PyroGenesis Canada : MD&A Q1 2024

PyroGenesis Canada Inc.

Management's Discussion and Analysis

For the three-month periods ended March 31, 2024, and 2023

(Unaudited)

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", or the "Company"). The MD&A provides the reader with a view and analysis, from the perspective of management, of the Company's financial results for the three-month period ended March 31, 2024. 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, 2023.

The condensed consolidated interim financial statements and MD&A have been reviewed by PyroGenesis' Audit Committee and were approved by its Board of Directors on May 14, 2024. 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 financial statements for issuance to shareholders.

The following information takes into account all material events that took place up until May 14, 2024, 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.sedarplus.ca,the Electronic Data Gathering, Analysis, and Retrieval system ("EDGAR") at www.sec.gov(up until the NASDAQ voluntary delisting in November 2023) 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 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; 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 of the Company dated April 1, 2024 (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.

Q1 2024 MD&A

PyroGenesis Canada Inc.

1

PyroGenesis Canada Inc.

Management's Discussion and Analysis

For the three-month periods ended March 31, 2024, and 2023

(Unaudited)

BASIS OF PRESENTATION

For reporting purposes, we prepared the 2023 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 2023 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 2023 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 highlights 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 entities that have similar structures. Management uses Modified EBITDA as it brings additional clarity to operating performance, eliminates variations in the fair value of strategic investments, among others, which may be beyond the control of the Company. Management believes that investors use Modified EBITDA for similar purposes and to evaluate performance while adjusting for non-cash discretionary expenses. Modified EBITDA allows a more appropriate comparison to 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, its future performance and to 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 Inc. (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 in 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) and tradeable through the OTCQX Best Market (Ticker Symbol: PYRGF) and the Frankfurt Stock Exchange (FSX) (Ticker symbol: 8PY). In November 2023, the Company's Common Shares were voluntarily delisted from NASDAQ (see "Market for Securities - Delisting from NASDAQ" in the Annual Information Form).

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 consolidated financial statements to be controlled by the Company. Unless otherwise stated, reference to subsidiaries in the 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.

Q1 2024 MD&A

PyroGenesis Canada Inc.

2

PyroGenesis Canada Inc.

Management's Discussion and Analysis

For the three-month periods ended March 31, 2024, and 2023

(Unaudited)

INFORMATION FROM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE QUARTERS ENDED MARCH 31 (expressed in dollars):

						Variation
		2024		2023		2024 vs 2023
Revenues	3,486,397	2,591,622	894,775
Cost of sales and services	2,730,052		2,065,049		665,003
Gross profit	756,345	526,573	229,772
Expenses
Selling, general and administrative (excluding share-based expenses)	4,058,880	6,568,946	(2,510,066)
Research and development, net	233,088		323,216		(90,128)
Total expenses (excluding share-based expenses)	4,291,968		6,892,162		(2,600,194)
Net loss from operations (excluding share-based expenses)	(3,535,623)	(6,365,589)	(2,829,966)
Share-based expenses	(479,598)		(988,162)		(508,564)
Net loss from operations	(4,015,221)	(7,353,751)	(3,338,530)
Changes in fair market value of strategic investments and net finance costs (income)	383,622	(1,215,144)	(1,598,766)
Income taxes	-		-		-
Net loss	(4,398,843)	(6,138,607)	(1,739,764)
Foreign currency translation gain (loss) on investments in foreign operations	(7,042)	(19,013)	(11,971)
Comprehensive loss	(4,405,885)	(6,157,620)	1,751,735
Loss per share
Basic	(0.02)	(0.03)	0.01
Diluted	(0.02)	(0.03)	0.01
Modified EBITDA(1)
(3,168,540)		(5,846,127)		2,677,587

1 See "Non-IFRS Measures"

Q1 2024 MD&A

PyroGenesis Canada Inc.

3

PyroGenesis Canada Inc.

