PyroGenesis Canada Inc.

Good day, and thank you for standing by. Welcome to the Pyrogenesis Canada First Quarter 2022 Business Update Conference Call. At this time, all participants are on a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your first speaker today, to Rodina Cafal, Vice President, Investor Relations. Please go ahead.

Thank you. Good morning, and thank you for joining Paragenesis' first quarter 2022 Financial Results and Business Updates Conference Call. On the call with us today are Peter Pascali, Chief Executive Officer, Andre Manella, Chief Financial Officer, Costa, the Packers Controller, and Steve McCormick, Vice President, Corporate Affairs of Paragenesis. The company issued a press release yesterday on May 16, 2022, containing business update and financial results for the 2022 first quarter ended March 31, 2022, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact the IR department. The company's management will now provide prepared remarks reviewing the financial and operational results for the 2022 first quarter ended March 31st, 2022. I would like to remind everyone that this discussion will include forward-looking information that is based on certain assumptions and is subject to risk and uncertainties that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information. Forward-looking information provided in this call speaks only as of the date of this call and is based on the plans, beliefs, estimates, projections, expectations, opinions, and assumptions of management as of today's date. There can be no assurance that forward-looking information will prove to be accurate, and you should not place and do reliance on forward-looking information. Prior genesis disclaims any obligation to update any forward-looking information or to explain any material difference between subsequent actual events and such forward-looking information, except as required by applicable law. In addition, during the course of this call, there may also be reference to certain non-IFRS financial measures, including references to adjusted net loss and adjusted EBITDA, which do not have any standardized meaning under IFRS, and therefore may not be comparable to similar measures presented by other companies. For more information about both forward-looking information and non-IFRS financial measures, including a reconciliation of each of adjusted net loss and adjusted epic delta net loss, please refer to the company's management discussion and analysis, which, along with the financial statements, are available on the company's website at www.paragenesis.com and the company's corporate filings on CEDAR With that, I will now turn the call over to Peter Pascali, President and Chief Executive Officer. Please go ahead, Peter.

