 
statements
 
include the
 
accounts
 
of PyroGenesis
 
and
 
its subsidiaries,
 
Drosrite
 
International
LLC and Pyro Green-Gas Inc. and its subsidiaries. Drosrite International LLC is owned by a member of the Company’s key
management personnel and close member of
 
the Chief Executive Officer (“CEO”)
 
and controlling shareholder’s family and
is deemed to be controlled by the Company.
 
Pyro Green-Gas Inc. and its subsidiaries Airscience Italia SRL and Airscience
Technologies Private Limited were acquired
 
by the
 
Company on August
 
11, 2021 (see note
 
6). All
 
transactions and balances
between the Company and its subsidiaries have been eliminated
 
upon consolidation.
The
 
accounting
 
policies
 
set
 
out
 
below
 
have
 
been
 
applied
 
consistently
 
in
 
the
 
preparation
 
of
 
the
 
consolidated
 
financial
statements of all years
 
presented. Finance costs
 
and changes in fair
 
value of strategic
 
investments are excluded
 
from the
loss from operations in the consolidated statements of
 
comprehensive loss.
4.
 
Significant accounting policies
(a)
 
Business combinations
Business combinations are accounted
 
for using the
 
acquisition method. Goodwill is
 
measured as the
 
excess of the
 
fair value
of the consideration transferred over the
 
net recognized amount of the identifiable
 
assets acquired and liabilities assumed,
all measured at the acquisition date.
The consideration transferred is measured as the net of the fair values of assets transferred,
 
liabilities assumed, and equity
instruments
 
issued
 
by
 
the
 
Company
 
at
 
the
 
acquisition
 
date,
 
including
 
any
 
asset
 
or
 
liability
 
resulting
 
from
 
a
 
contingent
consideration arrangement, in exchange of the acquiree.
The obligation to pay the contingent consideration
 
is classified as a liability and measured as a financial
 
instrument or as a
provision. Changes in fair values that qualify as measurement period adjustments of preliminary purchase price allocations
are adjusted in the current period and such changes are
 
applied on a retroactive basis.
Acquisition costs
 
that the
 
Company incurs
 
in connection
 
with a
 
business
 
combination
 
are recognized
 
in profit
 
or loss
 
as
incurred, except for costs associated with the issuance
 
of debt or equity securities.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
12
(b)
 
Revenue recognition
Revenue from
 
contracts
 
is recognized
 
for each
 
performance obligation
 
either over
 
a period
 
of time
 
or at
 
a point
 
in time,
depending on which method reflects the transfer of control of the goods and services underlying the particular performance
obligation.
i)
 
Long-term contracts
Long-term contracts
 
involve made-to-order
 
customized equipment
 
and machines
 
and are
 
generally priced
 
on a
 
fixed fee
basis.
 
Under
 
these
 
contracts,
 
the
 
equipment
 
or
 
machines
 
are
 
made
 
to
 
a
 
customer’s
 
specifications
 
and
 
if
 
a
 
contract
 
is
terminated by the customer, the Company
 
is entitled to the greater of the amounts invoiced at the termination
 
date and the
reimbursement of the costs
 
incurred to date of
 
termination, including a reasonable margin.
 
Agreements that contain multiple
deliverables require the Company to determine whether they contain separately identifiable performance obligations and to
allocate the consideration received to each performance
 
obligation.
Revenue
 
relating
 
to
 
long-term
 
contracts
 
is
 
recognized
 
over
 
time
 
based
 
on
 
the
 
measure
 
of
 
progress
 
determined
 
by
 
the
Company’s efforts or inputs
 
towards satisfying the performance obligation
 
relative to the total expected inputs.
 
The degree
of completion
 
is assessed
 
based on
 
the
 
proportion
 
of
 
total costs
 
and/or
 
hours
 
incurred
 
to date,
 
compared
 
to
 
total costs
and/or hours anticipated
 
to provide the
 
service under the
 
entire contract,
 
excluding the effects
 
of inputs that
 
do not depict
performance,
 
e.g.
 
uninstalled
 
materials.
 
For
 
long-term
 
contracts
 
with
 
uninstalled
 
materials,
 
the
 
Company
 
adjusts
 
the
transaction price and
 
recognizes revenue on
 
uninstalled materials to the
 
extent of those
 
costs incurred, i.e.
 
at a zero percent
profit margin, when certain conditions are met.
Estimates are required
 
to determine anticipated
 
costs and/or hours
 
on long-term contracts. A
 
provision is made
 
for the entire
amount of expected loss, if any,
 
in the period in which they are first determinable.
Contract modifications are changes in scope and/or price that are approved by the parties to the contract. Approval may
 
be
written,
 
oral
 
or
 
implied
 
by
 
customary
 
business
 
practices,
 
and
 
are
 
legally
 
enforceable.
 
The
 
Company
 
accounts
 
for
modifications as a separate
 
contract if the modifications
 
add distinct goods or
 
services that are priced
 
commensurate with
stand-alone
 
selling
 
prices
 
or
 
if
 
the
 
remaining
 
goods
 
or
 
services
 
are
 
distinct
 
from
 
those
 
already
 
transferred,
 
otherwise
modifications are accounted for as part of the original contract.
Costs and
 
profits in
 
excess of
 
billings on
 
uncompleted contracts
 
and trade
 
receivables are
 
both rights
 
to consideration
 
in
exchange for
 
goods or
 
services that
 
the Company
 
has transferred
 
to a
 
customer,
 
however the
 
classification
 
depends on
whether such right is only
 
conditional on the passage of time
 
(trade receivables) or if it is
 
also conditional on something else
(costs and profits
 
in excess of
 
billings on uncompleted contracts),
 
such as the
 
satisfaction of further performance
 
obligations
under the contract. Billings in excess of costs and
 
profits on uncompleted contracts is the cumulative
 
amount received and
contractually receivable by the Company that exceeds the right
 
to consideration resulting from the Company’s performance
under a given contract.
The costs
 
to obtain
 
long-term contracts
 
such as
 
sale commissions
 
are recognized
 
as Contract
 
assets and
 
recognized as
selling expenses over time based on degree of completion
 
of the related contract.
ii)
 
Sales of goods
Revenue related to sales of goods, which may
 
include powders and spare parts are measured
 
based on the consideration
specified in contracts
 
with customers. The
 
Company recognizes
 
revenue at a
 
point in time
 
when it transfers
 
control of the
goods to
 
the buyer.
 
This is
 
generally at
 
the time
 
the customer
 
obtains legal
 
title to
 
the product
 
and when
 
it is
 
physically
transferred to the custody transfer point agreed with the customer.
iii)
 
Sale of intellectual property
Sale of
 
intellectual property is
 
recognized at the
 
date the recipient
 
obtains control of
 
the asset. Variable consideration related
to the sale of intellectual property is recognized to the extent that it
 
is highly probable that a reversal will not occur when the
uncertainty associated with the variable consideration
 
is subsequently resolved.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
13
(c)
 
Foreign currency translation
i)
 
Foreign currency transactions
Revenue and expense transactions in foreign
 
currencies are translated into the functional
 
currency of the respective entity
using the
 
average exchange
 
rates prevailing
 
at the
 
time of
 
the transaction.
 
Foreign currency
 
balances are
 
translated into
the functional
 
currency of
 
the respect
 
ive entity
 
at year
 
end exchange
 
rates for
 
monetary items
 
and at
 
historical
 
rates for
non-monetary items. Translation gains
 
or losses are included in the determination of net loss.
ii)
 
Foreign operations
The assets and
 
liabilities of foreign
 
operations are translated
 
into Canadian dollars
 
using exchange rates
 
prevailing at the
end
 
of
 
the
 
reporting
 
period.
 
Revenue
 
and
 
expense
 
items
 
are
 
translated
 
at
 
the
 
average
 
exchange
 
rates
 
for
 
the
 
period.
Exchange
 
differences
 
arising
 
from
 
the
 
translation
 
process
 
of
 
foreign
 
operations
 
are
 
recognized
 
as
 
foreign
 
currency
translation adjustments in other comprehensive income and
 
accumulated in equity.
(d)
 
Cash and cash equivalents
Cash and
 
cash equivalents
 
are financial
 
instruments readily
 
convertible to
 
a known
 
amount of
 
cash and
 
not subject
 
to a
significant risk of
 
changes in fair
 
value. Cash equivalents
 
include instruments with
 
a maturity of
 
three months or
 
less from
the date of
 
acquisition and
 
instruments with
 
an original
 
term longer than
 
three months if
 
there is
 
no significant
 
penalty for
withdrawal within a three-month period from the date
 
of acquisition.
(e)
 
Inventory
Inventory is composed of spare
 
parts for resale. Inventory
 
is valued at the
 
lower of cost and net
 
realizable value. The
 
cost
of
 
inventory
 
is
 
based
 
on
 
the
 
first-in,
 
first-out
 
principle
 
and
 
comprises
 
all
 
costs
 
of
 
purchases.
 
Net
 
realizable
 
value
 
is
 
the
estimated selling price in the ordinary course of business,
 
less estimated costs of completion and selling costs.
(f)
 
Income taxes
i)
 
Current tax
Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from
or paid
 
to the
 
taxation authorities.
 
The tax
 
rates and
 
tax laws
 
used to
 
compute the
 
amount are
 
those that
 
are enacted
 
or
substantively enacted by the date of the consolidated statements
 
of financial position.
iii)
 
Deferred tax
Deferred tax is provided using the liability method, providing for temporary differences between the tax
 
bases of assets and
liabilities and their carrying
 
amounts in the consolidated
 
financial statements. The
 
temporary difference
 
is not provided for
if it arises from the initial recognition
 
of goodwill or the initial recognition
 
of an asset or liability in
 
a transaction other than
 
a
business combination that at the time of the transaction affects neither accounting
 
nor taxable profit or loss. The amount of
deferred tax
 
provided is
 
based on
 
the expected
 
manner of
 
realization or
 
settlement of
 
the carrying
 
amount of
 
assets and
liabilities, using tax
 
rates enacted or
 
substantively enacted at
 
the financial position
 
reporting date and
 
whose implementation
is expected over the period in which the deferred tax is
 
realized or recovered. A deferred tax asset is recognized only to the
extent that it is probable that future taxable profits will
 
be available against which the asset can be used.
Deferred tax assets
 
and liabilities are
 
presented as non-current. Assets
 
and liabilities are
 
offset where the
 
entity has a
 
legally
enforceable right
 
to offset current
 
tax assets and
 
liabilities or
 
deferred tax assets
 
and liabilities,
 
and the respective
 
assets
and liabilities
 
relate to
 
income taxes
 
levied by
 
the same
 
taxation authority
 
on the
 
same taxable
 
entity or
 
different
 
taxable
entities which intend to settle the liabilities and assets on a net
 
basis.
(g)
 
Earnings (loss) per share
The Company
 
presents basic
 
earnings (loss)
 
per share data
 
for its common
 
shares. Basic
 
loss per share
 
is computed
 
by
dividing net earnings
 
(loss) by the
 
weighted average
 
number of common
 
shares outstanding
 
during the year.
 
Diluted loss
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
14
per share is
 
computed similarly to
 
basic earnings per
 
share, except that
 
the weighted average
 
number of shares
 
outstanding
is increased
 
to include
 
shares from
 
the assumed
 
exercise of
 
stock options
 
and share
 
purchase warrants,
 
if dilutive.
 
The
number of additional shares
 
is calculated by assuming
 
that outstanding share options and
 
warrants were exercised and that
the
 
proceeds
 
from
 
such
 
exercises
 
were
 
used
 
to
 
acquire
 
common
 
shares
 
at
 
the
 
average
 
market
 
price
 
during
 
the year.
Potential shares from
 
all outstanding stock
 
options and share
 
purchase warrants are excluded
 
from the calculation of
 
diluted
loss per share as their inclusion is considered anti-dilutive in
 
years when a loss is incurred.
(h)
 
Property and equipment
Property
 
and
 
equipment
 
are
 
measured
 
at
 
cost
 
less
 
accumulated
 
depreciation
 
and
 
accumulated
 
impairment
 
losses
 
if
applicable. Cost includes expenditures that
 
are directly attributable to the
 
acquisition of the asset
 
and bringing the asset into
operation. Borrowing
 
costs capitalized
 
to asset
 
under development
 
represents the
 
interest expense
 
calculated under
 
the
effective interest
 
method and
 
does not include
 
any fair value
 
adjustments of
 
investments designated
 
at fair
 
value through
profit and loss. Government assistance
 
and investment tax credits related to
 
the purchase or development of
 
property and
equipment
 
are recorded
 
in reduction
 
of the
 
cost.
 
When major
 
parts
 
of an
 
item of
 
property
 
and
 
equipment
 
have different
useful lives, they are accounted for separately. Property and equipment are depreciated from the acquisition date
 
over their
respective useful life.
 
Depreciation of
 
an asset under
 
construction begins
 
when it is
 
available for
 
use, i.e. when
 
it is in
 
the
location and condition necessary for it to be capable of
 
operating in the manner intended by the Company.
Depreciation is calculated using the following methods
 
and rates:
Computer equipment
Straight line over
3 years
Machinery and equipment
Straight line over
10 years
Automobiles
Straight line over
7 years
Leasehold improvements
Lesser of the lease term or the useful life (
20 years
)
Impairment losses recognized in prior
 
periods are assessed at each reporting
 
date as to whether there are
 
any indications
that the previously recognized losses may no longer exist or may be decreased. An impairment loss is reversed only to the
extent
 
that
 
the
 
asset’s
 
carrying
 
amount
 
does
 
not
 
exceed
 
the
 
carrying
 
amount
 
that
 
would
 
have
 
been
 
determined,
 
net
 
of
depreciation, had no impairment loss been recognized for the
 
asset in prior years.
Property and equipment are assessed for impairment
 
whenever there is an indication of impairment.
Depreciation methods, useful lives and residual
 
values are reviewed at each financial
 
year end and adjusted prospectively
if appropriate.
(i)
 
Leases
Under IFRS 16 Leases, at
 
inception, the Company assesses
 
whether a contract is, or contains,
 
a lease based on whether
the contract conveys the right to control the use of an identified
 
asset for a period of time in exchange for consideration.
The Company recognizes a right-of-use asset and
 
a lease liability at the
 
commencement date of the lease, i.e., the date
 
the
underlying asset is available for use.
Right-of-use assets
Right-of-use
 
assets
 
are measured
 
at cost,
 
less
 
any
 
accumulated
 
depreciation
 
and
 
accumulated
 
impairment
 
losses,
 
and
adjusted for any remeasurement of lease liabilities. Cost
 
of right-of-use assets is comprised of:
-
 
the initial measurement amount of the lease liabilities recognized
 
;
-
 
any lease payments made at or before the commencement
 
date, less any lease incentives received;
-
 
any initial direct costs incurred; and
-
 
an estimate of costs to dismantle and remove the underlying
 
asset, restore the site on which it is located or
 
restore the underlying asset to the condition required by
 
the terms and conditions of the lease contract.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
15
Right-of-use assets are
 
depreciated over the
 
shorter period of
 
the lease term
 
and the useful
 
life of the underlying
 
asset. If
a lease transfers ownership
 
of the underlying asset
 
or the cost of the
 
right-of-use asset reflects
 
that the Company expects
to exercise a purchase option,
 
the related right-of-use asset is
 
depreciated over the useful life
 
of the underlying asset based
on
 
periods
 
detailed
 
above.
 
The
 
depreciation
 
starts
 
at
 
the
 
commencement
 
date
 
of
 
the
 
lease.
 
Right-of-use
 
assets
 
are
assessed for impairment whenever there is an indication that
 
the right-of-use assets may be impaired.
Lease liabilities
Lease liabilities are
 
initially measured at
 
the present value
 
of the lease
 
payments that
 
are not paid
 
at the commencement
date over the lease term. The present value of the lease payments is determined
 
using the lessee’s incremental borrowing
rate at
 
the commencement date
 
if the
 
interest rate implicit
 
in the
 
lease is
 
not readily determinable.
 
The incremental borrowing
rate is
 
a function
 
of the
 
lessee’s incremental
 
borrowing rate,
 
the nature
 
of the
 
underlying asset,
 
the location
 
of the
 
asset,
the
 
length
 
of
 
the
 
lease
 
and
 
the
 
currency
 
of
 
the
 
lease
 
contract.
 
Generally,
 
the
 
Company
 
uses
 
the
 
lessee’s
 
incremental
borrowing rate
 
for the
 
present value.
 
At the commencement
 
date, lease
 
payments generally
 
include fixed
 
payments, less
any
 
lease
 
incentives
 
receivable,
 
variable
 
lease
 
payments
 
that
 
depend
 
on
 
an
 
index
 
(e.g.,
 
based
 
on
 
inflation
 
index)
 
or
 
a
specified rate, and payments of
 
penalties for terminating the lease,
 
if the lease term
 
reflects the lessee exercising the
 
option
to terminate the lease. Lease payments also include amounts expected to be
 
paid under residual value guarantees and the
exercise price of a purchase option if the Company is reasonably
 
certain to exercise that option.
Variable
 
lease payments that
 
do not depend on
 
an index or a
 
specified rate are not
 
included in the measurement
 
of lease
liabilities but
 
instead are
 
recognized
 
as expenses
 
in the
 
period in
 
which the
 
event or
 
condition that
 
triggers the
 
payment
occurs.
After the
 
commencement date,
 
the carrying
 
amount of
 
lease liabilities
 
is increased
 
to reflect
 
the accretion
 
of interest
 
and
reduced to reflect lease payments made.
 