Management's Discussion and Analysis

For the three-month periods ended March 31, 2024, and 2023

(Unaudited)

INFORMATION FROM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE PERIODS ENDED MARCH 31 (expressed in dollars):

			March 31, 2024		March 31, 2023		March 31, 2022
Revenues	3,486,397	2,591,622	4,206,762
Cost of sales and services		2,730,052		2,065,049		3,155,039
Gross profit	756,345	526,573	1,051,723
Expenses
Selling, general and administrative (excluding share-based expenses)	4,058,880	6,568,946	3,942,738
Research and development, net		233,088	323,216	482,432
Total expenses (excluding share-based expenses)		4,291,968	6,892,162	4,425,170
Net loss from operations (excluding share-based expenses)	(3,535,623)	(6,365,589)	(3,373,447)
Share-based expenses	(479,598)	(988,162)	(1,669,630)
Net loss from operations		(4,015,221)	(7,353,751)	(5,043,077)
Changes in fair market value of strategic investments and net finance costs (income)	383,622	(1,215,144)	(992,855)
Income taxes				-			-		56,553
Net loss and comprehensive loss	(4,398,843)	(6,138,607)	(4,106,775)
Foreign currency translation gain (loss) on investments in foreign operations		(7,042)		(19,013)		37,656
Comprehensive loss	(4,405,885)	(6,157,620)	(4,069,119)
Loss per share
Basic	(0.02)	(0.03)	(0.02)
Diluted		(0.02)		(0.03)		(0.02)
Modified EBITDA(1)	(3,168,540)	(5,846,127)	(2,807,818)
1 See "Non-IFRS Measures"
SELECTED FINANCIAL INFORMATION(expressed in dollars)
		March 31, 2024 December 31, 2023	December 31, 2022
Current assets		16,459,814			16,803,425			27,448,182
Non-current assets		9,549,483			11,631,926			20,218,568
Total assets		26,009,297			28,435,351			47,666,750
Current liabilities	27,824,334			23,811,144			25,797,473
Non-current liabilities		4,939,827			7,452,784			5,000,350
Total liabilities		32,764,161			31,263,928			30,797,823
Shareholders' equity (deficiency)		(6,754,864)			(2,828,577)			16,868,927

Q1 2024 MD&A

PyroGenesis Canada Inc.

4

PyroGenesis Canada Inc.

Management's Discussion and Analysis

For the three-month periods ended March 31, 2024, and 2023

(Unaudited)

FINANCIAL CONDITION(expressed in dollars)
						Variation
		March 31, 2024 December 31, 2023		2024 vs 2023
Current Assets
Cash	169,928	1,802,616	(1,632,688)
Accounts receivable	9,514,930	9,265,665	249,265
Costs and profits in excess of billings on uncompleted contracts	647,589	648,813	(1,224)
Inventory	2,104,113	1,905,313	198,800
Investment tax credits receivable	366,662	352,530	14,132
Income tax receivable	16,250	15,900	350
Current portion of deposits	625,562	638,739	(13,177)
Current portion of royalties receivable	691,271	684,651	6,620
Contract assets	599,186	615,527	(16,341)
Prepaid expenses	1,724,323		873,671		850,652
Total Current Assets	16,459,814	16,803,425	(343,611)
Non-Current assets
Deposits	99,238	46,045	53,193
Strategic investments	735,146	2,551,427	(1,816,281)
Property and equipment	2,707,066	2,855,226	(148,160)
Right-of-use-assets	4,019,442	4,200,635	(181,193)
Royalties receivable	544,782	529,017	15,765
Intangible assets	1,443,809		1,449,576		(5,767)
Total Non-Current Assets	9,549,483	11,631,926	(2,082,443)
Current Liabilities
Bank indebtedness	179,365	181,267	(1,902)
Accounts payable and accrued liabilities	11,334,639	9,345,134	1,989,505
Billings in excess of costs and profits on uncompleted contracts	10,786,440	10,992,126	(205,686)
Current portion of term loans	90,000	117,500	(27,500)
Current portion of lease liabilities	2,769,046	524,802	2,244,244
Current portion of balance due on business combination	1,704,676	1,726,510	(21,834)
Current portion of convertible debentures	960,168		923,805		36,363
Total Current Liabilities	27,824,334	23,811,144	4,013,190
Non-current Liabilities
Lease liabilities	2,172,813	4,582,090	(2,409,277)
Term loans	260,822	286,579	(25,757)
Convertible debentures	1,510,999	1,636,416	(125,417)
Convertible loan	995,193		947,699		47,494
Total Non-Current Liabilities		4,939,827		7,452,784		(2,512,957)