Thank you very much, Rubina, and thanks for everyone for joining us today on this call. To say that I'm disappointed would be an understatement because what should have been one of our best quarters was negated by logistic issues being dealt with by our clients. In fact, this is the first quarter throughout the pandemic where logistics issues have impacted our bottom line. But although I'm disappointed for investors and for our production team, because as I said, this should have been one of our best quarters, I'm extremely excited at where we are, where we're going, and the foundation upon which we have built. this company, as you'll soon see as we peel back the numbers for you. I'm pleased to report that we continue to execute on our business growth strategy by offering technology solutions that provide benefits from greenhouse gas emissions reduction. We also continue to build upon established customer relationships, introducing new solutions, and entering new markets. which is setting us up for ongoing success for years to come. Despite the continuing challenges of the global marketplace due to COVID, plus new challenges resulting from the conflict in Ukraine, as well as energy supply shortages in Europe and China, impacting both the cost and output of aluminum and steel opportunities for aerogenesis continue to expand across the board. In fact, these factors and the global push towards fossil fuel reduction at both industry and government levels give us the ability to further showcase the pyrogenesis advantage. We expect that the tailwind into an already strong pipeline will continue throughout 2022 and beyond. The company's backlog of signed contracts is 41.2 million. We expect to maintain this backlog and more than likely raced past the 50 million mark due to the numerous proposals and bids well underway with many more in development. We maintain our competitive advantage by remaining at the forefront of technology development and commercialization. Excuse me. Our core competencies allow Pyrogenesis to lead the way in providing innovative, ultra-high temperature solutions including plasma torches, plasma waste processes, metallurgical processes, and engineering services to the global marketplace of heavy industry sectors such as aluminum, steelmaking, and iron ore production. Additionally, since our acquisition of Pyro Green Gas, we now offer technologies, equipment, and expertise in the area of biogas upgrading and air pollution control which further demonstrates our commitment to offer technology solutions that provide benefits from greenhouse gas emissions reduction. World events in 2022 have served to highlight how our technology solutions are now in even greater demand. In particular, the conflict in the Ukraine has demonstrated once again how geopolitical influences will continue to impact the supply of metals that are already under extraordinary supply pressure. As the war in the Ukraine drove supply chain issues with additional sanctions on Russia, aluminum spot prices spiked as high as 60% year-over-year in March 2022, up to $3,487 a ton, which was a 30-year high. The conflict has also fully exposed the vulnerability of aluminum producers to power availability and energy price uncertainty, and current energy supply challenges are being experienced by European and Asian metal producers were exasperated during the war. All of these factors underscore that with global metal demand growing, anticipated to grow, sorry, by 80% by 2050, and industry carbon reduction targets not yet on track to meet their goals, aluminum producers must find ways to improve their efficiency and increase their yield of high-quality metal from current production, all while lowering their carbon footprint. Our range of technology solutions provide just such an opportunity, with the company's dross rate systems providing industry-leading dross recovery rates of high-quality aluminum in line and on site, with a lower OPEX and lower carbon footprint than all current competing technologies. Additionally, the company's mainstream plasma torch offering provides another technology-driven solution for metal producers looking to reduce their reliance on the volatile natural gas supply chain, or any fossil fuel for that matter, within any aspect of their operations that require metal melting or heating. These same or similar pressures are affecting the global steelmaking industry, into which we have already sold initial torches for final pre-ordered trials. and we expect similar positive outcomes as a result of these additional pressures. For clarity, as stated many times, most of Pyrogenesis' product lines do not depend on environmental initiatives such as tax credits, GHG certificates, environmental subsidies to be economically viable. We believe that with the increased commitments by the steelmaking and aluminum industries to carbon reduction, it is anticipated that our growth drivers will expand and shareholders will see increased value. We believe that the pyrogenesis organic growth will be spurred on by a multitude of events including, one, the natural growth of our existing offerings which continue to accelerate given our strong balance sheet. Two, leveraging off of our insider golden ticket advantage For example, and the fact that the inline hot dross-enabled dross right metal recovery system is installed inside a customer's facility versus the legacy cold dross rotary salt furnace approach that is installed off-site. This allows us to see firsthand some of the additional and peripheral needs of our customers. And three, exploring, testing, and rapidly commercializing new ways to provide unique solutions and value that helps industries deal with some of the most pressing environmental, engineering, and energy problems they have ever seen. Our insider golden ticket provides the opportunity to either cross-sell other products or, ideally, identify new areas of concern that can be addressed uniquely by PyroGenesis' solutions. Over the past several years, PyroGenesis has successfully positioned each of its business lines for rapid growth by strategically partnering with multi-billion dollar entities. These entities have identified PyroGenesis offerings to be unique, in-demand, and commercially viable. We expect that these relationships are now positioned to transition into significant additional revenue streams. I'd like to highlight that we are now one of the largest, if not the fastest growing dross recovery solution in the world. with 11 DrossRite systems in use or slated for delivery to markets around the world, and three more under LOI. Once all systems are fully operational, we will expect to generate recurring revenue from ongoing maintenance and spare parts contracts. We also continue to increase the price and efficiency of our systems and are pitching several more contracts as we speak. During the quarter, we received a $4 million purchase order for the first of three 10-ton DrossRite systems from an existing client. which follows the receipt of an LOI from the existing client in June 2021. We believe this further validation of the success we're having in introducing our environmental technologies within the aluminum industry. Turning now to the steelmaking and iron ore business. As most of you know, steelmaking is one of the most carbon emission intensive industries in the world. estimated to be responsible for between 7% and 12% of all global fossil fuel and greenhouse gas emissions. When combined with iron ore, these two related issues account for almost one quarter of all industrial emissions. The industry continues to be under intense pressure, including huge financial penalties to reduce these emissions. This pressure on the steelmaking industry allows pyrogenesis to expect demand for its upstream iron ore pelletization solution to increase significantly as deal makers look to all aspects of the production life cycle for carbon reduction opportunities. In fact, during the quarter, we announced the scheduling of a factory acceptance test for plasma torches for Client A, a multi-billion dollar international producer of iron ore. Subsequently, on February 8th, we announced the completion of the factory acceptance test and further announced that the torch system would be shipped to the client's facility and it is expected to arrive on or about the end of the second quarter of 2022. On February 1st, we also announced a request for a cost estimate for 36 plasma torches from the same client A. The estimate was provided at a value of between $95 and $115 million. This was for 36 plasma torches from client A that we expect has a need for at least $500 million. In addition, we are proactively targeting other industries which are experiencing significant pressure to reduce greenhouse gases and which utilize fossil fuel burners as well, such as the cement, aluminum, and automotive industries. Additionally, we are also offering plasma torches to emerging niche markets where there's a high probability of ongoing sales from successful implementation. An example of this was our announcement that we had signed a contract with the European Research Center to manufacture and deliver a 50-kilowatt methane plasma torch, which will be used by the client to develop a process to convert hydrocarbons, including methane and greenhouse gas, into useful chemicals such as olefins, thereby significantly reducing greenhouse gases. For each new market we open, we also benefit from providing proprietary spare parts and services. which generates significant recurring revenue, thus complementing our long-term strategy to build a recurring revenue business model. With respect to added manufacturing, we continue to expect to see significant year-over-year improvements in our 3D metal powders offering, as our next-gen facility is now officially online and operational. This new facility incorporates all the previously disclosed benefits, such as increased production rates and lower capital and operating expenditures. Notably, a major tier one global aerospace company has already entered into an agreement with us to formally qualify our powders at considerable expense to the global aerospace company with a view towards having us become a supplier. This qualification process has been ongoing for quite some time as the customer undertakes this critical process in a very methodical manner, analyzing our process, our facilities, and our powders again and again to ensure absolute accuracy. It's a slow but necessary process that speaks to the safety and caution of the aerospace industry. There are additional major top-tier aerospace companies and OEMs in both Europe and North America eagerly awaiting powders from this new state-of-the-art production line, and we are currently in the process of supplying sample powders to them for analysis as we speak. We expect that such developments will continue, will translate into improvements and contributions to revenue by this segment in the mid to long term. In conclusion, Cryogenesis sees 2022 as a foundational year from which we will drive exponential growth and position ourselves as a leader in the market for decades to come. We plan to take advantage of our unique position in the market and our broad offerings to accelerate growth, with a particular emphasis on offerings geared to aggressively reducing greenhouse gas emissions and the world's carbon footprint, while finding and offering solutions to pressing environmental, engineering, and energy challenges while driving cost savings for our clients. I'll be back with some final thoughts at the end, but at this point, I'd like to turn the call over to our Chief Financial Officer, Andre Manella, to go over the financials in detail. Andre, please go ahead.

