Research and Development (“R&D”) Costs
The Company incurred $236,535 of R&D costs in Q3 2019, compared with $177,405 in Q3 2018, representing an increase of 33%. The increase in Q3 2019 is related to torch development and plasma atomization related expenses.
In addition to internally funded R&D projects, the Company also incurred R&D expenditures during the execution of client funded projects. These expenses are eligible for Scientific Research and Experimental Development (“SR&ED”) tax credits. SR&ED tax credits on client funded projects are applied against cost of sales and services (see “Cost of Sales” above).
Net Comprehensive Loss
The net comprehensive loss for Q3 2019 of 965,032 compared to a loss of $2,758,835 in Q3 2018, represents a decrease of 65% year-over-year. The increase of $1,793,803 in the comprehensive loss in Q3 2019 is primarily attributable to the factors described above, which have been summarized as follows:
| (i) | an increase in product and service-related revenue of $999,711 arising in Q3 2019, |
| (ii) | an increase in cost of sales and services totaling $304,772, primarily due to an increase in direct materials and manufacturing overhead and other, |
| (iii) | a decrease of SG&A expenses of $399,590 arising in Q3 2019 is primarily due to a decrease in office and general, other expenses, professional fees and employee compensation, |
| (iv) | an increase in R&D expenses of $59,130 primarily due to an increase in materials and equipment and subcontracting, |
| (v) | a decrease in net finance costs of $758,404 in Q3 2019, primarily due to the fair value adjustment of investments. |
EBITDA
The EBITDA loss in Q3 2019 was $556,963 compared with an EBITDA loss of $2,538,215 for Q3 2018, representing a decrease of 78% year-over-year. The $1,981,252 decrease in the EBITDA loss in Q3 2019, compared with Q3 2018, is due to the decrease in comprehensive loss of $1,793,803, an increase in depreciation on property and equipment of $1,627, an increase in depreciation of right of use assets of $111,492, an increase in amortization of intangible assets of $5,267 and an increase in finance charges of $69,063.
Adjusted EBITDA loss in Q3 2019 was $542,814 compared with an Adjusted EBITDA loss of $2,334,831 for Q3 2018. The decrease of $1,792,017 in the Adjusted EBITDA loss in Q3 2019 is attributable to a decrease in EBITDA loss of $1,981,252 and a decrease of $189,235 in share-based payments.
Modified EBITDA loss in Q3 2019 was $613,531 compared with a Modified EBITDA loss of $1,578,081 for Q3 2018, representing a decrease of 61%. The decrease in the Modified EBITDA loss in Q3 2019 is attributable to the decrease as mentioned above in the Adjusted EBITDA loss of $1,792,017 and a decrease in the change of fair value of investments of $827,467.
Liquidity
The Company has incurred, in the last several years, operating losses and negative cash flows from operations, resulting in an accumulated deficit of $55,163,886 and a negative working capital of $8,509,212 as at September 30, 2019 (December 31, 2018 - $51,066,540 and $4,101,428 respectively). Furthermore, as at September 30, 2019, the Company’s current liabilities and expected level of expenses for the next twelve months exceed cash on hand of $276,067 (December 31, 2018 - $644,981). The Company has relied upon external financings to fund its operations in the past, primarily through the issuance of equity, debt, and convertible debentures, as well as from investment tax credits.
Revenue generated from active projects does not yet produce sufficient positive cash flow to fund operations. However, based on current backlog of $29.5MM at November 27, 2019, together with the pipeline of prospective new projects, cash flow from operations are expected to become positive in the very near future.
About PyroGenesis Canada Inc.
PyroGenesis Canada Inc., a high-tech company, is the world leader in the design, development, manufacture and commercialization of advanced plasma processes and products. We provide engineering and manufacturing expertise, cutting-edge contract research, as well as turnkey process equipment packages to the defense, metallurgical, mining, advanced materials (including 3D printing), oil & gas, and environmental industries. With a team of experienced engineers, scientists and technicians working out of our Montreal office and our 3,800 m2 manufacturing facility, PyroGenesis maintains its competitive advantage by remaining at the forefront of technology development and commercialization. Our core competencies allow PyroGenesis to lead the way in providing innovative plasma torches, plasma waste processes, high-temperature metallurgical processes, and engineering services to the global marketplace. Our operations are ISO 9001:2015 and AS9100D certified, and have been since 1997. PyroGenesis is a publicly traded Canadian Corporation on the TSX Venture Exchange (Ticker Symbol: PYR) and on the OTCQB Marketplace. For more information, please visit www.pyrogenesis.com.
This press release contains certain forward-looking statements, including, without limitation, statements containing the words "may", "plan", "will", "estimate", "continue", "anticipate", "intend", "expect", "in the process" and other similar expressions which constitute "forward- looking information" within the meaning of applicable securities laws. Forward-looking statements reflect the Corporation's current expectation and assumptions and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. These forward-looking statements involve risks and uncertainties including, but not limited to, our expectations regarding the acceptance of our products by the market, our strategy to develop new products and enhance the capabilities of existing products, our strategy with respect to research and development, the impact of competitive products and pricing, new product development, and uncertainties related to the regulatory approval process. Such statements reflect the current views of the Corporation with respect to future events and are subject to certain risks and uncertainties and other risks detailed from time-to-time in the Corporation's ongoing filings with the securities regulatory authorities, which filings can be found at www.sedar.com, or at www.otcmarkets.com. Actual results, events, and performance may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements. The Corporation undertakes no obligation to publicly update or revise any forward- looking statements either as a result of new information, future events or otherwise, except as required by applicable securities laws. Neither the TSX Venture Exchange, its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) nor the OTCQB accepts responsibility for the adequacy or accuracy of this press release.
SOURCE PyroGenesis Canada Inc.
For further information please contact:
Rodayna Kafal, Vice President Investors Relations and Strategic Business Development
Phone: (514) 937-0002, E-mail:
ir@pyrogenesis.com
RELATED LINK:
http://www.pyrogenesis.com/
