Carbon Done Right Developments Inc. — Management Reports 2022

Mar 28, 2022

EARL RESOURCES LIMITED

Management’s Discussion and Analysis of Financial Condition and Results of Operations For the Year Ended December 31, 2021

Date: March 25, 2022

General

This Management’s Discussion and Analysis ("MD&A") should be read in conjunction with the audited financial statements of Earl Resources Limited (the “Company”) for the year ended December 31, 2021. The audited financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) and include the operating results of the Company. The date of this Management Discussion and Analysis is March 25, 2022.

Additional information relating to the Company can be found on the SEDAR website at www.sedar.com.

All dollar figures stated herein are expressed in Canadian dollars, unless otherwise specified.

Forward-Looking Statements

This MD&A may contain forward-looking information and is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forwardlooking statements. Readers can identify many of these statements by looking for words such as “believes”, “expects”, “will”, “intends”, “projects”, “anticipates”, “estimates”, “continues” or similar words or the negative thereof.

Forward-looking information is based on the opinions and estimates of management and its consultants at the date the information is given. It is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. The information is based on reasonable assumptions which include but are not limited to expectations with respect to new business opportunities and expectations regarding the ability to raise capital (see “Liquidity and Capital Resources” below).

Factors that could cause actual results to differ materially from those in forward-looking statements include competition, escalating costs and professional fees, stock market volatility, unanticipated operating events, liabilities inherent in industry and the lack of availability of necessary capital, which may not be available to the Company on terms acceptable to it or at all.

Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. There can be no assurance that the plan, intentions or expectations upon which these forward-looking statements are based will occur. Forward looking statements are subject to risks, uncertainties and assumptions. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements should not be in any

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way construed as guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements.

Readers are cautioned not to put undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws.

Overview and Going concern

Earl Resources Limited was incorporated under the British Columbia “ Companies Act ” as a Specialty Limited Company on November 21, 1963. In July 1998, the Company continued to the Cayman Islands. In February 2018, the Company continued back to British Columbia. The Company is currently inactive with limited operations.

The Company’s common shares are listed on the NEX Board of the TSX Venture Exchange (the “Exchange”).

Management is in the process of seeking business opportunities for the Company, including the Proposed Transactions in connection with the Proposed Change of Business as described below. The Company’s ability to continue as a going concern is dependent upon its ability to continue raising equity financing, to identify, evaluate and negotiate a participation in, or an investment of an interest in a fundamental acquisition. Such an acquisition will be subject to regulatory approval and may be subject to shareholder approval. In order to continue as a going concern and meet its corporate objectives, the Company will require additional financing through debt or equity issuances or other available means. There is no assurance that the Company will be able to obtain adequate financing in the future or that such financing will be on terms advantageous to the Company. These financial statements do not reflect the adjustments to the carrying amounts of assets and liabilities, or the impact on the statements of loss and comprehensive loss and financial position classifications that would be necessary were the going concern assumption not appropriate.

At December 31, 2021, the Company has an accumulated deficit of $4,280,010 (December 31, 2020 - $2,210,958) and has incurred recurring losses. There can be no assurance that a viable business opportunity that can be adequately financed will be identified and available to the Company. Additional equity and/or debt financing is subject to the global financial markets and prevailing economic conditions, which have recently been volatile and distressed. These factors will likely make it more challenging to obtain financing for the Company going forward. These matters and conditions indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as going concern.

Since March 2020, there has been a global outbreak of COVID-19. The actual and threatened spread of the virus globally has had a material adverse effect on the regional economies in which the Company operates and could continue to result in negative impacts on the stock market, including trading prices of the Company’s shares, and the ability to raise capital and could impact the Company’s operations.

In the opinion of management, all adjustments consisting of normal recurring adjustments, considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows, have been included.

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Proposed Transactions

The Definitive Agreements

The Company has entered into certain Definitive Agreements (as defined herein) in respect of Earl Resources’ proposed “Change of Business” (the “Proposed COB”) as such term is defined in TSX Venture Exchange (“TSXV”) Policy 5.2 (“Policy 5.2”).