Thank you, Peter. Total revenue for the three-month end in March 31, 2022, was $4.2 million, a decrease of 33% from $6.3 million for the same period last year. The revenue decrease was mainly caused by a decrease in sales related to DrossRide and Curva, as well as a decrease in support-related sales to U.S. Navy, offset by an increase in tourist sales and an increase in biogas upgrading and pollution controls. As of May 15th, yesterday's filing date, the company had a backlog of signed contracts of $41.2 million. Gross profit for the three-month period ended March 31st, 2022, with $1.1 million, or 25% of revenue. That compares to 2.1 million or 34% of revenue for the same period last year. Cost of sales and services before amortization of intangible assets was 2.9 million in Q1 of 2022. This represents a decrease of 29% when comparing to 4.1 million of the same quarter last year. The decrease in cost of sales was primarily due to a decrease in direct materials and manufacturing overhead of about 1.8 million. offset by an increase of approximately $600,000 in employee compensation, subcontracting, and foreign exchange. If we look at SG&A and exclude the costs associated with share-based expenses, and just to mention, this is a non-cash item in which the option expense is amortized over the vesting period. That expense for the three-month period ended March 31, 2022, is $3.9 million, representing an increase of 41%. and covers 2.8 million for the same period in 2021. The increase in SG&A expense was mainly attributable to an increase in employee compensation as a result of additional headcounts as we continue to build up our base and our facilities, as well as an increase in professional fees, office and general travel, depreciation of property and equipment, and depreciation of right of use assets, along with government grants, ITCs, and other expenses. Additionally, share-based expenses increased by 81% to $1.7 million for the quarter, converting $922,000 for the same period in 2021. R&D expenses for the three-month period ended March 31, 2022, were $482,000, an increase of 69% or $286,000 for the same period of last year. For comprehensive loss for the three months ended March 31st, 2022, it was $4.1 million compared to a net income of $3.7 million for the same quarter of 2021. Modified FDBA, which we consider a useful metric in measuring ongoing operations, was at a loss of $2.8 million compared to a loss of $761,000 in Q1 of 2021. Modified FDBA excludes $1.7 million of non-cash share-based expense as well as a $1.2 million adjustment for the fair market value of strategic investments in Q1 2022. This is attributable to the decreased market price of the common share and warrants owned by the company of HPQ Silicon Resources, Inc. Modified EBITDA also adjusts for an increase in depreciation of property and equipment, $67,000, an increase in depreciation of right-of-use assets, right around $60,000, increase in amortization of intangible assets of $212,000, an increase in financial expense of $131,000. We had a strong balance sheet on March 31st, 2022, with $6.6 million of cash and cash equivalent. With a strong and clean balance sheet, we believe we're well positioned to execute on our strategy of growth, both organic and through synergistic mergers and acquisitions. Additionally, it's key to point out that our revenues and our growth margins this quarter both reported downwards, were impacted by certain accounting procedures that negated the recognition of certain revenue. More specifically, the company had nearly completed several projects that were delayed due to global shipping challenges and not completed as quickly as we would have liked. As a result, a slower recognition of costs or cost of sales means a slower percentage of revenue recognized. With these factors related to external shipping and logistic factors and not to the company's sales and production efforts, It's noteworthy that this should be mentioned for the benefit of investors' understanding. In addition, those contracts which are close to the final delivery stage tend to incur costs at a slower pace, as well as the corresponding revenue. Similarly, a reported cash position is also not representative of the full picture. For strategic reasons, we have made an arrangement with an existing customer to delay a large payment, an arrangement that will benefit both companies with further contracts. As this was intentional and temporary, there is no concern that we will not be paid, and there is no concern regarding our cash flow or cash on hand. At this point, I'll turn the call back over to Peter. Thank you, Andre.