Working capital, (expressed as current assets less current liabilities) varied since December 31, 2023 by $4.4 million, mainly a result of:

• a decrease of cash of $1.6 million, explained in the section Summary of Cash Flows,
• an increase of $0.2 million of accounts receivable due to the trade accounts receivable increasing by $0.9 million, an increase in sales tax receivable of $0.3 million, offset by the increase of $0.4 million in allowance for expected credit loss, and by the decrease in other receivables of $0.5 million,
• an increase of $0.2 million in inventory due to the increase in production and storage of the Company's plasma atomized metal powders,
• an increase of $0.9 million in prepaid expenses mainly related to the prepayment of the annual insurance program,
• an increase of $2.0 million in accounts payable and accrued liabilities due to the insurance renewals, mainly, Directors and Officers insurance,
• a decrease of $0.2 million in billings in excess of costs and profits on uncompleted contracts due to the increase in workforce working on progressing customer projects by achieving contract milestones in shorter amounts of time, and
• an increase of $2.2 million in current portion of lease liabilities due to the reclassification of the option to buy one of the manufacturing facilities presented as a current liability.

Q1 2024 MD&A

PyroGenesis Canada Inc.

5

PyroGenesis Canada Inc.

Management's Discussion and Analysis

For the three-month periods ended March 31, 2024, and 2023

(Unaudited)

Non-current assets varied since December 31, 2023, by $2.1 million, mainly a result of:

• a decrease in strategic investments mainly attributable to the disposition of common share of HPQ Silicon Inc. during the first three-months of 2024, and $0.2 million decrease in the fair value of the common shares of HPQ Silicon Inc.
• a decrease of property and equipment of $0.1 million due to recurring depreciation, and
• a decrease of $0.2 million in right-of-use-assets due to the depreciation expense in the three-month period ended March 31, 2024.

Non-current liabilities varied since December 31, 2023, by $2.5 million, mainly a result of:

• a decrease of $2.4 million in lease liabilities due mainly to the reclassification of the liability of the option to buy one of the manufacturing facilities from non-current to current, and
• a decrease of $0.1 million in convertible debentures due to the principal repayment of $0.2 million, offset by the interest and accretion of $0.1 million incurred during the three-month period ended March 31, 2024.

RESULTS OF OPERATIONS

Revenues (expressed in dollars)

PyroGenesis recorded revenue of $3.5 million in the first quarter of 2024 ("Q1, 2024"), representing an increase of $0.9 million compared with $2.6 million recorded in the first quarter of 2023 ("Q1, 2023"),

Revenues recorded in the three-months ended March 31, 2024, were generated primarily from:

	Three months ended March 31		Variation
	2024		2023		2024 vs 2023
High purity metallurgical grade silicon & solar grade silicon from quartz (PUREVAP™)	394,444	527,600	(133,156)
Aluminium and zinc dross recovery (DROSRITE™)	663,185	90,226	572,959
Development and support related to systems supplied to the U.S. Navy	1,044,434	352,103	692,331
Torch-related sales	877,048	1,170,748	(293,700)
Refrigerant destruction (SPARC™)	102,718	67,847	34,871
Biogas upgrading and pollution controls	32,049	32,895	(846)
Other sales and services	372,519		350,203		22,316
Revenue	3,486,397	2,591,622	894,775

Q1, 2024 revenues increased by $0.9 million, mainly as a result of:

• PUREVAP™ related sales decreased by $0.1 million due to the completion of the project, with the Company previously announcing the successful silicon "pour" validating all critical milestones and with this achievement, the stage had been set for discussions in transitioning to commercial production,
• DROSRITE™ related sales increased by $0.6 million due to the increase in spare parts orders from existing clients and the increase in storage revenue and other ancillary revenue related to the DROSRITE units, at the request of the client,
• Support services related to systems supplied for the US Navy increased by $0.7 million due to the increase in awarded contracts for spare parts and engineering services from clients that are third-party suppliers of the US Navy,
• Torch-relatedproducts and services decreased by $0.3 million, due to the completion of the project, with the Company currently providing continuous 24/7 onsite support.

