EverGen Infrastructure Corp. — Management Reports 2021

Aug 31, 2021

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Management’s Discussion and Analysis For the three and six months ended June 30, 2021 and 2020

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MANAGEMENT’S DISCUSSION AND ANALYSIS

BASIS OF PRESENTATION AND DESCRIPTION OF THE COMPANY

August 30, 2021 - The following Management’s Discussion and Analysis (“MD&A”) of financial condition and results of operations for EverGen Infrastructure Corp. (“EverGen” or “the Company” which includes references to “we”, “our”, “us”, “its”), is a review of the operations, current financial position and condition for the three month and six month periods ended June 30, 2021 and should be read in conjunction with the Company’s unaudited interim consolidated financial statements for the three and six month periods ended June 30, 2021 and the audited consolidated financial statements and related notes as at December 31, 2020 and for the period from incorporation on May 13, 2020 to December 31, 2020.

The consolidated financial statements of EverGen have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board ("IASB"), except where indicated otherwise. This MD&A and the unaudited interim consolidated financial statements of EverGen have been prepared by management and approved by the board of directors as of August 30, 2021. Unless otherwise indicated, all dollar amounts presented herein are in thousands of Canadian dollars.

EverGen, headquartered in Vancouver, British Columbia is a sustainable infrastructure platform established to acquire, develop, build, own and operate a portfolio of renewable natural gas (“RNG”), waste to energy, and related infrastructure projects in British Columbia and other regions of North America.

Additional information relating to the Company is available on SEDAR at www.sedar.com. The Company’s common shares trade on the TSX Venture Exchange (“TSX-V”) under the symbol “EVGN”.

READER ADVISORIES

This MD&A contains forward-looking statements and introduces financial measures which are not defined under IFRS aimed at helping the reader in making comparisons to metrics similarly disclosed by industry peers. Readers are cautioned that the MD&A should be read in conjunction with the Company’s disclosure under “Non-GAAP Measures” and “Forward-Looking Information” included at the end of this MD&A.

COMPANY OVERVIEW AND STRATEGY

EverGen is a sustainable infrastructure platform and currently owns and operates organic waste processing facilities which also provide organic feedstock for the existing owned RNG facilities and further RNG infrastructure projects.

The Company operates three facilities through its wholly subsidiaries: Net Zero Waste Abbotsford Inc. (“NZWA”), Sea to Sky Soils and Composting Inc. (“SSS”), and Fraser Valley Biogas Ltd. (“FVB”).

EverGen owns and operates a biogas facility in Abbotsford, British Columbia (through its wholly owned subsidiary FVB) which sells RNG under a long-term contract with FortisBC Energy Inc. (“FortisBC”). FVB is the original producing RNG project in Western Canada. The facility combines anaerobic digestion and biogas upgrading to produce RNG, primarily by converting agricultural waste from local dairy farms.

EverGen owns and operates organic waste conversion facilities in British Columbia (through its wholly owned subsidiaries NZWA and SSS), which primarily process inbound organics, yard waste and biosolids for a contracted tipping fee and produces high-quality organic compost and soils for farmers, gardeners and developers as part of its outbound business. The majority of the revenue currently earned by the composting operations is sourced under long-term contracts with local municipalities. In addition, EverGen’s wholly owned subsidiary NZWA entered into a 20-year offtake agreement with FortisBC on April 29, 2021 which underpins the RNG expansion at this facility. From this existing platform, EverGen plans to further develop RNG facilities to provide offtake to FortisBC and other creditworthy buyers under long term contracts.

2021 Q2 MD&A EverGen Infrastructure Corp. 2

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It is EverGen’s purpose to contribute to the circular economy, promoting socially conscious business models for waste recycling while providing superior, sustainable returns for the planet by using its platform of investments and its operational excellence to drive rapid RNG penetration and grid conversion in addition to:

• Progressing the development and construction of existing portfolio of RNG expansion projects;

• Optimization, diversification and expansion of existing organic waste processing capabilities (RNG feedstock);

• Continuing the growth of its project portfolio via strategic acquisitions and consolidation opportunities; and

• Developing strategic partnerships and advancing RNG project pipelines.

EverGen completed an initial public offering (the “Offering”) of 3,080,000 units (the “Offered Units”) of the Company at a price of $6.50 per Offered Unit (the “Offering Price”), for aggregate gross proceeds of $20,020. The Company’s common shares were listed on the TSX Venture Exchange under the symbol “EVGN” and commenced trading on August 4, 2021.

Each Offered Unit consisted of one common share of the Company and one-half of one common share purchase warrant. Each whole common share purchase warrant entitles the holder thereof to purchase one common share of the Company at an exercise price of $10.50 until August 4, 2023.

The Offering was conducted by a syndicate of underwriters.

The Company has also granted the underwriters with an over-allotment option to purchase up to an additional 462,000 Offered Units at the Offering Price, exercisable in whole or in part, at any time on or prior to the date that is 30 days following the closing of the Offering. If the over-allotment option is exercised in full, additional gross proceeds of $3,003 will be raised.

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2021 Q2 MD&A EverGen Infrastructure Corp. 3

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FINANCIAL AND OPERATIONAL HIGHLIGHTS

On December 31, 2020, EverGen acquired NZWA and SSS. The acquired assets and liabilities are reflected in EverGen’s total assets and total long-term liabilities as of December 31, 2020 and the results of operations for NZWA and SSS are consolidated in EverGen’s consolidated results of operations commencing on January 1, 2021.

Both NZWA and SSS were private companies earning revenue from the receipt of organic waste at their respective facilities, primarily from municipal customers under contracted tipping agreements. The organic waste facilities are designed and permitted to accept most forms of organic waste from residential, commercial and industrial sources.

On April 16, 2021, EverGen acquired all of the issued and outstanding shares of FVB. The acquired assets and liabilities are reflected in EverGen’s total assets and total liabilities as at June 30, 2021, and the results of operations for FVB are included in EverGen’s consolidated results of operations commencing April 16, 2021. FVB was a private company earning revenue from the receipt of organic waste under a contracted tipping agreement and the sale of RNG to FortisBC under a contracted offtake agreement.

On April 29, 2021, EverGen’s wholly owned subsidiary Net Zero Waste Abbotsford Inc. entered into a 20year offtake agreement with FortisBC. Under the agreement, FortisBC will purchase up to 173,000 gigajoules of RNG annually for injection into its natural gas system, upon completion of an anaerobic digester project at EverGen’s existing Net Zero Waste Abbotsford composting and organic processing facility in Abbotsford, British Columbia. Once approved by the British Columbia Utilities Commission and other regulatory agencies, the project would convert municipal and commercial organic waste into energy to meet the needs of approximately 1,900 residential homes.

This MD&A includes a review and analysis of the consolidated operations of EverGen which includes the operations of its wholly-owned subsidiaries, NZWA, SSS for the six month period ended June 30, 2021 as well as the consolidated results of FVB from April 16, 2021, the date of acquisition to June 30, 2021.