In conclusion, we are very pleased with the progress we've made during the quarter where we have set the stage for continued success. Moving forward, we plan to take advantage of our unique position and expect our main business offerings to accelerate growth, the particular emphasis on offerings geared toward aggressively reducing greenhouse gas emissions and the world's carbon footprint, while funding and offering solutions to even more of the world's most pressing environmental engineering and energy challenges. For a strong financial position, we are well-funded to execute our growth strategy over the foreseeable future and have absolutely no plans and no need to raise additional capital. We remain committed to driving shareholder value and look forward to providing further updates as developments unfold. Once again, I'd like to thank you for joining the call today, and at this point, we would like to open the call up to questions from participants.

Operator? Thank you, Peter, and we actually received several questions from investors in advance of the call. We'll take a moment to read these questions aloud so that management can directly address these questions, and then we'll open up the call to live questions. So the first question that came in is, there's a difference across multiple lines for the changes in the value of strategic investments. On page five of the MDNA, it's changes in fair market value of strategic investments and financial expenses of $992,855. On page 10 of the MDNA, it's changes to fair value of strategic investments of $1,176,755. Can you clarify? I'll leave that to Andre. Andre, you want to take that?

Yeah. In fact, if I listen to the question, both lines refer to different items. So one of them includes or excludes the financial expenses. So the difference of $183,000 is exactly the financial expense, which is included elsewhere on the line. So it's not a misprint. It's just the lines themselves have two separate definitions. Thanks, Andre.

Great. Thank you. The next question is, you've changed the revenue recognition period from the previously used 18 months to now three years. Is this an indicator or admission that contracts are stalled and will take even longer?

