# EDGAR Filing Document

**Accession Number:** 0001743344
**File Stem:** 0001562762-23-000149
**Filing Date:** 2023-3
**Character Count:** 609724
**Document Hash:** 760939256faee1abb34c4e7fb2109b6d
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001562762-23-000149.hdr.sgml**: 20241204

**ACCESSION NUMBER**: 0001562762-23-000149

**CONFORMED SUBMISSION TYPE**: 40-F

**PUBLIC DOCUMENT COUNT**: 159

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230331

**DATE AS OF CHANGE**: 20230331

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** PyroGenesis Canada Inc.
- **CENTRAL INDEX KEY:** 0001743344
- **STANDARD INDUSTRIAL CLASSIFICATION:** PHARMACEUTICAL PREPARATIONS [2834]
- **IRS NUMBER:** 980627529
- **STATE OF INCORPORATION:** A8
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 40-F
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-39989
- **FILM NUMBER:** 23783454

**BUSINESS ADDRESS:**
- **STREET 1:** 1744 WILLIAM STREET, SUITE 200
- **CITY:** MONTREAL
- **STATE:** A8
- **ZIP:** H3J 1R4
- **BUSINESS PHONE:** 514-937-0002 EXT 227

**MAIL ADDRESS:**
- **STREET 1:** 1744 WILLIAM STREET, SUITE 200
- **CITY:** MONTREAL
- **STATE:** A8
- **ZIP:** H3J 1R4

?xml version="1.0" encoding="UTF-8"? pyro40f2022

#### UNITED STATES

#### SECURITIES AND EXCHANGE COMMISSION

#### WASHINGTON, D.C. 20549

#### FORM

#### 40-F

#### ☐

#### REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
OR

#### ☒

#### ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended

Commission File Number:

December 31, 2022

001-39989

#### PYROGENESIS CANADA INC.
 *(Exact name of Registrant as specified in its charter)*

#### Canada

#### 3599

#### N/A
*(Province or Other Jurisdiction*

*of Incorporation or*

*Organization)*

*(Primary Standard*

*Industrial Classification Code)*

*(I.R.S. Employer Identification*

*No.)*

#### 1744, William St. Suite 200

#### Montréal

#### ,

#### QC

#### ,

#### H3J1R4

#### CANADA

#### Attention:
P. Peter Pascali

#### Chief Executive Officer

#### Tel:

#### 1

#### -

#### 514

#### -

#### 937-0002
 *(Address and telephone number of Registrant's principal executive offices)*

#### National Registered Agents, Inc.

#### 1209 Orange St.

#### Wilmington

#### ,

#### Delaware

#### 19801

#### Tel:

#### 202

#### -

#### 572-3133
 *(Name, address (including zip code) and telephone number (including area code) of agent for service in the United States)*

Securities registered or to be registered pursuant to section 12(b) of the Act:

Name of Each Exchange on Which

Title of Each Class

Trading Symbol(s)

Registered:

#### Common Shares, no par value

#### PYR

#### The Nasdaq Stock Market LLC
Securities registered or to be registered pursuant to Section 12(g) of the Act:

#### None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

For annual reports, indicate by check mark the information filed with this Form:

#### ☒
Annual Information Form

Audited Annual Financial Statements

Indicate the number of outstanding shares of each of the Registrant's classes of capital or common stock as of the close of the period covered by the annual report:

#### Title of Each Class

#### Number of outstanding shares
Common Shares, no par value

173,580,395

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months

(or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

No

☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be

submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant

was required to submit and post such files).

Yes

☒

No

☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.

Emerging growth company

☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the

extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over

financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

☐

#### EXPLANATORY NOTE
PyroGenesis Canada Inc. (the "Company" or the "Registrant") is a Canadian issuer that is permitted, under the

multijurisdictional disclosure system adopted in the United States, to prepare this Annual Report on Form 40-F pursuant to

Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in accordance with Canadian

disclosure requirements. The Company is a "foreign private issuer" as defined in Rule 3b-4 under the Exchange Act. Equity

securities of the Company are accordingly exempt from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the Exchange Act

pursuant to Rule 3a12-3.

#### FORWARD LOOKING STATEMENTS
This Annual Report, including the exhibits attached hereto and incorporated herein may contain "forward-looking

statements" within the meaning of applicable Canadian and United States securities laws. All statements other than

statements of historical fact are forward-looking statements. The forward-looking statements contained in this Annual Report

are made only as of the date hereof. The forward-looking statements contained in the exhibits incorporated by reference

into this Annual Report are made only as of the respective dates set forth in such exhibits. The Registrant does not have,

or undertake, any obligation to update or revise any forward -looking statements whether as a result of new information,

subsequent events or otherwise, unless otherwise required by law.

Generally, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "expects"

or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not

anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may",

"could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are based on a number of

material assumptions, which management of the Registrant believe to be reasonable, including, but not limited to, the

Registrant's ability to generate sufficient cash flow from operations and obtain financing, if needed, on acceptable terms or

at all; the general economic, financial market, regulatory and political conditions in which the Registrant operates; the

interest of potential purchasers in the Registrant's products; anticipated and unanticipated costs; the government regulation

of the Registrant's activities and products; the timely receipt of any required regulatory approvals; the Registrant's ability to

obtain qualified staff, equipment and services in a timely and cost efficient manner; the Registrant's ability to conduct

operations in a safe, efficient and effective manner; and the Registrant's expansion plans and timeframe for completion of

such plans

Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the

actual results, level of activity, performance or achievements of the Registrant to be materially different from those

expressed or implied by such forward-looking information. Although the Registrant has attempted to identify important

factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be

other factors that cause results not to be as anticipated, estimated, intended or projected. There is no assurance that such

statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in

such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Readers should

carefully consider the maters as further discussed under the heading "Risk Factors" in the Registrant's Annual Information

Form for the year ended December 31, 2020, which is filed as Exhibit 99.1 hereto and incorporated by reference herein

The forward-looking statements contained in, or incorporated by reference into, this Form 40-F are made as of the date of

this Form 40-F or as otherwise specified. Except as required by applicable securities law, the Registrant undertakes no

obligation to update publicly or otherwise revise any forward -looking statements or the foregoing list of factors affecting

those statements, whether as a result of new information, future events or otherwise or the foregoing lists of factors affecting

this information. All forward-looking statements contained in this Form 40-F are expressly qualified in their entirety by this

cautionary statement.

#### DIFFERENCES IN UNITED STATES AND CANADIAN REPORTING PRACTICES
The Registrant is permitted, under a multijurisdictional disclosure system adopted by the United States, to prepare this

report in accordance with Canadian disclosure requirements, which are different from those of the United States. The

Registrant prepares its financial statements, which are filed with this Form 40-F in accordance with International Financial

Reporting Standards as issued by the International Accounting Standards Board.

#### PRINCIPAL DOCUMENTS

#### Annual Information Form
The Registrant's Annual Information Form for the fiscal year ended December 31, 2022 is filed as Exhibit 99.1 and

incorporated by reference in this Annual Report on Form 40-

F. #### Audited Annual Financial Statements
The audited consolidated financial statements of the Registrant for the fiscal year ended December 31, 2022, including the

Independent Auditor's Report with respect thereto, are filed as Exhibit 99.3 and incorporated by reference in this Annual

Report on Form 40-

F. #### Management Discussion and Analysis
The Registrant's Management Discussion and Analysis for the fiscal year ended December 31, 2022 is filed as Exhibit 99.2

and incorporated by reference in this Annual Report on Form 40-

F. #### CERTIFICATIONS AND DISCLOSURES REGARDING CONTOLS AND PROCEDURES

#### Certifications
The required certifications are attached hereto as Exhibits 99.4, 99.5, 99.6, and 99.7.

#### Disclosure Controls and Procedures
The information provided in the section entitled "Controls and Procedures" under the sub-heading "Disclosure Controls and

Procedures" contained in the 2022 MD&A filed as Exhibit 99.2 to this Annual Report on Form 40-F is incorporated by

reference herein.

#### Management's Annual Report on Internal Control over Financial Reporting
The information provided in the section entitled "Controls and Procedures" under the sub-headings "Management's Annual

Report on Internal Controls over Financial Reporting and Remediation Plan" contained in the 2022 MD&A filed as

Exhibit 99.2 to this Annual Report on Form 40-F is incorporated by reference herein.

#### Attestation Report of Independent Auditor
In accordance with the United States Jumpstart Our Business Startup Act (the "JOBS Act") enacted on April 5, 2012, the

Registrant qualifies as an "emerging growth company" (an "EGC"), which entitles the Registrant to take advantage of certain

exemptions from various reporting requirements that are applicable to other public companies that are not EGCs.

Specifically, the JOBS Act defers the requirement to have the Registrant's independent auditor assess the Registrant's

internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act. As such, the Registrant is

exempted from the requirement to include an auditor attestation report in this Form 40-F for so long as the Registrant

remains an EGC, which may be for as long as five years following its initial registration in the United States.

#### Changes in Internal Control over Financial Reporting
The information provided in the section entitled "Controls and Procedures" under the sub-heading "Changes in Internal

Controls over Financial Reporting" contained in the 2022 MD&A filed as Exhibit 99.2 to this Annual Report on Form 40-F is

incorporated by reference herein.

#### NOTICES PURSUANT TO REGULATION BTR
The Registrant was not required by Rule 104 of Regulation BTR to send any notices to any of its directors or executive

officers during the fiscal year ended December 31, 2022.

#### AUDIT COMMITTEE FINANCIAL EXPERT
The board of directors of the Registrant has determined that Mr. Andrew Abdalla, the chair of the Registrant's audit

committee, qualifies as an audit committee financial expert for purposes of paragraph (8) of General Instruction B to

Form 40-F. The board of directors has further determined that Mr. Abdalla is also independent, as that term is defined in

the corporate governance requirements of the Nasdaq Capital Market ("Nasdaq"). The Commission has indicated that the

designation of Mr. Abdalla as an audit committee financial expert does not make him an "expert" for any purpose, impose

any duties, obligations or liabilities on him that are greater than those imposed on members of the audit committee and the

board of directors who do not carry this designation or affect the duties, obligations or liabilities of any other member of the

audit committee or the board of directors.

#### CODE OF ETHICS
The Registrant has adopted a written Code of Business Conduct and Ethics (the "Code") that is applicable to all employees,

contractors, consultants, officers and directors of the Registrant, and is filed as an exhibit to this Annual Report on

Form 40-

F. All departures from, all amendments to the Code, and all waivers of the Code with respect to any of the senior officers

covered by it, which waiver may be made only by the board of directors of the Registrant in respect of senior officers, will

be disclosed as required. The Code is located on the Registrant's website at www.pyrogenesis.com. Information contained

in or otherwise accessible through the Registrant's website does not form part of this Form 40-F, and is not incorporated

into this Form 40-F by reference.

#### PRINCIPAL ACCOUNTANT FEES AND SERVICES
The fees paid to the independent auditor are included under the heading "Audit Committee - External Fees by Audit

Category" in the AIF, which is filed as Exhibit 99.1 hereto and incorporated by reference herein.

The Registrant's audit committee has adopted a pre-approval policy. Under this policy, all non-audit services must be pre-

approved by the Audit Committee. The Registrant did not rely on the de minimis exemption provided by

Section (c)(7) (i)(C) of Rule 2-01 of Regulation S-X.

#### OFF-BALANCE SHEET ARRANGEMENTS
The Registrant has not entered into any "off-balance sheet arrangements", that have or are reasonably likely to have a

current or future effect on the Registrant's financial condition, changes in financial condition, revenues, expenses, results

of operations, liquidity, capital expenditures or capital resources that are material to investors.

#### CONTRACTUAL OBLIGATIONS
Below is a tabular disclosure of the Registrant's contractual obligations at December 31, 2022:

#### Total

#### Carrying

#### contractual

#### Less than

#### Over 5

#### value

#### amount

#### one year

#### 2-3 years

#### 4-5 years

#### years

#### $
Bank indebtedness

991,902

991,902

991,902

—

—

—

Accounts payable and

accrued liabilities

9,620,591

9,620,591

9,620,591

—

—

—

Term loans

389,987

520,444

59,917

190,587

180,000

89,940

Balance due on

business combination

3,907,775

4,137,820

2,177,800

1,960,020

—

—

Lease liabilities

5,533,694

6,745,329

2,984,243

1,165,281

703,816

1,891,989

20,443,949

22,016,086

15,834,453

3,315,888

883,816

1,981,929

#### IDENTIFICATION OF THE AUDIT COMMITTEE
The Registrant's Board of Directors has a separately designated standing Audit Committee established in accordance with

Section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee are Andrew Abdalla (Chair of the

Committee), Robert Radin and Ben Naccarato.

#### MINE SAFETY DISCLOSURE
Not applicable

#### NASDAQ STATEMENT OF CORPORATE GOVERNANCE DIFFERENCES
The Registrant is a "foreign private issuer" as defined in Rule 3b-4 under Exchange Act and its common shares are listed

on Nasdaq and the Toronto Stock Exchange (the "TSX"). Rule 5615(a)(3) of Nasdaq Stock Market Rules permits foreign

private issuers to follow home country practices in lieu of certain provisions of Nasdaq Stock Market Rules. A foreign private

issuer that follows home country practices in lieu of certain provisions of Nasdaq Stock Market Rules must disclose ways in

which its corporate governance practices differ from those followed by domestic companies either on its website or in the

annual report that it distributes to shareholders in the United States. A description of the ways in which the Registrant's

governance practices differ from those followed by domestic companies pursuant to Nasdaq Stock Market Rules are as

follows:

#### Majority Independent Directors
: The Registrant does not follow Nasdaq Stock Market Rule 5605(b)(1), which requires

listed companies to have a majority of the board of directors comprised of "Independent Directors" as defined in Nasdaq

Stock Market Rule 5605(a)(2). In lieu of following Nasdaq Stock Market Rule 5605(b)(1), the Registrant follows the rules of

the TSX.

#### Executive Sessions
: The Registrant does not follow Nasdaq Stock Market Rule 5605(b)(2), which requires listed

companies to have their Independent Directors regularly schedule meetings at which only Independent Directors are

present. In lieu of following Nasdaq Stock Market Rule 5605(b)(2), the Registrant follows the rules of the TSX.

#### Audit Committee Charter
: The Registrant does not follow Nasdaq Stock Market Rule 5605(c)(1), which requires listed

companies to adopt a formal written audit committee charter that specifies the scope of its responsibilities and the means

by which it carries out those responsibilities; the outside auditor's accountability to the audit committee; and the audit

committee's responsibility to ensure the independence of the outside auditor. In lieu of following Nasdaq Stock Market Rule

5605(c)(1), the Registrant follows the rules of the TSX.

#### Compensation Committee Charter
: The Registrant does not follow Nasdaq Stock Market Rule 5605(d)(1), which requires

listed companies to adopt a formal written compensation committee charter and have a compensation committee review

and reassess the adequacy of the charter on an annual basis. In lieu of following Nasdaq Stock Market Rule 5605(d)(1),

the Registrant follows the rules of the TSX.

#### Composition of Compensation Committee
: The Registrant does not follow Rule Nasdaq Stock Market 5605(d)(2), which

requires listed companies to have a compensation committee comprised of at least two members, with each member being

an Independent Director as defined under Nasdaq Stock Market Rule 5605(a)(2). In lieu of following Nasdaq Stock Market

Rule 5605(d)(2), the Registrant follows the rules of the TSX.

#### Independent Director Oversight of Director Nominations
: The Registrant does not follow Nasdaq Stock Market Rule

5605(e)(1), which requires Independent Director involvement in the selection of director nominees, by having a nominations

committee comprised solely of Independent Directors. In lieu of following Nasdaq Stock Market Rule 5605(e)(1), the

Registrant follows the rules of the TSX.

#### Nominations Committee Charter
: The Registrant does not follow Nasdaq Stock Market Rule 5605(e)(2), which requires

listed companies to adopt a formal written nominations committee charter or board resolution, as applicable, addressing the

director nomination process and such related matters as may be required under the federal securities laws. In lieu of

following Nasdaq Stock Market Rule 5605(e)(2), the Registrant follows the rules of the TSX.

#### Shareholder Meeting Quorum Requirements
: The Registrant does not follow Nasdaq Stock Market Rule 5620(c) which

requires that the minimum quorum requirement for a meeting of shareholders be 33 1/3 % of the outstanding common

shares. In addition, Nasdaq Stock Market Rule 5620(c) requires that an issuer listed on Nasdaq state its quorum requirement

in its by-laws. In lieu of following Nasdaq Stock Market Rule 5620(c), the Registrant follows the rules of the TSX.

The foregoing is consistent with applicable laws, customs and practices in Canada.

#### UNDERTAKING
The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by

the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to:

the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an Annual Report on

Form 40-F arises; or transactions in said securities.

#### DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENT INSPECTIONS
Not applicable.

#### CONSENT TO SERVICE OF PROCESS
The Registrant has previously filed with the Commission a written irrevocable consent and power of attorney on Form F-X.

Any change to the name or address of the Registrant's agent for service shall be communicated promptly to the Commission

by amendment to the Form F-X referencing the file number of the Registrant.

The following documents are being filed with the Commission as exhibits to this Form 40-

F. #### EXHIBIT INDEX

#### Exhibit Number

#### Exhibit Description
99.1 [Annual Information Form for the year ended December 31, 2022](pyrex99d1.htm)

99.2 [Management's Discussion and Analysis for the year ended December 31, 2022](pyrex99d2.htm)

99.3 [Audited Annual Consolidated Financial Statements for the year ended December 31, 2022](pyrex99d3.htm)

99.4 [Certification of The Principal Executive Officer](pyrex99d4.htm)

99.5 [Certification of The Principal Financial Officer](pyrex99d5.htm)

99.6 [Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350](pyrex99d6.htm)

99.7 [Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350](pyrex99d7.htm)

99.8 [Consent of RCGT LLP](pyrex99d8.htm)

99.9 [Code of Business Conduct and Ethics](pyrex99d9.htm)

Interactive Data File

#### SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on

Form 40-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 31, 2023

#### PYROGENESIS CANADA INC.
By:

/s/ P. Peter Pascali

P. Peter Pascali

Chief Executive Officer

## Exhibit 99.1

Table of Contents

Exhibit 99.1

pyrex99d1p1i0

# **PYROGENESIS CANADA INC.**

# **ANNUAL INFORMATION FORM**
**FOR THE YEAR ENDED DECEMBER 31, 2022**

**Dated March 30, 2023**

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81. 82. 83. 84. 85. 86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96. 97. 98. 99. 100.

Table of Contents

# TABLE OF CONTENTS

| 1. | Explanatory Notes | 5 |
| --- | --- | --- |
| 2. | Forward-Looking Statements | 5 |
| 3. | Market and industry data | 6 |
| 4. | Corporate Structure | 6 |
| 4.1. | Name, Address and Incorporation | 6 |
| 4.2. | Subsidiaries | 7 |
| 5. | General Development of the Business | 7 |
| 5.1. | Year Ended December 31, 2020 | 7 |
| 5.2. | Year Ended December 31, 2021 | 9 |
| 5.3. | Year Ended December 31, 2022 | 10 |
| 5.4. | Recent Developments | 11 |
| 6. | Business of the Company | 12 |
| 6.1. | General | 12 |
| 6.2. | Products and Services | 12 |
| 6.3. | Installation & Servicing | 16 |
| 6.4. | Research and Development, Internal and External Funded Projects by Customers | 16 |
| 6.5. | Markets and Opportunities | 16 |
| 6.6. | Growth Strategy | 20 |
| 6.7. | Employees | 20 |
| 6.8. | Facilities | 21 |
| 6.9. | Distribution Methods | 21 |
| 6.10. | Intellectual Property and Research and Development | 21 |
| 6.11. | Environmental Protection | 23 |
| 6.12. | Foreign Operations | 23 |
| 6.13. | Competition | 23 |
| 7. | Dividends and Distributions | 23 |
| 8. | Description of Capital Structure | 24 |
| 8.1. | Authorized Share Capital | 24 |
| 8.2. | Stock Options | 24 |
| 9. | Market for Securities | 24 |
| 9.1. | Trading Price and Volume | 24 |
| 9.2. | Prior Sales | 25 |
| 10. | Directors and Executive Officers | 25 |
| 10.1. | Name and Occupation | 25 |
| 10.2. | Biographies | 28 |
| 10.3. | Cease Trade Orders, Bankruptcies, Penalties or Sanctions | 30 |
| 10.4. | Conflicts of Interest | 31 |
| 10.5. | Board Independence | 32 |
| 11. | Audit Committee and Other Committees | 32 |
| 11.1. | Audit Committee | 32 |
|  | Audit Committee Charter | 32 |
|  | Composition of the Audit Committee | 33 |
|  | Pre-Approval Policies and Procedures | 33 |
|  | External Fees by Audit Category | 33 |
| 11.2. | Other Committees | 33 |
|  | Nominating and Corporate Governance Committee | 33 |
|  | Compensation Committee | 34 |
| 12. | Risk Factors | 34 |
| 12.1. | Risks Related to the Company's Business and Industry | 34 |
| 12.2. | Risks Related to the Company's Securities | 43 |
| 12.3. | Risks Related to the Company's Status as a Foreign Private Issuer | 45 |
| 13. | Legal Proceedings | 47 |

3

Table of Contents

| 14. Interest of Management and Others in Material Transactions | 47 |
| --- | --- |
| 15. Transfer Agent and Registrar | 48 |
| 16. Auditors | 48 |
| 17. Material Contracts | 48 |
| 18. Additional Information | 48 |
| 19. Glossary of Terms | 48 |
| SCHEDULE “A” CHARTER OF THE AUDIT COMMITTEE | 51 |

4

Table of Contents

# 1. Explanatory Notes

The information in this annual information form (this "AIF") of PyroGenesis is stated as at December 31, 2022, unless otherwise indicated.

For an explanation of the capitalized terms and expressions and certain defined terms, please refer to the "Glossary of Terms" at the end of this AIF.

In this AIF, unless the context otherwise requires, references to the "Company" or "PyroGenesis" refer to PyroGenesis Canada Inc. together with its subsidiaries.

In this AIF, unless otherwise indicated, all references to "$" are to Canadian dollars, all references to "US$" are to U.S. dollars, and all references to "€" are to euros. Amounts are stated in Canadian dollars unless otherwise indicated.

This AIF should be read in conjunction with the information contained in the Company's consolidated financial statements and related notes for the year ended December 31, 2022, and the management's discussion and analysis thereon.

The Company has certain proprietary or contractual rights to certain company names, product names, trade names and trademarks used in this AIF that are important to its business, including PyroGenesis, PYROGENESIS (LOGO), PYROGENESIS ADDITIVE, PYROGENESIS ADDITIVE (LOGO) PYROGENESIS ALUMINUM, PYRO GREEN-GAS, PYRO GREEN-GAS (LOGO), SPHEROGENESIS, NEXGEN, DROSRITE, PUREVAP, SPARC, APT, APT-HP, RPT, MINIGUN, SPT, PPRS and, PAGV. The Company has omitted the registered trademark (®) and trademark (TM) symbols and any other related symbols for such trademarks and all related trademarks, including those related to specific products or services, when used in this AIF.

# 2. Forward-Looking Statements

This AIF contains forward-looking statements and forward-looking information (collectively, "forward-looking statements") within the meaning of applicable securities legislation. All statements other than statements of historical fact contained in this AIF are forward-looking statements, including, without limitation, the Company's statements regarding its products and services; the execution of its growth strategy; relations with suppliers and customers; future financial position; business strategy; potential acquisitions; potential business partnering; litigation; and plans and objectives. In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" and similar words or the negative thereof. These forward-looking statements are based on management's current expectations and are subject to a number of risks, uncertainties, and assumptions, including market and economic conditions, business prospects or opportunities, future plans and strategies, projections and anticipated events and trends that affect the Company and its industry. Although management of the Company believes that the expectations reflected in such forward-looking statements are reasonable and are based on reasonable assumptions and estimates as of the date hereof, there can be no assurance that these assumptions or estimates are accurate or that any of these expectations will prove accurate.

Actual results and developments are likely to differ, and may differ materially, from those anticipated by the Company and expressed or implied by the forward-looking statements contained in this AIF. Such statements are based on a number of assumptions and risks which may prove to be incorrect. Important assumptions relating to the forward-looking statements contained in this AIF include, among other things, assumptions concerning:

- the Company's business strategies, strategic objectives and growth strategy;
- the Company's expected production volumes, rates and costs;
- the Company's current and future capital resources and the need for additional financing;
- the Company's ability to increase sales from new and existing customers, and the results of the successful completion of the Company's current projects;
- management's expectation that the Company will achieve growth and profitability;

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- the Company's overall financial performance;
- the Company continuing to maintain sufficient and effective production and research and development;
- there being no significant reduction in the availability of qualified and cost-effective human resources;
- there will be adequate liquidity available to the Company to carry out its operations;
- the Company's ability to obtain and retain key personnel; and
- the success of intellectual property applications.

By their nature, forward-looking statements require assumptions and are subject to inherent risks and uncertainties including those discussed herein. There is significant risk that predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned to not place undue reliance on forward-looking statements made herein because a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.

The future outcomes that relate to forward-looking statements may be influenced by many factors, including, but not limited to, the risk factors described under the heading "Risk Factors". The Company cautions that the foregoing list of factors is not exhaustive, and that, when relying on forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements.

Although the forward-looking statements contained in this AIF are based upon what management currently believes to be reasonable assumptions, the Company cannot assure investors that actual results, performance or achievements will be consistent with these forward-looking statements and additional risks and uncertainties discussed in the Company's materials filed with the Canadian securities regulatory authorities from time to time, available under the Company's profile on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Forward-looking statements are provided as of the date of this AIF, and the Company assumes no obligation to update or revise such forward-looking statements to reflect new events or circumstances except as required under applicable securities laws.

The forward-looking statements contained in this AIF are expressly qualified in their entirety by this cautionary statement and are made as of the date of this AIF or such other date specified herein.

### 3. Market and industry data

Unless otherwise indicated, information contained in this AIF concerning the industry and the markets in which the Company operates, including its general expectations, market position and market opportunity, is based on information from industry publications and reports generated by several third parties and management estimates. Unless otherwise indicated, management estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as data from the Company's internal research, and are based on assumptions made by the Company based on such data and its knowledge of such industry and markets, which the Company believes to be reasonable. These industry publications and reports generally indicate that the information contained therein was obtained from sources believed to be reliable, but do not guarantee the accuracy and completeness of such information. The Company has not independently verified the data in such publications, reports or resources, and such information is inherently imprecise. In addition, projections, assumptions and estimates of the Company's future performance and the future performance of the industry in which the Company operates are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under "Forward-Looking Statements" and "Risk Factors".

### 4. Corporate Structure

#### 4.1. Name, Address and Incorporation

PyroGenesis is a corporation governed by the provisions of the Canada Business Corporations Act ("CBCA") and results from an amalgamation completed on July 11, 2011, under the CBCA, of Industrial Growth Income Corporation and PyroGenesis Canada Inc., a predecessor entity incorporated on June 5, 2006, to form the Company. Prior to the

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amalgamation, which constituted its qualifying transaction, Industrial Growth Income Corporation was a capital pool company listed on the TSX-V.

The Company's head and registered office is located at 1744 William Street, Suite 200, Montréal, Québec, Canada, H3J 1R4.

#### 4.2. Subsidiaries

On August 11, 2021, PyroGenesis acquired all of the issued and outstanding shares of Pyro Green-Gas Inc. (formerly AirScience Technologies Inc.) ('**Pyro Green-Gas**'), a private corporation incorporated under the laws of Canada. Pyro Green-Gas has three subsidiaries: 1) AirScience Technologies Pvt. Ltd., a private corporation incorporated under the laws of India; 2) AirScience Italia S.r.l., a private corporation incorporated under the laws of Italy; and 3) Alga-Labs Inc., a private corporation incorporated under the laws of Canada. Pyro Green-Gas owns 99.99% of the issued and outstanding shares of AirScience Technologies Pvt. Ltd. and 90.00% of the issued and outstanding shares of AirScience Italia S.r.l. Alga-Labs Inc. is a wholly owned subsidiary of Pyro Green-Gas.

#### 5. General Development of the Business

The following is a summary of the significant events that have influenced the general development of the business of the Company over the last three completed years.

##### 5.1. Year Ended December 31, 2020

#### *Business Highlights and Milestones*

On March 4, 2020, the Company announced the successful completion testing of a 900 kilowatts plasma torch system valued at more than $1,000,000 which had been installed pursuant to an agreement entered into on January 7, 2019, between the Company and RISE Energy Technology Center AB, a Swedish company.

On March 24, 2020, the Company announced it had received the first payment of approximately $1.44 million under the Drosrite International Exclusive Agreement dated August 29, 2019, between Drosrite International LLC ('**Drosrite International**'), a US-based company, and PyroGenesis (the '**Drosrite International Exclusive Agreement**'). Under the terms of this agreement, Drosrite International had received the required rights from PyroGenesis to perform Drosrite International's obligations under a 2019 agreement it had entered into with Radian Oil & Gas Services Company, an oil and gas services company operating in the Middle East (the '**Dross Processing Service Agreement**'). For more information on the Drosrite International Exclusive Agreement, the Dross Processing Services Agreement, and the relationship between Drosrite International and PyroGenesis, see 'Directors and Executive Officers - Conflicts of Interest'.

On April 30, 2020, PyroGenesis announced it had successfully completed the first phase of a multi-phase modeling contract with a client that aimed at evaluating the performance of PyroGenesis' proprietary torches in an existing iron ore industrial furnace. On September 1, 2020, the Company announced the completion and acceptance of its modeling contract, which demonstrated that replacing fossil fuel burners with PyroGenesis' proprietary plasma torches could play a significant role in reducing the client's greenhouse gas ('**GHG**') emissions and assist the client in attaining its GHG reduction objectives.

On June 11, 2020, the Company announced it had signed a second multi-phase torch modeling contract, aimed at evaluating the performance of PyroGenesis' proprietary torches in an existing iron ore industrial furnace with the goal of replacing existing fossil fuel burners with PyroGenesis' plasma torches.

On August 18, 2020, the Company announced the realization of a development agreement with HPQ Nano Silicon Powders Inc. ('**HPQ Nano**'), a wholly owned subsidiary of HPQ Silicon Resources Inc. ('**HPQ**'), which aims to transform silicon into spherical silicon nano powders and nanowires for use in lithium-ion batteries. The agreement, valued at approximately $3,000,000, includes royalty rights on the future sales of nano silicon powders and wires by HPQ Nano, royalty rights that can be converted by PyroGenesis into a 50% ownership stake in HPQ Nano.

On September 4, 2020, the Company announced an $11.5 million contract to provide waste destruction systems for two US Navy ships.

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On September 22, 2020, the Company announced a business initiative to increases its presence as an on-site processor of aluminum dross, with the aim to reduce landfill waste, reduce harmful GHG emissions, and recover aluminum while minimizing the creations of potentially toxic minerals.

On November 24, 2020, the Company announced it had signed a plasma torch contract to provide one high powered (approximately one megawatt) plasma torch with ancillary equipment to a major iron ore producer in connection with the pelletization process.

On December 16, 2020, the Company announced it had signed an additional contract with a US-based tunneling client to design, manufacture, test, and supply a plasma torch system tailored for tunneling.

### **Corporate Developments and Financings**

On March 18, 2020, the Company completed a $903,000 non-brokered secured convertible loan with Fiducie de Crédit Mellon Trust (the '**Pascali Trust**'), a trust of which Company's Chief Executive Officer, P. Peter Pascali, is a trustee, officer and beneficiary (the '**2020 Convertible Loan**'). The 2020 Convertible Loan bore interest at the rate of 12% per annum, with interest payable in cash on a quarterly basis, had a September 17, 2021, maturity date, and was convertible into common shares of the Company at a conversion price of $0.28 per common share. The 2020 Convertible Loan was secured by a hypothec on the universality of all of the present and after acquired moveable property and assets of the Company. The 2020 Convertible Loan was subsequently converted in common shares in accordance with its terms on September 30, 2020, resulting in 3,225,000 common shares being issued. As the 2020 Convertible Loan was provided by the Pascali Trust, the 2020 Convertible Loan constituted a 'related party transaction' as defined in MI 61-101. The related party transaction was exempt from the formal valuation and minority approval requirements of MI 61-101, as the transaction had a value of less than 25% of the Company's market capitalization (calculated in accordance with MI 61-101). The transaction was unanimously approved by the board of directors of the Company. See 'Directors and Executive Officers - Conflicts of Interest'.

On July 28, 2020, the Company requested that the Pascali Trust convert the 2020 Convertible Loan on or before September 30, 2020. The Pascali Trust agreed to such request subject to the prepayment of 5 years rent, plus estimated yearly municipal taxes, no later than December 31, 2020, for a total prepayment of $1,438,530. As a result of the conversion of the 2020 Convertible Loan, the Company saved approximately $110,000 of interest payments that would otherwise have been required to be paid under the 2020 Convertible Loan. The agreement with the Pascali Trust in respect of the prepayment of rent constituted a 'related party transaction' as defined in MI 61101. The related party transaction was exempt from the formal valuation and minority approval requirements of MI 61-101, as the transaction had a value of less than 25% of the Company's market capitalization (calculated in accordance with MI 61-101). The transaction was unanimously approved by the board of directors of the Company. See 'Directors and Executive Officers - Conflicts of Interest'.

On September 1, 2020, PyroGenesis announced that it had acquired 4,000,000 units of HPQ in a private placement at a price of $0.60 per unit for a total investment $2.4 million. Each unit consists of one common share of HPQ and one common share of HPQ purchase warrant. Each warrant entitles the Company to purchase one common share of HPQ at a price of $0.61 for a period of 36 months following the issue date.

On September 22, 2020, at the Company's annual general meeting, the five then current members of the Board were re-elected and two additional nominees, Ms. Rodayna Kafal and Mr. Rodney Beveridge, were also elected to the Board.

On November 10, 2020, the Company closed a bought-deal short form prospectus offering (the '**2020 Public Offering**') pursuant to an underwriting agreement dated October 20, 2020, entered into between the Company and Mackie Research Capital Corporation, as sole underwriter and sole bookrunner. Under the 2020 Public Offering, the Company issued 3,354,550 units of the Company ('**2020 Units**') at a price of $3.60 per unit for aggregate proceeds of $12,076,380, including the full exercise of the over-allotment option by the underwriter. Each unit is comprised of one Common Share and one-half of one Common Share purchase warrant. Each whole warrant (a '**2020 Public Offering Warrant**') entitles the holder thereof to purchase one additional Common Share at an exercise price of $4.50. The 2020 Public Offering Warrants are governed by a warrant indenture dated November 10, 2020 (the '**2020 Warrant Indenture**'). On March 15, 2021, the Company announced its exercise of its right under the 2020 Warrant Indenture to accelerate the expiry date of the 2020 Public Offering Warrants to April 14, 2021. The Company paid the underwriter a cash commission equal to 6.5% of the gross proceeds of the 2020 Public Offering and issued it an aggregate of 191,414 non-transferable compensation options, which were exercisable into 2020 Units at a price of $3.60 per unit at any time up to 24 months from closing of the 2020 Public Offering.

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On November 20, 2020, the Common Shares commenced trading on the TSX under the trading symbol 'PYR', at which time the Common Shares were delisted from the TSX-V.

On December 22, 2020, PyroGenesis announced it had submitted a formal application to list its Common Shares on the NASDAQ.

## 5.2. Year Ended December 31, 2021

### *Business Highlights and Milestones*

On March 17, 2021, PyroGenesis announced that it had received a grant from the Quebec Ministry of the Economy and Innovation to fund a project aimed at developing a solution to recover residues of spent pot lining, which are produced in the primary aluminum industry and are considered harmful.

On April 8, 2021, PyroGenesis announced the appointment of Ms. Nannette Ramsey as an independent director.

On April 19, 2021, PyroGenesis unveiled that its additive manufacturing NEXGEN powder production line was operational and producing powders. PyroGenesis' NEXGEN plasma atomization system has recorded a production rate exceeding 25 kg/h, surpassing all published plasma-atomized production rates for titanium known to the Company.

On May 27, 2021, PyroGenesis announced that it had received a grant from Sustainable Development Technology Canada for the financing of the development of a novel production process to transform quartz into fumed silica using a plasma reactor, reducing hazardous waste and GHG emissions attributed to the established fumed silica production process.

On July 6, 2021, PyroGenesis announced the signature of a contract valued at approximately $4 million with HPQ Silica Polvere Inc. ('**HPQ Polvere**'), a wholly owned subsidiary of HPQ. Under this contract, PyroGenesis was tasked to design, develop and manufacture a novel one-step plasma-based reactor and process for the conversion of quartz to fumed silica. The contract includes annual royalty payments by HPQ Polvere to PyroGenesis on future sales arising from the project and PyroGenesis may, at any time, convert said royalties into a 50% ownership stake in HPQ Polvere.

On August 17, 2021, the Company announced the signing of a $1.2 million contract for two air plasma torch systems with an existing Asian client. These torches are to be incorporated into the client's medical waste destruction systems.

On September 22, 2021, PyroGenesis announced that Pyro Green-Gas had been selected to supply its landfill biogas purification system to Carbonaxion Bioénergies Inc., the promoter of the GNR Neuville project, which is being carried out at the environmental complex of the Régie régionale de gestion des matières résiduelles de Portneuf.

On October 19, 2021, PyroGenesis announced that it had been awarded an Innovative Solutions Canada phase 2 (prototype development) contract to develop a unique hybrid ceramic powder processing system for the National Research Council Canada, Canada's largest federal research and development organization.

On October 20, 2021, PyroGenesis announced the creation PyroGenesis Aluminum, a new division bringing together PyroGenesis' aluminum industry offerings to provide the following primary products and services: i) DROSRITE sales and tolling services; ii) conversion of dross residues into valuable chemicals; iii) upstream applications where plasma-based solutions are expected to reduce GHG emissions; iv) high powered plasma torches geared to replacing fossil fuel burners; and v) conversion of spent pot lining residues into a valuable end-product.

On October 28, 2021, PyroGenesis announced that it had been selected to provide a $9.2 million land-based system to destroy perfluoroalkyl and polyfluoroalkyl substances. The Company would provide its plasma based thermal process equipment in a two-phase project geared toward providing a land-based system to destroy these substances. On October 7, 2022, the Company announced that contract negotiations had been suspended and discontinued.

On December 8, 2021, PyroGenesis announced the launch of a new zero-carbon emission hydrogen production project which aims to compete with conventional technologies to produce an environmentally friendly hydrogen. If successful, PyroGenesis' new hydrogen production technology would convert methane to hydrogen, thereby creating a zero-carbon emission hydrogen.

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## **Corporate Developments and Financings**

During the year, the Company repurchased and cancelled 840,094 common shares at a weighted average price of $4.96 per share, for total cash considerations of $4,183,617, including commissions of $16,678.

On January 12, 2021, PyroGenesis announced that it intended to implement a normal course issuer bid according to which the Company could purchase over a twelve-month period up to 5,000,000 common shares (approximately 3.14% of the then issued and outstanding).

On March 3, 2021, PyroGenesis announced the appointment of Mr. Ben Naccarato as an independent director.

On March 10, 2021, the Company announced that its application to list its Common Shares on the NASDAQ had been approved. Trading commenced on March 11, 2021, under the ticker symbol 'PYR' and trading of its Common Shares ceased to be traded on the OTCQB. In connection with the NASDAQ listing, the Company announced that, to maintain the overall independence of the Board of Directors, Mr. Michael Blank resigned as a director and member of the Audit Committee but would continue to serve as the Company's acting Chief Financial Officer.

On August 11, 2021, PyroGenesis finalized its strategic acquisition of Pyro Green-Gas and its subsidiaries for a total cash consideration of approximately $4.4 million. Montreal-based Pyro Green-Gas designs and builds (i) gas upgrading systems to convert biogas into renewable natural gas ('RNG'), (ii) pyrolysis-gas purification systems, (iii) biogas and landfill-gas flares and thermal oxidizers, and (iv) systems for the purification of coke-oven gas (a by-product in the primary steel industry arising from the conversion of coal into coke) into high purity hydrogen. Pyro Green-Gas is also known for its line of landfill gas flares which reduce GHG emissions from landfills.

On September 20, 2021, PyroGenesis announced that it had been added to the FTSE Global Total Cap Index and FTSE Global Micro Cap Index. The FTSE Global Total Cap Index is a market-capitalization weighted index representing the performance of large, mid and small cap stocks, across emerging and developed companies. The FTSE Global Micro Cap Index provides deep representation of micro cap stocks. Both indexes are used as the basis for performance benchmarks and investment products, such as funds, derivatives, and exchange-traded funds by investment professionals globally.

On September 27, 2021, PyroGenesis announced the appointment of Mr. Andre Mainella, as Chief Financial Officer (CFO) of the Company.

### **5.3. Year Ended December 31, 2022**

#### ***Business Highlights and Milestones***

On February 2, 2022, PyroGenesis announced the receipt of a US$3,000,000 purchase order for the first of three 10-tonne DROSRITE systems from an existing client.

On February 7, 2022, PyroGenesis announced that it had signed an agreement with a European research center for the sale of a plasma torch system which will be used to develop a process to convert hydrocarbons, including GHG producing gases such as methane, into non-hazardous chemicals.

On April 25, 2022, PyroGenesis confirmed that the Company's DROSRITE dross recovery technology (a total of seven DROSRITE systems) had been successfully commissioned for Ma'aden Aluminum.

On May 19, 2022, PyroGenesis announced that it had completed a commercial order for titanium powders. The order derived from the Company's partnership agreement with Aubert & Duval, a multinational specializing in upscale metallurgy, and the powder in question was produced at PyroGenesis' production facility using its NexGen plasma atomization system.

On September 7, 2022, the Company announced that it had been selected by an international producer of magnesium metal, to test PyroGenesis' zero-emission plasma torches as part of their process for transforming mining waste and recycled minerals into high-value metal.

On October 6, 2022, PyroGenesis confirmed that its Gen3 PUREVAP Quartz Reduction Reactor pilot plant had completed the month-long power-up process and was initiating the testing phase of its transformation of quartz into high

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purity silicon. The plant is designed to produce multiple systems that can operate under harsh conditions, including at extremely high temperatures and under vacuum.

On November 2, 2022, PyroGenesis announced that it had passed its annual quality audit for two key international standards: ISO 9001:2015, and AS9100D. The audits encompassed all of PyroGenesis' facilities for the purpose of meeting compliance with the existing quality management designations.

On November 10, 2022, PyroGenesis announced that it had successfully produced hydrogen from methane using zero-carbon emission hydrogen production technology.

### **Corporate Developments and Financings**

On October 19, 2022, PyroGenesis announced the completion of a non-brokered private placement consisting of the issuance and sale of 1,014,600 units of the Corporation at a price of $1.30 per unit, for gross proceeds of $1,318,980 to the Company. Each unit consisted of one Common Share and one warrant entitling the holder thereof to purchase one Common Share at a price of $1.75 until October 19, 2024.

On November 22, 2022, PyroGenesis received a notice ('Notice') from the NASDAQ stating that the Company is not in compliance with the minimum bid price requirement ('Minimum Bid Requirement') of US$1.00 per share under the NASDAQ Listing Rule 5550(a)(2) based upon the closing bid price of the Company's Common Shares for the 30 consecutive business days prior to the date of the Notice. The Notice has no immediate effect on the listing or trading of the Common Shares on NASDAQ, and the Company's operations are not affected by the receipt of the Notice. Under NASDAQ Listing Rule 5810(c)(3)(A), the Company had 180 calendar days from the date of the Notice, or until May 22, 2023, to regain compliance with the Minimum Bid Requirement, during which time the Common Shares will continue to trade on NASDAQ. If at any time before May 22, 2023, the bid price of the Common Shares closes at or above US$1.00 per share for a minimum of 10 consecutive business days, the Company will regain compliance with the Minimum Bid Requirement. If the Company does not regain compliance with the Minimum Bid Requirement by May 22, 2023, the Company may be eligible, upon satisfaction of certain NASDAQ listing requirements, for an additional period of 180 calendar days to regain compliance or the Common Shares may be subject to delisting from NASDAQ. The Company will closely monitor the situation and is considering various strategies to regain compliance with the Minimum Bid Requirement under the Nasdaq Listing Rules.

### **5.4. Recent Developments**

On January 10, 2023, PyroGenesis announced a contract to provide its SPARCTM refrigerant waste destruction system to a subsidiary of The Trust for the Destruction of Synthetic Refrigerants, a New Zealand government-mandated organization. The project, initially valued at $6 million, aims to assist New Zealand in its stated goals of reducing synthetic gas emissions by 25% no later than 2035.

On January 12, 2023, PyroGenesis announced an initial contract with a major European multinational chemical, oil, and gas conglomerate to assess the applicability of PyroGenesis' plasma torches for use in the client's chemical production process.

On January 17, 2023, PyroGenesis announced that Pyro Green-Gas signed a contract with a North American lithium-ion battery recycler for the delivery of a system to decontaminate the dust generated during the battery recycling process.

On February 8, 2023, PyroGenesis announced that Mr. Alan Curleigh is returning to lead PyroGenesis' Board of Directors as Chair. Mr. P. Peter Pascali stepped down as Chair and will continue to serve as Chief Executive Officer, President and Director of PyroGenesis. The Board now has eight directors, of whom six are independent.

On March 8, 2022, PyroGenesis announced the completion of a non-brokered private placement consisting of the issuance and sale of 5,000,000 units of the Company at a price of $1.00 per unit, for gross proceeds of $5,000,000 to the Company. Mr. Pascali subscribed to 2,500,000 Units under the private placement. Each unit consists of one Common Share and one warrant entitling the holder to purchase one Common Share at a price of $1.25 until March 7, 2025. The Common Shares and warrants issued in connection with the private placement as well as the Common Shares underlying the warrants are subject to a hold period of four months and one day from the date of closing.

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## 6. Business of the Company

### 6.1. General

PyroGenesis is a high-tech company and a leader in the design, development, manufacture, and commercialization of advanced plasma processes and sustainable solutions aimed at reducing GHG and providing economically attractive alternatives to conventional 'dirty' processes. PyroGenesis has created proprietary, patented, advanced plasma technologies that are being vetted and adopted by industry leaders in five markets: (i) iron ore pelletization; (ii) aluminum; (iii) waste management; (iv) steel making; and (v) additive manufacturing.

With a team of experienced engineers, scientists and technicians working at its Montreal head office and 3,800 m2 and 2,940 m2 manufacturing facilities, the Company endeavours to continuously innovate and provide original and inventive cleantech products to the marketplace. Its core competencies allow PyroGenesis to provide plasma torches, plasma waste processes, high-temperature metallurgical processes, and additive manufacturing powders to the global marketplace. The operations of PyroGenesis are ISO 9001 and AS9100D certified.

### 6.2. Products and Services

The Company's specialized products and services are commercialized to customers operating in a wide range of industries, including the defense, metallurgical, mining, advanced materials (including 3D printing), oil & gas, and environmental industries. The products and services of PyroGenesis include:

- • Plasma torches systems, used for, among other things, replacing conventional burners in pelletizing of iron ore furnaces (mining sector) and other industrial furnaces (mainly metallurgy sector);
- • Waste destruction and waste-to-energy systems, offered predominantly to customers in the environmental and defense industries, and for the destruction of end-of-life refrigerants;
- • Systems for the recovery of aluminum and other metal from dross (a residue generated by primary and secondary metal producers), offered mainly to customers in the mining and metallurgical industries;
- • Production of high purity spherical metal powders, which are predominantly offered to customers in the additive manufacturing (also known sometimes as 3D printing) industry;
- • Development of processes to produce high purity silicon metals, nano powders and nanowires, offered predominantly to customers in the mining and metallurgical industries as well as those in the battery manufacturing and/or disposal business;
- • Systems for upgrading of biogas and landfill gas into renewable natural gas, used in the environmental industry;
- • Systems used in the petrochemical and metallurgical industries for the purification of industrial gases, including the extraction of hydrogen from coke oven gas, the purification of natural gas into high purity methane, and the purification of pyrolytic gases;
- • Development of a process to produce fumed silica, used in the polymer, cosmetics, and paint industries;
- • Installation, commissioning, and start-up services; and
- • Internally and externally funded research and development projects.

### *Plasma Torches for Iron Ore Pelletization*

PyroGenesis manufactures and commercializes proprietary plasma torches and plasma torch systems used to replace fossil fuel burners in industrial iron ore pelletization process. The Company's plasma torches can heat gas up to 10,000°F, which is as hot as the surface of the sun.

Pelletization is the process in which iron ore fines are agglomerated into small balls with some additives and then heated at high temperatures in an induration furnace to make them more resistant. The resulting pellets are then used

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downstream and typically on a different site to make iron and steel in blast furnaces and in direct reduction of iron (DRI). In conventional technology, the process heat is provided by fuel oil or natural gas burners. The combustion of fossil fuels in these burners results in the production of GHGs, notably carbon dioxide. Because plasma torches use renewable electricity to generate heat, they offer an environmentally attractive alternative to fossil fuel burners.

The objective of the Company is to be a significant player in the world-wide movement to reduce the carbon footprint in mining and manufacturing. PyroGenesis offers a patented process to replace fossil fuel burners with electrically heated plasma torches, thereby reducing GHG emissions for the iron ore pelletization industry. The Company believes its solutions can be economically attractive with greater environment benefits than the traditional alternatives. By using the Company's solutions, companies can convert their existing burners and systems often without needing to shut down their facility for installation and with minimal changes to their processes.

### Waste Destruction and Waste-to-Energy Systems

PyroGenesis manufactures and commercializes a broad range of waste destruction and waste-to-energy systems to customers in the environmental and defense industries. At the core of these systems are the Company's plasma torches and plasma gasification reactors. The Company believes it offers one of the most complete, easy-to-operate, high temperature, plasma-based treatment systems. The waste destruction and waste-to-energy systems offered by the Company include the following:

- Plasma Arc Waste Destruction Systems ("PAWDS") for waste destruction onboard ships;
- Steam Plasma Arc Refrigerant Cracking ("SPARC") systems for the destruction of certain refrigerants, including chlorofluorocarbons ("CFCs"), hydrofluorocarbons ("HFCs") and hydrochlorofluorocarbons ("HCFCs");
- Plasma Arc Chemical Warfare Agent Destruction Systems ("PACWADS"), which are mobile platforms for the onsite destruction of chemical warfare agents;
- Plasma Resource Recovery Systems ("PRRS") for land-based waste destruction and waste-to-energy applications;
- Plasma torches for waste gasification and combustion; and
- Plasma Arc Gasification and Vitrification ("PAGV").

### Plasma Arc Waste Destruction System (PAWDS)

Originally developed by the Company in the late 1990s for the gasification of waste onboard US Navy aircraft carriers, PAWDS was the first plasma destruction system for marine use on US Navy aircraft carriers. PAWDS uses the plasma eductor for the fast gasification of milled waste. Navy waste is comparable to the combustible fraction of municipal solid waste, comprised of paper, cardboard, plastics, wood and rags. Since launching PAWDS in 1999, the Company received orders for four PAWDS for the US Navy, two of which have been delivered and installed on the Gerald R. Ford (CVN-78) and the John F. Kennedy (CVN-79) aircraft carriers, and two of which are to be installed in two planned aircraft carriers during the construction of those vessels. Developed in collaboration with the US Navy, at 1/5th the size and half the weight of a typical marine incinerator, the patented PAWDS has a capacity of 3.5 tons/day. PAWDS is a highly compact, inherently safe and efficient alternative to the shipboard waste incinerators.

### Steam Plasma Arc Refrigerant Cracking (SPARC)

The SPARC process is the Company's patented technology for the destruction of old refrigerants such as CFCs, HFC and HCFCs. The system is pre-assembled on skids and has demonstrated high destruction and removal efficiency of more than 99.9999%. The SPARC system uses a water vapour (steam) torch to destroy the refrigerants quickly and efficiently. The system is designed to handle wastes that have very high chlorine and fluorine content. An integrated caustic scrubber ensures that hydrochloric acid (HCl) and hydrofluoric acid (HF) emissions are well below accepted limits. The base system is designed for a destruction capacity of 50 kilograms per hour based on the refrigerant R12.

### Plasma Arc Chemical Warfare Agent Destruction System (PACWADS)

PACWADS was developed by the Company for the US and UK special forces to destroy chemical warfare agents on site. The system is installed on two trailers and can be deployed quickly in areas where chemical warfare agents must

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be immediately destroyed. Performance tests on simulants have demonstrated destruction and removal efficiency of more than 99.99999%. The system is designed to destroy the equivalent of two barrels (or approximately 318 litres) per day of sarin, a deadly nerve gas, and is also suitable for the destruction of a variety of other chemical warfare agents.

# Plasma Resource Recovery System (PRRS)

The PRRS is used to convert waste to syngas (synthesis gas) and inert slag (a glass-like by-product left over after a desired metal has been separated (i.e., smelted) from its raw ore). The PRRS combines a direct current graphite arc furnace, where the inorganic portion of waste is vitrified, and the organic portion is gasified. The produced syngas is then cleaned up in a plasma-fired eductor, similar to the one used in the PAWDS technology, where tars are converted into clean syngas (i.e. carbon monoxide and hydrogen). The resulting syngas is further cleaned of contaminants (such as HCl, sulfur compounds, particulates and volatile heavy metals) using filters and scrubbers. The resulting syngas can be used as fuel in a gas engine. The inert slag can be used as construction material.

# Plasma Torches for Waste Gasification Systems

PyroGenesis' plasma torch systems are used in waste-to-energy applications, advanced material production, metallurgical processing, thermal treatment and nanotechnology manufacturing. As a cleantech alternative to fossil fuel burning, PyroGenesis' electricity-driven plasma torch systems are easy to operate and offer a high level of safety, reliability and service life of wear components.

# Plasma Arc Gasification and Vitrification (PAGV)

PAGV systems convert incinerator ash and other hazardous inorganic material to an inert, non-toxic slag. Slag is a glass like material, composed of several oxides, typically silica based. Using the Company's unique furnace design, the proprietary arc plasma technology uses graphite electrodes and an electrical current to create arcs between the electrodes and the melt, generating a high temperature environment (typically above 1500°C) and melting the mineral matter into slag. This slag can be used in a wide range of applications, namely as a building material for construction (e.g. aggregate asphalt and flooring as well as partial replacement for cement in concrete). The PAGV systems minimize future legacy issues for operators of incinerators (notably municipalities as well as managers of incineration operations for industrial, hazardous, biomedical, and animal (slaughterhouse) waste) with a relatively simple melting process for their grate and fly ash. Asbestos waste from decommissioning operations is also an excellent use for this technology.

# Systems for the Recovery of Aluminum and Other Metal from Dross

Dross, a by-product of the smelting process for aluminum and other metals, presents the metallurgical industry with challenges and opportunities. A dross is normally composed of roughly 60% metal and 40% residue. Traditional dross treatment techniques typically contaminate the residues with salt. Metallurgical companies aim to recover metal found in dross while properly disposing of the oft-contaminated residue.

PyroGenesis produces systems for the recovery of aluminum and other metal from dross through its DROSRITE process. This process is a salt-free, cost-effective, sustainable process for maximizing metal recovery from dross without any hazardous by-products. By using the DROSRITE technology, the residues can be converted into high-margin chemical and metallurgical products, including ammonium sulphate and aluminum sulphate. DROSRITE allows the treatment of dross at its source of generation in a controlled atmosphere, tilting rotary furnace, and minimizes costly loss of metal while reducing a smelter's carbon footprint and energy consumption.

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The following images compare the traditional process for the recovery and treatment of dross with the DROSRITE process:

![img-0.jpeg](img-0.jpeg)

These systems are predominantly offered to customers in the metallurgical industry, targeting mainly the aluminum and zinc industries.

### Production of High Purity Spherical Metal Powders

The Company produces high purity spherical metal powders through its plasma atomization process, which are predominantly offered to customers in the additive manufacturing (also known as 3D printing) industry.

PyroGenesis' plasma atomization process (known as NEXGEN plasma atomization) allows the Company to produce and sell high purity spherical metal powders, including titanium alloy powders. Many existing reactive metals cannot easily be transformed into high purity spherical powders, especially not in finer size cuts such as -45μm/+15μm. PyroGenesis' NEXGEN process offers an improved yield in the finer size cuts along with a higher production rate. In addition, PyroGenesis can convert a wider variety of metals and alloys into high purity spherical powders since its plasma torches use argon gas and the reactor is backfilled with argon. This ensures the powders produced are not exposed to any oxygen during the production process and, as a result, PyroGenesis is able to produce high purity powder such as titanium alloy powders (Ti 6Al-4V grade 23).

### Development of Processes to Produce High Purity Silicon Metals, Nano Powders and Nanowires

The Company is developing processes to produce high purity silicon metals through its PUREVAP process and nano powders and nanowires through its PUREVAP NSiR process. These applications are expected to be predominantly offered to customers in the mining and metallurgical industries, including those involved in the making and/or disposal of batteries.