Sierra Leone Transaction

On February 25, 2022, Earl Resources entered into a deed of assignment with Rewilding Maforki Ltd. (“RML”) and Aristeus Projects Limited (“APL”) (the “Sierra Leone COB Agreement”) and a prepayment agreement with RML and APL (the “Sierra Leone Prepayment Agreement”), whereby Earl Resources will acquire by assignment 51% of carbon credits to be generated by RML from its planned project being developed on approximately 25,000 hectares of land with the Maforki Chiefdom in Sierra Leone located at the Malal, Rokon, Gbonkohyeni and Maforay communities (together referred to as the “Maforki Project”), for aggregate consideration consisting of 7,500,000 common shares of Earl Resources (“Earl Shares”) issuable at a deemed value of $0.45 per Earl Share (which implies a consideration in the amount of $3,375,000). Pursuant to the Sierra Leone COB Agreement and for further consideration of the assignment of the future carbon credits, Earl Resources has also entered into the Sierra Leone Prepayment Agreement pursuant to which it will advance aggregate funds of up to USD $750,000 to RML in order to assist RML in the initial setup works and costs associated with the Maforki Project together with funding EcoSecurities baseline and PDD reports required in assessing project viability. Earl Resources, in its discretion, may also make one or more further advances for aggregate funds of up to USD $350,000 to RML to further the Maforki Project. RML is in the process of completing the land title formalities over 25,000 ha of land in Sierra Leone designated for re-wilding.

The Sierra Leone Transaction constitutes an Arm’s Length Transaction pursuant to the policies of the TSXV and no new control person will be created upon completion of the Sierra Leone Transaction. Further information regarding RML, APL and the Sierra Leone Transaction are set out in Earl Resources’ press release dated November 26, 2021. Copies of the Sierra Leone COB Agreement and Sierra Leone Prepayment Agreement are available for review under Earl Resource’s profile at www.sedar.com.

Guyana Transaction

On February 25, 2022, Earl Resources entered into a share purchase agreement with Pomeroon Trading (Holdings) Ltd. (“PTHL”) and certain minority shareholders of PTHL (the “Guyana COB Agreement”) that together hold the majority of the issued shares of PTHL (the “PTHL Shares”) and concurrently issued an offer to purchase to all of the other shareholders of PTHL (the “Guyana Short Offers to Purchase”), to purchase, in the aggregate, up to 887,703 PTHL Shares, in exchange for the issuance of that number of Earl Shares equal to an aggregate price of USD$3,550,812, at a price per Earl Share of CAD$0.45. In addition, Earl Resources agreed to concurrently subscribe for an additional 187,000 PTHL Shares for cash, at an implied price per PTHL Share of USD$4.00 (providing for an aggregate subscription price of USD$748,000), which, with the aforementioned purchase of PTHL Shares, is expected to result in Earl Resources holding (upon closing) a circa. 60% ownership interest in PTHL. The Guyana COB Agreement also provides that Earl Resources shall commit for a period of 12 months following closing of the transactions pursuant to the Guyana COB Agreement, that subject to PTHL initiating one or more qualifying carbon credit project(s) (to the satisfaction of Earl Resources), Earl Resources will make an offer

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to all remaining shareholders of PTHL to acquire all of their PTHL Shares at a price to be agreed, accepting that the consideration to be paid pursuant to any such acquisition shall be settled through the issuance of additional Earl Shares (at a price calculated as the 30 day volume weighted average price of the Earl Shares and subject to approval of the TSXV) unless otherwise mutually agreed between Earl Resources and a remaining PTHL shareholder.

The Guyana Transaction is considered a Related Party Transaction on the basis that Mr. Ford Nicholson, a director and insider of the Company, owns 16,667 PTHL Shares representing 1.7% of the PTHL Shares. However, due to the minimal holdings of PTHL Shares by Mr. Ford Nicholson (among other things), the Guyana Transaction is exempt from the formal valuation and minority approval requirements of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions . No new Control Person will be created upon completion of the Guyana Transaction.

Further information regarding PTHL and the Guyana Transaction are set out in Earl Resources’ press release dated November 26, 2021. Copies of the Guyana COB Agreement and Guyana Short Offers to Purchase are available for review under Earl Resource’s profile at www.sedar.com.

Yucatan Transaction

On November 26, 2021, the Company entered into an assignment agreement with Compania Mexicana de Captacion de Carbono (“CMCC”) (the “Yucatan COB Agreement”) to acquire all of CMCC’s rights and interests under a consulting services agreement dated May 11, 2021 between CMCC and the Government of the State of Yucatan, Mexico (the “Yucatan Contract”), as well as that it entered into an agreement with CMCC dated November 25, 2021 wherein CCMC assigned a certain commission to Earl Resources (the “Commission Agreement”).

