Dear Berzy, 

This is a very difficult question to answer given the very nature of the topic it touches upon and that is one of strategy, as opposed to the nature of an NDA in general, or specifically the one noted in your question.

Obviously, I am not at liberty to discuss specific conversations that took place leading up to the NDA, but I can assure you this is not the first NDA we have written with a credible entity.  I can also confirm that the last conversation I had with them the goal was to pursue the NDA. Beyond that is subject to the NDA.

However, subject to the above, let me break down your question into what may be four areas of interest/concern that I can address in more detail,  namely: First, did PyroGenesis do something wrong? Second, was there something false or misleading disclosed? Third, why change the press release? Fourth, why disclose an NDA in the first place?

With respect to the first question, Did PyroGenesis do something wrong?, let me assure you that  PyroGenesis did absolutely nothing wrong.  I wish I could go into more detail than that to convince you, but that is the bottom line:  nothing wrong was done.

With respect to the second question, was there something false or misleading disclosed?, again I can assure you that nothing in the original press release was either wrong or misleading and we stand by our original disclosures.

My answers to the first two questions naturally lead to the third; why change the press release then?, and that is more complicated to answer because it speaks to strategy.  The decision to change the press release was an internal decision based on a changed strategy with respect to how we wish to manage this information. Regretfully, strategy sometimes does not keep step with events and this was a case in point.  We decided, maybe wrongly, to change the press release as we did, to keep in step with this new strategy (at least it wouldn’t be on our web site).  As I said, it may not have been the right thing to do, and I am the first to admit that we don’t, and wont, always get it right, but we try our best, and I think that our track record speaks for itself in this respect.

This now leads to the fourth question which speaks to the heart of it all: why disclose an NDA in the first place?, and that is easier to address.  In our opinion the actual signing of this particular NDA, in and of itself, was material, and as such we were bound by laws/regulations to disclose it.  We sign over 2 NDA’s a month and I cannot recall another time we disclosed an NDA…. maybe there was one?  All this to say we sign over 25 NDA’s a year and we don’t typically, if ever, disclose such, why now?  To answer that specific question, one must appreciate PyroGenesis’ recent history:

 About 18 months ago PyroGenesis decided to get out of a $12MM contract to deliver 10 powder producing systems to an Asian client in favour of getting into the powder production business.  At the time, our strategy was not well understood, and we were highly criticized for getting out of an existing, paying contract.  I heard the “bird in the hand vs birds in a bush” refrain more times than I would like to count.  There were even, in some remote corners, accusations flying that the system didn’t work, and that we were masking it with a “new venture”.  Our stock languished in the 20-cent range and it was an uphill battle during the first half of last year.  The market started to understand what we were talking about only after GE announced its intention to acquire Arcam in the 2nd half of 2016 and the focus started to center on powder supply.  There was still doubt in the marketplace as to our ability to get a system up by our target date of Q1 2017.  We did it on time.  The market started to sense that we might be something to keep an eye on, but the question with respect to who we actually are (the inventors of Plasma Atomization? Really?), and what we are doing, still lingered.  There was also the question of ramp-up…could we do it?  Well we did that as well, and at the same time we developed new IP.  We started becoming recognized.  We started to be featured in articles alongside major players in the AM industry.  We went from being highly criticized to becoming the player in the room that everyone wanted to understand better…and engage with. 

It is in this light that an NDA such as the one we announced is material to a company such as ourselves, and must be disclosed, particularly in light of this history.  It justifies our vision, our strategy, and our positioning all at once.  Even if nothing comes from it, the fact that a global international engine manufacturer has taken the time to negotiate and conclude, an NDA with us, in and of itself is material on more than one level.

Berzy, you asked a very complicated question and I hope I have done it justice.  Regretfully I cannot spell out the reasons behind our decision line and verse, but that is the nature of strategy – sometimes its best kept under wraps.  I am not sure where this relationship with this global international engine manufacturer will go, but I think we can all agree it’s more than a good first step.

Sincerely,

P. Peter Pascali, CEO, PyroGenesis Canada Inc.