PUREVAP is a patent pending, one-step proprietary process being developed by the Company that uses a plasma arc within a vacuum furnace to produce high purity metallurgical grade silicon and solar grade silicon from quartz. PUREVAP reduces the quartz with carbon using a plasma submerged arc. Under vacuum, and at very low operating pressure, the silicon is refined in a one-step process removing impurities and transforming it to a purer form, resulting in a high purity silicon. The Company expects that the silicon grades produced by PUREVAP will, when commercialized, be used for different applications, including solar energy.

The PUREVAP NSiR process is designed to transform silicon into spherical silicon nano powders and nanowires for use in lithium-ion batteries. This proprietary process is designed to be highly scalable and is hoped to allow the production of silicon nano powders in large quantities at a competitive cost with other materials used in the lithium-ion space. The PUREVAP NSiR can use different purities of silicon as feedstock.

HPQ Nano acquired the intellectual property rights to the PUREVAP NSiR system in 2020 and PyroGenesis is entitled to a royalty of 10% on the future sales of nano silicon powders and wires by HPQ Nano, subject to the terms of the contract. The royalty stream can, at any time, be converted by PyroGenesis into a 50% ownership of HPQ Nano. PyroGenesis has retained a royalty-free, exclusive, irrevocable, worldwide license to use the new system for all purposes other than the manufacturing of nano silicon powders and wires.

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### **Upgrading of Biogas and Landfill Gas Into Renewable Natural Gas (RNG)**

Through Pyro Green-Gas, the Company offers equipment for the upgrading of biogas and landfill gas into RNG. Pyro Green-Gas' equipment combines different technologies and effects the removal of contaminants from biogas and landfill gas, such as hydrogen sulfide, oxygen nitrogen, volatile organic compounds, and moisture. Pyro Green-Gas can offer both individual equipment and fully integrated turnkey systems to its customers.

### **Systems for the Purification of Industrial Gases**

Through Pyro Green-Gas, the Company offers equipment for gas purification and air emission controls. Pyro Green-Gas can offer both individual equipment and fully integrated turnkey systems to its customers. The technologies can be used, for example, for coke oven gas purification, natural gas purification into high quality methane, and purification of pyrolytic gas and syngas (similar to the substances produced during the application of the Company's PRRS).

### **Development of a Process to Produce Fumed Silica From Quartz**

This plasma-based process allows a direct quartz-to-fumed silica transformation, removing the usage of hazardous chemical in the conventional making of fumed silica and eliminating the hydrogen chloride gas normally associated with its manufacturing. Furthermore, the process requires 15,000 kWh to produce a metric ton of fumed silica, representing a significant reduction in the energy footprint normally associated with manufacturing fumed silica. And because the process uses quartz as feedstock, it is expected that capital requirements to build a plant using this plasma-based process will be significantly less than the capital requirements required to build a traditional fumed silica plant.

HPQ Polvere acquired the intellectual property rights to the fuming silica patent in 2021 and PyroGenesis is entitled to a royalty of 10% on the future annual gross sales of fumed silica by HPQ Polvere, subject to the terms of the contract. The royalty stream can, at any time, be converted by PyroGenesis into a 50% ownership of HPQ Nano. PyroGenesis has retained a royalty-free, exclusive, irrevocable, worldwide license to use the new system for all purposes other than the manufacturing of nano fumed silica.

#### **6.3. Installation & Servicing**

PyroGenesis offers to its client installation, commissioning, and start-up services. These services are typically quoted as an option in equipment sales contracts. Separately, PyroGenesis offers aftersales services to its customers, including the sale of spare and replacement parts, consumable parts, and onsite or remote service on installed systems.

#### **6.4. Internally and Externally Funded Research and Development Projects**

The Company relies on a combination of internally funded and externally funded R&D to grow its intellectual property portfolio. For externally funded R&D, the company typically retains intellectual property rights for the developed technology, while providing licensing rights to the client in the sector of application and the geographic area of interest to the client.

#### **6.5. Markets and Opportunities**

### **Waste Destruction and Waste-to-Energy Systems**

#### **Marine Waste Treatment Market (PAWDS)**

Marine waste has been an issue for lawmakers and corporations for decades. The disposal of waste overboard is harmful to the marine environment. National governments and international organizations (such as the International Maritime Organization) have adopted rules to minimize the discharge of harmful waste and effluents from commercial and non-commercial ships. At the same time, onboard storage of waste takes up valuable space within the hull of a ship and the eventual disposal in port is costly and, if not handled properly, harmful to the environment. To mitigate this, modern ship builders have incorporated onboard marine incinerators to treat waste. However, these incinerators also occupy significant space, sometimes ascending through several decks of a ship.

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PyroGenesis' PAWDS provides an innovative solution to these issues. The entire system can fit in the headroom of a single deck. It is also capable of being started up or shut down in a matter of minutes. Finally, it does not create the same level of GHG and other harmful emissions associated with traditional incinerators.

At present, the most attractive target market for the PAWDS is military navies. PyroGenesis has and continues to do business with the US Navy and its contractors. PyroGenesis has already outfitted US Navy aircraft carriers with its PAWDS and will continue aggressively exploring this market. The price of each PAWDS built for the US Navy currently ranges between US$5 to 6 million and new US aircraft carriers are built every five to seven years.

In addition to new navy vessels, PyroGenesis also sees a potential market in the retrofitting of existing ships. As of March 2023, the U.S. Navy fleet comprises approximately 240 active in commission ships, including 11 aircraft carriers.1 The Company believes some or all of these existing aircraft carriers may be candidates for retrofitting their legacy waste management systems with a PAWDS.

# Waste-to-Energy Market (PRRS)

Waste management is a large and growing market on a global scale. The methods of managing waste are shifting from disposal towards recycling and resource recovery. Governments, industries, and society in general are seeking more sustainable waste management practices that have lower environmental impacts than traditional solutions such as landfill or incineration.

Just as responsible waste treatment systems are seen as an environment and societal priority, solutions that are capable of transforming waste into energy has also seen major growth on a global scale. Recent research identified the global waste to energy market as valued in excess of US$35 billion in 2019, with projections that it will exceed US$50 billion by 2027.2

PyroGenesis looks to continue to expand its business in this fast-growing area. The Company believes its PRRS is already a viable and economic alternative for small capacity projects compared to conventional incinerators. The system is well suited for the decentralized treatment of industrial, hazardous, and clinical waste. As such, in the short to medium term, the Company is targeting markets that are readily accessible for plasma waste-to-energy conversion, which include industrial, hazardous, non-hazardous remote communities, military bases, and medical wastes. In the medium to long term, the Company also intends to target the municipal solid waste market with larger system capacities of up to 100 tons/day.

PyroGenesis is currently engaged in pilot testing of its PRRS technology with two Canadian clients. The aim of the testing is to establish the design basis for larger commercial systems that will be proposed to the customers following the end of pilot testing. PyroGenesis is working with one such client, Aluminerie Alouette, to create a plasma solution to treat the hazardous solid wastes produced by this industrial client. The Aluminerie Alouette project aims to not only produce energy rich syngas that the client will use to reduce its consumption of purchased fuels, but also to generate a valuable, safe material from the client's waste.

# End-of-Life Refrigerant Destruction (SPARC)

The international community has long recognized that certain substances have been having harmful effects of ozone depleting substances ("ODS") as well as impacting climate change. These substances often attack the ozone layer, the protective shield that covers earth's atmosphere and protects its ecologies and inhabitants from harmful solar UV and UVC radiation. They also can lead the emission of GHGs, which alters the global climate. Refrigerants used in the refrigeration cycle of air conditioning systems and heat pumps have played a significant factor in both. CFC and HCFC refrigerants are potent ODSs, while CFC, HCFC, and HFC refrigerants all contribute to GHG emissions.

While emissions from ODS have started to fall and the ozone layer slowly heal, there remains an active need for safe and effective means of controlling and disposing of these harmful refrigerants. PyroGenesis' SPARC system uses plasma technology to destroy CFCs, HCFCs and HFCs, including from end-of-life cooling apparatus. These gases must typically be destroyed when they cannot be recycled.

1 https://www.nvr.navy.mil/NVRSHIPS/FLEETSIZE.HTML.

2 https://www.alliedmarketresearch.com/waste-to-energy-market#:~:text=The%20global%20waste%20to%20energy,4.6%25%20from%202020%20to%202027.

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PyroGenesis continues to explore potential applications for the SPARC technology, especially in markets with limited conventional incineration capacity. An example is the project initiated with The Trust for the Destruction of Synthetic Refrigerants, a New Zealand government-mandated organization, in which the SPARC system will be used to destroy refrigerants and assist New Zealand in its ambitious goals to reduce synthetic gas emissions.

### **Plasma Torch Market**

A plasma torch is a device for generating a directed flow of plasma and, as indicated in numerous parts of this document, can be used in several applications. PyroGenesis' plasma torches are used in, among other things, waste treatment systems (waste gasification and vitrification), its PAWDS and PRRS systems, thermal spray (plasma spray) in advanced materials production, and metallurgical applications.

Plasma torches can be effective and relatively safe replacements to conventional fuel or gas burners in industrial furnaces. For example, customers use PyroGenesis' patented pelletizing apparatus to perform the induration of iron ore concentrate pellets in a tunnel furnace heated by plasma torches. By using PyroGenesis' electricity powered plasma torches instead of burning natural gas, heavy oil, or pulverized coal to power burners, the generation of harmful GHGs (notably carbon dioxide) is greatly reduced relative to conventional iron ore pelletizing processes.

The Company sees excellent potential for growth in the sale of plasma torch systems. The global iron ore pellets market alone already exceeds US$45 billion and the demand for iron ore pellets is expected to near 540,000 kilotons by 2027.3 To date, PyroGenesis occupies only a fraction of this market. But given the global appetite for more environmentally sustainable and economically viable industrial solutions, the Company expects more new and existing customers to look to refit existing burners with its plasma torch systems and considers itself well placed to see growth in this area.

### **Systems for the Recovery of Aluminum and Other Metal from Dross**

Dross is a by-product of the smelting process for aluminum and other metals. As described early in this document, dross presents both a challenge and an opportunity for those in the metallurgical industry. Dross is typically composed of both metal and residue and companies want to recover the valuable metal while treating and/or disposing of the residue, which is usually contaminated.

Aluminum is one of the most popular metals in the world. Global annual production of aluminum exceeds 65 million metric tons and, from that aluminum production, nearly 5 metric tons of dross is generated annually.4 While this presents exciting opportunities for PyroGenesis, it is important to note that more than half of all aluminium is produced in China, a market that the Company does not do much business in and which is traditionally complicated to enter (for reasons which include a relative lack of intellectual property protection, restricted market conditions, and a sometimes politicized commercial environment).

Over the past several years, PyroGenesis has shifted its DROSRITE marketing strategy from a model focused on selling equipment to one in which DROSRITE is offered as a service via a tolling agreement. In a tolling arrangement, PyroGenesis would build, own and operate the DROSRITE system and associated equipment for the aluminum smelter on the smelter plant location. Although tolling revenues can vary widely depending on the sector and geographic location, this tolling model offers PyroGenesis the opportunity to create recurring revenues.

Because the DROSRITE technology not only allows users to recover valuable metal but also treat dross and create valuable residues, PyroGenesis has the opportunity to become a leader as an onsite dross processor that delivers a zero-landfill/reduced carbon solution.

### **Production of High Purity Silicon Metals, Nano Powders and Nanowires**

#### **Solar Industry**

Solar photovoltaic (PV) systems have grown at a tremendous rate. The International Energy Agency estimates that Solar PV generation increased by a record 179 TWh (up 22%) in 2021 to exceed 1 000 TWh and already accounts for 3.6%

3 Iron Ore Pellets Market Size, Share & Trends Analysis Report By Product (Blast Furnace, Direct Reduced), By Trade (Captive, Seaborne), By Region, And Segment Forecasts, 2020 - 2027. See https://www.grandviewresearch.com/industry-analysis/iron-ore-pellets-market.

4 On trending technologies of aluminium dross recycling: A review, by Ankur Srivastava and Arunabh Meshram (March 2023). See https://www.sciencedirect.com/science/article/abs/pii/S0957582023000113

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of global electricity generation$^{5}$. Solar grade silicon metal (SOG Si), used in manufacturing solar cells, is a key material needed to meet the growing demand for solar energy. Each new gigawatt of solar energy capacity requires 5,000 tonnes of solar grade silicon metal and strong demand is expected to fuel growth.

### Battery Industry

Battery manufacturing is another high-growth industry. The lithium-ion battery market size is estimated to grow from US$44.2 billion in 2020 to US$94.4 billion by 2025, equivalent to a compound annual growth rate of 16.4%$^{6}$. Research indicates that replacing graphite with nano silicon powders could allow the manufacturing of high-performance lithium-ion batteries with the capability of delivering an almost tenfold (10x) increase in anode capacity, inducing a 20-40% gain in the energy density of the next generation of lithium-ion batteries$^{7}$. Manufacturing of silicon nano powders is not yet commercially feasible with selling prices of US$30,000/kg.$^{8}$

### Production of Fuming Silica

Fumed silica (pyrogenic silica) is a white microscopic powder with high surface area and low bulk density. Its commercial applications encompass various industries including personal care, pharmaceuticals, agriculture (food & feed), adhesives, sealants, construction, batteries and automotive to name a few. Demand for fumed silica is growing but present manufacturing processes are hindering its growth potential$^{9}$.

### Production of High Purity Spherical Metal Powders

The global metal additive manufacturing (also known as the 3D printing) continues to see strong growth and is expected to continue to expand. The market size reached US$6.36 billion in 2022 and is expected to reach US$22.60 billion by 2030.$^{10}$

At present, PyroGenesis focuses its additive manufacturing sales and marketing efforts on titanium and its alloys. Titanium is a highly sought-after material in the aeronautical, biomedical, and high-end automotive industry due to its high strength, low density, high fracture toughness, excellent corrosion resistance and superior biocompatibility. Titanium is also a high margin material (in part because of its attributes and desirability). PyroGenesis will consider additional high margin materials to maximize the potential of its NEXGEN technology.

While plasma atomized powders can be of a higher quality than gas atomized powders, their widespread adoption has so far been limited by their higher price. In addition to PyroGenesis, some of the key players in the making of additive manufacturing powders through plasma atomization are 6K Additive, Tekna Advanced Materials, and AP&C, which is part of GE. With its NEXGEN technology, PyroGenesis aims to gain a competitive advantage in the market by producing high-quality powder by plasma atomization at rates comparable to gas atomization, all while maximizing the yield of powder in the preferred size range for additive manufacturing.

PyroGenesis' additive manufacturing sales and marketing efforts are done on an international footing. Through an exclusive distribution agreement, Aubert & Duval supports PyroGenesis' sales in the European market. PyroGenesis continues its own sales efforts in the North American and Asian markets and is in frequent discussions with potential customers, including well-established aerospace companies. PyroGenesis draws on its plasma torch and powder production expertise to design and develop its own torches and equipment for additive manufacturing.

### Renewable Natural Gas

The biogas industry is well established on a global level and remains strong in North America. Investments in biogas production and purification represent approximately $20 billion. There are many RNG plants in operation or in development and the market for RNG purification remains highly competitive.

$^{5}$ Solar PV Report, by Piotr Bojek (September 2022). See https://www.iea.org/reports/solar-pv

$^{6}$ Markets and Markets: 'Lithium-Ion Battery Market - Global Forecast to 2025'.

$^{7}$ Chemical Engineering News: 'In the Battery Materials World, the Anode's Time Has Come', Volume 97, Issue 14 (2019).

$^{8}$ HPQ-Silicon Resources Inc.: Innovative Silicon Solutions, 2020.

$^{9}$ <https://hpqsilicon.com/press-release/hpq-silicon-and-pyrogenesis-sign-an-agreement-to-develop-a-new-environmentally-friendly-process-to-manufacture-fumed-silica/>

$^{10}$ 'Metal 3D Printing Market Size to Hit $22.60 Billion by 2030', by Grand View Research, Inc. (September 13, 2022). See: https://www.prnewswire.com/news-releases/metal-3d-printing-market-size-to-hit-22-60-billion-by-2030---grand-view-research-inc-301623035.html

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## 6.6. Growth Strategy

As interest in the Company's products and services has increased and the variety of uses for its core technologies has expanded, the Company has evolved its strategy to concentrate its solution set under three categories. These categories represent economic drivers that are key to global heavy industry:

Energy Transition & Emission Reduction:

- fuel switching, utilizing the Company's electrically powered plasma torches and biogas upgrading technology to help reduce fossil fuel use and greenhouse gas emissions.

Commodity Security & Optimization:

- recovery of viable metals, and optimization of production to increase output, to maximize raw materials and improve availability of critical minerals.

Waste Remediation:

- safe destruction of hazardous materials, and the recovery and valorization of underlying substances such as chemicals and minerals.

Currently, within each category the Company offers several solutions in different stages leading up to commercialization, including the partial list in the diagram below:

pyrex99d1p20i0

Going forward, the Company's efforts will be focused around helping customers overcome challenges within this spectrum. More information can be found on each of these solutions and the markets in which they operate above (see 'Products and Services' and 'Markets and Opportunities')

Levering off its expertise in ultra-high temperature industrial processes, the Company typically aims to introduce its products to markets by selling to, or partnering with, industry-leading companies. These industry leaders not only bring the credibility sought when introducing new technology but also valuable insight into the market and potential customers as well as important market feedback. This corporate strategy of leveraging off these strategic partnerships seeks growth geared at (i) broadening the customer base and (ii) increasing sales to existing customers. Each of the Company's existing product lines has been, or is in the process of being, vetted or adopted by industry leaders. The Company also seeks eco-friendly business, primarily targeting offerings that reduce GHGs as opposed to those who do not. As part of its growth strategy, the Company will also selectively consider opportunities to broaden and enhance its product and market scope through acquisitions.

## 6.7. Employees

The Company had, as of December 31, 2022, 107 part-time and full-time employees. Pyro Green-Gas has 9 part-time and full-time employees.

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The Company prides itself in hiring talented individuals with a complementary mix of professional experience and industry knowledge. The Company continues to develop a working environment wherein everyone is valued for their contribution to the team and rewarded for their accomplishments. The Company believes that it has one of the highest concentrations of plasma expertise under one roof in the world. As of December 31, 2022, all of the Company's employees were non-unionized.

### 6.8. Facilities

The headquarters of the Company are located at 1744 William Street, Suite 200, Montréal, Québec, Canada, H3J 1R4 in leased premises, which are leased from the Pascali Trust, a related party of which P. Peter Pascali, the Chief Executive Officer of the Company, is a trustee, officer and beneficiary. See 'Directors and Executive Officers - Conflicts of Interest'.

The Company operates two manufacturing facilities, one facility which is 40,902 sq. ft. (3,800 m2) and is located at 5655 Philippe-Turcot, Montréal, Québec, Canada, H4C 3K8 (the 'Turcot Facility') and the second facility which is 31,632 sq. ft. (2,939 m2) and is located at 9371 Wanklyn Street, LaSalle, Québec, Canada, H8R 1Z2 (the 'Wanklyn Facility'). These facilities are used to manufacture systems, produce metal powders, and host various pilot systems for demonstration and testing, as well as to provide spare parts to the Company's existing client base.

The Company leases the Wanklyn Facility. Although the Company continues to pay rent pursuant to a lease agreement for the Turcot Facility, it exercised its contractual option to purchase the property in 2022. The exercise of said option and the ownership of the Turcot Facility are the subject of legal proceedings described below (see 'Legal Proceedings').

The Company's subsidiaries Pyro Green-Gas, Air Science Technologies Private Limited and Air Science Italia S.r.l. lease office premises in Montreal (Québec, Canada), India and Italy, respectively.

### 6.9. Distribution Methods

The Company sells its products and systems primarily through direct sales by its own internal sales team. The marketing of the Company's products is provided by its internal sales and marketing group located in Montréal, Canada.

Under a mutual exclusive agreement with Aubert & Duval, PyroGenesis supplies plasma atomized titanium powder to Aubert & Duval for distribution to the additive manufacturing market in Europe. In addition, Drosrite International has the right to manufacture, market, sell and distribute DROSRITE systems and the DROSRITE technology in the Kingdom of Saudi Arabia and certain other countries in the Middle East, on an exclusive basis. See 'Directors and Executive Officers - Conflicts of Interest'.

The business of the Company is neither cyclical nor seasonal. The Company's products have long sales cycles, which are generally unaffected by seasonal variations.

The Company's agreements are typically for the sale of equipment. The Company gets paid on milestone payments that reflect progress on the projects. Usually, the Company tries to also obtain advance payments. For the sale of powders and parts, the Company generally invoices and gets paid upon delivery.

### 6.10. Intellectual Property and Research and Development

The intellectual property and proprietary rights of PyroGenesis as well as its research and development efforts are important to its business. Considering the time and investment required to develop new products and obtain marketing authorization, the Company places considerable importance on protecting its research findings, trade secrets and technologies.

#### *Intellectual Property*

In efforts to secure, maintain, and protect its intellectual property, proprietary rights and exclusive technology, PyroGenesis relies on a combination of patents, trademarks, trade secrets, and other rights as well as licenses, non-disclosure agreements, and various other contractual arrangements. Nothing, however, can guarantee that the Company's protective measures are sufficient to prevent illicit or wrongful appropriation or misuse of its technology or the development of the same or similar technology by a third party.

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## Tradenames and Trademarks

PyroGenesis uses the following tradenames and trademarks in connection with the sale of its services and products, some of which are registered:

- PYROGENESIS
- PYROGENESIS ADDITIVE
- PYROGENESIS ALUMINUM
- PYRO GREEN-GAS
- AIRSCIENCE TECHNOLOGIES
- NEXGEN
- DROSRITE
- PUREVAP
- SPARC
- APT
- APT-HP
- RPT
- MINIGU
- SPT
- PAWDS
- PACWADS
- PPRS
- PAGV
- AVITA

pyrex99d1p1i0

pyrex99d1p22i1

pyrex99d1p22i0

The tradenames and logos are used everywhere the Company does business and the common law trademarks are or have been used in connection to the sale of specific products. In addition, PyroGenesis has registered trademarks or filed for registered trademark protection in the following jurisdictions: Australia, Brazil, Canada, China, European Union, United Kingdom, Indonesia, Israel, India, Japan, Korea (Republic of), Mexico, New Zealand, Russian Federation, Turkey, United States and Vietnam.

## Patents

As of March 1, 2023, the Company owned a total of 148 patents (32 granted, 116 pending) relating to its products and processes.

## Research & Development

The Company's competitive strategy includes a strong innovation culture and a long-standing commitment to performing research and development. The Company's research and development projects in various areas, including but

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not limited to, the production of metallic powders and the development of plasma torches, are performed and conducted internally out of its Montréal facility.

As of February 27, 2023, the Company employed twelve engineers, scientists and technicians who are fully dedicated to research and development projects. Separately, the Engineering and Process Startup and Optimization teams are also involved in research and development projects. Most research and development projects are funded by external customers or government grants and are initiated to respond to a specific customer need. Follow-on work and equipment sales can often result from these initial research and development projects. Research and development projects are mainly focused on product extension. Internal research and development expenses vary widely from year to year and depend on Company priorities.

#### **6.11. Environmental Protection**

The Company currently has active permits, including from the City of Montréal, to carry out manufacturing activities at the Wanklyn Facility and conduct research and development and operate production systems at the Turcot Facility.

The Company usually needs to apply for a new permit each time a new project involving testing occurs. There are no costs to these permits except the time required to prepare the documentation for the City of Montréal. The time to obtain a permit is usually between two and four months.

#### **6.12. Foreign Operations**

The Company, through its subsidiaries Air Science Technologies Private Limited and Air Science Italia S.r.l., carries out operations in India and Italy, respectively. The Company is in the process of developing a European operational strategy to produce titanium metal powders on the European continent. The Company continues to consider expanding its corporate footprint in other jurisdictions, including the United States.

#### **6.13. Competition**

PyroGenesis competes with a substantial number of companies in the industries in which it operates, some of which have greater technical and financial resources. There can be no assurance that such competitors are not already devoting (or will not devote in the future) substantially more resources to the development and marketing of products and services that compete with those of the Company or that new or existing competitors will not enter the various markets in which PyroGenesis is active. There can be no assurance that competitors will not develop new and unknown technologies with which the Company may have difficulty competing. Furthermore, failure to remain cost competitive may result in PyroGenesis losing business to its competitors.

For example, the Company faces competition from Europlasma in the waste destruction and waste-to-energy systems markets, the Company faces competition from Altek, a division of Harsco Corp., in the systems for the recovery of aluminum and other metal from dross market, and the Company faces competition from AP&C, a GE Additive company, and Tekna, a portfolio company of Arendals Fossekompani ASA, in the production of high purity spherical metal powders market.

Several companies in the world develop and promote thermal plasma torches, most notably Europlasma S.A. in France, Scanarc Plasma Technologies AB in Sweden, Tetronics Technologies Ltd. in the UK, Phoenix Solution Company in the USA, and Plazarium in Russia and Germany.

### **7. Dividends and Distributions**

The Company has not paid any dividends, has no policy on paying dividends or distributions, and has no present intention to pay dividends. The Company currently intends to reinvest any earnings to fund the development and growth of its business. Any future payments of dividends will be at the discretion of the Board and will depend on many factors, including, among other things, the Company's financial condition, current and anticipated capital requirements, contractual requirements, solvency tests imposed by applicable corporate law and other factors it may deem relevant.

### **8. Description of Capital Structure**

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## 8.1. Share Capital and Issued and Outstanding Shares

The sections below describe some of the material terms of the Common Shares and the number of Common Shares issued and outstanding. These descriptions are not meant to be exhaustive and are subject to, and qualified in their entirety by reference to, the terms and provisions of the Company's articles of incorporation (the "Articles").

# Description of Common Shares

The Company is authorized to issue an unlimited number of Common Shares without par value. Subject to the rights, privileges, restrictions and conditions attaching to any preferred shares authorized in the future, the rights of the holders of Common Shares, as a class, are equal in all respects and include the following rights:

- Voting: The right to vote at any meeting of shareholders;
- Dividends: The right to receive, as and when declared by the directors of the Company, any dividends payable on such dates, for such amounts and at such place or places as the Board may from time to time determine; and
- Liquidation or Dissolution: The right to receive the remaining property of the Company on liquidation or dissolution.

# Outstanding Common Shares

As at the date of this AIF, there were 178,580,395 Common Shares issued and outstanding.

## 8.2. Stock Options and Warrants

The following table sets forth, as of the date of this AIF, the aggregate number of exchangeable securities that are outstanding.

| Description of Security | Number of exchangeable securities | Number of listed securities |
| --- | --- | --- |
| Stock Options (1) | 9,815,500 | 9,815,500 |
| Warrants (2) | 6,014,600 | 6,014,600 |

# Notes:

(1) Details of stock options outstanding: (i) 300,000 stock options exercisable at a price of $0.51 until July 3, 2023, (ii) 100,000 stock options exercisable at a price of $0.51 until September 29, 2024, (iii) 100,000 stock options exercisable at a price of $0.45 until January 2, 2025, (iv) 2,195,500 stock options exercisable at a price of $4.41 until July 16, 2025 (v) 50,000 stock options exercisable at a price of $4.00 until October 26, 2025, (vi) 550,000 stock options exercisable at a price of $8.47 until April 6, 2026, (vii) 200,000 stock options exercisable at a price of $6.59 until June 1, 2026, (viii) 100,000 stock options exercisable at a price of $6.70 until June 14, 2026, (ix) 100,000 stock options exercisable at a price of $5.04 until October 14, 2026, (x) 1,920,000 stock options exercisable at a price of $3.13 until December 17, 2026, (xi) 100,000 stock options exercisable at a price of $3.61 until December 30, 2026, (xii) 450,000 stock options exercisable at a price of $3.33 until January 3, 2027, (xiii) 400,000 stock options exercisable at a price of $2.96 until April 5, 2027, (xiv) 1,500,000 stock options exercisable at a price of $3.88 until June 2, 2027, (xv) 125,000 stock options exercisable at a price of $2.14 until July 20, 2027, (xvi) 1,625,000 stock options exercisable at a price of $1.03 until January 2, 2028.
(2) For more details on the share purchase warrants outstanding, please refer to the Company's audited consolidated financial statements and related notes thereto for the year ended December 31, 2022.

## 9. Market for Securities

### 9.1. Trading Price and Volume

The Common Shares are listed on the TSX under the symbol "PYR". The following table sets forth, for the periods indicated, the reported high and low prices and the aggregate volume of trading of the Common Shares on the TSX. The Common Shares are also listed on the NASDAQ since March 11, 2021, under the symbol "PYR" and on the Frankfurt (FRA) exchange under the symbol "8PY".

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| Period | High ($) | Low ($) | Average Daily Trading Volume |
| --- | --- | --- | --- |
| January 2022 | 3.89 | 2.19 | 424,821 |
| February 2022 | 3.90 | 2.20 | 402,998 |
| March 2022 | 3.23 | 2.02 | 199,866 |
| April 2022 | 3.13 | 2.30 | 219,418 |
| May 2022 | 3.35 | 2.16 | 250,945 |
| June 2022 | 3.89 | 2.30 | 284,496 |
| July 2022 | 2.61 | 1.54 | 267,611 |
| August 2022 | 2.42 | 1.74 | 194,559 |
| September 2022 | 2.08 | 1.51 | 167,318 |
| October 2022 | 1.68 | 0.94 | 324,916 |
| November 2022 | 1.39 | 0.97 | 268,102 |
| December 2022 | 1.14 | 0.84 | 221,204 |

## 9.2. Prior Sales

The following table summarizes the issuances of unlisted securities of the Company during the financial year ended December 31, 2022.

| Date of Grant | Type of Security Issued | Number of Securities Issued | Price Per Security | Total Consideration |
| --- | --- | --- | --- | --- |
| January 3, 2022 | Stock Options | 450,000 | $3.36 | n/a |
| April 5, 2022 | Stock Options | 400,000 | $2.96 | n/a |
| June 2, 2022 | Stock Options | 1,500,000 | $3.88 | n/a |
| July 13, 2022 | Stock Options | 125,000 | $2.14 | n/a |
| October 19, 2022 | Warrants | 1,014,600 | $1.75 | n/a |

## 10. Directors and Executive Officers

The Articles of the Company provide for a minimum of three directors and a maximum of 15 directors. Each director holds office until the close of the next annual general meeting of the Company, or until his or her successor is duly elected or appointed, unless his or her office is earlier vacated.

### 10.1. Name and Occupation

The following table lists the names of the directors and executive officers of the Company as of the date of this AIF and their province/state and country of residence, their positions and offices held with the Company, their principal occupations during the past five years, the date on which they first became officers or directors of the Company, and the number and percentage of Common Shares which is beneficially owned, directly or indirectly, or over which control or direction is exercised, by each of them.

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| Name, Province/State and Country | Positions and Offices Held with the Company | Committee (s) of the Board of Directors | Director or Officer of the Company Since/Until | Principal Occupation for the Previous Five Years | Number (and Percentage) of Common Shares Owned or Controlled |
| --- | --- | --- | --- | --- | --- |
| P. Peter Pascali | President | None | 2006 | President and Chief Executive Officer of the Company since 2006. | 80,925,698 (1) |
|  | Chief Executive Officer Chair of the Board of Directors |  |  |  | (45.32)% |
| Québec, Canada |  |  |  |  |  |
| Pierre Carabin | Chief Technology Officer & Chief Strategist | None | 2006 | Chief Technology Officer & Chief Strategist of the Company since 2018. Previously, Chief Technology officer from 2016 to 2018. | 506,500 |
|  |  |  |  |  | (0.28)% |
| Québec, Canada |  |  |  |  |  |
| Alan Curleigh | Independent Director - Board of Directors | Chair of the Board of Directors | 2023 (Also a Director and Chair from 2010 until 2019) | Corporate director (was Chair of the Board of Directors of the Company from 2010 until 2019) | 60,000 |
|  |  |  |  |  | (0.03)% |
| Québec, Canada |  |  |  |  |  |
| Robert M. Radin | Lead Independent Director - Board of Directors | Member of the Audit Committee | 2012 | President of Radin & Associates Consulting, LLC since 2011. | 673,500 |
|  |  | Chair of the Compensation Committee |  |  |  |
|  |  | Member of the Nominating and Corporate Governance Committee |  |  |  |
|  |  | Member of the Strategic Initiatives Committee |  |  | (0.38)% |
| South Carolina, USA |  |  |  |  |  |
| Andrew Abdalla, CPA, CA | Independent Director - Board of Directors | Chair of the Audit Committee | 2018 | Senior Partner at chartered accountancy and business advisory firm MNP LLP. | 107,800 |
|  |  | Member of the Compensation Committee |  |  |  |
|  |  | Member of the Nominating and Corporate Governance Committee |  |  | (0.06)% |
| Québec, Canada |  |  |  |  |  |
| Dr. Virendra Jha | Independent Director - Board of Directors | Chair of the Nominating and Corporate Governance Committee | 2019 | Corporate director | 100,000 |

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|  |  | Member of the Compensation Committee |  |  | (0.06)% |
| --- | --- | --- | --- | --- | --- |
| Québec, Canada |  |  |  |  |  |
| Rodayna Kafal | Vice President, Investor Relations and Strategic Business Development | Officer since 2016 | Vice President, Investor Relations and Strategic Business Development of the Company. |  | 17,407 |
|  | Director - Board of Directors | Director since 2020 |  |  | (0.01)% |
| Québec, Canada |  |  |  |  |  |
| Nannette Ramsey | Independent Director - Board of Directors | Member of the Compensation Committee | 2021 | Corporate director | 1,000 |
|  |  | Member of the Nominating and Corporate Governance Committee |  |  |  |
|  |  | Chair of the Strategic Initiatives Committee |  |  |  |
| Florida, USA |  |  |  |  |  |
| Ben Naccarato | Independent Director - Board of Directors | Member of the Audit Committee | 2021 | Executive Vice President and Chief Financial Officer at Perma-Fix Environmental Services Inc. | 350 |
|  |  | Member of the Compensation Committee |  |  |  |
|  |  | Member of the Strategic Initiatives Committee |  |  | (0.0002)% |
| Georgia, USA |  |  |  |  |  |
| Andre Mainella | Chief Financial Officer | None | 2021 | Chief Financial Officer since 2021 | 7500 |
|  |  |  |  | Director of Consolidation and Corporate accounting, Cogeco Communications Inc. until 2021 | (0.004)% |
| Québec, Canada |  |  |  |  |  |
| Mark Paterson | General Counsel | None | 2023 | General Counsel since 2023 | 0 |
|  |  |  |  | General Counsel of Tanet Fintech Group Inc. from 2021-2022 |  |
|  |  |  |  | Director - Legal Affairs of Future Electronics Inc. from 2010-2021 | (0.00)% |
| Québec, Canada |  |  |  |  |  |

# **Notes:**

- Mr. Pascali holds 66,642,941 Common Shares directly, and indirectly holds or controls (i) 7,251,000 Common Shares through a holding company, 8339856 Canada Inc., of which he is the sole shareholder, (ii) 4,000,000 Common Shares through a foundation, The 2 Percent Solution Foundation, and (ii) 3,031,757 Common Shares

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through the Pascali Trust, a family trust of which he is a trustee, officer and a beneficiary. 'Description of Capital Structure - Stock Options'.

All executive officers of the Company are full time employees of the Company and none are independent contractors.

As of the date of this AIF, the directors and executive officers of the Company, as a group, beneficially own, directly or indirectly, or exercise control or direction over, an aggregate of 82,399,755 Common Shares representing 46.14% of the issued and outstanding Common Shares.

## 10.2. Biographies

The following biographies provide certain selected information in respect of the persons who are serving as directors and executive officers of the Company:

### P. Peter Pascali - President and, Chief Executive Officer and Director

Mr. P. Peter Pascali, after graduating with an MBA from McGill University in 1983, became an investment banker specializing in mergers and acquisitions and public offerings. He initially worked for the Bank of Nova Scotia and then, in 1987, joined Westpac Banking Company. In 1989, he joined DeGeorge Financial Company as a strategic advisor. Mr. Pascali has been with the Company since its incorporation in 2006 where he has been responsible for developing the business strategy and marketing focus for commercializing the Company's technologies and running the business. Mr. Pascali continues to develop the Company's strategy and oversee the operational management as the President and Chief Executive Officer. In his leadership role, Mr. Pascali spearheads the Strategic Management Team which is responsible for the strategic planning and execution of the Company's business plans.

### Alan Curleigh - Director and Chair of the Board of Directors

Alan Curleigh has a wealth of experience in international business, capital projects, and board governance. For many years he was a senior executive and Board member of a leading Canadian engineering contracting company. Mr. Curleigh subsequently served as a representative on multiple corporate boards and associations. Most notably, Mr. Curleigh was federally appointed by Canada's International Trade Minister to Chair the Board of Directors of the Canadian Commercial Corporation, a crown corporation mandated to support the growth of international trade by helping Canadian exporters gain access to, and negotiate with, foreign government procurement markets - a role he held for 7 years. Additionally, Mr. Curleigh was Chair of the Audit Committee for Veterans Affairs Canada, was the Chair of the Board of the Canadian Manufacturers and Exporters, Canada's largest industry association, was a board member and treasurer of the Canadian Exporters Association; and a Board Member for NorthStar Trade Finance. Mr. Curleigh has been a visiting Faculty Member at the Directors College, a joint initiative between The Conference Board of Canada and McMaster University's DeGroote School of Business and Canada's premier school of governance, where he has lectured extensively on Board governance issues since the school's inauguration. For his many contributions to leadership and business in Canada, Mr. Curleigh is the recipient of numerous awards, including the Queen Elizabeth II Diamond Jubilee Medal for dedicated service to peers and country in building a stronger export sector for Canada.

### Robert M. Radin - Director, Member of the Audit Committee, Member of the Nominating and Corporate Governance Committee, Chair of the Compensation Committee, and Member of the Strategic Initiatives Committee

Robert M. Radin retired from the U.S. Army in 2011 after serving for over 35 years and attaining the rank of Major General. His last assignment was as the U.S. Army Assistant Deputy Chief of Staff, G-4, (Logistics), the Pentagon, Washington, DC. In this position he was responsible for policy development, strategic planning and budget programming for distribution, logistics force structure, readiness reporting, Army pre-positions stocks, contingency contracting and support of U.S. Army worldwide operations. Prior to joining the Army Staff, he served as the Commanding General of the U.S. Army Sustainment Command at Rock Island, Illinois. Other key assignments include: Deputy Chief of Staff for Operations and Logistics for the U.S. Army Materiel Command from 2005 to 2007; Commanding General of the Joint Munitions Command from 2004 to 2005; and from 2003 to 2004 was deployed to Kuwait as the Commanding General, U.S. Army Materiel Command-SWA and was responsible for support of U.S. land forces in Kuwait, Iraq, Afghanistan and Djibouti. After retiring from the Army in June 2011, he founded Radin & Associates Consulting, LLC, a firm that assists clients with supply chain related issues. Mr. Radin has graduated from the U.S. Military Academy at West Point and holds postgraduate degrees from the Florida Institute of Technology and the National Defense University.

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# **Dr. Virendra Jha - Director, Member of the Compensation Committee, and Chair of the Nominating and Corporate Governance Committee**

Dr. Virendra Jha, member of the order of Canada, has over 42 years of experience in the Canadian Space Program ranging from in-depth engineering work to senior management positions in both the private and the public sectors. Dr. Jha began his space career in 1972 when he joined the aerospace group of RCA Limited Montréal, which later became Spar Aerospace Limited. In 1988, he became the Director of Engineering at Spar Aerospace Limited. In 1991 Dr. Jha joined the Canadian Space Agency as Director of the Space Mechanics Group. In 1996, he was promoted to the position of Director General, Space Technologies Branch of the CSA. From 2003 till 2008, he was the Vice-President responsible for Science, Technology and Programs at the Canadian Space Agency. As Vice President, Dr. Jha provided strategic direction, vision and leadership to all core technical sectors of the Agency. From November 2005 until February 2006, Dr. Jha also served as the Acting President of the Canadian Space Agency. He was Chief Engineering Adviser at the Canadian Space Agency until his retirement in 2014.

Dr. Jha received his B. Tech. degree in Mechanical Engineering from the Indian Institute of Technology Delhi India, his Master's degree in Mechanical engineering from McMaster University, Hamilton, Canada, and his Ph.D. degree in Mechanical Engineering from Concordia University, Montréal, Canada and the C.Dir. (Chartered Director) Degree from McMaster University, Hamilton, Canada. Dr. Jha's technical contributions in Canadian Space Program as well as in International Space activities have been significant. His leadership and commitment to the profession is reflected by his recognition and active participation in many groups, committees and advisory boards.

Dr. Jha currently serves as a director on the Board of the Atomic Energy of Canada Limited, a Canadian federal Crown corporation and Canada's largest nuclear science and technology laboratory.

# **Andrew Abdalla - Director, Member of the Compensation Committee, Member of the Nominating and Corporate Governance Committee and Chair of the Audit Committee**

Andrew Abdalla, CPA, CA, is a partner at MNP LLP, a leading national accounting, tax and business consulting firm in Canada. Mr. Abdalla brings to the Board of Directors more than 20 years of strategic planning, and tax advice, with a specific focus on sales and income tax, acquisitions and divestitures, business valuations, corporate reorganizations and spinoffs. Mr. Abdalla received his Chartered Professional Accountant (CPA, CA) designation in 1987. He holds a Bachelor of Commerce and a graduate diploma in public accounting from Concordia University in Montréal.

# **Rodayna Kafal - Director and Vice President, Investor Relations and Strategic Business Development**

Upon graduating from McGill University in 2009 (Bachelor's degree in Chemical Engineering), Ms. Kafal took on lead roles in process engineering at the Natural Gas Technologies Centre in Montréal, Québec, where she was responsible for managing a number of high-level projects. Thereafter, she enrolled in a two-year graduate program in Industrial Engineering and Project Management at École Polytechnique de Montréal. Ms. Kafal joined PyroGenesis with a strong background in process engineering, combined with practical experience in sales, promotional activities and business relations. Ms. Kafal has been a member of PyroGenesis' Strategic Management Group since 2016 where she has been instrumental in providing input into all aspects of PyroGenesis' growth and represented the views of the investor community. As Vice President, Investor Relations and Strategic Business Development, Ms. Kafal continues to oversee PyroGenesis' complete investor relations program, while managing the Company's marketing team.

# **Ben Naccarato - Director, Member of the Compensation Committee, Member of the Audit Committee, and Member of the Strategic Initiatives Committee**

Mr. Naccarato, CPA, CMA, is the Executive Vice-President and Chief Financial Officer at Perma-Fix Environmental Services Inc., a NASDAQ-listed environmental services company, providing unique radioactive mixed and industrial waste management services. Mr. Naccarato brings to the Board more than 30 years of experience in senior financial positions in the environmental industry. Mr. Naccarato is a graduate from the University of Toronto with a Bachelor of Commerce and Finance Degree as well as being a Chartered Professional Accountant and Certified Management Accountant (CPA, CMA).

# **Nannette Ramsey - Director, Member of the Compensation Committee, and Chair of the Strategic Initiatives Committee**

Ms. Ramsey holds undergraduate degrees in Economics, Engineering and an MBA. She brings process engineering and machining and materials expertise from Caterpillar Tractor Company, J.I. Case and more recently served as the Site Manager and Associate Director of Engineering for Edgewood Chemical Biological Center's site at the Rock

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Island Arsenal in Illinois. She was responsible for strategic planning, budgeting, industrial base analysis, engineering and testing, quality assurance and information technology solutions to a variety of customers.

### ***Pierre Carabin - Chief Technology Officer and Chief Strategist***

Mr. Pierre Carabin, P. Eng., has over thirty years of experience in process engineering and environmental technologies. Throughout his 23 years at PyroGenesis, he has been instrumental in the development of the Company's various technology platforms. He is the inventor or co-inventor of more than one hundred pending and issued patents relating to high temperature chemical processes. As Chief Technology Officer, he leads PyroGenesis' engineering team in the design and development of plasma systems and is also member of the Company's Strategic Management Team which is responsible for the strategic planning and execution of the Company's business plan.

Prior to joining PyroGenesis in 1998, Mr. Carabin worked in the pulp and paper industry for 8 years, notably developing paper recycling machinery. Mr. Carabin holds a Master's degree in Chemical Engineering with honors from McGill University, and, to date, he has contributed to more than 50 technical communications for various journals and at technical conferences. Mr. Carabin also volunteers for the Air and Waste Management Association (AWMA) and Ecotech Québec, the cleantech cluster in Québec.

### ***Andre Mainella - Chief Financial Officer***

Upon graduating from Concordia University, Mr. Mainella has since then accumulated over 20 years of experience in accounting. Andre began his career at Raymond Chabot Grant Thornton. As a senior audit manager, he worked on a diverse list of audit and non-audit related mandates for private and publicly-traded companies. His broad experience includes clients in various business sectors such as manufacturing, distribution, retail, real estate and airlines. Mr. Mainella had the opportunity to assist in the implementation of accounting standards, initial public offerings as well as business acquisitions and divestitures.

From 2013 to 2015, Mr. Mainella occupied the role of finance manager for the Canadian operations of Orica, a provider of commercial explosives and blasting systems for the mining and construction sectors. Andre was responsible for the financial information, budgeting & forecasting, in addition to advising on new sales contracts and capital projects, among others.

Subsequently, Mr. Mainella joined Cogeco, a telecommunications and media company, as their director of consolidation and corporate accounting. He managed the activities of corporate accounting, shared services, and the consolidation of the Canadian and American financial results. Mr. Mainella was part of the Cogeco corporate team for 6 years and contributed in various manners to the implementation of the company's numerous acquisitions, enterprise resource planning implementation, new accounting standards, and involvement in the corporate insurance policies.

Mr. Mainella received his Chartered Professional Accountant designation in 2001. He holds a Bachelor of Commerce and a graduate diploma in public accounting from Concordia University in Montreal.

### ***Mark Paterson - General Counsel***

Mark Paterson is a senior business lawyer with comprehensive corporate and commercial experience, including in senior in-house roles as well as private practice. He has an extensive legal understanding in a wide array of areas, including in contract negotiations, M&A management, conflict resolution, human resources, and corporate and regulatory compliance. Prior to joining PyroGenesis, Mr. Paterson was General Counsel for Tenet Fintech Group, a publicly traded company specialized in innovative fintech and AI applications. From 2010 to 2021, he served as Director - Legal Affairs for Future Electronics, a large, multinational distributor of electronic components. Before joining Future Electronics, Mr. Paterson was General Counsel and Vice-President of Strategic Alliances for Luxury Retreats, a provider of high-end vacation accommodations. He began his legal career at Fasken, one of the leading business law firms in Canada, working in its corporate law department. Mr. Paterson is a member of the Quebec bar and holds BCL and LLB degrees from McGill University. He also holds a B.A. from Bishop's University.

### **10.3. Cease Trade Orders, Bankruptcies, Penalties or Sanctions**

Except as indicated below, to the knowledge of the Company, no director or executive officer of the Company is, as at the date of this AIF, or was within 10 years before the date of this AIF, a director, chief executive officer or chief financial officer of any company (including the Company), that: (a) was subject to a cease trade order, an order similar to a cease trade order, or an order that denied such company access to any exemption under securities legislation (each an

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“Order”) that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer, or (b) was subject to an Order that was issued after the director or executive officer ceased to be a trustee, director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer. As announced on February 23, 2023 by the Company, the AMF issued an order suspending a private placement of units of the Company. The AMF alleged in the order that the Company did not satisfy all of the requirements necessary to complete the financing under the listed issuer financing exemption under Part 5A of National Instrument 45-106 - Prospectus Exemptions.

To the knowledge of the Company, no director or executive officer of the Company, or a shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company, (a) is, as at the date of this AIF, or has been within the 10 years before the date of this AIF, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (b) has, within the 10 years before the date of this AIF, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder.

To the knowledge of the Company, no director or executive officer of the Company, or a shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company has been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority, or has been subject to any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor making an investment decision.

#### **10.4. Conflicts of Interest**

There are potential conflicts of interest to which the directors and officers of the Company may be subject to in connection with the operations of the Company. In particular, the Pascali Trust, of which P. Peter Pascali, the Chief Executive Officer of the Company, is a trustee, officer and beneficiary is the landlord under the lease regarding the Company’s corporate headquarters. See “Business of the Company - Facilities” and “General Development of the Business - Year Ended December 31, 2020 - Corporate Developments and Financings”. Over the past three completed financial years, P. Peter Pascali has also participated in financings of the Company, and he may continue to do so in the future. See “General Development of the Business - Year Ended December 31, 2020 - Corporate Developments and Financings”. In addition to being the Chief Executive Officer of the Company, P. Peter Pascali is also a controlling shareholder of the Company. See “Risk Factors - Influence of the Significant Shareholders”.

On October 9, 2019, Drosrite International, a US-based private company owned by Alex Pascali, the son of P. Peter Pascali, entered into the Dross Processing Service Agreement with Radian Oil & Gas Services Company, an oil and gas services company operating in the Middle East (the “Dross Processing Service Agreement”). The Dross Processing Service Agreement was structured as a “BOOT” agreement (build, own, operate and transfer) having a 20-year term and using PyroGenesis’ DROSrite technology. The Dross Processing Service Agreement provides that Drosrite International will manufacture and deliver to Radian Oil & Gas DROSrite TPY systems which will be installed at the aluminium smelting facility of Ma’aden Aluminum Company located at Ras Al-Khair, in Saudi Arabia. In addition, Drosrite International will oversee the installation of the systems at the Ras Al-Khair facility. Drosrite International will also supply spare parts over the 20-year duration of the Dross Processing Service Agreement and be entitled to receive an annual royalty. The total value of the project exceeds US$17 million. The amount remaining to be collected is approximately US$9 million of the initial US$17 million purchase order with remaining billings of roughly US$1 million to be issued. There is also an additional approximately US$450,000 to be collected for transportation, storage, and insurance fees. See also the Company’s consolidated financial statements and related notes for the year ended December 31, 2022, and the management’s discussion and analysis thereon.

In connection with the Dross Processing Service Agreement between Drosrite International and Radian Oil & Gas, the Drosrite International Exclusive Agreement was entered into between PyroGenesis and Drosrite International on August 29, 2019, under which Drosrite International received the required rights from PyroGenesis to perform its obligations under its agreement with Radian Oil & Gas. Under the Drosrite International Exclusive Agreement, PyroGenesis will receive payments equal to the payments received by Drosrite International under its Dross Processing Service Agreement with Radian Oil & Gas.

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The sole director, officer, and shareholder of Drosrite International is Alex Pascali, an employee of the Company and the son of P. Peter Pascali, Chief Executive Officer of the Company. Drosrite International does not receive any management, administration or other fee from the Company. Drosrite International is, on an accounting basis, a subsidiary of the Company and not a client, as under applicable accounting standards the Company is considered to effectively control Drosrite International. The Company has to indemnify Drosrite International for any claims and liabilities incurred in connection with the Drosrite systems. The Company's Drosrite technology was protected by patents until 2017 and new patent applications pertaining to the technology have been filed before 2017, which patent applications are pending.

To the best of the Company's knowledge, other than as disclosed in this AIF, there are no known existing or potential conflicts of interest among the Company, the directors and officers of the Company or other members of management or of any proposed promoter, director, officer or other member of management as a result of their outside business interests except that certain of the directors and officers serve as directors and officers of other companies, and therefore it is possible that a conflict may arise between their duties to the Company and their duties as a director or officer of such other companies.

A director who has a material interest in a matter before the Board or any committee on which he or she serves is required to disclose such interest as soon as the director becomes aware of it. In situations where a director has a material interest in a matter to be considered by the Board or any committee on which he or she serves, such director may be required to absent himself or herself from the meeting while discussions and voting with respect to the matter are taking place. Directors are also required to comply with the relevant provisions of applicable corporate laws regarding conflicts of interest. Under the CBCA, directors who have a material interest in any person or entity that is a party to a material contract or a proposed material contract with the Company are required under the CBCA, subject to certain exceptions, to disclose that interest and generally abstain from voting on any resolution to approve such a contract. In addition, directors and executive officers are required to act honestly and in good faith with a view to the best interests of the Company.

### 10.5. Board Independence

The Board believes that sound corporate governance practices are essential to the effective, efficient and prudent operation of the Company and to the enhancement of shareholder value.

Under National Instrument 58-101 - Disclosure of Corporate Governance Practices, a director is considered to be independent if the director is independent within the meaning of section 1.4 of **NI 52-110**. Pursuant to section 1.4 of NI 52-110, an independent director is a director who is free from any direct or indirect relationship which could, in the view of the board, be reasonably expected to interfere with a director's independent judgment. Based on information provided by each director concerning their background, employment and affiliations, the Board has determined that, of the eight directors on the Company's Board, P. Peter Pascali and Rodayna Kafal are not independent under section 1.4 of NI 52-110 because they are executive officers of the Company.

### 11. Audit Committee and Other Committees

#### 11.1. Audit Committee

The Company's Audit Committee is responsible for assisting the Board in monitoring the performance of management in ensuring that the Company is operating in an ethical manner and encouraging management to demonstrate a strong commitment to integrity.

The Audit Committee is also responsible for providing assistance to the Board in fulfilling its financial reporting and control responsibilities to the shareholders of the Company and to the investment community. The Audit Committee's primary responsibilities in this regard are to: (i) oversee the accounting and financial reporting process of the Company and the audit of its financial statements; (ii) monitor the Company's financial reporting process and internal control systems; (iii) review and appraise the audit activities of the Company's independent auditors; (iv) meet periodically with management and with the independent auditors; and (v) assess the relevance and reliability of the Company's financial reports to ensure they accurately portray the underlying economic circumstances and financial performance of the Company.

#### *Audit Committee Charter*

The Audit Committee's mandate is to promote and ensure that the Company complies with high standards of financial reporting, risk management and ethical behavior. The Audit Committee Charter is attached hereto as Schedule 'A'.

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### **Composition of the Audit Committee**

The Audit Committee is comprised of three directors, Messrs. Abdalla (Chair of the Audit Committee), Naccarato, and Radin. Each of the three members meets the independence requirements for members of the Audit Committee pursuant to NI 52-110, NASDAQ Rule 5605 and Rule 10A-3 under the Securities Exchange Act of 1934, as amended. Each of the three members is financially literate within the meaning of NI 52-110 and NASDAQ Rule 5605, has an understanding of the accounting principles used to prepare financial statements and varied experience as to the general application of such accounting principles, and has an understanding of the internal controls and procedures necessary for financial reporting. For additional details regarding the education and experience of each member of the Audit Committee, see 'Directors and Executive Officers'.

### **Pre-Approval Policies and Procedures**

The Audit Committee must pre-approve all non-audit services to be provided to the Company by its external auditors.

### **External Fees by Audit Category**

Fees incurred with the auditors for audit and non-audit services in the last two fiscal years for audit fees are outlined in the following table.

|  | Fees paid to RCGT LLP in Fiscal Year ended December 31, 2022 | Fees paid to RCGT LLP in Fiscal Year ended December 31, 2021 |
| --- | --- | --- |
| Audit Fees (1) | $531,818 | $325,500 |
| Audit-Related Fees (2) | $13,000 | $ - |
| Tax-Related Fees (3) | $ - | $9,975 |
| All Other Fees | $57,725 | $21,000 |
| Total Fees | $602,543 | $356,475 |

#### **Notes:**

(1) 'Audit Fees' include fees necessary to perform the annual audit of the Company's consolidated financial statements, and for services that are normally provided in connection with statutory and regulatory filings or engagement related to the annual consolidated financial statements.

(2) 'Audit-Related Fees' include translation services and fees for accounting consultations on matters reflected in the financial statements.

(3) 'Tax-Related Fees' includes fees for tax compliance, tax planning and tax advice. Tax planning and tax advice includes assistance with tax audits and Research and Development tax credits.

### **11.2. Other Committees**

In addition to the Audit Committee, the Board has established three other standing committees, namely the Nominating and Governance Committee, the Compensation Committee, and the Strategic Initiatives Committee.

### **Nominating and Corporate Governance Committee**

The Company's Nominating and Corporate Governance Committee consists of four directors, each of whom is a person determined by the Board to be an independent director, and is charged with reviewing, overseeing and evaluating the Company's corporate governance and nominating policies. The Nominating and Corporate Governance Committee comprises Dr. Virendra Jha (Chair), Andrew Abdalla, Robert M. Radin, and Nannette Ramsey. The Board has adopted a written charter setting forth the purpose, composition, authority and responsibility of the Nominating and Corporate Governance Committee.

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### ***Compensation Committee***

The Company's Compensation Committee consists of five directors, each of whom is a person determined by the Board to be an independent director, and is charged with reviewing, overseeing and evaluating the Company's compensation policies. The Compensation Committee comprises Robert M. Radin (Chair), Andrew Abdalla, Dr. Virendra Jha, Ben Naccarato and Nannette Ramsey. The Board has adopted a written charter setting forth the purpose, composition, authority and responsibility of the Compensation Committee.