In addition, the carrying amount of
 
lease liabilities is remeasured when
 
there is a
change in future
 
lease payments arising
 
from a change
 
in an index
 
or specified rate,
 
if there is a
 
modification to the
 
lease
terms and conditions, a change in the estimate of
 
the amount expected to be payable under residual
 
value guarantee, or if
the
 
Company
 
changes
 
its
 
assessment
 
of
 
whether
 
it
 
will
 
exercise
 
a
 
termination,
 
extension
 
or
 
purchase
 
option.
 
The
remeasurement amount of
 
the lease liabilities
 
is recognized as an
 
adjustment to the right-of-use
 
asset, or in the
 
profit and
loss statement when the carrying amount of the right-
 
of-use asset is reduced to zero.
Classification and presentation of lease-related expenses
Depreciation charge for right-of-use assets, expenses
 
related to variable lease payments not included in the measurement
of lease
 
liabilities and
 
loss (gain)
 
related to
 
lease modifications
 
are allocated
 
in the
 
Company’s
 
profit and
 
loss statement
based on their function within the Company,
 
while interest expense on lease liabilities is presented within
 
finance costs.
Cash flow classification
Lease payments related
 
to the principal
 
portion of the
 
lease liabilities are
 
classified as
 
cash flows from
 
financing activities
while lease
 
payments related
 
to the
 
interest portion
 
of the
 
lease liabilities
 
are classified
 
as interest
 
paid within
 
cash flows
from
 
financing
 
activities.
 
Lease
 
incentives
 
received
 
are
 
classified
 
as
 
cash
 
flows
 
from
 
investing
 
activities.
 
Variable
 
lease
payments not included in the measurement of lease
 
liabilities are classified as cash flows from operating activities.
(j)
 
Government assistance and investment tax credits
Investment
 
tax
 
credits
 
are
 
comprised
 
of
 
scientific
 
research
 
and
 
experimental
 
development
 
tax
 
credits.
 
Government
assistance and investment
 
tax credits are
 
recognized when there
 
is reasonable assurance
 
of their recovery
 
and recorded
as a reduction of the related expense or cost
 
of the asset acquired, as applicable. Investment
 
tax credits are subject to the
customary
 
approvals
 
by
 
the
 
pertinent
 
tax
 
authorities.
 
Adjustments
 
required,
 
if
 
any,
 
are
 
reflected
 
in
 
the year
 
when
 
such
assessments are received.
(k)
 
Intangible assets and Goodwill
Intangible
 
assets
 
acquired
 
separately
 
are
 
measured
 
at
 
cost
 
on
 
initial
 
recognition.
 
Following
 
initial
 
recognition,
 
intangible
assets are carried at cost less any accumulated amortization
 
and any accumulated impairment losses.
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
16
Identifiable intangible assets
 
acquired in a
 
business combination
 
are recognized separately
 
from goodwill if
 
they meet the
definition of an intangible
 
asset and if their fair
 
value can be measured
 
reliably.
 
The cost of these
 
intangible assets equals
their acquisition-date fair value.
Subsequent to initial recognition, identifiable intangible assets acquired in a business combination are
 
recorded at cost less
accumulated
 
amortization
 
and
 
impairment
 
losses,
 
if
 
they
 
are
 
amortizable,
 
otherwise
 
only
 
at
 
cost
 
net
 
of
 
accumulated
impairment losses. The useful lives of intangible assets
 
are assessed as either finite or indefinite.
Intangible assets with finite
 
lives are amortized over
 
the useful life of
 
the asset and assessed for
 
impairment whenever there
is
 
an
 
indication
 
of
 
impairment.
 
Amortization
 
expense
 
on
 
the
 
intangible
 
assets
 
with
 
finite
 
lives
 
is
 
recognized
 
in
 
the
consolidated statements of comprehensive loss.
Research
 
costs
 
are
 
charged
 
to
 
comprehensive
 
loss
 
in
 
the year
 
they
 
are
 
incurred,
 
net
 
of
 
related
 
investment
 
tax
 
credits.
Development costs
 
are charged
 
to comprehensive
 
loss in
 
the year they
 
are incurred
 
net of
 
related investment
 
tax credits
unless they meet specific criteria related to technical, market and financial feasibility in order to be recognized as intangible
assets which include:
-
 
the technical feasibility of completing the intangible asset so that
 
it will be available for use or sale;
-
 
the Company has the intention to complete and the ability to
 
use or sell the asset;
-
 
the asset will generate future economic benefits;
-
 
the Company has the resources to complete the asset; and
-
 
ability to measure reliably the expenditure during development.
Costs
 
to
 
establish
 
patents
 
for
 
internally
 
developed
 
technology
 
are
 
considered
 
development
 
costs
 
and
 
are
 
charged
 
to
comprehensive loss in the year they are
 
incurred unless they meet specific criteria related to
 
technical, market and financial
feasibility. Patent costs
 
include legal and other advisor fees to obtain patents,
 
and patent application fees.
Amortization
 
of
 
the
 
development
 
costs
 
is calculated
 
on
 
a straight
 
-line
 
basis
 
over
 
the
 
remaining
 
useful
 
life
 
of
 
the
 
related
patent
 
and
 
begins
 
when
 
development
 
is
 
complete.
 
During
 
the
 
period
 
of
 
development,
 
the
 
asset
 
is
 
tested
 
annually
 
for
impairment. Residual values and useful lives are reviewed
 
at each reporting date.
Amortization is calculated on a straight-line basis:
Useful life
Production backlog
30 months
Patents and development costs
1
 
to
21 years
Goodwill represents the future
 
economic benefits arising from
 
a business combination that are
 
not individually identified and
separately
 
recognized.
 
Goodwill
 
is carried
 
at cost
 
less
 
accumulated
 
impairment
 
losses.
 
Goodwill
 
is not
 
amortized
 
but
 
is
tested for impairment
 
annually or if
 
there is an indication
 
of impairment. Impairment
 
losses recognized for
 
goodwill cannot
be reversed.
(l)
 
Impairment testing of goodwill, other intangible assets,
 
property and equipment and right-of-use assets
The carrying
 
amounts of
 
the Company’s
 
non-financial
 
assets are
 
assessed at
 
each reporting
 
date to
 
determine
 
whether
there is an indication of impairment. If any such indication
 
exists, then the asset’s recoverable amount
 
is estimated.
For impairment assessment purposes, assets are
 
grouped at the lowest levels
 
for which there are largely independent
 
cash
inflows (cash
 
-generating
 
units).
 
As
 
a result,
 
some
 
assets
 
are tested
 
individually
 
for impairment
 
,
 
and some
 
are tested
 
at
cash-generating unit level. Goodwill is allocated to those
 
cash-generating units that are expected to benefit from
 
synergies
of
 
a
 
related
 
business
 
combination
 
and
 
represents
 
the
 
lowest
 
level
 
within
 
the
 
Company
 
at
 
which
 
management
 
monitors
goodwill.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
17
Cash-generating units to which goodwill
 
has been allocated are tested for
 
impairment at least annually.
 
All other individual
assets
 
or
 
cash-generating
 
units
 
are
 
tested
 
for
 
impairment
 
whenever
 
events
 
or
 
changes
 
in
 
circumstances
 
indicate
 
the
carrying amount may not be recoverable.
The recoverable amount
 
of an asset
 
or cash-generating unit
 
(CGU) is the
 
greater of its
 
value in use and
 
its fair value
 
less
costs to sell.
 
In assessing
 
value in use,
 
the estimated
 
future cash flows
 
are discounted to
 
their present value
 
using a pre-
tax discount
 
rate that
 
reflects current
 
market assessments
 
of the
 
time value
 
of money
 
and the
 
risks specific
 
to the
 
asset.
For the purposes of testing non-financial assets for
 
impairment, management has identified
one
 
CGU.
An impairment loss is
 
recognized if the carrying amount of
 
an asset or its
 
CGU exceeds its recoverable amount. Impairment
losses are
 
recognized in
 
the consolidated
 
statements
 
of comprehensive
 
loss. Impairment
 
losses recognized
 
in respect
 
of
the CGU are allocated first to reduce the carrying amount of goodwill allocated to the units, and then to reduce the carrying
amounts on a pro-rata basis of the other assets in the
 
unit.
(m)
 
Provisions and contingent liabilities
Provisions for legal
 
disputes, onerous contracts
 
or other claims
 
are recognized when
 
the Company has
 
a present legal
 
or
constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from
the Company and amounts can be estimated reliably.
 
The timing or amount of the outflow may still be uncertain.
Provisions are measured at the estimated
 
expenditure required to settle the
 
present obligation, based on the
 
most reliable
evidence available at the reporting date, including the risks and uncertainties associated with the
 
present obligation. Where
there
 
are
 
a
 
number
 
of
 
similar
 
obligations,
 
the
 
likelihood
 
that
 
an
 
outflow
 
will
 
be
 
required
 
in
 
settlement
 
is
 
determined
 
by
considering the class
 
of obligations as a
 
whole. Provisions are discounted
 
to their present values,
 
where the time value
 
of
money is material.
No
 
liability
 
is
 
recognized
 
if
 
an
 
outflow
 
of
 
economic
 
resources
 
as
 
a
 
result
 
of
 
present
 
obligations
 
is
 
not
 
probable.
 
Such
situations are disclosed as contingent liabilities unless
 
the outflow of resources is remote.
(n)
 
Employee benefits
Share-based payments
The Company applies a fair
 
value-based method of accounting to
 
all share-based payments. Employee
 
and director stock
options are measured
 
at their fair
 
value of each
 
tranche on the
 
grant date and
 
recognized in its
 
respective vesting period.
Non-employee stock options
 
are measured when
 
the services are
 
rendered by the
 
consultant at the
 
fair value of
 
the services
received if the
 
fair value can
 
be measured reliably.
 
In the case
 
the fair value
 
of the services
 
cannot be measured
 
reliably,
the services are measured
 
indirectly using the fair
 
value of the equity
 
instruments granted at
 
grant date. The
 
cost of stock
options is presented
 
as share-based
 
payment expense.
 
On the
 
exercise of stock
 
options, share
 
capital is
 
credited for
 
the
consideration received
 
and for
 
the fair
 
value amounts
 
previously credited
 
to contributed
 
surplus. The
 
Company uses
 
the
Black-Scholes option-pricing model to estimate the fair value
 
of share-based payments.
Deferred profit-sharing plan
The Company
 
established a
 
yearly Deferred
 
Profit-Sharing
 
Plan (“DPSP”)
 
for all
 
eligible employees
 
who have
 
materially
and
 
significantly
 
contributed
 
to
 
the
 
prosperity
 
and
 
profits
 
of
 
the
 
Company.
 
The
 
significance
 
of
 
any
 
contribution
 
of
 
any
employee to the prosperity and profits of the Company for purposes of eligibility in the DPSP is determined by the Board of
Directors of the Company
 
upon such relevant information
 
as the Board, in its
 
sole discretion, may find
 
relevant. All related
persons to the Company are excluded from participating in
 
the DPSP.
For all eligible
 
employees, the Company is
 
required to contribute to
 
the DPSP out
 
of the profits
 
of the Company. The amount
of the Company’s contribution will be such amount which, in the opinion of its Board of Directors, is
 
warranted by the profits
and overall financial
 
position of the
 
Company.
 
During the year,
 
the Company contributed
 
$
Nil
 
to the DPSP
 
($
Nil
 
in 2021).
Obligations for contributions
 
to the DPSP
 
are recognized as
 
an employee benefit
 
expense in the
 
consolidated statements
of comprehensive loss in the periods during which services
 
are rendered by employees.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
18
Short-term employee benefits
Short-term employee benefit obligations
 
are measured on an undiscounted
 
basis and are expensed as
 
the related service
is provided.
A liability is
 
recognized for the amount
 
expected to be
 
paid under the
 
short-term incentive plan if
 
the Company has a
 
present
legal or constructive obligation
 
to pay this amount as
 
a result of past service
 
provided by the employee,
 
and the obligation
can be estimated reliably.
(o)
 
Equity instruments
 
Issuance of equity instruments
Incremental
 
costs
 
directly
 
attributable
 
to
 
the
 
issue
 
of
 
equity-classified
 
shares
 
are
 
recognized
 
as
 
a
 
deduction
 
from
 
the
common
 
shares
 
and
 
warrants,
 
net
 
of
 
any
 
tax
 
effects.
 
Upon
 
issuance
 
of
 
units,
 
the
 
Company
 
uses
 
the
 
residual
 
value
 
to
allocate the net proceeds between common shares and
 
warrants.
Extinguishing financial liabilities with equity instruments
When
 
equity
 
instruments
 
issued
 
to
 
a
 
creditor
 
to
 
extinguish
 
all
 
or
 
part
 
of
 
a
 
financial
 
liability
 
are
 
recognized
 
initially,
 
the
Company
 
measures
 
them
 
at
 
the
 
fair
 
value
 
of
 
the
 
equity
 
instruments
 
issued,
 
unless
 
that
 
fair
 
value
 
cannot
 
be
 
reliably
measured. If the fair
 
value of the equity
 
instruments issued cannot
 
be reliably measured,
 
then the equity instruments
 
shall
be measured to reflect the fair value of the financial liability
 
extinguished.
Contributed surplus
Contributed
 
surplus
 
includes
 
amounts
 
related
 
to
 
equity-settled
 
share-based
 
payments
 
until
 
such
 
equity
 
instruments
 
are
exercised or settled, in which case the amounts are transferred
 
to common shares or reversed upon forfeiture if not vested.
It also includes the unexercised conversion option at the
 
maturity of the convertible debentures.
(p)
 
Financial Instruments
Recognition:
The Company
 
recognizes a
 
financial asset
 
or a
 
financial liability
 
when it
 
becomes a
 
party to
 
the contractual
 
provisions of
the instrument.
Purchases
 
or
 
sales
 
of
 
financial
 
assets
 
that
 
require
 
delivery
 
of
 
assets
 
within
 
the
 
time
 
frame
 
generally
 
established
 
by
regulation or
 
convention in
 
the marketplace
 
(regular way
 
trades) are
 
recognized on
 
the trade
 
date, i.e.,
 
the date
 
that the
Company commits to purchase or sell the asset.
Classification
Financial
 
assets
 
are
 
classified
 
at
 
amortized
 
cost,
 
fair
 
value
 
through
 
profit
 
or
 
loss
 
(“FVTPL”)
 
or
 
fair
 
value
 
through
 
other
comprehensive
 
income
 
(“FVOCI”)
 
based
 
on
 
the
 
Company’s
 
business
 
model
 
for
 
managing
 
the
 
financial
 
assets
 
and
 
the
contractual cash flow characteristics of these assets.
 
Assessment and decision on the business model
 
approach used is an
accounting judgment.
A financial
 
asset
 
is measured
 
at amortized
 
cost
 
if it
 
is held
 
within
 
a business
 
model
 
whose
 
objective
 
is to
 
hold financial
assets in order to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding. The Company
 
includes in this category cash
and cash equivalents, trade accounts receivable, other receivables,
 
royalties receivable and deposits.
A financial asset is measured at fair value through profit or
 
loss (“FVTPL”) if:
(a)
 
Its contractual terms do not give rise to
 
cash flows on specified dates that are
 
solely payments of principal and interest
(SPPI) on the principal amount outstanding; or
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
19
(b)
 
It
 
is
 
not
 
held
 
within
 
a
 
business
 
model
 
whose
 
objective
 
is
 
either
 
to
 
collect
 
contractual
 
cash
 
flows,
 
or
 
to
 
both
 
collect
contractual cash flows and sell; or
(c)
 
At
 
initial
 
recognition,
 
it
 
is
 
irrevocably
 
designated
 
as
 
measured
 
at
 
FVTPL
 
when
 
doing
 
so
 
eliminates
 
or
 
significantly
reduces a measurement or
 
recognition inconsistency that would
 
otherwise arise from
 
measuring assets or
 
liabilities or
recognizing the gains and losses on them on different
 
bases.
The Company includes in this category strategic investments
 
in equity instruments.
All financial liabilities,
 
other than
 
those measured
 
at fair
 
value through
 
profit or
 
loss, are
 
included in the
 
financial liabilities
measured at
 
amortized cost.
 
The Company
 
includes in
 
this category
 
bank indebtedness,
 
accounts payable
 
and accrued
liabilities and term loans. The balance due on business
 
combination is measured at FVTPL.
Initial measurement
Financial assets and
 
liabilities (other than
 
financial assets at
 
FVTPL) are measured
 
initially at
 
their fair value
 
plus any directly
attributable incremental costs of acquisition or issue.
Financial assets
 
and financial
 
liabilities at
 
FVTPL are
 
recorded in
 
the consolidated
 
statements
 
of financial
 
position at
 
fair
value. All transaction costs for such instruments are recognized
 
directly in profit or loss.
Subsequent measurement
Financial assets (other than financial assets at FVTPL) are measured at amortized
 
cost using the effective interest method
less
 
any
 
allowance
 
for
 
impairment.
 