As the Company was only incorporated on May 13, 2020, the comparative information presented in this MD&A is limited to the period from EverGen’s commencement of operations and incorporation on May 13, 2020 to June 30, 2020. As the Company only generated revenue as of January 1, 2021, the MD&A discussion is focussed on the first half as well as the first two quarters of 2021.

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FINANCIAL AND OPERATIONAL HIGHLIGHTS SUMMARY

(Canadian $000’s, except per share amounts and as otherwise indicated)		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
FINANCIAL Revenue Net income (loss) Net income (loss) per share ($), basic and diluted EBITDA(1) Adjusted EBITDA(1) Capital expenditures– net additions to and dispositions of property and equipment Capital expenditures– acquisitions Total assets Total long-term liabilities Workingcapital surplus(deficit)(1)	3,349 (175) ($0.02) 454 1,863 119 11,690 64,961 15,460 2,310	- - ($2.73) - - - - - - -	- - - - - - - - -	4,934 (1,333) ($0.14) (506) 2,066 265 11,690 64,961 15,460 2,310	- - ($2.73) - - - - - - -	- - - - - - - - - -
OPERATING
Incoming organic feedstock (tonnes) Organic compost and soil sales (yards)(2) RNG(gigajoules)	30,467 37,053 18,845	- -	- - -	47,631 44,140 18,845	- -	- - -

(1) Non-GAAP measure as defined in the Non-GAAP measures of this MD&A.

(2) Organic compost and soil sales includes both finished and unfinished product sales and by-products.

RESULTS OF OPERATIONS

Revenue

(Canadian $000’s)		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
Tipping fees Organic compost and soil sales Trucking services RNG sales	2,238 691 150 270	- - - -	- - - -	3,493 886 285 270	- - - -	- - - -
Total	3,349	-	-	4,934	-	-

Revenue is generated primarily through contracted tipping fees charged to municipalities and other customers for the disposal of organic waste at the Company’s waste management facilities which use a Gore Cover™ system. EverGen also generate revenues from the sale of high-quality organic compost and soils, and from hauling services associated with delivering organic waste to its SSS facility. The Company’s revenue is exposed to fluctuations as a result of the inherent seasonality of organic waste processing and the sale of organic compost and soil with increased seasonal demand in the second quarter.

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EverGen generated $4,934 of revenue in the first half of 2021 as revenue increased to $3,349 or 111 percent in the second quarter of 2021 compared to $1,585 in the first quarter of 2021, primarily due to seasonal demand driving the increase in sales volumes.

In the second quarter of 2021, EverGen generated $2,239 tipping fees from 30,467 tonnes of incoming organic feedstock and $691 from 37,053 yards of organic compost and soil sales

In the first quarter of 2021, EverGen generated $1,255 tipping fees from 17,164 tonnes of incoming organic feedstock and $195 from 7,087 yards of organic compost and soil sales

From April 16, 2021, revenue also includes $270 of FVB’s RNG sales under contract with FortisBC.

Cost of goods sold

(Canadian $000’s)		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
Cost ofgoods sold	866	-	-	1,463	-	-

Cost of goods sold is comprised of direct and indirect costs, including handling, labour, fuel charges and hauling costs where required, associated with organic feedstock collection and the preparation and the process of screening, blending and curing the feedstock for conversion into saleable organic compost and soil. The Company’s cost of goods sold is exposed to fluctuations as a result of seasonal weather variation and the related fluctuations in volumes processed.

EverGen incurred $1,463 of cost of goods sold in the first half of 2021 as cost of goods sold increased to $866 or by 45 percent in the second quarter of 2021 compared to $597 in the first quarter of 2021. The increase in cost of goods sold relate mainly to variable costs associated with increased sales volumes in the current quarter.

Cost of goods sold of $866 for the second quarter of 2021 includes $440 of labour costs, $110 of fuel charges and $148 of SSS hauling costs.

Cost of goods sold of $597 for the first quarter of 2021 includes $340 of labour costs, $94 of fuel charges and $118 of SSS hauling costs.

From April 16, 2021, cost of goods sold also includes associated costs for newly acquired FVB including $70 of labour costs and $8 of fuel costs.

Gross profit

(Canadian$000’s,exceptpercentage)		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
Grossprofit	2,483	-	-	3,471	-	-
% of revenue	74	-	-	70	-	-

The Company’s 74 percent gross profit margin for the second quarter of 2021 and 70 percent for the first half of 2021 is better compared to the 62 percent gross profit margin of the first quarter of 2021 and the 2020 historical stand-alone gross profit margins of NZWA and SSS of 60 percent and 61 percent, respectively, prior to being acquired by EverGen. This improvement in the gross profit margin is due to operational efficiencies of consolidated EverGen operations as well as the associated costs relating to increased sales volumes being mostly of a variable cost nature.

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Operating costs

(Canadian $000’s)		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
Operatingcosts	421	-	-	643	-	-

Operating costs are comprised primarily of repairs and maintenance, licenses and permits and property taxes. Certain operating costs of the Company are exposed to fluctuations as a result of seasonal weather variation and the related fluctuations in volumes processed.

EverGen incurred $643 of operating costs in the first half of 2021 as operating costs increased to $421 or by 90 percent in the second quarter of 2021 compared to $222 in the first quarter of 2021. This compares favourably with a 111 percent increase in revenue in the current quarter.

Operating costs of $421 for the second quarter of 2021 include $118 of repairs and maintenance and $28 of equipment rental.

Operating costs of $222 for the first quarter of 2021 include $71 of repairs and maintenance and $99 of equipment rental with increased volumes being processed in the quarter.

From April 16, 2021, operating costs also includes associated costs for newly acquired FVB with utility costs being a significant component. The current quarter includes $127 in FVB utility costs.

General and administrative expenses

(Canadian $000’s)		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
General and administrative expenses	441	-	-	1,687	-	-

General and administrative expenses consist of labour and related benefits costs, professional and consulting fees and other general and administrative expenses.

EverGen incurred $1,687 of general and administrative costs in the first half of 2021 which decreased to $441 or by 65 percent in the second quarter of 2021 compared to $1,246 in the first quarter of 2021. This decrease is mainly due to one-time professional, legal and consulting fees incurred in the first quarter of the year related to the integration of the NZWA and SSS acquisitions, implementation of processes and in preparation of readying EverGen as a reporting issuer and public filer.

Operating profit

(Canadian$000’s)		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
Operating profit(loss)	1,621	-	-	1,141	-	-
% of revenue	48	-	-	23	-	-

Operating profit is measured as gross profit, an additional subtotal found in the statement of net income and comprehensive net income, less operating costs and general and administrative expenses and is a non-GAAP measure as defined in the non-GAAP measures section of this MD&A. Management uses this measure to evaluate the efficiency of its operations and considers it to be a key measure of profitability.

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EverGen generated a $1,141 operating profit in the first half of 2021 as EverGen turned the $480 operating loss in the first quarter of 2021 into a $1,621 operating profit in the current quarter. This turnaround and the much improved operating profit percentage in the second quarter of 2021 compared to a negative 30 percent operating profit in the first quarter is due to the increased gross profit margin in the current quarter as well as the significant decrease in general and administrative expenses in the current quarter due to the one-time professional, legal and consulting fees incurred in the first quarter of the year related to the integration of the NZWA and SSS acquisitions, implementation of processes and in preparation of readying EverGen as a reporting issuer and public filer.