### ***Strategic Initiatives Committee***

The Company's Strategic Initiatives Committee consists of three directors, each of whom is a person determined by the Board to be an independent director and is charged with assisting the Board by providing input to strategic decisions and their implementation. The Strategic Initiatives Committee comprises Nannette Ramsey (Chair), Ben Naccarato and Robert M. Radin. The Board has adopted a written charter setting forth the purpose, composition, authority and responsibility of the Strategic Initiatives Committee.

## **12. Risk Factors**

The Company has identified below certain significant risks relating to the business of the Company and the industry in which it operates. The following information is only a summary of certain risk factors and is qualified in its entirety by reference to, and must be read in conjunction with, the detailed information appearing elsewhere in this AIF. These risks and uncertainties are not the only ones facing the Company. Additional risks and uncertainties not currently known to the Company, or that the Company currently considers immaterial, may also impair the operations of the Company. If any such risks materialize into actual events or circumstances, the Company's assets, liabilities, financial condition, results of operations (including future results of operations), business and business prospects, are likely to be materially and adversely affected. There is no assurance that risk management steps taken will avoid future loss due to the uncertainties described below or other unforeseen risks. An investment in the Common Shares or other securities of the Company is highly speculative and involves a high degree of risk. Before making any investment decision, prospective investors should carefully consider all the information contained in this document including, in particular, the risk factors described below.

### **12.1. Risks Related to the Company's Business and Industry**

#### ***Operating Income (Loss) and Negative Operating Cash Flow***

The Company has a history of losses and negative cash flows. The Company's operations have not generated sufficient earnings and cash flows to date to result in consistent profitability or positive cash flows. For the year ended December 31, 2022, the Company had net losses of $32,167,027, cash flows used in operations of $11,128,885, and an accumulated deficit of $93,384,858. To the extent that the Company has net losses and negative operating cash flows in future periods, it may need to allocate a portion of its cash reserves to fund such negative cash flows. The Company may also be required to raise additional funds through the issuance of equity or debt securities, or otherwise. There can be no assurance that the Company will be able to generate positive cash flows from its operations, that additional capital or other types of financing will be available when needed or that these financings will be on terms favourable to the Company.

The Company's ability to continue as a going concern is dependent upon its ability in the future to grow its revenue, achieve profitable operations, successfully develop and introduce new products and, in the meantime, to obtain the necessary financing to meet its obligations and repay its liabilities when they become due. While the Company has been successful in securing financing in the past, raising additional funds is dependent on a number of factors outside the Company's control, and as such there is no assurance that it will be able to do so in the future. If the Company is unable to obtain sufficient additional financing, it may have to curtail operations and development activities, any of which could harm the business, financial condition and results of operations. In addition, the Company may not generate significant gains, and may suffer losses, from the value of its strategic investments in the future.

#### **Actual Financial Position and Results of Operations May Differ Materially from the Expectations of the Company's Management**

The Company's actual financial position and results of operations may differ materially from management's expectations. The Company has from time to time experienced changes in its operating plans and delays in the timing of its plans. As a result, the Company's revenue, net income and cash flow may differ materially from the Company's projected revenue, net income and cash flow. The process for estimating the Company's revenue, net income and cash flow requires the use of judgment in determining the appropriate assumptions and estimates. These estimates and assumptions may be

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revised as additional information becomes available and as additional analyses are performed. In addition, the assumptions used in planning may not prove to be accurate, and other factors may affect the Company's financial condition or results of operations.

# Revenue Risks

PyroGenesis may experience delays in achieving revenues, particularly with plasma gasification projects which have a long sales cycle. Revenues may be delayed or negatively impacted by issues encountered by the Company or its clients including:

- unforeseen engineering and/or environmental problems;
- delays or inability to obtain required financing, licenses, permits and/or regulatory approvals;
- supply interruptions and/or labour disputes;
- foreign exchange fluctuations and/or collection risk; and
- competition from other suppliers and/or alternative energy solutions that are less capital intensive.

There is no assurance that the business of the Company will perform as expected or that returns from the business will support the expenditures needed to develop it.

# Concentration Risk

To date, a small number of customers have accounted for a majority of PyroGenesis' revenues. As its business expands, the Company expects that revenue distribution will be over a larger number of different customers. For the year ended December 31, 2022, sales of PyroGenesis to its two principal customers accounted for approximately 52% of its total revenue. For the year ended December 31, 2021, sales to two principal customers accounted for approximately 79% of PyroGenesis' total revenue. The loss of, or a reduction in, purchase orders or anticipated purchase orders from PyroGenesis' principal customers could have a material adverse effect on its business, financial condition and results of operations. Additionally, if one of PyroGenesis' customers is unable to meet its commitments to PyroGenesis, the Company's business, financial condition and results of operations could be adversely affected.

As a result of the Drosrite International Exclusive Agreement and the Dross Processing Service Agreement, significant revenues may be generated by the Company from payments made to Drosrite International under the Dross Processing Service Agreement. The Company will no longer receive payments under such arrangement if the Dross Processing Service Agreement, which involves a third party in a foreign jurisdiction, is terminated, which could have a material adverse effect on the business, financial condition and results of operations of the Company.

# Technology Development and Manufacturing Capability Risks

PyroGenesis recently expanded into new areas of business and, as a result, many of the Company's products are at various stages of the development cycle. The Company may be unable to commercialize such products, or it may be unable to manufacture such products in a commercially viable manner. Whilst management is confident in both the Company's technology and in its team of experienced engineers, scientists and technicians, management cannot know with certainty which of the Company's products will be commercialized, when any such products will be commercialized, or whether any such products will be manufactured and distributed profitably.

# Additional financing and dilution

PyroGenesis may require additional financing. There can be no assurance that additional financing will be available to the Company when needed, or on terms acceptable to the Company. PyroGenesis' inability to raise financing to support ongoing operations or to fund capital expenditures could limit the Company's growth and may have a material adverse effect upon the Company.

The Company does not exclude raising additional funds by equity financing. In addition, as of the date of this AIF, 9,815,500 stock options and 6,014,600 warrants are currently issued and outstanding. The exercise of stock options and/or warrants, as well as any new equity financings, represents dilution factors for present and future shareholders.

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## **Reliance on Third Party Suppliers, Service Providers, Distributors and Manufacturers**

The Company's direct and indirect suppliers, service providers, distributors and manufacturers may elect, at any time, to breach or otherwise cease to participate in supply, service, distribution or manufacturing agreements, or other relationships, on which the Company's operations rely. Loss of its suppliers, service providers, distributors and manufacturers could have a material adverse effect on the Company's business and operational results. Further, any disruption in the manufacturing process done by third party manufacturers could have a material adverse effect on the business, financial condition and results of operations of the Company. The Company cannot ensure that alternative production capacity would be available in the event of a disruption, or if it would be available, that it could be obtained on favorable terms.

### **Manufacturing Facilities**

The vast majority of the Company's products are manufactured in its two manufacturing facilities located in Montréal, Québec. Accordingly, the Company is highly dependent on the uninterrupted and efficient operation of its manufacturing facility. If for any reason the Company is required to discontinue production at its facility, it could result in significant delays in production of the Company's products and interruption of the Company's sales as it seeks to resume production. The Company may be unable to resume production on a timely basis. If operations at the facility were to be disrupted as a result of equipment failures, natural disasters, fires, accidents, work stoppages, power outages or other reasons, the Company's business, financial condition and/or results of operations could be materially adversely affected.

### **Sales Cycle and Fixed Price Contracts**

PyroGenesis sales cycle is long and the signing of new contracts is subject to delay, over which the Company has little control. The Company also enters into sales contracts with fixed pricing, which may be impacted by changes over the period of implementation. There is no assurance that delays or problems in fulfilling contracts with clients will not adversely affect the Company's activities, operating results or financial position.

### **Reliance on Technology**

PyroGenesis depends upon continuous improvements in technology to meet client demands with respect to performance and cost, and to explore additional business opportunities. There can be no assurance that the Company will be successful in its efforts in this regard or that it will have the resources available to meet this demand. Whilst management anticipates that its research and development efforts will allow the Company to explore additional business opportunities, there is no guarantee that such business opportunities will be presented or realized. The commercial advantage of the Company will depend to a significant extent on the intellectual property and proprietary technology of PyroGenesis and the ability of the Company to prevent others from copying such proprietary technologies. PyroGenesis currently relies on intellectual property rights and other contractual or proprietary rights, including (without limitation) copyright, trade secrets, confidential procedures, contractual provisions, licenses and patents, to protect its proprietary technology. PyroGenesis may have to engage in litigation in order to protect its patents or other intellectual property rights, or to determine the validity or scope of the proprietary rights of others. This type of litigation can be expensive and time consuming, regardless of whether or not the Company is successful. PyroGenesis may seek patents or other similar protections in respect of particular technology; however, there can be no assurance that any future patent applications will actually result in issued patents, or that, even if patents are issued, they will be of sufficient scope or strength to provide meaningful protection or any commercial advantage to the Company. Moreover, the process of seeking patent protection can itself be long and expensive. In the meantime, competitors may develop technologies that are similar or superior to PyroGenesis' technology or design around the patents owned by the Company, thereby adversely affecting the Company's competitive advantage in one or more of its areas of business. Despite the efforts of the Company, its intellectual property rights may be invalidated, circumvented, challenged, infringed or required to be licensed to others. It cannot be assured that any steps the Company may take to protect its intellectual property rights and other rights to such proprietary technologies that are central to the Company's operations will prevent misappropriation or infringement of its technology.

### **Changes to Contracts**

PyroGenesis is dependent upon its ability to establish and develop new relationships and to build on existing relationships with current clients. The Company cannot provide assurance that it will be successful in maintaining or advancing its relationships with current clients or procure additional clients. In addition, PyroGenesis cannot provide assurance that its customers and the end users of its products will continue to provide the Company with business, or that existing customers and end users will not seek to renegotiate or terminate existing contracts providing for the sale of the Company's products and technology based on circumstances on which the Company is not currently aware. Any termination

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or amendment of a contract under which the Company derives an important portion of its revenues, including the Drosrite International Exclusive Agreement and the Dross Processing Service Agreement, and any adverse change in the relationship of the Company with its customers and end users, will have an adverse effect on the Company's business, financial condition and results of operations.

Sales to governments and governmental entities are subject to specific additional risks, such as delays in funding, termination of contracts or sub-contracts at the convenience of the government, termination, reduction or modification of contracts or sub-contracts in the event of changes in the government's policies or as a result of budgetary constraints and increased or unexpected costs resulting in losses or reduced profits under fixed price contracts.

### ***Foreign Exchange Exposure***

PyroGenesis' products and services are increasingly being sold in markets outside of Canada, whilst most of its operating expenses and capital expenditures are denominated in Canadian dollars. As a result, the Company is exposed to fluctuations in the foreign exchange rates between Canadian dollar and the currency in which a particular sale is transacted, which may result in foreign exchange losses that could affect earnings. Foreign sales are predominantly denominated in U.S. dollars. The Company has not to date sought to hedge the risks associated with fluctuations in foreign exchange rates.

### ***Competition***

The industry in which the Company operates is competitive and PyroGenesis competes with a substantial number of companies which have greater technical and financial resources. There can be no assurance that such competitors will not substantially increase the resources devoted to the development and marketing of products and services that compete with those of the Company or that new or existing competitors will not enter the various markets in which PyroGenesis is active. There can be no assurance that competitors will not develop new and unknown technologies with which the Company may have difficulty competing. Furthermore, failure to remain cost competitive may result in PyroGenesis losing business to its competitors.

The plasma technology of PyroGenesis competes against other plasma and conventional technologies. Without limitation, the demand for the plasma technology of PyroGenesis, particularly in waste destruction and waste-to-energy systems, can be impacted by the commodity prices of the energy source used for the process and the price at which waste is accepted by landfills and traditional waste processing plants. While the Company believes that demand for sustainable waste management practices that have lower environmental impacts than traditional solutions such as landfill or incineration is increasing, the high flows of electricity necessary to operate the waste destruction and waste-to-energy systems of PyroGenesis have an impact on the operational costs of the Company's systems, and traditional solutions may constitute lower-cost solutions, particularly if commodity prices (including oil and natural gas) are low or experience a decline.

### ***Management and Key Personnel***

PyroGenesis depends on the skills and experience of its executive and management team and other key employees. The Company relies heavily on its ability to attract and retain highly skilled personnel in a competitive environment. PyroGenesis may be unable to recruit, retain, and motivate highly skilled executives and employees in order to assist the Company's business, especially activities that are essential to the success of the Company. Failure to recruit and retain highly skilled executives and employees may adversely affect PyroGenesis' business, financial condition and results of operations.

### ***Implementation of a Strategic Plan***

PyroGenesis' commercial strategy aims to leverage its products, consumables, and services whilst focusing on the resolution of problems within niche markets within the industries served by the Company. There can be no assurances as to the success of the Company's strategic plan, which should be considered under the risks perspective and difficulties frequently encountered by a developing business.

### ***Adverse Decisions of Sovereign Governments***

PyroGenesis conducts an increasing portion of its business internationally. There is no assurance that any sovereign government, including Canada's, will not establish laws or regulations that may be detrimental to the Company's interests or that PyroGenesis will continue to have access to the regulatory agencies in the countries in which it sells or seeks to sell, directly or indirectly, its products and services. Governments have, from time to time, established foreign

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exchange controls, which could have a material adverse effect on the Company's business, financial condition and results of operations.

### Risks Related to International Operations

A substantial portion of the Company's sales are made to customers and end users outside Canada, including in the United States, the European Union and the Middle East. The Company conducts its international operations directly or through distributors or other agents or intermediaries, including Drosrite International. The Company plans to continue to expand its international sales and marketing efforts. International operations are subject to a number of inherent risks, and the Company's future results could be adversely affected by a number of factors, including:

- unfavorable political or economic environments;
- requirements or preferences for domestic products or solutions, which could reduce demand for the Company's products;
- differing existing or future regulatory and certification requirements;
- unexpected legal or regulatory changes;
- greater difficulty in collecting accounts receivable and longer collection periods;
- difficulties in enforcing contracts;
- any inability to effectively protect intellectual property;
- tariffs and trade barriers, export regulations and other regulatory and contractual limitations on the Company's ability to sell its products; and
- potentially adverse tax consequences, including multiple and possibly overlapping tax structures.

Fluctuations in currency exchange rates could materially adversely affect sales denominated in currencies other than the Canadian dollar and cause a reduction in revenues derived from sales in a particular country. Financial instability in foreign markets could also affect the sale of the Company's products in international jurisdictions. In addition, the Company may be denied access to its end customers as a result of a closing of the borders of the countries in which it its products are sold due to economic, legislative, political, military and other conditions in such countries.

There can be no assurance that such factors will not materially adversely affect the operations, growth prospects and sales of the Company and, consequently, its results of operations. In addition, revenues the Company earns in other jurisdictions may be subject to taxation by more than one jurisdiction, which could materially adversely affect the Company's earnings. Each of these factors could have an adverse effect on the Company's business, financial condition and results of operations.

### Governmental Regulation

PyroGenesis is subject to a variety of federal, provincial, state, local and international laws and regulations relating namely to the environment, health and safety, export controls, currency exchange, labour and employment and taxation. These laws and regulations are complex, change frequently and have tended to become more stringent over time. Failure to comply with these laws and regulations may result in a variety of administrative, civil and criminal enforcement measures, including assessment of monetary penalties, imposition of remedial requirements and issuance of injunctions as to future compliance. The Company may be subject to compliance audits by regulatory authorities in the various countries in which it operates.

### Government-funded Defense and Security Programs

Like most companies that supply products and services to governments, the Company is subject to routine audit and investigation procedures of government agencies. These agencies may review the Company's performance under its contracts, business processes, cost structure, and compliance with applicable laws, regulations and standards. The Company's incurred costs for each year are subject to audit by government agencies, which can result in payment demands related to costs they believe should be disallowed. The Company works with governments to assess the merits of claims and where appropriate reserve for amounts disputed. The Company could be required to provide repayments to

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governments, which may have a negative effect on its results of operations. Contrary to cost-reimbursable contracts, some costs may not be reimbursed or allowed under fixed-price contracts, which may have a negative effect on the Company's results of operations if it experiences costs overruns.

### ***Environmental Liability***

PyroGenesis is subject to various environmental laws and regulations enacted in the jurisdictions in which it operates, which govern the manufacturing, processing, importation, transportation, handling and disposal of certain materials used in the Company's operations. Management believes that it has adequate procedures in place to address compliance with current environmental laws and regulations. Furthermore, management monitors the Company's practices concerning the handling of environmentally hazardous materials. However, there can be no assurance that the Company's procedures will prevent environmental damage occurring from spills of materials handled by the Company or that such damage has not already occurred. On occasion, substantial liabilities to third parties may be incurred. The Company may have the benefit of insurance maintained by it or the operator, however the Company may become liable for damages against which it cannot adequately insure or against which it may elect not to insure because of high costs or other reasons. The Company's clients are subject to similar environmental laws and regulations, as well as limits on emissions to the air and discharges into surface and sub-surface waters. While regulatory developments that may follow in subsequent years could have the effect of reducing industry activity, the Company cannot predict the nature of the restrictions that may be imposed. The Company may be required to increase operating expenses or capital expenditures in order to comply with any new restrictions or regulations.

### ***Product Liability and Other Lawsuits***

PyroGenesis is subject to a variety of potential product liabilities claims and other lawsuits related with its operations, including liabilities and expenses associated with product defects. The Company maintains product liability and other insurance coverage that management believes is generally in accordance with the market practice in its industry, but there can be no assurance that the Company will always be adequately insured against all potential liabilities.

A malfunction or the inadequate design of the Company's products could result in product liability or other tort claims. Accidents involving the Company's products could lead to personal injury or physical damage. Any liability for damages resulting from malfunctions could be substantial and could materially adversely affect the Company's business and results of operations. In addition, a well-publicized actual or perceived problem could adversely affect the market's perception of the Company's products and affect its reputation. This could result in a decline in demand for the Company's products, which would materially adversely affect the Company's financial condition and results of operations.

The sale and use of products and processes developed or sold by the Company may entail potential liability and possible warranty claims. The Company is also required to indemnify Drosrite International for any claims and liabilities incurred in connection with the Drosrite systems. The Company may be subject to personal injury claims for injuries resulting from use of its products. Although the Company maintains product liability insurance, there can be no assurance that such insurance will continue to be available on commercially reasonable terms or that the risks covered or coverage amounts will be sufficient to cover all claims.

### ***Information Systems Disruptions***

The Company relies on various information technology systems to manage its operations. Over the last several years, the Company has implemented, and it continues to implement, modifications and upgrades to such systems, including changes to legacy systems, replacing legacy systems with successor systems with new functionality, and acquiring new systems with new functionality. These types of activities subject the Company to inherent costs and risks associated with replacing and changing these systems, including impairment of the Company's ability to fulfill customer orders, potential disruption of its internal control structure, substantial capital expenditures, additional administration and operating expenses, retention of sufficiently skilled personnel to implement and operate the new systems, demands on management time and other risks and costs of delays or difficulties in transitioning to or integrating new systems into the Company's current systems. These implementations, modifications, and upgrades may not result in productivity improvements at a level that outweighs the costs of implementation, or at all. In addition, the difficulties with implementing new technology systems may cause disruptions in the Company's business operations and have a material adverse effect on its business, financial condition, or results of operations.

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## **Security Breaches**

As part of its day-to-day business, the Company stores its data and certain data about its customers in its global information technology system. Unauthorized access to the Company's data, including any regarding its customers, could expose the Company to a risk of loss of this information, loss of business, litigation and possible liability. Security measures may be breached by intentional misconduct by computer hackers, as a result of third-party action, employee errors, malfeasance or otherwise. Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other information in order to gain access to the data of the Company's customers or the Company's data, including the Company's intellectual property and other confidential business information, or the Company's information technology systems. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, the Company may be unable to anticipate these techniques or to implement adequate preventative measures. Any security breach could result in a loss of confidence by the Company's customers, damage its reputation, disrupt its business, lead to legal liability and negatively impact its future sales, business, operations and financial results.

## **Public Health Crises**

Public health crises, including local, regional, national or international outbreak of a contagious disease, could have an adverse effect on local economies, the global economy, and the markets in which the Company operates and markets its products, and may adversely impact the price and demand for the Company's products and the ability of the Company to operate and market its products. Any such alterations or modifications could cause substantial interruption to the Company's business, any of which could have a material adverse effect on the Company's operations or financial results, and could include temporary closures of one or more of the Company's or its partner's offices or facilities; temporary or long-term labor shortages; temporary or long-term adverse impacts on the Company's supply chain and distribution channels; the potential of increased network vulnerability and risk of data loss resulting from increased use of remote access and removal of data from the Company's facilities.

2020 and 2021 saw The global outbreak of COVID-19 have devastating effects on populations and led to governments worldwide enacting emergency measures to protect against the spread of the virus. In 2022, the detrimental effects of the COVID-19 pandemic on economies and businesses lessened with the lifting of most public health restrictions during the year. Like most businesses, PyroGenesis was affected by the pandemic. However, the Company took measures to protect its employees and the company in general and continued its operations throughout the pandemic. Notwithstanding the foregoing, there is no guarantee that the global effects of the pandemic will continue to improve and if new strains, outbreaks, or other adverse effects arise, the Company and its vendors and suppliers may be unable to continue operations or keep up with increasing demands as a result of COVID-19 and customers may experience delays or interruptions in service or the delivery of products, which may be detrimental to the Company's reputation, business, results of operations and financial position. The Company cautions that it is impossible to fully anticipate or quantify the effect and ultimate impact of the COVID-19 pandemic as the situation still continues to evolve.

## **Litigation**

The Company may from time to time become party to litigation, including in the ordinary course of business which could adversely affect its business. Should any litigation in which the Company becomes involved be determined against the Company, such a decision could adversely affect the Company's ability to continue operating and the market price for the Common Shares and could use significant resources. Even if the Company is involved in litigation and wins, litigation can redirect significant Company resources. Litigation may also create a negative perception of the Company's brand. See 'Legal Proceedings'.

## **Trade Secrets May Be Difficult to Protect**

The Company's success depends upon the skills, knowledge and experience of its scientific and technical personnel, consultants and advisors, as well as contractors. Because the Company operates in a highly competitive industry, it relies in part on trade secrets to protect its proprietary products and processes. However, trade secrets are difficult to protect. The Company generally enters into confidentiality or non-disclosure agreements with its corporate partners, employees, consultants, outside scientific collaborators, developers and other advisors. These agreements generally require that the receiving party keep confidential, and not disclose to third parties, confidential information developed by the receiving party or made known to the receiving party by the Company during the course of the receiving party's relationship with the Company. These agreements also generally provide that inventions conceived by the receiving party in the course of rendering services to the Company will be its exclusive property, and the Company enters into assignment agreements to perfect its rights.

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These confidentiality, inventions and assignment agreements, where in place, may be breached and may not effectively assign intellectual property rights to the Company. The Company's trade secrets also could be independently discovered by competitors, in which case the Company would not be able to prevent the use of such trade secrets by its competitors. The enforcement of a claim alleging that a party illegally obtained and was using the Company's trade secrets could be difficult, expensive and time consuming and the outcome could be unpredictable. The failure to obtain or maintain meaningful trade secret protection could adversely affect the Company's competitive position.

### ***Risks Related to Acquiring Companies***

The Company has in the past and may in the future acquire other companies and there are risks inherent in any such acquisition. Specifically, there could be unknown or undisclosed risks or liabilities of such companies for which the Company is not sufficiently indemnified. Any such unknown or undisclosed risks or liabilities could materially and adversely affect the Company's financial performance and results of operations. The Company could encounter additional transaction and integration related costs or other factors such as the failure to realize all of the benefits from such acquisitions. All of these factors could cause dilution to the Company's earnings per share or decrease or delay the anticipated accretive effect of the acquisition and cause a decrease in the market price of the Company's securities. The Company may not be able to successfully integrate and combine the operations, personnel and technology infrastructure of any such acquired company with its existing operations. If integration is not managed successfully by the Company's management, the Company may experience interruptions in its business activities, deterioration in its employee and customer relationships, increased costs of integration and harm to its reputation, all of which could have a material adverse effect on the Company's business, financial condition and results of operations. The Company may experience difficulties in combining corporate cultures, maintaining employee morale and retaining key employees. The integration of any such acquired companies may also impose substantial demands on the management. There is no assurance that any acquisition will be successfully integrated in a timely manner or at all.

### ***Global Economic Uncertainty***

Demand for the Company's products and services are influenced by general economic and consumer trends beyond the Company's control. There can be no assurance that the Company's business and corresponding financial performance will not be adversely affected by general economic or consumer trends. In particular, global economic conditions are still tight, and if such conditions continue, recur or worsen, there can be no assurance that they will not have a material adverse effect on the Company's business, financial condition and results of operations.

Furthermore, economic conditions may produce downward pressure on stock prices and on the availability of credit for financial institutions and corporations. If any market disruption and volatility continue, the Company might experience reductions in business activity, increased funding costs and funding pressures, as applicable, a decrease in the market price of the Common Shares, a decrease in asset values, additional write-downs and impairment charges and lower profitability.

### ***Inability to Renew Leases***

The Company may be unable to renew or maintain its leases (commercial or real property) on commercially acceptable terms or at all. Any inability to renew a lease, or any renewal of a lease with a rental rate higher than the prevailing rate under the applicable lease prior to expiration, may have an adverse impact on the Company's operations, including disruption of its operations or an increase in its cost of operations. In addition, in the event of non-renewal of any of the Company's leases, the Company may be unable to locate suitable replacement properties for its facilities or it may experience delays in relocation that could lead to a disruption in its operations. Any disruption in the Company's operations could have an adverse effect on its financial condition and results of operations.

### ***Financial Reporting and Other Public Issuer Requirements***

As a public company, the Company is subject to the reporting requirements of the Canadian Securities Administrators, or the CSA, and the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations of the listing standards of the TSX and NASDAQ and the U.S. Sarbanes-Oxley Act. The requirements of these laws, rules and regulations have increased and will continue to increase the Company's legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and costly, and place significant strain on the Company's personnel, systems, and resources. The Company is continuing to develop and refine its disclosure controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it will file with the CSA is recorded, processed, summarized, and reported within the time periods specified in CSA rules and forms and that

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information required to be disclosed in reports under applicable securities laws is accumulated and communicated to the Company's principal executive and financial officers. The Company is also continuing to improve its internal control over financial reporting. In order to improve the effectiveness of its disclosure controls and procedures and internal control over financial reporting, the Company has expended, and anticipate that it will continue to expend, significant resources, including accounting-related costs and significant management oversight.

The Company has identified certain material weaknesses in its internal controls, as more fully explained in its management's discussion and analysis for the year ended December 31, 2022, under 'Disclosure Controls and Procedures'. Additional weaknesses in the Company's disclosure controls and internal control over financial reporting may also be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm the Company's results of operations or cause the Company to fail to meet its reporting obligations and may result in a restatement of the Company's financial statements for prior periods. Any failure to improve and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of the Company's internal control over financial reporting that the Company will eventually be required to include in its periodic reports that will be filed with the CSA. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in the Company's reported financial and other information, which could have a negative effect on the trading price of the Common Shares. In addition, if the Company is unable to continue to meet these requirements, it may not be able to remain listed on the TSX and/or NASDAQ.

#### ***Influence of the Significant Shareholders***

To the Company's knowledge, no shareholder beneficially owns, or controls or directs, directly or indirectly, more than 10% of the voting rights attached to the Company's outstanding voting securities, except for Mr. P. Peter Pascali, President and Chief Executive Officer of the Company, who holds or controls, directly or indirectly, 80,925,698 Common Shares, representing in aggregate 45.32% of the total voting rights attached to the outstanding Common Shares, and 2,500,000 share purchase warrants and options to acquire an additional 4,270,000 Common Shares (increasing the total number of Common Shares held or controlled, directly or indirectly, by him to 87,695,698 Common Shares, or 47.31% or the Common Shares, on a fully diluted basis). In addition, from time to time, the Company may have other shareholders who have the ability to exercise significant influence over matters submitted to the shareholders of the Company for approval, whether subject to approval by a majority of the shareholders of the Company or subject to a class vote or special resolution. See 'Directors and Executive Officers - Conflicts of Interest'.

#### ***Joint Venture/Partnership Arrangements***

The Company may participate in joint ventures and partnerships with third parties. A joint venture or partnership arrangement involves certain additional risks including: (i) the possibility that a partner may at any time have economic or business interests or goals that are inconsistent with those of the Company or take actions contrary to the instructions or requests of the Company or contrary to the Company's objectives; (ii) the risk that the partner could experience financial difficulties or seek the protection of bankruptcy, insolvency or other laws, which could result in additional financial demands on the Company; and (iii) the need to obtain the partner's consent with respect to certain major decisions. In addition, the sale or transfer of an interest in joint ventures and partnerships will generally be subject to rights of first refusal or first offer and certain other joint venture or partnership agreements may provide for buy-sell or similar arrangements. Such rights may be triggered at a time when the Company may not desire the sale but may be forced to do so because it does not then have the financial resources with which to purchase the other parties' interests. The terms of any joint venture or partnership arrangement may not allow the Company to realize anticipated benefits and may adversely affect the Company and its business.

#### ***Limited Control Over the Company's Operations***

Holders of the Common Shares have limited control over changes in the Company's policies and operations, which increases the uncertainty and risks of an investment in the Company. The Board determines major policies, including policies regarding financing, growth, debt capitalization and any future dividends to shareholders of the Company. Generally, the Board may amend or revise these and other policies without a vote of the holders of the Common Shares. The Board's broad discretion in setting policies and the limited ability of holders of the Common Shares to exert control over those policies increases the uncertainty and risks of an investment in the Company.

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# Change in Tax Laws

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to the Company. These enactments and events could require the Company to pay additional tax amounts on a prospective or retroactive basis, thereby substantially increasing the amount of taxes the Company is liable to pay in the relevant tax jurisdictions. Accordingly, these events could decrease the capital that the Company has available to operate its business. Any or all of these events could harm the business and financial performance of the Company.

# Forward-Looking Information

The forward-looking information included in this AIF relating to, among other things, the Company's future results, performance, achievements, prospects, targets, intentions or opportunities or the markets in which it operates (including, in particular, the information contained under "Business of the Company", and the other statements listed in "Forward-Looking Statements") is based on opinions, assumptions and estimates made by the Company's management in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. The Company's actual results in the future may vary significantly from the historical and estimated results and those variations may be material. The Company makes no representation that its actual results in the future will be the same, in whole or in part, as those included in this AIF. See "Forward-Looking Statements".

# Credit Facilities

The Company's credit facilities and financing agreements mature on various dates. There can be no assurance that such credit facilities or financing agreements will be renewed or refinanced, or if renewed or refinanced, that the renewal or refinancing will occur on equally favourable terms to the Company. The Company's ability to continue operating may be adversely affected if the Company is not able to renew its credit facilities or arrange refinancing, or if such renewal or refinancing, as the case may be, occurs on terms materially less favorable to the Company than at present. The Company's current credit facilities and financing agreements impose covenants and obligations on the Company. There is a risk that such loans may go into default if there is a breach in complying with such covenants and obligations, which could result in the lenders realizing on their security and causing the Company's shareholders to lose some or all of their investment.

# 12.2. Risks Related to the Company's Securities

# Potential Volatility of Common Share Price

The market price of the Common Shares could be subject to significant fluctuations. Some of the factors that may cause the market price of the Common Shares to fluctuate include:

- the public's reaction to the Company's press releases, announcements and filings with regulatory authorities and those of its competitors;
- fluctuations in broader stock market prices and volumes;
- changes in market valuations of similar companies;
- investor perception of the Company, its prospects or the industry in general;
- additions or departures of key personnel;
- commencement of or involvement in litigation;
- announcements by the Company or its competitors of strategic alliances, significant contracts, new technologies, acquisitions, commercial relationships, joint ventures or capital commitments;
- variations in the Company's quarterly results of operations or cash flows or those of other comparable companies;
- revenues and operating results failing to meet the expectations of securities analysts or investors in particular quarter;

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- changes in the Company's pricing policies or the pricing policies of its competitors;
- future issuances and sales of Common Shares;
- sales of Common Shares by insiders of the Company;
- third party disclosure of significant short positions;
- demand for and trading volume of Common Shares;
- changes in securities analysts' recommendations and their estimates of the Company's financial performance;
- short-term fluctuation in stock price caused by changes in general conditions in the domestic and worldwide economies or financial markets; and
- the other risk factors described under this heading of the AIF.

The realization of any of these risks and other factors beyond the Company's control could cause the market price of the Common Shares to decline significantly.

In addition, broad market and industry factors may harm the market price of the Common Shares. Hence, the price of the Common Shares could fluctuate based upon factors that have little or nothing to do with the Company, and these fluctuations could materially reduce the price of the Common Shares regardless of the Company's operating performance. In the past, following a significant decline in the market price of a company's securities, there have been instances of securities class action litigation having been instituted against that company. If the Company were involved in any similar litigation, it could incur substantial costs, management's attention and resources could be diverted and it could harm the Company's business, operating results and financial condition.

In addition, the Company may face the risk of being delisted from the TSX and/or NASDAQ if decreases in the price of the Common Shares do not allow the Company to meet certain conditions of the listing exchange(s).

### Market Liquidity

The market price for the Common Shares could be subject to wide fluctuations. Factors such as the announcement of significant contracts, technological innovations, new commercial products, patents, a change in regulations, quarterly financial results, future sales of Common Shares by the Company or current shareholders, and many other factors could have considerable repercussions on the price of the Common Shares. In addition, the financial markets may experience significant price and value fluctuations that affect the market prices of equity securities of companies that sometimes are unrelated to the operating performance of these companies. Broad market fluctuations, as well as economic conditions generally may adversely affect the market price of the Common Shares.

### Dividends to Shareholders

The Company does not anticipate paying cash dividends on the Common Shares in the foreseeable future. The Company currently intends to retain all future earnings to fund the development and growth of its business. Any payment of future dividends will be at the discretion of the directors and will depend on, among other things, the Company's earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends, and other considerations that the directors deem relevant.

### Impact of Future Sales by Existing Shareholders

If the Company's shareholders sell substantial amounts of the Common Shares in the public market, the market price of the Common Shares could decrease. The perception among investors that these sales will occur could also produce this effect. All currently outstanding Common Shares other than those subject to lock-up agreements, if any, executed by certain existing shareholders are, subject to applicable securities laws, generally immediately available for resale in the public markets.

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Subject to compliance with applicable securities laws, the Company's officers, directors and their affiliates may sell some or all of their Common Shares in the future. No prediction can be made as to the effect, if any, such future sales of Common Shares will have on the market price of the Common Shares prevailing from time to time. However, the future sale of a substantial number of Common Shares by the Company's officers, directors and their affiliates, or the perception that such sales could occur, could materially adversely affect prevailing market prices for the Common Shares.

Additional Common Shares issuable upon the exercise of stock options or warrants may also be available for sale in the public market, which may also cause the market price of the Common Shares to fall. Accordingly, if substantial amounts of Common Shares are sold in the public market, the market price could fall.

### ***Working Capital and Future Issuances***

The Company may issue additional Common Shares in the future which may dilute a shareholder's holdings in the Company. The Articles permit the issuance of an unlimited number of Common Shares, and shareholders of the Company will have no pre-emptive rights in connection with any further issuances. The directors of the Company have the discretion to determine the provisions attaching to the Common Shares and the price and the terms of issue of further Common Shares.

Additional equity financing may be dilutive to holders of Common Shares. Debt financing may involve restrictions on the Company's financing and operating activities. Debt financing may be convertible into other securities of the Company which may result in immediate or resulting dilution. In either case, additional financing may not be available to the Company on acceptable terms or at all. If the Company is unable to raise additional funds as needed, the scope of its operations or growth may be reduced and, as a result, the Company may be unable to fulfil its long-term goals. In this case, investors may lose all or part of their investment. Any default under such debt instruments could have a material adverse effect on the Company, its business or the results of operations.

### ***Securities or Industry Analysts***

The trading market for Common Shares could be influenced by the research and reports that industry and/or securities analysts, or others, may publish about the Company, its business, the market or competitors. If any of the analysts who may cover the Company's business change their recommendation regarding the Common Shares adversely, or provide more favourable relative recommendations about its competitors, the share price would likely decline. If any analyst who may cover the Company's business were to cease coverage or fail to regularly publish reports on the Company, it could lose visibility in the financial markets, which in turn could cause the share price or trading volume to decline.

### **12.3. Risks Related to the Company's Status as a Foreign Private Issuer**

#### ***Information Publicly Available to the Company's U.S. Shareholders***

The Company is a foreign private issuer under applicable U.S. federal securities laws. As a result, the Company does not file the same reports that a U.S. domestic issuer would file with the U.S. Securities and Exchange Commission (the 'SEC'), although the Company is required to file with or furnish to the SEC the continuous disclosure documents that the Company is required to file in Canada under Canadian Securities Laws, in certain respects the reporting obligations are less detailed and less frequent than those of U.S. domestic reporting companies. In addition, the Company's officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the U.S. Exchange Act. Therefore, the Company's shareholders may not know on as timely a basis when the Company's officers, directors and principal shareholders purchase or sell Common Shares as the reporting periods under the corresponding Canadian insider reporting requirements are longer.

As a foreign private issuer, the Company is exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements. The Company is also exempt from Regulation FD, which prohibits issuers from making selective disclosures of material non-public information. While the Company complies with the corresponding requirements relating to proxy statements and disclosure of material non-public information under Canadian Securities Laws, these requirements differ from those under the Exchange Act and Regulation FD and shareholders should not expect to receive the same information at the same time as such information is provided by U.S. domestic companies. In addition, the Company may not be required under the Exchange Act to file annual and quarterly reports with the SEC as promptly as U.S. domestic companies whose securities are registered under the Exchange Act.

In addition, as a foreign private issuer, the Company has the option to follow certain Canadian corporate governance practices, except to the extent that such laws would be contrary to U.S. securities laws, and provided that the Company

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discloses the requirements it is not following and describe the Canadian practices it follows instead. The Company plans to rely on this exemption. As a result, the Company's shareholders may not have the same protections afforded to shareholders of U.S. domestic companies that are subject to all U.S. corporate governance requirements.

### ***Loss of Foreign Private Issuer Status in the Future***

In order to maintain its status as a foreign private issuer, a majority of the Company's Common Shares must be either directly or indirectly owned by non-residents of the U.S. unless the Company also satisfies one of the additional requirements necessary to preserve this status. The Company may in the future lose its foreign private issuer status if a majority of the Common Shares are held in the United States and the Company fails to meet the additional requirements necessary to avoid loss of foreign private issuer status. The regulatory and compliance costs to the Company under U.S. federal securities laws as a U.S. domestic issuer may be significantly more than the costs the Company incurs as a Canadian foreign private issuer eligible to use the multi-jurisdictional disclosure system ('MJDS'). If the Company is not a foreign private issuer, it would not be eligible to use the MJDS or other foreign issuer forms and would be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. In addition, the Company may lose the ability to rely upon exemptions from Nasdaq corporate governance requirements that are available to foreign private issuers.

### ***Inability for U.S. Investors to Enforce Certain Judgments***

The Company is a corporation existing under the Canada Business Corporations Act. A number of the Company's directors and officers are residents of Canada, and substantially all of the Company's assets are located outside the United States. As a result, it may be difficult to effect service within the United States upon the Company or upon its directors and officers. Execution by United States courts of any judgment obtained against the Company or any of the Company's directors or officers in United States courts may be limited to the assets of such companies or such persons, as the case may be, located in the United States. It may also be difficult for holders of securities who reside in the United States to realize in the United States upon judgments of courts of the United States predicated upon civil liability and the civil liability of the Company's directors and executive officers under the United States federal securities laws. The Company has been advised that a judgment of a U.S. court predicated solely upon civil liability under U.S. federal securities laws or the securities or 'blue sky' laws of any state within the United States, would likely be enforceable in Canada if the United States court in which the judgment was obtained has a basis for jurisdiction in the matter that would be recognized by a Canadian court for the same purposes. However, there may be doubt as to the enforceability in Canada against these non-U.S. entities or their controlling persons, directors and officers who are not residents of the United States, in original actions or in actions for enforcement of judgments of courts of the United States, of liabilities predicated solely upon U.S. federal or state securities laws.

### ***Risks Relating to the Company's Status as an 'Emerging Growth Company' Under U.S. Securities Laws***

The Company is an 'emerging growth company' as defined in section 3(a) of the Exchange Act (as amended by the JOBS Act, enacted on April 5, 2012), and the Company will continue to qualify as an emerging growth company until the earliest to occur of: (a) the last day of the fiscal year during which the Company has total annual gross revenues of US$1,070,000,000 (as such amount is indexed for inflation every five years by the SEC) or more; (b) the last day of the fiscal year of the Company following the fifth anniversary of the date of the first sale of common equity securities of the Company pursuant to an effective registration statement under the United States Securities Act of 1933, as amended; (c) the date on which the Company has, during the previous three year period, issued more than US$1,000,000,000 in non-convertible debt; and (d) the date on which the Company is deemed to be a 'large accelerated filer', as defined in Rule 12b-2 under the Exchange Act. The Company will qualify as a large accelerated filer (and would cease to be an emerging growth company) at such time when on the last business day of its second fiscal quarter of such year the aggregate worldwide market value of its common equity held by non-affiliates will be US$700,000,000 or more.

For so long as the Company remains an emerging growth company, it is permitted to and intends to rely upon exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the JOBS Act. The Company takes advantage of some, but not all, of the available exemptions available to emerging growth companies. The Company cannot predict whether investors will find the Common Shares less attractive because the Company relies upon certain of these exemptions. If some investors find the Common Shares less attractive as a result, there may be a less active trading market for the Common Shares and the Common Share price may be more volatile. On the other hand, if the Company no longer qualifies as an emerging growth company, the Company would be required to divert additional management time and attention from the Company's development and other business activities and incur

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increased legal and financial costs to comply with the additional associated reporting requirements, which could negatively impact the Company's business, financial condition and results of operations.

### 13. Legal Proceedings

The Company may, from time to time be involved in legal proceedings. The Company is not involved in any legal proceedings which, individually or in the aggregate, would be material to the Company's consolidated financial condition or results of operations, except as follows:

The Company filed an originating application on August 11, 2022, petitioning the Quebec Superior Court to order P. Riopel (1993) Inc. to convey title of the property bearing civic address 5655 Philippe-Turcot, Montreal, Quebec, H4C 3K8. The property is the location of one of the Company's two manufacturing facilities. The petition followed the Company's exercise of its contractual option to purchase the property for $2,750,000. On December 23, 2022, P. Riopel (1993) Inc. filed a counterclaim in which it sought damages in the amount of $415,425, alleging that the Company breached the lease agreement between the parties.

On July 28, 2021, an application for a safeguard order and permanent injunction was filed by AirScience Systems Inc. ('**ASSI**') before the Quebec Superior Court against Gas RNG Systems Inc. ('**RNG Canada**'), RNG Investments Inc., Glauber Equipment Corporation, Mr. Peter Glauber and Mr. Shivaji Ramalingam (collectively, the 'Defendants'). ASSI is seeking an oppression remedy, alleging the wrongful expulsion of ASSI as a shareholder and Mr. Gérard Magnin as a director from RNG Canada. On April 29, 2022, the Defendants filed a defence and a counterclaim against ASSI, AirScience Technologies Inc. ('**AST**') (now Pyro Green-Gas Inc., a wholly-owned subsidiary of the Company) and Mr. Magnin for allegedly breaching their obligations with respect to a unanimous shareholder agreement governing RNG Canada as well as an operating agreement governing another entity, Gas RNG Systems LLC ('**RNG US**'). The Defendants, by way of their counterclaim, seek damages in the amount of $4.9 million. PyroGenesis has maintained that AST was never a shareholder of either RNG Canada or RNG US nor was it a party to the disputed shareholders and operating agreements.

On October 6, 2021, AST filed an action for damages and unpaid invoices against RNG Canada, RNG US, Mr. Shivaji Ramalingam, Mr. Peter Glauber, Mr. Paul-Louis Crouzat and Mr. Tarlok Nandhra before the Quebec Superior Court. On February 13, 2022, a defence and counterclaim was filed against AST and two former shareholders of AST (Mr. Magnin and Mr. Paul D. Singh), seeking approximately $712,000 in alleged compensatory damages. The counterclaim also seeks a condemnation for legal fees, moral damages and punitive damages for approximately $771,333.

On February 17, 2023, the Company received a motion from the securities regulatory authority in the Province of Québec, filed with the Superior Court of Québec, pursuant to which the AMF is asking the Court to determine whether certain documents previously requested by the AMF from the Company are subject to solicitor-client privilege. The motion was filed by the AMF in connection with an investigation being conducted in the context of applicable securities laws. The Company understands the AMF is investigating certain actions taken by the President and Chief Executive Officer of the Company, Mr. P. Peter Pascali, in connection with a settlement agreement entered into on April 30, 2018, between the Company and Phoenix Haute Technology Inc. ('**Phoenix**'), a company controlled by the father of Mr. P. Peter Pascali, and ancillary transactions. Pursuant to the terms of a board-approved settlement agreement, and as further disclosed in the annual information form of the Company for the year ended December 31, 2020, available under the Company's profile on SEDAR at www.sedar.com, under 'Interest of Management and Others in Material Transactions - Settlement of Claim', the Company issued $3.7 million of units comprised of common shares and warrants to Phoenix in 2018, to settle a $5.5 million claim of Phoenix with respect to the unpaid portion of the consideration payable by the Company to Phoenix for an acquisition of intellectual property rights completed in 2011. To the Company's knowledge, the investigation of the AMF does not involve any allegations of wrongdoing by the Company. The AMF has neither announced any proceedings nor filed any charges. The Company believes that no corporate or securities laws have been breached but cannot predict whether any enforcement action will result from the investigation.

### 14. Interest of Management and Others in Material Transactions

Other than as described elsewhere in this AIF and as described below, there is no material interest, direct or indirect, of: (i) any director or executive officer of the Company; (ii) any person or company that beneficially owns, or controls or directs, directly or indirectly, more than 10% of the Company's outstanding voting securities; or (iii) an associate or any affiliate of any persons or companies referred to above in (i) or (ii), in any transaction within the three years before the date of this AIF that has materially affected or is reasonably expected to materially affect the Company. See 'Directors and Executive Officers - Conflicts of Interest'.

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# 15. Transfer Agent and Registrar

The transfer agent and registrar of the Company's Common Shares is TSX Trust Company (Canada) having an office at 2001, Robert-Bourassa Boulevard, Suite 1600, Montréal, Québec, H3A 2A6. The transfer agent and registrar of the Company's Common Shares in the United States is American Stock Transfer & Trust Company, LLC, having an office at 6201 15th Ave, Brooklyn, NY 11219, United States.

# 16. Auditors

The auditors of the Company are RCGT at its office located at 600 de la Gauchetière Street West, Suite 2000, Montréal, Québec. RCGT has informed the Company that it is independent with respect to the Company within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada.

# 17. Material Contracts

This AIF includes a summary description of certain material contracts. Each summary description discloses all material attributes of the applicable contract but is not complete and is qualified by reference to the terms of the material contracts, which are available under the Company's SEDAR profile at www.sedar.com. The following are the Company's only material contracts, other than those contracts entered into in the ordinary course of business, which have been entered into since the beginning of its last financial year, or entered into prior to such date, but which are still in effect and which are required to be filed with Canadian securities regulatory authorities:

- contract between PyroGenesis and HPQ Silica Polvere Inc., a wholly owned subsidiary of HPQ Silicon Resources Inc., dated June 30, 2021 whereby HPQ Silica Polvere Inc. purchased certain intellectual property and the Company contracted to advance the development of a green reactor and process used to produce fumed silica directly from quartz in consideration for $3,300,000, as described under "Business of the Company - Development of a Process to Produce Fuming Silica from Quartz"; and
- contract between PyroGenesis and HPQ Silicon Resources dated July 29, 2016 whereby HPQ purchased certain intellectual property and the Company contracted to build a PUREVAP system for C$7,070,000, which contract refers to certain terms in a development contract between HPQ (f/k/a Uragold Bay Resources Inc.) dated February 26, 2015, as amended from time to time, as described under the "Business of the Company - Development of Processes for the Production of High Purity Silicon Metals, Nano Powders and Nanowires";

# 18. Additional Information

Additional information, including with respect to directors' and executive officers' remuneration and indebtedness, principal holders of the Company's securities, and securities authorized for issuance under equity compensation plans, is contained in the Company's management information circular for its most recent annual meeting of shareholders that involved the election of directors which is available under the Company's SEDAR profile at www.sedar.com. Additional financial information is contained in the Company's consolidated financial statements and management's discussion and analysis for the year ended December 31, 2022. Further information about the Company, filed with Canadian securities regulators, is available online under the Company's SEDAR profile at www.sedar.com or filed with the Securities and Exchange Commission at www.sec.gov.

# 19. Glossary of Terms

"2020 Convertible Loan" has the meaning given to such term under "General Development of the Business - Year Ended December 31, 2022 - Corporate Developments and Financings".

"2020 Public Offering" has the meaning given to such term under "General Development of the Business - Year Ended December 31, 2022 - Corporate Developments and Financings".

"2020 Public Offering Warrant" has the meaning given to such term under "General Development of the Business - Year Ended December 31, 2022 - Corporate Developments and Financings".

"2020 Units" has the meaning given to such term under "General Development of the Business - Year Ended December 31, 2022 - Corporate Developments and Financings".

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'AIF' means this annual information form.

'AMF' means Autorité des marchés financiers.

'Articles' has the meaning given to such term under 'Description of Capital Structure'.

'ASSI' means AirScience Systems Inc.

'AST' means AirScience Technologies Inc., now Pyro Green-Gas Inc., a wholly-owned subsidiary of the Company.

'Audit Committee' means the Company's audit committee.

'Board' or 'Board of Directors' means the board of directors of the Company.

'business day' means a day other than a Saturday, Sunday or a day on which the principal chartered banks located at Toronto are not open for business.

'Canadian Securities Laws' means the securities legislation or ordinance and regulations thereunder of each province of Canada and the rules, instruments, policies and orders of each Canadian securities regulator made thereunder.

'CBCA' means the Canada Business Corporations Act.

'CFC' means chlorofluorocarbons.

'Common Share' means a common share in the capital of the Company, as described under 'Description of Capital Structure - Share Capital and Issued and Outstanding Shares'.

'Company' has the meaning given to such term under 'Explanatory Notes'.

'diluted basis' means the number of Common Shares outstanding assuming the exercise of all outstanding Options and other rights to acquire Common Shares.

'Drosrite International' means Drosrite International LLC, a US-based private company.

'Drosrite International Exclusive Agreement' has the meaning given to such term under 'Directors and Executive Officers - Conflicts of Interest'.

'Dross Processing Service Agreement' has the meaning given to such term under 'Directors and Executive Officers - Conflicts of Interest'.

'forward-looking statements' has the meaning given to such term under 'Forward-Looking Statements'.

'GHG' means greenhouse gas.

'HCFC' means hydrochlorofluorocarbons.

'HFC' means hydrofluorocarbons.

'HPQ' means HPQ Silicon Resources Inc., a corporation listed for trading on the TSX-V.

'HPQ Nano' means HPQ Nano Silicon Powders Inc., a wholly owned subsidiary of HPQ.

'ISO' means International Organization for Standardization.

'MI 61-101' means Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions.

'NASDAQ' means the NASDAQ Capital Market.

'NI 52-110' means National Instrument 52-110 - Audit Committees.

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'ODS' means ozone depleting substances.

'Option' means an option to acquire a Common Share granted pursuant to the Company's option plan.

'PACWADS' means the Company's Plasma Arc Chemical Warfare Agent Destruction System.

'PAGV' means plasma arc gasification and vitrification.

'Pascali Trust' means Fiducie de Crédit Mellon Trust, a trust of which Company's Chief Executive Officer, P. Peter Pascali, is a trustee, officer and beneficiary.

'PAWDS' means the Company's Plasma Arc Waste Destruction System.

'Phoenix' has the meaning given to such term under 'Legal Proceedings'.

'RCGT' means Raymond Chabot Grant Thornton LLP, the Company's external auditors.

'RGN' means renewable natural gas.

'RNG Canada' means Gas RNG Systems Inc.

'RNG US' means Gas RNG Systems LLC.

'PRRS' means the Company's Plasma Resource Recovery System.

'R&D' means research and development.

'SEC' means the U.S. Securities Exchange Commission.

'SEDAR' means the System for Electronic Document Analysis and Retrieval.

'SPARC' means Steam Plasma Arc Refrigerant Cracking.

'TSX' means the Toronto Stock Exchange.

'TSX-V' means the TSX Venture Exchange.

'Turcot Facility' means the facility located at 5655 Philippe-Turcot, Montréal, Québec, Canada, H4C 3K8, as described in 'Business of the Company - Facilities'.

'Wanklyn Facility' means the facility located at 9371 Wanklyn Street, LaSalle, Québec, Canada, H8R 1Z2, as described in 'Business of the Company - Facilities'.

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# SCHEDULE 'A' CHARTER OF THE AUDIT COMMITTEE

## PYROGENESIS CANADA INC.

## AUDIT COMMITTEE CHARTER

Approved by the Board of Directors

and effective as of October 25th, 2011

### PREAMBLE

The Audit Committee's (the 'Committee') Charter clarifies its responsibilities delegated by the Board of Directors (the 'Board'). The Charter is used by the Committee to guide the planning and the performance of its work. The Charter also clarifies the understanding the Committee has with the Company's auditors and with management about the nature of their involvement with the Committee and its work.

### OVERALL MANDATE

Generally, the Committee promotes and ensures a high standard of financial reporting, risk management and ethical behavior for the Company and in doing so shall carry out the duties and responsibilities as set out in this Charter.

### COMPOSITION

The Committee shall consist of at least three Directors appointed by the Board who will serve at the pleasure of the Board and, in any event, only so long as he/she shall be a Board member. The Committee will have an appropriate representation of independent directors as required by law. The composition of the Committee shall comply with the rules and regulations of the stock exchange on which the shares of the Company are listed as well as the Canadian Securities Administrators 'Instruments'. The Board may fill vacancies in the Committee by election from their number. The Board shall elect the Chairperson of the Committee. In the absence of the Chairperson, the members of the Committee shall appoint an Acting Chairperson. The President of the Company shall not be an ex-officio member of the Committee, but the Chairperson of the Board may, at his/her discretion, attend meetings as an ex-officio member. An ex-officio member shall be vested with all the rights and powers of appointed members.

To ensure the Committee's effectiveness, each member will be financially literate and be prepared to spend the time necessary to address complex issues and to challenge both management and the auditors, where necessary.

A quorum of the Committee shall consist of at least two members of the Committee (for this purpose the Committee shall be deemed to consist of at least three members, two being appointed by the Board as aforesaid and one being an ex-officio member as aforesaid). Notwithstanding any vacancy on the Committee, a quorum may exercise all the powers of the Committee.

The Secretary shall be selected from its members or shall be the Corporate Secretary. The Secretary of the Committee shall ensure that minutes of meetings are prepared for distribution to Committee members.

### DUTIES AND RESPONSIBILITIES

The Committee shall have the following duties and responsibilities:

### OVERSEEING STANDARDS OF INTEGRITY AND BEHAVIOUR

Management is responsible for the Company's standards of behavior. The Committee assists the Board in obtaining assurances that management is operating the Company in an ethical manner and encourages management to demonstrate a strong commitment to integrity.

The Committee requests that management report periodically on how the Company's systems, practices and controls encourage, monitor and provide assurance of compliance with laws, regulations and standards of ethical conduct, including the control of expenses such as perquisites, expense accounts and out-of-pocket expenses for officers and directors.

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The Committee seeks the views of the auditors about the Company's standards of behavior. It discusses with the auditors the adequacy of the systems and controls, and the details of any practices or transactions identified by the auditors as being in potential violation of the legal authorities, as well as the details of any "other matters" they consider bringing to the attention of the Board. The committee seeks the views of auditors on remedies to curtail inappropriate practices and behaviors, as well as alternative remedies to rectify those matters that are not in the Company's best interest.

The Committee values financial integrity and credibility. It actively promotes an overall corporate "tone" for quality financial reporting, sound business risk practices, and ethical behavior.

# OVERSEEING FINANCIAL REPORTING

Management is responsible for the Company's financial reporting. This includes preparation of accurate, fair and complete financial reports, the selection of the most appropriate accounting principles and practices, formulation of accounting judgments and estimates, and preparation of the annual report including its management's discussion and analysis (MD&A), budgets and other such reports.