Gains
 
and
 
losses
 
are
 
recognized
 
in
 
profit
 
or
 
loss
 
when
 
the
 
debt
 
instruments
 
are
derecognized or impaired, as well as through the amortization
 
process.
Financial liabilities are
 
measured at amortized
 
cost using the
 
effective interest
 
method except for
 
derivatives and financial
liabilities designated at
 
FVTPL. Gains and
 
losses are recognized
 
in profit or
 
loss when the
 
liabilities are derecognized,
 
as
well as through
 
the amortization
 
process. Changes
 
in fair value
 
of financial liabilities
 
attributable to changes
 
in the entity’s
own credit risk are to be presented in other comprehensive
 
income unless they affect amounts recorded
 
in income.
Fair value measurement principles
Fair value is the price that would be received to sell
 
an asset or paid to transfer a liability in an orderly
 
transaction between
market participants at the measurement date.
Where financial assets and
 
financial liabilities measured
 
at fair value though
 
profit or loss have
 
a quoted price in
 
an active
market at the reporting date,
 
the fair value is based
 
on this price. A financial
 
instrument is regarded as
 
quoted in an active
market if
 
quoted prices
 
are readily
 
and regularly
 
available from
 
a stock
 
exchange and
 
those prices
 
represent actual
 
and
regularly occurring market transactions on an arm’s
 
length basis.
Securities traded on stock exchanges are stated at market
 
price based on the closing price on the
 
relevant valuation day.
Derecognition
A financial asset is derecognized
 
where the rights to receive
 
cash flows from the asset
 
have expired, or the Company
 
has
transferred its
 
rights to receive
 
cash flows
 
from the asset.
 
The Company derecognizes
 
a financial liability
 
when the obligation
under the liability is discharged, cancelled,
 
or expired.
Offsetting of financial instruments
Financial assets and financial
 
liabilities are offset,
 
and the net amount
 
reported in the
 
consolidated statements
 
of financial
position if, and only if, there is a currently enforceable
 
legal right to offset the recognized amounts
 
and there is an intention
to settle on a net basis, or to realize the assets and settle
 
the liabilities simultaneously.
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
20
Impairment of financial instruments
The
 
Company
 
applies
 
the
 
“expected
 
credit
 
loss”
 
(“ECL”)
 
model
 
to
 
financial
 
assets
 
measured
 
at
 
amortized
 
cost.
 
The
Company’s financial
 
assets subject to
 
this impairment model
 
are cash and
 
cash equivalents,
 
trade and other
 
receivables,
costs and profits in excess of billings on uncompleted
 
contracts, royalties receivable and deposits.
The trade accounts receivable have no financing component
 
and have maturities of less than 12 months
 
at amortized cost
and,
 
as
 
such,
 
the
 
Company
 
applies
 
the
 
simplified
 
approach
 
for
 
expected
 
credit
 
losses
 
(ECLs)
 
to
 
all
 
its
 
trade
 
accounts
receivable. Therefore, the Company recognizes a loss
 
allowance based on lifetime ECLs at each reporting date.
The Company’s
 
approach to
 
ECLs reflects
 
a probability-weighted
 
outcome, the
 
time value
 
of money
 
and reasonable
 
and
supportable
 
information
 
that
 
is
 
available
 
without
 
undue
 
cost
 
or
 
effort
 
at
 
the
 
reporting
 
date
 
about
 
past
 
events,
 
current
conditions, and forecasts of future economic conditions.
The Company
 
uses
 
the
 
provision
 
matrix
 
as a
 
practical
 
expedient
 
to
 
measure
 
ECLs
 
on
 
trade
 
receivables
 
and
 
costs
 
and
profits in excess of billings on uncompleted contracts, based on days past due for
 
groupings of receivables with similar loss
patterns. Contracts with particular
 
recovery history are analysed
 
separately from other accounts.
 
The loss rates are based
on historical observed loss rates over the expected life of the receivables and are adjusted for forward-looking estimates to
reflect differences between economic conditions
 
during the period over which the historical data has been collected.
Impairment
 
losses
 
are
 
recognized
 
in
 
profit
 
or
 
loss
 
and
 
reflected
 
in
 
an
 
allowance
 
account
 
presented
 
in
 
reduction
 
of
receivables and cost in excess of billings on uncompleted
 
contracts.
Write-off
The
 
gross
 
carrying
 
amount
 
of
 
a
 
financial
 
asset
 
is
 
written
 
off
 
when
 
the
 
Company
 
has
 
no
 
reasonable
 
expectations
 
of
recovering a financial asset in its entirety or a portion thereof.
Failure to engage and communicate with
 
the Company on alternative payment arrangements and
 
failure to make payments
within 90
 
days, amongst
 
others, are
 
considered possible
 
indicators of
 
no reasonable
 
expectation of
 
recovery of
 
accounts
receivable.
Effective Interest Method
The
 
effective
 
interest
 
method
 
is
 
a
 
method
 
of
 
calculating
 
the
 
amortized
 
cost
 
of
 
a
 
financial
 
asset/financial
 
liability
 
and
 
of
allocating
 
interest
 
income/expense
 
over
 
the relevant
 
period. The
 
effective
 
interest
 
rate is
 
the
 
rate
 
that
 
exactly
 
discounts
estimated
 
future
 
cash
 
receipts/payments
 
(including
 
all
 
fees
 
and
 
points
 
paid
 
or
 
received
 
that
 
form
 
an
 
integral
 
part
 
of
 
the
effective
 
interest
 
rate,
 
transaction
 
costs
 
and
 
other
 
premiums
 
or
 
discounts)
 
through
 
the
 
expected
 
life
 
of
 
the
 
financial
instrument, or (when appropriate) a shorter period, to the net
 
carrying amount on initial recognition.
(q)
 
Future Changes and Amendments to Accounting Standards
 
and Interpretations
i)
 
IAS 1
Presentation of Financial Statements - Accounting Policies
In
 
2021,
 
the
 
IASB
 
amended
 
IAS
 
1,
 
Presentation
 
of
 
Financial
 
Statements,
 
to
 
require
 
entities
 
to
 
disclose
 
their
 
material
accounting policy information rather than their significant accounting policies. Additional amendments to IAS 1 are made to
explain how an entity can identify
 
a material accounting policy.
 
The amendments are effective
 
for annual reporting periods
beginning on or after January 1, 2023, with earlier application
 
permitted.
ii)
 
IAS 1
Presentation of Financial Statements - Classification of Liabilities
The
 
IASB
 
released
 
Classification
 
of
 
Liabilities
 
as
 
Current
 
or
 
Non-current
 
(Amendments
 
to
 
IAS
 
1),
 
which
 
clarifies
 
the
guidance in IAS 1 Presentation
 
of Financial Statements on whether
 
a liability should be classified
 
as either current or non-
current
 
relating
 
to
 
the
 
right
 
to
 
defer
 
settlement
 
of
 
the
 
liability
 
for
 
at
 
least
 
twelve
 
months
 
after
 
the
 
reporting
 
date.
 
The
amendment is effective
 
for annual reporting
 
periods beginning on
 
or after January 1,
 
2023, with earlier
 
application permitted.
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
21
iii)
 
IAS 12
 
Income Taxes
The IASB released
 
Deferred Tax
 
Related to Assets
 
and Liabilities Arising
 
from a Single
 
Transaction (Amendments
 
to IAS
12). The amendment relates
 
to the recognition of deferred
 
tax when an entity
 
accounts for transactions, such
 
as leases or
decommissioning obligations, by recognizing both an asset and a liability. The objective of this amendment is to narrow the
initial recognition exemption
 
in paragraphs 15
 
and 24 of
 
IAS 12, so
 
that it would
 
not apply to
 
transactions that give
 
rise to
both taxable and deductible temporary differences,
 
to the extent the amounts recognized for the temporary
 
differences are
the
 
same.
 
The
 
amendment
 
is
 
effective
 
for
 
annual
 
reporting
 
periods
 
beginning
 
on
 
or
 
after
 
January 1,
 
2023,
 
with
 
earlier
application permitted.
iv)
 
IAS 37
Provisions, Contingent Liabilities and Contingent Assets
The IASB
 
released Onerous
 
Contracts -
 
Cost of
 
Fulfilling a
 
Contract (Amendments
 
to IAS
 
37). The
 
amendments specify
which costs an
 
entity includes in
 
determining the cost
 
of fulfilling a
 
contract for the
 
purpose of assessing
 
whether the contract
is onerous.
 
Costs
 
to be
 
included
 
comprise
 
the costs
 
that
 
relate directly
 
to the
 
contract,
 
which
 
includes
 
both
 
incremental
costs of fulfilling the contract and an allocation
 
of other costs that relate directly to
 
fulfilling the contract. The amendment
 
is
effective for annual reporting periods beginning
 
on or after January 1, 2023, with earlier application permitted.
The Company has determined that the adoption of these standards or amendments will not have a significant impact on its
consolidated financial statements as of the date of adoption.
5.
 
Significant accounting judgments, estimates and assumptions
The preparation of
 
consolidated financial statements requires management
 
to make judgments, estimates
 
and assumptions
based on
 
currently
 
available information
 
that affect
 
the
 
reported amounts
 
of assets,
 
liabilities and
 
contingent
 
assets and
liabilities at the
 
date of the
 
consolidated financial
 
statements and
 
reported amounts
 
of revenues and
 
expenses during the
reporting period.
 
Estimates and
 
judgments are
 
continuously evaluated
 
and are
 
based on
 
management’s
 
experience and
other factors, including expectations of future events
 
that are believed to be
 
reasonable under the circumstances. However,
actual
 
results
 
could
 
differ
 
from
 
those
 
estimated.
 
By
 
their
 
very
 
nature,
 
these
 
estimates
 
are
 
subject
 
to
 
measurement
uncertainty and the effect of any changes in estimates
 
on the financial statements of future periods could be
 
material.
In the process of applying the Company’s
 
accounting policies, management has made the following
 
judgments, estimates,
and assumptions which
 
have the most
 
significant effect on the
 
amounts recognized in the
 
consolidated financial statements.
Critical judgments in applying accounting policies
(a)
 
Assessment of
 
whether there
 
is any
 
indication that
 
property and
 
equipment, right-of-use
 
assets and
 
intangible assets
may be impaired
At each reporting date,
 
the Company reviews
 
the carrying amounts
 
of its property and
 
equipment, right-of-use assets
 
and
intangible assets
 
with a
 
finite useful
 
life to
 
determine whether
 
there is
 
any indication
 
of impairment.
 
If any
 
such indication
exists, then the
 
asset’s recoverable
 
amount is estimated.
 
Management’s judgment
 
is required in
 
assessing whether
 
there
is any indication that an asset may be impaired.
(b)
 
Intangible assets
The recognition of development costs as intangible
 
assets requires judgments to determine whether the
 
required criteria for
recognition are met including management estimates of future
 
economic benefits.
(c)
 
Sale of intellectual property and related royalties
The recognition
 
of variable
 
consideration related
 
to the
 
sale of
 
intellectual property
 
requires management’s
 
judgments to
determine
 
whether
 
it
 
is
 
highly
 
probable
 
that
 
a
 
reversal
 
will
 
not
 
occur
 
when
 
the
 
uncertainty
 
associated
 
with
 
the
 
variable
consideration is subsequently resolved.
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
22
(d)
 
Investment tax credits receivable
The investment tax credits are estimated
 
by management based on quantitative
 
and qualitative analysis and interpretation
of various government programs,
 
related restrictions, limitations,
 
definitions, and eligibility
 
conditions. Uncertainty over
 
the
eligibility and final assessment by taxation authorities of investment
 
tax credits requires judgment. Management involves its
technical staff
 
and external
 
specialists in
 
determining if
 
the expenditures
 
meet the
 
requirements of
 
the different
 
tax credit
claims.
Key sources of estimation uncertainty
(e)
 
Revenue recognition
Revenue recognition for long-term contracts completion requires the use of estimates to determine the recorded amount of
revenues, costs in excess of billings and billings in excess
 
of costs and profits on uncompleted contracts.
The determination of anticipated
 
costs for completing
 
a contract is based on
 
estimates that can
 
be affected by a
 
variety of
factors,
 
including
 
the
 
cost
 
of
 
materials,
 
labour
 
and
 
sub-contractors,
 
as
 
well
 
as
 
potential
 
claims
 
from
 
customers
 
and
subcontractors.
As risks and
 
uncertainties are different for
 
each project, the
 
sources of variations between
 
anticipated costs and actual
 
costs
incurred will also vary by project. The determination
 
of estimates is based on the Company’s
 
business practices as well as
its historical experience. Estimates are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in
the period in which the estimate is revised.
Given
 
this
 
estimation
 
process,
 
it
 
is
 
possible
 
that
 
changes
 
in
 
future
 
conditions
 
could
 
cause
 
a
 
material
 
change
 
in
 
the
recognized amount of revenues
 
and costs and
 
profits in excess of
 
billings on uncompleted contracts
 
and accrued expenses.
Agreements that
 
contain multiple
 
deliverables require
 
the use
 
of judgment
 
to determine
 
whether they
 
contain separately
identifiable performance obligations and to allocate the consideration
 
received to each performance obligation.
(f)
 
Share-based payments
The Company uses the
 
fair value method
 
of valuing compensation
 
cost associated with
 
the Company’s
 
stock option plan.
Estimating fair value
 
requires determining the
 
most appropriate valuation
 
model for a grant
 
of equity instruments,
 
which is
dependent
 
on
 
the
 
terms
 
and
 
conditions
 
of
 
the
 
grant.
 
This
 
also
 
requires
 
determining
 
the
 
most
 
appropriate
 
inputs
 
to
 
the
valuation model including the
 
expected life of the option
 
and volatility.
 
The assumptions and models
 
are discussed in note
22.
(g)
 
Useful lives of property and equipment and intangible
 
assets
The Company estimates
 
the useful lives
 
of property and
 
equipment and intangible
 
assets based on
 
the period over
 
which
the assets are expected to be available
 
for use. The estimated useful lives of property and equipment and intangible
 
assets
are reviewed periodically and are updated
 
if expectations differ from previous
 
estimates due to physical wear and tear
 
and
legal or other
 
limits on the
 
use of the
 
relevant assets. In addition,
 
the estimation of
 
the useful lives
 
of property and
 
equipment
and intangible assets are based
 
on management’s experience with similar assets. It
 
is possible, however, that future results
of
 
operations
 
could
 
be
 
materially
 
affected
 
by
 
changes
 
in
 
the
 
estimates
 
brought
 
about
 
by
 
changes
 
in
 
factors
 
mentioned
above. The
 
amounts and
 
timing of
 
recorded expenses
 
for any
 
period would
 
be affected
 
by changes
 
in these
 
factors and
circumstances. Useful lives, depreciation and amortization
 
rates and residual values are reviewed at least annually.
(h)
 
Impairment of non-financial assets and goodwill
In assessing impairment,
 
management estimates the
 
recoverable amount
 
of each asset or
 
cash generating unit
 
based on
expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about
future operating results and the determination of a suitable
 
discount rate (see note 4 (l)).
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
23
(i)
 
Fair value of strategic investments
Where the fair
 
values of investments
 
recorded in the
 
consolidated statements
 
of financial position
 
cannot be derived
 
from
active markets,
 
they
 
are
 
determined
 
using
 
valuation
 
techniques
 
including
 
the
 
Black-Scholes
 
model.
 
The
 
inputs
 
to
 
these
models are taken from observable markets where possible, but where
 
this is not feasible, a degree of judgment is required
in establishing the fair values. The judgments
 
include considerations of inputs such as the expected volatility
 
and the initial
allocation of the consideration paid between the fair value of the common shares and warrants
 
received. Should any of the
inputs to these models or changes in assumptions about
 
these factors occur,
 
this could affect the reported fair value of the
investments.
(j)
 
Right-of-use assets and lease liabilities
In determining
 
the carrying
 
amount of
 
the right-of-use
 
assets and
 
corresponding lease
 
liabilities, assumptions
 
include the
non-cancellable term of the lease
 
plus periods covered by an
 
option to renew or purchase
 
the assets, estimated useful lives
of the related assets, and incremental borrowing
 
rate. Renewal and purchase options are only
 
included in the lease term if
management is reasonably certain to renew.
 