Depreciation and amortization

(Canadian $000’s)		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
Depreciation Amortization	234 438	- -	- -	438 826	- -	- -
Total	672	-	-	1,264	-	-

Depreciation is recognized on property and equipment including right-of-use assets related to lease contracts. Amortization is recognized on the intangible assets including brands, and customer contracts and stakeholder relationships.

Depreciation and amortization on the NZWA and SSS assets acquired at December 31, 2020 commenced on January 1, 2021 and the Company recorded $204 and $388 of depreciation and amortization, respectively, for the first quarter of 2021.

From April 16, 2021, depreciation and amortization includes newly acquired FVB including $17 of depreciation and $50 of amortization in the second quarter. If not for the effect of FVB, depreciation and amortization for EverGen quarter over quarter remains very consistent with $234 of depreciation and $438 of amortization in the current quarter.

Share-based payment expense

(Canadian $000’s)		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
Share-basedpayment expense	332	-	-	745	-	-

Share-based payment expense include various non-cash incentive programs awarded to founders and advisors of EverGen as consideration for services rendered or recognition of incremental fair value of share capital issued.

On December 31, 2020, EverGen adopted a Performance Share Unit Plan (“PSU Plan”) and granted 600,000 performance share units (“PSUs”) to the directors and officers of the Company. While the number of PSUs outstanding will count towards the maximum number of common shares reserved under the Equity Incentive Plan, no additional PSUs can be granted under the Equity Incentive Plan or the PSU Plan.

On March 18, 2021, the Company adopted the Equity Incentive Plan, which provides for the grant of the following equity-based compensation awards: (i) stock options (“Options”); (ii) restricted share units (“RSUs”) and (iii) deferred share units (“DSUs”).

The purpose of the Equity Incentive Plan is to advance the interests of the Company by providing an incentive to the directors, officers, employees and certain consultants of the Company, and any of its

2021 Q2 MD&A EverGen Infrastructure Corp.

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subsidiaries (including any acquired businesses) and affiliates, if any, to align growth objectives of the Company and participants, to associate a portion of the participants’ compensation with the Company’s long term performance and to attract to and retain in the employment of the Company or any of its subsidiaries, persons of experience and ability, by providing them with the opportunity to acquire an increased proprietary interest in the Company through the acquisition of common shares.

In addition, on March 18, 2021, the Company granted (i) 195,000 Options to officers, an employee and consultants of the Company; (ii) 17,500 RSUs to an officer and consultants of the Company; and (iii) 27,500 DSUs to its directors.

The total number of PSUs, Options, RSUs and DSUs that can be granted pursuant to the Equity Incentive Plan is equal to 20 percent of the issued and outstanding Common Shares (on a non-diluted basis) calculated as of the date the Company is listed on the TSX Venture Exchange.

EverGen recorded share-based payment expense of $413 for the first quarter of 2021 related to its Equity Incentive Plan and PSU Plan.

At the end of the second quarter of 2021, the Company granted 100,000 RSUs to an officer of the Company that will only vest at the end of 30 months from the grant date. EverGen recorded share-based payment expense of $332 for the second quarter of 2021 related to its Equity Incentive Plan and PSU Plan. The decrease in the second quarter of 2021 compared to the prior quarter relates mainly to the $193 of DSUs share-based payments expense recognized in full in the first quarter as DSUs vest immediately upon being granted to directors.

Finance costs (income), net

(Canadian$000’s)		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
Finance costs(income),net	123	-	-	230	-	-

Finance costs (income), net consist primarily of the interest expense component of lease payments, interest expense recognized on loans payable, interest income on cash balances as well as other financing costs.

Finance costs (income), net of $107 for the first quarter of 2021 are primarily due to the Company’s interest expense on lease liabilities and financing costs incurred entering into its credit facility.

Finance costs (income), net of $123 for the second quarter of 2021 are mainly due to interest expense on the credit facility and lease liabilities.

Other expenses (income)

(Canadian $000’s)		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
Contingent consideration loss	867	-	-	867	-	-
Transaction costs	(18)			49
Other income	(14)	-	-	(14)	-	-

In the second quarter of 2021, EverGen recognized an $867 contingent consideration loss in re-measuring the liability at fair value at June 30, 2021 taking into account changes in estimated holdbacks, performance obligations and working capital changes relating to the NZWA and SSS acquisitions.

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Transaction costs in 2021 relate mainly to the acquisition of FVB.

Income taxes

(Canadian$000’s)		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
Current tax expense (recovery) Deferred tax expense(recovery)	85 (251)	- -	- -	3 (670)	- -	- -
Total tax expense(recovery)	(166)	-	-	(667)	-	-

Income taxes consist of current and deferred income taxes.

The total tax recovery of $166 in the second quarter of 2021 is mainly due to applying non-capital losses accumulated to date to reduce taxable income in the current year.

The total tax recovery of $501 in the first quarter of 2021 is mainly due to non-recurring expenses related to the integration of acquisitions, implementation of processes and in preparation of readying EverGen as a reporting issuer and public filer. These expenditures effectively reduce taxable income and create noncapital losses in the quarter that the Company may utilize against future taxable income.

EBITDA and Adjusted EBITDA

(Canadian$000’s)		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
EBITDA	454	-	-	(506)	-	-
Adjusted EBITDA	1,863	-	-	2,066	-	-

Management considers EBITDA and adjusted EBITDA key metrics in analyzing operational performance and the Company’s ability to generate cashflow. EBITDA is measured as net income (loss) before interest, tax, depreciation and amortization (“EBITDA”). Adjusted EBITDA is measured as EBITDA adjusted for share-based payment expense, certain non-cash items and unusual or non-recurring items. EBITDA and adjusted EBITDA are non-GAAP measure as defined in the non-GAAP measures section of this MD&A.

EverGen’s EBITDA of $454 in the current quarter is significantly higher compared to the negative EBITDA of $960 in the first quarter of 2021 mainly due to much improved operating profits on increased sales volumes in the current quarter as well as lower general and administrative expenses in the second quarter of 2021 primarily due to non-recurring professional, legal and consulting fees included in general and administrative expenses as described above.

EverGen’s adjusted EBITDA of $1,863 in the second quarter of 2021 has been adjusted for $332 of sharebased payment expense, $18 transaction costs recovery, $228 of one-time professional, legal and consulting fees included in general and administrative expenses related to the integration of acquisitions, implementation of processes and in preparation of readying EverGen as a reporting issuer and public filer and $867 contingent consideration loss in the current quarter in re-measuring the liability at fair value at June 30, 2021.

EverGen’s negative EBITDA of $960 in the first quarter of 2021 is primarily due to non-recurring professional, legal and consulting fees included in general and administrative expenses as described above.

