Mr. P. Peter Pascali reports

PYROGENESIS ANNOUNCES 2023 FIRST QUARTER RESULTS

PyroGenesis Canada Inc. has released its financial and operational results for the first quarter ended March 31, 2023.

"The company remains intensely focused on its goal of demonstrating its expertise and capturing greater market share across the broad industrial decarbonization landscape and more specifically around the refined strategic verticals that the company introduced in [fourth quarter], namely energy transition and emissions reduction, commodity security and optimization, and waste remediation," said P. Peter Pascali, chief executive officer and president of PyroGenesis.

"Our backlog of signed and/or awarded contracts remains strong at $30.6-million. Our belief in both our strategy and our technology has never been stronger, and the expanding interest from customers throughout the world and in fast-moving industries speaks not just to our potential, but to our immediate future," continued Mr. Pascali. "Our recent relationship with the New Zealand Trust for the destruction of synthetic refrigerants -- who have made PyroGenesis's Sparc waste destruction system central to their efforts to safely reduce greenhouse gas emissions throughout New Zealand -- and the rapidly developing interest within the additive manufacturing industry for our metal powders, as noted in our outlook, are to us the ultimate expressions of this belief.

"The industrial world is changing, and while our quarterly revenues may fluctuate in this continued period of inflationary and logistical pressures, our customer-ready solutions will only gain more visibility as heavy industry races to meet decarbonization goals or maintain a competitive advantage," Mr. Pascali added.

The information herein represents important highlights from the past quarter, followed by an outline of the company's strategy and outlook for the next quarter.

Outlook

Consistent with the company's past practice, and in view of the early stage of market adoption of its core lines of business, it is not providing specific revenue or net income (loss) guidance for 2023. However, numerous events have occurred that allow for a partial window into the rest of 2023.

Financial summary

Revenues

PyroGenesis recorded revenue of $2.6-million in the first quarter of 2023, representing a decrease of $1.6-million compared with $4.2-million recorded in the first quarter of 2022. Revenues recorded in Q1 2023 were generated primarily from:

1. Purevap related sales of $527,600 (Q1 2022: $441,605);
2. Drosrite related sales of $90,226 (Q1 2022: $900,079);
3. Support services related to systems supplied to the U.S. Navy: $352,103 (Q1 2022: $745,260);
4. Torch related sales of $1,170,748 (Q1 2022: $1,041,709);
5. Refrigerant destruction (Sparc) related sales of $67,847 (Q1 2022: $0);
6. Biogas upgrading and pollution controls of $32,895 (Q1 2022: $990,045);
7. Other sales and services of $350,203 (Q1 2022: $88,064).

Q1 2023 revenues decreased by $1.6-million, mainly as a result of:

1. Drosrite related sales decreased by $800,000 due to continued customer delays in financing for the construction of the on-site facility.
2. Support services related to systems supplied for the U.S. Navy decreased by $400,000 due to remaining project milestones mainly related to inspection, packaging and shipment of the equipment to its customer to move forward with installation and commission.
3. Biogas upgrading and pollution controls related sales decreased by $1.0-million, of which $600,000 is due to clients requiring additional modifications prior to installation and commissioning, as well as continuous testing to achieve desired results and $400,000 due to the company's Italian subsidiary and a customer, which both agreed on the final acceptance of a contract, which resulted in the reversal of costs and profits in excess of billings on uncompleted contracts.
4. Other sales and services increased by $300,000 due to an increase in sales related to spare parts required by its customers.

As of May 15, 2023, revenue expected to be recognized in the future related to backlog of signed and/or awarded contracts is $30.6-million. Revenue will be recognized as the company satisfies its performance obligations under long-term contracts, which are expected to occur over a maximum period of approximately three years.

Comprehensive loss

The comprehensive loss for Q1 2023 of $6.2-million compared with a loss of $4.1-million in Q1 2022 represents a variation of $2.1-million, and is primarily attributable to the factors summarized as follows:

• A decrease in product and service-related revenue of $1.6-million arising in Q1 2023;
• A decrease in cost of sales and services of $1.1-million, primarily due to a decrease in subcontracting, direct materials and foreign exchange charge on materials, offset by the increase in employee compensation and manufacturing overhead;
• An increase in SG&A expenses of $1.9-million arising in Q1 2023 was primarily due to an increase in employee compensation, professional fees, travel, depreciation in property and equipment, foreign exchange charge on materials, and the allowance for credit loss of $800,000 and a write-off of $600,000, which is offset by a decrease in several non-significant expenses;
• A decrease in share-based expenses of $700,000;
• A decrease in research and development expenses of $200,000 primarily due to a decrease in employee compensation, subcontracting, material and equipment, and an increase in investment tax credits and other expenses;
• A decrease in finance costs (income), net of $1.1-million in Q1 2023, primarily due to the revaluation of balance due on business combination;
• A decrease in changes in fair market value of strategic investments of $900,000;
• A decrease in income taxes of $60,000 in Q1 2023.

About PyroGenesis Canada Inc.

PyroGenesis, a high-technology company, is a proud leader in the design, development, manufacture and commercialization of advanced plasma processes and sustainable solutions which reduce greenhouse gases (GHG) and are economically attractive alternatives to conventional dirty processes. PyroGenesis has created proprietary, patented and advanced plasma technologies that are being vetted and adopted by industry leaders in four massive markets: iron ore pelletization, aluminum, waste management and additive manufacturing. With a team of experienced engineers, scientists and technicians working out of its Montreal office, and its 3,800-square-metre and 2,940-square-metre manufacturing facilities, PyroGenesis maintains its competitive advantage by remaining at the forefront of technology development and commercialization. The operations of PyroGenesis are ISO 9001:2015 and AS9100D certified, having been ISO certified since 1997.

We seek Safe Harbor.