Management considers factors such as market conditions, comparable
 
rental
rates and similar property values. The
 
Company is also required to estimate the incremental borrowing
 
rate specific to each
portfolio of leased assets with similar characteristics
 
if the interest rate in the lease is not readily
 
determined. Management
determines the incremental borrowing rate using the base
 
rate for similar loans plus a risk premium.
(k)
 
Income taxes
The Company has unused available tax
 
losses, deductible temporary differences and investment tax
 
credits. The Company
recognizes deferred income tax assets for these unused tax losses and deductible temporary differences only to the extent
that, in
 
management’s
 
opinion, it
 
is probable
 
that future
 
taxable profit
 
will be
 
available against
 
which these
 
available tax
losses and temporary differences
 
can be utilized. The Company recognizes
 
investment tax credits when it
 
has reasonable
assurance
 
that
 
it
 
has
 
complied
 
with
 
the
 
conditions
 
of
 
the
 
program
 
and
 
that
 
the
 
amounts
 
will
 
be
 
realized
 
(i.e.
 
that
 
it
 
will
generate future federal income taxes
 
payable against which the tax
 
credits can be applied). The
 
Company’s projections of
future taxable profit
 
involve the use
 
of significant assumptions
 
and estimates with
 
respect to a
 
variety of factors,
 
including
future sales
 
and operating
 
expenses. There
 
can be
 
no assurance
 
that the
 
estimates and
 
assumptions used in
 
our projections
of future
 
taxable
 
income will
 
prove to
 
be accurate
 
predictions
 
of the
 
future,
 
and in
 
the event
 
that
 
our assessment
 
of the
recoverability of these deferred tax
 
assets and investment tax credits
 
changes in the future, a
 
material increase or reduction
in the carrying value of
 
these deferred tax assets and
 
investment tax credits could be required, with
 
a corresponding charge
to net loss.
(l)
 
Business combinations
Fair value of assets acquired and liabilities assumed in a
 
business combination is estimated based on information available
at
 
the
 
date
 
of
 
acquisition
 
and
 
involves
 
considerable
 
judgment
 
in
 
determining
 
the
 
fair
 
values
 
assigned
 
to
 
the
 
identifiable
assets acquired and liabilities
 
assumed on acquisition. Among
 
other things, the determination
 
of these fair values involves
the
 
use
 
of
 
discounted
 
cash
 
flow
 
analyses
 
and
 
estimated
 
profit
 
margins
 
on
 
contracts
 
in
 
progress.
 
In
 
addition,
 
the
determination of the
 
contingent consideration due on
 
the business combination
 
is based on
 
the estimations of
 
the probability
and timing of completing the predetermined milestones
 
(see note 6);
(m) COVID-19 pandemic
The COVID-19
 
pandemic continues
 
to cause
 
significant financial
 
market and
 
social dislocation.
 
The situation
 
is dynamic
with various cities and
 
countries around the world responding
 
in different ways to address
 
the outbreak. While the
 
Company
has experienced
 
the impact
 
of the outbreak
 
of the Coronavirus
 
(COVID 19)
 
on its
 
operations, it
 
had continued
 
to operate
during the
 
current
 
pandemic.
 
In the
 
event of
 
a prolonged
 
continuation
 
of the
 
pandemic,
 
it is
 
not clear
 
what
 
the potential
impact may be on the Company’s business,
 
financial position and financial performance.
6.
 
Business combination
On August 11, 2021, the Company completed the
 
acquisition of Pyro Green-Gas
 
Inc. and its
 
subsidiaries, a Montreal-based
company
 
which
 
offers
 
technologies,
 
equipment,
 
and
 
expertise
 
in
 
the
 
area
 
of
 
biogas
 
upgrading,
 
as
 
well
 
as
 
air
 
pollution
controls, for
 
a maximum
 
purchase price
 
consideration of $
4,355,600
 
in cash,
 
subject to customary
 
post-closing adjustments.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
24
In addition, the Company settled
 
a pre-existing loan receivable from Pyro
 
Green-Gas Inc. of approximately $
1,744,000
. The
transaction was executed
 
through a purchase
 
of the entirety of
 
the common class
 
“A” shares of Pyro
 
Green-Gas Inc. This
acquisition
 
enables
 
the
 
Company
 
to
 
springboard
 
into
 
the
 
renewable
 
natural
 
gas
 
market
 
and
 
provides
 
an
 
advantage
compared
 
to building
 
its own
 
operations.
 
In addition,
 
the Company
 
will now
 
have
 
a presence
 
in Italy
 
and
 
India, and
 
the
acquisition will provide potential synergies with the Company’s land-based waste
 
destruction offerings. The purchase price
will
 
be
 
paid
 
upon
 
the
 
achievement
 
of
 
various
 
contract
 
and
 
business-related
 
milestones
 
by
 
Pyro
 
Green-Gas
 
Inc.
 
The
Company’s assessment
 
is that
 
these milestones
 
will be
 
realized at
 
various moments
 
during the
 
next
30 months
 
following
the date of the acquisition. The contingent consideration
 
was estimated using a discount rate of
8
%.
The acquisition was accounted for using the purchase
 
method and the final allocation of the purchase price is as
 
follows:
$
Total consideration
Consideration paid at closing
1
Contingent consideration
3,841,999
Consideration paid at closing and continent consideration
3,842,000
Settlement of pre-existing loan receivable from Pyro Green-Gas
1,744,400
5,586,400
Net assets acquired
Current assets
1
5,186,086
ROU asset
477,608
Property and equipment
42,552
Intangible assets and Goodwill
2
4,780,607
Deferred income tax asset
79,360
Current liabilities
(4,507,907)
Non-current liabilities
(471,906)
5,586,400
1
 
Includes $
807,946
 
of cash and trade receivables with a net fair value of $
3,255,000
, including an allowance for expected credit losses
of $
512,592
.
2
 
The goodwill of $
2,660,607
 
recorded on the transaction
 
is mainly attributable
 
to the expected growth
 
in biogas upgrading market
 
and
the expertise of the workforce, and it is not expected to be deductible for tax purposes.
During the
 
period ended
 
December 31, 2021,
 
the Company recognized
 
revenue of $
6,800,090
 
and net
 
earnings of
 
$807,395
related to the operations generated by Pyro Green-Gas
 
Inc. since the acquisition date.
In connection with
 
this acquisition, the
 
Company incurred acquisition-related
 
costs of $
101,157
, recognized within
 
Selling,
General and Administrative expenses in the 2021 consolidated
 
statements
 
of comprehensive loss.
The
 
maximum
 
purchase
 
price
 
consideration
 
of
 
$
4,355,600
 
was
 
discounted
 
to
 
$
3,841,999
,
 
at
 
August
 
11,
 
2021
 
and
 
an
accretion expense of $
173,350
 
was recognized in Net finance costs in
 
the consolidated statements of comprehensive
 
loss
for the year
 
ended December
 
31, 2022,
 
compared to
 
a recognized
 
accretion expense
 
of $
110,204
 
during the year
 
ended
December 31, 2021.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
25
7.
 
Revenues
Revenues by product line:
The company’s revenues are generated primarily
 
from the following:
2022
2021
$
$
Revenue from contracts with customers by product
 
line:
High purity metallurgical grade silicon & solar grade silicon from
 
quartz
(PUREVAP™)
6,272,697
6,138,111
Aluminium and zinc dross recovery (DROSRITE™)
1,912,807
7,940,771
Development and support related to systems supplied to the
 
U.S. Navy
1,288,356
7,522,809
Torch
 
-related sales
5,558,210
2,084,511
Biogas upgrading and pollution controls
3,347,443
6,800,090
Other sales and services
633,990
582,058
19,013,503
31,068,350
The following is a summary of the Company’s
 
revenues by revenue recognition method:
2022
2021
$
$
Revenue from contracts with customers:
Sales of goods under long-term contracts recognized over
 
time
13,997,163
25,918,594
Sales of goods at a point of time
1,135,498
1,533,910
Other revenue:
 
Sale of intellectual properties (i)
3,600,000
3,300,000
Royalties
280,842
315,846
19,013,503
31,068,350
See note 32 for sales by geographic area.
(i)
 
Sale of intellectual properties
During the year, the Company sold
 
intellectual property to a subsidiary
 
of a company in
 
which it holds a
 
strategic investment
for
 
a
 
non-refundable
 
fee
 
of
 
$
3,600,000
.
 
Under
 
the
 
terms
 
of
 
the
 
sale
 
agreement,
 
control
 
of
 
the
 
intellectual
 
property
 
was
transferred
 
to
 
the
 
purchaser
 
and
 
the
 
Company
 
has
 
no
 
obligation
 
to
 
undertake
 
activities
 
that
 
will
 
significantly
 
affect
 
the
intellectual property.
In June 2021, the Company
 
sold intellectual property to
 
a subsidiary of a company
 
in which it holds a strategic
 
investment
for
 
a
 
non-refundable
 
fee
 
of
 
$
3,300,000
.
 
Under
 
the
 
terms
 
of
 
the
 
sale
 
agreement,
 
control
 
of
 
the
 
intellectual
 
property
 
was
transferred
 
to
 
the
 
purchaser
 
and
 
the
 
Company
 
has
 
no
 
obligation
 
to
 
undertake
 
activities
 
that
 
will
 
significantly
 
affect
 
the
intellectual property.
 
The terms of the agreement also include additional
 
variable consideration that can be received based
on the
 
greater of
10
% of
 
sales made
 
by the
 
purchaser,
 
and royalties
 
of $
50,000
 
in 2023,
 
$
100,000
 
in 2024,
 
$
150,000
 
in
2025, and $
200,000
 
in 2026 and every year thereafter.
Transaction price
 
allocated to remaining performance obligations
As
 
at
 
December 31,
 
2022,
 
revenue
 
expected
 
to
 
be
 
recognized
 
in
 
the
 
future
 
related
 
to
 
performance
 
obligations
 
that
 
are
unsatisfied (or partially satisfied) at the reporting
 
date is $
26,741,550
 
(2021 - $
34,258,148
, excluding a contract which was
terminated in the fall
 
of 2022). Revenue will
 
be recognized as the
 
Company satisfies its performance obligations
 
under long-
term contracts, which is expected to occur over the
 
next
3
 
years.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
26
8.
 
Cash and cash equivalents
As at
 
December 31, 2022
 
and 2021,
 
there are
no
 
restrictions on
 
cash and
 
cash equivalents.
 
Cash and
 
cash equivalents
include the following components:
2022
2021
$
$
Cash
 
3,445,649
3,568,561
Guaranteed investment certificates
—
8,633,952
Cash and cash equivalents
 
3,445,649
12,202,513
Guaranteed investment certificates were
 
instruments issued by Canadian
 
financial institutions, bore interest at
 
rates varying
from
0.08
% to
0.86
%, and held to maturity or were redeemed during the
 
year 2022.
9.
 
Accounts receivable
Details of accounts receivable based on past due terms
 
were as follows:
December 31,
December 31,
2022
2021
$
$
Current
6,578,269
1,919,786
1 – 30 days
15,959
32,028
31 – 60 days
57,944
7,006,652
61 – 90 days
718,239
788,330
Greater than 90 days
13,790,716
6,317,239
Holdback receivable
1,536,115
974,878
Total
 
trade accounts receivable
22,697,242
17,038,913
Allowance for expected credit loss
(4,693,283)
(520,000)
Other receivables
240,560
270,536
Sales tax receivable
380,112
850,167
18,624,631
17,639,616
As
 
at
 
December 31,
 
2022
 
the
 
allowance
 
for
 
expected
 
credit
 
loss
 
on
 
trade
 
accounts
 
receivable
 
is
 
$
4,693,283
 
(2021
 
-
$
520,000
), $
543,283
 
which was included
 
through the business
 
combination and only varied
 
due to foreign
 
exchange, and
$
4,150,000
 
recognized during 2022. The
 
portion recognized during the
 
year includes $
3,765,000
 
attributable to one specific
customer, whereby the carrying amount has been
 
reduced from $
12,810,231
 
to $
9,045,231
. The carrying value of all other
trade receivables was reduced from $
9,887,011
 
to $
8,958,728
. On the basis of the Company’s expected
 
credit loss policy,
the allowance was determined generally by applying a loss rate of
1
% on balances 1-30 days past the invoice date,
2
% for
31-60 days,
3
% for
 
61-90 days
 
and a
 
minimum of
10
% for
 
those beyond
 
90 days.
 
Specific consideration
 
was applied
 
for
situations where
 
the receivable
 
is a
 
holdback on
 
a contract,
 
and also
 
for customers
 
that have
 
exceeded normal
 
payment
terms.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
27
The closing balance of the trade
 
receivables credit loss allowance as at December 31,
 
reconciles with the trade receivables
credit loss allowance opening balance as follows:
Opening allowance January 1, 2021
—
Business combination
512,592
Foreign exchange
7,408
Loss allowance at December 31, 2021
520,000
Loss recognized during the year
4,150,000
Foreign exchange
23,283
Loss allowance at December 31, 2022
4,693,283
 
10.
 
Costs and profits in excess of billings on uncompleted
 
contracts
As at December 31, 2022, the Company had
eighteen
 
contracts with total billings of $
10,475,299
 
which were less than total
costs
 
incurred
 
and
 
had
 
recognized
 
cumulative
 
revenue
 
of
 
$
11,856,596
 
since
 
those
 
projects
 
began.
 
This compares
 
with
fourteen
 
contracts with total
 
billings of $
16,676,700
 
which were less
 
than total costs
 
incurred and had
 
recognized cumulative
revenue of $
21,599,410
 
as at December 31, 2021.
 
The net amount
 
of $
1,051,297
 
as at December
 
31, 2022 includes
 
an expected credit
 
loss allowance of
 
$
330,000
 
($
Nil
 
as
at December 31,
 
2021). On the basis
 
of the Company’s expected
 
credit loss policy, the allowance was
 
determined generally
by applying a
 
loss rate of
2
% on all
 
balances, and
 
adjusting for
 
specific situations,
 
such as
 
past due customers,
 
whereby
the loss rate varied from
25
% to
50
%.
Changes in
 
costs and
 
profits in
 
excess of
 
billings on
 
uncompleted contracts
 
during the
 
year are
 
explained by
 
$
4,164,109
(2021 -
 
$
983,891
)
 
recognized
 
at
 
the
 
beginning
 
of
 
the
 
year
 
being
 
transferred
 
to
 
accounts
 
receivable,
 
$
622,696
 
(2021 -
$
4,832,968
) resulting from changes in the measure of progress and the expected credit loss allowance of
 
$
330,000
 
($
Nil
 
in
2021).
11.
 
Investment tax credits
An amount recognized
 
in 2022 included
 
$
169,434
 
(2021 - $
202,472
) of investment
 
tax credits
 
earned in
 
the year,
 
as well
as $
Nil
 
(2021 -
 
$
706,000
) of
 
investment tax
 
credits earned
 
in prior years
 
that no
 
longer met
 
the criteria
 
for recognition
 
in
2021. $
70,258
 
(2021 -
 
$
148,695
) of
 
the investment
 
tax credits
 
recognized in
 
the year was
 
recorded against
 
cost of
 
sales
and
 
services,
 
$
69,176
 
(2021
 
-
 
($
684,709
))
 
against
 
research
 
and
 
development
 
expenses
 
and
 
$
30,000
 
(2021 -
 
$
32,486
)
against selling general and administrative expenses.
Eligible
 
scientific
 
research
 
and
 
experimental
 
development
 
(“SR&ED”)
 
expenses
 
for
 
the
 
year
 
amounted
 
to
 
$
2,783,450
(2021 – $
2,000,853
) less
 
investment
 
tax credits
 
of ($
169,434
) (2021
 
– ($
684,709
)), less
 
government grants
 
of $
296,043
(2021 – $
149,575
) totalling $
2,317,973
 
(2021 – $
2,535,987
).
12.
 
