While investigating for four years on transactions involving the big boss of PyroGenèse, the Autorité des marchés financiers (AMF) forces the interruption of a financing transaction announced last week by the Montreal technological company of industrial processes in plasma.
The AMF has just issued an order suspending the private placement of units worth several million dollars announced by PyroGenèse on February 14, for a period of 15 days.
The AMF argues that PyroGenèse does not meet all the requirements necessary to complete the financing, namely that it will have the funds necessary to achieve its business objectives and meet its liquidity needs for a period of 12 months.
The financial statements raise “reasonable doubts” for the AMF regarding the solidity of the financial foundations. The regulator points to “numerous weaknesses” in internal control over financial reporting.
“Some of these weaknesses are reflected in the financial information obtained, in particular by the significant variations in the items presented in the different versions of the summary of the forecast cash flows”, can be read in the decision sent to the company at the end of the Wednesday by the AMF.
AMF staff noted, for example, that cash flow from operating activities is negative “significantly, which demonstrates short-term cash flow problems” and that the provision for expected credit losses recognized in interim financial statements is “understated”.
In response, PyroGenèse claims that it will be able to provide sufficient evidence to respond to the AMF’s concerns over the coming weeks and specifies that it will re-examine its financing options, with its banker Cormark Securities, in the context of the market at that time.
Under investigation since 2019
The CEO of PyroGenèse, Peter Pascali, has been in the crosshairs of the Quebec stock market policeman for four years. The AMF ordered an investigation on June 10, 2019.
This information comes from a motion filed earlier this month by the AMF in the Superior Court of Quebec. The request provides details regarding certain information sought by the AMF.
PyroGenèse itself had revealed on Tuesday the existence of an investigation, saying that it understood that the AMF was looking into the actions taken by its president and chief executive, Peter Pascali, as part of an agreement concluded in the spring of 2018. between PyroGenèse and a company controlled by Peter Pascali’s late father.
According to this agreement, PyroGenèse issued $3.7 million in securities to the company controlled by Peter Pascali’s father in 2018 to settle a $5.5 million claim related to a previously acquired intellectual property rights. carried out.
PyroGenèse’s largest shareholder with a 46% stake, PyroGenèse founder, CEO and board member Peter Pascali was questioned three times by AMF investigators in March last year in the framework of the investigation.
In the wake of this interrogation, the AMF investigators sent a subpoena to Peter Pascali asking him to provide various documents relating to when the board of directors of PyroGenèse was informed of the claims of the company belonging to his father or his intentions, and what information was disclosed.
In response to these requests, the boss of PyroGenèse provided emails and attachments containing passages redacted due to a claim of attorney-client privilege.
The AMF has asked Peter Pascali to tell it whether an independent external lawyer has been appointed by PyroGenèse (or Peter Pascali) to assess the validity of the claim and to provide a copy of the legal opinion in question.
The motion filed in court asks the Court to determine whether the required documents are subject to professional secrecy or not.
PyroGenesis stock went from being worth less than $1 in 2020 to over $12 in Toronto two years ago before returning to its current approximate price of $1.