As of May 14, 2024, revenue expected to be recognized in the future related to backlog of signed and/or awarded contracts is $28.1 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 (expressed in dollars)
	Three months ended March 31		Variation
	2024		2023		2024 vs 2023
Employee compensation	1,070,020	888,435	181,585
Subcontracting	66,749	48,573	18,176
Direct materials	1,177,948	614,998	562,950
Manufacturing overhead & other	332,740	293,637	39,103
Investment tax credits	(4,395)	(2,346)	(2,049)
Amortization of intangible assets	86,990		221,752		(134,762)
Total Cost of Sales and Services	2,730,052	2,065,049	665,003

Q1 2024 MD&A

PyroGenesis Canada Inc.

6

PyroGenesis Canada Inc.

Management's Discussion and Analysis

For the three-month periods ended March 31, 2024, and 2023

(Unaudited)

Gross Margin (expressed in dollars except for gross margin which is expressed as a percentage)
	Three months ended March 31
	2024		2023
Revenues	3,486,397	2,591,622
Cost of Sales and Services	2,730,052		2,065,049
Gross Profit	756,345		526,573
Gross Margin %	22	20

Cost of sales and services was $2.7 million in Q1 2024, representing an increase of $0.7 million compared with $2.1 million in Q1 2023, primarily due to an increase of $0.2 million in employee compensation, and an increase in direct materials of $0.6 million, due to an increase of on-going projects, offset by the decrease in amortization of intangible assets of $0.1 million compared with $0.2 million for Q1, 2023. This expense variation relates mainly to the intangible assets in connection with the Pyro Green-Gas acquisition, which have been fully amortized by January 2024. These expenses are non-cash items, and the remaining intangible assets are composed of patents, and deferred development costs that will be amortized over the expected useful lives.

The gross margin for Q1, 2024 was $0.8 million or 22% of revenue compared to a gross margin of $0.5 million or 20% of revenue for Q1 2023, the increase in gross margin was mainly attributable to the increase in spare parts sales which yield high profit margins by the added benefits from a vast in-house inventory of over 1000 unique items and approximately 40,000 parts, allowing the Company to avoid long lead times on parts, which ultimately, enables the Company to process additional orders in a shorter period of time.

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, as the mix between labour, materials and subcontracts may be significantly different. In addition, due to the nature of these long-term contracts, the Company has not necessarily passed on to the customer, the increased cost of sales which was attributable to inflation, if any. The costs and sales and services are in line with management's expectations and with the nature of the revenue.

Selling, General and Administrative Expenses (expressed in dollars)

	Three months ended March 31		Variation
	2024		2023		2024 vs 2023
Employee compensation	2,158,030	2,553,957	(395,927)
Share-based expenses	479,598	988,162	(508,564)
Professional fees	588,183	1,244,279	(656,096)
Office and general	238,312	172,263	66,049
Travel	44,036	59,793	(15,757)
Depreciation of property and equipment	105,941	160,363	(54,422)
Depreciation of right-of-use assets	181,193	156,362	24,831
Investment tax credits	--	(7,500)	7,500
Government grants	(34,900)	(53,511)	18,611
Other expenses	647,840	885,450	(237,610)
Foreign exchange charge on materials	(280,665)	21,894	(302,559)
Expected credit loss & bad debt	410,910		1,375,596		(964,686)
Total selling, general and administrative	4,538,478	7,557,108	(3,018,630)