Strategic investments
December 31,
December 31,
2022
2021
$
$
Beauce Gold Fields (“BGF”) shares – level 1
56,419
123,095
HPQ Silicon Inc. (“HPQ”) shares - level 1
5,415,749
12,306,196
HPQ warrants – level 3
770,466
2,472,368
6,242,634
14,901,659
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
28
The change in the strategic investments is summarized as
 
follows:
(“BGF”) shares – level 1
(“HPQ”) shares - level 1
HPQ warrants – level 3
Quantity
$
Quantity
$
Quantity
$
Balance, December 31, 2020
1,025,794
123,095
14,990,200
16,489,220
25,844,600
23,379,435
Additions
—
—
8,268,000
8,070,109
—
—
Exercised
 
—
—
16,250,000
11,700,000
(16,250,000)
(9,181,250)
Disposed
—
—
(12,755,600)
(14,252,732)
—
—
Change in the fair value
—
—
—
(9,700,401)
—
(11,725,817)
Balance, December 31, 2021
1,025,794
123,095
26,752,600
12,306,196
9,594,600
2,472,368
Additions
—
—
6,800,000
3,196,000
6,800,000
408,000
Disposed
—
—
(11,447,500)
(3,922,244)
—
—
Change in the fair value
—
(66,676)
—
(6,164,203)
—
(2,109,902)
Balance, December 31, 2022
1,025,794
56,419
22,105,100
5,415,749
16,394,600
770,466
The Company owns
9.82
% on a
 
fully diluted basis
 
of HPQ as
 
at December 31, 2022 (2021 –
9.64
%) and has
 
other business
transactions with this entity– see notes 7(i) and 13.
The following table sets out the details and activity of the HPQ
 
warrants:
Number of
Number of
warrants
warrants
Exercise
Expiry date
Dec 31, 2021
Additions
Exercised
Dec 31, 2022
price ($)
 
April 29, 2023
1,200,000
—
—
1,200,000
0.10
June 2, 2023
4,394,600
—
—
4,394,600
0.10
September 3, 2023
4,000,000
—
—
4,000,000
0.61
April 20, 2024
—
6,800,000
—
6,800,000
0.60
9,594,600
6,800,000
—
16,394,600
2022 Transactions
6,800,000
 
common shares
 
and
6,800,000
 
warrants of
 
HPQ were purchased
 
in cash
 
for an amount
 
of $
3,604,000
 
in April
2022.
11,447,500
 
HPQ
 
common
 
shares
 
were
 
disposed
 
for
 
cash
 
amounts
 
totalling
 
$
3,922,244
 
resulting
 
in
 
a
 
realized
 
loss
 
of
$
225,527
.
2021 Transactions
12,755,600
 
HPQ
 
common
 
shares
 
were
 
disposed
 
for
 
cash
 
amounts
 
totalling
 
$
14,252,732
 
resulting
 
in
 
a
 
realized
 
gain
 
of
$
9,893,900
.
16,250,000
 
shares purchase warrants were
 
exercised in cash for a
 
total amount of $
2,518,750
. An amount of
$
9,181,250
 
was transferred to the share value on the exercise
 
of the warrants.
8,268,000
 
common shares of HPQ were purchased in cash
 
for an amount of $
8,070,109
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
29
At inception, the
 
fair value of
 
the HPQ warrants
 
purchased in
 
2022 was measured
 
using the Black-Scholes
 
option pricing
model using the following assumptions:
Number of warrants
6,800,000
Date of issuance
April 20, 2022
 
Exercise price ($)
0.60
Assumptions under the Black-Scholes model:
 
Fair value of the shares ($)
0.47
Risk-free interest rate (%)
2.47
Expected volatility (%)
107.60
Expected dividend yield
–
Contractual remaining life (number of months)
24
As
 
at
 
December 31,
 
2022
 
and
 
2021,
 
the
 
fair
 
value
 
of
 
the
 
HPQ
 
warrants
 
was
 
measured
 
using
 
the
 
Black-Scholes
 
option
pricing model using the following assumptions:
2022
2021
Number of warrants
1,200,000
4,394,600
4,000,000
6,800,000
1,200,000
4,394,600
4,000,000
Date of issuance
April 29, 2020
June 2, 2020
Sept. 3, 2020
April 20, 2022
April 29, 2020
June 2, 2020
Sept. 3, 2020
Exercise price ($)
0.1
0.1
0.61
0.60
0.1
0.1
0.61
Assumptions under the Black-
Scholes model:
Fair value of the shares ($)
0.25
0.25
0.25
0.25
0.46
0.46
0.46
Risk-free interest rate (%)
4.03
4.03
4.03
4.03
1.22
1.22
1.22
Expected volatility (%)
80.55
73.74
76.85
74.58
89.88
94.01
110.47
Expected dividend yield
–
–
–
–
–
–
–
Contractual remaining life (in
months)
4
5
8
16
16
17
20
As at December 31, 2022, a gain from
 
initial recognition of the warrants of $
280,926
 
($
510,573
 
– 2021) has been deferred
off balance sheet until realized.
13.
 
Royalties receivable
December 31
December 31
2022
2021
$
$
Opening balance
1,258,654
1,060,000
Accretion interest
118,290
132,809
Royalties recognized during the year
450,000
450,000
Discounting
(169,158)
(134,155)
Amounts received during the year
(250,000)
(250,000)
Balance at end of the year
1,407,786
1,258,654
Current portion
455,556
311,111
Non-current portion
952,230
947,543
1,407,786
1,258,654
The Company
 
sold intellectual
 
property to
 
HPQ Silicon
 
Inc. (“HPQ”)
 
in 2016
 
(“HPQ 2016
 
contract”) and
 
its wholly
 
owned
subsidiary,
 
HPQ Nano
 
Silicon Powders
 
Inc. in
 
2020 (“HPQ
 
Nano contract”),
 
and HPQ
 
Silica Polvere
 
Inc. (“HPQ
 
Polvere
contract”) in 2021. The
 
terms of those
 
sales contracts include,
 
in addition to the
 
purchase price amounts
 
already received
of $
1,000,000
 
in 2016 and $
2,400,000
 
in 2020 and $
3,300,000
 
in 2021, respectively, the following variable consideration in
the form of royalty payments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
30
HPQ 2016 contract:
Royalties
 
are
10
%
 
of
 
net
 
sales,
 
with
 
minimum
 
payments
 
of
 
$
200,000
 
in
 
2021
 
and
 
$
250,000
 
in
 
2022
 
and
 
every year
thereafter.
 
Payment is
 
due no later
 
than 30 days
 
after the year
 
end of HPQ
 
Silicon Inc. An
 
amount of
 
$
250,000
 
has been
received under this agreement in 2022 ($
200,000
 
was received in 2021).
HPQ Nano contract:
Royalties
 
are
10
% of
 
net
 
sales,
 
with
 
minimum
 
payments
 
of
 
$
50,000
 
in
 
2021,
 
$
100,000
 
in
 
2022,
 
$
150,000
 
in
 
2023,
 
and
$
200,000
 
in 2024 and
 
every year thereafter. Payments are due
 
no later than
 
10 days after
 
the year end of
 
HPQ Nano Silicon
Powders Inc. An amount of $
Nil
 
has been received under this agreement in 2022
 
($
50,000
 
was received in 2021).
HPQ Polvere contract:
Royalties
 
are
10
%
 
of
 
net
 
sales
 
with
 
minimum
 
payments
 
of
 
$
50,000
 
in
 
2023,
 
$
100,000
 
in
 
2024,
 
$
150,000
 
in
 
2025
 
and
$
200,000
 
in 2026
 
and every
 
year thereafter.
 
Royalty payments
 
are limited
 
to the
 
total net
 
sales for
 
the period.
 
Payments
are due no later than 10 days after the year end of HPQ
 
Silica Polvere Inc.
During the
 
year ended
 
December 31, 2022,
 
the Company
 
recognized an
 
additional $
250,000
 
and $
200,000
 
for the
 
HPQ
2016 contract
 
and
 
HPQ
 
Nano
 
contracts,
 
respectively,
 
of
 
royalties
 
receivable,
 
which
 
have
 
been
 
discounted
 
using
12.5
%
discount rate.
During the
 
year ended
 
December 31, 2021,
 
the Company
 
recognized an
 
additional $
250,000
 
and $
200,000
 
for the
 
HPQ
2016 contract
 
and
 
HPQ
 
Nano
 
contracts,
 
respectively,
 
of
 
royalties
 
receivable,
 
which
 
have
 
been
 
discounted
 
using
12.5
%
discount rate.
The Company
 
only recognizes
 
variable consideration,
 
including minimum
 
royalties, arising
 
from these
 
agreements in
 
the
period(s)
 
when
 
it
 
is
 
highly
 
probable
 
that
 
a
 
reversal
 
will
 
not
 
occur
 
when
 
the
 
uncertainty
 
associated
 
with
 
the
 
variable
consideration
 
is
 
subsequently
 
resolved.
 
Minimum
 
royalties
 
are
 
recognized
 
for
 
the
 
period
 
the
 
Company
 
evaluates
 
the
collectability of the minimum royalties is probable, which
 
the Company has estimated over four years.
The HPQ Nano contract
 
and the HPQ Polvere
 
contract each provide
 
the Company with the
 
option to convert, at
 
any time,
the future
 
royalties
 
that would
 
be owed
 
to it
 
into a
50
% equity
 
stake
 
in HPQ
 
Nano
 
Silicon
 
Powders Inc.
 
and HPQ
 
Silica
Polvere
 
Inc., respectively.
 
Each option
 
is considered
 
an embedded
 
derivative
 
that
 
is initially
 
measured
 
at
 
fair
 
value
 
and
subsequently remeasured
 
at fair value at
 
each reporting period.
 
The Company determined
 
that the embedded
 
derivatives
had a fair value of $
Nil
 
at the inception of the contracts and $
Nil
 
at each of the reporting dates.
14.
 
Deposits
December 31
December 31
2022
2021
$
$
Current portion:
Suppliers
392,309
1,236,211
Security deposit on leased premises
40,241
92,241
Total
 
current
432,550
1,328,452
Non-current portion:
Suppliers
7,250
1,952
Security deposit on leased premises
38,803
246,804
Total
 
non-current
46,053
248,756
Total
 
deposits
 
478,603
1,577,208
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
31
15. Property and equipment
Machinery
Equipment
Computer
and
Leasehold
under
equipment
equipment
Automobiles
improvements
construction
Total
$
$
$
$
$
$
Cost
Balance at December 31, 2020
549,659
1,621,899
306,164
180,901
1,940,234
4,598,857
Acquired through business
combination
13,585
28,967
—
—
—
42,552
Additions
245,984
384,092
30,495
752,204
84,143
1,496,918
Balance at December 31, 2021
809,228
2,034,958
336,659
933,105
2,024,377
6,138,327
Additions
(1)
164,059
(89,085)
—
209,435
—
284,409
Assets under construction put
in service
—
1,065,672
—
958,705
(2,024,377)
—
Balance at December 31, 2022
973,287
3,011,545
336,659
2,101,245
—
6,422,736
Accumulated depreciation
Balance at December 31, 2020
509,112
1,441,642
21,748
96,785
—
2,069,287
Depreciation
88,410
182,739
59,959
24,995
—
356,103
Balance at December 31, 2021
597,522
1,624,381
81,707
121,780
—
2,425,390
Depreciation
146,550
297,021
57,543
102,780
—
603,894
Balance at December 31, 2022
744,072
1,921,402
139,250
224,560
—
3,029,284
Carrying amounts
Balance at December 31, 2021
211,706
410,577
254,952
811,325
2,024,377
3,712,937
Balance at December 31, 2022
229,215
1,090,143
197,409
1,876,685
—
3,393,452
(1)
The adjustment to
 
additions to Machinery
 
and Equipment of
 
$
89,085
, relates to
 
the discounting of
 
the non-interest-bearing
loan from the Economic Development Agency of Canada,
 
representing government assistance (see note 21).
Equipment under
 
construction included
 
the leasehold
 
improvements of
 
a clean room
 
and the costs
 
related to
 
building the
new Plasma Powder Production equipment which have been
 
put in service during the year ended December
 
31, 2022.
 
16. Leases
The Company has entered into lease contracts mainly for buildings
 
and computer equipment, which expire at various dates
through
 
the
 
year
 
2036.
 
Some
 
leases
 
have extension
 
or purchase
 
options
 
for various
 
terms.
 
The
 
lease
 
contracts
 
do not
impose any financial covenants.
On January 1, 2022, a lease for rent
 
of a property with a trust whose
 
beneficiary is the controlling shareholder
 
and CEO of
the
 
Company,
 
was
 
modified
 
to
 
extend
 
the
 
lease
 
term
 
until
 
December
 
2026.
 
The
 
lessor
 
also
 
reimbursed
 
an
 
amount
 
of
$
1,070,264
 
representing the balance at
 
the date of modification
 
of the original prepayment
 
amount of $
1,178,530
 
made in
2020. At
 
the date
 
of modification,
 
the
 
lease
 
liability was
 
remeasured
 
using
 
a discount
 
rate
 
of
4
%. As
 
a result,
 
the
 
lease
liability was increased by an amount of $
1,070,264
 
and the right-of-use assets was decreased by an amount
 
of $
108,267
.
 
 
On September
 
1, 2022,
 
a lease
 
of a
 
property was
 
modified to
 
extend the
 
term, to
 
postpone the
 
exercise of
 
the purchase
option of the property,
 
and to factor a
 
deposit of $
275,000
 
required to exercise
 
the purchase option.
 
As a result, the
 
lease
liability was remeasured using a discount rate of
8.6
% and the lease liability and the right-of-use assets were decreased by
$
203,154
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
32
a) Right-of-use assets
Land and
Computer
building
equipment
Total
$
$
$
Balance at January 1, 2021
3,688,315
12,685
3,701,000
Additions - business combination
477,608
—
477,608
Additions
2,157,796
—
2,157,796
Depreciation
(566,182)
(4,228)
(570,411)
Balance at December 31, 2021
5,757,537
8,457
5,765,993
Modification of lease agreements
(311,421)
—
(311,421)
Depreciation
(631,600)
(4,228)
(635,828)
Balance at December 31, 2022
4,814,516
4,229
4,818,744
b) The table below summarizes changes to the lease liabilities:
$
Balance at January 1, 2021
2,988,542
Addition - business acquisition
477,608
Additions - other
2,120,893
Payments
(263,078)
Balance at December 31, 2021
5,323,965
Modification of lease agreements
867,110
Payments
(657,381)
Balance at December 31, 2022
5,533,694
Current portion
2,934,236
Non-current portion
2,389,729
Balance at December 31, 2021
5,323,965
Current portion
2,672,212
Non-current portion
2,861,482
Balance at December 31, 2022
5,533,694
c) Amount recognized in the consolidated statements of comprehensive
 
loss:
2022
2021
$
$
Depreciation of right-of-use assets
635,828
570,411
Interest on lease liabilities
378,611
307,691
Expense related to lease payments excluded in the measurement
 
of lease
liabilities
243,209
178,707
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
33
d) Maturity analysis – contractual undiscounted cash flows
 
of lease liabilities as at December 31, 2022
$
2023
2,984,243
2024
592,719
2025
572,562
2026
474,484
2027
229,332
Thereafter
1,891,989
6,745,329
 
17. Intangible assets
Production
Development
backlog
Patents
costs
Total
$
$
$
$
Cost
Balance at December 31, 2020
—
768,392
244,871
1,013,263
Acquired through business combination
2,120,000
—
—
2,120,000
Additions
—
214,497
—
214,497
Write-off
—
(85,544)
—
(85,544)
Balance at December 31, 2021
2,120,000
897,345
244,871
3,262,216
Additions
—
208,680
—
208,680
Balance at December 31, 2022
2,120,000
1,106,025
244,871
3,470,896
Accumulated amortization
Balance at December 31, 2020
—
58,125
49,524
107,649
Amortization
353,333
10,528
16,508
380,369
Balance at December 31, 2021
353,333
68,653
66,032
488,018
Amortization
848,000
13,522
16,508
878,030
Balance at December 31, 2022
1,201,333
82,175
82,540
1,366,048
Carrying amounts
Balance at December 31, 2021
1,766,667
828,692
178,839
2,774,198
Balance at December 31, 2022
918,667
1,023,850
162,331
2,104,848
The Company’s development costs have been incurred to develop plasma-related technologies and the patents protect the
design and specification of these technologies.
18. Goodwill
The
 
Company
 
tests
 
goodwill
 
for
 
impairment
 
annually,
 
or
 
more
 
frequently
 
when
 
an
 
indicator
 
of
 
impairment
 
is
 
identified.
Goodwill is considered impaired if the recoverable amount
 
is less than the carrying amount.
The recoverable
 
amount of
 
an operating
 
segment
 
is determined
 
based on
 
value-in-use
 
calculations,
 
covering a
 
detailed
five-year forecast, followed
 
by an
 
extrapolation of expected
 
cash flows for
 
the remaining useful
 
lives using a
 
declining growth
rate determined by management. The present value of the expected
 
cash flows of the operating segment is determined by
applying a suitable discount rate reflecting current market assessments of the time value of money and risks specific to the
segment.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
34
For
 
the
 
purpose
 
of
 
impairment
 
testing,
 
goodwill
 
is
 
allocated
 
to
 
the
 
sole
 
operating
 
segment,
 
Pyro
 
Green-Gas,
 
which
 
is
expected
 
to
 
benefit
 
from
 
the
 
synergies
 
of
 
the
 
business
 
combination
 
in
 
which
 
the
 
goodwill
 
arises
 
and
 
is compared
 
to
 
its
recoverable value.
At December
 
31,
 
2022
 
and
 
2021,
 
it
 
was
 
determined
 
that
 
the
 
recoverable
 
amounts
 
exceed
 
the
 
carrying
 
amount,
 
and
no
impairment was required.
 
