Dear JLM,

Thank-you for your kind words of appreciation.  It was a team effort and we have the best plasma team in the world working here, and we all owe this success to them.

I also noted to someone earlier today that, when you read such news remember it was a combined effort of technology/ideas and money ...both sharing the most important ingredient: vision.  Our supporters and investors played no small part in helping us change the world with our advances.  So, congratulations goes out to you, and all our supporters, who shared the vison, for without that ideal combination of ideas and money we would not be here today.

With respect to your questions I will try and answer them as best I can within the context of publicly available information

Despite our recently announced plans to add to capacity we do not think that will be sufficient for the potential demand given the level of interest we are seeing. 

We are conservative by nature and are reluctant to build excess capacity without having a clear understanding of where that capacity is going.  I would hate to be negotiating a long term take or pay contract with a client who knows I am sitting on excess capacity.  On that note, most everyone knows we don’t have football field after football field of powder production systems and as such realize that we would have to build into any capacity of reasonable size.  This build out we call our Industrialization Plan.

Our Industrialization Plan is a very detailed plan of the exact layout of each piece of equipment and how they will relate to each other.  Recognizing such a plan takes about 6 months or more to finalize we decided to start it ahead of any large order to save that time down the road.  The plan is flexible to some degree as it articulates the ideal plan for 1 unit, 3 units, or 5 units.  As such we can combine the plans for almost any ideal configuration (8 units would be 5 plus 3).  The plan is updated every time we have an improvement that we are confident enough to commercialize with.

Our strategy is to implement the Industrialization Plan when we are confident that the production will be called for.  Ideally, this would be in conjunction with a take or pay contract.  A take or pay contract would also help in funding the build out under the Industrialization Plan.

I do not want to give too much away when discussing new IP, but I think it would be safe to say that any improvements to production rates would see a reduction in cost, everything else being equal.  I think it is also safe to say that any reasonable management would be interested in doing just that.  Achieving that goal would probably be a combination of things, each adding to whatever has been accomplished  and, as such, can be viewed as multiple independent successes as opposed to one hit or miss event.  With respect to this issue, who better to tackle it than the inventors of the process who also have one of the largest concentrations of plasma expertise under one roof?  I can’t think of any one better positioned.

The new towers have incorporated some improvements over the older model, but only those improvements that we are confident in.  When compared to what we are testing out, the incorporated improvements are negligible.  The challenge is to accelerate the testing of improvements so that when we are called upon to execute the Industrialization Plan we can do so at the best production rates.  It is a nice problem to have.  When put in context of where we were Q1 2017, almost completely unknown in the field, we are very happy to have this issue today.

I trust that answers your questions,

Thanks again for the kind words,

 Sincerely, 

Peter

CEO

PyroGenesis Canada Inc.