EverGen’s adjusted EBITDA of $203 in the first quarter of 2021 has been adjusted for $413 of share-based payment expense, $67 transaction costs and $683 of one-time professional, legal and consulting fees

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included in general and administrative expenses related to the integration of acquisitions, implementation of processes and in preparation of readying EverGen as a reporting issuer and public filer.

CAPITAL EXPENDITURES

(Canadian$000’s)		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
Capital expenditures – additions topropertyand equipment	122	-	-	268	-	-
Capital expenditures– dispositions ofpropertyand equipment	(3)	-	-	(3)	-	-
Capital expenditures– acquisitions	11,690	-	-	11,690	-	-

Capital expenditures include purchases of property and equipment used in operations as well as acquisitions.

During the first quarter of 2021, EverGen incurred capital expenditures of $146 as the Company replaced an engine on the green waste shredder and added other equipment to its facilities, and made other leasehold improvements as part of its SSS facility expansion.

In the second quarter of 2021, EverGen signed a two year lease for its new corporate office adding $110 to its right-of-use assets and did not have any other significant additions to property and equipment, however, EverGen acquired FVB for total consideration of $11,690 consisting of $10,690 cash consideration and 125,000 common shares in EverGen valued at $8.00 per common share n the acquisition date.

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SUPPLEMENTAL QUARTERLY INFORMATION

The table below summarizes EverGen’s quarterly financial and operational highlights from incorporation[(1)] :

		2021		2020
(Canadian $000’s, except	Jun 30	Mar 31	Dec 31	Sep 30	Jun 30
as otherwise indicated)	Q2	Q1	Q4	Q3	Q2(2)
FINANCIAL
Revenue	3,349	1,585	-	-		-
Net income (loss)	(175)	(1,158)	(2,227)	(5)		-
Net income (loss) per
share ($),
basic and diluted	(0.02)	(0.13)	(6.69)	(2,142.16)	(2.73)
EBITDA(3)	454	(960)	(2,515)	(6)		-
Adjusted EBITDA(3)	1,863	203	-	-		-
Capital expenditures–
additions to property
and equipment	119	146	-	-		-
Capital expenditures –
acquisitions	11,690(6)	-	34,042(4)	-		-
Total assets	64,961	61,912	50,510	104		-
Working capital surplus
(deficit)(3)	2,310	11,579	(2,842)	(6)		-
Total long-term liabilities	15,460	14,347	8,780	100(5)		-
OPERATING
Incoming organic
feedstock (tonnes)	30,647	17,164	-	-		-
Organic compost and
soil sales (yards)	37,053	7,087	-	-		-
RNG sales(gigajoules)	18,845	-	-	-		-

(1) Includes results from the date of incorporation on May 13, 2020.

(2) Period from incorporation on May 13, 2020 to June 30, 2020.

(3) Non-GAAP measure as defined in the Non-GAAP measures section of this MD&A.

(4) Includes the acquisition of NZWA and SSS at December 31, 2020 for cash consideration of $24,498, contingent consideration of $5,655 and 777,777 common shares in EverGen valued at $5.00 per common share on the acquisition date.

(5) Includes $100 of convertible notes exchanged for funds advanced by founder shareholders.

(6) Includes the acquisition of FVB at April 16, 2021 for cash consideration of $10,690 and 125,000 common shares in EverGen valued at $8.00 per common share on the acquisition date.

EverGen was incorporated on May 13, 2020.

On December 31, 2020, EverGen acquired NZWA and SSS. The acquired assets and liabilities are reflected in EverGen’s total assets and total long-term liabilities as of December 31, 2020 and the results of operations for NZWA and SSS are consolidated in EverGen’s consolidated results of operations commencing on January 1, 2021.

On April 16, 2021, EverGen acquired FVB. The acquired assets and liabilities are reflected in EverGen’s total assets and total long-term liabilities as at June 30, 2021 and the results of operations for FVB are included in EverGen’s consolidated results of operations commencing April 16, 2021.

During the periods from May 13, 2020 to December 31, 2020, EverGen earned no revenue from its operations with activities focused on establishing a sustainable infrastructure platform and for the acquisitions of NZWA and SSS. The Company incurred net losses for the periods from May 13, 2020 to June 30, 2021 primarily due to non-reoccurring general and administrative expenses related to one-time professional fees, transaction costs for the acquisition of NZWA and SSS as well as other planned acquisitions, and share-based payment expenses.

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CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES

The following discussion relates to the consolidated position of liquidity and capital of EverGen as at June 30, 2021.

EverGen’s business operates to receive inbound organic municipal waste under contracted tipping fees with municipalities, to sell outbound organic compost and soil products to farmers, gardeners and developers, and to provide organic feedstock for the existing owned RNG facilities and further RNG infrastructure projects.

At June 30, 2021, EverGen had cash and cash equivalents of $3,647 (December 31, 2020 - $4,684), restricted cash of $3,187 (December 31, 2020 - $319) and a working capital surplus of $2,310 (December 31, 2020 - $2,842 deficit) which is primarily due to the proceeds from the equity issuance and debt advanced in the first quarter of 2021 offset by the acquisition of FVB in the second quarter of 2021.

The Company actively monitors its capital and operational spending activities to ensure that it can meet its future anticipated obligations incurred from normal ongoing operations, which may require the Company to make adjustments to its capital structure. The Company’s capital structure includes working capital, debt financing, lease liabilities and shareholders’ equity. Regular reporting of the Company’s liquidity and capital resources is provided to EverGen’s board of directors. To maintain or adjust its capital structure, the Company may issue additional common shares, repay existing debt, seek additional debt financing or adjust its spending or capital expenditures. There is no assurance that any of these will be on acceptable terms to EverGen.

EverGen assesses its ability to meet its on-going obligations using the non-GAAP measures of EBITDA and adjusted EBITDA. These ratios are key measures of liquidity and the management of capital resources.

Credit facilities

On March 17, 2021, EverGen entered into a credit facility arrangement with a Canadian lender, providing for a senior secured term loan up of to $7,000, repayable over a term of three years bearing interest at a rate of Canadian Variable Rate plus 3.0 percent per annum. The credit facility is secured by the assets of the Company and its subsidiaries.

As at June 30, 2021, the credit facility has a loans payable balance of $6,777.

The credit facility agreement is subject to the following covenants:

• Maintain a consolidated working capital ratio equal to or greater than 1.20:1 at all times;

• Maintain a consolidated “fixed charge coverage ratio” as defined in the agreement equal to or greater than 1.20:1 at all times, tested quarterly on a rolling four quarters basis;

• Maintain a consolidated “total funded debt to EBITDA ratio” as defined in the agreement equal to or less than 3.00 at all times, tested quarterly on a rolling four quarters basis; and

• Other operational and financial covenants including but not limited to the Company’s ability to pay dividends, incur additional debt, directly or indirectly grant loans or make investments and other such matters.

The Company is in compliance with all covenants as at June 30, 2021.