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 Q1, 2024 were $4.5 million, representing a decrease of $3.0 million compared to $7.6 million for Q1, 2023. The decrease is a result of a $0.4 million decrease in employee compensation, decreasing to $2.2 million (Q1, 2023 - $2.6 million), share-based expenses decreased by $0.5 million to $0.5 million (Q1, 2023 - $1.0 million), which is a non-cash item and relates mainly to 2022, and 2023 grants not repeated in 2024, professional fees decreased by $0.7 million to $0.6 million (Q1, 2023 - $1.2 million) mainly related to the decrease of $0.4 million of legal fees incurred during the first three-months of 2024. A decrease of other expenses by $0.2 million to $0.7 million (Q1, 2023 - $0.9 million), due to a net reduction of insurance expenses and the expected credit loss & bad debt provision decreased by $1.0 million to $0.4 million compared to $1.4 million recorded in the comparable period. Furthermore, this was offset by the favourable impact of $0.3 million on the foreign exchange charge on materials.

Share-based payment expenses, as explained above, are non-cash expenses and are directly impacted by the vesting structure of the stock option plan whereby options vest between 10% and up to 100% on the grant date and may require an immediate recognition of that cost.

Q1 2024 MD&A

PyroGenesis Canada Inc.

7

PyroGenesis Canada Inc.

Management's Discussion and Analysis

For the three-month periods ended March 31, 2024, and 2023

(Unaudited)

Depreciation on Property and Equipment (expressed in dollars)
	Three months ended March 31		Variation
	2024		2023		2024 vs 2023
Depreciation of property and equipment	105,941	160,363	(54,422)

The depreciation on property and equipment decreased to $0.1 million in Q1 2024, compared with $0.2 in Q1 2023. The expense is comparable to the same quarter last year and the decrease is primarily due to the nature and useful lives of the property and equipment being depreciated.

Research and Development ("R&D") Costs, net (expressed in dollars)

	Three months ended March 31		Variation
	2024		2023		2024 vs 2023
Employee compensation	145,022	16,132	128,890
Investment tax credits	(9,737)	(10,097)	360
Subcontracting	-	31,291	(31,291)
Materials and equipment	95,141	84,324	10,817
Other expenses	2,662		201,566		(198,904)
Total net R&D expenses, net	233,088	323,216	(90,128)

During the three-months ended March 31, 2024, the Company incurred $0.2 million of R&D costs on internal projects, a decrease of $0.1 million as compared with $0.3 million in Q1 2023. The decrease in Q1 2024 is primarily related to a decrease in other expenses of $0.2 million and offset by the increase in employee compensation of $0.1 million.

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).

Finance costs (income), net (expressed in dollars)

		Three months ended March 31		Variation
		2024	2023		2024 vs 2023
Financial expenses
Interest on term loans	-	361	(361)
Interest on lease liabilities	56,859	93,121	(36,262)
Interest on convertible debentures	74,908		-	74,908
Interest on convertible loan	8,333		-	8,333
Interest accretion on long term loan	(3,257)		-	(3,257)
Interest accretion on convertible debentures	38,037		-	38,037
Interest accretion on convertible loan	39,160		-	39,160
Penalties and other interest	25,482		71,167		(45,685)
		239,522	164,649	74,873
Financial income
Interest accretion on and revaluation of balance due on business combination	(21,833)	(1,037,417)	1,015,584
Interest accretion on royalty receivable	(22,385)		(41,485)		19,100
Finance costs (income), net	195,304	(914,253)	1,109,557

Finance expense for Q1 2024 totaled $0.2 million as compared with a finance income of $0.9 million for Q1 2023, representing a variation of $1.1 million year-over-year. The increase in finance expenses in Q1 2024, is mainly due to the increase in interest and accretion related to the convertible debenture and convertible loan issued during 2023. This was offset by the decrease of $1.0 million of the revaluation of the balance due on business combination in Q1 2023 whereby the Company's Italian subsidiary and a customer both agreed on the final acceptance of a contract, prior to final completion and the Company determined that a milestone related to the business combination would not be achieved. As a result, the contract did not attain the pre-determined milestone in connection with the balance due on business combination, and a reversal of the liabilities was recorded.

