ATI Airtest Technologies Inc. — Management Reports 2021

Jun 1, 2021

ATI AIRTEST TECHNOLOGIES INC.

Management Discussion and Analysis

For the quarter ended March 31, 2021

This Management Discussion and Analysis of ATI AirTest Technologies Inc. (the "Company") provides analysis of the Company's financial results for the quarter ended March 31, 2021. The following information should be read in conjunction with the accompanying unaudited financial statements and the notes to the unaudited financial statements for the quarter ended March 31, 2021.

1.1 Date of the Report

May 31, 2021

1.2 Overall Performance

For the quarter ended March 31, 2021 the Company had a 30.9% decrease in sales compared to the same period in 2020. The Company reported a net loss of \$388,873 for the quarter ended March 31, 2021 which was an increase of 88.4% over the \$206,453 operating loss reported for the quarter ended March 31, 2020.

The Company's working capital deficiency increased from \$4,510,803 as at March 31, 2020 to \$6,863,660 as at March 31, 2021.

The Sales Royalty Agreement signed between Omni Marketing Global and the Company which was approved by the TSX Venture Exchange in second quarter 2018 is still in effect, and with the placements that have recently been completed the Company has caught up the outstanding payments.

Company management continues to work with potential capital providers to arrange a more significant long-term financing that will finance our growth, enable us to complete some pending R&D projects that will contribute strongly to our growth, and also provide capital for a marketing budget that will allow us to aggressively pursue our marketing plan including the promotion of our new wireless technologies.

1.3 Selected Annual Information

Fiscal Year	2020	2019	2018
Net Sales	\$2,660,242	\$3,480,868	\$2,703,073
Net and Comprehensive Loss	\$ 714,396	\$ 217,574	\$ 958,848
Basic and diluted loss/share	\$ 0.01	\$ 0.00	\$ 0.03
Total Assets	\$ 615,031	\$ 629,801	\$ 487,748
Total Long-Term Liabilities	\$1,186,246	\$1,193,444	\$1,351,632
Cash dividends per common share	N/A	N/A	N/A

1.4 Results of Operations

Revenue

Sales for the first quarter of 2021 totaled \$619,872, down from \$897,644 or a 30.9% decrease from sales for the first quarter of 2020. This decrease in sales was largely a result of reduced production related to three of our large OEM accounts and also some slippage in volume for the regular accounts due to the Pandemic.

Gross Profit

Gross Profit on sales amounted to \$230,726 in the first quarter of 2021 compared to \$358,174 in the first quarter of 2020, a decrease of \$127,448 or 35.6%. Gross margin as a percentage of sales decreased by 2.7% from the 2020 first quarter gross margin percentage.

Expenses

Total expenses for the first quarter of 2021 were \$619,599 compared to \$564,628 for the first quarter of 2020, an increase of \$54,971 or 9.7% over the same period in 2020.

Profit & Loss

The Company recorded a net loss of \$388,873 for the quarter ended March 31, 2021, as compared to a loss of \$206,453 for the same period in 2020. The loss increase was primarily related to the reduction of gross profit resulting from the fall off in sales.

Company management expects to see sales growth commencing in the second half of 2021 with the increased promotion of its new line of wireless sensor products both for the new DIGI parking garage sensors and also the new wireless sensor that has been developed for our DCV energy saving program as well as our air quality program for schools and smaller sized offices. Introduction of the new BACnet capability for the Parking Garage systems will also contribute greatly to sales growth starting in the third quarter of 2021. The key to executing the Company's plan for growth will be its ability to finance an aggressive marketing program as well as the cost of growth in accounts receivable and inventory.

	2021	2020				2019
	Q1	Q4	Q3	Q2	Q1	Q4	Q3	Q2
Net Sales	\$619,872	\$491,493	\$ 561,504	\$709,601	\$897,644	\$865,131	\$ 727,185	\$1,026,410
Loss	(\$388,873)	(\$740,429)	(\$283,213)	(\$134,274)	(\$206,453)	\$ 18,965	(\$ 98,816)	(\$ 16,885)
Basic and diluted loss per share	\$ 0.00	\$ 0.00	\$ 0.00	\$ 0.00	\$ 0.00	\$ 0.00	\$ 0.00	\$ 0.00

1.5 Summary of Quarterly Results

1.6 Liquidity

The Company concluded four share placements from September 2020 through April, 2021 to raise a total of \$2,468,692 through the issuance of 50,476,668 shares.