The Committee shall provide assistance to the Board in fulfilling its financial reporting and control responsibilities to the shareholders of the Company and to the investment community. The Committee's primary duties and responsibilities in this regard are to:

(a) oversee the accounting and financial reporting processes of the Company and the audit of its financial statements including:

i. the integrity of the Company's financial statements;
ii. the compliance with legal and regulatory requirements; and,
iii. the independent auditor's qualifications and independence;

(b) serve as an independent and objective party to monitor the Company's financial reporting process and internal control systems;

(c) review and appraise the audit activities of the Company's independent auditors;

(d) provide open lines of communication among the independent auditors, financial and senior management and the Board for financial reporting and control matters and meet periodically with management and with the independent auditors.

The Committee assesses the relevance and the reliability of the financial reports to ensure that they portray, in the clearest light possible, the underlying economic circumstances and financial performance of the Company.

The Committee promotes accuracy, truthfulness, integrity and credibility in financial reporting.

The Committee discusses with management and auditors the inherent fairness, accuracy and completeness of financial disclosures as well as the Company's compliance with legal and regulatory requirements and may request attestation to this effect from them.

The Committee reviews the key accounting principles and the significant judgments and estimates with management and auditors. It seeks their views with respect to the appropriateness and consistency of the accounting principles and practices, not just their acceptability, and the degree of aggressiveness or conservatism in determining estimates.

As integral components of its financial review processes, the Committee reviews the operating and capital budgets, the borrowing plan, summaries of the corporate plan and budgets, the annual and quarterly financial statements, including the MD&A sections, and any other financial information which will be distributed to the public and requiring approval of the Board.

The Committee assesses how well the Company's financial information reporting package meets the Board's needs by reviewing its form, content and level of details.

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# OVERSEEING MANAGEMENT CONTROL PRACTICES

Management is responsible for maintaining records and financial management and control systems that provide reasonable assurance that assets are safeguarded and maintained, that Intellectual Property (IP) is identified, protected and secured, that transactions are in accordance with regulations and any government directives issued and that financial, human and physical resources are managed economically and efficiently and that operations are carried out effectively.

Management is responsible for identifying the principal business risks facing the Company and formulating the Company's risk tolerance levels and risk management policies for consideration and approval by the Board. The Committee assists the Board in this function, focusing on the financial risks.

The Committee holds management accountable for the design and functioning of the Company's control framework in order to monitor, assess and mitigate the Company's business risks and uncertainty, as well as legal, environmental, social responsibility and ethical compliance. Periodically, the Committee requests that management provides it with an assessment of the effectiveness of the internal control structure and procedures, and, if warranted, with plans for improving its effectiveness.

The Committee reviews with the auditors (internal, external and special examiners when applicable) their assessments of the design and functioning of the control framework and the systems in place for ensuring that the business risks are identified, monitored, controlled and within the Company's limit of tolerance, and their views on management's plans for improvements.

# OVERSEEING WORK OF AUDITORS

The Committee recognizes that the Company's auditors possess substantial expertise and have significant professional responsibilities. It holds the auditors accountable for fulfilling their respective responsibilities.

The Internal auditor (when established) will be accountable to the Committee, in its capacity as a committee of the Board.

The Committee demands independent and objective assessments of the Company's standards of behavior, its compliance with authorities, its financial reporting, and its business risks systems, practices and controls from the auditors.

The Committee oversees audit activities with respect to the following two (2) types of audits:

(a) the annual audit deals with the fairness of the statements, compliance of transactions with specified legal authorities, and any other matter identified by the external auditor as important,
(b) the internal audit (when established), which is a part of management's system of internal control, deals with matters similar to those of the annual audit.

The Committee reviews and follows the five (5) generic phases of each of the two (2) types of audits:

1. establishing the purpose and terms of reference for the audit;
2. selection and organization of a team of experienced professionals to plan and conduct the audit;
3. conduct of the audit; and
4. reviews all the audit results and findings, and reports to the Board.

The Committee shall review management's plans to correct any significant problems raised by the internal and external auditors. It shall monitor and review management's progress in implementing its response plan.

The Committee ensures that management has not placed any inappropriate restrictions on the audits and confirms that the external auditor is independent and able to maintain its objectivity.

The Committee approves the mandate of the internal audit function, monitors the long term internal audit plan and ensures that the internal auditor has adequate resources to perform its responsibilities and has direct and open communication with the Committee. It reviews the reporting relationship of the internal auditor to ensure that an appropriate segregation of duties is maintained and that the internal auditor has an obligation to report directly to the Committee on matters affecting its duties, irrespective of his or her reporting relationships.

The Committee evaluates the work of each of the auditors with a view to determining the level of assurance that can be derived from their work.

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Periodically, the Committee evaluates the performance of each auditor.

The Committee shall establish effective communication processes with management and the Company's auditors, to assist it in monitoring objectively the quality and effectiveness of the relationship among the auditors, management and the Audit Committee. It shall be responsible for the resolution of disagreements between management and auditors.

## **OPERATIONAL RESPONSIBILITIES**

Each new member will receive an orientation about the Committee's work and responsibilities and all members are encouraged to keep current about accounting, auditing and financial reporting standards and practices. In recognition of the importance of the financial literacy skills of its members, the Committee relies on the full support of the Board in acquiring and in developing an approach to improve the necessary skills, when required.

Annually, the Committee reviews the Charter setting out the scope of its responsibilities, and, where in the opinion of the Committee, amendments to the Charter are required, may propose such amendments to the Board for consideration and approval.

Annually, the Committee will consider the appropriateness of preparing a report to the Board describing its work.

## **OTHER RESPONSIBILITIES**

Periodically, in consultation with the Chief Financial Officer and the auditors, the Committee seeks reasonable assurance of the quality and sufficiency of the Company's accounting and financial personnel and other resources.

The Committee shall discuss or review in advance the appointment of the Chief Financial Officer.

The Committee shall review procedures established by management for dealing with complaints from employees related to financial reporting, controls and corporate conduct.

The Committee may investigate any matters that, at the Committee's discretion, fall within its duties.

The Committee shall perform such other functions as are assigned to it by law or by the Board.

The Committee shall review with the general counsel, legal and regulatory matters that, in the opinion of management, may have a material impact on the financial statements, related organization compliance policies, and program and reports received from regulators.

## **OPERATING PROCEDURES**

The Committee shall meet quarterly, or more frequently as appropriate, in advance of regularly scheduled Board meetings. Committee meetings shall be called by the Committee Chair or requested by any Committee member or by the Board Chair.

Notice of each meeting of the Committee shall be given to each member of the Committee (including the Chair of the Board as an ex-officio member of the Committee), and except in the case of an in-camera meeting, also to the Auditors, the Chief Executive Officer and the Chief Financial Officer of the Company. Notice of the meeting shall be given either orally or by electronic mail, not less than 48 hours before the time fixed for the meeting. Members may waive notice of a meeting. Meeting discussions may take place face to face, by teleconference or through a reciprocal interchange of emails.

The agenda for each meeting will be established by the Chair of the Committee.

Any decision made by the Committee shall be determined by a majority vote of the members of the Committee present. A member will be deemed to have consented to any resolution passed or action taken at a meeting of the Committee unless the member dissents.

The Chief Executive Officer and the Chief Financial Officer of the Company shall attend all Audit Committee meetings, with the exception of in-camera meetings.

A matter put to vote at a meeting of the Committee shall be decided by a majority of the votes cast, and in the event of an equality of votes, the Chair has a deciding vote.

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The Secretary of the Committee shall ensure that minutes of meetings are prepared for distribution to Committee members, and, except for in-camera meetings, to the Auditors, the Chief Executive Officer and the Chief Financial Officer of the Company.

The Chair of the Committee will report to the Board on proceedings and deliberations of the Committee, either orally or in writing, at the first subsequent meeting of the Board or at such earlier time as the Committee in its discretion may consider advisable.

The Committee may retain at the Company's expense, with prior Board approval, independent consultants and such other persons as the Committee shall determine necessary to fulfill its duties and responsibilities.

#### **LIMITATION ON THE COMMITTEE'S DUTIES**

In contributing to the Committee's discharging of its duties under this Charter, each member of the Committee shall be obliged only to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Nothing in this mandate is intended, or may be construed, to impose on any member of the Committee a standard of care or diligence that is in any way more onerous or extensive than the standard to which all Board members are subject. The essence of the Committee's purpose is to monitor, review and when appropriate, recommend changes to financial and corporate operating standards as they are practiced by the Company's management to gain reasonable assurance (but not to ensure) about fundamental activities of the Company.

55---

## Exhibit 99.2

PyroGenesis Canada Inc.
Management's Discussion and Analysis
For the years ended December 31, 2022, and 2021

Exhibit 99.2

This management's discussion and analysis ("MD&A") is intended to assist readers in understanding the business environment, strategies, performance and risk factors of PyroGenesis Canada Inc. ("PyroGenesis", the "Company" or "we"). The MD&A provides the reader with a view and analysis, from the perspective of management, of the Company's financial results for the fourth quarter and for the year ended December 31, 2022. The MD&A has been prepared in accordance with National Instrument 51-102, Continuous Disclosure Requirements, and should be read in conjunction with the audited consolidated financial statements and related notes thereto of the Company for the year ended December 31, 2022. (the "2022 consolidated financial statements") and the Company's annual information form for the year ended December 31, 2022 (the "Annual Information Form").

The 2022 consolidated financial statements and MD&A have been reviewed by PyroGenesis' Audit Committee and were approved by its Board of Directors on March 30, 2023. The Board of Directors is responsible for ensuring that the Company fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the MD&A. The Board of Directors carries out this responsibility principally through its Audit Committee. The Audit Committee is appointed by the Board of Directors and is comprised of independent directors. The Audit Committee reports its findings to the Board of Directors for its consideration when it approves the MD&A and consolidated financial statements for issuance to shareholders.

The following information takes into account all material events that took place up until March 30, 2023, the date on which the Company's Board of Directors approved this MD&A. Unless otherwise indicated, all amounts are presented in Canadian dollars. The Company's functional and reporting currency is the Canadian dollar.

Additional information regarding PyroGenesis is available on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com, the Electronic Data Gathering, Analysis, and Retrieval system ("EDGAR") at www.sec.gov, and on the Company's website at www.pyrogenesis.com.

# FORWARD-LOOKING STATEMENTS

This MD&A contains forward-looking statements and forward-looking information (collectively, "forward-looking statements") within the meaning of applicable securities legislation. All statements other than statements of historical fact contained in this MD&A are forward-looking statements, including, without limitation, the Company's statements regarding its products and services; relations with suppliers and clients; future financial position; business strategies; potential acquisitions; potential business partnering; litigation; and plans and objectives. In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" and similar words or the negative thereof. Although management of the Company believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

In particular, this MD&A contains forward-looking statements that relate, but are not limited, to:

- the Company's business strategies, strategic objectives and growth strategy;
- the Company's current and future capital resources and the need for additional financing;
- the Company's ability to increase sales, including the results of the successful completion of the Company's current projects;
- management's expectation that the Company will achieve sustained annual growth and profitability, and that gross margins will increase resulting in a decrease in cost of sales as a percentage of revenue; and
- the Company's overall financial performance.

By their nature, forward-looking statements require assumptions and are subject to inherent risks and uncertainties including those discussed herein. In particular, forward-looking statements relating to future sales, growth and profitability are based

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PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

on the assumption that current projects will be completed, and the Company will be awarded certain anticipated contracts pursuant to recent negotiations with, and statements made by, third parties. There is significant risk that predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned to not place undue reliance on forward-looking statements made herein because a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.

Many factors could cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by forward-looking statements, including, without limitation, risks and uncertainties relating to: the strength of the Canadian, US, European and Asian economies; operational, funding, and liquidity risks; unforeseen engineering and environmental problems; delays or inability to obtain required financing and/or anticipated contracts; risks associated with licenses, permits and regulatory approvals; supply interruptions or labour disputes; the impact of the Coronavirus (COVID-19) pandemic on our business and our operations; foreign exchange fluctuations and collection risk; competition from other suppliers, or alternative, less capital intensive, energy solutions; and risk factors described elsewhere under the heading 'Risk Factors' in this MD&A and the Annual Information Form, and elsewhere in this MD&A and other filings that the Company has made and may make in the future with applicable securities regulatory authorities. We caution that the foregoing list of factors is not exhaustive, and that, when relying on forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements.

Although the Company has attempted to identify significant factors that could cause actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Forward-looking statements are provided as of the date of this MD&A, and the Company assumes no obligation to update or revise such forward-looking statements to reflect new events or circumstances except as required under applicable securities laws.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this MD&A are made as of the date of this MD&A or such other date specified herein.

## BASIS OF PRESENTATION

For reporting purposes, we prepared the 2022 consolidated financial statements in accordance with International Financial Reporting Standards ('IFRS') as issued by the International Accounting Standards Board. The financial information contained in this MD&A was derived from the 2022 consolidated financial statements. Unless otherwise indicated, all references to '$' are to Canadian dollars. Unless otherwise indicated, all references to a specific 'note' refer to the notes to the 2022 consolidated financial statements. Certain totals, subtotals and percentages throughout this MD&A may not reconcile due to rounding.

## NON-IFRS MEASURES

This MD&A makes reference to certain non-IFRS measures. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS.

We use non-IFRS measures, including EBITDA and Modified EBITDA, both of which are not considered an alternative to income or loss from operations, or to net earnings or loss, in the context of measuring a company's performance. EBITDA is used by management in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. Management believes that EBITDA is used by investors as it provides supplemental measures of operating performance and thus highlight trends in our business that may not otherwise be apparent when relying solely on IFRS measures, and to compare the results of our operations with other entities with similar structures. Modified EBITDA is used by management as it brings additional clarity to operating performance, as it eliminates variations in the fair value of strategic investments, among others, which may be

---

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PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

beyond the control of the Company. Management believes that investors use Modified EBITDA for similar purposes as management and to evaluate performance while adjusting for non-cash discretionary expenses. Modified EBITDA allows a more appropriate comparison to other companies whose earnings or loss is not adjusted by fair value adjustments from strategic investments. The Company also uses 'Backlog' or 'Backlog of signed and/or awarded contracts' interchangeably, as a non-IFRS measure. Backlog figures allow management of the Company to foresee and predict their future needs and resource planning. Management believes that 'Backlog' is used by investors to evaluate the Company, their future performance and better understand the production capacity.

**EBITDA:** We define EBITDA as net earnings before net financing costs, income taxes, depreciation and amortization. See 'Results of Operations - Reconciliation of Non-IFRS measures (EBITDA and Modified EBITDA)'.

**Modified EBITDA:** We defined Modified EBITDA as EBITDA and adjust for non-cash items namely share-based payments expenses and Changes in fair value of strategic investments. See 'Results of Operations - Reconciliation of Non-IFRS measures (EBITDA and Modified EBITDA)'.

**Backlog or Backlog of signed and/or awarded contracts:** This measure is defined as contracts with customers, firm purchase order and contracts agreed between us and the customer, whereby we can determine the proceeds and the obligations to perform.

## OVERVIEW

PyroGenesis Canada Inc. is a leader in the design, development, manufacture and commercialization of advanced plasma processes. We provide engineering and manufacturing expertise, cutting-edge contract research, as well as turnkey process equipment packages to the defense, metallurgical, mining, additive manufacturing (including 3D printing), oil & gas, and environmental industries. With a team of experienced engineers, scientists and technicians working out of our Montreal office and our 40,902 sq. ft. (3,800 m2) and 31,632 sq. ft. (2,940 m2) manufacturing facilities, PyroGenesis maintains its competitive advantage by remaining at the forefront of technology development and commercialization. Our core competencies allow PyroGenesis to lead the way in providing innovative plasma torches, plasma waste processes, high-temperature metallurgical processes, and engineering services to the global marketplace. Our operations are ISO 9001:2015 and AS9100D certified, having been ISO certified since 1997. Since our acquisition of Pyro Green-Gas (formerly AirScience Technologies Inc), we now offer technologies, equipment, and expertise in the area of biogas upgrading, and air pollution control. As a result, we have extended our presence to Italy and India, and this acquisition provides potential synergies with our current land-based waste destruction offerings. Our common shares are listed on the Toronto Stock Exchange (TSX) (Ticker Symbol: PYR), NASDAQ (Ticker Symbol: PYR) and the Frankfurt Stock Exchange (FSX) (Ticker symbol: 8PY).

This MD&A includes the accounts of the Company, Pyro Green-Gas Inc (including the subsidiaries in Italy and India) as well as Drosrite International LLC ('Drosrite International'). Drosrite International is owned by a member of the Company's key management personnel and close family member of the Chief Executive Officer ('CEO') and controlling shareholder and is deemed for the purposes of the 2022 consolidated financial statements to be controlled by the Company. Unless otherwise stated, reference to subsidiaries in the 2022 consolidated financial statements and this MD&A shall include Drosrite International and/or Pyro Green-Gas Inc. All transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation.

---

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PyroGenesis Canada Inc.  
 Management's Discussion and Analysis  
 For the years ended December 31, 2022, and 2021

# **INFORMATION FROM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE QUARTERS AND YEARS ENDED DECEMBER 31:**

|  | Three months ended Dec 31 |  | % Change 2022vs2021 | Twelve months ended Dec 31 |  | % Change 2022vs2021 |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 |  | 2022 | 2021 |  |
| Revenues | $3,301,777 | $7,205,349 | (54) % | $19,013,503 | $31,068,350 | (39)% |
| Cost of sales and services | 2,822,062 | 5,902,560 | (52) % | 10,869,616 | 18,636,539 | (42)% |
| Gross margin | 479,715 | 1,302,789 | (63) % | 8,143,887 | 12,431,811 | (34)% |
| Expenses |  |  |  |  |  |  |
| Selling, general and administrative (not including share-based expenses) | 9,093,820 | 7,071,471 | 29% | 23,486,971 | 17,474,390 | 34% |
| Research and development | 740,603 | 1,149,140 | (36) % | 2,317,973 | 2,535,987 | (9)% |
| Total expenses (not including share-based expenses) | 9,834,423 | 8,220,611 | 20% | 25,804,944 | 20,010,377 | 29% |
| Net (loss) income from operations (not including share-based expenses) | (9,354,708) | (6,917,822) | 35% | (17,661,057) | (7,578,566) | 133% |
| Share-based expenses | (1,316,221) | (4,878,526) | (73) % | (5,538,463) | (9,762,745) | (43)% |
| Net loss from operations | (10,670,929) | (11,796,348) | (10) % | (23,199,520) | (17,341,311) | 34% |
| Changes in fair market value of strategic investments and financial expenses | (264,231) | (11,349,913) | (98) % | (8,891,523) | (21,830,588) | (59)% |
| Income taxes | (189,069) | (739,960) | (74) % | 75,984 | (739,960) | (110)% |
| Net loss | $(10,746,091) | $(22,406,301) | (52) % | $(32,167,027) | $(38,431,939) | 16% |
| Foreign currency translation gain (loss) on investments in foreign operations | (72,664) | 3,444 | 2,210% | (3,042) | 3,444 | 188% |
| Comprehensive loss | $(10,818,755) | $(22,402,857) | (52) % | $(32,170,069) | $(38,428,495) | (16)% |
| Loss per share |  |  |  |  |  |  |
| Basic | $(0.06) | $(0.13) |  | $(0.19) | $(0.23) |  |
| Diluted | $(0.06) | $(0.13) |  | $(0.19) | $(0.02) |  |
| Modified EBITDA (1) | $(8,549,513) | $(6,522,877) | 31% | $(15,546,347) | $(6,182,695) | 151% |

$^{1}$ See 'Non-IFRS Measures'

4 || Page

PyroGenesis Canada Inc.  
 Management's Discussion and Analysis  
 For the years ended December 31, 2022, and 2021

# **INFORMATION FROM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31:**

|  | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 |
| --- | --- | --- | --- |
| Revenues | $19,013,503 | $31,068,350 | $17,775,029 |
| Cost of sales and services | 10,869,616 | 18,636,539 | 7,472,361 |
| Gross margin | 8,143,887 | 12,431,811 | 10,302,668 |
| Expenses |  |  |  |
| Selling, general and administrative (not including share-based expenses) | 23,486,971 | 17,474,390 | 8,089,945 |
| Research and development | 2,317,973 | 2,535,987 | (731,077) |
| Total expenses (not including share-based expenses) | 25,804,944 | 20,010,377 | 7,358,868 |
| Net (loss) income from operations (not including share-based expenses) | (17,661,057) | (7,578,566) | 2,943,800 |
| Share-based expenses | (5,538,463) | (9,762,745) | (4,244,608) |
| Net loss from operations | (23,199,520) | (17,341,311) | (1,300,808) |
| Changes in fair market value of strategic investments and financial expenses | (8,891,523) | (21,830,588) | 44,102,624 |
| Income taxes | 75,984 | (739,960) | 1,033,412 |
| Net income (loss) and comprehensive income (loss) | $(32,167,027) | $(38,431,939) | $41,768,404 |
| Foreign currency translation gain (loss) on investments in foreign operations | (3,042) | 3,444 | - |
| Comprehensive income (loss) | $(32,170,069) | $(38,428,495) | $41,768,404 |
| Earnings (loss) per share |  |  |  |
| Basic | $(0.19) | $(0.23) | $0.28 |
| Diluted | $(0.19) | $(0.23) | $0.27 |
| Modified EBITDA (1) | $(15,546,347) | $(6,182,695) | $3,442,443 |

$^{1}$ See 'Non-IFRS Measures'

# **SELECTED FINANCIAL INFORMATION**

|  | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 |
| --- | --- | --- | --- |
| Current assets | 27,448,182 | 38,758,984 | 25,336,787 |
| Non-current assets | 20,218,568 | 31,011,693 | 49,194,591 |
| Total assets | $47,666,750 | $69,770,677 | $74,531,378 |
| Current liabilities | 25,797,473 | 24,752,199 | 11,539,208 |
| Non-current liabilities | 5,000,350 | 4,249,724 | 3,569,064 |
| Total liabilities | $30,797,823 | $29,001,923 | $15,108,272 |
| Shareholders' equity | $16,868,927 | $40,768,754 | $59,423,106 |

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PyroGenesis Canada Inc.
Management's Discussion and Analysis
For the years ended December 31, 2022, and 2021

# **FINANCIAL CONDITION**

|  | December 31, 2022 | 2021 | $ Change 2022vs2021 |
| --- | --- | --- | --- |
| Current Assets |  |  |  |
| Cash and cash equivalents | $3,445,649 | $12,202,513 | (8,756,864) |
| Accounts receivable | 18,624,631 | 17,639,616 | 985,015 |
| Costs and profits in excess of billings on uncompleted contracts | 1,051,297 | 4,922,710 | (3,871,413) |
| Inventory | 1,876,411 | 887,590 | 988,821 |
| Investment tax credits receivable | 276,404 | 256,513 | 19,891 |
| Income tax receivable | 14,169 | 117,029 | (102,860) |
| Current portion of deposits | 432,550 | 1,328,452 | (895,902) |
| Current portion of royalties receivable | 455,556 | 311,111 | 144,445 |
| Contract assets | 499,912 | 375,789 | 124,123 |
| Prepaid expenses | 771,603 | 717,661 | 53,942 |
| Total Current Assets | $27,448,182 | $38,758,984 | (11,310,802) |
| Non-Current assets |  |  |  |
| Deposits | 46,053 | 248,756 | (202,703) |
| Strategic investments | 6,242,634 | 14,901,659 | (8,659,025) |
| Property and equipment | 3,393,452 | 3,712,937 | (319,485) |
| Right-of-use-assets | 4,818,744 | 5,765,993 | (947,249) |
| Royalties receivable | 952,230 | 947,543 | 4,687 |
| Intangible assets | 2,104,848 | 2,774,198 | (669,350) |
| Goodwill | 2,660,607 | 2,660,607 | - |
| Total Non-Current Assets | $20,218,568 | 31,011,693 | (10,793,125) |
| Current Liabilities |  |  |  |
| Bank indebtedness | 991,902 | - | 991,902 |
| Accounts payable and accrued liabilities | 10,115,870 | 10,069,177 | 46,693 |
| Billings in excess of costs and profits on uncompleted contracts | 9,670,993 | 9,400,231 | 270,762 |
| Current portion of term loans | 69,917 | 83,004 | (13,087) |
| Current portion of lease liabilities | 2,672,212 | 2,934,236 | (262,024) |
| Balance due on business combination | 2,088,977 | 2,242,503 | (153,526) |
| Income tax payable | 187,602 | 23,048 | 164,554 |
| Total Current Liabilities | $25,797,473 | 24,752,199 | 1,045,274 |
| Non-current Liabilities |  |  |  |
| Lease liabilities | 2,861,482 | 2,389,729 | 471,753 |
| Term loans | 320,070 | 107,901 | 212,169 |
| Balance due on business combination | 1,818,798 | 1,709,700 | 109,098 |
| Deferred income taxes | - | 42,394 | (42,394) |
| Total Non-Current Liabilities | $5,000,350 | $4,249,724 | 750,626 |

Working capital, (expressed as current assets less current liabilities) varied year-over-year by $12.4 million, mainly a result of:

- a decrease of cash and cash equivalents of $8.8 million, explained in the section Summary of Cash Flows,
- an increase of $1.0 million of accounts receivable as the Company has reached the invoicing milestones on contracts in progress and offset by $4.15 million as a result of the increased allowance for credit loss,
- a decrease of $3.6 million in costs and profits in excess of billings on uncompleted contracts related to invoicing to customers upon successfully reaching contract milestones and such amounts are converted to accounts receivable and $0.3 million as a result of the allowance for credit loss on costs and profits in excess of billings on uncompleted contracts,

6 | Page

PyroGenesis Canada Inc.
Management's Discussion and Analysis
For the years ended December 31, 2022, and 2021

- an increase in $1 million of inventory as the Company continues to source materials for production and minimize the risks of transport delays and reduce lead time to its customers,
- a decrease of $0.9 million in current portion of deposits due to the timing of deposits with suppliers,
- an increase of $1 million in bank indebtedness, due to the usage of the credit facilities by Pyro Green-Gas and its Italian subsidiary, and
- an increase of $0.3 million in billings in excess of costs and profits in uncompleted contracts due to proceeds received on a contract signed close to the December 31, 2022, year-end.

Non-current assets varied year-over-year by $10.8 million, mainly a result of:

- a decrease of $8.7 million in strategic investments is mainly attributable to the $8.3 million decrease in the fair value of the common shares and warrants owned of HPQ Silicon Inc. and the net result of purchases and disposition of common share of HPQ Silicon Inc. during the year 2022,
- a decrease of property and equipment of $0.3 million due to annual depreciation including the assets under construction placed in service,
- a decrease of $0.9 million in right-of-use-assets due to timing of lease maturity dates, and
- a decrease of $0.7 million in intangible assets due to the amortization of the intangible asset from the 2021 business combination as well as the HP Torch and SPARC patents,

Non-current liabilities varied year-over-year by $0.8 million, mainly a result of:

Reimbursement of lease payments made in advance, an increase in the Economic Development Agency loan, and timing of the expected payments related to the balance due on business combination.

# RESULTS OF OPERATIONS

# Revenues

PyroGenesis recorded revenue of $3.3 million in the fourth quarter of 2022 ("Q4, 2022"), representing a decrease of $3.9 million compared with $7.2 million recorded in the fourth quarter of 2021 ("Q4, 2021"). Revenue for fiscal 2022 was $19.0 million a decrease of $12.1 million over revenue of $31.1 million compared to fiscal 2021.

Revenues recorded in fiscal 2022 were generated primarily from:

|  | Three months ended Dec 31 |  | % Change | Twelve months ended Dec 31 |  | % Change |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2022vs2021 | 2022 | 2021 | 2022vs2021 |
| High purity metallurgical grade silicon & solar grade silicon from quartz (PUREVAPTM) | $824,894 | $938,211 | (113,317) | $6,272,697 | $6,138,111 | 134,586 |
| Aluminium and zinc dross recovery (DROSRITETM) | 504,760 | 1,567,641 | (1,062,881) | 1,912,807 | 7,940,771 | (6,027,964) |
| Development and support related to systems supplied to the U.S. Navy | (468,812) | 845,621 | (1,314,433) | 1,288,356 | 7,522,809 | (6,234,453) |
| Torch-related sales | 2,110,497 | 651,661 | 1,458,836 | 5,558,210 | 2,084,511 | 3,473,699 |
| Biogas upgrading and pollution controls | 86,593 | 3,152,524 | (3,065,931) | 3,347,443 | 6,800,090 | (3,452,647) |
| Other sales and services | 243,845 | 49,691 | 194,154 | 633,990 | 582,058 | 51,932 |
| Revenue | $3,301,777 | $7,205,349 | (3,903,572) | $19,013,503 | $31,068,350 | (12,054,847) |

Q4, 2022 revenues decreased by $3.9 million, mainly as a result of:

- PUREVAPTM related sales decreased by $0.1 million due to the project nearing its completion, with the phase of the project being mainly testing,
- DROSRITETM related sales decreased by $1 million due to customer delays in funding for the construction of the onsite facility,

7 | Page

PyroGenesis Canada Inc.
Management's Discussion and Analysis
For the years ended December 31, 2022, and 2021

- Support services related to systems supplied for the US Navy decreased by $1.3 million due to a revision in the cost budget which effects the revenue recognized by percentage completion. As of December 31, 2022 the customer has not provided a firm purchase order for the change in project scope, however, the Company expects to do so in 2023 and
- Biogas upgrading and pollution controls related sales decreased by $3.1 million due to clients requesting additional modifications prior to installation and commissioning, as well as continuous testing to achieve desired results.

Fiscal 2022 revenues decreased by $12.1 million, mainly as a result of:

- DROSRITETM related sales decreased by $6.0 million due to client delays in funding for the construction of the onsite facility,
- Support services related to systems supplied for the US Navy decreased by $6.2 million due to the project nearing its completion with remaining milestones based largely on inspections and shipment of the equipment, as well as, additional out of scope work costs incurred and not yet reflected in receipt of purchase order modifications, and
- Biogas upgrading and pollution controls decreased by $3.4 million due to the continuous effort in reaching desired results in order to advance to final steps, such as, commissioning.

PUREVAPTM related sales includes revenue from the sale of technologies in the amount of $3.6 million ($3.3 million in 2021). See note 7 to the 2022 consolidated financial statements.

As of March 30, 2023, revenue expected to be recognized in the future related to backlog of signed and/or awarded contracts is $32.4 million. Revenue will be recognized as the Company satisfies its performance obligations under long-term contracts, which is expected to occur over a maximum period of approximately 3 years.

# Cost of Sales and Services

|  | Three months ended Dec 31 |  | % Change | Twelve months ended Dec 31 |  | % Change |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2022vs2021 | 2022 | 2021 | 2022vs2021 |
| Employee compensation | $1,014,363 | $769,322 | 32% | $3,668,261 | $2,650,739 | 38% |
| Subcontracting | 113,610 | 210,848 | (46)% | 1,323,092 | 872,933 | 52% |
| Direct materials | 1,005,318 | 4,498,835 | (78)% | 4,698,982 | 14,252,205 | (67) % |
| Manufacturing overhead & other | 265,579 | 434,778 | (39)% | 1,371,462 | 1,111,975 | 23% |
| Foreign exchange charge on materials | 224,880 | (306,918) | (173)% | (999,548) | (568,531) | 76% |
| Investment tax credits | (23,440) | (65,326) | (64)% | (70,663) | (148,695) | (52) % |
| Amortization of intangible assets | 221,752 | 361,021 | (39)% | 878,030 | 465,913 | 88% |
| Total Cost of Sales and Services | $2,822,062 | $5,902,560 | (52)% | $10,869,616 | $18,636,539 | (42) % |

# Gross Margin

|  | Three months ended Dec 31 |  | Twelve months ended Dec 31 |  |
| --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2022 | 2021 |
| Revenues | $3,301,777 | $7,205,349 | $19,013,503 | $31,068,350 |
| Cost of Sales and Services | 2,822,062 | 5,902,560 | 10,869,616 | 18,636,539 |
| Gross Margin | $479,715 | $1,302,789 | $8,143,887 | $12,431,811 |
| Gross Margin % | 14.5% | 18.1% | 42.8% | 40.0% |

Cost of sales and services was $2.8 million in Q4, 2022, representing a decrease of 52% compared to $5.9 million in Q4, 2021, primarily due to decreases in subcontracting $0.1 million (Q4, 2021 - $0.2 million), direct materials $1.0 million (Q4, 2021 - $4.5 million), manufacturing overhead & other $0.3 million (Q4, 2021 - $0.4 million), foreign exchange charge on materials $0.2 million, (Q4, 2021 - $0.3 million), which is largely due to the decrease in product and service-related revenues, as well as being negatively impacted by the foreign exchange charge on materials, and a decrease in investment tax credits ($0.02 million) due to a lower levels of qualifying projects.

8 | Page

PyroGenesis Canada Inc.  
 Management's Discussion and Analysis  
 For the years ended December 31, 2022, and 2021

Fiscal 2022, cost of sales and services was $10.9 million, representing a decrease of 42% compared to $18.6 million in 2021, primarily due to the decrease of product and service-related revenues in the Company and its subsidiaries. Decreases in direct materials $4.7 million (2021 - $14.3 million) and investment tax credits ($0.07 million) (2021 - ($0.1 million)), were offset by the increases in employee compensation $3.7 million (2021 - $2.6 million), subcontracting $1.3 million (2021 - $0.9 million), manufacturing overhead & other $1.4 million (2021 - $1.1 million), foreign exchange charge on materials ($1.0 million) (2021 - ($0.6 million), totaling an increase of $5.4 million compared to $4.1 million in 2021. The increase in employee compensation, subcontracting, and manufacturing overhead & other is primarily related to an increase in labour intense projects, which require additional engineering hours, as well as specific subcontracting work related to equipment capacity improvements, mainly for torch-related sales, and the increase to manufacturing and other was due to higher utility costs, and equipment rentals, such as cranes and power generators. These increases were offset by the decrease in direct materials and by the foreign exchange charge on materials.

The gross margin for Q4, 2022 was $0.5 million or 14.5% of revenue compared to a gross margin of $1.3 million or 18.1% of revenue for Q4, 2021, the decrease in gross margin was mainly attributable to the negative impact in foreign exchange charge on materials of $0.5 million.

Fiscal 2022, gross margin was $8.1 million or 42.8% of revenue compared to a gross margin of $12.4 million or 40% for fiscal 2021. As a result of the type of contracts being executed, the nature of the project activity, as well as the composition of the cost of sales and services, the mix between labour, materials and subcontracts may be significantly different. The cost of sales and services for 2022 and 2021 are in line with management's expectations and with the nature of revenue.

Investment tax credits recorded against cost of sales are related to projects that qualify for tax credits from the provincial government of Quebec. Qualifying tax credits decreased in Q4, 2022 to $0.02 million compared to $0.07 million for Q4, 2021. In 2022, $0.07 million compared to $0.1 million in 2021. The decrease in fiscal 2022 is primarily related to less contracts being eligible for qualifying tax credits.

The amortization of intangible assets for Q4, 2022 was $0.2 million compared to $0.4 million for Q4, 2021. In 2022, the amortization of intangible assets was $0.9 million compared to $0.5 million for 2021. The increase in 2022, relates mainly to the intangible assets in connection with the Pyro Green-Gas acquisition, patents and deferred development costs. These expenses are non-cash items and will be amortized over the duration of the patent lives.

#### Selling, General and Administrative Expenses

|  | Three months ended Dec 31 |  | % Change | Twelve months ended Dec 31 |  | % Change |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2022vs2021 | 2022 | 2021 | 2022vs2021 |
| Employee compensation | $2,458,487 | $4,648,952 | (47)% | $8,094,226 | $8,664,603 | (7)% |
| Share-based expenses | 1,316,221 | 4,878,526 | (73)% | 5,538,463 | 9,762,745 | (43)% |
| Professional fees | 1,473,164 | 998,098 | 48% | 5,129,384 | 3,884,734 | 32% |
| Office and general | 454,881 | 125,224 | 263% | 1,154,327 | 609,353 | 89% |
| Travel | 79,875 | 37,193 | 115% | 283,142 | 114,206 | 148% |
| Depreciation of property and equipment | 157,011 | 102,024 | 54% | 603,894 | 356,103 | 70% |
| Depreciation of ROU assets | 156,362 | 166,223 | (6)% | 635,828 | 570,411 | 11% |
| Investment tax credits | (7,500) | (9,007) | (17)% | (30,000) | (32,486) | (8)% |
| Government grants | (67,268) | (32,612) | 106% | (204,791) | (76,845) | 166% |
| Other expenses | (91,191) | 1,035,375 | (109)% | 3,340,961 | 3,384,311 | (1)% |
| Bad debt provision | 4,480,000 | - | 100% | 4,480,000 | - | 100% |
| Total selling, general and administrative | $10,410,042 | $11,949,996 | (13)% | $29,025,434 | $27,237,135 | 7% |

Included within Selling, General and Administrative expenses ('SG&A') are costs associated with corporate administration, business development, project proposals, operations administration, investor relations and employee training.

SG&A expenses for Q4, 2022 were $10.4 million, representing a decrease of 13% compared to $11.9 million for Q4, 2021. The decrease is mainly a result of employee compensation decreasing to $2.5 million (Q4, 2021 - 4.6 million), due to lower

9 | Page

PyroGenesis Canada Inc.
Management's Discussion and Analysis
For the years ended December 31, 2022, and 2021

levels of eligible commissions and bonuses, a decrease in share-based compensation of $3.6 million (a non-cash expense related to a Q4 2021 grant not repeated in 2022), and a decrease in other expenses, which in Q4 2021 comprised of insurances, taxes, interest, and bank charges. Professional fees for Q4 2022 were greater due to an increase in legal fees, accounting fees, investor relation fees and patent expenses. In addition, in Q4 2022 a credit loss of $4.5 million was recorded related to collection of accounts receivable, also a non-cash expense.

SG&A expenses for fiscal 2022 were $29.0 million, representing an increase of 7% compared to $27.2 million for fiscal 2021. The SG&A expense now includes those of Pyro Green-Gas for the full year, versus approximately 5 months for fiscal 2021, increased due to the following:

i) a decrease of $0.6 million in employee compensation primarily due to a decrease in commissions and bonuses,
ii) an increase of $1.3 million for professional fees, primarily due to an increase in consulting fees, accounting and audit fees, legal fees, investor relation fees and public listing fees,
iii) an increase of $0.5 million in office and general expenses, is primarily due to information technology expenses including those related to the new ERP system,
iv) depreciation on property and equipment increased by $0.2 million due to higher amounts of property and equipment being depreciated,
v) Bad debt provision increased by $4.5 million, of which $4.2 million is attributable to accounts receivable and $0.3 million related to costs and profits in excess of billings on uncompleted contracts.

Separately, share-based payments decreased to $1.3 million for Q4, 2022 (Q4, 2021 - $4.9 million) and decreased to $5,538,463 in 2022, compared to $9,762,745 over the same period in 2021. This was directly impacted by the vesting structure of the stock option plan with options vesting between 10% and 100% on the grant date requiring an immediate recognition of that cost.

# Depreciation on Property and Equipment

|  | Three months ended Dec 31 |  | % Change 2022vs2021 | Twelve months ended Dec 31 |  | % Change 2022vs2021 |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 |  | 2022 | 2021 |  |
| Depreciation of property and equipment | $157,011 | $102,024 | 54% | $603,894 | $356,103 | 70% |

During the three months ended December 31, 2022, depreciation on property and equipment increased to $0.2 million compared to $0.1 million for the same period in the prior year. The 54% increase is due to the equipment under construction placed in service.

The depreciation on property and equipment increased to $0.6 million in 2022, compared to $0.4 million in 2021. The 70% increase is due to higher amounts of property and equipment being depreciated.

# Research and Development ("R&D") Expenses

|  | Three months ended Dec 31 |  | % Change 2022vs2021 | Twelve months ended Dec 31 |  | % Change 2022vs2021 |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 |  | 2022 | 2021 |  |
| Employee compensation | $201,756 | $186,677 | 8% | $814,334 | $777,870 | 5% |
| Investment tax credits | (22,637) | 757,946 | 103% | (68,771) | 684,709 | 110% |
| Subcontracting | 50,590 | 14,356 | 252% | 142,027 | 135,066 | 5% |
| Materials and equipment | 288,315 | 136,982 | 110% | 1,033,235 | 912,456 | 13% |
| Other expenses | 222,579 | 68,956 | 223% | 397,148 | 175,461 | 126% |
| Sub-total before government grants | $740,603 | $1,164,917 | (36)% | $2,317,973 | $2,685,562 | (14) % |
| Government grants | - | (16,115) | (100)% | - | (149,575) | (100) % |
| Total net R&D expenses | $740,603 | $1,148,802 | (36)% | $2,317,973 | $2,535,987 | (9) % |

10 | Page

PyroGenesis Canada Inc.  
 Management's Discussion and Analysis  
 For the years ended December 31, 2022, and 2021

During the three months ended December 31, 2022, the Company incurred $0.7 million of R&D expenses, net of government grants, on internal projects in Q4 2022, a decrease of 36% compared to $1.1 million for the same period in the prior year.

The Company incurred $2.3 million of R&D expenses, net of government grants, on internal projects in 2022, a decrease of 9% compared to $2.5 million in 2021. The decrease in 2022 is due to a decrease in R&D activities, the type of contracts being executed, the nature of the project activity, and the decrease in government grants of $Nil compared to ($0.1 million) reported in 2021.

In addition to internally funded R&D projects, the Company also incurred R&D expenditures during the execution of client-funded projects. These expenses are eligible for Scientific Research and Experimental Development (“SR&ED”) tax credits. SR&ED tax credits on client-funded projects are applied against cost of sales and services (see “Cost of Sales” above).

### Financial Expenses

|  | Three months ended Dec 31 |  | % Change 2022vs2021 | Twelve months ended Dec 31 |  | % Change 2022vs2021 |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 |  | 2022 | 2021 |  |
| Interest on term loans | 160 | 84,203 | (100)% | 3,198 | 87,775 | (97)% |
| Interest on lease liabilities | 94,421 | 86,177 | 10% | 378,611 | 307,691 | 23% |
| Interest on balance due on business combination | 3,040 | 110,203 | (97)% | 173,350 | 110,203 | 57% |
| Interest accretion of royalty receivable | (40,278) | 16,283 | (347)% | (118,290) | (132,808) | (11)% |
| Interest accretion of term loan | 8,032 | 3,219 | 250% | 28,229 | 12,185 | 232% |
| Penalties and other interest | (38,340) | 4,320 | (802)% | 85,644 | 19,324 | 489% |
| Financial expenses | $27,035 | $304,405 | (91)% | $550,742 | $404,370 | 36% |

During the three months ended December 31, 2022, financial expenses decreased to $0.03 million compared to $0.3 million for the same period in the prior year. The decrease is due to the various decreases in interest on term loans, penalties, and other interest expenses, not repeated in 2022.

Financial expenses for 2022 totaled $0.6 million as compared with $0.4 million for 2021, representing an increase of $0.1 million year-over-year. The increase in finance costs, is primarily attributable to the increase in accretion on the balance due on business combination and interest on the increased lease liability balance.

### Strategic Investments

|  | Three months ended Dec 31 |  | % Change 2022vs2021 | Twelve months ended Dec 31 |  | % Change 2022vs2021 |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 |  | 2022 | 2021 |  |
| Changes to fair value of strategic investments | $(237,194) | $(11,045,508) | 98% | $(8,340,781) | $(21,426,218) | 61% |

During the three months ended December 31, 2022, the adjustment to the fair market value of strategic investments resulted in a loss of $0.2 million compared to $11.0 million for the same period in the prior year. The 98% increase is primarily due to the closing share price of the HPQ common shares, used in determining the fair value.

The adjustment to the fair market value of strategic investments in 2022 resulted in a loss of $8.3 million compared to a loss in the amount of $21.4 million in 2021, representing a variation of $13.1 million. The variation is primarily attributable to closing share price of the HPQ common shares, used in determining the fair value of common shares and warrants owned by the Company of HPQ Silicon Inc.

11 | Page

PyroGenesis Canada Inc.
Management's Discussion and Analysis
For the years ended December 31, 2022, and 2021

# Comprehensive loss

|  | Three months ended Dec 31 |  | % Change 2022vs2021 | Twelve months ended Dec 31 |  | % Change 2022vs2021 |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 |  | 2022 | 2021 |  |
| Comprehensive loss | $(10,818,755) | $(22,402,857) | (52)% | $(32,170,069) | $(38,428,495) | (16)% |

The comprehensive loss for 2022 of $32.2 million compared to a loss of $38.4 million, in 2021, represents a decrease of 16% year-over-year. The variation of $6.3 million in the comprehensive loss in 2022 is primarily attributable to the factors described above, which have been summarized as follows, and includes the profit and loss items of Pyro Green-Gas since the acquisition date:

- (i) a decrease in product and service-related revenue of $12.1 million arising in 2022,
- (ii) a decrease in cost of sales and services of $7.8 million, primarily due to a decrease in direct materials, and investment tax credits,
- (iii) an increase in SG&A expenses of $1.8 million arising in 2022 primarily due to an increase in professional fees, office & general, travel, depreciation of property and equipment, depreciation of ROU assets, government grants, other expenses, and the allowance for credit loss of $4.5 million,
- (iv) a decrease in R&D expenses of $0.2 million primarily related to the decrease in government grants and an increase in investment tax credits,
- (v) a decrease in share-based expenses of $4.2 million,
- (vi) a decrease in changes in fair market value of strategic investments and net finance costs of $12.9 million,
- (vii) a decrease in income taxes of $815,944.

In Q4 2022, the comprehensive loss is $11.6 million favorable, compared to Q4 2021, due to the reasons detailed above and summarized mainly as the reduction is revenue of $3.9 million, favorable impact of SG&A salaries and share-based expenses, offset by the allowance for credit loss of $4.48 million and an adjustment for change in fair value of strategic investment which is $10.8 million favorable versus Q4 2021.

# Reconciliation of Non-IFRS measures (EBITDA, Adjusted and Modified)

|  | Three months ended Dec 31 |  | % Change 2022vs2021 | Twelve months ended Dec 31 |  | % Change 2022vs2021 |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 |  | 2022 | 2021 |  |
| Comprehensive loss | $(10,818,755) | $(22,402,857) | (52) % | $(32,170,069) | $(38,428,495) | (16) % |
| Depreciation of property and equipment | 157,011 | 102,024 | 54% | 603,894 | 356,103 | 70% |
| Depreciation of ROU assets | 156,362 | 166,223 | (6) % | 635,828 | 570,411 | 11% |
| Amortization of intangible assets | 218,760 | 353,333 | (38) % | 878,030 | 465,913 | 88% |
| Financial expenses | 183,694 | 74,326 | 147% | 550,742 | 404,370 | 36% |
| Income taxes | - | (739,960) | (100) % | 75,984 | (739,960) | 110% |
| EBITDA (1) | $(10,102,928) | $(22,446,911) | (55) % | $(29,425,591) | $(37,371,658) | (21) % |
| Other non-cash items: |  |  |  |  |  |  |
| Share-based expenses | 1,316,221 | 4,878,526 | (73) % | 5,538,463 | 9,762,745 | (43) % |
| Change in fair value of investments | 237,194 | 11,045,508 | (98) % | 8,340,781 | 21,426,218 | (61) % |
| Modified EBITDA (1) | $(8,549,513) | $(6,522,877) | 31% | $(15,546,347) | $(6,182,695) | 151% |

12 | Page

PyroGenesis Canada Inc.  
 Management's Discussion and Analysis  
 For the years ended December 31, 2022, and 2021

$^{1}$ See “Non-IFRS Measures”

The EBITDA in 2022 was a $29.4 million loss compared to an EBITDA loss of $37.4 million for 2021, representing a decrease of 21% year-over-year. The variation in the EBITDA in 2022 compared to 2021 is due to the decrease in comprehensive loss of $6.2 million, offset by an increase in depreciation on property and equipment of $0.2 million, an increase in depreciation on right-of-use assets of $0.07 million, an increase in amortization of intangible assets of $0.4 million, an increase in finance charges of $0.1 million and an increase in income taxes of $0.8 million. The 2022 Q4 EBITDA varied by $12.3 million mainly due to the reduced comprehensive loss in the quarter, and to the income tax reversal in Q4 2021, which was not repeated in 2022.

The Modified EBITDA in 2022 was a $15.5 million loss compared to a Modified EBITDA loss of $6.2 million for 2021, representing an increased loss of $9.3 million. The increase in the Modified EBITDA loss in 2022 is attributable to the decrease as mentioned above in the EBITDA of $7.9 million and a decrease in share-based expenses of $4.2 million from an expense not recurring in 2022 and a decrease in the change of fair value of investments of $13.1 million, based on the fair value of such investment. The 2022 Q4 Modified EBITDA is a loss of $8.55 million which is $2 million greater than Q4 2021, due to the quarterly EBITDA variation explained above, a decreased share-based expense in the current quarter and a fair value of the strategic investment which remained stable, based on the share price of the investment.

## SUMMARY OF QUARTERLY RESULTS

|  | 2022 |  |  |  | 2021 |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
| Revenues | $3,301,777 | $5,657,783 | $5,847,180 | $4,206,762 | $7,205,349 | $9,317,926 | $8,280,572 | $6,264,503 |
| Gross margin | 479,715 | 4,113,176 | 2,499,273 | 1,051,723 | 1,302,789 | 4,052,531 | 4,933,481 | 2,143,010 |
| Gross margin % | 14.5% | 72.7% | 42.7% | 25.0% | 18.1% | 43.5% | 59.6% | 34.2% |
| Comprehensive income (loss) | (10,818,755) | (4,053,706) | (13,039,531) | (4,069,119) | (22,402,857) | 623,664 | (20,362,205) | 3,712,903 |
| Earnings (loss) per share |  |  |  |  |  |  |  |  |
| Basic | (0.06) | (0.02) | (0.08) | (0.02) | (0.13) | - | (0.12) | 0.02 |
| Diluted | (0.06) | (0.02) | (0.08) | (0.02) | (0.13) | - | (0.12) | 0.02 |

The majority of PyroGenesis’ revenue is recognised over the time of the contract and is dependent on the timing of project initiation and execution, including project engineering, manufacturing, and testing. Revenues in 2022 include revenues from the sale of intellectual property and royalties of $3.6 million ($3.3 million in 2021) and $280,842.14 ($315,846 in 2021), respectively.

## LIQUIDITY AND CAPITAL RESOURCES

As at December 31, 2022, the Company had cash of $3.4 million, included in the net working capital of $1.7 million. Certain working capital items such as *Billings in excess of costs and profits on uncompleted contracts* do not represent a direct outflow of cash. The Company expects that with its cash, liquidity position, the proceeds available from the strategic investment and access to capital markets it will be able to finance its operations for the foreseeable future.

The Company’s term loan balance at December 31, 2022 was $389,987, and the increase since January 1, 2022, was mainly attributable to the additional proceeds received on the Economic Development Agency of Canada loan. This loan is interest free and will remain so, until the balance is paid over the 60 month period ending March 2029. The average interest expense on the other term loans was 7.2% in 2022 and in 2021. The Company does not expect changes to the structure of term loans in the next fiscal year. The Company maintained two credit facilities which bear interest at variable rates of 7.45% and 8% at December 31, 2022. The Company expects to reimburse a portion of the credit facilities during 2023, and extending the due date of the remaining balance, while maintaining the similar conditions.

13 | Page

PyroGenesis Canada Inc.  
 Management's Discussion and Analysis  
 For the years ended December 31, 2022, and 2021

|  | Carrying Value $ | Total contractual amount $ | Less than 1 year $ | 2-3 years $ | 4-5 years $ | Over 5 years $ |
| --- | --- | --- | --- | --- | --- | --- |
| Bank indebtedness | 991,902 | 991,902 | 991,902 | - | - | - |
| Accounts payable and accrued liabilities 1 | 9,620,591 | 9,620,591 | 9,620,591 | - | - | - |
| Term loans | 389,987 | 520,444 | 59,917 | 190,587 | 180,000 | 89,940 |
| Balance due on business combination | 3,907,775 | 4,137,820 | 2,177,800 | 1,960,020 | - | - |
| Lease liabilities | 5,533,694 | 6,745,329 | 2,984,243 | 1,165,281 | 703,816 | 1,891,989 |
|  | 20,443,949 | 22,016,086 | 15,834,453 | 3,315,888 | 883,816 | 1,981,929 |

$^{1}$ Accounts payable and accrued liabilities exclude amounts which are not financial liabilities.

## SUMMARY OF CASH FLOWS

|  | Three months ended Dec 31 |  | Twelve months ended Dec 31 |  |
| --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2022 | 2021 |
| Cash used in operating activities | $(1,226,224) | $(1,763,488) | $(11,128,885) | $(18,113,432) |
| Cash provided by (used in) investing activities | (111,458) | 1,299,358 | (368,180) | 2,722,957 |
| Cash provided by (used in) financing activities | 2,346,316 | (3,128,952) | 2,641,007 | 9,474,022 |
| Effect of exchange rate changes on cash denominated in foreign currency | 72,154 | 14,067 | 99,194 | 14,067 |
| Increase (decrease) in cash | 1,080,788 | (3,579,015) | (8,756,864) | (5,902,386) |
| Cash - end of period | 3,445,649 | 12,202,513 | 3,445,649 | 12,202,513 |

On a year-to-date basis, cash flow used by operating activities was $11.1 million compared to $18.1 million for the same period in the prior year. During the three months ended December 31, 2022, cash flow used by operating activities was $1.2 million compared to $1.8 million for the same period in the prior year. The use of cash during 2022 consists of the net loss of $32.2 million (2021 - net loss of $38.4 million) plus adjustments for operating activities of $16.6 million (2021 - $32.9 million), including a net change in non-cash operating working capital items of $4.2 million (2021 - net change of $12.6 million). During the three months ended December 31, 2022, the use of cash consisted of net losses of $10.7 million (Q4, 2021 - net loss of $22.4 million) plus adjustments for operating activities of $1.9 million (Q4, 2021 - $15.9 million), including a net change in non-cash operating working capital items of $7.8 million (Q4, 2021 - net change of $4.3 million).

Investing activities resulted in a use of funds of $0.4 million in 2022, compared to a net source of funds of $2.7 million in 2021 resulting from the additions to property and equipment, intangible assets, purchased and disposals of strategic investments and cash acquired through the business combination. During the three months ended December 31, 2022, investing activities resulted in a use of cash of $0.1 million, compared to a net source of funds of $1.3 million for the same period in the prior year. For Q4 2022 and fiscal 2022, the variation was mainly due to less purchases of property and equipment as equipment under construction was complete, and also from the variation of purchases and disposals of shares of the strategic investment.

Financing activities in 2022 resulted in a net source of funds of $2.6 million, compared with a net source of funds of $9.5 million for the same period in 2021. In 2022, the Company issued common shares for net cash proceeds of $2.7 million and repaid an amount of $0.7 million in loans and lease liabilities. In 2021, the Company issued common shares for net cash proceeds of $14.2 million, repaid an amount of $0.3 million in loans and lease liabilities and repurchased 0.8 million common

14 | Page

PyroGenesis Canada Inc.  
 Management's Discussion and Analysis  
 For the years ended December 31, 2022, and 2021

shares for an amount of $4.2 million. Financing activities also include interest paid of $0.5 million in 2022 compared to $0.3 million in 2021. In fiscal 2022, the proceeds from the credit facilities represent a cash inflow of $1 million. During the three months ended December 31, 2022, financing activities resulted in a net source of funds of $2.3 million due partly to the private placement, compared with a use of funds of $3.1 million for the same period in the prior year.

The net cash position of the Company decreased by $8.8 million for 2022 compared to an increase of $5.9 million for 2021.

#### **USE OF PROCEEDS FROM FINANCINGS**

| Description of intended use of funds from financings in the past 12 months | Proposed use of proceeds from financings completed in the past 12 months | Use of funds to Date |
| --- | --- | --- |
| October 19, 2022: Private Placement for total gross proceeds of $1,318,980 | Proceeds were intended and used for working capital and general corporate purposes | $1,318,980 |

#### **CAPITAL STOCK INFORMATION**

The authorized share capital of the Company consists of an unlimited number of common shares. As at March 30, 2023 PyroGenesis had 178,580,395 Common Shares, 6,014,600 share purchase warrants, 9,815,000 outstanding stock options issued, and 6,473,000 exercisable options issued.

#### **GOING CONCERN**

These consolidated financial statements have been prepared on the going concern basis, which presumes that the Company will be able to continue its operations for the foreseeable and will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.

The Company is subject to certain risks and uncertainty associated with the achievement of profitable operations such as the successful signing and delivery of contracts and access to adequate financing.

The Company has incurred, in the last years, operating losses and negative cash flows from operations, and as a result, the Company has an accumulated deficit of $93,384,858 as at December 31, 2022 ($61,217,831 as at December 31, 2021). Furthermore, there have been unexpected delays in the collection of certain accounts receivable from contracts closed in a prior year. This has resulted in a shortfall in cash flows from operating activities that would be used in funding the Company's operations.