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Share capital

The Company had the following outstanding common shares and equity instruments at June 30, 2021 and December 31, 2020:

As at (thousands)	June 30, 2021	December 31, 2020
Common shares(1) Share warrants(2) Share rights Options Performance share units Restricted share units Deferred share units	10,287(1) 911(2) - 195 600 118 28	8,203 340 462 - 600 - -
Total outstandingsecurities	12,139	9,605

(1) At June 30, 2021, common shares includes the 1,059,325 Special Warrant Unit Shares classified as equity that converted to common shares of the Company on July 20, 2021, following a deemed exercise on the Automatic Exercise Date.

(2) At June 30, 2021, share warrants includes the 529,662 Special Warrant Unit Warrants included in the Special Warrant Financing that converted to warrants of the Company on July 20, 2021, following a deemed exercise on the Automatic Exercise Date.

On January 12, 2021, EverGen completed a non-brokered private placement of 254,000 common shares at $5.00 per common share for gross proceeds of $1,270.

On January 26, 2021, the Company issued 50,000 common shares with a fair value of $5.00 per common share to an advisor and former shareholder of NZWA as consideration for services rendered in connection with the acquisition of NZWA by EverGen at December 31, 2020. The Company previously recognized $250 of share-based payment expense in connection with the fair value of these services rendered for the period ended December 31, 2020.

On March 18, 2021, the Company issued 13,500 common shares with a fair value of $7.00 per common share for advisor services rendered in connection with the Special Warrant Financing, see share warrants below.

On March 18, 2021, EverGen completed a private placement of 1,059,325 Special Warrants at $8.00 per unit for aggregate gross proceeds of $8,475 (the “Special Warrant Financing”).

Each Special Warrant entitles its holder to receive, upon exercise or deemed exercise, one Special Warrant Unit at no additional cost. Each Special Warrant not previously voluntarily exercised by the holder thereof shall be deemed exercised on behalf of, and without any required action on the part of, the holder thereof, for one Special Warrant Unit on the Automatic Exercise Date.

The Automatic Exercise Date is the earlier of (i) the date which is the third business day following the date on which the Company has obtained a receipt for the final, long prospectus of the Company from the British Columbia Securities Commission, as principal regulator, qualifying the distribution of the Special Warrant Units in qualifying jurisdictions and (ii) the first business day following July 19, 2021, the exercise deadline day.

Each Special Warrant Unit is comprised of:

• One Common Share (a “Special Warrant Unit Share”) and

• One-half of one Common Share purchase warrant (each whole Common Share purchase warrant, a “Special Warrant Unit Warrant”).

Management determined that the Special Warrants are equity instruments, and EverGen has included the 1,059,325 Special Warrant Unit Shares as part of share capital and included the 529,662 Special Warrant Unit Warrants as part of share warrants.

EverGen determined a fair value of $2.36 per Special Warrant Unit Warrant, and recognized $1,250 of gross proceeds in share warrants and the balance of $7,225 in share capital.

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On April 16, 2021, EverGen acquired all of the issued and outstanding shares of Fraser Valley Biogas Ltd., pursuant to a share purchase agreement. The Company paid an aggregate amount of $11,500 comprised of $10,690 cash consideration and issued 125,000 common shares valued at $8.00 per share.

On April 27, 2021, EverGen completed a non-brokered private placement of 111,111 common shares at $9.00 per common share for gross proceeds of $1,000.

On June 22, 2021, the deadline for completing a liquidity event expired and the holders of these 461,699 share rights were issued an additional 461,699 common shares for no additional consideration.

On June 29, 2021, the Company granted 100,000 RSUs to an officer of the Company that will only vest at the end of 30 months from the grant date.

In addition, during the six month period ended June 30, 2021, EverGen completed other private placements of 10,000 common shares at $5.00 per common share for gross proceeds of $50.

On July 20, 2021, following the Automatic Exercise Date, the 1,059,325 Special Warrants were deemed exercised for 1,059,325 Special Warrant Units, each unit comprising one common share and one half a warrant issued with the completion of this deemed exercise. As management previously determined these Special Warrants are equity instruments, EverGen included the 1,059,325 Special Warrant Unit Shares as part of share capital and included the 529,662 Special Warrant Unit Warrants as part of share warrants as of March 18, 2021, the private placement issue date of the Special Warrants.

A summary of EverGen’s other equity instruments at June 30, 2021 and December 31, 2020 can be found in note 13 to the unaudited interim consolidated financial statements for the three and six month periods ended June 30, 2021, in note 13 to the audited consolidated financial statements for the period from incorporation on May 13, 2020 to December 31, 2020 and in the Share-based payment expense section above.

On August 30, 2021, the Company had the following outstanding common shares and equity instruments outstanding:

As at (thousands)	August 30, 2021
Common shares Share warrants Share rights Options Performance share units Restricted share units Deferred share units	13,367 2,451 - 193 600 118 28
Total outstandingsecurities	16,757

OUTLOOK

EverGen’s ability to continue to grow our business and generate improvements in our financial performance depends on the execution of our strategy to build, own and operate a portfolio of RNG, waste to energy and related sustainable infrastructure projects in British Columbia and other regions in North America including:

• Development and construction of existing portfolio of RNG expansion projects;

• Optimization and expansion of existing organic waste processing facilities and RNG feedstock;

• Securing and optimizing long-term contracts for RNG offtake and feedstock inputs to provide stable low-risk cash flows;

• Acquisition of cash flow generating projects for the early generation of working capital;

• Secure a strong pipeline of municipal feedstock agreements through developed partnerships and vertically integrated operations;

• Diversification of feedstock suppliers to de-risk our inbound revenue streams;

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• Integration of talent, systems and processes across our acquired projects to create efficiencies and best in class operations; and

• Continued growth of project portfolio via strategic acquisitions and consolidation opportunities.

The Company is uniquely positioned with the prospect to capture expansion in both compost and RNG markets. The organic compost and soil industry provides opportunities in agriculture, home gardening, landscaping, horticulture and construction due to increasing demand for organic products and growing awareness regarding the disadvantages of chemical fertilizers and pesticides. The RNG industry is set to grow rapidly over the next several decades based on increased availability of various feedstock and increased customer demand for lower carbon energy alternatives.

Executing strategic and accretive acquisitions

EverGen’s ability to identify, execute and integrate accretive acquisitions is a key driver of our growth. Given the significant fragmentation that exists in the North American market, our growth and success depends on our ability to realize consolidation opportunities and achieve synergies in cost and margin through the operation and expansion of facilities under a unified business platform. The identification and execution of acquisitions and consolidation opportunities as well as the integration of such into a common operating platform, with shared services and efficiency optimizations, is a key factor to our success. The successful execution of acquisitions opens new markets to EverGen, provides us with additional growth opportunities and drives further procurement and cost synergies across our operations.

Driving cost efficiencies

The Company currently provides high-value services and high-quality products through strategically located projects in British Columbia. These projects provide the foundation of our initial platform to consolidate growth and realize operational and capital efficiencies. In each of our local markets, our strong competitive position is supported by asset management discipline, investment in sustainable infrastructure and collaborative stakeholder relationships. EverGen’s continued success depends on our ability to leverage our scalable network and platform to build relationships with municipal, commercial and utility customers, realize operational and capital efficiencies, and extract procurement and cost synergies.