Further information regarding CMCC and the Yucatan Transaction are set out in Earl Resources’ press release dated November 26, 2021. The Yucatan Transaction constitutes an Arm’s Length Transaction pursuant to the policies of the TSXV and no new Control Person will be created upon completion of the Yucatan Transaction. Copies of the Yucatan COB Agreement, Yucatan Contract and Commission Agreement are available for review under Earl Resource’s profile at www.sedar.com.

In March 2022, $25,000 was paid as a non-refundable deposit for the Yucatan Transaction and an additional $25,000 will be paid upon closing of the Yucatan Transaction.

Proposed COB

It is intended that the Proposed COB will constitute Earl Resources’ “reactivation” under the policies of the TSXV and that upon completion of the Proposed COB (“Closing”) and satisfaction of all conditions of the TSXV, Earl Resources will have its listing transferred from the NEX board of the TSXV (“NEX”) to the TSXV.

It is anticipated that Earl Resources will carry on the business of developing validated and verified carbon credits from afforestation and reforestation of degraded land areas for sale into international voluntary carbon markets (the “Business”) and will meet the Tier 2 Initial Listing Requirements for an Industrial Issuer, such that Earl Resources will be graduated from the NEX to the TSXV. In connection with the Closing, it is anticipated that Earl Resources will change its name to “Klimat X Development Inc.”, or such other

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name as the directors of Earl Resources may chose (subject to applicable regulatory approvals and approval of the TSXV), in order to more accurately reflect its operations and the Business.

Completion of the Proposed COB is subject to a number of conditions, including the conditions to closing set forth in the Sierra Leone COB Agreement, the Sierra Leone Prepayment Agreement, the Yucatan COB Agreement, the Commission Agreement, the Guyana COB Agreement and the Guyana Short Offers to Purchase (collectively, the “Definitive Agreements”) and acceptance by the TSXV. There can be no assurance the Proposed COB will be completed as proposed or at all.

Shares for Debt Settlement

In connection with the Proposed COB, Earl Resources intends to settle certain outstanding accounts payable in the aggregate amount of CAD$363,415 (the “Debt”) owing to certain consultants of the Company (“Consultants”) through the issuance of 807,588 common shares of Earl Resources (the “Settlement Shares”), at a deemed price of CAD$0.45 per Settlement Share (the “Shares for Debt Transaction”).

The Debt was accrued pursuant to certain consultant services agreements (the “Consulting Agreements”) entered into: (i) between the Company and 1LS Consulting, for aggregate consulting services payable to 1LS Consulting of CAD$50,000; (ii) between the Company and Park Energy Law UK Ltd., for aggregate consulting services payable to Park Energy Law UK Ltd. of USD$50,000; (iii) between the Company and Guy Bertin, for aggregate consulting services payable to Guy Bertin of CAD$25,000; and (iv) between the Company and Clarus Securities Inc., for aggregate consulting services payable to Clarus Securities Inc. of CAD$225,000.

No new control person of the Company will be created pursuant to the Shares for Debt Transaction and the Shares for Debt Transaction is an arm’s length transaction within the policies of the TSXV. All Settlement Shares will be subject to a four-month and one-day hold period from the date of issuance, being the date of closing of the Proposed COB.

Final approval of the Shares for Debt Transaction remains subject to approval of the TSXV.

Trading Halt

In accordance with Policy 5.2, the Common Shares of Earl Resources are currently halted from trading and are expected to remain halted pending the requirements of Section 2.5 of Policy 5.2 being met.

Subsequent Events

Bridge Financing

On January 28, 2022, the Company completed a non-brokered private placement of 1,000,000 Earl Resources common shares at a price of $0.45 per Earl Share for aggregate gross proceeds of $450,000 (the “Bridge Financing”). In accordance with TSXV Policy 5.2, the proceeds of the Bridge Financing will be used specifically for purposes of funding the costs associated with completing the Proposed Transactions, including costs related to audit fees, legal fees, preparation of necessary documentation for the Proposed Transactions and due diligence costs. Final approval of the Bridge Financing remains subject to approval of the TSXV.