As at December 31, 2022, the Company has working capital of $1,650,709 ($14,006,785 as at December 31, 2021) including cash and cash equivalents of $3,445,649 ($12,202,513 as at December 31, 2021). The working capital is net of an allowance for credit losses amounting to $5,023,283 ($520,000 as at December 31, 2021) as further described in notes 9 and 10. The Company's business plan is dependent upon the successful completion of contracts and also the receipt of payments from certain contracts closed in a prior year and expects these payments to be made during fiscal 2023, as well as the achievement of profitable operations through the signing, completion and delivery of additional contracts or a reduction in certain operating expenses. In the absence of this, the Company is dependent upon raising additional funds to finance operations within and beyond the next twelve months. The Company has been successful in securing financing in the past and has relied upon external financing to fund its operations, primarily through the issuance of equity, debt and convertible debentures. The Company completed a private placement in October 2022 for an amount of $1,318,980 and also completed another private placement in March 2023 for $5,000,000 (see note 33). While the Company has been successful in securing financing, raising additional funds is dependent on a number of factors, some of which are outside the Company's control, and therefore there is no assurance that it will be able to do so in the future or that these sources will be available to the Company or that they will be available on terms which are acceptable to the Company. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue operating as a going concern.

The consolidated financial statements have been prepared on a going concern basis and do not include any adjustments to the amounts and to classifications of the assets and liabilities that might be necessary should the Company be unable to achieve its plan and continue in business. If the going concern assumption were not appropriate, adjustments, which could be material, would be necessary to the carrying value of assets and liabilities, the reported expenses, and the classification of items on the consolidated statement of financial position.

15 | Page

PyroGenesis Canada Inc.  
 Management's Discussion and Analysis  
 For the years ended December 31, 2022, and 2021

## RELATED PARTY TRANSACTIONS

During the year ended December 31, 2022 and 2021, the Company concluded the following transactions with related parties:

In 2022, rent and property taxes were charged by a trust whose beneficiary is the controlling shareholder and CEO of the Company in the amount of $277,389 (2021 - $274,934). On January 1, 2022, a lease for rent of a property with a trust whose beneficiary is the controlling shareholder and CEO of the Company, was modified to extend the lease term until December 2026. The lessor also reimbursed an amount of $1,070,264 representing the balance at the date of modification of the original prepayment amount of $1,178,530 made in 2020. At the date of modification, the lease liability was remeasured using a discount rate of 4%. As a result, the lease liability was increased by an amount of $1,070,264 and the right-of-use assets was decreased by an amount of $108,267.

These expenses are recorded in captions cost of sales and selling and general in the consolidated statements of comprehensive loss. As at December 31, 2022 the right-of-use asset and the lease liabilities amount to $680,980 and $799,090 respectively (2021 - $1,107,131 and $Nil).

A balance due to the controlling shareholder and CEO of the Company amounted to $254,097 (2021 - $144,506) is included in accounts payable and accrued liabilities.

The key management personnel of the Company, in accordance with IAS 24 Related Party Disclosures, are the members of the Board of Directors and certain officers. Total compensation to key management consisted of the following:

|  | Three months ended Dec 31 |  | % Change | Twelve months ended Dec 31 |  | % Change |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2022vs2021 | 2022 | 2021 | 2022vs2021 |
| Salaries - key management | $359,932 | $2,335,482 | (85)% | $1,204,306 | $3,049,501 | (61) % |
| Pension contributions | 6,838 | 46,335 | (85)% | 22,479 | 59,377 | (62) % |
| Fees - Board of Directors | 23,200 | 40,200 | (42)% | 157,900 | 187,600 | (16) % |
| Share-based compensation - officers | 245,915 | 4,125,512 | (94)% | 2,017,348 | 6,182,573 | (67) % |
| Share-based compensation - Board of Directors | 313,757 | 375,333 | (16)% | 2,293,167 | 2,338,650 | (2) % |
| Other benefits - key management | 222,686 | 61,684 | 261% | 244,621 | 237,903 | 3% |
| Total compensation | $1,172,328 | $6,984,546 | (83)% | $5,939,821 | $12,055,604 | (51) % |

## CORPORATE HIGHLIGHTS

On February 2, 2022, PyroGenesis announced the receipt of a US$3,000,000 purchase order for the first of three 10-tonne DROSRITE systems from an existing client.

On February 7, 2022, PyroGenesis announced that it had signed an agreement with a European research center for the sale of a plasma torch system which will be used to develop a process to convert hydrocarbons, including GHG producing gases such as methane, into non-hazardous chemicals.

On April 25, 2022, PyroGenesis confirmed that the Company's DROSRITE dross recovery technology (a total of seven DROSRITE systems) has been successfully commissioned for Ma'aden Aluminum.

On May 19, 2022, PyroGenesis announced that it had completed a commercial order for titanium powders. The order derived from the Company's partnership agreement with Aubert & Duval, a multinational specializing in upscale metallurgy, and the powder in question was produced at PyroGenesis' production facility using its NexGen plasma atomization system.

16 | Page

PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

On September 7, 2022, the Company announced that it has been selected by an international producer of magnesium metal, to test PyroGenesis' zero-emission plasma torches as part of their process for transforming mining waste and recycled minerals into high-value metal.

On October 6, 2022, PyroGenesis confirmed that its Gen3 PUREVAP Quartz Reduction Reactor pilot plant had completed the month-long power-up process and was initiating the testing phase of its transformation of quartz into high purity silicon. The plant is designed to produce multiple systems that can operate under harsh conditions, including at extremely high temperatures and under vacuum.

On October 19, 2022, PyroGenesis announced that it has completed a non-brokered private placement consisting of the issuance and sale of 1,014,600 units of the Corporation at a price of $1.30 per unit, for gross proceeds of $1,318,980 to the Company. Each unit consisted of one Common Share and one warrant entitling the holder thereof to purchase one Common Share at a price of $1.75 until October 19, 2024.

On November 2, 2022, PyroGenesis announced that it has passed its annual quality audit for two key international standards: ISO 9001:2015, and AS9100D. The audits encompassed all of PyroGenesis' facilities for the purpose of meeting compliance with the existing quality management designations.

On November 10, 2022, PyroGenesis announced that it has successfully produced hydrogen from methane using zero-carbon emission hydrogen production technology.

### SUBSEQUENT EVENTS

On March 8, 2023, the Company announced it had completed a non-brokered private placement consisting of the issuance and sale of 5,000,000 units of the Company at a price of $1.00 per unit, for gross proceeds of $5,000,000. Each unit consists of one common share of the Company and one common share purchase warrant. Each warrant entitles the holder thereof to purchase one common share at a price of $1.25 until March 7, 2025. The entire amount is allocated to the common shares as the fair value of the common shares on March 8, 2023, was $1.38.

### CRITICAL ACCOUNTING ESTIMATES, NEW AND FUTURE ACCOUNTING POLICIES AND FINANCIAL INSTRUMENTS

For a discussion of significant accounting policies, judgements, estimates assumptions and financial instruments, please refer to notes 4, 5 and 28 of the 2022 consolidated financial statements.

### CONTROLS AND PROCEDURES

The Company's shares are traded on the Toronto Stock Exchange ('TSX') since November 2020 and on the NASDAQ since March 2021. Prior to November 2020, the Company's shares traded on the TSX Venture Exchange ('TSXV'), and all requirements of the TSXV were attained by the Company. The Company acknowledged that being listed on the TSX, and NASDAQ would require more stringent disclosure controls, and started implementing such before the NASDAQ listing.

As a result of the graduation to the TSX and NASDAQ, the Company became subject to additional requirements under applicable securities laws relating to the establishment and maintenance of disclosure controls and procedures ('DC&P') and internal control over financial reporting ('ICFR'), as defined in NI 52-109 and the applicable rules of the U.S. Securities and Exchange Commission. Such requirements also include the assessment and evaluation of both DC&P and ICFR, which was not required while the Company was listed on the TSXV. Consequently, the Company continues to take several actions to improve its DC&P and ICFR, in accordance with the thresholds provided by the regulators. The Company is currently implementing measures designed to improve its ICFR environment and remediate the control deficiencies that led to the material weaknesses identified below.

In accordance with the provisions of National Instrument 52-109 - Issuers' annual and interim filings ('NI 52-109') adopted by Canadian securities regulators and in Rule 13a-15(e) and 15d-15(e) under the U.S. Securities Exchange Act of 1934, as amended (the 'Exchange Act'), the Company has filed certificates signed by the Chief Executive Officer ('CEO') and Chief Financial Officer ('CFO') that report on, among other items, i) their responsibility for establishing and maintaining DC&P and ICFR for the Company, ii) the design of DC&P and the design of ICFR, and the effectiveness of DC&P and ICFR.

---

17 | Page

PyroGenesis Canada Inc.
Management's Discussion and Analysis
For the years ended December 31, 2022, and 2021

## Disclosure controls and procedures

The Company under the supervision of the CEO and CFO, have designed DC&P (as defined in NI-52-109 and Rule 13a-15(e) and 15d-15(e) under the Exchange Act), in order to provide reasonable assurance that:

- material information relating to the Company is made known to the CEO and CFO by others; and
- information required to be disclosed by the Company in its filings, under applicable securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation.

As of December 31, 2022, an evaluation was carried out under the supervision of the CEO and CFO, of the design and operating effectiveness of the Company's DC&P. Based on this evaluation, the CEO and CFO concluded that due to the material weaknesses in our ICFR as described below in Management's Annual Report on Internal Controls over Financial Reporting, the Company's DC&P were not effective as of December 31, 2022.

### Management's Annual Report on Internal Controls over Financial Reporting

The Company under the supervision of the CEO and CFO, are responsible to design ICFR (as defined in NI-52-109 and Rules 13a-15(f) and 15d-15(f) under the Exchange Act) in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS as issued by the IASB.

As of December 31, 2022, an evaluation was carried out, under the supervision of the CEO and the CFO, of the effectiveness of the Company's ICFR. Based on this evaluation, the CEO and the CFO concluded that material weaknesses exist, as described below, and due to these material weaknesses, the Company's ICFR is not effective as of December 31, 2022. The control framework used to design and evaluate effectiveness of the Company's ICFR is established under the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) on Internal Control - Integrated Framework (2013 framework). A material weakness is a deficiency, or combination of deficiencies, in ICFR, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

In connection with the Company's evaluation of ICFR, the following are the control deficiencies that were considered to be material weaknesses in the current year, and in 2021 and any remediation that occurred during fiscal 2022:

- **Control environment:** The Company did not maintain an effective control environment and has identified deficiencies relating to appropriate organizational structure and authority and responsibilities. The Company did not have a sufficient number of trained resources with the appropriate skills and knowledge with assigned responsibilities and accountability for the design and operation of ICFR and for holding individuals accountable for their internal control-related responsibilities.

Nonetheless, during a portion of 2022, the deficiencies related to the control environment over reporting lines as well as authority and responsibilities were improved with the implementation of additional controls. Oversight and governance of financial reporting and related party transactions, including the oversight executed by Board of Directors and the Audit Committee was not indicative of a control environment deficiency. The Company has financial reporting resources internally, or at their disposal to ensure they can deal with complex accounting matters, as well as period-end controls to mitigate the risk of misstatement in the financial information.

- **Control activities:** The Company did not fully design and implement effective control activities and has identified deficiencies relating to: (i) selecting and developing control activities that contribute to the mitigation of risks to acceptable levels, and (ii) deploying control activities through policies that establish what is expected and procedures that put policies into action.

During 2022, the Company continued to implement numerous internal controls, including compensating controls to mitigate these risks as well as adding sufficient levels of review and approval in order to reduce the risk related to control activities thereby improving the quality of financial information.

18 | Page

PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

- **Journal Entries:** The Company did not effectively design and maintain appropriate segregation of duties and controls over the effective preparation, review and approval, and associated documentation of journal entries, across its ERP platform. The Company did not have adequate review procedures for the recording of manual entries.

Throughout 2022 however, the Company continues to modify their processes to ensure that journal entries are sufficiently reviewed and approved, and compensating controls exist to ensure the financial information is free of misstatement.

- **Complex Spreadsheet Controls:** The Company did not implement and maintain effective controls surrounding certain complex spreadsheets, including addressing all identified risks associated with manual data entry, completeness of data entry, and the accuracy of mathematical formulas, impacting complex spreadsheets used in fixed asset continuity schedules, production and revenue forecasting, and the calculation of the fair value of investments.

During the course of 2022, the Company continued to improve the safeguarding of spreadsheets and data, through various controls, password protections and improved segregation of duties with the objective of reducing the possibility of error.

- **User Access Controls:** The Company did not maintain effective user access controls to adequately restrict user access to financial applications and related data in accordance with job responsibilities, for the entirety of 2022.

In response to this, the Company has continued to implement controls to limit the access to financial and non-financial applications, based on employee profile. The Company continues to implement IT environment best practices for access controls, including prompt changes, access limitation to appropriate users and systematic periodic reviews of account privileges. Automated access controls are being integrated into the new ERP system.

As a consequence, the Company did not have effective control activities related to the design, implementation and operation of process-level and management review control activities related to order-to-cash (including revenue trade receivables, and billings in excess of cost/cost in excess of billings), procure-to-pay (including operating expenses, prepaid expenses, accounts payable, and accrued liabilities), hire-to-pay (including compensation expense and accrued liabilities), long-lived assets, significant unusual transactions, related party transactions and other financial reporting processes for the entire year.

Aside from these material weaknesses, management has concluded that the Company's consolidated financial statements as at and for the year ended December 31, 2022, present fairly, in all material respects, the Company's financial position, results of operations, changes in shareholders' equity and cash flows in accordance with IFRS as issued by the IASB. There were no material adjustments to the Company's consolidated financial statements for the year ended December 31, 2022, and there were no changes to previously released financial results. However, because the deficiencies and material weaknesses create a reasonable possibility that a material misstatement to our consolidated financial statements would not be prevented or detected on a timely basis, the CEO and CFO concluded that as of December 31, 2022, the Company's design and operation of ICFR and DC&P were not effective.

#### Management's Ongoing Remediation Measures

During the year ended December 31, 2022, and beyond, management initiated and continues to implement remediation measures as outlined above, in the 2021 annual MD&A as well as the quarterly MD&A's of 2022. Management has performed an initial risk assessment using a top-down, risk-based approach with respect to the risks of material misstatement of the consolidated financial statements. In addition, compensating controls have been applied to the areas where the risks of material misstatement are considered moderate to high, as throughout the various accounting cycles. The Company is using and plans to continue to use outside resources to strengthen the business process documentation and help with management's self-assessment and testing of internal controls. In 2023, the Company's management, with oversight of the Audit Committee expects to advance the documenting, testing, and refining the internal controls, in addition with the upgrade to the ERP system, which inherently will add additional automated controls. As a result, the Company will improve the design of control activities and strengthen process controls surrounding sales, purchases, payroll, among others, and will be call for fewer compensating controls.

---

19 | Page

PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

Although the Company can give no assurance that these actions will remediate these material weaknesses in internal controls or that additional material weaknesses in our ICFR will not be identified in the future, management believes the foregoing efforts will, when implemented, strengthen our ICFR and DC&P and effectively remediate the identified material weaknesses.

Management will take additional remedial actions as necessary as they continue to evaluate and work to improve the Company's ICFR environment.

### Changes in internal controls over financial reporting

Other than the material weaknesses described above, and the remediation process described above, there were no changes to the Company's ICFR during the year ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's ICFR.

#### *Limitations on Effectiveness of Disclosure Controls and Procedures and Internal Control over Financial Reporting*

The Company's management recognizes that any DC&P and ICFR, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Because of their inherent limitations, DC&P and ICFR may not prevent or detect all errors or misstatements on a timely basis.

### RISK FACTORS

The Company has identified below certain significant risks relating to the business of the Company and the industry in which it operates. The following information is only a summary of certain risk factors and is qualified in its entirety by reference to, and must be read in conjunction with, the detailed information appearing elsewhere in this MD&A. These risks and uncertainties are not the only ones facing the Company. Additional risks and uncertainties not currently known to the Company, or that the Company currently considers immaterial, may also impair the operations of the Company. If any such risks materialize into actual events or circumstances, the Company's assets, liabilities, financial condition, results of operations (including future results of operations), business and business prospects, are likely to be materially and adversely affected. There is no assurance that risk management steps taken will avoid future loss due to the uncertainties described below or other unforeseen risks. An investment in the Common Shares or other securities of the Company is highly speculative and involves a high degree of risk. Before making any investment decision, prospective investors should carefully consider all the information contained in this document including, in particular, the risk factors described below.

Certain factors may have a material adverse effect on the Company's business, financial condition and results of operations. Current and prospective investors should carefully consider the risks and uncertainties and other information contained in this MD&A, the 2022 consolidated Financial Statements and the Annual Information Form, particularly under the heading 'Risk Factors' in the Annual Information Form, and in other filings that the Company has made and may make in the future with applicable securities authorities, Company's website at www.pyrogenesis.com. The risks and uncertainties described herein and therein are not the only ones the Company may face. Additional risks and uncertainties that the Company is unaware of, or that the Company currently believes are not material, may also become important factors that could adversely affect the Company's business. If any of such risks actually occur, the Company's business, financial condition, results of operations, and future prospects could be materially and adversely affected. In that event, the trading price of the Common Shares (or the value of any other securities of the Company) could decline, and the Company's securityholders could lose part or all of their investment.

### Risks Related to the Company's Business and Industry

#### Operating Income (Loss) and Negative Operating Cash Flow

Prior to December 31, 2022, the Company had a history of losses and negative cash flows. For the year ended December 31, 2022, the Company has net losses of $32.2 million, cash flows used in operations of $11.1 million, and an accumulated deficit of $93.4 million at December 31, 2022. To the extent that the Company has net losses and negative operating cash flow in future periods, it may need to allocate a portion of its cash reserves to fund such negative cash flow. The Company may also be required to raise additional funds through the issuance of equity or debt securities. There can be no assurance that the Company will be able to generate a positive cash flow from its operations, that additional capital or other types of financing will be available when needed or that these financings will be on terms favourable to the Company.

---

20 | Page

PyroGenesis Canada Inc.
Management's Discussion and Analysis
For the years ended December 31, 2022, and 2021

The Company's ability to continue as a going concern is dependent upon its ability in the future to grow its revenue, achieve profitable operations, successfully developing and introducing new products and, in the meantime, to obtain the necessary financing to meet its obligations and repay its liabilities when they become due. While the Company has been successful in securing financing in the past, raising additional funds is dependent on a number of factors outside the Company's control, and as such there is no assurance that it will be able to do so in the future. External financing, predominantly by the issuance of equity and debt, might be, sought to finance the operations of the Company; however, there can be no certainty that such funds will be available at terms acceptable to the Company, or at all. If the Company is unable to obtain sufficient additional financing, it may have to curtail operations and development activities, any of which could harm the business, financial condition and results of operations.

### Actual Financial Position and Results of Operations May Differ Materially from the Expectations of the Company's Management

The Company's actual financial position and results of operations may differ materially from management's expectations. The Company has experienced some changes in its operating plans and certain delays in the timing of its plans. As a result, the Company's revenue, net income and cash flow may differ materially from the Company's projected revenue, net income and cash flow. The process for estimating the Company's revenue, net income and cash flow requires the use of judgment in determining the appropriate assumptions and estimates. These estimates and assumptions may be revised as additional information becomes available and as additional analyses are performed. In addition, the assumptions used in planning may not prove to be accurate, and other factors may affect the Company's financial condition or results of operations.

### Revenue Risks

PyroGenesis may experience delays in achieving revenues, particularly with plasma gasification projects which have a long sales cycle. Revenues may be delayed or negatively impacted by issues encountered by the Company or its clients including:

- (i) unforeseen engineering and/or environmental problems;
- (ii) delays or inability to obtain required financing, licenses, permits and/or regulatory approvals;
- (iii) supply interruptions and/or labour disputes;
- (iv) foreign exchange fluctuations and/or collection risk; and
- (v) competition from other suppliers and/or alternative energy solutions that are less capital intensive.

There is no assurance that the business will perform as expected or that returns from the business will support the expenditures needed to develop it.

### Concentration Risk and Credit Risk

To date, a small number of customers have accounted for a majority of PyroGenesis' revenues. As its business expands, the Company expects that revenue distribution will be over a larger number of different customers. For the year ended December 31, 2022, sales of PyroGenesis to its two principal customers accounted for approximately 52% of its total revenue. For the year ended December 31, 2021, sales to two principal customers accounted for approximately 79% of PyroGenesis' total revenue. The loss of, or a reduction in, purchase orders or anticipated purchase orders from PyroGenesis' principal customers could have a material adverse effect on its business, financial condition and results of operations. Additionally, if one of PyroGenesis' customers is unable to meet its commitments to PyroGenesis, the Company's business, financial condition and results of operations could be adversely affected.

As a result of the Drosrite International Exclusive Agreement and the Dross Processing Service Agreement, the Company generates significant revenues from payments made to Drosrite International under the Dross Processing Service Agreement. The Company will no longer receive payments under such arrangement if the Dross Processing Service Agreement, which involves a third party in a foreign jurisdiction, is terminated, which could have a material adverse effect on the business, financial condition and results of operations of the Company.

21 | Page

PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The maximum credit risk to which the Company is exposed as at December 31, 2022 represents the carrying amount of cash and cash equivalents, accounts receivable (except sales tax receivable), costs and profits in excess of billings on uncompleted contracts, deposits and royalties receivable.

Cash and cash equivalents, which only comprise guaranteed investment certificates redeemable on relatively short notice by the Company, are held with major reputable financial institutions.

Management has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company's payment and delivery terms and conditions are offered. The Company's review could include reviewing external ratings, if they are available, financial statements, credit agency information, industry information and in some cases bank references. The Company's exposure to credit risk is mainly influenced by the individual characteristics of each customer. In monitoring customer credit risk, customers are identified according to their characteristics such as their geographic location, industry, trading history with the Company and existence of previous financial difficulties.

The Company does not generally require collateral or other security from customers on accounts receivable, however, the contract terms may include the possibility of recourse in the event of late payment. The Company believes that there is no unusual exposure associated with the collection of these receivables.

The credit risk associated with costs and profits in excess of billings on uncompleted contracts is similar to that of accounts receivable, as these amounts are accumulated and converted to accounts receivable as invoicing milestones are reached.

The royalties receivable are due from a company in which the Company has a strategic investments. The Company does not have collateral or other security associated with the collection of this receivable. The carrying amount of the royalties receivable have been discounted to reflect the time value of money and credit risk of the counterparty.

The deposits are payments made to suppliers and entities from which the Company leases property. The Company does not have collateral or other security associated with the collection of these deposits. As at December 31, 2022 and 2021, no loss allowance has been recognized in connection with these deposits and the maximum exposure is the carrying amount of these deposits.

During the years 2022 and 2021, provisions for expected credit losses were recorded, however, no amounts of financial assets have been written off. The accounts provisioned by the loss are still subject to enforcement activity in order to collect the balances due.

### ***Technology Development and Manufacturing Capability Risks***

PyroGenesis recently expanded into new areas of business and, as a result, many of the Company's products are at various stages of the development cycle. The Company may be unable to commercialise such products, or it may be unable to manufacture such products in a commercially viable manner. Whilst management is confident in both its technology and in its team of experienced engineers, scientists and technicians, it cannot know with certainty, which of its products will be commercialised, when such products will be commercialised, or whether such products will be able to be manufactured and distributed profitably.

### ***Product Revenues/History of Losses***

PyroGenesis has incurred losses in the majority of years since its inception. In the past the Company's operations have not generated sufficient earnings and cash flows to date to result in consistent profitability or positive cash flow. For the year ended December 31, 2022, the Company has a net loss of $32.2 million which includes a loss from the change in value of strategic investment of $8.3 million and cash flows used in operations of $11.1 million. There can be no assurance that the Company will be able to continue to generate significant gains from the value of its strategic investments in the future.

### ***Additional financing and dilution***

PyroGenesis may require additional financing. There can be no assurance that additional financing will be available to the Company when needed, or on terms acceptable to the Company.

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22 | Page

PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

PyroGenesis' inability to raise financing to support ongoing operations or to fund capital expenditures could limit the Company's growth and may have a material adverse effect upon the Company.

The Company does not exclude raising additional funds by equity financing. In addition, at March 30, 2023, 9,815,500 stock options are currently issued and outstanding, together with 6,014,600 share purchase warrants. The exercise of stock options and/or warrants, as well as any new equity financings, represents dilution factors for present and future shareholders.

### *Reliance on Third Party Suppliers, Service Providers, Distributors and Manufacturers*

The Company's direct and indirect suppliers, service providers, distributors and manufacturers may elect, at any time, to breach or otherwise cease to participate in supply, service, distribution or manufacturing agreements, or other relationships, on which the Company's operations rely. Loss of its suppliers, service providers, distributors and manufacturers could have a material adverse effect on the Company's business and operational results. Further, any disruption in the manufacturing process done by third-party manufacturers could have a material adverse effect on the business, financial condition and results of operations of the Company. The Company cannot ensure that alternative production capacity would be available in the event of a disruption, or if it would be available, it could be obtained on favorable terms.

### *Manufacturing Facilities*

The vast majority of the Company's products are manufactured in its manufacturing facilities located in Montreal, Quebec, as well as in Italy and India. Accordingly, the Company is highly dependent on the uninterrupted and efficient operation of its manufacturing facilities. If for any reason the Company is required to discontinue production at its facilities, it could result in significant delays in production of the Company's products and interruption of the Company's sales as it seeks to resume production. The Company may be unable to resume production on a timely basis. If operations at the facilities were to be disrupted as a result of equipment failures, natural disasters, fires, accidents, work stoppages, power outages or other reasons, the Company's business, financial condition and/or results of operations could be materially adversely affected.

### *Sales Cycle and Fixed Price Contracts*

PyroGenesis sales cycle is long and the signing of new contracts is subject to delay, over which the Company has little control. The Company also enters into sales contracts with fixed pricing, which may be impacted by changes over the period of implementation. There is no assurance that delays or problems in fulfilling contracts with clients will not adversely affect the Company's activities, operating results or financial position.

### *Reliance on Technology*

PyroGenesis will depend upon continuous improvements in technology to meet client demands in respect of performance and cost, and to explore additional business opportunities. There can be no assurance that the Company will be successful in its efforts in this regard or that it will have the resources available to meet this demand. Whilst management anticipates that the research and development will allow the Company to explore additional business opportunities, there is no guarantee that such business opportunities will be presented or realized. The commercial advantage of the Company will depend to a significant extent on the intellectual property and proprietary technology of PyroGenesis and the ability of the Company to prevent others from copying such proprietary technologies. PyroGenesis currently relies on intellectual property rights and other contractual or proprietary rights, including (without limitation) copyright, trade secrets, confidential procedures, contractual provisions, licenses and patents, to protect its proprietary technology. PyroGenesis may have to engage in litigation in order to protect its patents or other intellectual property rights, or to determine the validity or scope of the proprietary rights of others. This type of litigation can be expensive and time consuming, regardless of whether or not the Company is successful. PyroGenesis may seek patents or other similar protections in respect of particular technology; however, there can be no assurance that any future patent applications will actually result in issued patents, or that, even if patents are issued, they will be of sufficient scope or strength to provide meaningful protection or any commercial advantage to the Company.

Moreover, the process of seeking patent protection can itself be long and expensive. In the meantime, competitors may develop technologies that are similar or superior to PyroGenesis' technology or design around the patents owned by the Company, thereby adversely affecting the Company's competitive advantage in one or more of its areas of business. Despite the efforts of the Company, its intellectual property rights may be invalidated, circumvented, challenged, infringed or required to be licensed to others. It cannot be assured that any steps the Company may take to protect its intellectual

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23 | Page

PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

property rights and other rights to such proprietary technologies that are central to the Company's operations will prevent misappropriation or infringement of its technology.

### Changes to Contracts

PyroGenesis is dependent upon its ability to establish and develop new relationships and to build on existing relationships with current clients. The Company cannot provide assurance that it will be successful in maintaining or advancing its relationships with current clients or procure additional clients. In addition, PyroGenesis cannot provide assurance that its customers and the end users of its products will continue to provide the Company with business, or that existing customers and end users will not seek to renegotiate or terminate existing contracts providing for the sale of the Company's products and technology based on circumstances on which the Company is not currently aware. Any termination or amendment of a contract under which the Company derives an important portion of its revenues, including the Drosrite International Exclusive Agreement and the Dross Processing Service Agreement, and any adverse change in the relationship of the Company with its customers and end users, will have an adverse effect on the Company's business, financial condition and results of operations.

Sales to governments and governmental entities are subject to specific additional risks, such as delays in funding, termination of contracts or sub-contracts at the convenience of the government, termination, reduction or modification of contracts or sub-contracts in the event of changes in the government's policies or as a result of budgetary constraints and increased or unexpected costs resulting in losses or reduced profits under fixed price contracts.

### Foreign Exchange Exposure

PyroGenesis' products and services are increasingly being sold in markets outside of Canada, whilst most of its operating expenses and capital expenditures are denominated in Canadian dollars. As a result, the Company is exposed to fluctuations in the foreign exchange rates between Canadian dollar and the currency in which a particular sale is transacted, which may result in foreign exchange losses that could affect earnings. Foreign sales are predominantly denominated in U.S. dollars, as well as the Euro and Indian Rupee. The Company has not to date sought to hedge the risks associated with fluctuations in foreign exchange rates.

### Competition

The industry is competitive and PyroGenesis competes with a substantial number of companies which have greater technical and financial resources. There can be no assurance that such competitors will not substantially increase the resources devoted to the development and marketing of products and services that compete with those of the Company or that new or existing competitors will not enter the various markets in which PyroGenesis is active. There can be no assurance that competitors will not develop new and unknown technologies with which the Company may have difficulty competing. Furthermore, failure to remain cost competitive may result in PyroGenesis losing business to its competitors.

The plasma technology of PyroGenesis competes against other plasma and conventional technologies. Without limitation, the demand for the plasma technology of PyroGenesis, particularly in waste destruction and waste-to-energy systems, can be impacted by the commodity prices of the energy source used for the process and the price at which waste is accepted by landfills and traditional waste processing plants. While the Company believes that demand for sustainable waste management practices that have lower environmental impacts than traditional solutions such as landfill or incineration is increasing, the high flows of electricity necessary to operate the waste destruction and waste-to-energy systems of PyroGenesis have an impact on the operational costs of the Company's systems, and traditional solutions may constitute lower-cost solutions, particularly if commodity prices (including of oil and natural gas) remain low or experience a decline.

### Management and Key Personnel

PyroGenesis depends on the skills and experience of its management team and other key employees. The Company relies heavily on its ability to attract and retain highly skilled personnel in a competitive environment. PyroGenesis may be unable to recruit, retain, and motivate highly skilled employees in order to assist the Company's business, especially activities that are essential to the success of the Company. Failure to recruit and retain highly skilled employees may adversely affect PyroGenesis' business, financial condition and results of operations.

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24 | Page

PyroGenesis Canada Inc.
Management's Discussion and Analysis
For the years ended December 31, 2022, and 2021

### *Implementation of a strategic plan*

PyroGenesis' commercial strategy aims to leverage its products, consumables, and services whilst focusing on the resolution of problems within niche markets within the industries served by the Company. There can be no assurances as to the success of the Company's strategic plan, which should be considered under the risks perspective and difficulties frequently encountered by a developing business.

### *Adverse Decisions of Sovereign Governments*

PyroGenesis conducts an increasing portion of its business internationally. There is no assurance that any sovereign government, including Canada's, will not establish laws or regulations that will not be detrimental to the Company's interests or that, as a foreign corporation, it will continue to have access to the regulatory agencies in other countries. Governments have, from time to time, established foreign exchange controls, which could have a material adverse effect on the Company's business, financial condition and results of operations.

### *Risks Related to International Operations*

A substantial portion of the Company's sales are made to customers and end users outside Canada. The Company conducts its international operations directly or through distributors or other agents or intermediaries, including Drosrite International. The Company plans to continue to expand its international sales and marketing efforts. International operations are subject to a number of inherent risks, and the Company's future results could be adversely affected by a number of factors, including:

- unfavorable political or economic environments; requirements or preferences for domestic products or solutions, which could reduce demand for the Company's products;
- differing existing or future regulatory and certification requirements;
- unexpected legal or regulatory changes;
- greater difficulty in collecting accounts receivable and longer collection periods;
- difficulties in enforcing contracts; an inability to effectively protect intellectual property;
- tariffs and trade barriers, export regulations and other regulatory and contractual limitations on the Company's ability to sell its products; and
- potentially adverse tax consequences, including multiple and possibly overlapping tax structures.

Fluctuations in currency exchange rates could materially adversely affect sales denominated in currencies other than the Canadian dollar and cause a reduction in revenues derived from sales in a particular country. Financial instability in foreign markets could also affect the sale of the Company's products in international jurisdictions. In addition, the Company may be denied access to its end customers as a result of a closing of the borders of the countries in which it its products are sold due to economic, legislative, political and military conditions in such countries.

There can be no assurance that such factors will not materially adversely affect the operations, growth prospects and sales of the Company and, consequently, its results of operations. In addition, revenues the Company earns in other jurisdictions may be subject to taxation by more than one jurisdiction, which could materially adversely affect the Company's earnings. Each of these factors could have an adverse effect on the Company's business, financial condition and results of operations.

### *Governmental Regulation*

PyroGenesis is subject to a variety of federal, provincial, state, local and international laws and regulations relating namely to the environment, health and safety, export controls, currency exchange, labour and employment and taxation. These laws and regulations are complex, change frequently and have tended to become more stringent over time. Failure to comply with these laws and regulations may result in a variety of administrative, civil and criminal enforcement measures, including assessment of monetary penalties, imposition of remedial requirements and issuance of injunctions as to future

25 | Page

PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

compliance. The Company may be subject to compliance audits by regulatory authorities in the various countries in which it operates.

### Government-funded Defense and Security Programs

Like most companies that supply products and services to governments, government agencies routinely audit and investigate government contractors. These agencies may review the Company's performance under its contracts, business processes, cost structure, and compliance with applicable laws, regulations and standards. The Company's incurred costs for each year are subject to audit by government agencies, which can result in payment demands related to costs they believe should be disallowed. The Company works with governments to assess the merits of claims and where appropriate reserve for amounts disputed. The Company could be required to provide repayments to governments and may have a negative effect on its results of operations.

Contrary to cost-reimbursable contracts, some costs may not be reimbursed or allowed under fixed-price contracts, which may have a negative effect on the Company's results of operations if it experiences costs overruns.

### Environmental Liability

PyroGenesis is subject to various environmental laws and regulations enacted in the jurisdictions in which it operates, which govern the manufacturing, processing, importation, transportation, handling and disposal of certain materials used in the Company's operations. Management believes that it has adequate procedures in place to address compliance with current environmental laws and regulations. Furthermore, management monitors the Company's practices concerning the handling of environmentally hazardous materials. However, there can be no assurance that the

Company's procedures will prevent environmental damage occurring from spills of materials handled by the Company or that such damage has not already occurred. On occasion, substantial liabilities to third parties may be incurred. The Company may have the benefit of insurance maintained by it or the operator, however, the Company may become liable for damages against which it cannot adequately insure or against which it may elect not to insure because of high costs or other reasons. The Company's clients are subject to similar environmental laws and regulations, as well as limits on emissions to the air and discharges into surface and sub-surface waters. While regulatory developments that may follow in subsequent years could have the effect of reducing industry activity, the Company cannot predict the nature of the restrictions that may be imposed. The Company may be required to increase operating expenses or capital expenditures in order to comply with any new restrictions or regulations.

### Product Liability and Other Lawsuits

PyroGenesis is subject to a variety of potential product liabilities claims and other lawsuits related with its operations, including liabilities and expenses associated with product defects. The Company maintains product liability and other insurance coverage that management believes is generally in accordance with the market practice in its industry, but there can be no assurance that the Company will always be adequately insured against all such potential liabilities.

A malfunction or the inadequate design of the Company's products could result in product liability or other tort claims. Accidents involving the Company's products could lead to personal injury or physical damage. Any liability for damages resulting from malfunctions could be substantial and could materially adversely affect the Company's business and results of operations. In addition, a well-publicized actual or perceived problem could adversely affect the market's perception of the Company's products. This could result in a decline in demand for the Company's products, which would materially adversely affect the Company's financial condition and results of operations.

The sale and use of products and processes developed by the Company may entail potential liability and possible warranty claims. The Company may be subject to personal injury claims for injuries resulting from use of its products. Although the Company maintains product liability insurance, there can be no assurance that such insurance will continue to be available on commercially reasonable terms or that the risks covered, or coverage amounts will be sufficient to cover all claims.

### Information systems disruptions

The Company relies on various information technology systems to manage its operations. Over the last several years, the Company has implemented, and it continues to implement, modifications and upgrades to such systems, including changes to legacy systems, replacing legacy systems with successor systems with new functionality, and acquiring new systems

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26 | Page

PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

with new functionality. These types of activities subject the Company to inherent costs and risks associated with replacing and changing these systems, including impairment of the Company's ability to fulfill customer orders, potential disruption of its internal control structure, substantial capital expenditures, additional administration and operating expenses, retention of sufficiently skilled personnel to implement and operate the new systems, demands on management time and other risks and costs of delays or difficulties in transitioning to or integrating new systems into the Company's current systems. These implementations, modifications, and upgrades may not result in productivity improvements at a level that outweighs the costs of implementation, or at all. In addition, the difficulties with implementing new technology systems may cause disruptions in the Company's business operations and have a material adverse effect on its business, financial condition, or results of operations.

### Security Breaches

As part of its day-to-day business, the Company stores its data and certain data about its customers in its global information technology system. Unauthorized access to the Company's data, including any regarding its customers, could expose the Company to a risk of loss of this information, loss of business, litigation and possible liability. These security measures may be breached by intentional misconduct by computer hackers, as a result of third-party action, employee error, malfeasance or otherwise. Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other information in order to gain access to the data of the Company's customers or the Company's data, including the Company's intellectual property and other confidential business information, or the Company's information technology systems. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, the Company may be unable to anticipate these techniques or to implement adequate preventative measures. Any security breach could result in a loss of confidence by the Company's customers, damage its reputation, disrupt its business, lead to legal liability and negatively impact its future sales.

### Public Health Crises

Public health crises, including local, regional, national or international outbreak of a contagious disease, could have an adverse effect on local economies, the global economy, and the markets in which the Company operates and markets its products, and may adversely impact the price and demand for the Company's products and the ability of the Company to operate and market its products. Any such alterations or modifications could cause substantial interruption to the Company's business, any of which could have a material adverse effect on the Company's operations or financial results, and could include temporary closures of one or more of the Company's or its partner's offices or facilities; temporary or long-term labor shortages; temporary or long-term adverse impacts on the Company's supply chain and distribution channels; the potential of increased network vulnerability and risk of data loss resulting from increased use of remote access and removal of data from the Company's facilities.

Subsequent to December 31, 2019, the global emergence of coronavirus (COVID-19) occurred. The global outbreak of COVID-19 has resulted in governments worldwide enacting emergency measures to protect against the spread of the virus. These measures, which include, among other things, limitations on travel, self-imposed quarantine periods and social distancing measures, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of any government and/or central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company in future periods.

As of the date of this MD&A, the Company has successfully continued operations under COVID-19 protocols. COVID-19 has not resulted in any material delays in the development or testing of the Company's products or any other material development projects. The Company is not currently experiencing any delays or interruptions in service or product delivery. At the outset of the COVID-19 pandemic, certain of the Company's operations were negatively impacted, but have since normalized. The Company has not experienced any material disruption in its supply chain, and the pandemic has not materially impacted the Company's business or delivery of services or products.

The Company's production schedule has continued throughout COVID-19 on a modified employee schedule, with certain non-production employees working remotely. The Company has been able to operate largely unaffected by the COVID-19 pandemic. Notwithstanding the foregoing, if the Company or its vendors and suppliers are unable to continue operations or keep up with increasing demands as a result of COVID-19, customers may experience delays or interruptions in service or

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27 | Page

PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

the delivery of products, which may be detrimental to the Company's reputation, business, results of operations and financial position. The Company cautions that it is impossible to fully anticipate or quantify the effect and ultimate impact of the COVID-19 pandemic as the situation is rapidly evolving. The extent to which COVID-19 impacts the Company's results will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions taken by governments to contain it or treat its impact, including shelter in place directives, which, if extended, may impact the economies in which the Company now operates, or may in the future operate, key markets into which the Company sells products and delivers services, and markets through which the Company's key suppliers source their products.

### *Litigation*

The Company may from time to time become party to litigation in the ordinary course of business which could adversely affect its business. Should any litigation in which the Company becomes involved be determined against the Company, such a decision could adversely affect the Company's ability to continue operating and the market price for the Common Shares and could use significant resources. Even if the Company is involved in litigation and wins, litigation can redirect significant Company resources. Litigation may also create a negative perception of the Company's brand.

### *Trade Secrets May Be Difficult to Protect*

The Company's success depends upon the skills, knowledge and experience of its scientific and technical personnel, consultants and advisors, as well as contractors. Because the Company operates in a highly competitive industry, it relies in part on trade secrets to protect its proprietary products and processes. However, trade secrets are difficult to protect. The Company generally enters into confidentiality or non-disclosure agreements with its corporate partners, employees, consultants, outside scientific collaborators, developers and other advisors. These agreements generally, require that the receiving party keep confidential, and not disclose to third parties, confidential information developed by the receiving party or made known to the receiving party by the Company during the course of the receiving party's relationship with the Company. These agreements also generally provide that inventions conceived by the receiving party in the course of rendering services to the Company will be its exclusive property, and the Company enters into assignment agreements to perfect its rights.

These confidentiality, inventions, and assignment agreements, where in place, may be breached and may not effectively assign intellectual property rights to the Company. The Company's trade secrets could also be independently discovered by competitors, in which case the Company would not be able to prevent the use of such trade secrets by its competitors. The enforcement of a claim alleging that a party illegally obtained and was using the Company's trade secrets could be difficult, expensive and time consuming and the outcome could be unpredictable. The failure to obtain or maintain meaningful trade secret protection could adversely affect the Company's competitive position.

### *Risks Related to Acquiring Companies*

The Company may acquire other companies in the future and there are risks inherent in any such acquisition. Specifically, there could be unknown or undisclosed risks or liabilities of such companies for which the Company is not sufficiently indemnified. Any such unknown or undisclosed risks or liabilities could materially and adversely affect the Company's financial performance and results of operations. The Company could encounter additional transaction and integration-related costs or other factors such as the failure to realize all of the benefits from such acquisitions. All of these factors could cause dilution to the Company's earnings per share or decrease or delay the anticipated accretive effect of the acquisition and cause a decrease in the market price of the Company's securities. The Company may not be able to successfully integrate and combine the operations, personnel and technology infrastructure of any such acquired company with its existing operations. If integration is not managed successfully by the Company's management, the Company may experience interruptions in its business activities, deterioration of its employee and customer relationships, increased costs of integration and harm to its reputation, all of which could have a material adverse effect on the Company's business, financial condition and results of operations. The Company may experience difficulties in combining corporate cultures, maintaining employee morale and retaining key employees. The integration of any such acquired companies may also impose substantial demands on the management. There is no assurance that these acquisitions will be successfully integrated in a timely manner.

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28 | Page

PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

### Global Economic Uncertainty

Demand for the Company's products and services are influenced by general economic and consumer trends beyond the Company's control. There can be no assurance that the Company's business and corresponding financial performance will not be adversely affected by general economic or consumer trends. In particular, global economic conditions are still tight, and if such conditions continue, recur or worsen, there can be no assurance that they will not have a material adverse effect on the Company's business, financial condition and results of operations.

Furthermore, such economic conditions have produced downward pressure on stock prices and on the availability of credit for financial institutions and corporations. If these levels of market disruption and volatility continue, the Company might experience reductions in business activity, increased funding costs and funding pressures, as applicable, a decrease in the market price of the Common Shares, a decrease in asset values, additional write-downs and impairment charges and lower profitability.

### Inability to Renew Leases

The Company may be unable to renew or maintain its leases (commercial or real property) on commercially acceptable terms or at all. An inability to renew its leases, or a renewal of its leases with a rental rate higher than the prevailing rate under the applicable lease prior to expiration, may have an adverse impact on the Company's operations, including disruption of its operations or an increase in its cost of operations. In addition, in the event of non-renewal of any of the Company's leases, the Company may be unable to locate suitable replacement properties for its facilities or it may experience delays in relocation that could lead to a disruption in its operations. Any disruption in the Company's operations could have an adverse effect on its financial condition and results of operations.

### Financial Reporting and Other Public Issuer Requirements

As a public company, the Company is subject to the reporting requirements of the Canadian Securities Administrators, or the CSA, and the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations of the listing standards of the TSX and NASDAQ and the U.S. Sarbanes-Oxley Act. The requirements of these laws, rules and regulations have increased and will continue to increase the Company's legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and costly, and place significant strain on the Company's personnel, systems, and resources. The Company is continuing to develop and refine its disclosure controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it will file with the CSA is recorded, processed, summarized, and reported within the time periods specified in CSA rules and forms and that information required to be disclosed in reports under applicable securities laws is accumulated and communicated to the Company's principal executive and financial officers. The Company is also continuing to improve its internal control over financial reporting. In order to improve the effectiveness of its disclosure controls and procedures and internal control over financial reporting, the Company has expended, and anticipate that it will continue to expend, significant resources, including accounting-related costs and significant management oversight.

The Company has identified certain material weaknesses in its internal controls, as more fully explained in its management's discussion and analysis for the year ended December 31, 2022, under 'Disclosure Controls and Procedures'. Additional weaknesses in the Company's disclosure controls and internal control over financial reporting may also be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm the Company's results of operations or cause the Company to fail to meet its reporting obligations and may result in a restatement of the Company's consolidated financial statements for prior periods. Any failure to improve and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of the Company's internal control over financial reporting that the Company will eventually be required to include in its periodic reports that will be filed with the CSA. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in the Company's reported financial and other information, which could have a negative effect on the trading price of the Common Shares. In addition, if the Company is unable to continue to meet these requirements, it may not be able to remain listed on the TSX and/or NASDAQ.

### Influence of the Significant Shareholders

To the Company's knowledge, no shareholder beneficially owns, or controls or directs, directly or indirectly, more than 10% of the voting rights attached to the Company's outstanding voting securities, except for Mr. Photis Peter Pascali, President

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29 | Page

PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

and Chief Executive Officer of the Company, who holds or controls, directly or indirectly, 80,925,698 Common Shares, representing in aggregate 45.32% of the total voting rights attached to the outstanding Common Shares, and 2,500,000 share purchase warrants and options to acquire an additional 6,770,000 Common Shares (increasing the total number of Common Shares held or controlled, directly or indirectly, by him to 87,695,698 Common Shares, or 47.31% of the Common Shares, on a fully diluted basis). In addition, from time to time, the Company may have other shareholders who have the ability to exercise significant influence over matters submitted to the shareholders of the Company for approval, whether subject to approval by a majority of the shareholders of the Company or subject to a class vote or special resolution.

#### ***Limited Control Over the Company's Operations***

Holders of the Common Shares have limited control over changes in the Company's policies and operations, which increases the uncertainty and risks of an investment in the Company. The Board determines major policies, including policies regarding financing, growth, debt capitalization and any future dividends to shareholders of the Company. Generally, the Board may amend or revise these and other policies without a vote of the holders of the Common Shares. The Board's broad discretion in setting policies and the limited ability of holders of the Common Shares to exert control over those policies increases the uncertainty and risks of an investment in the Company.

#### ***Change in Tax Laws***

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to the Company. These enactments and events could require the Company to pay additional tax amounts on a prospective or retroactive basis, thereby substantially increasing the amount of taxes the Company is liable to pay in the relevant tax jurisdictions. Accordingly, these events could decrease the capital that the Company has available to operate its business. Any or all of these events could harm the business and financial performance of the Company.

#### ***Forward-Looking Information***

The forward-looking information included in this MD&A relating to, among other things, the Company's future results, performance, achievements, prospects, targets, intentions or opportunities or the markets in which it operates and the other statements listed are based on opinions, assumptions and estimates made by the Company's management in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. The Company's actual results in the future may vary significantly from the historical and estimated results and those variations may be material. The Company makes no representation that its actual results in the future will be the same, in whole or in part, as those included in this MD&A.

#### ***Credit Facilities***

The Company's credit facilities and financing agreements mature on various dates. There can be no assurance that such credit facilities or financing agreements will be renewed or refinanced, or if renewed or refinanced, that the renewal or refinancing will occur on equally favourable terms to the Company. The Company's ability to continue operating may be adversely affected if the Company is not able to renew its credit facilities or arrange refinancing, or if such renewal or refinancing, as the case may be, occurs on terms materially less favorable to the Company than at present. The Company's current credit facilities and financing agreements have no imposed financial covenants and obligations on the Company. In the event of the contrary, there is a risk that such loans may go into default if there is a breach in complying with such covenants and obligations, which could result in the lenders realizing on their security and causing our shareholders to lose some or all of their investment.

#### ***Risks Related to the Company's Securities***

#### ***Potential Volatility of Common Share Price***

The market price of the Common Shares could be subject to significant fluctuations. Some of the factors that may cause the market price of the Common Shares to fluctuate include:

(i) the public's reaction to the Company's press releases, announcements and filings with regulatory authorities and those of its competitors;

---

30 | Page

PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

- (ii) fluctuations in broader stock market prices and volumes;
- (iii) changes in market valuations of similar companies;
- (iv) investor perception of the Company, its prospects or the industry in general;
- (v) additions or departures of key personnel;
- (vi) commencement of or involvement in litigation;
- (vii) announcements by the Company or its competitors of strategic alliances, significant contracts, new technologies, acquisitions, commercial relationships, joint ventures or capital commitments;
- (viii) variations in the Company's quarterly results of operations or cash flows or those of other comparable companies;
- (ix) revenues and operating results failing to meet the expectations of securities analysts or investors in particular quarter;
- (x) changes in the Company's pricing policies or the pricing policies of its competitors;
- (xi) future issuances and sales of Common Shares;
- (xii) sales of Common Shares by insiders of the Company;
- (xiii) third party disclosure of significant short positions;
- (xiv) demand for and trading volume of Common Shares;
- (xv) changes in securities analysts' recommendations and their estimates of the Company's financial performance;
- (xvi) short-term fluctuation in stock price caused by changes in general conditions in the domestic and worldwide economies or financial markets; and
- (xvii) the other risk factors described under this heading of the MD&A.

The realization of any of these risks and other factors beyond the Company's control could cause the market price of the Common Shares to decline significantly.

In addition, broad market and industry factors may harm the market price of the Common Shares. Hence, the price of the Common Shares could fluctuate based upon factors that have little or nothing to do with the Company, and these fluctuations could materially reduce the price of the Common Shares regardless of the Company's operating performance. In the past, following a significant decline in the market price of a company's securities, there have been instances of securities class action litigation having been instituted against that company. If the Company were involved in any similar litigation, it could incur substantial costs, management's attention and resources could be diverted and it could harm the Company's business, operating results and financial condition.

### Market Liquidity

The market price for the Common Shares could be subject to wide fluctuations. Factors such as the announcement of significant contracts, technological innovations, new commercial products, patents, a change in regulations, quarterly financial results, future sales of Common Shares by the Company or current shareholders, and many other factors could have considerable repercussions on the price of the Common Shares. In addition, the financial markets may experience significant price and value fluctuations that affect the market prices of equity securities of companies that sometimes are unrelated to the operating performance of these companies. Broad market fluctuations, as well as economic conditions generally may adversely affect the market price of the Common Shares.

---

31 || Page

PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

### *Dividends to Shareholders*

The Company does not anticipate paying cash dividends on the Common Shares in the foreseeable future. The Company currently intends to retain all future earnings to fund the development and growth of its business. Any payment of future dividends will be at the discretion of the directors and will depend on, among other things, the Company's earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends, and other considerations that the directors deems relevant.

### *Impact of Future Sales by Existing Shareholders*

If the Company's shareholders sell substantial amounts of the Common Shares in the public market, the market price of the Common Shares could decrease. The perception among investors that these sales will occur could also produce this effect. All currently outstanding Common Shares other than those subject to lock-up agreements executed by certain existing shareholders will, subject to applicable securities laws, generally be immediately available for resale in the public markets.

Subject to compliance with applicable securities laws, the Company's officers, directors and their affiliates may sell some or all of their Common Shares in the future. No prediction can be made as to the effect, if any, such future sales of Common Shares will have on the market price of the Common Shares prevailing from time to time. However, the future sale of a substantial number of Common Shares by the Company's officers, directors and their affiliates, or the perception that such sales could occur, could materially adversely affect prevailing market prices for the Common Shares.

Additional Common Shares issuable upon the exercise of stock options may also be available for sale in the public market, which may also cause the market price of the Common Shares to fall. Accordingly, if substantial amounts of Common Shares are sold in the public market, the market price could fall.

### *Working Capital and Future Issuances*

The Company may issue additional Common Shares in the future which may dilute a shareholder's holdings in the Company. The Articles permit the issuance of an unlimited number of Common Shares, and shareholders of the Company will have no pre-emptive rights in connection with any further issuances. The directors of the Company have the discretion to determine the provisions attaching to the Common Shares and the price and the terms of issue of further Common Shares.

Additional equity financing may be dilutive to holders of Common Shares. Debt financing may involve restrictions on the Company's financing and operating activities. Debt financing may be convertible into other securities of the Company which may result in immediate or resulting dilution. In either case, additional financing may not be available to the Company on acceptable terms or at all. If the Company is unable to raise additional funds as needed, the scope of its operations or growth may be reduced and, as a result, the Company may be unable to fulfill its long-term goals. In this case, investors may lose all or part of their investment. Any default under such debt instruments could have a material adverse effect on the Company, its business or the results of operations.

### *Securities or Industry Analysts*

The trading market for Common Shares could be influenced by the research and reports that industry and/or securities analysts may publish about the Company, its business, the market or competitors. If any of the analysts who may cover the Company's business change their recommendation regarding the Common Shares adversely, or provide more favourable relative recommendations about its competitors, the share price would likely decline. If any analyst who may cover the Company's business were to cease coverage or fail to regularly publish reports on the Company, it could lose visibility in the financial markets, which in turn could cause the share price or trading volume to decline.

### *Risks Related to the Company's Status as a Foreign Private Issuer*

#### *Information Publicly Available to the Company's U.S. shareholders*

The Company is a foreign private issuer under applicable U.S. federal securities laws. As a result, the Company does not file the same reports that a U.S. domestic issuer would file with the U.S. Securities and Exchange Commission (the 'SEC'), although the Company is required to file with or furnish to the SEC the continuous disclosure documents that the Company

---

32 | Page

PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

is required to file in Canada under Canadian Securities Laws, in certain respects the reporting obligations are less detailed and less frequent than those of U.S. domestic reporting companies. In addition, the Company's officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the U.S. Exchange Act. Therefore, the Company's shareholders may not know on as timely a basis when the Company's officers, directors and principal shareholders purchase or sell Common Shares as the reporting periods under the corresponding Canadian insider reporting requirements are longer.

As a foreign private issuer, the Company is exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements. The Company is also exempt from Regulation FD, which prohibits issuers from making selective disclosures of material non-public information. While the Company complies with the corresponding requirements relating to proxy statements and disclosure of material non-public information under Canadian securities laws, these requirements differ from those under the Exchange Act and Regulation FD and shareholders should not expect to receive the same information at the same time as such information is provided by U.S. domestic companies. In addition, the Company may not be required under the Exchange Act to file annual and quarterly reports with the SEC as promptly as U.S. domestic companies whose securities are registered under the Exchange Act.

In addition, as a foreign private issuer, the Company has the option to follow certain Canadian corporate governance practices, except to the extent that such laws would be contrary to U.S. securities laws, and provided that the Company discloses the requirements it is not following and describe the Canadian practices it follows instead. The Company plans to rely on this exemption. As a result, the Company's shareholders may not have the same protections afforded to shareholders of U.S. domestic companies that are subject to all U.S. corporate governance requirements.

### Loss of Foreign Private Issuer Status in the Future

In order to maintain its status as a foreign private issuer, a majority of the Company's Common Shares must be either directly or indirectly owned by non-residents of the U.S. unless the Company also satisfies one of the additional requirements necessary to preserve this status. The Company may in the future lose its foreign private issuer status if a majority of the Common Shares are held in the United States and the Company fails to meet the additional requirements necessary to avoid loss of foreign private issuer status. The regulatory and compliance costs to the Company under U.S. federal securities laws as a U.S. domestic issuer may be significantly more than the costs the Company incurs as a Canadian foreign private issuer eligible to use the multi-jurisdictional disclosure system ('MJDS'). If the Company is not a foreign private issuer, it would not be eligible to use the MJDS or other foreign issuer forms and would be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. In addition, the Company may lose the ability to rely upon exemptions from NASDAQ corporate governance requirements that are available to foreign private issuers.