Building collaborations

EverGen’s collaboration approach propels growth and extends our execution capabilities across our value chain and supply chain. Key relationships with local developers, First Nations and other stakeholders provide access to projects and leverage our capabilities in sourcing new organic waste streams and extending out our business model to fulfill societal and customer expectations of waste recycling and waste to energy production combined with reduced greenhouse gas emissions.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE

The above strategy is implemented in conjunction with our commitment to deliver on societal trends and expectations of a circular economy and fulfilling ESG values. EverGen was established for the purpose of contributing to a circular economy in waste recycling and waste to energy production through sourcing, operating and developing sustainable infrastructure and fulfilling our ESG values.

EverGen intends to deliver on its ESG values as follows:

• E – The Company recycles and repurposes organic waste products, produces and expects to produce a growing supply of renewable energy and reduces greenhouse gas emissions;

• S – EverGen operates as a community-focused business, receiving and recycling organic waste from local municipalities and businesses and focused on partnering with local First Nations including as hosts for its operations and as workforce participants; and

• G – The Company is committed to strong governance practices in its current operations and in planned growth and development of RNG. EverGen is dedicated to developing a sustainable

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business platform through collaboration with stakeholders, communities, First Nations, employees and contractors, customers and investors and through responsible development, disciplined asset management, financial strength and resiliency and the capacity to operate and grow sustainably.

EverGen is proactively engaging with local businesses, such as restaurants and food and beverage producers and distributors, to advance socially conscious commerce, to create mutually beneficial and socially responsible alternatives to traditional waste disposal and in achieving a reduced carbon footprint. These relationships represent a significant area of growth and diversification from EverGen’s existing customer base and provide the opportunity for market expansion while fulfilling expectations of directing organic waste for recycling and the production of renewable energy.

BUSINESS RISKS

EverGen’s business and financial performance, which includes our results of operations and cash flows, are impacted by a number of risks. For a full understanding of the risks that impact EverGen, the following should be read in conjunction with the Business Risks section of our 2020 annual MD&A. Many of these risks are outside of our control. The risks and uncertainties described below are not the only risks that the Company faces. Additional risks and uncertainties, including those of which management is not currently aware of or which are currently deemed immaterial, may adversely affect the Company. Any of these factors, either alone or taken together, could have a material adverse effect on the Company and could change whether any forward-looking statements are ultimately realized.

These risks cannot be eliminated, however, EverGen’s management is committed to proactively monitoring, and where possible, mitigating risk. Issues affecting, or with the potential to affect, the Company’s assets, operations and/or reputation, are generally of a strategic nature or are emerging issues that can be identified early and then managed, but occasionally include unforeseen issues that arise unexpectedly and must be managed on an urgent basis. EverGen takes a proactive approach to the identification and management of issues that may affect the Company’s assets, operations and/or reputation and has established consistent and clear policies, procedures, guidelines and responsibilities for issue identification, management and mitigation.

Acquisitions risk

EverGen’s ability to make strategic acquisitions depends on our capacity to identify desirable acquisition targets, negotiate advantageous transactions despite competition for such opportunities, fund such acquisitions on terms favorable to EverGen, obtain regulatory approvals and realize the expected benefits of such transactions. The Company proactively manages its rate of growth through strategic and timely acquisitions, the development of key management capabilities and the engagement of advisors as considered appropriate.

Acquisitions and other investments made in conjunction with our expansion to RNG production and renewable energy infrastructure may not increase our results of operations in the timeframe anticipated or at all. EverGen may face difficulties in operating in new or expanded markets and to provide new revenue sources. The Company may face acquisition integration challenges such as the failure to operate within budget, failure to implement the planned operational efficiencies or such efforts may not yield the intended results. EverGen may not be able to achieve or maintain the cost savings planned through optimization efforts and synergies.

The integration of acquisitions by EverGen could increase our exposure to the risk of inadvertent noncompliance with laws and regulations. Liabilities associated with acquisitions, including known liabilities and ones that may exist only because of past operations of an acquired business, may provide to be more difficult or costly to address than originally anticipated.

Future acquisitions may require significant resources including financial means, which may not result in adequate returns for EverGen’s shareholders.

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Customer contracts risk

The majority of revenues earned by EverGen are derived from long-term material contracts with municipalities located in proximity to the Company’s waste processing facilities. During the six months ended June 30, 2021, the Company had 6 municipal customers who represented 59 percent of revenue. These revenue contracts represent a significant portion of the current revenues reported by the Company. Management does not consider there to be a concentration of risk associated with any one customer.

The Company’s wholly-owned subsidiary, SSS, responded to a request for proposal, specifically No. 20-016, related to organics management at the City of Vancouver’s North Shore Transfer Station for a material contract for both tipping and trucking of organic waste from Metro Vancouver. The request for proposal was a competitive process launched to recontract for those contracts expiring June 30, 2021, which are currently held by SSS at the Company’s facility near Whistler, British Columbia. These contracts accounted for 26 percent of EverGen’s revenue for the six month period ended June 30, 2021 (year ended December 31, 2020, these contracts accounted for 70 percent of SSS’s revenue). On April 16, 2021, the Company was notified that this material contract was awarded to another bidder subject to final review and execution by the commissioner of the Metro Vancouver Regional District – Zero Waste Committee. Management expects to replace this material contract with revenue from other municipal, commercial or residential sources, the specific timing of which is uncertain.

Contractual provisions are in place to safeguard EverGen in the event that this contract was not renewed or otherwise offset by new contracts. Under compensation provisions in EverGen’s purchase agreement with the previous shareholders of SSS, this request for proposal outcome may prompt (i) the release to EverGen of $2,000 of performance driven holdbacks paid to the escrow agent in trust in the first quarter of 2021 and (ii) the release of encumbrances on the $319 of restricted cash held in restricted term deposits, the $368 of restricted cash held in cash as well as the $78 of collateralized accounts receivable at June 30, 2021, respectively, that are also subject to holdback performance obligations and escrow arrangements.

The North Shore Transfer Station represents two of the 21 municipalities, less than 10 percent, included under the administration of Metro Vancouver. The remaining municipalities provide EverGen the opportunity for additional municipal contracts.

EverGen is also working in collaboration with local businesses and leading consumer driven businesses to advance the circular economy under new business models targeted at organic waste recycling. These collaborations are part of EverGen’s diversification and extension strategies. These new business models aim to expand and capture additional sources of organic waste for recycling by motivating and fulfilling consumer-driven expectations of organic waste recycling. Accordingly, EverGen’s business model contains a significant expansion of organic waste sourcing from new participants and capture of additional value beyond EverGen’s current sources of revenue.

Trading risk

On August 4, 2021, EverGen completed its initial public offering. The Company’s common shares were listed on the TSX Venture Exchange under the symbol “EVGN” and commenced trading on August 4, 2021.

There is no guarantee of a return on investment in the common shares of EverGen and investors may lose their entire investment. The Company is unlikely to pay dividends for an extended period of time.