There's no indication of stalled contracts. In fact, if we use the term, I believe the term we use is to a maximum of three years. So there's no change in the revenue recognition. There could be a slight change in the mix of contracts, but there's no indication of stalled contracts now.

I think just to underscore that it was to be factual and include all the contracts that come within three years, but most of them are, as we said, within 18 months.

Great, thank you. And the next, sorry. Go ahead. Our next question, from the MD&A, SG&A costs are up significantly on lower revenue and insurance costs seem to be increasing by a lot. Can you explain that? How much is insurance and for what?

The largest item on that SG&A portion, which increases year over year, is the insurance for the directors and officers, so the D&O insurance, which is new starting in Q2 of last year, 2021. Therefore, Q1 of last year does not have a significant D&O insurance, whereas Q1 of the current year has a significant portion of D&O insurance. So that's one of the main drivers for the SG&A increase. along with the additional headcount as we're building up our fundamentals of the business and the core business as well.

Great. Thank you very much. We'll now open up the call for live questions. Operator?

Thank you, sir. As a reminder, to ask a question, you will need to press star 1 on your telephone. To return your question, please press the pound key. Please stand by while we compile the Q&A roster. I show our first question. It comes from the line of Jeffrey Campbell from Alliance Global Partners. Please go ahead.

Good morning. Morning, Jeffrey. You mentioned on the call delaying a customer payment. Is this payment included in the backlog?

No. The backlog are contracts that have signed and have yet been percent completed. So the backlog is to be worked on. and to be billed, I guess, basically. And there's a second part to your question. Oh, did I answer it?

No, you answered it. I mean, basically, the revenues that you've delayed recognition of is for work that's already been completed and for reasons you haven't articulated, you're delaying the payment. Is that the way to think of it?

Are you talking about the liability item, billing an excessive cost of profits on contracts?

No, I'm not. No, I'm referring to, I mentioned earlier during the CFO's remarks that when he was talking about liquidity and apparent cash versus, I guess, cash in reality, that the company and the customer have mutually agreed to delay revenue from a contract. So that was what I was referring to.

Sorry, Jeff, I'll answer the question, but I have a question now. In fact, that's sitting in accounts receivables. So our accounts receivables balance is close to $17 million at March 31, 2022. But again, that's an intentional agreement that we've had with our customer to favor ourselves and to favor the customer to delay the payment or to delay the collection of the receivable. So that's why it's sitting in receivables, but it has nothing to do with the backlog of contracts of $42 million. So what we have in receivables of $70 million has been Bill delivered is collectible, but we just haven't collected it because of the agreement we have with our customer. Okay, got it.

So back to the backlog, just remind us again, what's the timeline for converting the $41.2 million?

So most of that is within 18 months, but there are some outlying ones like on the U.S. military contract that may go out three years. So a very short tail that will go out three years.

Okay. So particularly bearing in mind that this quarter came in softer than you wanted, what's the anticipated cadence of this revenue recognition over whatever time period you want to make, 12 months, 18 months? Really what I'm thinking about is is there going to be any kind of seasonality in these results or do you expect them to sort of build in a more linear manner, logistical issues notwithstanding?

So we don't experience any seasonal aspects to our business, really. We expect them to roughly play out over the next 18 months, barring any supply chain issues. Or when I say supply chain issues, I'm also talking about shipping. And I'll give you an example. We account, as you know, on a percent complete basis. and we could have our, for example, draw strike systems completed and ready to be shipped, sitting on our dock. But until they go that extra two feet and get into the truck or off the ship, we cannot percent complete it. So if there are delays in getting onto that truck or onto that ship to get them shipped, they can be sitting in our warehouse, and we will miss the quarter and not be able to percent complete them, although they are completed. But for accounting purposes, until they're actually out of our hands, They can't be percent completed. So barring any sort of anomalies with respect to that, we expect to run it out over the next 18 months in a linear fashion.