### Inability for U.S. Investors to Enforce Certain Judgments

The Company is a corporation existing under the Canada Business Corporations Act. A number of the Company's directors and officers are residents of Canada, and substantially all of the Company's assets are located outside the United States. As a result, it may be difficult to effect service within the United States upon the Company or upon its directors and officers. Execution by United States courts of any judgment obtained against the Company or any of the Company's directors or officers in United States courts may be limited to the assets of such companies or such persons, as the case may be, located in the United States. It may also be difficult for holders of securities who reside in the United States to realize in the United States upon judgments of courts of the United States predicated upon civil liability and the civil liability of the Company's directors and executive officers under the United States federal securities laws. The Company has been advised that a judgment of a U.S. court predicated solely upon civil liability under U.S. federal securities laws or the securities or 'blue sky' laws of any state within the United States, would likely be enforceable in Canada if the United States court in which the judgment was obtained has a basis for jurisdiction in the matter that would be recognized by a Canadian court for the same purposes. However, there may be doubt as to the enforceability in Canada against these non-U.S. entities or their controlling persons, directors and officers who are not residents of the United States, in original actions or in actions for enforcement of judgments of courts of the United States, of liabilities predicated solely upon U.S. federal or state securities laws.

### Risks Relating to the Company's Status as an 'Emerging Growth Company' Under U.S. Securities Laws

The Company is an 'emerging growth company' as defined in section 3(a) of the Exchange Act (as amended by the JOBS Act, enacted on April 5, 2012), and the Company will continue to qualify as an emerging growth company until the earliest

---

33 | Page

PyroGenesis Canada Inc.
Management's Discussion and Analysis
For the years ended December 31, 2022, and 2021

to occur of: (a) the last day of the fiscal year during which the Company has total annual gross revenues of US$1,070,000,000 (as such amount is indexed for inflation every five years by the SEC) or more; (b) the last day of the fiscal year of the Company following the fifth anniversary of the date of the first sale of common equity securities of the Company pursuant to an effective registration statement under the United States Securities Act of 1933, as amended; (c) the date on which the Company has, during the previous three year period, issued more than US$1,000,000,000 in non-convertible debt; and (d) the date on which the Company is deemed to be a "large accelerated filer", as defined in Rule 12b-2 under the Exchange Act. The Company will qualify as a large, accelerated filer (and would cease to be an emerging growth company) at such time when on the last business day of its second fiscal quarter of such year the aggregate worldwide market value of its common equity held by non-affiliates will be US$700,000,000 or more.

For so long as the Company remains an emerging growth company, it is permitted to and intends to rely upon exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the JOBS Act. The Company takes advantage of some, but not all, of the available exemptions available to emerging growth companies. The Company cannot predict whether investors will find the Common Shares less attractive because the Company relies upon certain of these exemptions. If some investors find the Common Shares less attractive as a result, there may be a less active trading market for the Common Shares and the Common Share price may be more volatile. On the other hand, if the Company no longer qualifies as an emerging growth company, the Company would be required to divert additional management time and attention from the Company's development and other business activities and incur increased legal and financial costs to comply with the additional associated reporting requirements, which could negatively impact the Company's business, financial condition and results of operations.

## OUTLOOK

In 2022, PyroGenesis remained focused on driving its major lines of business toward widespread acceptance, moving its newer innovations closer to commercialization, finding efficiencies, and maintaining margin - all while providing the type of superior service and solutions that have endeared the Company to large global public, private, and government partners.

The information below represents important highlights from the past year, followed by an outline of the company's strategy and outlook for 2023.

### Key Strategic Actions

#### Major Deliverables

- **Titanium Powder Commercial Orders:** During 2022, the Company announced it had received and completed its first two commercial orders for Titanium powders using its NexGenTM plasma atomization process. The first, for 100 kg, was under its mutually exclusive partnership agreement with Aubert & Duval, a major supplier of metal powders for additive manufacturing serving the Aerospace, Energy, Transport, Medical, Defense, and Automotive sectors; the second, also for 100 kg, was to a confidential customer.
- **Iron Ore Pelletization Torches:** During 2022, the Company continued to progress its major initiative to supply electric plasma torch systems to large iron ore companies for first-ever trials in this important upstream part of the steelmaking process. In July 2022, the first plasma system plus required components was completed and delivered to a client. Subsequent to year-end 2022, in January 2023, four electric plasma torch systems plus required components were delivered to a second client. These clients are two of the largest iron ore companies in the world and each has made a significant financial and logistical commitment over the past two years to test plasma as a possible replacement for the diesel and/or natural gas furnace burners needed for iron ore pellet baking. Live onsite trials and testing will be conducted per client-defined scheduling, based on the Client's own resourcing and logistical decisions of which the Company has no input.
- **Metal Powder Aerospace Client Qualification:** In September 2022, the Company announced it had completed the in-house quality audit of its NexGenTM metal powder production facility and process, which it also later passed subsequent to year-end 2022, by a large global aerospace client. The in-house audit was part of an almost two year long process of qualification by the client, towards an end-goal of being a certified supplier of titanium metal powders to the client, its suppliers, and service centers. With the audit completed, the last step is a testing of the Company's powders, which will be conducted per client-defined scheduling.

34 | Page

PyroGenesis Canada Inc.
Management's Discussion and Analysis
For the years ended December 31, 2022, and 2021

# Innovations

- **Aluminum Scrap Remelting:** in May 2022, the Company announced it had undertaken a joint evaluation with a major manufacturer to test PyroGenesis' zero-emission plasma torches in the Client's aluminum scrap remelting and holding furnaces. This was one of several secondary or tertiary aluminum producers who are investigating the Company's electric plasma torches to replace fossil fuels in recycled aluminum production, holding tank heating, or cast houses.
- **Carbon-anode baking:** The Company announced in June 2022 it had undertaken a joint initiative with a premier applied engineering and process optimization firm in the global aluminum industry, focused on utilizing PyroGenesis' zero-emission plasma torches in carbon anode baking - a vital upstream step in the aluminum production process. Carbon anodes, which are used as an electrical conductor during the aluminum smelting process but constantly consumed, are traditionally produced using natural gas baking; reducing fossil fuel use while optimizing the anode baking process is an objective in the industry for manufacturers of high-grade anodes.
- **Spent-pot linings:** The Company continues to progress the previously announced initiative to develop a solution to recover residues of aluminum pot linings, in conjunction with project partner Aluminerie Alouette (co-owned by Rio Tinto and Norsk Hydro), the largest primary aluminum smelter in the Americas. The solution under development is intended to safely recover valuable metals and various compounds from the heavily contaminated carbon-lined cells or "pots" from inside a smelter, which degrade over time and must be removed and safely disposed. The project evolved throughout 2022, with additional technology benchmarks being met, and with the Company and Aluminerie Alouette deepening their relationship with a further commitment.
- **Magnesium Recovery and Valourization:** in September 2022, the Company announced it was selected by an international producer of magnesium metal to develop two processes: a method to clean and decontaminate particulate matter produced during primary magnesium production, and to process the metal waste stream known as dross, for the purpose of recovering valuable metal. Dross recovery is not widespread in the magnesium industry, due to the complexity of the process and the inherent challenges of working with magnesium - a very combustible and volatile metal that is highly reactive to oxygen. With PyroGenesis' expertise in recovering high-value metal from dross in other industries (such as aluminum), the Company believes it has the solution to the specific challenges posed by magnesium, potentially opening a large opportunity for growth, while decreasing the Client's environmental impact.
- **Turquoise Hydrogen Production:** The Company continues to progress the previously announced initiative to produce an environmentally friendly hydrogen. In November 2022, the Company successfully produced hydrogen from methane using this ZCE hydrogen production technology which, because it uses electricity in the form of plasma, rather than combustion of fossil fuels, is typically referred to as "Turquoise Hydrogen". A solid carbon byproduct that has many industrial applications (including the production of car tires, coatings, plastics, and batteries), and is considered an essential raw material, is also produced through the process.

# Operational

- **European Metal Powders Production:** Throughout 2022, the Company continued to evolve its strategy, first announced in July 2022, for European market expansion for its titanium metal powder line of business. With the goal to eventually build and operate a metal powder production facility in Europe. Subsequent to year-end 2022, in Q1 2023 the Company announced expansion of its strategy team, with the hiring of a key Europe-based executive with a long track-record across sales, marketing, and business process in the metals industry, particularly the aerospace, space, and defense markets.
- **Quality Management Process Certification:** In November 2022, the Company passed its annual quality audit for two key international standards: ISO 9001:2015, and AS9100D, the latter being a quality management designation specific to the aerospace industry. The audits encompassed all of PyroGenesis' facilities for the purpose of meeting compliance with the existing quality management designations. Additionally, as a result of this audit, the Company's newest facility located at 9371 Wanklyn St. in LaSalle, Quebec, was officially added to the ISO 9001:2015 certification. Separately, the Company continues its path to become ISO 13485:2016 certified, a Quality Management System designation required by most manufacturers within the medical devices and related services industry.

# Financial

35 | Page

PyroGenesis Canada Inc.
Management's Discussion and Analysis
For the years ended December 31, 2022, and 2021

- **Private Placement:** In October 2022, the Company announced the completion of a non-brokered private placement consisting of the issuance and sale of 1,014,600 units of the Corporation at a price of $1.30 per Unit, for gross proceeds of $1,318,980 to the Company. The closing price of the common shares of the Company on October 18, 2022, the last trading day prior to the closing of the Private Placement, was $1.17. Each Unit consists of one common share of the Company and one Common Share purchase warrant. Each Warrant entitles the holder thereof to purchase one Common Share at a price of $1.75 until October 19, 2024. The Common Shares and Warrants issued in connection with the Private Placement, and the Common Shares underlying the Warrants, are subject to a statutory hold period of four months and one day from the date of closing, in accordance with applicable securities legislation.

# Outlook

Consistent with the Company's past practice, and in view of the early stage of market adoption of our core lines of business, we are not providing specific revenue or net income (loss) guidance for 2023. In 2023, we continue our plan to increase sales, marketing, and R&D efforts in-line - and in some cases ahead of - the growth curve for industrial change related to greenhouse gas reduction efforts. This includes expanded technology offering and capabilities across the industrial value chain, using an updated strategy that sees the Company bundle its solution-set into verticals that represent key economic drivers for heavy industry.

# Overall Strategy

PyroGenesis' provides technology solutions to heavy industry that leverage off the Company's proprietary position and expertise in ultra-high temperature processes. The Company has evolved from its early roots of being a specialty-engineering firm to being a provider of a robust technology eco-system for heavy industry that helps address key strategic goals.

# Aligning Business Lines to Economic Drivers

As interest in the Company's products has increased, and the variety of uses for its core technologies has expanded, the Company has evolved its strategy to concentrate its solution set under three categories. These categories represent economic drivers that are key to global heavy industry:

1. **Energy Transition & Emission Reduction:**
   - fuel switching, utilizing the Company's electric-powered plasma torches and biogas upgrading technology to help heavy industry reduce fossil fuel use and greenhouse gas emissions.
2. **Commodity Security & Optimization:**
   - recovery of viable metals, and optimization of production to increase output, to maximize raw materials and improve availability of critical minerals.
3. **Waste Remediation:**
   - safe destruction of hazardous materials, and the recovery and valorization of underlying substances such as chemicals and minerals.

36 | Page

PyroGenesis Canada Inc.  
Management's Discussion and Analysis  
For the years ended December 31, 2022, and 2021---

Within each category the Company offers several solutions at different stages leading up to commercialization, including the partial list in the diagram below:

pyrex99d2p37i0

The Company's believes its strategy to be timely, as multiple heavy industries are committing to major carbon and waste reduction targets at the same time as many governments are increasingly funding environmental technologies and infrastructure projects - all while both are making efforts to ensure the availability of critical minerals during the coming decades of increased output demand.

While there can be no guarantee, the Company believes this evolution of its strategy beyond a greenhouse gas emission reduction emphasis, to an expanded focus that encapsulates the key verticals listed above, both improves the Company's chances for success while also providing a clearer picture of how the Company's wide array of offerings work in tandem to support heavy industry goals.

PyroGenesis' market opportunity remains large, as major industries such as aluminum, steelmaking, manufacturing, and government require factory-ready, technology-based solutions to help steer through the paradoxical landscape of increasing demand and tightening regulations and material availability.

As more of the Company's offerings reach full commercialization, PyroGenesis will remain focused on attracting influential customers in broad markets and ensuring that operating expenses are controlled to achieve profitable growth.

#### **FURTHER INFORMATION**

Additional information relating to Company and its business, including the 2022 consolidated financial statements, the Annual Information Form and other filings that the Company has made and may make in the future with applicable securities authorities, may be found on or through SEDAR at www.sedar.com, EDGAR at www.sec.gov or the Company's website at www.pyrogenesis.com.

Additional information, including directors' and officers' remuneration and indebtedness, principal holders of the Company's securities and securities authorized for issuance under equity compensation plans, is also contained in the Company's most recent management information circular for the most recent annual meeting of shareholders of the Company.

---

37 | Page

## Exhibit 99.3

Exhibit 99.3

# **PyroGenesis Canada Inc.**

# **Consolidated Financial Statements  
December 31, 2022 and 2021**

1---

# **PyroGenesis Canada Inc.**

# **Consolidated Financial Statements**
**December 31, 2022 and 2021**

| Management's responsibility | 3 |
| --- | --- |
| Report of Independent Registered Public Accounting Firm - Current Firm (PCAOB ID Number 1232) | 4 |
| Financial Statements |  |
| Consolidated Statements of Financial Position | 5 |
| Consolidated Statements of Comprehensive Loss | 6 |
| Consolidated Statements of Changes in Shareholders' Equity | 7 |
| Consolidated Statements of Cash Flows | 8 - 9 |
| Notes to Consolidated Financial Statements | 10 - 51 |

2

## Management's Responsibility

Management is responsible for the preparation and presentation of the accompanying consolidated financial statements, including responsibility for significant accounting judgments and estimates in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. This responsibility includes selecting appropriate accounting principles and methods, and making decisions affecting the measurement of transactions in which objective judgment is required.

The Board of Directors and Audit Committee are composed primarily of Directors who are neither management nor employees of the Company. The Board of Directors is responsible for overseeing management in the performance of its financial reporting responsibilities, and for approving the financial information included in the annual report. The Board fulfills these responsibilities by reviewing the financial information prepared by management and discussing relevant matters with management and the external auditor. The Audit Committee has the responsibility of meeting with management and the external auditors to discuss the internal controls over the financial reporting process, auditing matters and financial reporting issues. The Audit Committee is also responsible for recommending the appointment of the Company's external auditor.

Raymond Chabot Grant Thornton LLP, an Independent Registered Public Accounting Firm, is appointed by the shareholders to audit the consolidated financial statements and report directly to them; their report follows. The external auditor has full and free access to, and meets periodically and separately with, both the Audit Committee and management to discuss their audit findings.

March 30, 2023

[Signed by P. Peter Pascali]

P. Peter Pascali, Chief Executive Officer

[Signed by Andre Mainella]

Andre Mainella, Chief Financial Officer

3---

pyrex99d3p4i0

Grant Thornton LLP**

Suite 2000

National Bank Tower  
600 De La Gauchetière Street West  
Montréal, Quebec  
H3B 4L8  
T 514-878-2691

## Report of Independent Registered Public Accounting Firm

To the Shareholders and Directors of PyroGenesis Canada Inc.

### Opinion on the consolidated financial statements

We have audited the accompanying consolidated statements of financial position of PyroGenesis Canada Inc. (the 'Company') as of December 31, 2022 and 2021, the related consolidated statements of comprehensive loss, changes in shareholders' equity and cash flows for the years then ended, and the related notes (collectively referred to as the 'consolidated financial statements'). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

### Going concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred operating losses and negative cash flows from operations and, as a result, has an accumulated deficit as of December 31, 2022. These conditions, along with other matters as set forth in Note 2, indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue operating as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

### Basis for opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ('PCAOB') and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company's auditor since 2021.

pyrex99d3p4i1

Montréal, Canada March 30, 2023

4---

# **PyroGenesis Canada Inc.**  
 **Consolidated Statements of Financial Position**  
 December 31, 2022 and 2021  
 (In Canadian dollars)

|  | December 31, 2022 $ | December 31, 2021 $ |
| --- | --- | --- |
| Assets |  |  |
| Current assets |  |  |
| Cash and cash equivalents [note 8] | 3,445,649 | 12,202,513 |
| Accounts receivable [note 9] | 18,624,631 | 17,639,616 |
| Costs and profits in excess of billings on uncompleted contracts [note 10] | 1,051,297 | 4,922,710 |
| Inventory [note 24] | 1,876,411 | 887,590 |
| Investment tax credits receivable [note 11] | 276,404 | 256,513 |
| Income taxes receivable | 14,169 | 117,029 |
| Current portion of deposits [note 14] | 432,550 | 1,328,452 |
| Current portion of royalties receivable [note 13] | 455,556 | 311,111 |
| Contract assets | 499,912 | 375,789 |
| Prepaid expenses | 771,603 | 717,661 |
| Total current assets | 27,448,182 | 38,758,984 |
| Non-current assets |  |  |
| Deposits [note 14] | 46,053 | 248,756 |
| Strategic investments [note 12] | 6,242,634 | 14,901,659 |
| Property and equipment [note 15] | 3,393,452 | 3,712,937 |
| Right-of-use assets [note 16] | 4,818,744 | 5,765,993 |
| Royalties receivable [note 13] | 952,230 | 947,543 |
| Intangible assets [note 17] | 2,104,848 | 2,774,198 |
| Goodwill [note 18] | 2,660,607 | 2,660,607 |
| Total assets | 47,666,750 | 69,770,677 |
| Liabilities |  |  |
| Current liabilities |  |  |
| Bank indebtedness [note 28] | 991,902 | - |
| Accounts payable and accrued liabilities [note 19] | 10,115,870 | 10,069,177 |
| Billings in excess of costs and profits on uncompleted contracts [note 20] | 9,670,993 | 9,400,231 |
| Current portion of term loans [note 21] | 69,917 | 83,004 |
| Current portion of lease liabilities [note 16] | 2,672,212 | 2,934,236 |
| Balance due on business combination [note 6] | 2,088,977 | 2,242,503 |
| Income taxes payable | 187,602 | 23,048 |
| Total current liabilities | 25,797,473 | 24,752,199 |
| Non-current liabilities |  |  |
| Lease liabilities [note 16] | 2,861,482 | 2,389,729 |
| Term loans [note 21] | 320,070 | 107,901 |
| Balance due on business combination [note 6] | 1,818,798 | 1,709,700 |
| Deferred income taxes [note 31] | - | 42,394 |
| Total liabilities | 30,797,823 | 29,001,923 |
| Shareholders' equity [note 22] |  |  |
| Common shares | 85,483,223 | 82,104,086 |
| Warrants | 223,200 | - |
| Contributed surplus | 24,546,960 | 19,879,055 |
| Accumulated other comprehensive income | 402 | 3,444 |
| Deficit | (93,384,858) | (61,217,831) |
| Total shareholders' equity | 16,868,927 | 40,768,754 |
| Total liabilities and shareholders' equity | 47,666,750 | 69,770,677 |

Contingent liabilities, subsequent events [notes 29 and 33].

The accompanying notes form an integral part of the consolidated financial statements.

Approved on behalf of the Board:

[Signed by P. Peter Pascali] P. Peter Pascali

[Signed by Andrew Abdalla] Andrew Abdalla

5

# **PyroGenesis Canada Inc.**  
 **Consolidated Statements of Comprehensive Loss**  
 For the years ended December 31, 2022 and 2021  
 (In Canadian dollars)

|  | 2022 $ | 2021 $ |
| --- | --- | --- |
| Revenues [note 7] | 19,013,503 | 31,068,350 |
| Cost of sales and services [note 24] | 10,869,616 | 18,636,539 |
| Gross profit | 8,143,887 | 12,431,811 |
| Expenses |  |  |
| Selling, general and administrative [note 24] | 29,025,434 | 27,237,135 |
| Research and development, net [note 11] | 2,317,973 | 2,535,987 |
|  | 31,343,407 | 29,773,122 |
| Net loss from operations | (23,199,520) | (17,341,311) |
| Changes in fair value of strategic investments [note 12] | (8,340,781) | (21,426,218) |
| Finance costs, net [note 25] | (550,742) | (404,370) |
| Loss before income taxes | (32,091,043) | (39,171,899) |
| Income taxes [note 31] | 75,984 | (739,960) |
| Net loss | (32,167,027) | (38,431,939) |
| Other comprehensive income (loss) |  |  |
| Items that will be reclassified subsequently to profit or loss |  |  |
| Foreign currency translation gain (loss) on investments in foreign operations | (3,042) | 3,444 |
| Comprehensive loss | (32,170,069) | (38,428,495) |
| Loss per share [note 26] |  |  |
| Basic | (0.19) | (0.23) |
| Diluted | (0.19) | (0.23) |

The accompanying notes form an integral part of the consolidated financial statements.

6

# **PyroGenesis Canada Inc.**  
 **Consolidated Statements of Changes in Shareholders' Equity**  
 For the years ended December 31, 2022 and 2021  
 (In Canadian dollars)

|  | Number of common shares | Common shares | Warrants | Contributed Surplus | Accumulated other comprehensive income | Deficit | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | $ | $ | $ | $ | $ | $ |
| Balance - December 31, 2021 | 170,125,795 | 82,104,086 | - | 19,879,055 | 3,444 | (61,217,831) | 40,768,754 |
| Shares issued upon exercise of stock options [note 22] | 2,440,000 | 2,283,357 | - | (870,558) | - | - | 1,412,799 |
| Private placement [note 22] | 1,014,600 | 1,095,780 | 223,200 | - | - | - | 1,318,980 |
| Share-based payments | - | - | - | 5,538,463 | - | - | 5,538,463 |
| Other comprehensive loss for the year | - | - | - | - | (3,042) | - | (3,042) |
| Net loss | - | - | - | - | - | (32,167,027) | (32,167,027) |
| Balance - December 31, 2022 | 173,580,395 | 85,483,223 | 223,200 | 24,546,960 | 402 | (93,384,858) | 16,868,927 |
| Balance - December 31, 2020 | 159,145,992 | 67,950,069 | - | 10,480,310 | - | (19,007,273) | 59,423,106 |
| Shares issued upon exercise of stock options [note 22] | 3,482,000 | 1,473,818 | - | (364,000) | - | - | 1,109,818 |
| Shares issued upon exercise of purchase warrants and compensation options [note 22] | 8,337,897 | 13,085,197 | - | - | - | - | 13,085,197 |
| Share redemptions for cancellation [note 22] | (840,094) | (404,998) | - | - | - | (3,778,619) | (4,183,617) |
| Share-based payments | - | - | - | 9,762,745 | - | - | 9,762,745 |
| Other comprehensive income for the year | - | - | - | - | 3,444 | - | 3,444 |
| Net loss | - | - | - | - | - | (38,431,939) | (38,431,939) |
| Balance - December 31, 2021 | 170,125,795 | 82,104,086 | - | 19,879,055 | 3,444 | (61,217,831) | 40,768,754 |

The accompanying notes form an integral part of the consolidated financial statements.

7

# **PyroGenesis Canada Inc.**  
 **Consolidated Statements of Cash Flows**  
 For the years ended December 31, 2022 and 2021  
 (In Canadian dollars)

|  | 2022 $ | 2021 $ |
| --- | --- | --- |
| Cash flows provided by (used in) |  |  |
| Operating activities |  |  |
| Net loss | (32,167,027) | (38,431,939) |
| Adjustments for: |  |  |
| Share-based payments | 5,538,463 | 9,762,745 |
| Depreciation of property and equipment | 603,894 | 356,103 |
| Depreciation of right-of-use assets | 635,828 | 570,411 |
| Amortization and write-off of intangible assets | 878,030 | 465,913 |
| Amortization of contract assets | 243,626 | 513,572 |
| Net finance costs | 550,742 | 404,370 |
| Change in fair value of investments | 8,340,781 | 21,426,218 |
| Deferred income taxes | (42,394) | (584,246) |
| Unrealized foreign exchange | (102,236) | (10,623) |
|  | (15,520,293) | (5,527,476) |
| Net change to working capital items [note 23] | 4,391,408 | (12,585,956) |
|  | (11,128,885) | (18,113,432) |
| Investing activities |  |  |
| Additions to property and equipment | (396,051) | (1,502,231) |
| Additions to intangible assets | (290,373) | (246,630) |
| Purchase of strategic investments | (3,604,000) | (10,588,857) |
| Disposal of strategic investments | 3,922,244 | 14,252,730 |
| Business combination, net of cash acquired | - | 807,945 |
|  | (368,180) | 2,722,957 |
| Financing activities |  |  |
| Increase in bank indebtedness | 991,902 | - |
| Interest paid | (467,453) | (253,791) |
| Repayment of term loans | (33,003) | (20,507) |
| Repayment of lease liabilities | (657,381) | (263,078) |
| Repayment of balance due on business combination | (217,778) | - |
| Proceeds from issuance of term loans | 292,941 | - |
| Proceeds from issuance of shares upon exercise of warrants | - | 13,085,197 |
| Proceeds from issuance of shares upon exercise of stock options | 1,412,799 | 1,109,818 |
| Proceeds from private placement [note 22] | 1,318,980 | - |
| Shares repurchased for cancellation | - | (4,183,617) |
|  | 2,641,007 | 9,474,022 |
| Effect of exchange rate changes on cash denominated in foreign currencies | 99,194 | 14,067 |
| Net decrease in cash and cash equivalents | (8,756,864) | (5,902,386) |
| Cash and cash equivalents - beginning of year | 12,202,513 | 18,104,899 |
| Cash and cash equivalents - end of year | 3,445,649 | 12,202,513 |

8

# **Supplemental cash flow disclosure**

# **Non-cash transactions:**

|  | 2022 $ | 2021 $ |
| --- | --- | --- |
| Purchase of intangible assets included in accounts payable | - | 81,693 |
| Purchase of property and equipment included in accounts payable | - | 22,557 |
| Addition to contract assets included in accounts payable | - | 195,060 |
| Settlement of accounts receivable on business acquisition | - | 1,744,400 |
| Accretion interest on balance due on business combination | 173,350 | 110,204 |
| Accretion interest on royalties receivable | 118,290 | 132,809 |
| Accretion on term loan | 28,236 | 12,185 |
| Fair value of HPQ warrants exercised | - | 9,181,250 |
| Initial recognition or modification of lease liabilities and right-of-use assets [note 16]: |  |  |
| Right-of-use assets | (311,421) | 2,157,796 |
| Prepaid rent expense | - | (36,903) |
| Lease liabilities | 867,110 | 2,120,893 |

The accompanying notes form an integral part of the consolidated financial statements.

9

# **PyroGenesis Canada Inc.**  
**Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)---

# **1. Nature of operations**

PyroGenesis Canada Inc. ('PyroGenesis') and its subsidiaries (collectively, the 'Company'), incorporated under the laws of the Canada Business Corporations Act, was formed on July 11, 2011. The Company owns patents of advanced waste treatment systems technology and designs, develops, manufactures, and commercialises advanced plasma processes and sustainable solutions to reduce greenhouse gases. The Company is domiciled at 1744 William Street, Suite 200, Montreal, Quebec. The Company is publicly traded on the TSX Exchange under the Symbol 'PYR', on NASDAQ in the USA under the symbol 'PYR' and on the Frankfurt Stock Exchange (FSX) under the symbol '8PY'.

# **2. Going concern**

These consolidated financial statements have been prepared on the going concern basis, which presumes that the Company will be able to continue its operations for the foreseeable and will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.

The Company is subject to certain risks and uncertainty associated with the achievement of profitable operations such as the successful signing and delivery of contracts and access to adequate financing.

The Company has incurred, in the last years, operating losses and negative cash flows from operations, and as a result, the Company has an accumulated deficit of $93,384,858 as at December 31, 2022 ($61,217,831 as at December 31, 2021). Furthermore, there have been unexpected delays in the collection of certain accounts receivable from contracts closed in a prior year. This has resulted in a shortfall in cash flows from operating activities that would be used in funding the Company's operations.

As at December 31, 2022, the Company has working capital of $1,650,709 ($14,006,785 as at December 31, 2021) including cash and cash equivalents of $3,445,649 ($12,202,513 as at December 31, 2021). The working capital is net of an allowance for credit losses amounting to $5,023,283 ($520,000 as at December 31, 2021) as further described in notes 9 and 10. The Company's business plan is dependent upon the successful completion of contracts and also the receipt of payments from certain contracts closed in a prior year and expects these payments to be made during fiscal 2023, as well as the achievement of profitable operations through the signing, completion and delivery of additional contracts or a reduction in certain operating expenses. In the absence of this, the Company is dependent upon raising additional funds to finance operations within and beyond the next twelve months. The Company has been successful in securing financing in the past and has relied upon external financing to fund its operations, primarily through the issuance of equity, debt and convertible debentures. The Company completed a private placement in October 2022 for an amount of $1,318,980 and also completed another private placement in March 2023 for $5,000,000 (see note 33). While the Company has been successful in securing financing, raising additional funds is dependent on a number of factors, some of which are outside the Company's control, and therefore there is no assurance that it will be able to do so in the future or that these sources will be available to the Company or that they will be available on terms which are acceptable to the Company. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue operating as a going concern.

The consolidated financial statements have been prepared on a going concern basis and do not include any adjustments to the amounts and to classifications of the assets and liabilities that might be necessary should the Company be unable to achieve its plan and continue in business. If the going concern assumption were not appropriate, adjustments, which could be material, would be necessary to the carrying value of assets and liabilities, the reported expenses, and the classification of items on the consolidated statement of financial position.

# **3. Basis of preparation**

# **(a) Statement of compliance**

These financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as issued by the International Accounting Standards Board ('IASB'). These financial statements were approved and authorized for issuance by the Board of Directors on March 30, 2023.

---

10

# **PyroGenesis Canada Inc.**
**Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021
(In Canadian dollars)

(b) Functional and presentation currency

These consolidated financial statements are presented in Canadian dollars, which is the functional currency of PyroGenesis, Drosrite International LLC and Pyro Green-Gas Inc. The functional currency of Airscience Italia SRL is the Euro whereas the functional currency of Airscience Technologies Private Limited is the Indian rupee.

(c) Basis of measurement

These financial statements have been prepared on the historical cost basis except for:

(i) strategic investments which are accounted for at fair value,
(ii) share-based payment arrangements, which are measured at fair value on the grant date pursuant to IFRS 2, Share-based Payment; and
(iii) lease liabilities, which are initially measured at the present value of minimum lease payments

(d) Basis of consolidation

For financial reporting purposes, subsidiaries are defined as entities controlled by the Company. The Company controls an entity when it has power over the investee; it is exposed to, or has rights to, variable returns from its involvement with the entity; and it has the ability to affect those returns through its power over the entity.

In instances where the Company does not hold a majority of the voting rights, further analysis is performed to determine whether or not the Company has control of the entity. The Company is deemed to have control when, according to the terms of the shareholder's and/or other agreements, it makes most of the decisions affecting relevant activities.

These consolidated financial statements include the accounts of PyroGenesis and its subsidiaries, Drosrite International LLC and Pyro Green-Gas Inc. and its subsidiaries. Drosrite International LLC is owned by a member of the Company's key management personnel and close member of the Chief Executive Officer ("CEO") and controlling shareholder's family and is deemed to be controlled by the Company. Pyro Green-Gas Inc. and its subsidiaries Airscience Italia SRL and Airscience Technologies Private Limited were acquired by the Company on August 11, 2021 (see note 6). All transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation.

The accounting policies set out below have been applied consistently in the preparation of the consolidated financial statements of all years presented. Finance costs and changes in fair value of strategic investments are excluded from the loss from operations in the consolidated statements of comprehensive loss.

**4. Significant accounting policies**

(a) Business combinations

Business combinations are accounted for using the acquisition method. Goodwill is measured as the excess of the fair value of the consideration transferred over the net recognized amount of the identifiable assets acquired and liabilities assumed, all measured at the acquisition date.

The consideration transferred is measured as the net of the fair values of assets transferred, liabilities assumed, and equity instruments issued by the Company at the acquisition date, including any asset or liability resulting from a contingent consideration arrangement, in exchange of the acquiree.

The obligation to pay the contingent consideration is classified as a liability and measured as a financial instrument or as a provision. Changes in fair values that qualify as measurement period adjustments of preliminary purchase price allocations are adjusted in the current period and such changes are applied on a retroactive basis.

Acquisition costs that the Company incurs in connection with a business combination are recognized in profit or loss as incurred, except for costs associated with the issuance of debt or equity securities.

11

# **PyroGenesis Canada Inc.**  
**Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)---

# **(b) Revenue recognition**

Revenue from contracts is recognized for each performance obligation either over a period of time or at a point in time, depending on which method reflects the transfer of control of the goods and services underlying the particular performance obligation.

# **i) Long-term contracts**

Long-term contracts involve made-to-order customized equipment and machines and are generally priced on a fixed fee basis. Under these contracts, the equipment or machines are made to a customer's specifications and if a contract is terminated by the customer, the Company is entitled to the greater of the amounts invoiced at the termination date and the reimbursement of the costs incurred to date of termination, including a reasonable margin. Agreements that contain multiple deliverables require the Company to determine whether they contain separately identifiable performance obligations and to allocate the consideration received to each performance obligation.

Revenue relating to long-term contracts is recognized over time based on the measure of progress determined by the Company's efforts or inputs towards satisfying the performance obligation relative to the total expected inputs. The degree of completion is assessed based on the proportion of total costs and/or hours incurred to date, compared to total costs and/or hours anticipated to provide the service under the entire contract, excluding the effects of inputs that do not depict performance, e.g. uninstalled materials. For long-term contracts with uninstalled materials, the Company adjusts the transaction price and recognizes revenue on uninstalled materials to the extent of those costs incurred, i.e. at a zero percent profit margin, when certain conditions are met.

Estimates are required to determine anticipated costs and/or hours on long-term contracts. A provision is made for the entire amount of expected loss, if any, in the period in which they are first determinable.

Contract modifications are changes in scope and/or price that are approved by the parties to the contract. Approval may be written, oral or implied by customary business practices, and are legally enforceable. The Company accounts for modifications as a separate contract if the modifications add distinct goods or services that are priced commensurate with stand-alone selling prices or if the remaining goods or services are distinct from those already transferred, otherwise modifications are accounted for as part of the original contract.

Costs and profits in excess of billings on uncompleted contracts and trade receivables are both rights to consideration in exchange for goods or services that the Company has transferred to a customer, however the classification depends on whether such right is only conditional on the passage of time (trade receivables) or if it is also conditional on something else (costs and profits in excess of billings on uncompleted contracts), such as the satisfaction of further performance obligations under the contract. Billings in excess of costs and profits on uncompleted contracts is the cumulative amount received and contractually receivable by the Company that exceeds the right to consideration resulting from the Company's performance under a given contract.

The costs to obtain long-term contracts such as sale commissions are recognized as Contract assets and recognized as selling expenses over time based on degree of completion of the related contract.

# **ii) Sales of goods**

Revenue related to sales of goods, which may include powders and spare parts are measured based on the consideration specified in contracts with customers. The Company recognizes revenue at a point in time when it transfers control of the goods to the buyer. This is generally at the time the customer obtains legal title to the product and when it is physically transferred to the custody transfer point agreed with the customer.

# **iii) Sale of intellectual property**

Sale of intellectual property is recognized at the date the recipient obtains control of the asset. Variable consideration related to the sale of intellectual property is recognized to the extent that it is highly probable that a reversal will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

---

12

# **PyroGenesis Canada Inc.**  
**Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)---

# **(c) Foreign currency translation**

# **i) Foreign currency transactions**

Revenue and expense transactions in foreign currencies are translated into the functional currency of the respective entity using the average exchange rates prevailing at the time of the transaction. Foreign currency balances are translated into the functional currency of the respective entity at year end exchange rates for monetary items and at historical rates for non-monetary items. Translation gains or losses are included in the determination of net loss.

# **ii) Foreign operations**

The assets and liabilities of foreign operations are translated into Canadian dollars using exchange rates prevailing at the end of the reporting period. Revenue and expense items are translated at the average exchange rates for the period. Exchange differences arising from the translation process of foreign operations are recognized as foreign currency translation adjustments in other comprehensive income and accumulated in equity.

# **(d) Cash and cash equivalents**

Cash and cash equivalents are financial instruments readily convertible to a known amount of cash and not subject to a significant risk of changes in fair value. Cash equivalents include instruments with a maturity of three months or less from the date of acquisition and instruments with an original term longer than three months if there is no significant penalty for withdrawal within a three-month period from the date of acquisition.

# **(e) Inventory**

Inventory is composed of spare parts for resale. Inventory is valued at the lower of cost and net realizable value. The cost of inventory is based on the first-in, first-out principle and comprises all costs of purchases. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling costs.

# **(f) Income taxes**

# **i) Current tax**

Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the date of the consolidated statements of financial position.

# **ii) Deferred tax**

Deferred tax is provided using the liability method, providing for temporary differences between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. The temporary difference is not provided for if it arises from the initial recognition of goodwill or the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the financial position reporting date and whose implementation is expected over the period in which the deferred tax is realized or recovered. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be used.

Deferred tax assets and liabilities are presented as non-current. Assets and liabilities are offset where the entity has a legally enforceable right to offset current tax assets and liabilities or deferred tax assets and liabilities, and the respective assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity or different taxable entities which intend to settle the liabilities and assets on a net basis.

# **(g) Earnings (loss) per share**

The Company presents basic earnings (loss) per share data for its common shares. Basic loss per share is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding during the year. Diluted loss

---

13

# **PyroGenesis Canada Inc.**
**Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021
(In Canadian dollars)

per share is computed similarly to basic earnings per share, except that the weighted average number of shares outstanding is increased to include shares from the assumed exercise of stock options and share purchase warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding share options and warrants were exercised and that the proceeds from such exercises were used to acquire common shares at the average market price during the year. Potential shares from all outstanding stock options and share purchase warrants are excluded from the calculation of diluted loss per share as their inclusion is considered anti-dilutive in years when a loss is incurred.

(h) Property and equipment

Property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses if applicable. Cost includes expenditures that are directly attributable to the acquisition of the asset and bringing the asset into operation. Borrowing costs capitalized to asset under development represents the interest expense calculated under the effective interest method and does not include any fair value adjustments of investments designated at fair value through profit and loss. Government assistance and investment tax credits related to the purchase or development of property and equipment are recorded in reduction of the cost. When major parts of an item of property and equipment have different useful lives, they are accounted for separately. Property and equipment are depreciated from the acquisition date over their respective useful life. Depreciation of an asset under construction begins when it is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by the Company.

Depreciation is calculated using the following methods and rates:

| Computer equipment | Straight line over 3 years |
| --- | --- |
| Machinery and equipment | Straight line over 10 years |
| Automobiles | Straight line over 7 years |
| Leasehold improvements | Lesser of the lease term or the useful life (20 years) |

Impairment losses recognized in prior periods are assessed at each reporting date as to whether there are any indications that the previously recognized losses may no longer exist or may be decreased. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.

Property and equipment are assessed for impairment whenever there is an indication of impairment.

Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted prospectively if appropriate.

(i) Leases

Under IFRS 16 Leases, at inception, the Company assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Company recognizes a right-of-use asset and a lease liability at the commencement date of the lease, i.e., the date the underlying asset is available for use.

*Right-of-use assets*

Right-of-use assets are measured at cost, less any accumulated depreciation and accumulated impairment losses, and adjusted for any remeasurement of lease liabilities. Cost of right-of-use assets is comprised of:

- the initial measurement amount of the lease liabilities recognized;
- any lease payments made at or before the commencement date, less any lease incentives received;
- any initial direct costs incurred; and
- an estimate of costs to dismantle and remove the underlying asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease contract.

14

# **PyroGenesis Canada Inc.**  
**Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)---

Right-of-use assets are depreciated over the shorter period of the lease term and the useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset based on periods detailed above. The depreciation starts at the commencement date of the lease. Right-of-use assets are assessed for impairment whenever there is an indication that the right-of-use assets may be impaired.

# *Lease liabilities*

Lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date over the lease term. The present value of the lease payments is determined using the lessee's incremental borrowing rate at the commencement date if the interest rate implicit in the lease is not readily determinable. The incremental borrowing rate is a function of the lessee's incremental borrowing rate, the nature of the underlying asset, the location of the asset, the length of the lease and the currency of the lease contract. Generally, the Company uses the lessee's incremental borrowing rate for the present value. At the commencement date, lease payments generally include fixed payments, less any lease incentives receivable, variable lease payments that depend on an index (e.g., based on inflation index) or a specified rate, and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising the option to terminate the lease. Lease payments also include amounts expected to be paid under residual value guarantees and the exercise price of a purchase option if the Company is reasonably certain to exercise that option.

Variable lease payments that do not depend on an index or a specified rate are not included in the measurement of lease liabilities but instead are recognized as expenses in the period in which the event or condition that triggers the payment occurs.

After the commencement date, the carrying amount of lease liabilities is increased to reflect the accretion of interest and reduced to reflect lease payments made. In addition, the carrying amount of lease liabilities is remeasured when there is a change in future lease payments arising from a change in an index or specified rate, if there is a modification to the lease terms and conditions, a change in the estimate of the amount expected to be payable under residual value guarantee, or if the Company changes its assessment of whether it will exercise a termination, extension or purchase option. The remeasurement amount of the lease liabilities is recognized as an adjustment to the right-of-use asset, or in the profit and loss statement when the carrying amount of the right-of-use asset is reduced to zero.

# *Classification and presentation of lease-related expenses*

Depreciation charge for right-of-use assets, expenses related to variable lease payments not included in the measurement of lease liabilities and loss (gain) related to lease modifications are allocated in the Company's profit and loss statement based on their function within the Company, while interest expense on lease liabilities is presented within finance costs.

# *Cash flow classification*

Lease payments related to the principal portion of the lease liabilities are classified as cash flows from financing activities while lease payments related to the interest portion of the lease liabilities are classified as interest paid within cash flows from financing activities. Lease incentives received are classified as cash flows from investing activities. Variable lease payments not included in the measurement of lease liabilities are classified as cash flows from operating activities.

# (j) Government assistance and investment tax credits

Investment tax credits are comprised of scientific research and experimental development tax credits. Government assistance and investment tax credits are recognized when there is reasonable assurance of their recovery and recorded as a reduction of the related expense or cost of the asset acquired, as applicable. Investment tax credits are subject to the customary approvals by the pertinent tax authorities. Adjustments required, if any, are reflected in the year when such assessments are received.

# (k) Intangible assets and Goodwill

Intangible assets acquired separately are measured at cost on initial recognition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.

---

15

# **PyroGenesis Canada Inc.**
**Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021
(In Canadian dollars)

Identifiable intangible assets acquired in a business combination are recognized separately from goodwill if they meet the definition of an intangible asset and if their fair value can be measured reliably. The cost of these intangible assets equals their acquisition-date fair value.

Subsequent to initial recognition, identifiable intangible assets acquired in a business combination are recorded at cost less accumulated amortization and impairment losses, if they are amortizable, otherwise only at cost net of accumulated impairment losses. The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortized over the useful life of the asset and assessed for impairment whenever there is an indication of impairment. Amortization expense on the intangible assets with finite lives is recognized in the consolidated statements of comprehensive loss.

Research costs are charged to comprehensive loss in the year they are incurred, net of related investment tax credits. Development costs are charged to comprehensive loss in the year they are incurred net of related investment tax credits unless they meet specific criteria related to technical, market and financial feasibility in order to be recognized as intangible assets which include:

- the technical feasibility of completing the intangible asset so that it will be available for use or sale;
- the Company has the intention to complete and the ability to use or sell the asset;
- the asset will generate future economic benefits;
- the Company has the resources to complete the asset; and
- ability to measure reliably the expenditure during development.

Costs to establish patents for internally developed technology are considered development costs and are charged to comprehensive loss in the year they are incurred unless they meet specific criteria related to technical, market and financial feasibility. Patent costs include legal and other advisor fees to obtain patents, and patent application fees.

Amortization of the development costs is calculated on a straight-line basis over the remaining useful life of the related patent and begins when development is complete. During the period of development, the asset is tested annually for impairment. Residual values and useful lives are reviewed at each reporting date.

Amortization is calculated on a straight-line basis:

|  | Useful life |
| --- | --- |
| Production backlog | 30 months |
| Patents and development costs | 1 to 21 years |

Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognized. Goodwill is carried at cost less accumulated impairment losses. Goodwill is not amortized but is tested for impairment annually or if there is an indication of impairment. Impairment losses recognized for goodwill cannot be reversed.

(l) Impairment testing of goodwill, other intangible assets, property and equipment and right-of-use assets

The carrying amounts of the Company's non-financial assets are assessed at each reporting date to determine whether there is an indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.

For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment, and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of a related business combination and represents the lowest level within the Company at which management monitors goodwill.

16

# **PyroGenesis Canada Inc.**  
**Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

The recoverable amount of an asset or cash-generating unit (CGU) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purposes of testing non-financial assets for impairment, management has identified one CGU.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its recoverable amount. Impairment losses are recognized in the consolidated statements of comprehensive loss. Impairment losses recognized in respect of the CGU are allocated first to reduce the carrying amount of goodwill allocated to the units, and then to reduce the carrying amounts on a pro-rata basis of the other assets in the unit.

# (m) Provisions and contingent liabilities

Provisions for legal disputes, onerous contracts or other claims are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the Company and amounts can be estimated reliably. The timing or amount of the outflow may still be uncertain.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.

No liability is recognized if an outflow of economic resources as a result of present obligations is not probable. Such situations are disclosed as contingent liabilities unless the outflow of resources is remote.

# (n) Employee benefits

# *Share-based payments*

The Company applies a fair value-based method of accounting to all share-based payments. Employee and director stock options are measured at their fair value of each tranche on the grant date and recognized in its respective vesting period. Non-employee stock options are measured when the services are rendered by the consultant at the fair value of the services received if the fair value can be measured reliably. In the case the fair value of the services cannot be measured reliably, the services are measured indirectly using the fair value of the equity instruments granted at grant date. The cost of stock options is presented as share-based payment expense. On the exercise of stock options, share capital is credited for the consideration received and for the fair value amounts previously credited to contributed surplus. The Company uses the Black-Scholes option-pricing model to estimate the fair value of share-based payments.

# *Deferred profit-sharing plan*

The Company established a yearly Deferred Profit-Sharing Plan ('DPSP') for all eligible employees who have materially and significantly contributed to the prosperity and profits of the Company. The significance of any contribution of any employee to the prosperity and profits of the Company for purposes of eligibility in the DPSP is determined by the Board of Directors of the Company upon such relevant information as the Board, in its sole discretion, may find relevant. All related persons to the Company are excluded from participating in the DPSP.

For all eligible employees, the Company is required to contribute to the DPSP out of the profits of the Company. The amount of the Company's contribution will be such amount which, in the opinion of its Board of Directors, is warranted by the profits and overall financial position of the Company. During the year, the Company contributed $Nil to the DPSP ($Nil in 2021). Obligations for contributions to the DPSP are recognized as an employee benefit expense in the consolidated statements of comprehensive loss in the periods during which services are rendered by employees.

17---

# **PyroGenesis Canada Inc.**  
**Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)---

# *Short-term employee benefits*

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid under the short-term incentive plan if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

# (o) Equity instruments

# *Issuance of equity instruments*

Incremental costs directly attributable to the issue of equity-classified shares are recognized as a deduction from the common shares and warrants, net of any tax effects. Upon issuance of units, the Company uses the residual value to allocate the net proceeds between common shares and warrants.

# *Extinguishing financial liabilities with equity instruments*

When equity instruments issued to a creditor to extinguish all or part of a financial liability are recognized initially, the Company measures them at the fair value of the equity instruments issued, unless that fair value cannot be reliably measured. If the fair value of the equity instruments issued cannot be reliably measured, then the equity instruments shall be measured to reflect the fair value of the financial liability extinguished.

# *Contributed surplus*

Contributed surplus includes amounts related to equity-settled share-based payments until such equity instruments are exercised or settled, in which case the amounts are transferred to common shares or reversed upon forfeiture if not vested. It also includes the unexercised conversion option at the maturity of the convertible debentures.

# (p) Financial Instruments

# *Recognition:*

The Company recognizes a financial asset or a financial liability when it becomes a party to the contractual provisions of the instrument.

Purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the marketplace (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.

# *Classification*

Financial assets are classified at amortized cost, fair value through profit or loss ('FVTPL') or fair value through other comprehensive income ('FVOCI') based on the Company's business model for managing the financial assets and the contractual cash flow characteristics of these assets. Assessment and decision on the business model approach used is an accounting judgment.

A financial asset is measured at amortized cost if it is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company includes in this category cash and cash equivalents, trade accounts receivable, other receivables, royalties receivable and deposits.

A financial asset is measured at fair value through profit or loss ('FVTPL') if:

(a) Its contractual terms do not give rise to cash flows on specified dates that are solely payments of principal and interest (SPPI) on the principal amount outstanding; or

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18

# **PyroGenesis Canada Inc.**
**Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021
(In Canadian dollars)

- (b) It is not held within a business model whose objective is either to collect contractual cash flows, or to both collect contractual cash flows and sell; or
- (c) At initial recognition, it is irrevocably designated as measured at FVTPL when doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.

The Company includes in this category strategic investments in equity instruments.

All financial liabilities, other than those measured at fair value through profit or loss, are included in the financial liabilities measured at amortized cost. The Company includes in this category bank indebtedness, accounts payable and accrued liabilities and term loans. The balance due on business combination is measured at FVTPL.

*Initial measurement*

Financial assets and liabilities (other than financial assets at FVTPL) are measured initially at their fair value plus any directly attributable incremental costs of acquisition or issue.

Financial assets and financial liabilities at FVTPL are recorded in the consolidated statements of financial position at fair value. All transaction costs for such instruments are recognized directly in profit or loss.

*Subsequent measurement*

Financial assets (other than financial assets at FVTPL) are measured at amortized cost using the effective interest method less any allowance for impairment. Gains and losses are recognized in profit or loss when the debt instruments are derecognized or impaired, as well as through the amortization process.

Financial liabilities are measured at amortized cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL. Gains and losses are recognized in profit or loss when the liabilities are derecognized, as well as through the amortization process. Changes in fair value of financial liabilities attributable to changes in the entity's own credit risk are to be presented in other comprehensive income unless they affect amounts recorded in income.

*Fair value measurement principles*

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Where financial assets and financial liabilities measured at fair value though profit or loss have a quoted price in an active market at the reporting date, the fair value is based on this price. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from a stock exchange and those prices represent actual and regularly occurring market transactions on an arm's length basis.

Securities traded on stock exchanges are stated at market price based on the closing price on the relevant valuation day.

*Derecognition*

A financial asset is derecognized where the rights to receive cash flows from the asset have expired, or the Company has transferred its rights to receive cash flows from the asset. The Company derecognizes a financial liability when the obligation under the liability is discharged, cancelled, or expired.

*Offsetting of financial instruments*

Financial assets and financial liabilities are offset, and the net amount reported in the consolidated statements of financial position if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

19

# **PyroGenesis Canada Inc.**  
**Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)---

# *Impairment of financial instruments*

The Company applies the “expected credit loss” (“ECL”) model to financial assets measured at amortized cost. The Company’s financial assets subject to this impairment model are cash and cash equivalents, trade and other receivables, costs and profits in excess of billings on uncompleted contracts, royalties receivable and deposits.

The trade accounts receivable have no financing component and have maturities of less than 12 months at amortized cost and, as such, the Company applies the simplified approach for expected credit losses (ECLs) to all its trade accounts receivable. Therefore, the Company recognizes a loss allowance based on lifetime ECLs at each reporting date.

The Company’s approach to ECLs reflects a probability-weighted outcome, the time value of money and reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions, and forecasts of future economic conditions.

The Company uses the provision matrix as a practical expedient to measure ECLs on trade receivables and costs and profits in excess of billings on uncompleted contracts, based on days past due for groupings of receivables with similar loss patterns. Contracts with particular recovery history are analysed separately from other accounts. The loss rates are based on historical observed loss rates over the expected life of the receivables and are adjusted for forward-looking estimates to reflect differences between economic conditions during the period over which the historical data has been collected.

Impairment losses are recognized in profit or loss and reflected in an allowance account presented in reduction of receivables and cost in excess of billings on uncompleted contracts.

# *Write-off*

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof.

Failure to engage and communicate with the Company on alternative payment arrangements and failure to make payments within 90 days, amongst others, are considered possible indicators of no reasonable expectation of recovery of accounts receivable.

# *Effective Interest Method*

The effective interest method is a method of calculating the amortized cost of a financial asset/financial liability and of allocating interest income/expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts/payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or (when appropriate) a shorter period, to the net carrying amount on initial recognition.

# (q) Future Changes and Amendments to Accounting Standards and Interpretations

# i) *IAS 1 Presentation of Financial Statements - Accounting Policies*

In 2021, the IASB amended IAS 1, Presentation of Financial Statements, to require entities to disclose their material accounting policy information rather than their significant accounting policies. Additional amendments to IAS 1 are made to explain how an entity can identify a material accounting policy. The amendments are effective for annual reporting periods beginning on or after January 1, 2023, with earlier application permitted.

# ii) *IAS 1 Presentation of Financial Statements - Classification of Liabilities*

The IASB released Classification of Liabilities as Current or Non-current (Amendments to IAS 1), which clarifies the guidance in IAS 1 Presentation of Financial Statements on whether a liability should be classified as either current or non-current relating to the right to defer settlement of the liability for at least twelve months after the reporting date. The amendment is effective for annual reporting periods beginning on or after January 1, 2023, with earlier application permitted.

---

20

# **PyroGenesis Canada Inc.**  
**Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)---

# iii) *IAS 12 Income Taxes*

The IASB released Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction (Amendments to IAS 12). The amendment relates to the recognition of deferred tax when an entity accounts for transactions, such as leases or decommissioning obligations, by recognizing both an asset and a liability. The objective of this amendment is to narrow the initial recognition exemption in paragraphs 15 and 24 of IAS 12, so that it would not apply to transactions that give rise to both taxable and deductible temporary differences, to the extent the amounts recognized for the temporary differences are the same. The amendment is effective for annual reporting periods beginning on or after January 1, 2023, with earlier application permitted.

# iv) *IAS 37 Provisions, Contingent Liabilities and Contingent Assets*

The IASB released Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37). The amendments specify which costs an entity includes in determining the cost of fulfilling a contract for the purpose of assessing whether the contract is onerous. Costs to be included comprise the costs that relate directly to the contract, which includes both incremental costs of fulfilling the contract and an allocation of other costs that relate directly to fulfilling the contract. The amendment is effective for annual reporting periods beginning on or after January 1, 2023, with earlier application permitted.

The Company has determined that the adoption of these standards or amendments will not have a significant impact on its consolidated financial statements as of the date of adoption.

# **5. Significant accounting judgments, estimates and assumptions**

The preparation of consolidated financial statements requires management to make judgments, estimates and assumptions based on currently available information that affect the reported amounts of assets, liabilities and contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and judgments are continuously evaluated and are based on management's experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual results could differ from those estimated. By their very nature, these estimates are subject to measurement uncertainty and the effect of any changes in estimates on the financial statements of future periods could be material.

In the process of applying the Company's accounting policies, management has made the following judgments, estimates, and assumptions which have the most significant effect on the amounts recognized in the consolidated financial statements.

# Critical judgments in applying accounting policies

(a) Assessment of whether there is any indication that property and equipment, right-of-use assets and intangible assets may be impaired

At each reporting date, the Company reviews the carrying amounts of its property and equipment, right-of-use assets and intangible assets with a finite useful life to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. Management's judgment is required in assessing whether there is any indication that an asset may be impaired.

(b) Intangible assets

The recognition of development costs as intangible assets requires judgments to determine whether the required criteria for recognition are met including management estimates of future economic benefits.

(c) Sale of intellectual property and related royalties

The recognition of variable consideration related to the sale of intellectual property requires management's judgments to determine whether it is highly probable that a reversal will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

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21

# **PyroGenesis Canada Inc.**  
**Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)---

# **(d) Investment tax credits receivable**

The investment tax credits are estimated by management based on quantitative and qualitative analysis and interpretation of various government programs, related restrictions, limitations, definitions, and eligibility conditions. Uncertainty over the eligibility and final assessment by taxation authorities of investment tax credits requires judgment. Management involves its technical staff and external specialists in determining if the expenditures meet the requirements of the different tax credit claims.

# Key sources of estimation uncertainty

# **(e) Revenue recognition**

Revenue recognition for long-term contracts completion requires the use of estimates to determine the recorded amount of revenues, costs in excess of billings and billings in excess of costs and profits on uncompleted contracts.

The determination of anticipated costs for completing a contract is based on estimates that can be affected by a variety of factors, including the cost of materials, labour and sub-contractors, as well as potential claims from customers and subcontractors.

As risks and uncertainties are different for each project, the sources of variations between anticipated costs and actual costs incurred will also vary by project. The determination of estimates is based on the Company's business practices as well as its historical experience. Estimates are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised.