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Concurrent Financing

On January 28, 2022 and February 1, 2022, in connection with the Proposed COB, Earl Resources completed the first tranches of a non-brokered private placement of 20,482,827 Subscription Receipts at a price of $0.45 per subscription receipt (“Subscription Receipt”) for aggregate gross proceeds of $9,217,272 (the “Concurrent Financing”). Each Subscription Receipt will be automatically exchanged immediately prior to the completion of the Proposed COB (without any further action by the holder of such Subscription Receipt and for no further payment) for one Earl Resources common share upon satisfaction of the escrow release conditions, provided that such conditions are satisfied before the escrow release deadline on May 28, 2022. The proceeds from the Concurrent Financing will be used to fund the Proposed COB, develop the business, and for working capital and general corporate purposes. Final approval of the Concurrent Financing remains subject to approval of the TSXV.

Selected Annual Information and Results of Operations

As at December 31, Total assets Deficit Working Capital (deficiency) Net income (loss) Loss per share – (basic and diluted)	2021 $ 2020 $ 2019 $
	165,758 517,664 95,840 (4,280,010) (2,210,958) (2,135,632) (169,723) 377,329 (44,464) (2,069,052) (75,326) (92,570) (0.05) (0.00) (0.00)

During the year ended December 31, 2021, the Company recorded a net loss of $2,069,052 and a loss of $0.05 per share (2020 - net loss $75,326 and $0.00 per share).

Total expenses for the year ended December 31, 2021 were $2,069,052 (2020 - $75,461). The increase was mainly due to $1,522,000 stock-based compensation expense recognized granting 3,849,040 incentive stock options in November 2021 to officers, directors, and consultants of the Company (2020 - $Nil). The increase was also due to costs related to the proposed change of business transaction including $221,003 in consulting fees (2020 - $Nil), $142,535 in legal fees (2020 - $Nil), $55,664 in management fees (2020 - $18,375) and $52,430 in travel and business development costs (2020 - $1,651).

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Summary of Quarterly Results

The following table sets forth selected (unaudited) quarterly financial information for the last eight completed quarters.

completed quarters.
			For the three	months ending
	Dec 31/21	Sep 30/21	Jun 30/21	Mar 31/21
	$	$	$	$
Total Assets	165,758	305,460	384,283	505,828
Accumulated Deficit	(4,280,010)	(2,423,378)	(2,371,697)	(2,223,146)
Working Capital (deficiency)	(169,723)	164,909	216,590	365,141
Net loss	(1,856,632)	(51,681)	(148,551)	(12,188)
Loss per share – (basic and diluted)	(0.05)	(0.00)	(0.00)	(0.00)
			For the three	months ending
	Dec 31/20	Sep 30/20	Jun 30/20	Mar 31/20
	$	$	$	$
Total Assets	517,664	531,948	47,750	77,703
Accumulated Deficit	(2,210,958)	(2,200,413)	(2,185,002)	(2,167,153)
Working Capital (deficiency)	377,329	387,874	(93,834)	(75,985)
Net loss	(10,545)	(15,411)	(17,850)	(31,521)
Loss per share – (basic and diluted)	(0.05)	(0.00)	(0.00)	(0.00)
Results of Operations for the Three Months	Ended December 31, 2021

During the three months ended December 31, 2021, the Company recorded a net loss of $1,856,632 and a loss of $0.05 per share (2020 - net loss $10,545 and $0.00 per share).

Total expenses for the three months ended December 31, 2021 were $1,856,632 (2020 - $10,545). The increase was mainly due to $1,522,000 stock-based compensation expense recognized granting 3,849,040 incentive stock options in November 2021 to officers, directors, and consultants of the Company (2020 - $Nil). The increase was also due to costs related to the proposed change of business transaction including $79,244 in consulting fees (2020 - $Nil), $117,421 in legal fees (2020 - $Nil), $55,664 in management fees (2020 - $Nil) and $52,430 in travel and business development costs (2020 - $1).

Significant Accounting Judgments, Estimates and Assumptions and Significant Accounting Policies

The preparation of these audited financial statements for the year ended December 31, 2021 in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the audited financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates. Please refer to Note 2 - Significant Accounting Policies of the audited financial statements for the year ended December 31, 2021 for full details.

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Share Capital

(a) Authorized: Unlimited common shares without par value.