Q1 2024 MD&A

PyroGenesis Canada Inc.

8

PyroGenesis Canada Inc.

Management's Discussion and Analysis

For the three-month periods ended March 31, 2024, and 2023

(Unaudited)

Strategic Investments (expressed in dollars)
	Three months ended March 31		Variation
	2024		2023		2024 vs 2023
Changes to fair value of strategic investments	(188,318)	300,891	(489,209)

During the three-months ended March 31, 2024, the adjustment to fair market value of strategic investments for Q1 2024 resulted in a loss of $0.2 million compared to a gain in the amount of $0.3 million in Q1 2023. The decrease in gain is attributable to the variation of the market value of the common shares owned by the Company of HPQ Silicon Inc.

Comprehensive loss (expressed in dollars)

	Three months ended March 31		Variation
	2024		2023		2024 vs 2023
Comprehensive loss	(4,405,885)	(6,157,620)	(1,751,735)

The comprehensive loss for Q1 2024 of $4.4 million compared to a loss of $6.2 million, in Q1 2023, represents a variation of $1.8 million, and is primarily attributable to the factors described above, and summarized as follows:

• an increase in product and service-related revenue of $0.9 million arising in Q1 2024,
• an increase in cost of sales and services of $0.7 million, primarily due to an increase in employee compensation, subcontracting, direct materials, manufacturing overhead, and investment tax credits, offset by the decrease in amortization of intangible assets,
• a decrease in SG&A expenses of $3.0 million arising in Q1 2024, was primarily due to a decrease in employee compensation, professional fees, travel, depreciation in property and equipment, other expenses, favourable variation of $0.3 million in foreign exchange charge on materials, and a decrease of $1.0 million of the allowance of credit loss, which is offset by an increase in several non-significant expenses,
• a decrease in share-based expenses of $0.5 million,
• a decrease in R&D expenses of $0.1 million primarily due to a decrease in other expenses, offset by the increase in employee compensation,
• an increase in finance costs (income), net expense of $1.1 million in Q1 2024 primarily due to the revaluation of balance due on business combination,
• a decrease in changes in fair market value of strategic investments of $0.5 million.

Reconciliation of Non-IFRS measures: (EBITDA and Modified EDITDA) (expressed in dollars)

		Three months ended March 31		Variation
		2024		2023		2024 vs 2023
Comprehensive loss	(4,405,885)	(6,157,620)	1,751,735
Depreciation of property and equipment	105,941	160,363	(54,422)
Depreciation of right-of-use assets	181,193	156,362	24,831
Amortization of intangible assets	86,990	221,752	(134,762)
Finance costs (income), net	195,304		(914,253)		1,109,557
EBITDA(1)	(3,836,457)	(6,533,396)	2,696,939
Other non-cash items:
Share-based expenses	479,598		988,162		(508,564)
Change in fair value of investments	188,318	(300,891)	489,209
Modified EBITDA(1)	(3,168,541)	(5,846,125)	2,677,584
¹ See "Non-IFRS Measures"

The EBITDA in Q1, 2024 was a $3.8 million loss compared to an EBITDA loss of $6.5 million for Q1, 2023, representing a decrease of $2.7 million year- over-year. The variation in the EBITDA in the three-months ended March 31, 2024, compared to March 31, 2023, is due to the decrease in comprehensive loss of $1.8 million, a decrease in depreciation on property and equipment of $0.05 million, an increase of depreciation of right-of-use assets of $0.02 million, a decrease in amortization of intangible assets of $0.1 million, and an increase in finance costs (income), net of $1.1 million.

The Modified EBITDA in Q1, 2024 was a $3.2 million loss compared to a Modified EBITDA loss of $5.8 million for Q1, 2023, representing a decreased loss of $2.7 million. The decrease in the Modified EBITDA loss in Q1, 2024 is attributable to the decrease as mentioned above in the EBITDA of $2.7 million and a decrease in share-based expenses of $0.5 million, and a decrease in the change of fair value of investments of $0.5 million, based on the fair value of such investment.