Given this estimation process, it is possible that changes in future conditions could cause a material change in the recognized amount of revenues and costs and profits in excess of billings on uncompleted contracts and accrued expenses.

Agreements that contain multiple deliverables require the use of judgment to determine whether they contain separately identifiable performance obligations and to allocate the consideration received to each performance obligation.

# **(f) Share-based payments**

The Company uses the fair value method of valuing compensation cost associated with the Company's stock option plan. Estimating fair value requires determining the most appropriate valuation model for a grant of equity instruments, which is dependent on the terms and conditions of the grant. This also requires determining the most appropriate inputs to the valuation model including the expected life of the option and volatility. The assumptions and models are discussed in note 22.

# **(g) Useful lives of property and equipment and intangible assets**

The Company estimates the useful lives of property and equipment and intangible assets based on the period over which the assets are expected to be available for use. The estimated useful lives of property and equipment and intangible assets are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear and legal or other limits on the use of the relevant assets. In addition, the estimation of the useful lives of property and equipment and intangible assets are based on management's experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. Useful lives, depreciation and amortization rates and residual values are reviewed at least annually.

# **(h) Impairment of non-financial assets and goodwill**

In assessing impairment, management estimates the recoverable amount of each asset or cash generating unit based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate (see note 4 (f)).

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22

# **PyroGenesis Canada Inc.**  
**Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)---

# (i) Fair value of strategic investments

Where the fair values of investments recorded in the consolidated statements of financial position cannot be derived from active markets, they are determined using valuation techniques including the Black-Scholes model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing the fair values. The judgments include considerations of inputs such as the expected volatility and the initial allocation of the consideration paid between the fair value of the common shares and warrants received. Should any of the inputs to these models or changes in assumptions about these factors occur, this could affect the reported fair value of the investments.

# (j) Right-of-use assets and lease liabilities

In determining the carrying amount of the right-of-use assets and corresponding lease liabilities, assumptions include the non-cancellable term of the lease plus periods covered by an option to renew or purchase the assets, estimated useful lives of the related assets, and incremental borrowing rate. Renewal and purchase options are only included in the lease term if management is reasonably certain to renew. Management considers factors such as market conditions, comparable rental rates and similar property values. The Company is also required to estimate the incremental borrowing rate specific to each portfolio of leased assets with similar characteristics if the interest rate in the lease is not readily determined. Management determines the incremental borrowing rate using the base rate for similar loans plus a risk premium.

# (k) Income taxes

The Company has unused available tax losses, deductible temporary differences and investment tax credits. The Company recognizes deferred income tax assets for these unused tax losses and deductible temporary differences only to the extent that, in management's opinion, it is probable that future taxable profit will be available against which these available tax losses and temporary differences can be utilized. The Company recognizes investment tax credits when it has reasonable assurance that it has complied with the conditions of the program and that the amounts will be realized (i.e. that it will generate future federal income taxes payable against which the tax credits can be applied). The Company's projections of future taxable profit involve the use of significant assumptions and estimates with respect to a variety of factors, including future sales and operating expenses. There can be no assurance that the estimates and assumptions used in our projections of future taxable income will prove to be accurate predictions of the future, and in the event that our assessment of the recoverability of these deferred tax assets and investment tax credits changes in the future, a material increase or reduction in the carrying value of these deferred tax assets and investment tax credits could be required, with a corresponding charge to net loss.

# (l) Business combinations

Fair value of assets acquired and liabilities assumed in a business combination is estimated based on information available at the date of acquisition and involves considerable judgment in determining the fair values assigned to the identifiable assets acquired and liabilities assumed on acquisition. Among other things, the determination of these fair values involves the use of discounted cash flow analyses and estimated profit margins on contracts in progress. In addition, the determination of the contingent consideration due on the business combination is based on the estimations of the probability and timing of completing the predetermined milestones (see note 6);

# (m) COVID-19 pandemic

The COVID-19 pandemic continues to cause significant financial market and social dislocation. The situation is dynamic with various cities and countries around the world responding in different ways to address the outbreak. While the Company has experienced the impact of the outbreak of the Coronavirus (COVID 19) on its operations, it had continued to operate during the current pandemic. In the event of a prolonged continuation of the pandemic, it is not clear what the potential impact may be on the Company's business, financial position and financial performance.

# **6. Business combination**

On August 11, 2021, the Company completed the acquisition of Pyro Green-Gas Inc. and its subsidiaries, a Montreal-based company which offers technologies, equipment, and expertise in the area of biogas upgrading, as well as air pollution controls, for a maximum purchase price consideration of $4,355,600 in cash, subject to customary post-closing adjustments.

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23

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

In addition, the Company settled a pre-existing loan receivable from Pyro Green-Gas Inc. of approximately $1,744,000. The transaction was executed through a purchase of the entirety of the common class “A” shares of Pyro Green-Gas Inc. This acquisition enables the Company to springboard into the renewable natural gas market and provides an advantage compared to building its own operations. In addition, the Company will now have a presence in Italy and India, and the acquisition will provide potential synergies with the Company’s land-based waste destruction offerings. The purchase price will be paid upon the achievement of various contract and business-related milestones by Pyro Green-Gas Inc. The Company’s assessment is that these milestones will be realized at various moments during the next 30 months following the date of the acquisition. The contingent consideration was estimated using a discount rate of 8%.

The acquisition was accounted for using the purchase method and the final allocation of the purchase price is as follows:

|  | $ |
| --- | --- |
| Total consideration |  |
| Consideration paid at closing | 1 |
| Contingent consideration | 3,841,999 |
| Consideration paid at closing and contingent consideration | 3,842,000 |
| Settlement of pre-existing loan receivable from Pyro Green-Gas | 1,744,400 |
|  | 5,586,400 |

| Net assets acquired |  |
| --- | --- |
| Current assets 1 | 5,186,086 |
| ROU asset | 477,608 |
| Property and equipment | 42,552 |
| Intangible assets and Goodwill 2 | 4,780,607 |
| Deferred income tax asset | 79,360 |
| Current liabilities | (4,507,907) |
| Non-current liabilities | (471,906) |
|  | 5,586,400 |

$^{1}$ Includes $807,946 of cash and trade receivables with a net fair value of $3,255,000, including an allowance for expected credit losses of $512,592.

$^{2}$ The goodwill of $2,660,607 recorded on the transaction is mainly attributable to the expected growth in biogas upgrading market and the expertise of the workforce, and it is not expected to be deductible for tax purposes.

During the period ended December 31, 2021, the Company recognized revenue of $6,800,090 and net earnings of $807,395 related to the operations generated by Pyro Green-Gas Inc. since the acquisition date.

In connection with this acquisition, the Company incurred acquisition-related costs of $101,157, recognized within Selling, General and Administrative expenses in the 2021 consolidated statements of comprehensive loss.

The maximum purchase price consideration of $4,355,600 was discounted to $3,841,999, at August 11, 2021 and an accretion expense of $173,350 was recognized in Net finance costs in the consolidated statements of comprehensive loss for the year ended December 31, 2022, compared to a recognized accretion expense of $110,204 during the year ended December 31, 2021.

24

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

# **7. Revenues**

# *Revenues by product line:*

The company's revenues are generated primarily from the following:

|  | 2022 $ | 2021 $ |
| --- | --- | --- |
| Revenue from contracts with customers by product line: |  |  |
| High purity metallurgical grade silicon & solar grade silicon from quartz (PUREVAPTM) | 6,272,697 | 6,138,111 |
| Aluminium and zinc dross recovery (DROSRITETM) | 1,912,807 | 7,940,771 |
| Development and support related to systems supplied to the U.S. Navy | 1,288,356 | 7,522,809 |
| Torch-related sales | 5,558,210 | 2,084,511 |
| Biogas upgrading and pollution controls | 3,347,443 | 6,800,090 |
| Other sales and services | 633,990 | 582,058 |
|  | 19,013,503 | 31,068,350 |

The following is a summary of the Company's revenues by revenue recognition method:

|  | 2022 $ | 2021 $ |
| --- | --- | --- |
| Revenue from contracts with customers: |  |  |
| Sales of goods under long-term contracts recognized over time | 13,997,163 | 25,918,594 |
| Sales of goods at a point of time | 1,135,498 | 1,533,910 |
| Other revenue: |  |  |
| Sale of intellectual properties (i) | 3,600,000 | 3,300,000 |
| Royalties | 280,842 | 315,846 |
|  | 19,013,503 | 31,068,350 |

See note 32 for sales by geographic area.

# (i) Sale of intellectual properties

During the year, the Company sold intellectual property to a subsidiary of a company in which it holds a strategic investment for a non-refundable fee of $3,600,000. Under the terms of the sale agreement, control of the intellectual property was transferred to the purchaser and the Company has no obligation to undertake activities that will significantly affect the intellectual property.

In June 2021, the Company sold intellectual property to a subsidiary of a company in which it holds a strategic investment for a non-refundable fee of $3,300,000. Under the terms of the sale agreement, control of the intellectual property was transferred to the purchaser and the Company has no obligation to undertake activities that will significantly affect the intellectual property. The terms of the agreement also include additional variable consideration that can be received based on the greater of 10% of sales made by the purchaser, and royalties of $50,000 in 2023, $100,000 in 2024, $150,000 in 2025, and $200,000 in 2026 and every year thereafter.

# *Transaction price allocated to remaining performance obligations*

As at December 31, 2022, revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially satisfied) at the reporting date is $26,741,550 (2021 - $34,258,148, excluding a contract which was terminated in the fall of 2022). Revenue will be recognized as the Company satisfies its performance obligations under long-term contracts, which is expected to occur over the next 3 years.

25

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

# **8. Cash and cash equivalents**

As at December 31, 2022 and 2021, there are no restrictions on cash and cash equivalents. Cash and cash equivalents include the following components:

|  | 2022 $ | 2021 $ |
| --- | --- | --- |
| Cash | 3,445,649 | 3,568,561 |
| Guaranteed investment certificates | - | 8,633,952 |
| Cash and cash equivalents | 3,445,649 | 12,202,513 |

Guaranteed investment certificates were instruments issued by Canadian financial institutions, bore interest at rates varying from 0.08% to 0.86%, and held to maturity or were redeemed during the year 2022.

# **9. Accounts receivable**

Details of accounts receivable based on past due terms were as follows:

|  | December 31, 2022 $ | December 31, 2021 $ |
| --- | --- | --- |
| Current | 6,578,269 | 1,919,786 |
| 1 - 30 days | 15,959 | 32,028 |
| 31 - 60 days | 57,944 | 7,006,652 |
| 61 - 90 days | 718,239 | 788,330 |
| Greater than 90 days | 13,790,716 | 6,317,239 |
| Holdback receivable | 1,536,115 | 974,878 |
| Total trade accounts receivable | 22,697,242 | 17,038,913 |
| Allowance for expected credit loss | (4,693,283) | (520,000) |
| Other receivables | 240,560 | 270,536 |
| Sales tax receivable | 380,112 | 850,167 |
|  | 18,624,631 | 17,639,616 |

As at December 31, 2022 the allowance for expected credit loss on trade accounts receivable is $4,693,283 (2021 - $520,000), $543,283 which was included through the business combination and only varied due to foreign exchange, and $4,150,000 recognized during 2022. The portion recognized during the year includes $3,765,000 attributable to one specific customer, whereby the carrying amount has been reduced from $12,810,231 to $9,045,231. The carrying value of all other trade receivables was reduced from $9,887,011 to $8,958,728. On the basis of the Company's expected credit loss policy, the allowance was determined generally by applying a loss rate of 1% on balances 1-30 days past the invoice date, 2% for 31-60 days, 3% for 61-90 days and a minimum of 10% for those beyond 90 days. Specific consideration was applied for situations where the receivable is a holdback on a contract, and also for customers that have exceeded normal payment terms.

26

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

The closing balance of the trade receivables credit loss allowance as at December 31, reconciles with the trade receivables credit loss allowance opening balance as follows:

| Opening allowance January 1, 2021 | - |
| --- | --- |
| Business combination | 512,592 |
| Foreign exchange | 7,408 |
| Loss allowance at December 31, 2021 | 520,000 |
| Loss recognized during the year | 4,150,000 |
| Foreign exchange | 23,283 |
| Loss allowance at December 31, 2022 | 4,693,283 |

# **10. Costs and profits in excess of billings on uncompleted contracts**

As at December 31, 2022, the Company had eighteen contracts with total billings of $10,475,299 which were less than total costs incurred and had recognized cumulative revenue of $11,856,596 since those projects began. This compares with fourteen contracts with total billings of $16,676,700 which were less than total costs incurred and had recognized cumulative revenue of $21,599,410 as at December 31, 2021.

The net amount of $1,051,297 as at December 31, 2022 includes an expected credit loss allowance of $330,000 ($Nil as at December 31, 2021). On the basis of the Company's expected credit loss policy, the allowance was determined generally by applying a loss rate of 2% on all balances, and adjusting for specific situations, such as past due customers, whereby the loss rate varied from 25% to 50%.

Changes in costs and profits in excess of billings on uncompleted contracts during the year are explained by $4,164,109 (2021 - $983,891) recognized at the beginning of the year being transferred to accounts receivable, $622,696 (2021 - $4,832,968) resulting from changes in the measure of progress and the expected credit loss allowance of $330,000 ($Nil in 2021).

# **11. Investment tax credits**

An amount recognized in 2022 included $169,434 (2021 - $202,472) of investment tax credits earned in the year, as well as $Nil (2021 - $706,000) of investment tax credits earned in prior years that no longer met the criteria for recognition in 2021. $70,258 (2021 - $148,695) of the investment tax credits recognized in the year was recorded against cost of sales and services, $69,176 (2021 - ($684,709)) against research and development expenses and $30,000 (2021 - $32,486) against selling general and administrative expenses.

Eligible scientific research and experimental development ('SR&ED') expenses for the year amounted to $2,783,450 (2021 - $2,000,853) less investment tax credits of ($169,434) (2021 - ($684,709)), less government grants of $296,043 (2021 - $149,575) totalling $2,317,973 (2021 - $2,535,987).

# **12. Strategic investments**

|  | December 31, 2022 $ | December 31, 2021 $ |
| --- | --- | --- |
| Beauce Gold Fields ('BGF') shares - level 1 | 56,419 | 123,095 |
| HPQ Silicon Inc. ('HPQ') shares - level 1 | 5,415,749 | 12,306,196 |
| HPQ warrants - level 3 | 770,466 | 2,472,368 |
|  | 6,242,634 | 14,901,659 |

27

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

The change in the strategic investments is summarized as follows:

|  | ('BGF') shares - level 1 |  | ('HPQ') shares - level 1 |  | HPQ warrants - level 3 |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Quantity | $ | Quantity | $ | Quantity | $ |
| Balance, December 31, 2020 | 1,025,794 | 123,095 | 14,990,200 | 16,489,220 | 25,844,600 | 23,379,435 |
| Additions | - | - | 8,268,000 | 8,070,109 | - | - |
| Exercised | - | - | 16,250,000 | 11,700,000 | (16,250,000) | (9,181,250) |
| Disposed | - | - | (12,755,600) | (14,252,732) | - | - |
| Change in the fair value | - | - | - | (9,700,401) | - | (11,725,817) |
| Balance, December 31, 2021 | 1,025,794 | 123,095 | 26,752,600 | 12,306,196 | 9,594,600 | 2,472,368 |
| Additions | - | - | 6,800,000 | 3,196,000 | 6,800,000 | 408,000 |
| Disposed | - | - | (11,447,500) | (3,922,244) | - | - |
| Change in the fair value | - | (66,676) | - | (6,164,203) | - | (2,109,902) |
| Balance, December 31, 2022 | 1,025,794 | 56,419 | 22,105,100 | 5,415,749 | 16,394,600 | 770,466 |

The Company owns 9.82% on a fully diluted basis of HPQ as at December 31, 2022 (2021 - 9.64%) and has other business transactions with this entity- see notes 7(i) and 13.

The following table sets out the details and activity of the HPQ warrants:

| Expiry date | Number of warrants |  | Exercised | Number of warrants |  | Exercise price ($) |
| --- | --- | --- | --- | --- | --- | --- |
|  | Dec 31, 2021 | Additions |  | Dec 31, 2022 | Dec 31, 2022 |  |
| April 29, 2023 | 1,200,000 | - | - | 1,200,000 | - | 0.10 |
| June 2, 2023 | 4,394,600 | - | - | 4,394,600 | - | 0.10 |
| September 3, 2023 | 4,000,000 | - | - | 4,000,000 | - | 0.61 |
| April 20, 2024 | - | 6,800,000 | - | 6,800,000 | - | 0.60 |
|  | 9,594,600 | 6,800,000 | - | 16,394,600 | - |  |

# **2022 Transactions**

6,800,000 common shares and 6,800,000 warrants of HPQ were purchased in cash for an amount of $3,604,000 in April 2022.

11,447,500 HPQ common shares were disposed for cash amounts totalling $3,922,244 resulting in a realized loss of $225,527.

# **2021 Transactions**

12,755,600 HPQ common shares were disposed for cash amounts totalling $14,252,732 resulting in a realized gain of $9,893,900. 16,250,000 shares purchase warrants were exercised in cash for a total amount of $2,518,750. An amount of $9,181,250 was transferred to the share value on the exercise of the warrants.

8,268,000 common shares of HPQ were purchased in cash for an amount of $8,070,109.

28

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

At inception, the fair value of the HPQ warrants purchased in 2022 was measured using the Black-Scholes option pricing model using the following assumptions:

| Number of warrants | 6,800,000 |
| --- | --- |
| Date of issuance | April 20, 2022 |
| Exercise price ($) | 0.60 |
| Assumptions under the Black-Scholes model: |  |
| Fair value of the shares ($) | 0.47 |
| Risk-free interest rate (%) | 2.47 |
| Expected volatility (%) | 107.60 |
| Expected dividend yield | - |
| Contractual remaining life (number of months) | 24 |

As at December 31, 2022 and 2021, the fair value of the HPQ warrants was measured using the Black-Scholes option pricing model using the following assumptions:

|  | 2022 |  |  |  | 2021 |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Number of warrants | 1,200,000 | 4,394,600 | 4,000,000 | 6,800,000 | 1,200,000 | 4,394,600 | 4,000,000 |
| Date of issuance | April 29, 2020 | June 2, 2020 | Sept. 3, 2020 | April 20, 2022 | April 29, 2020 | June 2, 2020 | Sept. 3, 2020 |
| Exercise price ($) | 0.1 | 0.1 | 0.61 | 0.60 | 0.1 | 0.1 | 0.61 |
| Assumptions under the Black-Scholes model: |  |  |  |  |  |  |  |
| Fair value of the shares ($) | 0.25 | 0.25 | 0.25 | 0.25 | 0.46 | 0.46 | 0.46 |
| Risk-free interest rate (%) | 4.03 | 4.03 | 4.03 | 4.03 | 1.22 | 1.22 | 1.22 |
| Expected volatility (%) | 80.55 | 73.74 | 76.85 | 74.58 | 89.88 | 94.01 | 110.47 |
| Expected dividend yield | - | - | - | - | - | - | - |
| Contractual remaining life (in months) | 4 | 5 | 8 | 16 | 16 | 17 | 20 |

As at December 31, 2022, a gain from initial recognition of the warrants of $280,926 ($510,573 - 2021) has been deferred off balance sheet until realized.

# **13. Royalties receivable**

|  | December 31 2022 | December 31 2021 |
| --- | --- | --- |
|  | $ | $ |
| Opening balance | 1,258,654 | 1,060,000 |
| Accretion interest | 118,290 | 132,809 |
| Royalties recognized during the year | 450,000 | 450,000 |
| Discounting | (169,158) | (134,155) |
| Amounts received during the year | (250,000) | (250,000) |
| Balance at end of the year | 1,407,786 | 1,258,654 |
| Current portion | 455,556 | 311,111 |
| Non-current portion | 952,230 | 947,543 |
|  | 1,407,786 | 1,258,654 |

The Company sold intellectual property to HPQ Silicon Inc. ('HPQ') in 2016 ('HPQ 2016 contract') and its wholly owned subsidiary, HPQ Nano Silicon Powders Inc. in 2020 ('HPQ Nano contract'), and HPQ Silica Polvere Inc. ('HPQ Polvere contract') in 2021. The terms of those sales contracts include, in addition to the purchase price amounts already received of $1,000,000 in 2016 and $2,400,000 in 2020 and $3,300,000 in 2021, respectively, the following variable consideration in the form of royalty payments:

29

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

# **HPQ 2016 contract:**

Royalties are 10% of net sales, with minimum payments of $200,000 in 2021 and $250,000 in 2022 and every year thereafter. Payment is due no later than 30 days after the year end of HPQ Silicon Inc. An amount of $250,000 has been received under this agreement in 2022 ($200,000 was received in 2021).

# **HPQ Nano contract:**

Royalties are 10% of net sales, with minimum payments of $50,000 in 2021, $100,000 in 2022, $150,000 in 2023, and $200,000 in 2024 and every year thereafter. Payments are due no later than 10 days after the year end of HPQ Nano Silicon Powders Inc. An amount of $Nil has been received under this agreement in 2022 ($50,000 was received in 2021).

# **HPQ Polvere contract:**

Royalties are 10% of net sales with minimum payments of $50,000 in 2023, $100,000 in 2024, $150,000 in 2025 and $200,000 in 2026 and every year thereafter. Royalty payments are limited to the total net sales for the period. Payments are due no later than 10 days after the year end of HPQ Silica Polvere Inc.

During the year ended December 31, 2022, the Company recognized an additional $250,000 and $200,000 for the HPQ 2016 contract and HPQ Nano contracts, respectively, of royalties receivable, which have been discounted using 12.5% discount rate.

During the year ended December 31, 2021, the Company recognized an additional $250,000 and $200,000 for the HPQ 2016 contract and HPQ Nano contracts, respectively, of royalties receivable, which have been discounted using 12.5% discount rate.

The Company only recognizes variable consideration, including minimum royalties, arising from these agreements in the period(s) when it is highly probable that a reversal will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Minimum royalties are recognized for the period the Company evaluates the collectability of the minimum royalties is probable, which the Company has estimated over four years.

The HPQ Nano contract and the HPQ Polvere contract each provide the Company with the option to convert, at any time, the future royalties that would be owed to it into a 50% equity stake in HPQ Nano Silicon Powders Inc. and HPQ Silica Polvere Inc., respectively. Each option is considered an embedded derivative that is initially measured at fair value and subsequently remeasured at fair value at each reporting period. The Company determined that the embedded derivatives had a fair value of $Nil at the inception of the contracts and $Nil at each of the reporting dates.

# **14. Deposits**

|  | December 31 2022 $ | December 31 2021 $ |
| --- | --- | --- |
| Current portion: |  |  |
| Suppliers | 392,309 | 1,236,211 |
| Security deposit on leased premises | 40,241 | 92,241 |
| Total current | 432,550 | 1,328,452 |
| Non-current portion: |  |  |
| Suppliers | 7,250 | 1,952 |
| Security deposit on leased premises | 38,803 | 246,804 |
| Total non-current | 46,053 | 248,756 |
| Total deposits | 478,603 | 1,577,208 |

30

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

# **15. Property and equipment**

|  | Computer equipment $ | Machinery and equipment $ | Automobiles $ | Leasehold improvements $ | Equipment under construction $ | Total $ |
| --- | --- | --- | --- | --- | --- | --- |
| Cost |  |  |  |  |  |  |
| Balance at December 31, 2020 | 549,659 | 1,621,899 | 306,164 | 180,901 | 1,940,234 | 4,598,857 |
| Acquired through business combination | 13,585 | 28,967 | - | - | - | 42,552 |
| Additions | 245,984 | 384,092 | 30,495 | 752,204 | 84,143 | 1,496,918 |
| Balance at December 31, 2021 | 809,228 | 2,034,958 | 336,659 | 933,105 | 2,024,377 | 6,138,327 |
| Additions (1) | 164,059 | (89,085) | - | 209,435 | - | 284,409 |
| Assets under construction put in service | - | 1,065,672 | - | 958,705 | (2,024,377) | - |
| Balance at December 31, 2022 | 973,287 | 3,011,545 | 336,659 | 2,101,245 | - | 6,422,736 |
| Accumulated depreciation |  |  |  |  |  |  |
| Balance at December 31, 2020 | 509,112 | 1,441,642 | 21,748 | 96,785 | - | 2,069,287 |
| Depreciation | 88,410 | 182,739 | 59,959 | 24,995 | - | 356,103 |
| Balance at December 31, 2021 | 597,522 | 1,624,381 | 81,707 | 121,780 | - | 2,425,390 |
| Depreciation | 146,550 | 297,021 | 57,543 | 102,780 | - | 603,894 |
| Balance at December 31, 2022 | 744,072 | 1,921,402 | 139,250 | 224,560 | - | 3,029,284 |
| Carrying amounts |  |  |  |  |  |  |
| Balance at December 31, 2021 | 211,706 | 410,577 | 254,952 | 811,325 | 2,024,377 | 3,712,937 |
| Balance at December 31, 2022 | 229,215 | 1,090,143 | 197,409 | 1,876,685 | - | 3,393,452 |

$^{(1)}$ The adjustment to additions to Machinery and Equipment of $89,085, relates to the discounting of the non-interest-bearing loan from the Economic Development Agency of Canada, representing government assistance (see note 21).

Equipment under construction included the leasehold improvements of a clean room and the costs related to building the new Plasma Powder Production equipment which have been put in service during the year ended December 31, 2022.

# **16. Leases**

The Company has entered into lease contracts mainly for buildings and computer equipment, which expire at various dates through the year 2036. Some leases have extension or purchase options for various terms. The lease contracts do not impose any financial covenants.

On January 1, 2022, a lease for rent of a property with a trust whose beneficiary is the controlling shareholder and CEO of the Company, was modified to extend the lease term until December 2026. The lessor also reimbursed an amount of $1,070,264 representing the balance at the date of modification of the original prepayment amount of $1,178,530 made in 2020. At the date of modification, the lease liability was remeasured using a discount rate of 4%. As a result, the lease liability was increased by an amount of $1,070,264 and the right-of-use assets was decreased by an amount of $108,267.

On September 1, 2022, a lease of a property was modified to extend the term, to postpone the exercise of the purchase option of the property, and to factor a deposit of $275,000 required to exercise the purchase option. As a result, the lease liability was remeasured using a discount rate of 8.6% and the lease liability and the right-of-use assets were decreased by $203,154.

31

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

# a) Right-of-use assets

|  | Land and building $ | Computer equipment $ | Total $ |
| --- | --- | --- | --- |
| Balance at January 1, 2021 | 3,688,315 | 12,685 | 3,701,000 |
| Additions - business combination | 477,608 | - | 477,608 |
| Additions | 2,157,796 | - | 2,157,796 |
| Depreciation | (566,182) | (4,228) | (570,411) |
| Balance at December 31, 2021 | 5,757,537 | 8,457 | 5,765,993 |
| Modification of lease agreements | (311,421) | - | (311,421) |
| Depreciation | (631,600) | (4,228) | (635,828) |
| Balance at December 31, 2022 | 4,814,516 | 4,229 | 4,818,744 |

# b) The table below summarizes changes to the lease liabilities:

|  | $ |
| --- | --- |
| Balance at January 1, 2021 | 2,988,542 |
| Addition - business acquisition | 477,608 |
| Additions - other | 2,120,893 |
| Payments | (263,078) |
| Balance at December 31, 2021 | 5,323,965 |
| Modification of lease agreements | 867,110 |
| Payments | (657,381) |
| Balance at December 31, 2022 | 5,533,694 |
| Current portion | 2,934,236 |
| Non-current portion | 2,389,729 |
| Balance at December 31, 2021 | 5,323,965 |
| Current portion | 2,672,212 |
| Non-current portion | 2,861,482 |
| Balance at December 31, 2022 | 5,533,694 |

# c) Amount recognized in the consolidated statements of comprehensive loss:

|  | 2022 $ | 2021 $ |
| --- | --- | --- |
| Depreciation of right-of-use assets | 635,828 | 570,411 |
| Interest on lease liabilities | 378,611 | 307,691 |
| Expense related to lease payments excluded in the measurement of lease liabilities | 243,209 | 178,707 |

32

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

d) Maturity analysis - contractual undiscounted cash flows of lease liabilities as at December 31, 2022

|  | $ |
| --- | --- |
| 2023 | 2,984,243 |
| 2024 | 592,719 |
| 2025 | 572,562 |
| 2026 | 474,484 |
| 2027 | 229,332 |
| Thereafter | 1,891,989 |
|  | 6,745,329 |

# **17. Intangible assets**

|  | Production backlog $ | Patents $ | Development costs $ | Total $ |
| --- | --- | --- | --- | --- |
| Cost |  |  |  |  |
| Balance at December 31, 2020 | - | 768,392 | 244,871 | 1,013,263 |
| Acquired through business combination | 2,120,000 | - | - | 2,120,000 |
| Additions | - | 214,497 | - | 214,497 |
| Write-off | - | (85,544) | - | (85,544) |
| Balance at December 31, 2021 | 2,120,000 | 897,345 | 244,871 | 3,262,216 |
| Additions | - | 208,680 | - | 208,680 |
| Balance at December 31, 2022 | 2,120,000 | 1,106,025 | 244,871 | 3,470,896 |
| Accumulated amortization |  |  |  |  |
| Balance at December 31, 2020 | - | 58,125 | 49,524 | 107,649 |
| Amortization | 353,333 | 10,528 | 16,508 | 380,369 |
| Balance at December 31, 2021 | 353,333 | 68,653 | 66,032 | 488,018 |
| Amortization | 848,000 | 13,522 | 16,508 | 878,030 |
| Balance at December 31, 2022 | 1,201,333 | 82,175 | 82,540 | 1,366,048 |
| Carrying amounts |  |  |  |  |
| Balance at December 31, 2021 | 1,766,667 | 828,692 | 178,839 | 2,774,198 |
| Balance at December 31, 2022 | 918,667 | 1,023,850 | 162,331 | 2,104,848 |

The Company's development costs have been incurred to develop plasma-related technologies and the patents protect the design and specification of these technologies.

# **18. Goodwill**

The Company tests goodwill for impairment annually, or more frequently when an indicator of impairment is identified. Goodwill is considered impaired if the recoverable amount is less than the carrying amount.

The recoverable amount of an operating segment is determined based on value-in-use calculations, covering a detailed five-year forecast, followed by an extrapolation of expected cash flows for the remaining useful lives using a declining growth rate determined by management. The present value of the expected cash flows of the operating segment is determined by applying a suitable discount rate reflecting current market assessments of the time value of money and risks specific to the segment.

33

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

For the purpose of impairment testing, goodwill is allocated to the sole operating segment, Pyro Green-Gas, which is expected to benefit from the synergies of the business combination in which the goodwill arises and is compared to its recoverable value.

At December 31, 2022 and 2021, it was determined that the recoverable amounts exceed the carrying amount, and no impairment was required. The recoverable amount in the most recent impairment test performed was determined using a pre-tax discount rate of 12.5% and terminal growth rate of 2% (2021 - pre-tax discount rate of 8% and terminal growth rate of 2%).

# **19. Accounts payable and accrued liabilities**

|  | December 31 2022 $ | December 31 2021 $ |
| --- | --- | --- |
| Accounts payable | 6,065,996 | 5,457,259 |
| Accrued liabilities | 2,891,053 | 3,730,048 |
| Sale commissions payable 1 | 904,724 | 737,364 |
| Accounts payable to the controlling shareholder and CEO | 254,097 | 144,506 |
|  | 10,115,870 | 10,069,177 |

$^{1}$ Sale commissions payable relate to the costs to obtain long-term contracts with clients.

# **20. Billings in excess of costs and profits on uncompleted contracts**

The amount to date of costs incurred and recognized profits less recognized losses for construction projects in progress amounted to $37,374,909 (2021 - $21,834,137).

Payments to date received were $47,045,902 on contracts in progress (2021 - $31,234,368).

Changes in billings in excess of costs and profits on uncompleted contracts during the year are explained by $2,416,229 (2021 - $6,268,910) recognized at the beginning of the year being recognized as revenue, and an increase of $2,686,991 (2021 - $9,076,169) resulting from cash received excluding amounts recognized as revenue.

34

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

# **21. Term loans**

|  | Economic Development Agency of Canada Loan 1 | Other Term Loans 2 | Other Term Loans 3 | Canada Emergency Business Account Loan 4 | Total |
| --- | --- | --- | --- | --- | --- |
|  | $ | $ | $ | $ | $ |
| Balance, December 31, 2020 | 75,800 | 36,907 | - | - | 112,707 |
| Assumed through business combination | - | - | 36,520 | 50,000 | 86,520 |
| Accretion | 12,185 | - | - | - | 12,185 |
| Payments | - | (12,207) | (8,300) | - | (20,507) |
| Balance, December 31, 2021 | 87,985 | 24,700 | 28,220 | 50,000 | 190,905 |
| Additions | 292,941 | - | - | - | 292,941 |
| Discounting | (89,085) | - | - | - | (89,085) |
| Accretion | 28,229 | - | - | - | 28,229 |
| Payments | - | (13,083) | (19,920) | - | (33,003) |
| Balance, December 31, 2022 | 320,070 | 11,617 | 8,300 | 50,000 | 389,987 |
| Less current portion | - | (11,617) | (8,300) | (50,000) | (69,917) |
| Balance, December 31, 2022 | 320,070 | - | - | - | 320,070 |

$^{1}$ maturing in 2029, non-interest bearing, payable in equal instalments from April 2024 to March 2029.

$^{2}$ maturing October 23, 2023 bearing interest at a rate of 6.95% per annum, payable in monthly instalments of $1,200 secured by automobile (carrying amount of $10,795 as at December 31, 2022).

$^{3}$ maturing in May 2023, payable in monthly instalments of $1,660, bearing interest at 7.45%

$^{4}$ loan bearing no interest and no minimum repayment, if repaid by December 2023

# **Economic Development Agency of Canada Loan**

On March 5, 2020, the Company entered into a repayable contribution agreement up to $450,000 under the Regional Economic Growth through Innovation program from the Economic Development Agency of Canada (“EDC”). The contribution is repayable in 60 equal monthly instalments due and payable 24 months following the completion of the project. During the year ended December 31, 2022, the Company received contributions totalling $292,941. The loan was discounted using the effective interest method using a rate of 8% as it is non-interest bearing. The difference between the discounted amount and the proceeds received of $89,085 represents government assistance and is accounted for as a reduction of the property and equipment.

# **Canada Emergency Business Account ('CEBA') Loan**

The Company’s subsidiary participated in the CEBA program whereby it obtained an interest free and partially forgivable loan. The loan bears no interest and no minimum repayment terms, and one third of the loan amount is forgiven if repaid by December 31, 2023. The unpaid balance, if any, at December 31, 2023 would be converted to a 24-month term loan bearing interest at 5% and be reimbursed entirely by December 31, 2025.

# **22. Shareholders' equity**

# **Common shares and warrants**

Authorized:

The Company is authorized to issue an unlimited number of common shares without par value.

# **Issuance of units**

On October 19, 2022, the Company completed a non-brokered private placement consisting of 1,014,600 units at a price of $1.30 per unit for aggregate gross proceeds to the Company of $1,318,980. Each unit is comprised of one common share of the Company and one common share purchase warrant of the company. Each warrant entitles the holder to purchase one additional common share at an exercise price of $1.75 for a period of 24 months. The Company allocated an amount of $1,095,780 to share capital representing the fair value of the shares on October 19, 2022, of $1.08 per share and the residual amount of $223,200 to warrants.

35

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

# **Shares issued upon exercise of stock options, share purchase warrants and compensation options**

During the year ended December 31, 2022, 2,440,000 (3,482,000 - 2021) stock options and Nil (8,146,483 - 2021) share purchase warrants were exercised for net proceeds of $1,412,799 and $Nil ($1,109,818 and $12,396,107 - 2021) respectively. The amounts credited to share capital from the exercise of stock options include an ascribed value from contributed surplus of $870,558 ($364,000 - 2021). In addition, in 2021, 191,414 compensation options relating to a bought deal in 2020, were exercised for net proceeds of $689,090.

# **Share redemptions for cancellation**

In January 2021, the Company announced it had been authorized to repurchase for cancellation, on the open market, or subject to the approval of any securities authority by private agreements, 5,000,000 common shares from January 14, 2021, to January 13, 2022. In February 2022, the Company announced it had been authorized to repurchase 7,500,000 of its common shares from February 15, 2022, to February 14, 2023.

During the year 2022, the Company did not repurchase any common shares for purpose of cancellation. The Company was under no obligation to repurchase its common shares as at December 31, 2022.

During the year 2021, the Company repurchased and cancelled 840,094 Common shares at a weighted average price of $4.96 per share, for a total cash consideration of $4,183,617 including commissions of $16,678. The excess of the total consideration over the carrying amount of the shares, in the amount of $3,778,619 was applied against deficit.

The repurchases were made in the normal course of business at market prices through the TSX. The Company was under no obligation to repurchase its common shares as at December 31, 2021.

# **Stock options**

The Company has a stock option plan authorizing the Board of Directors to grant options to directors, officers, employees and consultants to acquire common shares of the Company at a price computed by reference to the closing market price of the shares of the Company on the business day before the Company notifies the stock exchanges of the grant of the option. The number of shares which may be granted to any one person shall not exceed 5% (2% for consultants) of total share capital over a twelve-month period.

The following table sets out the activity in stock options:

|  | Number of options | Weighted average exercise price $ |
| --- | --- | --- |
| Balance - December 31, 2020 | 9,040,000 | 1.57 |
| Granted | 2,970,000 | 4.55 |
| Exercised (1) | (3,482,000) | 0.32 |
| Forfeited | (125,000) | 4.41 |
| Balance, December 31, 2021 | 8,403,000 | 3.10 |
| Granted | 2,475,000 | 3.55 |
| Exercised (1) | (2,440,000) | 0.58 |
| Forfeited | (242,500) | 4.07 |
| Balance, December 31, 2022 | 8,195,500 | 3.96 |

$^{(1)}$ The weighted fair market value of the share price for options exercised in 2022 was $1.44 ($5.48 in 2021).

36

# **PyroGenesis Canada Inc.**  
**Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)---

# **Grants in 2022**

On January 3, 2022, the Company granted 150,000 stock options to the President and Chief Executive Officer of the Company, and 300,000 stock options to members of its Board of Directors. The stock options have an exercise price of $3.36 per common share, vest immediately and are exercisable over a period of five (5) years.

On April 5, 2022, the Company granted 400,000 stock options to employees of the Company. The stock options have an exercise price of $2.96 per common share. The 400,000 options will vest as follows: 10 percent as of the day of the grant, 20 percent at the first anniversary of the date of the grant, 30 percent on the second anniversary of the date of the grant and 40 percent on the third anniversary of the date of the grant. All options mentioned above are exercisable over a period of five (5) years.

On June 2, 2022, the Company granted 600,000 stock options to the President and Chief Executive Officer of the Company, and 900,000 stock options to members of its Board of Directors. The 1,500,000 options will vest as follows: 25 percent as of the day of the grant, 25 percent at the first anniversary of the date of the grant, 25 percent on the second anniversary of the date of the grant and 25 percent at the third anniversary of the date of the grant. The stock options have an exercise price of $3.88 per common share and are exercisable over a period of five (5) years.

On July 3, 2022, the Company granted 125,000 stock options to employees of the Company. The stock options have an exercise price of $2.14 per common share. The 125,000 options will vest as follows: 10 percent as of the day of the grant, 20 percent at the first anniversary of the date of the grant, 30 percent on the second anniversary of the date of the grant and 40 percent on the third anniversary of the date of the grant. All options mentioned above are exercisable over a period of five (5) years.

Subsequent to year end, the Company granted 150,000 stock options to the President and Chief Executive Officer of the Company, and 500,000 stock options to members of its Board of Directors. The stock options have an exercise price of $1.03 per common share, vest immediately and are exercisable over a period of five (5) years. The Company accounted for an expense amounting to $453,204 related to these options as the stock options granted related to the services in 2022 and there was a shared understanding of the terms and conditions related to such grant prior to the grant date.

The Company also granted 975,000 stock options to employees of the Company. The stock options have an exercise price of $1.03 per common share. The 975,000 options will vest as follows: 10 percent as of the day of the grant, 20 percent at the first anniversary of the date of the grant, 30 percent on the second anniversary of the date of the grant and 40 percent on the third anniversary of the date of the grant. All options mentioned above are exercisable over a period of five (5) years. There was no expense accounted for in 2022 relating to these stock options.

# **Grants in 2021**

On December 30, 2021, the Company granted 100,000 stock options to a member of its Board of Directors. The stock options have an exercise price of $3.61 per common share, vest immediately and are exercisable over a period of five (5) years.

On December 17, 2021, the Company granted 1,920,000 stock options to the President and Chief Executive Officer of the Company. The stock options have an exercise price of $3.13 per common share, vest immediately and are exercisable over a period of five (5) years.

On October 14, 2021, the Company granted 100,000 stock options to the Chief Financial Officer of the Company. The stock options have an exercise price of $5.04 per common share. The 100,000 options will vest as follows: 10 percent as of the day of the grant, 20 percent at the first anniversary of the date of the grant, 30 percent at the second anniversary of the date of the grant, and 40 percent at the third anniversary of the date of the grant and are exercisable over a period of five (5) years.

On June 14, 2021, the Company granted 100,000 stock options to an officer of the Company. The stock options have an exercise price of $6.70 per common share. The 100,000 options will vest as follows: 25 percent at the date of the grant, 25 percent at the first anniversary of the date of grant, 25 percent at the second anniversary of the date of grant, and 25 percent at the third anniversary of the date of grant and are exercisable over a period of five (5) years.

---

37

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

On June 1, 2021, the Company granted 200,000 stock options to a member of its Board of Directors. The stock options have an exercise price of $6.59 per common share. The 200,000 options will vest as follows: 25 percent at the date of the grant, 25 percent at the first anniversary of the date of grant, 25 percent at the second anniversary of the date of grant, and 25 percent at the third anniversary of the date of grant and are exercisable over a period of five (5) years.

On April 6, 2021, the Company granted 150,000 stock options to the President and Chief Executive Officer of the Company, 100,000 and 200,000 stock options to two members of the Board of Directors and 100,000 stock options to an employee of the Company. The stock options have an exercise price of $8.47 per common share. Of these options, 250,000 will vest immediately, 200,000 options will vest as follows: 30 percent as of the day of the grant, 35 percent at the first anniversary of the date of the grant and 35 percent on the second anniversary of the date of the grant and the remaining 100,000 options will vest as follows: 10 percent as of the day of the grant, 20 percent at the first anniversary of the date of the grant, 30 percent at the second anniversary of the date of the grant, and 40 percent at the third anniversary of the date of the grant. All options mentioned above are exercisable over a period of five (5) years.

The weighted average fair value of stock options granted for the year ended December 31, 2022 was $2.37 ($2.99 in 2021) and $2.02 per option for stock options granted subsequent to the year end. The weighted average fair value of each option granted was estimated at the grant date for purposes of determining share-based payment expense using the Black-Scholes option pricing model based on the following weighted-average assumptions:

| Years ended December 31, | 2022 |  | 2021 |
| --- | --- | --- | --- |
| Number of options granted or recognized | 2,475,000 | 650,000 | 2,970,000 |
| Exercise price ($) | 3.55 | 3.02 | 4.55 |
| Fair value of each option under the Black-Scholes pricing model ($) | 2.37 | 2.02 | 2.99 |
| Assumptions under the Black-Scholes model: |  |  |  |
| Fair value of the shares ($) | 3.54 | 3.02 | 4.52 |
| Risk-free interest rate (%) | 2.43 | 3.38 | 1.11 |
| Expected volatility (%) | 83.17 | 83.15 | 83.00 |
| Expected dividend yield | - | - | - |
| Expected life (number of months) | 60 | 60 | 60 |

The underlying expected volatility was determined by reference to historical data of the Company's share price. No special features inherent to the stock options granted were incorporated into the measurement of fair value.

38

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

As at December 31, 2022, the outstanding options, as issued under the stock option plan to directors, officers, employees and consultants for the purchases of one common share per option, are as follows:

|  | Number of stock options Dec 31, 2021 | Granted | Exercised | Forfeitures | Number of stock options Dec 31, 2022 | Number of stock options vested (1) | Exercise price per option | Expiry date |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| November 3, 2017 | 2,400,000 | - | (2,400,000) | - | - | - | 0.58 | November 3, 2022 |
| July 3, 2018 | 300,000 | - | - | - | 300,000 | 300,000 | 0.51 | July 3, 2023 |
| October 29, 2018 | 40,000 | - | (40,000) | - | - | - | 0.52 | October 29, 2023 |
| September 29, 2019 | 100,000 | - | - | - | 100,000 | 100,000 | 0.51 | September 29, 2024 |
| January 2, 2020 | 100,000 | - | - | - | 100,000 | 100,000 | 0.45 | January 2, 2025 |
| July 16, 2020 | 2,243,000 | - | - | (42,500) | 2,200,500 | 1,775,500 | 4.41 | July 16, 2025 |
| October 26, 2020 | 250,000 | - | - | (200,000) | 50,000 | 37,500 | 4.00 | October 26, 2025 |
| April 6, 2021 | 550,000 | - | - | - | 550,000 | 410,000 | 8.47 | April 6, 2026 |
| June 1, 2021 | 200,000 | - | - | - | 200,000 | 100,000 | 6.59 | June 1, 2026 |
| June 14, 2021 | 100,000 | - | - | - | 100,000 | 50,000 | 6.70 | June 14, 2026 |
| October 14, 2021 | 100,000 | - | - | - | 100,000 | 30,000 | 5.04 | October 14, 2026 |
| December 17, 2021 | 1,920,000 | - | - | - | 1,920,000 | 1,920,000 | 3.13 | December 17, 2026 |
| December 30, 2021 | 100,000 | - | - | - | 100,000 | 30,000 | 3.61 | December 30, 2026 |
| January 3, 2022 | - | 450,000 | - | - | 450,000 | 450,000 | 3.36 | January 3, 2027 |
| April 5, 2022 | - | 400,000 | - | - | 400,000 | 40,000 | 2.96 | April 5, 2027 |
| June 2, 2022 | - | 1,500,000 | - | - | 1,500,000 | 375,000 | 3.88 | June 2, 2027 |
| July 13, 2022 | - | 125,000 | - | - | 125,000 | 12,500 | 2.14 | July 13, 2027 |
|  | 8,403,000 | 2,475,000 | (2,440,000) | (242,500) | 8,195,500 | 5,730,500 | 3.96 |  |

$^{(1)}$ At December 31, 2022, the weighted average exercise price for options outstanding which are exercisable was $3.96.

As at December 31, 2021, the outstanding options, as issued under the stock option plan to directors, officers, employees and consultants for the purchases of one common share per option, are as follows:

|  | Number of stock options Dec 31, 2020 | Granted | Exercised | Forfeitures | Number of stock options Dec 31, 2021 | Number of stock options vested | Exercise price per option | Expiry date |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| November 3, 2017 | 2,420,000 | - | (20,000) | - | 2,400,000 | 2,400,000 | 0.58 | November 3, 2022 |
| July 3, 2018 | 300,000 | - | - | - | 300,000 | 300,000 | 0.51 | July 3, 2023 |
| October 29, 2018 | 70,000 | - | (30,000) | - | 40,000 | 40,000 | 0.52 | October 29, 2023 |
| September 29, 2019 | 200,000 | - | (100,000) | - | 100,000 | 100,000 | 0.51 | September 29, 2024 |
| January 2, 2020 | 100,000 | - | - | - | 100,000 | 100,000 | 0.45 | January 2, 2025 |
| July 16, 2020 | 2,450,000 | - | (82,000) | (125,000) | 2,243,000 | 1,775,500 | 4.41 | July 16, 2025 |
| October 26, 2020 | 250,000 | - | - | - | 250,000 | 125,000 | 4.00 | October 26, 2025 |
| April 6, 2021 | - | 550,000 | - | - | 550,000 | 320,000 | 8.47 | April 6, 2026 |
| June 1, 2021 | - | 200,000 | - | - | 200,000 | 50,000 | 6.59 | June 1, 2026 |
| June 14, 2021 | - | 100,000 | - | - | 100,000 | 25,000 | 6.70 | June 14, 2026 |
| October 14, 2021 | - | 100,000 | - | - | 100,000 | 10,000 | 5.04 | October 14, 2026 |
| December 17, 2021 | - | 1,920,000 | - | - | 1,920,000 | 1,920,000 | 3.13 | December 17, 2026 |
| December 30, 2021 | - | 100,000 | - | - | 100,000 | 100,000 | 3.61 | December 30, 2026 |
|  | 9,040,000 | 2,970,000 | (3,482,000) | (125,000) | 8,403,000 | 7,265,500 | 3.10 |  |

For the year ended December 31, 2022, a share-based compensation expense of $5,538,463 (2021 - $9,762,745) was recorded in Selling, general and administrative expenses to the consolidated statements of comprehensive loss.

As at December 31, 2022, an amount of $3,184,866 (2021 - $2,719,354) remains to be amortized until October 2025 related to the grant of stock options.

39

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

# **Share purchase warrants**

The following table reflects the activity in warrants during the year ended December 31, 2022, and the number of issued and outstanding share purchase warrants at December 31, 2022:

|  | Number of warrants Dec 31, 2021 | Issued | Exercised | Expired | Number of warrants Dec 31, 2022 | Exercise price per warrant | Expiry date |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Issuance of units - October 19, 2022 | - | 1,014,600 | - | - | 1,014,600 | 1.75 | Oct 19, 2024 |
|  | - | 1,014,600 | - | - | 1,014,600 | 1.75 |  |

The following table reflects the activity in warrants during the year ended December 31, 2021, and the number of issued and outstanding share purchase warrants at December 31, 2021:

|  | Number of warrants Dec 31, 2020 | Issued | Exercised | Expired | Number of warrants Dec 31, 2021 | Exercise price per warrant | Expiry date |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Issuance of units - September 28, 2018 | 3,448,276 | - | (3,448,276) | - | - | 0.58 | January 28, 2021 |
| Issuance of units - October 19, 2018 | 100,000 | - | (100,000) | - | - | 0.58 | February 13, 2021 |
| Issuance of units - May 15, 2019 | 1,355,500 | - | (1,355,500) | - | - | 0.85 | May 15, 2021 |
| Issuance of units - May 28, 2019 | 750,000 | - | (750,000) | - | - | 0.85 | May 24, 2021 |
| Issuance of units - June 19, 2019 | 500,000 | - | (500,000) | - | - | 0.85 | June 19, 2021 |
| Issuance of units - October 25, 2019 | 225,000 | - | (225,000) | - | - | 0.75 | October 25, 2021 |
| Issuance of units - November 10, 2020 | 1,677,275 | - | (1,672,000) | (5,275) | - | 4.5 | November 10, 2022 |
| Issuance of warrants - November 10, 2020 | - | - | (95,707) | - | - | 4.5 | November 10, 2022 |
|  | 8,056,051 | - | (8,146,483) | (5,275) | - |  |  |

# **23. Supplemental disclosure of cash flow information**

|  | 2022 | 2021 |
| --- | --- | --- |
|  | $ | $ |
| Accounts receivable | (985,015) | (12,372,139) |
| Costs and profits in excess of billings on uncompleted contracts | 3,871,413 | (3,849,077) |
| Inventory | (988,821) | (839,352) |
| Investment tax credits receivable | (19,891) | 1,015,862 |
| Royalties receivable | (30,842) | (65,845) |
| Deposits | 2,277,136 | 145,379 |
| Contract assets | (562,809) | - |
| Prepaid expenses | (53,942) | 39,111 |
| Accounts payable and accrued liabilities | 346,003 | 1,953,208 |
| Billings in excess of costs and profits on uncompleted contracts | 270,762 | 1,485,969 |
| Income taxes | 267,414 | (99,072) |
|  | 4,391,408 | (12,585,956) |

40

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

# **24. Supplemental disclosure on comprehensive income statement**

The amount of inventories recognized in cost of sales is $844,304 for the year ended December 31, 2022 ($326,279 in 2021).

The aggregate amortization and write-off of intangible assets expense for the year ended December 31, 2022 was $878,030 (2021 - $465,913) and was recorded in cost of sales and services.

Depreciation on property and equipment amounted to $603,894 and ROU assets was $635,828 for the year ended December 31, 2022, as compared to (2021 - $356,103 and $570,411 respectively) and is recorded in selling, general and administrative.

Employee benefits totaled $18,115,284 in the year ended December 31, 2022 (2021 - $21,855,957) and include share-based compensation of $5,538,463 (2021 - $9,762,745).

The Company has been awarded various government grants during the year, which were recognized when they became receivable. The grants, received in 2022, are unconditional and amounted to $204,791 (2021 - $226,420). An amount of $Nil (2021 - $149,575) was recorded as a reduction to the related expenses in research and development, an amount of $204,791 (2021 - $76,845) was recorded as a reduction to the related expenses in selling, general and administrative.

# **25. Net finance costs**

|  | 2022 $ | 2021 $ |
| --- | --- | --- |
| Financial expenses |  |  |
| Interest on term loans | 3,198 | 87,775 |
| Interest on lease liabilities | 378,611 | 307,691 |
| Interest accretion on balance due on business combination | 173,350 | 110,204 |
| Interest accretion on long term loans | 28,229 | 12,185 |
| Penalties and other interest expenses | 85,644 | 19,324 |
|  | 669,032 | 537,179 |
| Financial income |  |  |
| Interest accretion on royalty receivable | (118,290) | (132,809) |
| Net finance costs | 550,742 | 404,370 |

# **26. Loss per share**

The following table provides a reconciliation between the number of basic and fully diluted shares outstanding as at December 31, 2022 and 2021:

|  | 2022 $ | 2021 $ |
| --- | --- | --- |
| Weighted daily average of Common shares | 170,953,374 | 166,645,546 |
| Dilutive effect of stock options | - | - |
| Dilutive effect of warrants | - | - |
| Weighted average number of diluted shares | 170,953,374 | 166,645,546 |
| Number of anti-dilutive stock options and warrants excluded from fully diluted loss per share calculation | 6,745,100 | 8,403,000 |

# **27. Related party transactions**

During the years ended December 31, 2022 and 2021, the Company concluded the following transactions with related parties:

41

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

In 2022, rent and property taxes were charged by a trust whose beneficiary is the controlling shareholder and CEO of the Company in the amount of $277,389 (2021 - $274,934). On January 1, 2022, a lease for rent of a property with a trust whose beneficiary is the controlling shareholder and CEO of the Company, was modified to extend the lease term until December 2026. The lessor also reimbursed an amount of $1,070,264 representing the balance at the date of modification of the original prepayment amount of $1,178,530 made in 2020. At the date of modification, the lease liability was remeasured using a discount rate of 4%. As a result, the lease liability was increased by an amount of $1,070,264 and the right-of-use assets was decreased by an amount of $108,267.

These expenses are recorded in captions cost of sales and selling and general in the consolidated statements of comprehensive loss. As at December 31, 2022 the right-of-use asset and the lease liabilities amount to $80,980 and $799,090 respectively (2021 - $1,107,131 and $Nil).

A balance due to the controlling shareholder and CEO of the Company amounted to $254,097 (2021 - $144,506) is included in accounts payable and accrued liabilities.

The key management personnel of the Company, in accordance with IAS 24 Related Party Disclosures, are the members of the Board of Directors and certain officers. Total compensation to key management consisted of the following:

|  | 2022 $ | 2021 $ |
| --- | --- | --- |
| Salaries - key management | 1,204,306 | 3,049,501 |
| Pension contributions | 22,479 | 59,377 |
| Fees - Board of Directors | 157,900 | 187,600 |
| Share-based compensation - officers | 2,017,348 | 6,182,573 |
| Share-based compensation - Board of Directors | 2,293,167 | 2,338,650 |
| Other benefits - key management | 244,621 | 237,903 |
| Total compensation | 5,939,821 | 12,055,604 |

# **28. Financial instruments**

As part of its operations, the Company carries a number of financial instruments. It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments except as otherwise disclosed. The Company's overall risk management program focuses on the unpredictability of the financial market and seeks to minimize potential adverse effects on the Company's financial performance. The Company does not use derivative financial instruments to hedge these risks.

# *Foreign currency risk*

The Company enters into transactions denominated in US dollars for which the related revenues, expenses, accounts receivable and accounts payable and accrued liabilities balances are subject to exchange rate fluctuations.

As at December 31, the Company's exposure to foreign exchange risk for amounts denominated in US dollars is as follows:

|  | 2022 $ | 2021 $ |
| --- | --- | --- |
| Cash | 2,871,062 | 1,714,670 |
| Accounts receivable | 13,537,912 | 14,465,011 |
| Accounts payable and accrued liabilities | (1,713,717) | (1,023,999) |
| Total | 14,695,257 | 15,155,682 |

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

42

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

# *Sensitivity analysis*

At December 31, 2022, if the US Dollar changes by 10% against the Canadian dollar with all other variables held constant, the impact on pre-tax gain or loss and equity for the year ended December 31, 2022 would have been $1,470,000 (December 31, 2021 - $1,516,000).