Okay. That makes sense. Regarding the, you know, racing to $50 million and beyond, I just wanted to dig into that a little bit because your estimate is to client A in this deal-making far exceeds that $50 million amount. So maybe you could give us some sense of the timeline surrounding that estimate, assuming it turns into an order.

So that's a good observation, Jeffrey. And I chose that $50 million mark just as a psychological mark. It's just, you know, a number that's above 41 right now. But as you pointed out quite rightly, so... The irons that we have in the fire, I mean, the 95 to 115, I think it's very real. I mean, it's very, very real. Everyone's moving forward. Everyone's investing time, effort, and money. Nobody expects anything to go onto a ride that would prevent us from moving forward. And the client is really motivated to move forward. I mean, they have huge issues, and now that's even further aggravated by the cost of diesel increasing. which, as you know, our torches don't run on diesel. So when they were excited before running quickly to put this torch in and get things moving, diesel prices were at a much lower level. Now we take away their dependence on diesel by putting these torches. So you can imagine the excitement. So I'll go out on a limb and suggest that if something should pop out of left field, maybe it'll increase the cost to us of providing a full system. Maybe we're gonna have to add something. But I do not see at this point anything that would critically affect the actual contract. Now I say that with a lot of caution because crazy things can happen. But that's the way it's looking and as you rightly pointed out Jeffrey, just that one order is between 95 and 150 million and we anticipate actually from beginning to end, delivering that well within nine months. Not from now, but from when it's awarded. So that particular contract, if you just want to focus in on that, could very well spell a very significant business nine months out, 12 months out. So thanks for pointing that out, because I wouldn't have dared done it unless it was an answer to a question.

Okay. Well, I'm glad I was of service. I've got two other sort of a little bit higher level questions. questions to ask, and then I'll turn it over to somebody else. The press release highlighted major aluminum spot price spikes on supply fears and aluminum producer vulnerability to power availability and pricing. And while this seems to logically support the need for greater productive efficiency, less throughput and higher operating costs also suggest capital to invest in efficiency might be harder to come by. So could you share your thoughts on this and perhaps how DrossRite Marketing anticipates this issue?

So, Jeff, I don't quite understand the question. You're speaking to ThrustRite, which recovers aluminum from a waste stream. The aluminum prices have gone up significantly since our offering has gotten a lot of excitement in the industry. In fact, we've mailed down some of the largest contracts put out to bid. So since that time, we are managing to decrease the cost of our systems by being able to buy in bulk. Instead of offering one system at a time, we're ordering multiple systems, so we're buying in bulk. That would tend to offset any increases in our product itself due to increased cost of supplies. However, on the demand side, there's increased demand because of increased interest. That aluminum waste stream now with aluminum is of much more value obviously because aluminum has gone up in price. So our offering has now changed somewhat. We're able to lower our costs because we're buying in multiple units from our suppliers. And the demand, what it actually does is better because the output, the aluminum that we recover is now of a higher value than it was a year ago. I'm not sure if I threw a back door. I answered your question, Jeffrey.

Well, no, that's a good answer. Maybe I was too highfalutin here. Basically, what I was trying to say was is that it sounds like from what you've said, there's some stresses on the aluminum producers with regard to perhaps how much throughput they can get out and also that their operating costs are higher because we all know aluminum uses a lot of power and power prices are up. So what I was really trying to get at is that maybe they don't have as much discretionary capital around to invest in the efficiency of the Drosserite system as they might have if they were able to have higher revenues on greater throughput and greater margins on lower costs. So what I was really wondering is, does Drosserite have any things in its toolkit to help, let's say, a theoretical aluminum producer that wants to it draws right in sooner than later, but might be a little bit capital constrained to make the investment.

So, here's something interesting. The aluminum producers are producing aluminum, and however they do it, they're doing it, right? Increased costs. And what they do naturally by doing that is they have a waste stream. Now, that waste stream has more value. That's the key. And I suspect... If you can get more value from your waste stream, it sort of offsets any other costs or increase your profitability at the other end, no matter what's happening to you. So the fact that they've got this valuable aluminum in their waste stream, and that value has increased significantly over time, the only prudent thing for them to do is recover it as best as they can. So pyrogenesis drossite system is a proven entity. it's out there, it's won some of the biggest bids, it's working. And now it's recovering basically at the same cost. I mean, to us, it's even lower cost because, as I say, we're buying in bulk. So, if I was an aluminum producer, I'd be very, and they are, they're very focused on getting the maximum they can from their waste. So, again, no matter what's happening on the other side of their business, we add an advantage by actually increasing the value of their product. increasing the value that they extract from their waste stream. Okay.