The recoverable
 
amount in the
 
most recent
 
impairment test
 
performed was
 
determined using
 
a
pre-tax discount rate of
12.5
% and terminal growth rate of
2
% (2021 - pre-tax discount rate of
8
% and terminal growth rate
of
2
%).
19. Accounts payable and accrued liabilities
December 31
December 31
2022
2021
$
$
Accounts payable
6,065,996
5,457,259
Accrued liabilities
2,891,053
3,730,048
Sale commissions payable
1
904,724
737,364
Accounts payable to the controlling shareholder and CEO
254,097
144,506
10,115,870
10,069,177
1
Sale commissions payable relate to the costs to obtain long-term
 
contracts with clients.
20. Billings in excess of costs and
 
profits on uncompleted contracts
The amount
 
to date
 
of costs
 
incurred and
 
recognized profits
 
less recognized
 
losses for
 
construction projects
 
in progress
amounted to $
37,374,909
 
(2021 - $
21,834,137
).
Payments to date received were $
47,045,902
 
on contracts in progress (2021 - $
31,234,368
).
Changes in
 
billings in
 
excess of
 
costs and
 
profits on
 
uncompleted contracts
 
during the year
 
are explained
 
by $
2,416,229
(2021 - $
6,268,910
) recognized at
 
the beginning of
 
the year being recognized
 
as revenue, and
 
an increase of
 
$
2,686,991
(2021 - $
9,076,169
) resulting from cash received excluding amounts
 
recognized as revenue.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
35
21. Term
 
loans
Economic
Development Agency
Other Term
Other Term
Canada
Emergency Business
of Canada Loan
1
Loans
2
Loans
3
Account Loan
4
Total
$
$
$
$
$
Balance, December 31, 2020
75,800
36,907
—
—
112,707
Assumed through business combination
—
—
36,520
50,000
86,520
Accretion
12,185
—
—
—
12,185
Payments
—
(12,207)
(8,300)
—
(20,507)
Balance, December 31, 2021
87,985
24,700
28,220
50,000
190,905
Additions
292,941
292,941
Discounting
(89,085)
—
—
—
(89,085)
Accretion
28,229
—
—
—
28,229
Payments
—
(13,083)
(19,920)
—
(33,003)
Balance, December 31, 2022
320,070
11,617
8,300
50,000
389,987
Less current portion
—
(11,617)
(8,300)
(50,000)
(69,917)
Balance, December 31, 2022
320,070
—
—
—
320,070
1
 
maturing in 2029, non-interest bearing, payable
 
in equal instalments from April 2024 to March 2029.
2
maturing October 23, 2023
 
bearing interest at
 
a rate
 
of
6.95
% per
 
annum, payable in monthly
 
instalments of $
1,200
 
secured by
 
automobile (carrying
amount of $
10,795
 
as at December 31, 2022)
3
 
maturing in May 2023, payable in monthly instalments
 
of $
1,660
, bearing interest at
7.45
%
4
 
loan bearing
no
 
interest and
no
 
minimum repayment, if repaid by December 2023
Economic Development Agency of Canada Loan
On
 
March 5,
 
2020,
 
the
 
Company
 
entered
 
into
 
a
 
repayable
 
contribution
 
agreement
 
up
 
to
 
$
450,000
 
under
 
the
 
Regional
Economic
 
Growth
 
through
 
Innovation
 
program
 
from
 
the
 
Economic
 
Development
 
Agency
 
of
 
Canada
 
(“EDC”).
 
The
contribution is
 
repayable in
60
 
equal monthly instalments due
 
and payable
24 months
 
following the
 
completion of
 
the project.
During
 
the year
 
ended
 
December 31,
 
2022,
 
the
 
Company
 
received
 
contributions
 
totalling
 
$
292,941
.
 
The
 
loan
 
was
discounted using the effective
 
interest method using a
 
rate of
8
% as it is non-interest
 
bearing. The difference
 
between the
discounted
 
amount
 
and
 
the
 
proceeds
 
received
 
of $
89,085
 
represents
 
government
 
assistance
 
and
 
is accounted
 
for as
 
a
reduction of the property and equipment.
Canada Emergency Business Account ("CEBA") Loan
The Company's
 
subsidiary participated
 
in the
 
CEBA program
 
whereby it
 
obtained an
 
interest free
 
and partially
 
forgivable
loan. The loan
 
bears
no
 
interest and
no
 
minimum repayment
 
terms, and
 
one third of
 
the loan
 
amount is forgiven
 
if repaid
by December 31,
 
2023. The
 
unpaid balance,
 
if any,
 
at December 31,
 
2023 would
 
be converted
 
to a
24
-month term
 
loan
bearing interest at
5
% and be reimbursed entirely by December 31, 2025.
 
22. Shareholders’ equity
Common shares and warrants
Authorized:
The Company is authorized to issue an unlimited number
 
of common shares without par value.
Issuance of units
On October 19,
 
2022, the
 
Company completed
 
a non-brokered
 
private placement
 
consisting of
1,014,600
 
units at
 
a price
of $
1.30
 
per unit for
 
aggregate gross proceeds to
 
the Company of $
1,318,980
. Each unit
 
is comprised of
one
 
common share
of the Company
 
and
one
 
common share
 
purchase warrant
 
of the
 
company.
 
Each warrant
 
entitles the
 
holder to
 
purchase
one additional common
 
share at an
 
exercise price of
 
$
1.75
 
for a period
 
of
24 months
. The Company
 
allocated an amount
of $
1,095,780
 
to share
 
capital representing
 
the fair
 
value of
 
the shares
 
on October
 
19, 2022,
 
of $
1.08
 
per share
 
and the
residual amount of $
223,200
 
to warrants.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
36
Shares issued upon exercise of stock options, share
 
purchase warrants and compensation options
During the year
 
ended December 31,
 
2022,
2,440,000
 
(
3,482,000
 
- 2021)
 
stock options
 
and Nil
 
(
8,146,483
 
- 2021)
 
share
purchase
 
warrants
 
were
 
exercised
 
for
 
net
 
proceeds
 
of
 
$
1,412,799
 
and
 
$
Nil
 
($
1,109,818
 
and
 
$
12,396,107
 
–
 
2021)
respectively.
 
The
 
amounts
 
credited
 
to
 
share
 
capital
 
from
 
the
 
exercise
 
of
 
stock
 
options
 
include
 
an
 
ascribed
 
value
 
from
contributed surplus of $
870,558
 
($
364,000
 
– 2021). In addition, in
 
2021,
191,414
 
compensation options relating to a bought
deal in 2020, were exercised for net proceeds of $
689,090
.
Share redemptions for cancellation
In January
 
2021, the
 
Company announced
 
it had
 
been authorized
 
to repurchase
 
for cancellation,
 
on the
 
open market,
 
or
subject to the
 
approval of any
 
securities authority by
 
private agreements,
5,000,000
 
common shares from
 
January 14, 2021,
to January
 
13,
 
2022. In
 
February
 
2022, the
 
Company
 
announced
 
it had
 
been authorized
 
to repurchase
7,500,000
 
of its
common shares from February 15, 2022, to February 14, 2023.
During the year 2022, the
 
Company did
no
t repurchase any common shares for
 
purpose of cancellation. The Company was
under no obligation to repurchase its common shares as
 
at December 31, 2022.
During the year
 
2021, the
 
Company repurchased
 
and cancelled
840,094
 
Common shares
 
at a weighted
 
average price
 
of
$
4.96
 
per share,
 
for a
 
total cash
 
consideration of
 
$
4,183,617
 
including commissions
 
of $
16,678
. The
 
excess of
 
the total
consideration over the carrying amount of the shares,
 
in the amount of $
3,778,619
 
was applied against deficit.
The repurchases were made in the normal course of business at market prices through the
 
TSX. The Company was under
no obligation to repurchase its common shares as at December
 
31, 2021.
Stock options
The Company has
 
a stock option
 
plan authorizing the
 
Board of Directors
 
to grant options to
 
directors, officers,
 
employees
and consultants to acquire common shares of the Company at a price computed by reference
 
to the closing market price of
the shares of the
 
Company on the business day
 
before the Company notifies the
 
stock exchanges of the grant
 
of the option.
The number
 
of shares
 
which may
 
be granted
 
to any
 
one person
 
shall not
 
exceed
5
% (
2
% for
 
consultants) of
 
total share
capital over a twelve-month period.
The following table sets out the activity in stock options:
Weighted
Number of
average
options
exercise price
$
Balance – December 31, 2020
9,040,000
1.57
Granted
2,970,000
4.55
Exercised
(1)
(3,482,000)
0.32
Forfeited
(125,000)
4.41
Balance, December 31, 2021
8,403,000
3.10
Granted
2,475,000
3.55
Exercised
(1)
(2,440,000)
0.58
Forfeited
(242,500)
4.07
Balance, December 31, 2022
8,195,500
3.96
(1)
 
The weighted fair market value of the share price for
 
options exercised in 2022 was $
1.44
 
($
5.48
 
in 2021).
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
37
Grants in 2022
On
 
January 3,
 
2022,
 
the
 
Company
 
granted
150,000
 
stock
 
options
 
to
 
the
 
President
 
and
 
Chief
 
Executive
 
Officer
 
of
 
the
Company,
 
and
300,000
 
stock options
 
to members
 
of its
 
Board of
 
Directors. The
 
stock options
 
have an
 
exercise price
 
of
$
3.36
 
per common share, vest immediately and are exercisable
 
over a period of five (
5
) years.
On April 5,
 
2022, the
 
Company granted
400,000
 
stock options
 
to employees
 
of the Company.
 
The stock
 
options have
 
an
exercise price of $
2.96
 
per common share. The
400,000
 
options will vest as follows:
10
 
percent as of the day
 
of the grant,
20
 
percent at
 
the first
 
anniversary of
 
the date
 
of the
 
grant,
30
 
percent on
 
the second
 
anniversary of
 
the date
 
of the
 
grant
and
40
 
percent on the third anniversary of the date of the grant. All
 
options mentioned above are exercisable over a period
of five (
5
) years.
On June 2, 2022,
 
the Company granted
600,000
 
stock options to
 
the President and
 
Chief Executive Officer of
 
the Company,
and
900,000
 
stock options to members
 
of its Board of
 
Directors. The
1,500,000
 
options will vest
 
as follows:
25
 
percent as
of the day of the grant,
25
 
percent at the first anniversary of the
 
date of the grant,
25
 
percent on the second anniversary of
the date
 
of the grant
 
and
25
 
percent at
 
the third
 
anniversary of
 
the date
 
of the grant.
 
The stock
 
options have
 
an exercise
price of $
3.88
 
per common share and are exercisable over a period of five (
5
) years.
On July 3,
 
2022, the
 
Company granted
125,000
 
stock options
 
to employees
 
of the
 
Company.
 
The stock
 
options have
 
an
exercise price of $
2.14
 
per common share. The
125,000
 
options will vest as follows:
10
 
percent as of the day
 
of the grant,
20
 
percent at
 
the first
 
anniversary of
 
the date
 
of the
 
grant,
30
 
percent on
 
the second
 
anniversary of
 
the date
 
of the
 
grant
and
40
 
percent on the third anniversary of the date of the grant. All
 
options mentioned above are exercisable over a period
of five (
5
) years.
Subsequent to
 
year end, the
 
Company granted
150,000
 
stock options
 
to the President
 
and Chief
 
Executive Officer
 
of the
Company,
 
and
500,000
 
stock options
 
to members
 
of its
 
Board of
 
Directors. The
 
stock options
 
have an
 
exercise price
 
of
$
1.03
 
per common
 
share, vest
 
immediately and
 
are exercisable
 
over a period
 
of five
 
(
5
) years.
 
The Company
 
accounted
for an expense amounting to $
453,204
 
related to these options as the stock options granted related to the services in 2022
and there was a shared understanding of the terms and
 
conditions related to such grant prior to the grant
 
date.
 
The Company also granted
975,000
 
stock options to employees of the Company. The stock options have an exercise price
of $
1.03
 
per common share.
 
The
975,000
 
options will vest
 
as follows:
10
 
percent as of
 
the day of
 
the grant,
20
 
percent at
the first anniversary of the
 
date of the grant,
30
 
percent on the second
 
anniversary of the date
 
of the grant and
40
 
percent
on the third anniversary of the date
 
of the grant. All options mentioned above
 
are exercisable over a period of five (
5
) years.
There was no expense accounted for in 2022 relating to
 
these stock options.
Grants in 2021
On
 
December 30,
 
2021,
 
the
 
Company
 
granted
100,000
 
stock
 
options
 
to
 
a
 
member
 
of
 
its
 
Board
 
of
 
Directors
 
The
 
stock
options have an exercise
 
price of $
3.61
 
per common share, vest
 
immediately and are
 
exercisable over a period
 
of five (
5
)
years.
On December 17, 2021, the Company
 
granted
1,920,000
 
stock options to the President and
 
Chief Executive Officer of the
Company. The stock options have an exercise
 
price of $
3.13
 
per common share, vest
 
immediately and are exercisable over
a period of five (
5
) years.
On October 14, 2021, the
 
Company granted
100,000
 
stock options to the Chief
 
Financial Officer of the Company. The stock
options have an exercise
 
price of $
5.04
 
per common share. The
100,000
 
options will vest
 
as follows:
10
 
percent as of the
day of the grant,
20
 
percent at the first anniversary of
 
the date of the grant,
30
 
percent at the second anniversary of the
 
date
of the
 
grant, and
40
 
percent at
 
the third
 
anniversary of
 
the date
 
of the
 
grant and
 
are exercisable
 
over a
 
period of
 
five (
5
)
years.
On June 14,
 
2021, the Company
 
granted
100,000
 
stock options
 
to an
 
officer of
 
the Company.
 
The stock
 
options have an
exercise price of $
6.70
 
per common share. The
100,000
 
options will vest as follows:
25
 
percent at the date of the grant,
25
percent at the
 
first anniversary of
 
the date of
 
grant,
25
 
percent at the
 
second anniversary of the
 
date of grant,
 
and
25
 
percent
at the third anniversary of the date of grant and are exercisable
 
over a period of five (
5
) years.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
38
On June 1,
 
2021, the
 
Company granted
200,000
 
stock options
 
to a
 
member of
 
its Board
 
of Directors.
 
The stock
 
options
have an exercise price of
 
$
6.59
 
per common share. The
200,000
 
options will vest as follows:
25
 
percent at the date of
 
the
grant,
25
 
percent at the first anniversary of the date of grant,
25
 
percent at the second anniversary of the date of grant, and
25
 
percent at the third anniversary of the date of grant
 
and are exercisable over a period of five (
5
) years.
On April 6, 2021, the
 
Company granted
150,000
 
stock options to the
 
President and Chief Executive Officer of
 
the Company,
100,000
 
and
200,000
 
stock options to two members of the Board of Directors and
100,000
 
stock options to an employee of
the Company.
 
The stock
 
options have
 
an exercise
 
price of
 
$
8.47
 
per common
 
share. Of
 
these options,
250,000
 
will vest
immediately,
200,000
 
options will vest
 
as follows:
30
 
percent as of the
 
day of the
 
grant,
35
 
percent at the
 
first anniversary
of the date
 
of the grant
 
and
35
 
percent on the
 
second anniversary of the
 
date of the
 
grant and the
 
remaining
100,000
 
options
will vest
 
as follows:
10
 
percent as
 
of the
 
day of
 
the grant,
20
 
percent at
 
the first
 
anniversary of
 
the date
 
of the
 
grant,
30
percent at the second anniversary
 
of the date of the grant,
 
and
40
 
percent at the third anniversary
 
of the date of the grant.
All options mentioned above are exercisable over a period of
 
five (
5
) years.
The weighted average fair value of stock options granted
 
for the year ended December 31, 2022 was $
2.37
 
($
2.99
 
in 2021)
and $
2.02
 
per option for stock options granted subsequent to the year end. The weighted average fair value of each option
granted was
 
estimated at
 
the grant
 
date for
 
purposes of determining
 
share-based payment expense
 
using the Black-Scholes
option pricing model based on the following weighted-average
 
assumptions:
Years ended December 31,
2022
2021
Number of options granted or recognized
2,475,000
650,000
2,970,000
Exercise price ($)
3.55
3.02
4.55
Fair value of each option under the Black-Scholes pricing
 
model
($)
2.37
2.02
2.99
Assumptions under the Black-Scholes model:
Fair value of the shares ($)
3.54
3.02
4.52
Risk-free interest rate (%)
2.43
3.38
1.11
Expected volatility (%)
83.17
83.15
83.00
Expected dividend yield
—
—
—
Expected life (number of months)
60
60
60
The underlying expected volatility was determined by reference to historical
 
data of the Company’s share price. No special
features inherent to the stock options granted were incorporated
 
into the measurement of fair value.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
39
As at December 31, 2022,
 
the outstanding options,
 
as issued under the
 
stock option plan to
 
directors, officers, employees
and consultants for the purchases of one common share
 
per option, are as follows:
Number of
Number of
Number of
stock
stock
stock
Exercise
options
options
options
price
Dec 31, 2021
Granted
Exercised
Forfeitures
Dec 31, 2022
vested (1)
per option
Expiry date
$
November 3, 2017
2,400,000
—
(2,400,000)
—
—
—
0.58
November 3, 2022
July 3, 2018
300,000
—
—
—
300,000
300,000
0.51
July 3, 2023
October 29, 2018
40,000
—
(40,000)
—
—
—
0.52
October 29, 2023
September 29, 2019
100,000
—
—
—
100,000
100,000
0.51
September 29, 2024
January 2, 2020
100,000
—
—
—
100,000
100,000
0.45
January 2, 2025
July 16, 2020
2,243,000
—
—
(42,500)
2,200,500
1,775,500
4.41
July 16, 2025
October 26, 2020
250,000
—
—
(200,000)
50,000
37,500
4.00
October 26, 2025
April 6, 2021
550,000
—
—
—
550,000
410,000
8.47
April 6, 2026
June 1, 2021
200,000
—
—
—
200,000
100,000
6.59
June 1, 2026
June 14, 2021
100,000
—
—
—
100,000
50,000
6.70
June 14, 2026
October 14, 2021
100,000
—
—
—
100,000
30,000
5.04
October 14, 2026
December 17, 2021
1,920,000
—
—
—
1,920,000
1,920,000
3.13
December 17, 2026
December 30, 2021
100,000
—
—
—
100,000
30,000
3.61
December 30, 2026
January 3, 2022
—
450,000
—
—
450,000
450,000
3.36
January 3, 2027
April 5, 2022
—
400,000
—
—
400,000
40,000
2.96
April 5, 2027
June 2, 2022
—
1,500,000
—
—
1,500,000
375,000
3.88
June 2, 2027
July 13, 2022
—
125,000
—
—
125,000
12,500
2.14
July 13, 2027
8,403,000
2,475,000
(2,440,000)
(242,500)
8,195,500
5,730,500
3.96
(1)
 