AirTest management has maintained communication with several financial sources in case it becomes necessary to conclude additional financing to ensure the Company will be able to aggressively pursue its business plan and take advantage of the outstanding growth opportunity it presently enjoys with its recently developed wireless technology.

1.7 Capital Resources

The Company has no commitments for capital expenditures as of the end of the first quarter of 2021. Capital is required for growth, to clean up some pending liability obligations, and for completion of some in-house product development projects. Management may find it necessary to consider further equity financing, but it will be done in stages to avoid excessive dilution to existing shareholders.

1.8 Off-Balance Sheet Arrangements

As of March 31, 2021, the Company had no material off-balance sheet arrangements.

1.9 Transactions with Related Parties

• (a) During the first quarter of 2021, the Company paid or accrued salaries to directors and officers of \$nil (2019 - \$nil).
• (b) At March 31, 2021, \$246,517 is payable to directors and officers for accrued services and advances. (Dec 2020 - \$246,517)
• (c) As at March 31, 2021, \$173,086 (Dec 2020 \$173,086) is included in non-current loans payable owed to the CFO and President of the Company.

Amounts becoming due to related parties in the normal course of operations, except where specifically stated, are non-interest bearing, unsecured, and without terms of repayment.

1.10 Proposed Transactions

There are currently no proposed transactions by the Company.

1.11 Changes in Accounting Policies including Initial Adoption

January 1, 2010 was the date of transition to IFRS (Transition Date). Previously, the Company prepared its financial statements in accordance with Canadian Generally Accepted Accounting Principles ("Canadian GAAP")

1.12 Financial Instruments and Other Instruments

The Company's financial instruments consist of cash, accounts receivable, an asset-based loan, shareholder loans, merchant advance loans, accounts payable and accrued liabilities.

The asset-based loan from Pivot Financial in Toronto is secured by the Company's accounts receivable.

Because a high percentage of the Company's sales are made in United States, and also because the Company has three important suppliers based in Europe, there is an element of risk related to any large fluctuation in the relationship between the Euro, the Canadian dollar and the US dollar.

1.13 Share Data

The number of common shares issued and outstanding as of the date of this filing is 87,305,581.

1.14 Evaluation and Effectiveness of Disclosure Controls and Procedures

Under National Instrument 52-109 management is now required to certify that they have caused the company to design suitable controls over external disclosure and financial reporting. Management must also undertake reviews of the effectiveness of such controls and discuss areas of significant weakness and the associated risks as well as their plans to address them.

The company has not had sufficient financial resources to maintain dedicated internal financial reporting and qualified professional accounting personnel. Accordingly, financial reporting controls and internal transaction controls are designed and provided primarily by management with limited involvement from external consultants and professionals. This approach has been determined by management to be the most cost effective to date.

Management and the audit committee have discussed and identified areas that need to be improved as the company expands its scope of operations and strives to meet current market and regulatory expectations relating to the effectiveness of controls.

When control weaknesses are identified there is increased risk of release of inappropriate disclosures. There is also increased risk of misstatement in financial reporting through errors, omissions or fraudulent activity that could occur and go undetected. The Company intends to direct additional resources to improving identified deficiencies and improve the overall control environment and governance processes within the company where deemed required.

The Company recognizes that its existing control measures do not comply with a recognized internal control framework such as COSO. The Company believes such a framework is not viable at this time due to the limited number of personnel, volume of transactions, and lack of financial resources.

1.15 Risks and Uncertainties

The Company operates in a competitive market. The Company needs to deliver high quality, cost effective, components to market and meet the

timelines required by customers. The Company must develop next generation components to satisfy the future needs of their customers. Should the Company be unable to continue to improve and update their product offering, this would have a negative impact on future growth.

The Company currently has limited working capital and incurs significant expenses on an on-going basis in its operations, which represents a significant risk factor. The Company will require additional financing to carry on its business, which financing may not be available when needed.

The Company does not have any significant environmental risk.