All right. That's fair. And my last question is somewhat similar for the steelmakers. Maybe I'm not visualizing this correctly, but it seems like the plasma torch installation can be managed more incrementally than just having to buy a whole comprehensive system. Is that correct? And if it is, would that aid acceleration in any way?

Well, of all our product lines, probably offering a torch is one of the fastest and simplest ones and one we have the most experience with. That's what we've been doing for 20-plus years, manufacturing all sorts of torches. So from beginning to end, from cradle to grave, you sign the contract delivering, it's lightning fast. I mean, we can do it with no advance notice within nine months, but with advance notice, we can get it done and installed. We're hoping we're targeting three to four months It's a very quick installation, very, very quick. What's interesting also is that when we make these torches, we can make them off-site if we have a large number, and we can drop-ship them to the iron or pelletizer site where they have a significant engineering expertise. So they can actually install it themselves. If they need, we can do it remotely, or we can send a team if they need to every so often. But this is one of the most exciting... of our offerings because we don't need to really invest in manufacturing space. We can leverage off of other people's manufacturing facilities. We can leverage off of the local expertise in engineering to install. It's really, the stars have all lined up for that. And if it wasn't exciting enough a year ago, now, as I said, and I hate to repeat myself, with the increased price of diesel, the business case for these things goes out the roof. Up the roof, up the roof, through the roof, through the roof.

Yeah, no, that's excellent color. So I appreciate those comprehensive answers.

Thanks, Jeffrey. Thank you. As a reminder, to ask a question, you would need to press star 1 on your telephone. To return your question, press the pound key. I show our next question comes from the line of Rob McIntyre, private investor. Please go ahead.

Thank you for taking my call. Hello? Hello there, Rob. Yes. Hello, Rob. Thank you for taking my call. Could you give us a little comment on what's happening with Client B in terms of manufacturing, delivery, installation of his four torches?

So Client B, I believe, is the client who has ordered four torches. If I recall, they're for about $1.5 million apiece. So it's about $6 million. Okay. That client has also given us some visibility as to what we should expect should these four torches be put in place and they work. It's for, I believe, $130 million of contract... Say it out loud. Okay, 130 torches. Sorry about that. Sorry about that, Bob. I got numbers running all over my head right now. And, of course, there's things we're working on that I can't talk to. But, so, yeah, that was 130 torches. And right now, those are being manufactured and shipped to them. Interestingly enough, both client A and client B have have in their annual reports, reflect the fact that they're actually working with plasma and plasma torches. Although we don't name them, we do have the patent on that, so you can probably default to the fact that we're working with them. And they're so excited about it, they actually decide to highlight it in their annual reports. So I think that speaks also to where we are with them, with client A and client B. Client B, the delivery is longer because they have a different implementation strategy or timeline.

So you cannot tell us when you expect to deliver?

We can't at this particular time. Okay.

Thank you. Pleasure. Thank you. I'm sure there are further questions in the queue. At this time, I'd like to turn the call back over to management for closing remarks.

I think we had some other questions that came through the email. David, are you there?

I am, yep. Yeah, so another question that came in was the cash burn is high with no sign of payments based on this burn rate going from 12.2 to 6.6 of about $500,000 a week and given that the quarter is half over within the next six weeks. the company will be out of money. How is the capital raised not to be expected?

