Mr. P. Peter Pascali, President and CEO of PyroGenesis, provides additional information in the following Q&A format.
Q. How significant is this potential Contract?
A. If awarded, as we anticipate, this Contract would be the single largest Contract in the Company’s history, representing over 3x last year’s revenues, and addresses the need of a very significant entity. Obviously, this Contract would also make PyroGenesis profitable.
Q. Do you have the infrastructure in place to perform under this Contract and will you need to hire additional personal to complete?
A. We have both the infrastructure and personnel in place to complete the project. We do not anticipate the need for additional capex or hiring more than one additional person. As a result, we anticipate very high margins with this Contract.
Q. Can you give us a sense of the economics, timeframe and details of the subsequent year revenues?
A. Most certainly.
First year revenues of $20M, together with subsequent year revenues, all meet our minimum targeted gross margins.
The net present value of all subsequent year’s revenues (using a 5% discount rate) is between $30-50M, giving the Contract a total value of between $50-70M.
Q. Why did you say “imminent”, and what are the next steps?
A. We said imminent because we expect this to be formally recognized shortly. Once this formal recognition has taken place, there will be a contractual arrangement after which a formal signing will kick off the Contract. This contractual arrangement will be quite detailed as it spans several years.
Q. What product line is this Contract for?
A. As much as I would like to, I cannot disclose, at this time, which business line it is in, or even where it is geographically. What I can disclose is that it is not related to our Military business line, and that it fits very well with our announcements over the past six months.
Q. How confident are you that this will materialize in the near term?
A. There is always a risk, but we are of the opinion that all major hurdles have been dealt with, and the path is now clear to contract. As a result, we felt this was material news and we have an obligation to our shareholders to disclose at this time even before the formal contract is awarded.
Q. How does this impact the long-term prospects for the Company?
A. As disclosed, this will be a very significant Contract for the Company. This is in addition to the approximately $12M in revenues that will be generated from the two-build order for Plasma Waste Destruction Systems for the US Navy, we previously announced, which translates into combined revenues well in excess of $30M over the next 12-18 months.