Equity securities are subject to trading and volatility risks which combined with various global financial conditions including the increased volatility of financial markets may reduce the price of the common shares of the Company and dilution from additional equity offerings may negatively impact holders of common shares. The sale of common shares by existing shareholders may adversely impact the share price.

A purchaser of shares under the initial public offering may purchase shares at a substantial premium to the current book value of the common shares. The failure of securities and industry analysts to publish research

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or to publish inaccurate or unfavourable research about the Company’s business may have a significant adverse impact on the price and trading volume of EverGen’s common shares.

FINANCIAL RISKS

EverGen defines financial risk as the risk of loss or lost opportunity resulting from financial management and market conditions that could have a positive or negative impact on the Company’s cash flows.

Credit risk

Credit risk is the risk of loss if purchasers or counterparties default on their financial obligations. The maximum exposure of EverGen to credit risk at June 30, 2021 is limited to cash and cash equivalents and accounts receivable. The Company limits its exposure to credit loss by placing its cash and cash equivalents with high credit quality financial institutions and through the performance of credit checks for new customers. The Company considers its credit risk with respect to accounts receivable to be limited to the value of the provision for allowance for expected credit losses which has been recognized.

EverGen’s customers are primarily municipal governments. At June 30, 2021, the Company has 7 customers who represent 67 percent of EverGen’s accounts receivable (December 31, 2020 – two customers represented 31 percent of account receivable). At June 30, 2021, the Company has $78 of collateralized accounts receivable (December 31, 2020 - $447).

Liquidity risk

Liquidity risk is the risk that EverGen will not be able to meet its financial liabilities as they come due. The Company monitors its liquidity requirements by anticipating operating, investing and financing activities and ensuring there are enough funds to cover these activities. Liquidity risks may necessitate the need for EverGen to conduct additional equity issues or obtain debt financing.

EverGen prepares annual capital expenditure and operating budgets and associated cash flow forecasts, which are monitored and updated as required. In addition, the Company requires authorizations for expenditures to assist with the management of capital.

The Company enters into leases and contracts that give rise to commitments in the normal course of business for future minimum payments. The Company had the following commitments at June 30, 2021:

		1 to 2	2 to 3	3 to 4	4 to 5
	< 1year	years	years	years	years	Thereafter	Total
Loan payments(1)	955	928	5,530	-	-	-	7,413
Lease payments(1)	417	411	383	362	302	3,221	5,096
Service contracts and
other lease
commitments(2)	112	48	5	5	4	-	174
Consulting services
agreements	150	-	-	-	-	-	150
Carbon emission
credits –
purchase agreement	222	58	-	-	-	-	280
Total	1,856	1,445	5,918	367	306	3,221	13,113

(1) Principal and interest

(2) Service contracts for leased equipment.

In addition to the above amounts, the Company has annual commitments related to certain of its land leases for utilities and property taxes that fluctuate with usage and assessments, respectively.

Market risk

Market risk is the risk that changes in market conditions, such as interest rates and foreign exchange rates will affect EverGen’s net income (loss) or value of financial instruments.

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At June 30, 2021, the Company has fixed interest rates associated with its lease liabilities, thereby substantially reducing the cash flow risk of market fluctuations related to interest rates.

At June 30, 2021, the Company is exposed to interest rate risk with respect to is loans payable. If interest rates were to increase or decrease 50 basis points, the impact on interest expense in net income (loss) for the six month period ended June 30, 2021 would be $10.

ACCOUNTING STANDARDS, CHANGES AND PRONOUNCEMENTS

EverGen’s interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, using accounting policies consistent with International Financial Reporting Standards as issued by the International Accounting Standards Board. These financial statements are condensed as they do not include all of the information required by IFRS for annual financial statements and therefore should be read in conjunction with the Company’s audited consolidated financial statements for the period from incorporation on May 13, 2020 to December 31, 2020. There were no new or amended accounting standards or interpretations issued during the three and six months ended June 30, 2021 that are expected to have a material impact on our interim consolidated financial statements.

CRITICAL ACCOUNTING ESTIMATES, JUDGMENTS AND ASSUMPTIONS

The preparation of financial statements requires management to make certain judgments, accounting estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues and expenses.

A summary of EverGen’s critical accounting estimates and judgments can be found in note 2 to the audited consolidated financial statements for the period from incorporation on May 13, 2020 to December 31, 2020. There have been no significant changes to the use of estimates, judgements or assumptions since December 31, 2020, except as outlined in note 2 to the unaudited interim consolidated financial statements for the three and six month periods ended June 30, 2021.

A summary of significant accounting policies can be found in note 3 to the audited consolidated financial statements for the period from incorporation on May 13, 2020 to December 31, 2020.

DISCLOSURE AND INTERNAL CONTROLS

Management is responsible for the preparation and integrity of the Company’s financial statements, including the maintenance of appropriate information systems, procedures and internal controls, and to ensure that information used internally or disclosed externally, including the financial statements and MD&A, is complete and reliable. Disclosure controls and procedures should be designed to provide reasonable assurance that information required to be disclosed by the Company is recorded, processed, summarized and reported within the time periods specified under the Canadian securities law.

In preparation for completing an initial public offering and readying EverGen as a venture reporting issuer, the Company has standardized pre-existing control systems at each of the acquired entities and is further strengthening EverGen’s internal control environment.

It should be noted that a control system, including EverGen’s disclosure and internal controls and procedures, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met and it should not be expected that the disclosure and internal controls and procedures will prevent all errors or fraud.

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RELATED PARTY TRANSACTIONS

EverGen had the following related party transactions during the three and six month periods ended June 30, 2021:

Key management compensation

The value of compensation and other fees paid to board of directors and members of executive management of EverGen is as follows:

		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
Management salaries and other benefits Share-basedpayment expense	191 331	- -	- -	369 742	- -	- -
Total	552	-	-	1,111	-	-

At June 30, 2021, $1 is payable to members of executive management as reimbursement of EverGen expenses incurred.

Other related party transactions

Office rent expense

During the first three months of 2021, the Company incurred office rent expense of $10 to a a private company of which a board member is a partner, with respect to shared office space. The fees which are included in general and administrative expenses were incurred in the normal course of business under the same terms and conditions as transactions with unrelated companies. At June 30, 2021, $nil was payable to the company.

New office rent sub-lease – cost recovery

In April 2021, the Company entered into a new office lease. The Company sub-leases part of this office space to a a private company of which a board member is a partner. During the six month period ended June 30, 2021, the Company included $5 as a cost recovery in general and administrative expenses. The Company billed these fees in the normal course of business under the same terms and conditions as transactions with unrelated companies. At June 30, 2021, $5 was receivable from the company.

SUBSEQUENT EVENTS

Special Warrant deemed exercise

On July 20, 2021, following the Automatic Exercise Date, the 1,059,325 Special Warrants were deemed exercised for 1,059,325 Special Warrant Units, each unit comprising one common share and one half a warrant issued with the completion of this deemed exercise. As management previously determined these Special Warrants are equity instruments, EverGen included the 1,059,325 Special Warrant Unit Shares as part of share capital and included the 529,662 Special Warrant Unit Warrants as part of share warrants as of March 18, 2021, the private placement issue date of the Special Warrants.