At December 31, 2022, the weighted average exercise
 
price for options outstanding which are exercisable was
 
$
3.96
.
As at December 31, 2021,
 
the outstanding options,
 
as issued under the
 
stock option plan to
 
directors, officers, employees
and consultants for the purchases of one common share
 
per option, are as follows:
Number of
Number of
Number of
stock
stock
stock
Exercise
options
options
options
price
Dec 31, 2020
Granted
Exercised
Forfeitures
Dec 31, 2021
vested
per option
Expiry date
$
November 3, 2017
2,420,000
—
(20,000)
—
2,400,000
2,400,000
0.58
November 3, 2022
July 3, 2018
300,000
—
—
—
300,000
300,000
0.51
July 3, 2023
October 29, 2018
70,000
—
(30,000)
—
40,000
40,000
0.52
October 29, 2023
September 29, 2019
200,000
—
(100,000)
—
100,000
100,000
0.51
September 29, 2024
January 2, 2020
100,000
—
—
—
100,000
100,000
0.45
January 2, 2025
July 16, 2020
2,450,000
—
(82,000)
(125,000)
2,243,000
1,775,500
4.41
July 16, 2025
October 26, 2020
250,000
—
—
—
250,000
125,000
4.00
October 26, 2025
April 6, 2021
—
550,000
—
—
550,000
320,000
8.47
April 6, 2026
June 1, 2021
—
200,000
—
—
200,000
50,000
6.59
June 1, 2026
June 14, 2021
—
100,000
—
—
100,000
25,000
6.70
June 14, 2026
October 14, 2021
—
100,000
—
—
100,000
10,000
5.04
October 14, 2026
December 17, 2021
—
1,920,000
—
—
1,920,000
1,920,000
3.13
December 17, 2026
December 30, 2021
—
100,000
—
—
100,000
100,000
3.61
December 30, 2026
9,040,000
2,970,000
(3,482,000)
(125,000)
8,403,000
7,265,500
3.10
For
 
the year
 
ended
 
December 31,
 
2022,
 
a
 
share-based
 
compensation
 
expense
 
of
 
$
5,538,463
 
(2021
 
-
 
$
9,762,745
)
 
was
recorded in Selling, general and administrative expenses
 
to the consolidated statements of comprehensive
 
loss.
As at December 31,
 
2022, an amount
 
of $
3,184,866
 
(2021 - $
2,719,354
) remains to
 
be amortized until
 
October 2025 related
to the grant of stock options.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
40
Share purchase warrants
The following
 
table reflects
 
the activity
 
in warrants
 
during the year
 
ended December 31,
 
2022, and
 
the number
 
of issued
and outstanding share purchase warrants at December
 
31, 2022:
Number of
Number of
warrants
warrants
Exercise
Dec 31,
Dec 31,
price per
2021
Issued
Exercised
Expired
2022
warrant
Expiry date
Issuance of units – October 19, 2022
—
1,014,600
—
—
1,014,600
1.75
Oct 19, 2024
—
1,014,600
—
—
1,014,600
1.75
The following
 
table reflects
 
the activity
 
in warrants
 
during the year
 
ended December 31,
 
2021, and
 
the number
 
of issued
and outstanding share purchase warrants at December
 
31, 2021:
Number of
Number of
warrants
warrants
Exercise
Dec 31,
Dec 31,
price per
2020
Issued
Exercised
Expired
2021
warrant
Expiry date
$
Issuance of units – September 28, 2018
3,448,276
—
(3,448,276)
—
—
0.58
January 28, 2021
Issuance of units – October 19, 2018
100,000
—
(100,000)
—
—
0.58
February 13, 2021
Issuance of units – May 15, 2019
1,355,500
—
(1,355,500)
—
—
0.85
May 15, 2021
Issuance of units – May 28, 2019
750,000
—
(750,000)
—
—
0.85
May 24, 2021
Issuance of units – June 19, 2019
500,000
—
(500,000)
—
—
0.85
June 19, 2021
Issuance of units – October 25, 2019
225,000
—
(225,000)
—
—
0.75
October 25, 2021
Issuance of units – November 10, 2020
1,677,275
—
(1,672,000)
(5,275)
—
4.5
November 10, 2022
Issuance of warrants – November 10, 2020
—
—
(95,707)
—
—
4.5
November 10, 2022
8,056,051
—
(8,146,483)
(5,275)
—
23. Supplemental disclosure of
 
cash flow information
2022
2021
$
$
Accounts receivable
(985,015)
(12,372,139)
Costs and profits in excess of billings on uncompleted
 
contracts
3,871,413
(3,849,077)
Inventory
(988,821)
(839,352)
Investment tax credits receivable
(19,891)
1,015,862
Royalties receivable
(30,842)
(65,845)
Deposits
2,277,136
145,379
Contract assets
(562,809)
—
Prepaid expenses
(53,942)
39,111
Accounts payable and accrued liabilities
346,003
1,953,208
Billings in excess of costs and profits on uncompleted contracts
270,762
1,485,969
Income taxes
267,414
(99,072)
4,391,408
(12,585,956)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
41
24. Supplemental disclosure on
 
comprehensive income statement
The amount
 
of
 
inventories
 
recognized
 
in cost
 
of sales
 
is $
844,304
 
for the
 
year
 
ended December
 
31,
 
2022 ($
326,279
 
in
2021).
The aggregate amortization
 
and write-off of
 
intangible assets expense
 
for the
 
year ended December 31, 2022
 
was $
878,030
(2021 - $
465,913
) and was recorded in cost of sales and services.
Depreciation
 
on
 
property
 
and
 
equipment
 
amounted
 
to
 
$
603,894
 
and
 
ROU
 
assets
 
was
 
$
635,828
 
for
 
the year
 
ended
December 31, 2022, as
 
compared to (2021 -
 
$
356,103
 
and $
570,411
 
respectively) and is
 
recorded in selling,
 
general and
administrative.
 
Employee
 
benefits
 
totaled
 
$
18,115,284
 
in
 
the year
 
ended
 
December 31,
 
2022
 
(2021 -
 
$
21,855,957
)
 
and
 
include
 
share-
based compensation of $
5,538,463
 
(2021 - $
9,762,745
).
 
The Company
 
has been
 
awarded various
 
government grants
 
during the year,
 
which were
 
recognized when
 
they became
receivable. The
 
grants, received
 
in 2022,
 
are unconditional
 
and amounted
 
to $
204,791
 
(2021 - $
226,420
). An
 
amount of
$
Nil
 
(2021 - $
149,575
) was
 
recorded as
 
a reduction
 
to the
 
related expenses
 
in research
 
and development,
 
an amount
 
of
$
204,791
 
(2021 - $
76,845
) was recorded as a reduction to the related expenses
 
in selling, general and administrative.
25. Net finance costs
2022
2021
$
$
Financial expenses
Interest on term loans
3,198
87,775
Interest on lease liabilities
378,611
307,691
Interest accretion on balance due on business combination
173,350
110,204
Interest accretion on long term loans
28,229
12,185
Penalties and other interest expenses
85,644
19,324
669,032
537,179
Financial income
Interest accretion on royalty receivable
(118,290)
(132,809)
Net finance costs
 
550,742
404,370
 
26. Loss per share
The
 
following
 
table
 
provides
 
a
 
reconciliation
 
between
 
the
 
number
 
of
 
basic
 
and
 
fully
 
diluted
 
shares
 
outstanding
 
as
 
at
December 31, 2022 and 2021:
2022
2021
$
$
Weighted daily average of Common shares
170,953,374
166,645,546
Dilutive effect of stock options
—
—
Dilutive effect of warrants
—
—
Weighted average number of diluted shares
170,953,374
166,645,546
Number of anti-dilutive stock options and warrants excluded
 
from fully diluted loss
per share calculation
6,745,100
8,403,000
 
27. Related party transactions
During
 
the years
 
ended
 
December 31,
 
2022
 
and
 
2021,
 
the
 
Company
 
concluded
 
the
 
following
 
transactions
 
with
 
related
parties:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
42
In 2022, rent
 
and property taxes
 
were charged by
 
a trust whose beneficiary
 
is the controlling
 
shareholder and CEO
 
of the
Company
 
in the
 
amount
 
of
 
$
277,389
 
(2021
 
- $
274,934
). On
 
January
 
1, 2022,
 
a
 
lease for
 
rent of
 
a property
 
with a
 
trust
whose beneficiary
 
is the
 
controlling
 
shareholder
 
and
 
CEO of
 
the
 
Company,
 
was
 
modified to
 
extend
 
the
 
lease
 
term until
December 2026. The lessor also reimbursed an amount of $
1,070,264
 
representing the balance at the date of modification
of
 
the
 
original
 
prepayment
 
amount
 
of
 
$
1,178,530
 
made
 
in
 
2020.
 
At
 
the
 
date
 
of
 
modification,
 
the
 
lease
 
liability
 
was
remeasured using a discount rate of
4
%. As a result, the lease liability
 
was increased by an amount of $
1,070,264
 
and the
right-of-use assets was decreased by an amount of $
108,267
.
 
These
 
expenses
 
are
 
recorded
 
in
 
captions
 
cost
 
of
 
sales
 
and
 
selling
 
and
 
general
 
in
 
the
 
consolidated
 
statements
 
of
comprehensive
 
loss.
 
As
 
at
 
December 31,
 
2022
 
the
 
right-of-use
 
asset
 
and
 
the
 
lease
 
liabilities
 
amount
 
to
 
$
680,980
 
and
$
799,090
 
respectively (2021 - $
1,107,131
 
and $
Nil
).
A balance due
 
to the controlling
 
shareholder and CEO of
 
the Company amounted to
 
$
254,097
 
(2021 - $
144,506
) is included
in accounts payable and accrued liabilities.
The key management personnel
 
of the Company,
 
in accordance with IAS
 
24 Related Party Disclosures,
 
are the members
of the Board of Directors and certain officers. Total
 
compensation to key management consisted of the following:
2022
2021
$
$
Salaries – key management
1,204,306
3,049,501
Pension contributions
22,479
59,377
Fees – Board of Directors
157,900
187,600
Share-based compensation – officers
2,017,348
6,182,573
Share-based compensation – Board of Directors
2,293,167
2,338,650
Other benefits – key management
 
244,621
237,903
Total
 
compensation
5,939,821
12,055,604
 
28. Financial instruments
As
 
part
 
of
 
its
 
operations,
 
the
 
Company
 
carries
 
a
 
number
 
of
 
financial
 
instruments.
 
It
 
is
 
management's
 
opinion
 
that
 
the
Company is
 
not exposed
 
to significant
 
interest, currency
 
or credit risks
 
arising from
 
these financial
 
instruments except
 
as
otherwise
 
disclosed.
 
The
 
Company's
 
overall
 
risk
 
management
 
program
 
focuses
 
on
 
the
 
unpredictability
 
of
 
the
 
financial
market and seeks
 
to minimize potential
 
adverse effects
 
on the Company's
 
financial performance.
 
The Company
 
does not
use derivative financial instruments to hedge these risks.
Foreign currency risk
The
 
Company
 
enters
 
into
 
transactions
 
denominated
 
in
 
US
 
dollars
 
for
 
which
 
the
 
related
 
revenues,
 
expenses,
 
accounts
receivable and accounts payable and accrued liabilities
 
balances are subject to exchange rate fluctuations.
As at December 31, the Company's exposure
 
to foreign exchange risk for
 
amounts denominated in US dollars is
 
as follows:
2022
2021
$
$
Cash
2,871,062
1,714,670
Accounts receivable
13,537,912
14,465,011
Accounts payable and accrued liabilities
(1,713,717)
(1,023,999)
Total
14,695,257
15,155,682
Foreign currency
 
risk is
 
the risk
 
that the
 
fair value
 
or future
 
cash flows
 
of a
 
financial
 
instrument will
 
fluctuate because
 
of
changes in foreign exchange rates.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
43
Sensitivity analysis
At December 31, 2022, if the US Dollar changes by
10
% against the Canadian dollar with all other variables held constant,
the
 
impact
 
on
 
pre-tax
 
gain
 
or
 
loss
 
and
 
equity
 
for
 
the
 
year
 
ended
 
December 31,
 
2022
 
would
 
have
 
been
 
$
1,470,000
(December 31, 2021 - $
1,516,000
).
Credit concentration
During the year
 
ended December 31,
 
2022,
two
 
customers accounted
 
for
52
% (December 31,
 
2021 –
four
 
customers for
79
%) of revenues from operations.
2022
2021
% of total
% of total
Revenues
revenues
Revenues
revenues
$
%
$
%
Customer 1
5,598,653
29
7,308,191
24
Customer 2
4,314,225
23
7,019,953
23
Customer 3
—
—
6,417,373
21
Customer 4
—
—
3,551,900
11
Total
9,912,878
52
24,297,417
79
Three
 
customers accounted
 
for
56
%,
16
% and
11
%, respectively
 
(December 31, 2021
 
–
one
 
customer for
73
%) of
 
trade
accounts receivable with
 
amounts owing to
 
the Company of
 
$
18,894,727
 
(2021 - $
12,063,636
), representing the
 
Company's
major
 
credit
 
risk
 
exposure.
 
Credit
 
concentration
 
is
 
determined
 
based
 
on
 
customers
 
representing
10
%
 
or
 
more
 
of
 
total
revenues and/or total accounts receivable.
Credit risk
Credit
 
risk
 
is
 
the
 
risk
 
that
 
one
 
party
 
to
 
a
 
financial
 
instrument
 
will
 
cause
 
a
 
financial
 
loss
 
for
 
the
 
other
 
party
 
by
 
failing
 
to
discharge an obligation.
 
The maximum credit
 
risk to which
 
the Company is
 
exposed as at
 
December 31, 2022
 
represents
the carrying amount
 
of cash
 
and cash equivalents,
 
accounts receivable
 
(except sales
 
tax receivable),
 
costs and
 
profits in
excess of billings on uncompleted contracts, deposits and
 
royalties receivable.
 
Cash and cash equivalents,
 
which only comprise guaranteed
 
investment certificates redeemable
 
on relatively short
 
notice
by the Company,
 
are held with major reputable financial institutions.
 
Management has established
 
a credit policy
 
under which each
 
new customer
 
is analysed individually
 
for creditworthiness
before
 
the
 
Company’s
 
payment
 
and
 
delivery
 
terms
 
and
 
conditions
 
are
 
offered.
 
The
 
Company’s
 
review
 
could
 
include
reviewing external ratings, if they are available,
 
financial statements, credit agency information,
 
industry information and in
some cases bank
 
references. The Company’s
 
exposure to credit
 
risk is mainly
 
influenced by the
 
individual characteristics
of each customer. In monitoring customer
 
credit risk, customers are
 
identified according to their
 
characteristics such as their
geographic location, industry,
 
trading history with the Company and existence of previous
 
financial difficulties.
The Company does not generally
 
require collateral or other security
 
from customers on accounts
 
receivable,
 
however, the
contract terms may include the
 
possibility of recourse in the
 
event of late payment.
 
The Company believes that
 
there is
no
unusual exposure associated with the collection of these
 
receivables.
The credit risk associated with costs and profits in excess of billings on uncompleted contracts is similar to that of accounts
receivable, as these amounts are accumulated and converted to
 
accounts receivable as invoicing milestones are reached.
The royalties receivable
 
are due from
 
a company in
 
which the Company
 
has a strategic
 
investments. The Company
 
does
not have
 
collateral or
 
other security
 
associated with
 
the collection
 
of this
 
receivable. The
 
carrying amount
 
of the
 
royalties
receivable have been discounted to reflect the time value
 
of money and credit risk of the counterparty.
 
The deposits are
 
payments made
 
to suppliers
 
and entities from
 
which the Company
 
leases property.
 
The Company
 
does
not have collateral
 
or other security
 
associated with
 
the collection
 
of these deposits.
 
As at December
 
31, 2022 and
 
2021,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
44
no loss
 
allowance has been
 
recognized in
 
connection with these
 
deposits and
 
the maximum exposure
 
is the
 
carrying amount
of these deposits.
During the
 
years 2022
 
and 2021,
 
provisions for
 
expected credit
 
losses were
 
recorded, however,
no
 
amounts
 
of financial
assets have been written off. The accounts provisioned by
 
the loss are still subject to
 
enforcement activity in order to collect
the balances due.
Interest rate risk
Interest rate risk is the risk that the
 
value of a financial instrument might be adversely affected by a change in interest rates.
Changes in market interest rates may have an effect on
 
the cash flows associated with some financial assets and liabilities,
known as cash flow
 
risk, and on the
 
fair value of other
 
financial assets or liabilities, known as
 
price risk, and on the
 
fair value
of investments
 
or liabilities,
 
known as
 
price risks.
 