So, yeah, so there's no capital raised. I think Andre spoke to that. I spoke to that. So there's no capital raised expected. Oftentimes it's a good question because we have management always has more information, full information. So when we look at the receivables of $17 million, which is real and collectible, We also know what type of down payments and what type of future payments we're getting on existing contracts. So that gives us a visibility as to our cash flow. The other thing is that we have, and actually, because it's been a question that's been coming, been asked from you recently, what we also did was we described at some point in our presentations not just cash and cash equivalents, but also publicly traded shares. I think our public traded share is something around $14 million, and you add it to cash, close to $20 million. And the reason we do that is to give people comfort that we're sitting on cash, cash equivalents, and publicly traded shares of a significant number, and that before a capital raise would be considered, one might suspect that we would tap into that amount as well. So rest assured... We're not running out of cash. 500K a week has full visibility on the cash flow. And barring any catastrophic unexpected event, we do not expect to be raising capital because we're running out of cash. Absolutely not.

Thank you. And I think the other two questions you've touched on, but the next one is, how has the backlog decreased by approximately 6 million but revenue is only 4.2 million? Okay. This was asked, I believe, in the last earnings call as well.

It's an interesting question because people assume that when we describe the backlog, which, for those that are unfamiliar, are signed contracts, they are at the same time that we are announcing revenue. For instance, our revenue for the quarter ends March 31st. But regulators mandate that when we do the press release and talk to backlog, it has to be at the date of the press release. So although the revenue was of March 31st, the backlog was as of the press release, which was yesterday. So it's very difficult to marry the two.

Great. Thank you. And the last question is, what happened to the target of $65 million within six months? This has been dropped from the discussion.

Okay. I don't think it's been dropped from the discussion. In fact, I think we've spoken to a particular element of it. I think the last time we discussed it was in our overview of the aluminum industry, where we once again pointed out that a significant part of that 65, now follow the numbers, the 65, about 40 million was delayed, and we talked about why it was delayed, because management changes, et cetera. Now, the difference between 65 and this 40 is 15. Sorry, 25, okay? Sorry, 25. I thought there was a lot of numbers going around in my head. When we announced, first announced the $65 million, that was pipeline, by the way. It was pipeline. It was last April, very much April. At the time, and I want people to focus on this because this really underscores how successful and how exciting things are here. At that time... we had announced roughly a $30 million backlog of signed contracts. That was when the press release came out sometime in the middle of April, I think it was. Since that time, we booked about $30 million in revenues. And our backlog increased to a high of 47.7. Now it's 40 million. So I don't know if you see what's happened here. But since we spoke about the $65 million of pipeline, we've increased our backup to $47 million and ran about $30 million of revenues through our income statement. That's outrageous. Outrageous. And if anybody criticizes this, not focus on the fact that we're now in Q1, although I'm a little disappointed, I'm also very excited. We're posting revenues this quarter, which are in line with last year's. We're talking about the revenues that in previous years, they were our total year's revenues. And we're doing that in every quarter. And what we're showing this year is it's not an anomaly. 2021 was an anomaly. We're building on a solid foundation of great growth in 2021. Our backlog is increasing. And Mr. Jeffrey Campbell was on talking about the $95 to $150 million pipeline that we have with a very serious client A. I mean, we're really lining things up with no debt on our balance sheets. And no, we're not running out of cash, as we point out. We've got cash, cash equivalents, and public shares of over $20 million. And no debt. So don't... So... Don't focus on a $65 million number like that. You've got to figure out what else has been happening. So, you know, how do we have that $40 million thing? Our backup would be $80 million, for crying out loud. So everything's going well, and if you expect us to hit everyone 100% on, forget about it. Go invest in some other company. We're not going to tell you we're going to hit it 100% every time, but we're going to nail it pretty close. Sorry, David. Sorry, David. You didn't ask that question, David. We won't kill a messenger. We won't kill a messenger. Okay.

Any other things that people like to talk about? No, I think that covers the questions that we received, so feel free if there's anything else you'd like to add. Okay.

All right, ladies and gentlemen, I think that concludes our earnings call for Q1 2022, I look forward to seeing and hearing from you between now and Q2. Any questions you may have, post them on the GORCOM website and we'll answer them or ask them directly to Pyrogenesis ourselves and we'll answer them as best as we can with the public information we have. Thanks a lot. See you next quarter.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.