• (b) Issued and Outstanding:

Issued and Outstanding:
				Share-based
	Number of				Payments
	shares		Capital stock		Reserve
Balance, as at December 31, 2019	32,308,610	$	2,029,668	$	61,500
Privateplacement,net of issuance costs	6,181,790		497,119		-
Balance, as at December 31, 2020	38,490,400	$	2,526,787	$	61,500
Stock-based compensation	-		-		1,522,000
Balance,as at December 31,2021	38,490,400	$	2,526,787	$	1,583,500

In September 2020, the Company closed a non-brokered private placement of 5,881,800 common shares in its capital (the “Common Shares”) issued at a price of $0.085 per common for gross proceeds of $499,953.00 (the “Offering”). In addition, the Company issued an aggregate of 299,990 common shares with a fair value of $25,499 as a finder’s fee payable to an eligible finder, Kepis & Pobe Financial Group Inc.

(c) Stock Options

The Company has a Stock Option Plan (the "Plan") which was approved by shareholders on November 10, 2010 and accepted for filing by the Exchange that allows it to grant options, subject to regulatory terms and approval, to its officers, directors, employees, and service providers. The Plan is based on the maximum number of eligible shares equaling a rolling percentage of up to 10% of the Company's outstanding common shares, calculated from time to time.

Pursuant to the Plan, if outstanding options are exercised, or expire, and/or the number of issued and outstanding common shares of the Company increases, then the options available to grant under the plan increase proportionately. The exercise price of each option is set by the Board of Directors at the time of grant but cannot be less than the Discounted Market Price, as calculated pursuant to the policies of the Exchange, or such other minimum price as may be required by the Exchange.

Options can have a maximum term of ten (10) years and typically terminate 90 days following the termination of the optionee’s employment or engagement, except in the case of retirement or death. Vesting of options is at the discretion of the Board of Directors at the time the options are granted.

In November 2021, the Company granted 3,849,040 incentive stock options to officers, directors, and consultants to purchase common shares of the Company with an exercise price of $0.445 per share that expire on November 26, 2026. Using the Black-Scholes option pricing model, the fair value of stock options recognized during the year ended December 31, 2021, as an expense was $1,522,000.

At December 31, 2021, all 3,849,040 stock options outstanding are fully vested and exercisable.

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Contractual Obligations

At December 31, 2021, the Company has no outstanding contractual obligations.

Related Party Transactions

Certain directors and/or senior officers transacted with the Company in the reporting period. The terms and conditions of the transactions with key management personnel and their related parties were no more favorable than those available, or which might reasonably be expected to be available, on similar transactions to non-key management personnel related entities on an arm’s length basis.

The Company incurred the following transactions with directors and companies controlled by directors of the Company:

Professional fees	2021 2020 For the year ended December 31,
	$117,146$-

Key management personnel compensation

Management fees Administration fees Rent Management stock-based compensation	2021 2020 For the year ended December 31,
	$ 55,664 $ 18,375 31,500 24,150 - 7,350 741,039 -
	$828,203$49,875

The following amounts are due to related parties and are included in trade payables and accrued liabilities:

Directors or officers of the Company	December 31, 2021 December 31, 2020
	$48,533$140,110

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Liquidity and Capital Resources

At December 31, 2021, the Company had an accumulated deficit of $4,280,010. The Company’s ability to continue as a going concern is dependent upon its ability to continue raising equity financing, to identify, evaluate and negotiate an acquisition of, a participation in, or an investment of an interest. Such an acquisition will be subject to regulatory approval and may be subject to shareholder approval. In order to continue as a going concern and meet its corporate objectives, the Company will require additional financing through debt or equity issuances or other available means. There is no assurance that the Company will be able to obtain adequate financing in the future or that such financing will be on terms advantageous to the Company. These financial statements do not reflect the adjustments to the carrying amount of assets and liabilities, or the impact on the statement of operations and comprehensive loss and financial position classifications that would be necessary were the going concern assumption not appropriate.

At December 31, 2021, the Company had cash of $164,825 and a working capital deficit of $169,723.

See Subsequent Events above with respect to the Bridge Financing in January 2022 and the Concurrent Financing in January and February 2022

Off-Balance Sheet Arrangements

The Company has not entered into any off-balance sheet arrangements, other than previously disclosed, that have, or are reasonably likely to have, an impact on the current or future results of operations or the financial condition of our Company.

Risks and Uncertainties

Other than the working capital deficiency and the going concern risk, the Company’s current activities do not present any other material risks such as political, environmental, foreign exchange or mining activities.

Outstanding Share Data – at March 25, 2022

Common shares, issued and outstanding Stock Options	Number Price Remaining Life in Years Weighted Average
	39,490,400 3,849,040 $0.445 4.66 43,339,440
FullyDiluted

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