Initial public offering

On August 4, 2021, EverGen completed an initial public offering (the “Offering”) of 3,080,000 units (the “Offered Units”) of the Company at a price of $6.50 per Offered Unit (the “Offering Price”), for aggregate gross proceeds of $20,020 (the “Offering”).

The Company’s common shares were listed on the TSX Venture Exchange under the symbol “EVGN” and commenced trading on August 4, 2021.

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Each Offered Unit consisted of one common share of the Company and one-half of one common share purchase warrant. Each whole common share purchase warrant entitles the holder thereof to purchase one common share of the Company at an exercise price of $10.50 until August 4, 2023.

The Offering was conducted by a syndicate of underwriters.

The Company has also granted the underwriters with an over-allotment option to purchase up to an additional 462,000 Offered Units at the Offering Price, exercisable in whole or in part, at any time on or prior to the date that is 30 days following the closing of the Offering. If the over-allotment option is exercised in full, additional gross proceeds of $3,003 will be raised.

ADDITIONAL INFORMATION

Additional information related to EverGen is available on www.evergeninfra.com and on the Company’s SEDAR profile at www.sedar.com.

NON-GAAP MEASUREMENTS

EverGen uses certain financial measures referred to in this MD&A to quantify its results that are not prescribed by International Financial Report Standards (“IFRS”). The following terms: “EBITDA”, “adjusted EBITDA”, “operating profit” and “working capital” are not recognized measures under IFRS and may not be comparable to that reported by other companies. EverGen believes that, in addition to measures prepared in accordance with IFRS, the non-GAAP measurements provide useful information to evaluate the Company’s performance and ability to generate cash, profitability and meet financial commitments.

These non-GAAP measures ae intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

EBITDA and Adjusted EBITDA

Management considers EBITDA and adjusted EBITDA key metrics in analyzing operational performance and the Company’s ability to generate cash flow. EBITDA is measured as net income (loss) before interest, tax, depreciation and amortization. Adjusted EBITDA is measured as EBITDA adjusted for share-based payment expense, certain non-cash items and unusual or non-recurring items.

The following table provides a reconciliation of the non-GAAP measures, EBITDA and adjusted EBITDA, to the applicable IFRS measure for EverGen:

		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
Net loss Tax expense (recovery) Depreciation and amortization Finance costs(income),net	(175) (166) 672 123	- - - -	- - - -	(1,333) (667) 1,264 230	- - - -	- - - -
EBITDA Share-based payment expense Transaction costs Non-recurring general and administrative expenses Contingent consideration loss	454 332 (18) 228 867	- - - - -	- - - - -	(506) 745 49 911 867	- - - - -	- - - - -
Adjusted EBITDA	1,863	-	-	2,066	-	-

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Operating profit

Management considers operating profit a key metric in analyzing operational efficiency and performance and the Company’s ability to generate cash flow. Operating profit is measured as gross profit, an additional subtotal found in the statements of net income, less operating costs and general and administrative expenses.

The following table provides a reconciliation of operating profit, a non-GAAP measure to the applicable IFRS measurement for the Company:

		Period from			Period from
		incorporation on			incorporation on
	Three months	May 13, 2020		Six months	May 13, 2020
	ended	to		ended	to
	June 30,	June 30,		June 30,	June 30,
			%			%
	2021	2020	Change	2021	2020	Change
Gross profit Operating costs General and administrative expenses	2,483 (421) (441)	- - -	- - -	3,471 (643) (1,687)	- - -	- - -
Operating profit (loss)	1,621	-	-	1,141	-	-

Working capital

Working capital for EverGen is calculated as current assets less current liabilities. The following table provides a reconciliation of working capital, a non-GAAP measure to the applicable IFRS measurements for the Company:

As at (thousands)	June 30, 2021	December 31, 2020
Current assets Current liabilities	9,346 (7,036)	6,979 (9,821)
Workingcapital surplus(deficit)	2,310	(2,842)

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FORWARD LOOKING STATEMENTS

Certain statements in this MD&A constitute forward-looking statements and forward-looking information (collectively “forward-looking statements”) within the meaning of applicable Canadian securities laws. All statements other than statements of present or historical fact are forward-looking statements. Forwardlooking information is often, but not always, identified by the use of words such as: “anticipates”, “believes”, “continues”, “estimates”, “could”, “expects”, “intends”, “may”, “objective”, “ongoing”, “plans”, “will”, “projects”, “should”, or similar expressions suggesting future outcomes or events. In particular, this MD&A contains forward-looking statements relating, but not limited to:

• EverGen’s plans to develop and construct a platform of sustainable infrastructure, produce RNG and reduce carbon emissions;

• Optimization and expansion of organic waste processing facilities and RNG feedstock;

• Cost savings through synergies and efficiencies expected to be realized from the acquisitions of NZWA, SSS and FVB;

• The sufficiency of EverGen’s liquidity to fund operations and to comply with covenants under its credit facility;

• Continued growth through strategic acquisitions and consolidation opportunities;

• • The establishment and realization of a circular economy through the Company’s organic waste management facilities and the expansion and development of renewable energy;

• Continued growth of the feedstock opportunity from municipal and commercial sources;

• Developing strategic partnerships and advancing RNG project pipelines;

• Incurring prospective transaction costs;

• The utilization of non-capital losses against future taxable income;

• The conversion of Special Warrant Unit Shares to common shares of the Company upon the exercise or deemed exercise on the Automatic Exercise Date;

• Negotiating increased prices for existing RNG offtake contracts;

• Planned construction on the anaerobic digester at its NZWA facility later this year;

• The anaerobic digester project at NZWA converting municipal and commercial organic waste into energy to meet the needs of approximately 1,900 residential homes; and

• Planned expansion of the RNG producing facility at FVB.

Such statements are based on assumptions of future events and actual results could vary from these assumptions. Events or circumstances may cause actual results to differ materially from those predicted as a result of numerous known and unknown risks, uncertainties and other factors, many of which are beyond the control of EverGen. These include, but are not limited to, risks associated with renewable energy sources, such as market competition, volatility of prices, currency fluctuations, environmental risk, and competition from other producers and ability to access sufficient capital from internal and external sources.

Although management believes that the expectations reflected in such forward-looking statements and information are reasonable, it can give no assurance that such expectations will prove to be accurate, as results and future events could differ materially from those expected or estimated in such statements. As such, readers are cautioned not to place undue reliance on these forward-looking statements. The forwardlooking statements contained in this MD&A are made as of the date hereof for the purposes of providing the readers with EverGen’s expectations for the coming year. The forward-looking statements and information may not be appropriate for other purposes. Furthermore, the Company undertakes no obligation to update or revise these forward-looking statements or information as a result of new information or future events, other than as required by applicable securities laws. However, in the event that subsequent events are reasonably likely to cause actual results to differ materially from forwardlooking statements previously disclosed by the Company for a period that is not yet complete, EverGen will provide disclosure on such events and the anticipated impact of such events.

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