# *Credit concentration*

During the year ended December 31, 2022, two customers accounted for 52% (December 31, 2021 - four customers for 79%) of revenues from operations.

|  | 2022 |  | 2021 |  |
| --- | --- | --- | --- | --- |
|  | Revenues | % of total revenues | Revenues | % of total revenues |
|  | $ | % | $ | % |
| Customer 1 | 5,598,653 | 29 | 7,308,191 | 24 |
| Customer 2 | 4,314,225 | 23 | 7,019,953 | 23 |
| Customer 3 | - | - | 6,417,373 | 21 |
| Customer 4 | - | - | 3,551,900 | 11 |
| Total | 9,912,878 | 52 | 24,297,417 | 79 |

Three customers accounted for 56%, 16% and 11%, respectively (December 31, 2021 - one customer for 73%) of trade accounts receivable with amounts owing to the Company of $18,894,727 (2021 - $12,063,636), representing the Company's major credit risk exposure. Credit concentration is determined based on customers representing 10% or more of total revenues and/or total accounts receivable.

# *Credit risk*

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The maximum credit risk to which the Company is exposed as at December 31, 2022 represents the carrying amount of cash and cash equivalents, accounts receivable (except sales tax receivable), costs and profits in excess of billings on uncompleted contracts, deposits and royalties receivable.

Cash and cash equivalents, which only comprise guaranteed investment certificates redeemable on relatively short notice by the Company, are held with major reputable financial institutions.

Management has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company's payment and delivery terms and conditions are offered. The Company's review could include reviewing external ratings, if they are available, financial statements, credit agency information, industry information and in some cases bank references. The Company's exposure to credit risk is mainly influenced by the individual characteristics of each customer. In monitoring customer credit risk, customers are identified according to their characteristics such as their geographic location, industry, trading history with the Company and existence of previous financial difficulties.

The Company does not generally require collateral or other security from customers on accounts receivable, however, the contract terms may include the possibility of recourse in the event of late payment. The Company believes that there is no unusual exposure associated with the collection of these receivables.

The credit risk associated with costs and profits in excess of billings on uncompleted contracts is similar to that of accounts receivable, as these amounts are accumulated and converted to accounts receivable as invoicing milestones are reached.

The royalties receivable are due from a company in which the Company has a strategic investments. The Company does not have collateral or other security associated with the collection of this receivable. The carrying amount of the royalties receivable have been discounted to reflect the time value of money and credit risk of the counterparty.

The deposits are payments made to suppliers and entities from which the Company leases property. The Company does not have collateral or other security associated with the collection of these deposits. As at December 31, 2022 and 2021,

43

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

no loss allowance has been recognized in connection with these deposits and the maximum exposure is the carrying amount of these deposits.

During the years 2022 and 2021, provisions for expected credit losses were recorded, however, no amounts of financial assets have been written off. The accounts provisioned by the loss are still subject to enforcement activity in order to collect the balances due.

# *Interest rate risk*

Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in interest rates. Changes in market interest rates may have an effect on the cash flows associated with some financial assets and liabilities, known as cash flow risk, and on the fair value of other financial assets or liabilities, known as price risk, and on the fair value of investments or liabilities, known as price risks. The Company is exposed to a risk of fair value on term loans as those financial instruments bear interest at fixed rates and to cash flow risk from the variable interest rate of the bank indebtedness.

# *Price risk*

Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market price (other than those arising from foreign currency risk and interest risk), whether those changes are caused by factors specific to the individual financial instrument or its issuers or factors affecting all similar financial instruments traded in the market. The most significant exposure to the price risk for the Company arises from its investments in shares and warrants of public companies quoted on the TSX Venture Exchange. If equity prices had increased or decreased by 25% as at December 31, 2022, with all other variables held constant, the Company's investments would have increased or decreased respectively, by approximately $1,841,484 (December 31, 2021 - $4,042,000).

# *Liquidity risk*

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivery of cash or another financial asset. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities.

The following table summarizes the contractual amounts payable and maturities of financial liabilities and other liabilities as at December 31, 2022:

|  | Carrying value $ | Total contractual amount $ | Less than one year $ | 2-3 years $ | 4-5 years $ | Over 5 years $ |
| --- | --- | --- | --- | --- | --- | --- |
| Bank indebtedness | 991,902 | 991,902 | 991,902 | - | - | - |
| Accounts payable and accrued liabilities 1 | 9,620,591 | 9,620,591 | 9,620,591 | - | - | - |
| Term loans | 389,987 | 520,444 | 59,917 | 190,587 | 180,000 | 89,940 |
| Balance due on business combination | 3,907,775 | 4,137,820 | 2,177,800 | 1,960,020 | - | - |
| Lease liabilities | 5,533,694 | 6,745,329 | 2,984,243 | 1,165,281 | 703,816 | 1,891,989 |
|  | 20,443,949 | 22,016,086 | 15,834,453 | 3,315,888 | 883,816 | 1,981,929 |

$^{1}$ Accounts payable and accrued liabilities exclude amounts which are not financial liabilities.

44

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

The following table summarizes the contractual amounts payable and maturities of financial liabilities and other liabilities as at December 31, 2021:

|  | Carrying value $ | Total contractual amount $ | Less than one year $ | 2-3 years $ | 4-5 years $ | Over 5 years $ |
| --- | --- | --- | --- | --- | --- | --- |
| Accounts payable and accrued liabilities 1 | 9,586,423 | 9,586,423 | 9,586,423 | - | - | - |
| Term loans | 190,905 | 263,232 | 85,731 | 67,561 | 62,823 | 47,117 |
| Balance due on business combination | 3,952,203 | 4,355,600 | 2,395,580 | 1,960,020 | - | - |
| Lease liabilities | 5,323,965 | 6,614,192 | 3,220,750 | 710,493 | 561,628 | 2,121,321 |
|  | 19,053,496 | 20,819,447 | 15,288,484 | 2,738,074 | 624,451 | 2,168,438 |

$^{1}$ Accounts payable and accrued liabilities exclude amounts which are not financial liabilities.

The Company's Canadian subsidiary benefits from a line of credit of $500,000, and the Italian subsidiary benefits from a 400,000 Euros ($576,000) line of credit. At December 31, 2022, $498,200 was drawn on the Canadian facility and 341,473 Euros ($493,702) was drawn on the Italian facility. The credit facilities both bear interest at variable rates which is the bank's prime rate plus 1%, therefore, 7.45% for the Canadian facility and 8% for the Italian facility. There are no imposed financial covenants on the credit facilities.

# *Fair value of financial instruments*

The fair value represents the amount that would be received for the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants at the measurement date. The fair value estimates are calculated at a specific date taking into consideration assumptions regarding the amounts, the timing of estimated future cash flows and discount rates. Accordingly, due to its approximate and subjective nature, the fair value must not be interpreted as being realizable in an immediate settlement of the financial instruments.

There are three levels of fair value that reflect the significance of inputs used in determining fair values of financial instruments:

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 - inputs for the asset or liability that are not based on observable market data.

The fair values of cash and cash equivalents, trade accounts receivable, other receivables, deposits, bank indebtedness, accounts payable and accrued liabilities approximate their carrying amounts due to their short-term maturities.

Investments in BGF and HPQ shares are valued at quoted market prices and are classified as Level 1.

Royalties receivable are discounted according to their corresponding agreements and are classified as Level 2.

Investments in HPQ warrants are valued using the Black-Scholes pricing model and are classified as Level 3 (note 11).

The fair value of the term loans and the balance due on business combination as at December 31, 2022 is determined using the discounted future cash flows method and management's estimates for market interest rates for similar issuances. Accordingly, as a result, their fair market values correspond to their carrying amount. The term loans are classified as level 2 and the balance due on business combination as Level 3.

45

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

# **29. Contingent liabilities**

The Company is currently a party to various legal proceedings. If management believes that a loss arising from these proceedings is probable and can reasonably be estimated, that amount of the loss is recorded. As additional information becomes available, any potential liability related to these proceedings is assessed and the estimates are revised, if necessary. Based on currently available information, management believes that the ultimate outcome of these proceedings, individually and in aggregate, will not have a material adverse effect on the Company's financial position or overall trends in results of operations.

The Company had received a government grant in prior years of approximately $800,000 to assist with the development of a new system of advanced waste treatment systems technology. The grant is potentially repayable at the rate of 3% of any consideration received as a result of the project, for which funding has been received, to a maximum of the actual grant received. This repayment provision will remain in effect until May 30, 2024. The Company abandoned the project in 2011 and accordingly, no amount is expected to be repaid.

# **30. Capital management**

The Company's objectives in managing capital are:

a) To ensure sufficient liquidity to support its current operations and execute its business plan; and

The Company's primary objectives when managing capital is to ensure the Company continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders.

The Company currently funds these requirements from cash flows from operations and with financing arrangements with third parties and shareholders.

The Company is not subject to any externally imposed capital requirements. The Company monitors its working capital in order to meet its financial obligations. As at December 31, 2022, the Company's working capital was $1,650,709 (2021 - $14,006,785).

The management of capital includes shareholders' equity for a total amount of $16,868,927 (2021 - $40,768,754) and term loans of $389,987 (2021 - $190,905), as well as cash and cash equivalents amounting to $3,445,649 (2021 - $12,202,513).

There were no significant changes in the Company's approach during the current and preceding fiscal year, however. In order to maintain or adjust capital structure, the Company may issue new shares, sell portions of its strategic investment and periodically purchase its own shares on the open market.

# **31. Income taxes**

a) Income tax expenses is comprised of the following:

|  | 2022 $ | 2021 $ |
| --- | --- | --- |
| Current tax |  |  |
| Current year | 118,378 | (155,714) |
| Deferred tax |  |  |
| Origination and reversal of temporary differences | (6,219,309) | (5,095,595) |
| Change in unrecognized deductible temporary differences | 6,176,915 | 4,511,349 |
|  | (42,394) | (584,246) |
| Income tax expense (recovery) | 75,984 | (739,960) |

46

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

# b) Reconciliation of effective tax rate

|  | 2022 $ | 2021 $ |
| --- | --- | --- |
| Loss before income taxes | (32,091,043) | (39,171,899) |
| Income tax rates | 26.5% | 26.5% |
| Income tax recovery at the combined basic Federal and Provincial tax rates | (8,504,126) | (10,380,553) |
| Permanent differences | 2,165,385 | 5,079,805 |
| Tax rate changes | (826) | 8,334 |
| Prior year adjustment | 115,118 | 60,533 |
| Change in unrecognized deductible temporary differences | 6,176,915 | 4,511,349 |
| Other | 123,518 | (19,428) |
| Income tax expense (recovery) | 75,984 | (739,960) |

The applicable statutory tax rates are 26.5% in 2022 and 26.5% in 2021. The Company's applicable tax rate is the Canadian combined rates applicable in the jurisdiction in which the Company operates.

# c) Deferred tax assets and liabilities

Recognized deferred tax assets and liabilities:

As at December 31, 2022 and 2021, recognized deferred tax assets and liabilities are attributable to the following:

|  | Assets |  | Liabilities |  | Net |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 $ | 2021 $ | 2022 $ | 2021 $ | 2022 $ | 2021 $ |
| Non-capital losses |  |  |  |  |  |  |
| carried forward | 772,343 | 1,705,073 | - | - | 772,343 | 1,705,073 |
| Strategic investments | - | - | - | (656,507) | - | (656,507) |
| Royalties receivable | - | - | (373,063) | (333,543) | (373,063) | (333,543) |
| Property and equipment | - | - | (155,833) | (147,127) | (155,833) | (147,127) |
| Intangibles | - | - | (243,447) | (468,167) | (243,447) | (468,167) |
| Deferred income | - | - | - | (21,000) | - | (21,000) |
| Right-of-use assets net of liabilities | - | - | - | (121,123) | - | (121,123) |
| Tax assets (liabilities) | 772,343 | 1,705,073 | (772,343) | (1,747,467) | - | (42,394) |
| Set off of tax | (772,343) | (1,705,073) | 772,343 | 1,705,073 | - | - |
| Net tax assets (liabilities) | - | - | - | (42,394) | - | (42,394) |

47

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

Deferred taxes from temporary differences and unused tax losses and tax credits are summarized as follows:

|  | January 1, 2021 $ | Recognized on business combination $ | Recognized in profit or loss $ | December 31, 2021 $ | January 1, 2022 $ | Recognized in profit or loss $ | December 31, 2022 $ |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Non-capital losses carried forward | 4,982,328 | 642,149 | (3,919,404) | 1,705,073 | 1,705,073 | (932,730) | 772,343 |
| Strategic investments | (4,919,499) | - | 4,262,992 | (656,507) | (656,507) | 656,507 | - |
| Investment tax credits | (273,854) | - | 273,854 | - | - | - | - |
| Royalties receivable | (280,900) | - | (52,643) | (333,543) | (333,543) | (39,520) | (373,063) |
| Property and equipment | (25,273) | (2,840) | (119,014) | (147,127) | (147,127) | (8,706) | (155,833) |
| Intangibles | - | (559,949) | 91,782 | (468,167) | (468,167) | 224,720 | (243,447) |
| Deferred income | - | - | (21,000) | (21,000) | (21,000) | 21,000 | - |
| Right-of-use assets net of liabilities | (188,802) | - | 67,679 | (121,123) | (121,123) | 121,123 | - |
|  | (706,000) | 79,360 | 584,246 | (42,394) | (42,394) | 42,394 | - |

48

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**  
 For the years ended December 31, 2022 and 2021  
 (In Canadian dollars)

As at December 31, 2022 and 2021, the amounts and expiry dates of tax attributes and temporary differences for which no deferred tax assets were recognized are as follows:

|  | December 31, 2022 |  | December 31, 2021 |  |
| --- | --- | --- | --- | --- |
|  | Federal $ | Provincial $ | Federal $ | Provincial $ |
| Research and development expenses, without time limitation: | 11,917,963 | 12,150,617 | 11,399,104 | 11,023,013 |
| Federal research and development investment tax credits: |  |  |  |  |
| 2029 | 299,881 | - | 299,881 | - |
| 2030 | 89,879 | - | 89,879 | - |
| 2031 | 223,759 | - | 223,759 | - |
| 2032 | 186,031 | - | 186,031 | - |
| 2033 | 105,216 | - | 105,216 | - |
| 2034 | 212,609 | - | 212,609 | - |
| 2035 | 488,555 | - | 488,555 | - |
| 2036 | 359,594 | - | 359,594 | - |
| 2037 | 253,885 | - | 253,885 | - |
| 2038 | 186,015 | - | 186,015 | - |
| 2039 | 340,728 | - | 465,535 | - |
| 2040 | 101,562 | - | 101,562 | - |
| 2041 | 167,461 | - | 359,115 | - |
| 2042 | 256,417 | - | - | - |
|  | 3,271,592 | - | 3,331,636 | - |

|  | December 31, 2022 |  |  | December 31, 2021 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Federal $ | Provincial $ | Italy $ | Federal $ | Provincial $ | Italy $ |
| Tax losses carried forward: |  |  |  |  |  |  |
| 2032 | 2,866,759 | 2,866,759 | - | 628,948 | - | - |
| 2033 | 2,047,643 | 2,047,643 | - | 2,047,643 | 1,490,639 | - |
| 2034 | 589,007 | 589,007 | - | 589,007 | 589,007 | - |
| 2035 | 703,664 | 416,827 | - | 703,664 | 416,827 | - |
| 2036 | 3,579,827 | 3,440,527 | - | 3,579,827 | 3,440,527 | - |
| 2037 | 1,577,876 | 1,568,739 | - | 1,577,876 | 1,568,739 | - |
| 2038 | 5,716,536 | 5,650,620 | - | 5,716,536 | 5,650,620 | - |
| 2039 | 4,772,060 | 4,079,919 | - | 4,163,315 | 4,079,919 | - |
| 2040 | 533,485 | 533,485 | - | - | - | - |
| 2041 | 3,818,898 | 3,773,941 | - | 2,710,255 | 2,659,255 | - |
| 2042 | 16,135,868 | 16,140,505 | - | - | - | - |
| Indefinite | - | - | 908,073 | - | - | 815,620 |
|  | 42,341,623 | 41,107,972 | 908,073 | 21,717,071 | 19,895,533 | 815,620 |

49

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

|  | December 31, 2022 |  | December 31, 2021 |  |
| --- | --- | --- | --- | --- |
|  | Federal | Provincial | Federal | Provincial |
|  | $ | $ | $ | $ |
| Other deductible temporary differences, |  |  |  |  |
| Without time limitation: |  |  |  |  |
| Right-of-use assets net of liabilities | 687,896 | 687,896 | - | - |
| Strategic investments | 3,068,378 | 3,068,378 | - | - |
| Financing costs | 677,789 | 677,789 | 1,100,504 | 1,100,504 |
| Intangible assets | 3,460,822 | 3,194,890 | 3,712,181 | 3,431,133 |
| Capital losses | - | - | 464,768 | 464,768 |
|  | 7,894,885 | 7,628,953 | 5,277,453 | 4,996,405 |

Deferred tax assets and investment tax credits have not been recognized in respect to these items because it is uncertain that future taxable profit will be available against which the Company can utilise the benefits therefrom. The generation of future taxable profit depends on the successful commercialisation of the Company's products and technologies.

# **32. Segment information**

The Company operates in one segment, based on financial information that is available and evaluated by the Company's Board of Directors. The Company's head office is located in Montreal, Quebec. The operations of the Company are located in three geographic areas: Canada, Italy and India.

The following is a summary of the Company's total revenues by geography:

|  | 2022 | 2021 |
| --- | --- | --- |
|  | $ | $ |
| Brazil | 162,797 | 1,475,608 |
| Canada | 11,933,904 | 7,383,884 |
| England | - | 634 |
| Germany | 11,606 | 3,867 |
| India | 91,699 | 698,837 |
| Israel | 27,360 | 126,246 |
| Italy | 1,309,478 | 2,514,665 |
| Mexico | 371,668 | 920,818 |
| Netherlands | 112,634 | - |
| Poland | 47,591 | 60,406 |
| Saudi Arabia | 1,511,142 | 7,019,953 |
| South Africa | 29,997 | - |
| Spain | 22,049 | 1,178 |
| United States of America | 2,661,071 | 10,567,741 |
| Vietnam | 720,507 | 294,513 |
|  | 19,013,503 | 31,068,350 |

Revenue by product line and revenues recognized by revenue recognition method are presented in note 7.

50

# **PyroGenesis Canada Inc.**  
 **Notes to the Consolidated Financial Statements**

For the years ended December 31, 2022 and 2021 (In Canadian dollars)

The following is a summary of selected asset categories by geographic market, at December 31:

|  | 2022 |  |  | 2021 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | $ Canada | $ India | $ Total | $ Canada | $ India | $ Total |
| Property and equipment | 3,372,356 | 21,096 | 3,393,452 | 3,685,974 | 26,963 | 3,712,937 |
| Right-of-use assets | 4,818,744 | - | 4,818,744 | 5,765,993 | - | 5,765,993 |
| Intangible assets | 2,104,848 | - | 2,104,848 | 2,774,198 | - | 2,774,198 |
| Goodwill | 2,660,607 | - | 2,660,607 | 2,660,607 | - | 2,660,607 |
|  | 12,956,555 | 21,096 | 12,977,651 | 14,886,772 | 26,963 | 14,913,735 |

In 2022 and 2021, none of the selected asset categories above were located in Italy.

# **33. Subsequent event**

On March 8, 2023, the Company announced it had completed a non-brokered private placement consisting of the issuance and sale of 5,000,000 units of the Company at a price of $1.00 per unit, for gross proceeds of $5,000,000. Each unit consists of one common share of the Company and one common share purchase warrant. Each warrant entitles the holder thereof to purchase one common share at a price of $1.25 until March 7, 2025. The entire amount is allocated to the common shares as the fair value of the common shares on March 8, 2023 was $1.38.

51

## Exhibit 99.4

#### Exhibit 99.4

#### CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

#### Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, P. Peter Pascali, certify that:

1. I have reviewed this annual report on Form 40-F of PyroGenesis Canada Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a

material fact necessary to make the statements made, in light of the circumstances under which such statements

were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly

present in all material respects the financial condition, results of operations and cash flows of the registrant as of,

and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls

and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15e)) and internal control over financial

reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to

be designed under our supervision, to ensure that material information relating to the registrant, including its

consolidated subsidiaries, is made known to us by others within those entities, particularly during the period

in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial

reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of

financial reporting and the preparation of financial statements for external purposes in accordance with

generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this

report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of

the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred

during the registrant's most recent fiscal year that has materially affected, or is reasonably likely to materially

affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal

control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of

directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over

financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,

summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant

role in the registrant's internal control over financial reporting.

Date: March 31

st

, 2023

By:

*/s/ P. Peter Pascali* 

P. Peter Pascali

Chief Executive Officer

(Principal Executive Officer)

## Exhibit 99.5

#### Exhibit 99.5

#### CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Andre Mainella, certify that:

1. I have reviewed this annual report on Form 40-F of PyroGenesis Canada Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a

material fact necessary to make the statements made, in light of the circumstances under which such statements

were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly

present in all material respects the financial condition, results of operations and cash flows of the registrant as of,

and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls

and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15e)) and internal control over financial

reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be

designed under our supervision, to ensure that material information relating to the registrant, including its

consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in

which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting

to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial

reporting and the preparation of financial statements for external purposes in accordance with generally

accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report

our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period

covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred

during the registrant's most recent fiscal year that has materially affected, or is reasonably likely to materially

affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal

control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of

directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial

reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize

and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role

in the registrant's internal control over financial reporting.

Date: March 31

st

, 2023

*By:* 

*/s/ Andre Mainella* 

Andre Mainella

Chief Financial Officer

(Principal Financial Officer)

## Exhibit 99.6

#### Exhibit 99.6

#### CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER TO

#### 18 U.S.C. Section 1350, As Adopted Pursuant to

#### Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of PyroGenesis Canada Inc. (the "Registrant") on Form 40 -F for the annual

period ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the "Report"),

I, P. Peter Pascali, Chief Executive Officer, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of

the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act

of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results

of operations of the Registrant.

Date: March 31

st

, 2023

By:

*/s/ P. Peter Pascali* 

P. Peter Pascali

Chief Executive Officer

(Principal Executive Officer)

## Exhibit 99.7

#### Exhibit 99.7

#### CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER TO

#### 18 U.S.C. Section 1350, As Adopted Pursuant to

#### Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of PyroGenesis Canada Inc. (the "Registrant") on Form 40 -F for the annual

period ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the "Report"),

I, Andre Mainella, Chief Financial Officer, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the

Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act

of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results

of operations of the Registrant.

Date: March 31

st

, 2023

By:

*/s/ Andre Mainella* 

Andre Mainella

Chief Financial Officer

(Principal Financial Officer)

## Exhibit 99.8

![pyrex99d8p1i0](pyrex99d8p1i0.gif) ![pyrex99d8p1i1](pyrex99d8p1i1.gif)

#### Exhibit 99.8

#### Raymond Chabot

#### Grant Thornton LLP

#### Consent of Independent
Suite 2000

#### Registered Public Accounting Firm
National Bank Tower

600 De La Gauchetière Street West

Montréal, Quebec

H3B 4L8

T 514-878-2691

We have issued our report dated March 30, 2023, with respect to the consolidated financial statements included in the

Annual Report of PyroGenesis Canada Inc. on Form 40-F for the year ended December 31, 2022.

We hereby consent to the inclusion of said report in the Annual Report of PyroGenesis Canada Inc. for the fiscal year ended

December 31, 2022.

Montreal, Canada

March 31, 2023

## Exhibit 99.9

![pyrex99d9p1i0](pyrex99d9p1i0.gif)

[**Table of Contents**](#a25)

#### Exhibit 99.9

#### CODE OF BUSINESS CONDUCT AND ETHICS

#### Adopted by Resolution of the Board of Directors on: March 30, 2021
[**Table of Contents**](#a25)

-i-

#### **TABLE OF CONTENTS**

#### Page
[INTRODUCTION](#a279)

[NO RETALIATION](#a445)

[CONFLICT OF INTEREST AND DISCLOSURE ISSUES](#a499)

[IntellectualProperty_514076](#a830)

[Conflicts of Interest](#a502)

[Outside Employment and Business Activities](#a593)

[Community Activities](#a621)

[Board Appointments](#a656)

[Personal Gain](#a703)

[CompanyConfidentialInformation_812506](#a738)

[Intellectual Property](#a830)

[Use of Company Assets](#a861)

[Use of Technology](#a889)

[WORK ENVIRONMENT](#a922)

[Discrimination- and Harassment-Free Work Environment](#a968)

[Equal Opportunity](#a1041)

[Employee Privacy and Personal Information](#a1049)

[Substance and Alcohol Abuse](#a1137)

[HEALTH, SAFETY & THE ENVIRONMENT](#a1153)

[ETHICAL BUSINESS PRACTICES](#a1201)

[Compliance with Laws](#a1204)

[Gifts, Benefits and Entertainment](#a1232)

[Recording of Transactions and Reporting of Financial Information](#a1352)

[Use of Written Agreements; No Side Deals or Side Letters](#a1393)

[Records Retention and Destruction](#a1419)

[Cybersecurity](#a1460)

[Ethical Competitive Practices and Third-Party Intellectual Property](#a1492)

[Crime and Money-Laundering Prevention](#a1524)

[DEALINGS WITH PERSONS OUTSIDE THE COMPANY](#a1541)

[Dealing with Public Officials](#a1552)

[Dealing with the Media and Communications Generally](#a1705)

[Dealings with Suppliers, Agents and Representatives](#a1732)

[Political and Charitable Contributions](#a1815)

[Investigations](#a1877)

[COMPLIANCE](#a1927)

[WAIVER, AMENDMENTS AND INTERPRETATION OF THIS CODE](#a2008)

#### CODE OF BUSINESS CONDUCT AND ETHICS

#### INTRODUCTION
Every employee, officer and director of PyroGenesis Canada Inc. (the "

#### Company
") and its subsidiaries occupies a position

of trust. In varying measures, individuals, as well as certain contractors and agents, represent the Company in its relations

with others whether with customers, suppliers, employees, competitors, governments, investors or the general public.

Whatever the area of activity and whatever the degree of responsibility, such persons are expected to act honestly, ethically,

with integrity and in compliance with applicable laws and regulations.

This Code of Business Conduct and Ethics (this "

#### Code
") was adopted by the board of directors of the Company (the

"

#### Board
") as a guide that is intended, among other things, to sensitize such individuals to significant legal and ethical issues

that arise frequently and to the mechanisms available to report illegal or unethical conduct, and provide assurance that

reporting of questionable behavior is protected and encouraged. It does not purport to address every legal or ethical issue

that may be encountered. Moreover, the specific requirements of applicable law in certain jurisdictions where we currently

operate or may operate in the future may impose a higher standard than is specifically set forth in this Code. Ultimately, no

code of conduct can replace the thoughtful behavior of a person acting honestly, ethically and with integrity.

Compliance with this Code is mandatory for all employees, officers and directors of the Company. Certain contractors,

agents and other representatives of the Company may also be required to comply with this Code. Failure to comply with

this Code, including a failure to report a violation of this Code, can have severe consequences. Conduct that violates this

Code may violate applicable laws and subject both the Company and its employees, officers and directors to prosecution

and legal sanctions. The Company may discipline those who violate this Code, up to and including discharge from office or

termination of employment or engagement with the Company.

The Company has set forth in writing numerous policies, procedures, codes, rules and standards of performance (all of

which continue in force) and may create new policies, procedures, codes, rules and standards in the future. This Code

supplements, but does not replace such other policies, procedures, codes, rules and standards of performance. In the event

of a conflict or inconsistency between this Code and any other written policies, procedures, codes, rules or standards of

performance of the Company this Code shall prevail unless the conflicting or inconsistent policy, procedure, code, rule or

standard of performance imposes an additional and/or higher obligation or standard, in which case the conflicting or

inconsistent policy, procedure, code, rule or standard of performance shall control.

Employees, officers or directors with questions about this Code or any policies, rules and employee performance standards

should consult a senior officer. Any employee, officer or director who is concerned about conduct that they believe may

violate this Code, such policies, rules and employee performance standards or applicable law, should consult a senior

officer. Procedures for reporting suspected violations of this Code are set out under "Compliance" below.

#### NO RETALIATION
The Company will not permit any form of retaliation (including discharge, demotion, suspension, threats, harassment or any

other form of discrimination) against an employee who has truthfully and in good faith:

(a) reported violations of this Code;

(b) lawfully sought advice about providing information, expressed an intention to provide information or provided

information or assistance regarding any conduct which the employee reasonably believes constitutes a criminal

offense or other violation of law;

(c) cooperated, filed, caused to be filed, testified, participated in or otherwise assisted in, or expressed an intention to

do any of the foregoing, in an investigation or proceeding related to a criminal offense or other violation of law; or

(d) provided a law enforcement officer with truthful information regarding the commission or possible commission of a

criminal offence or other violation of law, unless the individual reporting is one of the violators.

Any retaliation against an employee who has truthfully and in good faith done any of the foregoing in accordance with this

Code will result in discipline, up to and including dismissal.

#### CONFLICT OF INTEREST AND DISCLOSURE ISSUES

#### Conflicts of Interest
Employees, officers and directors owe a duty to the Company to advance its legitimate interests when the opportunity to do

so arises and to refrain from activities which could hinder their ability to act in the Company's best interest or have the

potential or could be perceived as doing so, including to avoid all situations in which their personal interests conflict, might

conflict or could be perceived to conflict with their duties to the Company. In particular, employees, officers and directors

should seek to avoid acquiring any interests or participating in any activities that would tend to:

(a) deprive the Company of the time or attention required to perform their duties properly; or

(b) create an obligation or distraction which would affect their judgement or ability to act solely in the Company's best

interest.

Employees charged with executive, managerial or supervisory responsibility are required to see that actions taken and

decisions made within their jurisdiction are free from the influence of any interests that might reasonably be regarded as

conflicting with those of the Company.

Employees, officers and directors owe a duty to the Company to advance its legitimate interests when the opportunity to do

so arises and to refrain from activities which could hinder their ability to act in the Company's best interest or have the

potential or could be perceived as doing so. Employees are required to disclose in writing to the Company all business,

commercial or financial interests or activities that might reasonably be regarded or perceived as creating an actual or

potential conflict with such duties. In addition, directors and officers are required under corporate law to disclose any interest

in and refrain from voting on any material contracts or transactions relating to the Company in which they are a party or

have a material interest.

A

senior officer must be contacted in advance to co-ordinate the approval of such material contracts

or transactions.

#### Outside Employment and Business Activities
Employees may take on employment and engage in or otherwise invest in business ventures, partnerships or enterprises,

but only outside their working hours and with the approval of a senior officer. However, employees must avoid outside

employment, businesses and other activities which would impair their effective performance as a Company employee, which

could have an adverse impact on the business or reputation of the Company or which might create or appear to create a

conflict with the best interests of the Company.

For these reasons, it is important for there to be current and complete disclosure of any such outside employment or

business ventures, partnerships or enterprises that any employee, officer or director may have. Such disclosure should be

made promptly to a senior officer and should also be listed in any acknowledgement of this Code requested by the Company.

See also "Personal Gain", "Company Confidential Information", "Intellectual Property", "Use of Company Assets" and "Use

of Technology" below.

#### Community Activities
Employees, officers and directors may, and are encouraged to, engage in community and volunteer work and activities

outside their working hours, and to uphold a commitment to community in all their activities. Requests for donation or

sponsorship by the Company or from Company assets, including employee work time, must be made only in accordance

with the Company's applicable established policies, procedures, codes, rules and standards and within any established

budget therefor or, alternatively, may be submitted to a senior officer and, in such case, may only be approved by the Chief

Executive Officer, Chief Financial Officer or another senior officer designated by the Chief Executive Officer or Chief

Financial Officer for such purpose. See also "Lobbying Activities and Political and Charitable Contributions" below.

#### Board Appointments
An employee may not sit on the board of a publicly-traded company or other entity (other than the Company and its affiliates)

without the permission of a senior officer or in the case of a senior officer, the Chief Executive Officer. Membership on

charitable or community boards does not require pre-approval but such activity must not interfere with duties and obligations

to the Company and must not reflect negatively on the Company.

An employee who sits on the board of a company or other entity (other than the Company and its affiliates) must abstain

from voting on any matter that directly or indirectly concerns the Company or would be contrary to the Company's interests

or would give the appearance or perception of a conflict of interest.

#### Personal Gain
Employees, officers and directors must not directly or indirectly use their status or position with the Company to obtain

personal gain in any manner, including from those doing or seeking to do business with the Company. Applicable law

provides that if personal financial benefit is improperly gained by an employee, officer or director directly or indirectly, through

a spouse or child or a relative sharing the same residence as the individual, as a result of his employment or position or by

the use or misuse of the Company's property or of information that is confidential to the Company's business, then the

employee, officer or director must account to the Company for any benefit received.

#### Company Confidential Information
Employees, officers and directors must safeguard the Company's Confidential Information. "

#### Confidential Information
"

includes, but is not limited to, trade secrets, know how, records, data, plans, strategies, processes, business opportunities

and ideas relating to present and contemplated products and services and financial affairs of the Company, its customers,

its suppliers and/or employees, as well as information relating to cybersecurity risks and incidents, which information is not

generally known to the public.

Employees, officers and directors are prohibited from disclosing Confidential Information or other information which might

impair the Company's competitive position or which might violate the private rights of individuals, enterprises or institutions

without appropriate authorization in accordance with the Company's Disclosure, Confidentiality and Trading Policy, and

must take the appropriate steps to protect such information. The above rules also apply to confidential information of a

Company customer or supplier (or prospective customer or supplier). These confidentiality obligations continue even after

an individual's service as an employee, officer or director of the Company has ceased.

If the decision is made to disclose Confidential Information to any person or entity outside of the Company (such as a

potential vendor or business partner), it should be done only after appropriate confidentiality agreements are executed.

These agreements must document the need to maintain confidentiality of the Confidential Information that is disclosed and

copies of all confidentiality agreements must be forwarded to a senior officer. The amount of Confidential Information shared

with any person or entity outside of the Company should, in any case, be kept to the minimum necessary to address the

applicable business need.

All employees, officers and directors must also adhere to the Company's policies, procedures, and rules on confidentiality,

disclosure and insider trading as set out in the Company's Disclosure, Confidentiality and Trading Policy. A copy of such

policy is available on the Company's intranet, but it may also be obtained from a senior officer. Nothing in such policy or

this Code restricts an employee from reporting potential violations of law to securities regulators or other governmental

agencies or self-regulatory authorities without notice or permission from the Company, or providing disclosures that are

protected or required under applicable whistleblower laws and cooperating voluntarily with or responding to any inquiry from

securities regulators or other governmental agencies or self-regulatory organizations.

#### Intellectual Property
Intellectual property refers to any creations of the mind, such as inventions, literary or artistic works, programs, databases,

designs, symbols, names and images. Intellectual property is protected in law by rights such as patents, copyright and

trademarks, which enable the creations to be protection from unauthorized use by third parties. All intellectual property

developed by an employee in his or her role during the course of his or her employment with the Company belongs to the

Company and all employees assign to the Company all rights the employee may have in such intellectual property. All

materials documenting intellectual property must remain with the Company following termination of employment and

employees must delete copies from personal devices. Employees must take such reasonable steps as requested by the

Company to confirm ownership of any intellectual property in the Company and assist the Company to perfect and maintain

its title to such intellectual property and bring or defend cases involving such intellectual property. All employees waive all

authors' and moral rights which they may have in such intellectual property.

#### Use of Company Assets
Each employee, officer and director has a responsibility to prevent misuse, loss, unauthorized destruction or damage or

theft of the Company's assets. Reasonable precautions should be taken to secure the Company premises and assets.

Company assets should be used solely for the benefit of the Company. Use of the Company's funds or assets for any

unlawful or improper purpose is prohibited. Claims for business expenses must be made consistent with the Company's

expense polices. Excessive, fictitious or unnecessary claims are prohibited.

#### Use of Technology
Improper use of the Company's IT resources can create legal liability and these resources should generally be used for

Company purposes only.

Information transmitted through Company resources implies affiliation with the Company and should therefore reflect

positively upon the Company. Sending, receiving, displaying, printing, or otherwise engaging in any communications that

are in violation of applicable law or this Code, or any other the Company policy, including, but not limited to, communications

that are unlawful, libellous, invasive of another's privacy, threatening, fraudulent, harassing, sexually explicit, defamatory,

or otherwise objectionable, or that infringe or may infringe the intellectual property or other rights of another person or

company, are prohibited. Employees are expected to discourage others from transmitting such information.

Subject to applicable laws, all information of any kind (including without limitation voice communications and electronic

messages) stored or transmitted on Company systems is the property of the Company and the Company has the right to

monitor, inspect and/or audit any communication or material stored, downloaded, accessed, posted, transmitted or

distributed on an employee's computer, phone or voicemail at any time for any purpose, without prior notice to the employee.

Communications of any nature on these systems should not be considered private communications.

#### WORK ENVIRONMENT
The Company is committed to respecting human rights both within the Company and with those with whom the Company

does business and the Board oversees this commitment and the Company policies in which it is reflected.

The Company respects human rights by seeking to avoid infringing on the rights of others and seeks to address adverse

human rights impacts with which the Company may become involved. The Company prohibit the use of any forced,

compulsory or child labor.

The Company respects the rights of Company employees and seeks to provide fair and safe working conditions, including

a work environment that is free from discrimination and harassment and affords equal opportunity to all. This commitment

is supported by a broad range of programs for employees and their family members, including employee benefits focused

on health, personal wellness, parental leave, diversity and inclusion, and education.

#### Discrimination- and Harassment-Free Work Environment
The Company strives to maintain a work environment free of violence, discrimination against and harassment of employees

or non-employees with whom the Company has a business service or professional relationship and in which individuals are

accorded equality of employment opportunity based upon merit and ability. Discriminatory practices based on race,

ancestry, place of origin, color, national or ethnic origin, citizenship, creed, sex, sexual orientation, gender identity, gender

expression, religion, marital status, family status, same-sex partnership status, age, record of offenses, disability or other

prohibited grounds of discrimination under applicable law will not be tolerated.

It is the responsibility of each employee, officer and director of the Company to help the Company provide a work

atmosphere free of harassing (sexual or otherwise), abusive, disrespectful, disorderly, violent, hostile, disruptive or other

non-professional conduct. Harassment in any form, verbal or physical, by any employee, will not be tolerated. The Company

requires every person to show sound judgment and respect for the feelings and sensibilities of all other employees .

If an employee feels that another employee's conduct is discriminatory, harassing, improper or offensive, the offended

employee should promptly and firmly tell the offender that his or her behavior is unwelcome. Doing so places the offender

on notice that his or her conduct is inappropriate . However, any employee who believes he or she has been subject to

harassment or offensive conduct, or who believes he or she has been a witness to such conduct, may report the offense to

the Human Resources Department or pursuant to the mechanisms for reporting suspected violations of this Code set out in

"Compliance".

#### Equal Opportunity
The Company is committed to fair employment practices, including equal treatment in hiring, promotion, training and

compensation, termination, and disciplinary action.

#### Employee Privacy and Personal Information
The Company believes in taking steps to protect the privacy of its employees, officers, directors, contractors, agents and

other representatives. The Company will not interfere in the personal lives of such individuals unless their conduct impairs

their work performance or adversely affects the work environment or business or reputation of the Company or is otherwise

a violation of this Code.

The Company limits the collection of personal information to that which is necessary for business, legal, security or

contractual purposes and collection of personal information is to be conducted by fair and lawful means with the knowledge

and consent of the individual from whom the information is being collected. Access to employee personnel and medical

records and the information contained therein must be limited to those with a need to know for a legitimate business purpose.

All employees have the right to see their own personnel record. Personal information must not be used or disclosed for

purposes other than those for which it was collected, except with the knowledge and consent of the individual or as required

by law. Personal information must be retained only as long as necessary for the fulfilment of those purposes and must be

kept sufficiently accurate, complete and up-to-date to minimize the possibility that inappropriate information may be used

or disclosed. The Company and its employees must observe obligations of confidentiality and non-disclosure of personal

information, including information of its employees and customers, with the same degree of diligence that employees are

expected to use in protecting Confidential Information. All employees must adhere to the Company's policies, procedures,

codes, rules and standards in place to protect personal information against loss or theft, as well as unauthorized access,

disclosure, copying, use or modification of personal information of others, as the Company is responsible for all personal

information in its possession or custody. The Company and all employees shall also comply with all applicable laws

regulating the disclosure of personal information.

#### Substance and Alcohol Abuse
The use, possession, sale, purchase and the negotiation for sale or purchase of illegal substances or alcohol in the

workplace or on or through Company property is prohibited unless otherwise authorized. The abuse or improper use of

prescription or over-the-counter drugs while in the workplace or on or through Company property is also prohibited.

Employees are prohibited against using drugs or alcohol in a manner, whether before, during or after work hours, which

adversely affects job performance or customer or supplier relations or compromises the safety of other persons.

#### HEALTH, SAFETY & THE ENVIRONMENT
The health and safety of employees is a vital concern for the Company and all Company employees share a responsibility

to promote a workplace free of preventable safety and health hazards that complies with all applicable laws and regulations

governing workplace health and safety. This commitment encompasses all of the Company's facilities and operations. Each

employee must be proactive and follow all of the Company's safety and health rules and report possible safety and health

issues and concerns to appropriate management personnel.

The Company is committed to conducting operations and activities in a manner that protects the environment. Company

policy is that no employee shall engage in conduct that violates environmental laws or regulations or is otherwise

inconsistent with the health and safety needs of our employees and the environmental needs of our communities. The

Company's employees are expected to take steps to conserve energy resources to the fullest extent possible consistent

with sound business operations and the Company encourages its offices, employees, suppliers and vendors to participate

in energy and water conservation and recycling programs .

The Company is also committed to the continuous improvement of its environmental management systems, its

environmental, health and safety programs, and to the prevention of pollution.

#### ETHICAL BUSINESS PRACTICES

#### Compliance with Laws
The Company conducts business in jurisdictions where laws, customs and social requirements vary considerably. It is the

Company's policy to operate in material compliance with all applicable domestic and foreign laws, including applicable anti-

corruption and anti-bribery laws. Any employee, officer or director becoming aware of a conflict between foreign laws,

customs or social requirements and applicable domestic or other laws should consult a senior officer promptly. If there is a

conflict between laws, customs or social requirements, employees, officers and directors should in all cases always comply

with all legal requirements. If there are no directly applicable legal requirements, employees, officers and directors should

always comply with applicable Company policies, guidance and expectations.

#### Gifts, Benefits and Entertainment
Except as set forth herein and in accordance herewith, employees, officers and directors are strictly prohibited from

furnishing or providing, directly or indirectly on behalf of the Company, gifts, entertainment or benefits to other persons

including public officials (as defined below). Similarly, employees, officers and directors must not accept or give anything

that will compromise, or be seen to compromise their judgement or inappropriately influence themselves or others. Any

gifts, entertainment or other benefits offered or received that do not comply with these restrictions must be disclosed to a

senior officer and should be declined or returned , if possible.

Those individuals whose duties permit them to do so may furnish or accept certain gifts, favors and entertainment to or from

persons, other than public officials (as defined below), if all the following tests are met:

(a) the gift or other benefit is not cash, a gift certificate or other negotiable instrument;

(b) the gift, other benefit or entertainment cannot reasonably be interpreted as an improper payment or inducement

and is of nominal value;

(c) the gift, other benefit or entertainment does not contravene any law and, in addition, is made in accordance with

generally-accepted local ethical practices;

(d) the gift, other benefit or entertainment does not influence Company business decisions or impact independent

judgement;

(e) the gift, other benefit or entertainment occurs or is given or accepted infrequently;

(f) the gift, other benefit or entertainment arises out of the ordinary course of business;

(g) the gift, other benefit, or entertainment involves reasonable expenditures; and

(h) if subsequently disclosed to the public, the provision or acceptance of the relevant gift, other benefit or

entertainment would not in any way embarrass the Company, its employees, officers or directors or the recipient.

For the avoidance of doubt, this section is not intended to apply to planned promotional or other similar activities of the

Company, including the offering of incentives to customers of the Company, which have been approved in accordance with

the Company's applicable policies and procedures. Any questions regarding the interpretation of this section and its

requirements should be directed to a senior officer prior to accepting or giving the gift or other benefit to the extent

reasonably practicable.

#### Recording of Transactions and Reporting of Financial Information
The integrity of the Company's record keeping and reporting systems shall be maintained at all times, as these systems are

required for the Company to meet its financial, legal and other business obligations.

Employees must document and record all transactions in accordance with the Company's internal control procedures and

in compliance with all applicable accounting principles, laws, rules and regulations, and employees with responsibility for

reporting financial information must provide information that is accurate, complete, objective, timely and understandable

and that complies with all applicable laws relating to the recording and disclosure of financial information. Employees and

managers are forbidden to use, authorize, or condone the use of "off-the-books" record-keeping or any other device that

could be utilized to distort records or reports of the Company's true operating results and financial conditions. Employees

must not fraudulently influence, coerce, manipulate or mislead any independent public or certified accountant engaged in

the performance of an audit, review, compilation or other service with respect to the financial statements for the purpose of

rendering such financial statements misleading.

#### Use of Written Agreements; No Side Deals or Side Letters
The Company documents business transactions with full and complete written agreements that set out the terms and

conditions of the agreement and understandings between the parties. No new agreement can be created, or an existing

agreement modified, without approval of a senior officer. All new agreements should also be reviewed by the relevant

functional areas, including finance, as the terms and conditions of the agreement may affect how the Company records and

reports the transaction for accounting or other purposes. No oral contracts, informal letters of understanding or intent,

"handshake deals" or side letters are permitted. Where the Company has developed standard written agreements and other

provisions, schedules, riders and appendices, Company employees must use these standard forms except to the extent

that changes are authorized by a senior officer.

#### Records Retention and Destruction
Legal and regulatory practice requires the retention of certain records, such as certain tax, personnel health and safety, and

financial records, for various periods of time and employees, officers and directors are required to comply with Company

controls for the retention and timely destruction of records. In addition, when litigation or a governmental investigation or

audit is pending or imminent, relevant records must not be altered or destroyed until the matter is closed. Alteration or

destruction of records in a legal or governmental proceeding may constitute a criminal offense.

A senior officer will notify employees when records have been placed on a "legal hold". Such records cannot be altered,

destroyed, deleted or modified in any manner for the duration of the "legal hold". Questions regarding records retention

should be addressed to a senior officer, particularly if any litigation, investigation, inquiry or administrative action involving

the Company or any of its employees, suppliers or customers is pending or threatened.

#### Cybersecurity
Cyber-attacks may be carried out by third parties or insiders using techniques that range from highly sophisticated efforts

to electronically circumvent network security or overwhelm websites to more traditional intelligence gathering and social

engineering aimed at obtaining information necessary to gain access. In addition, third parties may attempt to fraudulently

induce employees or customers to, or the Company's employees or customers themselves may, disclose information in

order to gain access to the Company's data or its customers' information and potentially use such data or information

improperly.

Employees must not engage in or otherwise aid, assist or ignore any potential or actual cyber-attacks or other cyber

incidents or otherwise exploit any cybersecurity vulnerabilities of the Company, and employees must report any such

threatened or actual cyber-attacks or cybersecurity vulnerabilities.

#### Ethical Competitive Practices and Third-Party Intellectual Property
The Company competes vigorously and creatively in its business activities, but does so in a fair, lawful and ethical manner.

Employees must not use improper or illegal means of gathering information about competitors or other third parties, and

must not exchange information or agree with competitors in connection with pricing or other matters that are prohibited by

applicable law. Theft or illegal entry and electronic eavesdropping are unacceptable means of searching for competitive

intelligence. Employees must neither offer a bribe or a gift in exchange for a competitor's information nor otherwise solicit

information from current or former employees of a competitor. Employees, officers and directors of the Company must also

not knowingly use or bring onto the Company's computer systems intellectual property belonging to third parties without the

applicable third party's consent, a license or other legal right.

#### Crime and Money-Laundering Prevention
The Company is committed to comply fully with all applicable anti-money laundering laws, both domestically and

internationally. The Company will conduct business only with reputable customers who are involved in legitimate business

activities and whose funds are derived from legitimate sources. All employees are to take reasonable steps to ensure that

the Company does not aid or take part in any illegal activities or accept payments that have been identified as a means of

laundering money.

#### DEALINGS WITH PERSONS OUTSIDE THE COMPANY
The honesty and integrity of those who represent the Company must underlie all of the Company's relationships with

persons outside the Company.

#### Dealing with Public Officials
As a general matter, all dealings between employees, officers and directors of the Company and public officials are to be

conducted in a manner that will not compromise the integrity or impugn the reputation of the Company, its employees,

officers or directors or any public official. The Company specifically prohibits bribery of public officials and third parties

anywhere in the world and requires compliance with all applicable laws in the countries in which the Company does

business, including, without limitation, Canada's Corruption of Foreign Public Officials Act ("

#### CFPOA
") and the U.S. Foreign

Corrupt Practices Act ("

#### FCPA
"), which prohibit bribery and corruption. This legislation also requires the Company to keep

accurate books and records and maintain effective internal controls. The CFPOA and the FCPA each have a broad scope,

and apply to the activities of the Company and activities carried out through its subsidiaries and affiliates anywhere in the

world.

Even the appearance of impropriety in dealing with public officials is improper and unacceptable. Any participation, whether

directly or indirectly, in any bribes, kickbacks, improper profit-sharing arrangements, illegal gratuities, indirect contributions,

improper inducements, "facilitation payments" or similar payments to any public official is expressly forbidden,

notwithstanding that they might further the business interests of the Company and notwithstanding that such practices may

be considered to be a way of "doing business" or necessary in a particular country in question, including where the making

small "facilitation payments" to foreign public officials to secure a routine business service or have routine administrative

actions performed by public officials is local custom. Furthermore, certain laws, such as the CFPOA, apply to dealings with

foreign public officials in Canada and in the official 's own state.

It is the Company's policy that no payments or offers to make payments whatsoever, regardless of amount or purpose, shall

be made either directly or through third parties to officials or employees of government agencies or instrumentalities

(including government monopolies) without an express authorization from a senior officer following consultation with the

appropriate compliance personnel. Any approved arrangements must be documented in accordance with the Company

legal and accounting requirements and ethical business practices.

The Company may hire former public officials from time to time, but because of the restrictions that applicable laws can

place on such arrangements in certain circumstances, employees, officers and directors must first consult with a senior

officer prior to hiring a current or former public official, or their family members and the Company will not hire any such

official if he or she is participating in a matter reasonably regarded as involving the Company's interests.

For purposes of this Code, a "public official" should be interpreted broadly and includes any official or employee of a

government or of a department, organization or agency of a government (or any department, organization or agency

thereof); any employee of any company owned or controlled by a government; any official who holds a legislative or judicial

position; any official of a public international organization; any political party or official of a political party; any candidate for

political office; and any person or firm acting in an official capacity, including for, or on behalf of, any of the following: a

government, a department or agency of a government, a company owned or controlled by a government, a legislator, a

judicial officer, a public international organization, or any political party.

The Company and its representatives will not engage in or undertake lobbying activities as defined under applicable laws

unless all requirements under such applicable laws have been satisfied and the prior express approval of a senior officer

has been obtained following consultation with appropriate compliance personnel.

#### Dealing with the Media and Communications Generally
The Company is committed to providing, as appropriate, full and prompt disclosure to the public of material developments

and events. However, all media, public and investor relations and communications are to be co-ordinated through a senior

officer and the Investor Relations, as applicable, in accordance with the Company's Disclosure, Confidentiality and Trading

Policy and applicable laws. Employees should not comment on any inquiry from the media, no matter how innocuous the

inquiry may appear. Any employee who is asked by the media or otherwise for a statement or to give a presentation should

explain that he or she is subject to this Code and the Disclosure, Confidentiality and Trading Policy and refer the matter to

a senior officer.

#### Dealings with Suppliers, Agents and Representatives
Selection of suppliers to the Company will be based on merit after due consideration of alternatives. The Company will only

deal with suppliers who comply with applicable legal requirements (including any applicable regulations requiring, for

example, the conduct of background checks) and the Company's standards relating to, among other things, labor, including

not using child or forced labor, environment, health and safety, intellectual property rights and refraining from improper

payments. Confidential information received from a supplier shall be treated as if it were the Company's Confidential

Information (see "Conflicts of Interest and Disclosure Issues – Company Confidential Information").

The Company will enter into representation agreements only with companies or persons believed to have a record of and

commitment to integrity. Efforts will be taken by the Company and its employees to ensure that agents, consultants,

independent contractors, representatives and suppliers are aware of this Code. A senior officer should be contacted prior

to retaining any individual who is to act as an agent, consultant, independent contractor or representative, and such

individual should be retained only pursuant to a written contract that has been approved by a senior officer .

In cases where an agent, consultant, independent contractor, or a representative is engaged to provide services to the

Company and that individual deals on behalf of the Company with public officials, has access to Confidential Information or

where the Company otherwise determines it is necessary or advisable, such person will be provided with a copy of this

Code and be required to acknowledge the same and be bound by its terms.

#### Political and Charitable Contributions
The use of the Company's funds, goods or services as contributions to political parties, candidates, campaigns or charities

is forbidden, unless authorized by a senior officer, and the contribution is in accordance with any approved political donations

or charitable donations budget. Contributions include money or anything having value, such as loans, services,

entertainment, trips, employee work time and the use of the Company's facilities or assets.

No corporate action, direct or indirect, will be allowed that infringes on the right of any employee individually to decide

whether, to whom, and in what amount, he or she will make personal political or charitable contributions. The same is true

of volunteer political or charitable donations of personal service time, so long as it does not interfere with the working status

of employees and is not during employee work time. Employees, officers and directors who participate in political or

charitable activities on their own behalf and on their own time must not purport to speak or act for the Company or in any

way use Company property or assets. It is illegal for the Company to reimburse an employee for a contribution in the nature

of those listed above.

#### Investigations
The Company will fully cooperate with any appropriate governmental or regulatory investigation. Any time an employee,

officer or director receives information about a new government, regulatory or other investigation or inquiry, this information

should be communicated immediately to a senior officer .

Employees, officers and directors should never, under any circumstances:

(a) destroy or alter any the Company documents or records in anticipation of a request for those documents from

any government agency or a court;

(b) lie or make any misleading statements to any governmental investigator (including routine as well as non-routine

investigations); or

(c) attempt to cause the Company, any employee or any other person, to fail to provide information to any

government investigator or to provide any false or misleading information.

(d) Should any governmental, regulatory or other inquiry be made through the issuance of a written or oral request

for information, such request should immediately, and before any action is taken or promised, be submitted to

a senior officer.

#### COMPLIANCE
This Code will be posted to the Company's website and filed under the Company's profile at www.sedar.com.

A

copy of

this Code will also be made available to each Company employee and made available to each director as part of his or her

orientation materials.

From time to time as may be requested by the Company, each employee, officer and director, as applicable, must complete

an acknowledgement and disclosure statement attesting to that individual's compliance with this Code. All such

acknowledgements will be retained by the Human Resources Department for purposes of confirming that each employee,

officer and director has acknowledged this Code.

The Company reserves the right to audit compliance with this Code. Accordingly, all employees, officers and directors must

afford any external or internal auditors full, free and unrestricted access to all the Company operations, records, facilities

and personnel and will take appropriate measures to safeguard information obtained through the audit process.

An employee, officer or director or other representative who becomes aware of a violation or possible violation of this Code

or any of the Company's statements and policies must report that information immediately to a senior officer or a director of

the Company. Senior officers and directors may be subject to disciplinary action if they condone misconduct or do not

demonstrate the appropriate leadership to ensure compliance with this Code.

An employee may report questionable accounting or auditing matters, on an anonymous basis, by sending a letter to "The

Board of Directors of PyroGenesis Canada Inc. c/o Chair, Audit Committee, 1744 William Street, Suite 200, Montréal,

Québec H3J 1R4, Canada". Employees, officers and directors must cooperate fully in any Company investigation and must

take all reasonably steps necessary to safeguard the integrity of the investigation.

#### WAIVER, AMENDMENTS AND INTERPRETATION OF THIS CODE
The Company retains sole discretion in interpreting and applying this Code. The Company will periodically review this Code

and make appropriate additions or changes. This Code may be updated, modified or withdrawn by the Company at any

time in its sole discretion. Any waiver of this Code for executive officers or directors may be made only by the Board and

will be publicly disclosed, together with the reasons for such waiver, in accordance with all applicable securities laws and

stock exchange rules. Any waivers of this Code will only be granted where such waiver is both necessary and appropriate,

and it will be qualified in scope so as to protect the Company to the greatest extent practicable. Amendments or other

modifications of this Code will also be publicly disclosed in accordance with all applicable securities laws and stock

exchange rules.

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