Q1 2024 MD&A

PyroGenesis Canada Inc.

9

PyroGenesis Canada Inc.

Management's Discussion and Analysis

For the three-month periods ended March 31, 2024, and 2023

(Unaudited)

SUMMARY OF QUARTERLY RESULTS (expressed in dollars)

	2024			2023					2022
	Q1		Q4		Q3		Q2		Q1		Q4		Q3		Q2
Revenues	3,486,397	3,028,255	3,685,725	3,039,479	2,591,622	3,301,777	5,657,783	5,847,180
Gross profit	756,345	703,655	1,099,392	1,927,664	526,573	479,715	4,113,176	2,499,273
Gross margin %	22.0	23.0	30.0	63.0	20.3	14.5	72.7	42.7
Comprehensive loss	(4,405,885)	(9,768,239)	(6,256,292)	(6,333,708)	(6,157,620)	(10,818,755)	(4,053,706)	(13,039,531)
Loss per share
Basic	(0.02)	(0.06)	(0.03)	(0.04)	(0.03)	(0.06)	(0.02)	(0.08)
Diluted	(0.02)	(0.06)	(0.03)	(0.04)	(0.03)	(0.06)	(0.02)	(0.08)

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.

LIQUIDITY AND CAPITAL RESOURCES

As at March 31, 2024, the Company had cash of $0.2 million, included in the net working capital deficiency of $11.4 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 its access to capital markets it will be able to finance its operations for the foreseeable future.

The Company's term loan balance at March 31, 2024 was $350,822 and decreased by $53,257 since December 31, 2023, due to the complete reimbursement of a loan. The decrease from January 1, 2023, to December was mainly attributable to the accretion on the Economic Development Agency of Canada loan, which is interest free and will remain so, until the balance is paid over the 60-month period ending March 2029. In July 2023, the Company closed a brokered private placement for $3,030,000, bearing interest at 10%. On December 20, 2023, the Company closed a non-brokered private placement of a convertible loan for gross proceeds of $1,250,000 and bears interest at 3%. The average interest expense on the other term loans and convertible debenture is approximately 10%. The Company does not expect changes to the structure of term loans and convertible debentures and loans in the next twelve-month period. The Company maintained one credit facility which bears interest at a variable rate of prime plus 1%, therefore 8.20% at March 31, 2024. The Company will continue to reimburse the existing credit facility in 2024.

			Total		Less
	Carrying		contractual		than one						Over 5
	Value		amount		year		2-3 years		4-5 years		years
	$		$		$		$		$		$
Bank indebtedness	179,365	179,365	179,365		-		-		-
Accounts payable and accrued liabilities1	10,009,444	10,009,444	10,009,444		-		-		-
Term loans	350,822	450,000	90,000	180,000	180,000		-
Balance due on business combination	1,704,676	1,860,020	1,860,020		-		-		-
Lease liabilities	4,972,482	6,032,233	713,194	3,197,718	458,664	1,662,657
Convertible debentures	2,471,167	3,243,783	1,468,708	1,775,075		-		-
Convertible loan	995,193		1,297,604		38,021		1,259,583		-		-
	20,683,149	23,072,449	14,358,752	6,412,376	638,664	1,662,657

1 Accounts payable and accrued liabilities exclude amounts which are not financial liabilities.

SUMMARY OF CASH FLOWS (expressed in dollars)

	Three months ended March 31
	2024		2023
Cash provided by (used in) operating activities	(2,763,272)		(6,530,631)
Cash provided by (used in) investing activities	1,588,959		250,696
Cash provided by (used in) financing activities	(475,794)		4,721,475
Effect of exchange rate changes on cash denominated in foreign currency	17,419		(168)
Decrease in cash	(1,632,688)		(1,558,628)
Cash - end of period	169,928		1,887,021

Q1 2024 MD&A

PyroGenesis Canada Inc.

10