The Company
 
is exposed
 
to a
 
risk of
 
fair value
 
on term
 
loans as
 
those
financial instruments bear
 
interest at
 
fixed rates
 
and to
 
cash flow
 
risk from
 
the variable
 
interest rate
 
of the
 
bank indebtedness.
Price risk
Price risk
 
is the
 
risk that
 
the fair
 
value or
 
future cash
 
flows of
 
a financial
 
instrument will
 
fluctuate because
 
of changes
 
in
market price (other
 
than those arising
 
from foreign
 
currency risk
 
and interest risk),
 
whether those
 
changes are
 
caused by
factors specific to the individual financial instrument or its issuers or factors affecting
 
all similar financial instruments traded
in the
 
market. The
 
most significant
 
exposure to
 
the price
 
risk for
 
the Company
 
arises from
 
its investments
 
in shares
 
and
warrants of public
 
companies quoted
 
on the TSX
 
Venture Exchange.
 
If equity prices
 
had increased or
 
decreased by
25
%
as
 
at
 
December 31,
 
2022,
 
with
 
all
 
other
 
variables
 
held
 
constant,
 
the
 
Company’s
 
investments
 
would
 
have
 
increased
 
or
decreased respectively,
 
by approximately $
1,841,484
 
(December 31, 2021 - $
4,042,000
).
Liquidity risk
Liquidity risk is the
 
risk that the
 
Company will encounter
 
difficulty in meeting
 
obligations associated with
 
financial liabilities
that are settled
 
by delivery of
 
cash or another
 
financial asset. The
 
Company manages its
 
liquidity risk by forecasting
 
cash
flows from operations and anticipating any investing and financing
 
activities.
The following table summarizes the contractual amounts payable and maturities of financial liabilities and other
 
liabilities as
at December 31, 2022:
Total
Carrying
contractual
Less than
value
amount
one year
2-3 years
4-5 years
Over 5 years
$
$
$
$
$
$
Bank indebtedness
991,902
991,902
991,902
—
—
—
Accounts payable and accrued
liabilities
1
9,620,591
9,620,591
9,620,591
—
—
—
Term
 
loans
389,987
520,444
59,917
190,587
180,000
89,940
Balance due on business
combination
3,907,775
4,137,820
2,177,800
1,960,020
—
—
Lease liabilities
5,533,694
6,745,329
2,984,243
1,165,281
703,816
1,891,989
20,443,949
22,016,086
15,834,453
3,315,888
883,816
1,981,929
1
Accounts payable and accrued liabilities exclude amounts
 
which are not financial liabilities.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
45
The following table summarizes the contractual amounts payable and maturities of financial liabilities and other
 
liabilities as
at December 31, 2021:
Total
Carrying
contractual
Less than
value
amount
one year
2-3 years
4-5 years
Over 5 years
$
$
$
$
$
$
Accounts payable and accrued
liabilities
1
9,586,423
9,586,423
9,586,423
—
—
—
Term
 
loans
190,905
263,232
85,731
67,561
62,823
47,117
Balance due on business
combination
3,952,203
4,355,600
2,395,580
1,960,020
—
—
Lease liabilities
5,323,965
6,614,192
3,220,750
710,493
561,628
2,121,321
19,053,496
20,819,447
15,288,484
2,738,074
624,451
2,168,438
1
Accounts payable and accrued liabilities exclude amounts
 
which are not financial liabilities.
The Company's
 
Canadian subsidiary
 
benefits from
 
a line
 
of credit
 
of $
500,000
, and
 
the Italian
 
subsidiary benefits
 
from a
400,000
 
Euros ($
576,000
) line of credit. At December 31, 2022, $
498,200
 
was drawn on the Canadian facility and
341,473
Euros ($
493,702
) was drawn on
 
the Italian facility. The credit facilities
 
both bear interest at
 
variable rates which is
 
the bank’s
prime rate plus 1%
, therefore,
7.45
% for the Canadian facility and
8
% for the Italian facility. There
 
are no imposed financial
covenants on the credit facilities.
 
Fair value of financial instruments
The fair value represents
 
the amount that
 
would be received
 
for the sale of
 
an asset or paid
 
for the transfer of
 
a liability in
an orderly transaction
 
between market
 
participants at the
 
measurement date.
 
The fair value
 
estimates are calculated
 
at a
specific date
 
taking into
 
consideration assumptions
 
regarding the
 
amounts, the
 
timing of
 
estimated future
 
cash flows
 
and
discount rates.
 
Accordingly,
 
due to
 
its approximate
 
and subjective
 
nature, the
 
fair value
 
must not
 
be interpreted
 
as being
realizable in an immediate settlement of the financial instruments.
There
 
are
 
three
 
levels
 
of
 
fair
 
value
 
that
 
reflect
 
the
 
significance
 
of
 
inputs
 
used
 
in
 
determining
 
fair
 
values
 
of
 
financial
instruments:
Level 1 — quoted prices (unadjusted) in active markets
 
for identical assets or liabilities.
Level 2 — inputs other than quoted prices included within Level
 
1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 — inputs for the asset or liability that are not based
 
on observable market data.
The fair values
 
of cash
 
and cash
 
equivalents, trade
 
accounts receivable,
 
other receivables,
 
deposits, bank
 
indebtedness,
accounts payable and accrued liabilities approximate their carrying
 
amounts
 
due to their short-term maturities.
Investments in BGF and HPQ shares are valued at quoted
 
market prices and are classified as Level 1.
Royalties receivable are discounted according to their corresponding
 
agreements and are classified as Level 2.
Investments in HPQ warrants are valued using the Black
 
-Scholes pricing model and are classified as Level 3 (note
 
11).
The fair value
 
of the term
 
loans and the
 
balance due on business
 
combination as at December 31,
 
2022 is determined using
the
 
discounted
 
future
 
cash
 
flows
 
method
 
and
 
management's
 
estimates
 
for
 
market
 
interest
 
rates
 
for
 
similar
 
issuances.
Accordingly, as a result
 
,
 
their fair market values correspond to their carrying amount. The term loans are classified
 
as level
2 and the balance due on business combination as Level 3.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
46
29.
 
Contingent liabilities
The
 
Company
 
is
 
currently
 
a
 
party
 
to
 
various
 
legal
 
proceedings.
 
If
 
management
 
believes
 
that
 
a
 
loss
 
arising
 
from
 
these
proceedings is
 
probable and
 
can reasonably
 
be estimated,
 
that amount
 
of the
 
loss is
 
recorded. As
 
additional information
becomes
 
available,
 
any
 
potential
 
liability
 
related
 
to
 
these
 
proceedings
 
is
 
assessed
 
and
 
the
 
estimates
 
are
 
revised,
 
if
necessary. Based on currently available information, management
 
believes that the ultimate
 
outcome of these proceedings,
individually and in
 
aggregate, will not
 
have a material
 
adverse effect on
 
the Company’s
 
financial position or
 
overall trends
in results of operations.
The Company had received a government grant in prior years of approximately $
800,000
 
to assist with the development of
a new system of advanced waste treatment systems technology. The grant
 
is potentially repayable at the rate of
3
% of any
consideration received
 
as a
 
result of
 
the project,
 
for which
 
funding has
 
been received,
 
to a
 
maximum of
 
the actual
 
grant
received. This repayment
 
provision will remain
 
in effect
 
until May 30,
 
2024. The Company
 
abandoned the
 
project in 2011
and accordingly,
no
 
amount is expected to be repaid.
30.
 
Capital management
The Company’s objectives in managing capital are:
a)
 
To
 
ensure sufficient liquidity to support its current
 
operations and execute its business plan; and
b)
 
To
 
provide adequate return to the shareholders
The Company’s primary objectives when managing capital is to ensure the Company continues as a going concern as well
as to maintain optimal returns to shareholders and benefits for
 
other stakeholders.
The Company
 
currently funds
 
these requirements
 
from cash
 
flows from
 
operations and
 
with financing
 
arrangements with
third parties and shareholders.
The Company is
 
not subject to
 
any externally imposed
 
capital requirements. The
 
Company monitors
 
its working capital
 
in
order to
 
meet its
 
financial obligations.
 
As at
 
December 31, 2022,
 
the Company’s
 
working capital
 
was $
1,650,709
 
(2021 -
$
14,006,785
).
The management of capital includes shareholders’ equity for a total amount of $
16,868,927
 
(2021 - $
40,768,754
) and term
loans of $
389,987
 
(2021 - $
190,905
), as well as cash and cash
 
equivalents amounting to $
3,445,649
 
(2021 - $
12,202,513
).
 
There were
 
no significant
 
changes in
 
the Company’s
 
approach during
 
the current
 
and preceding
 
fiscal year,
 
however,
 
In
order to
 
maintain or
 
adjust capital
 
structure, the
 
Company may
 
issue new
 
shares, sell
 
portions of
 
its strategic
 
investment
and periodically purchase its own shares on the open
 
market.
31.
 
Income taxes
a) Income tax expenses is comprised of the following:
2022
2021
$
$
Current tax
Current year
118,378
(155,714)
Deferred tax
Origination and reversal of temporary differences
(6,219,309)
(5,095,595)
Change in unrecognized deductible temporary differences
6,176,915
4,511,349
(42,394)
(584,246)
Income tax expense (recovery)
75,984
(739,960)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
47
b) Reconciliation of effective tax rate
2022
2021
$
$
Loss before income taxes
(32,091,043)
(39,171,899)
Income tax rates
26.5
%
26.5
%
Income tax recovery at the combined basic Federal and
 
Provincial tax rates
(8,504,126)
(10,380,553)
Permanent differences
2,165,385
5,079,805
Tax
 
rate changes
(826)
8,334
Prior year adjustment
115,118
60,533
Change in unrecognized deductible temporary differences
6,176,915
4,511,349
Other
123,518
(19,428)
Income tax expense (recovery)
 
75,984
(739,960)
The applicable statutory tax
 
rates are
26.5
% in 2022
 
and
26.5
% in 2021.
 
The Company's applicable tax
 
rate is the
 
Canadian
combined rates applicable in the jurisdiction in which the
 
Company operates.
c) Deferred tax assets and liabilities
Recognized deferred tax assets and liabilities:
As at December 31, 2022 and 2021, recognized deferred
 
tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
2022
2021
2022
2021
2022
2021
$
$
$
$
$
$
Non-capital losses
carried forward
772,343
1,705,073
—
—
772,343
1,705,073
Strategic investments
—
—
—
(656,507)
—
(656,507)
Royalties receivable
—
—
(373,063)
(333,543)
(373,063)
(333,543)
Property and equipment
—
—
(155,833)
(147,127)
(155,833)
(147,127)
Intangibles
—
—
(243,447)
(468,167)
(243,447)
(468,167)
Deferred income
—
—
—
(21,000)
—
(21,000)
Right-of-use assets net of liabilities
—
—
—
(121,123)
—
(121,123)
Tax
 
assets (liabilities)
772,343
1,705,073
(772,343)
(1,747,467)
—
(42,394)
Set off of tax
(772,343)
(1,705,073)
772,343
1,705,073
—
—
Net tax assets (liabilities)
—
—
—
(42,394)
—
(42,394)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
48
Deferred taxes from temporary differences and unused
 
tax losses and tax credits are summarized as follows:
Recognized
Recognized
 
Recognized
 
January 1,
on business
 
in profit or
December
January
in profit or
 
December
2021
combination
 
loss
 
31, 2021
1, 2022
loss
 
31, 2022
$
$
$
$
$
$
$
Non-capital
losses carried
forward
4,982,328
642,149
(3,919,404)
1,705,073
1,705,073
(932,730)
772,343
Strategic
investments
(4,919,499)
—
4,262,992
(656,507)
(656,507)
656,507
—
Investment tax
credits
(273,854)
—
273,854
—
—
—
—
Royalties
receivable
(280,900)
—
(52,643)
(333,543)
(333,543)
(39,520)
(373,063)
Property and
equipment
(25,273)
(2,840)
(119,014)
(147,127)
(147,127)
(8,706)
(155,833)
Intangibles
—
(559,949)
91,782
(468,167)
(468,167)
224,720
(243,447)
Deferred income
—
—
(21,000)
(21,000)
(21,000)
21,000
—
Right-of-use
assets net of
liabilities
(188,802)
—
67,679
(121,123)
(121,123)
121,123
—
(706,000)
79,360
584,246
(42,394)
(42,394)
42,394
—
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
49
As at December 31, 2022 and 2021, the amounts and expiry dates of tax attributes and temporary differences for which no
deferred tax assets were recognized are as follows:
December 31, 2022
December 31, 2021
Federal
Provincial
Federal
Provincial
$
$
$
$
Research and development expenses,
 
without time limitation:
11,917,963
12,150,617
11,399,104
11,023,013
Federal research and development
investment tax credits:
2029
299,881
—
299,881
—
2030
89,879
—
89,879
—
2031
223,759
—
223,759
—
2032
186,031
—
186,031
—
2033
105,216
—
105,216
—
2034
212,609
—
212,609
—
2035
488,555
—
488,555
—
2036
359,594
—
359,594
—
2037
253,885
—
253,885
—
2038
186,015
—
186,015
—
2039
340,728
—
465,535
—
2040
101,562
—
101,562
—
2041
167,461
—
359,115
—
2042
256,417
—
—
—
3,271,592
—
3,331,636
—
December 31, 2022
December 31, 2021
Federal
Provincial
Italy
Federal
Provincial
Italy
$
$
$
$
$
$
Tax
 
losses carried
forward:
2032
2,866,759
2,866,759
—
628,948
—
—
2033
2,047,643
2,047,643
—
2,047,643
1,490,639
—
2034
589,007
589,007
—
589,007
589,007
—
2035
703,664
416,827
—
703,664
416,827
—
2036
3,579,827
3,440,527
—
3,579,827
3,440,527
—
2037
1,577,876
1,568,739
—
1,577,876
1,568,739
—
2038
5,716,536
5,650,620
—
5,716,536
5,650,620
—
2039
4,772,060
4,079,919
—
4,163,315
4,079,919
—
2040
533,485
533,485
—
—
—
—
2041
3,818,898
3,773,941
—
2,710,255
2,659,255
—
2042
16,135,868
16,140,505
—
—
—
—
Indefinite
—
—
908,073
—
—
815,620
42,341,623
41,107,972
908,073
21,717,071
19,895,533
815,620
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
50
December 31, 2022
December 31, 2021
Federal
Provincial
Federal
Provincial
$
$
$
$
Other deductible temporary differences,
 
Without time limitation:
Right-of-use assets net of liabilities
687,896
687,896
—
—
Strategic investments
3,068,378
3,068,378
—
—
Financing costs
677,789
677,789
1,100,504
1,100,504
Intangible assets
3,460,822
3,194,890
3,712,181
3,431,133
Capital losses
—
—
464,768
464,768
7,894,885
7,628,953
5,277,453
4,996,405
Deferred tax assets and
 
investment tax credits have
 
not been recognized in respect
 
to these items because
 
it is uncertain
that future taxable
 
profit will be
 
available against which
 
the Company can
 
utilise the benefits
 
therefrom. The generation
 
of
future taxable profit depends on the successful commercialisation
 
of the Company’s products and technologies.
32.
 
Segment information
The Company operates
 
in
one
 
segment, based
 
on financial information
 
that is available
 
and evaluated
 
by the Company’s
Board of Directors. The Company’s head office is located in Montreal, Quebec. The operations of
 
the Company are located
in three geographic areas: Canada, Italy and India.
The following is a summary of the Company’s
 
total revenues by geography:
2022
2021
$
$
Brazil
162,797
1,475,608
Canada
11,933,904
7,383,884
England
—
634
Germany
11,606
3,867
India
91,699
698,837
Israel
27,360
126,246
Italy
1,309,478
2,514,665
Mexico
371,668
920,818
Netherlands
112,634
—
Poland
47,591
60,406
Saudi Arabia
1,511,142
7,019,953
South Africa
29,997
—
Spain
22,049
1,178
United States of America
2,661,071
10,567,741
Vietnam
720,507
294,513
19,013,503
31,068,350
Revenue by product line and revenues recognized by
 
revenue recognition method are presented in note 7.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PyroGenesis Canada Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(In Canadian dollars)
51
The following is a summary of selected asset categories
 
by geographic market, at December 31:
2022
2021
$
$
$
$
$
$
Canada
 
India
Total
Canada
 
India
Total
Property and equipment
3,372,356
21,096
3,393,452
3,685,974
26,963
3,712,937
Right-of-use assets
4,818,744
—
4,818,744
5,765,993
—
5,765,993
Intangible assets
2,104,848
—
2,104,848
2,774,198
—
2,774,198
Goodwill
2,660,607
—
2,660,607
2,660,607
—
2,660,607
12,956,555
21,096
12,977,651
14,886,772
26,963
14,913,735
In 2022 and 2021, none of the selected asset categories
 
above were located in Italy.
33.
 
Subsequent event
On March 8, 2023, the Company announced it had completed a non-brokered private placement consisting of the issuance
and sale of
5,000,000
 
units of the
 
Company at a
 
price of $
1.00
 
per unit, for
 
gross proceeds of
 
$
5,000,000
. Each unit
 
consists
of
one
 
common share of the Company
 
and
one
 
common share purchase warrant.
 
Each warrant entitles the holder
 
thereof
to purchase
one
 
common
 
share at
 
a price
 
of
 
$
1.25
 
until
 
March
 
7,
 
2025. The
 
entire amount
 
is allocated
 
to
 
the common
shares as the fair value of the common shares on March
 
8, 2023 was $
1.38
.