CHARTECH

Decarbonizing the Circular Economy through Advanced Design, Technology & Environmental Services.

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended
September 30, 2024 and 2023

Expressed in Canadian Dollars

Independent Auditor's Report

MNP

To the Shareholders of Char Technologies Ltd.:

Opinion

We have audited the consolidated financial statements of Char Technologies Ltd. and its subsidiaries (the "Company"), which comprise the consolidated statements of financial position as at September 30, 2024 and September 30, 2023, and the consolidated statements of loss and comprehensive loss, changes in shareholders' equity and cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at September 30, 2024 and September 30, 2023, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with IFRS® Accounting Standards.

Basis for Opinion

We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 in the consolidated financial statements, which indicates that the Company incurred net losses during the year end September 30, 2024 and, as of the date, the Company had an accumulated deficit. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report.

MNP LLP

50 Burnhamthorpe Road West, Suite 900, Mississauga ON, L5B 3C2

T: 416.626.6000 F: 416.626.8650

Valuation of Work in Progress and Percentage of Completion

Key Audit Matter Description

We identified the valuation of work in progress and percentage of completion as one of the most significant risks related to material misstatement. The Company enters into engineering contracts which can span over period of time with varying terms and recognizes revenue progressively 'over time' based on the percentage of completion method. This method is measured by reference to costs incurred to date as a percentage of the total estimated cost. The Company's policy for revenue recognition together with the related significant accounting estimates and assumptions are described in notes 2 of the consolidated financial statements.

The Company recognized $3.8 million of revenues and $297,195 in work in progress for the year ended and as at September 30, 2024. The determination of the estimated costs to complete projects that are open at period end is a significant estimate that can have a material impact on the amount of revenue recognized in the year. This estimate is subjective in nature and dependent on the complexity and status of the related contract as at year end.

Audit Response

We responded to this matter by performing audit procedures relating to the valuation of work in progress and percentage of completion. Our audit work in relation to this included, but was not restricted to, the following:

We obtained an understanding of the budgeting process for projects and the key controls. We also evaluated the design of key controls related to the budgeting process, including management's process of monitoring estimated costs to complete the projects.
We selected and reviewed contracts including the total contracted revenue, billings and change orders to ensure the accounting for these contracts was in compliance with IFRS.
We obtained a breakdown of budgeted and actual costs incurred and corroborated to evidence from the Company's operations team members for samples selected to ensure all costs were included and correctly accounted for.
We compared prior period cost estimates to current period estimated cost to complete to assess management's ability to accurately and reliably estimate the costs.
We reviewed the cost incurred subsequent to year end and had discussions with the Company's operations team members to assess whether there was any indications of material deviation in the costs to complete and thus the percentage of completion at year end.

Other Information

Management is responsible for the other information. The other information comprises Management's Discussion and Analysis.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audits of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits or otherwise appears to be materially misstated. We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

50 Burnhamthorpe Road West, Suite 900, Mississauga, Ontario, L5B 3C2
T: 416.626.6000 F: 416.626.8650 MNP.ca
MNP

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

50 Burnhamthorpe Road West, Suite 900, Mississauga, Ontario, L5B 3C2
T: 416.626.6000 F: 416.626.8650 MNP.ca
MNP

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits and significant audit findings, including any significant deficiencies in internal control that we identify during our audits.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Zahra Alnoor Bhanji.

Mississauga, Ontario
January 27, 2025

MNP LLP
Chartered Professional Accountants
Licensed Public Accountants

50 Burnhamthorpe Road West, Suite 900, Mississauga, Ontario, L5B 3C2
T: 416.626.6000 F: 416.626.8650 MNP.ca
MNP

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 3
CONSOLIDATED STATEMENTS OF LOSS & COMPREHENSIVE LOSS 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Nature of Business and Going Concern 7
Material Accounting Policies 7
Accounts Receivable 17
Work in Progress 18
Property and Equipment 18
Right-of-use Assets 21
Intangible Assets and Goodwill 22
Accounts Payable and Accrued Liabilities 24
Loans Payable 24
Lease Liabilities 26
Share Capital 27
Stock Options, Restricted Share Units, and Share Appreciation Rights 29
Capital Management 33
Financial Instruments and Risk Management 33
Related Party Balances and Transactions 34
Commitments 36
Income Tax 36
Assets Held for Sale 38
Subsequent Events 41

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in Canadian Dollars)

| | As at
September 30,
2024
$ | As at
September 30,
2023
$ |
| --- | --- | --- |
| ASSETS | | |
| Current assets | | |
| Cash | 948,689 | 2,093,154 |
| Term deposit | - | 4,000,000 |
| Accounts receivable (note 3) | 1,889,224 | 1,665,710 |
| Work-in-progress (note 4) | 297,195 | 303,598 |
| Inventory | - | 8,933 |
| Prepaid expenses | 150,792 | 196,249 |
| Assets held for sale (note 18) | 298,800 | - |
| Total current assets | 3,584,700 | 8,267,644 |
| Property and equipment (note 5) | 9,204,611 | 7,936,975 |
| Right-of-use assets (note 6) | 1,438,101 | 1,222,027 |
| Goodwill (note 7) | - | 652,916 |
| Intangible assets (note 7) | 1,125,059 | 786,311 |
| Total assets | 15,352,471 | 18,868,473 |
| SHAREHOLDERS' EQUITY AND LIABILITIES | | |
| Liabilities | | |
| Accounts payable and accrued liabilities (notes 8 & 15) | 4,499,621 | 2,501,017 |
| Lease liabilities (note 10) | 198,059 | 94,799 |
| Loans payable (note 9) | 1,031,430 | 32,136 |
| Deferred revenue | 24,750 | 574,638 |
| Deferred grant income (note 5) | - | 23,614 |
| Liabilities directly associated with assets held for sale (note 18) | 27,958 | - |
| Total current liabilities | 5,781,818 | 3,226,204 |
| Lease liabilities (note 10) | 1,386,949 | 1,213,416 |
| Loans payable (note 9) | 2,425,497 | 2,466,720 |
| Deferred grant income (note 5) | 5,286,517 | 5,028,168 |
| Total liabilities | 14,880,781 | 11,934,508 |
| Shareholders' equity | | |
| Share capital (note 11) | 24,619,524 | 24,007,240 |
| Share-based payment reserves (note 12) | 8,273,764 | 7,015,811 |
| Contributed surplus | 53,744 | 53,744 |
| Deficit | (32,475,342) | (24,142,830) |
| Total shareholders' equity | 471,690 | 6,933,965 |
| Total shareholders' equity and liabilities | 15,352,471 | 18,868,473 |
| Nature of business & going concern (Note 1);
Commitments (Note 16);
Subsequent events (Note 19) | | |
| Approved on behalf of the Board:
"Nik Nanos"
Director | "William White"
Director | |

The accompanying notes to the consolidated financial statements are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF LOSS & COMPREHENSIVE LOSS

(Expressed in Canadian Dollars)

| | Year Ended
September 30, | |
| --- | --- | --- |
| | 2024 | 2023 |
| | $ | $ |
| Revenue | | |
| Consulting revenue | - | 897,516 |
| Technology revenue | 3,161,996 | 1,102,810 |
| Total revenue | 3,161,996 | 2,000,326 |
| Cost of revenue | (2,530,414) | (1,360,160) |
| Gross profit | 631,582 | 640,166 |
| Expenses | | |
| Accretion and Interest | 353,064 | 158,481 |
| Research and development | 405,196 | 730,568 |
| Professional fees | 1,055,067 | 1,442,596 |
| Consulting fees (note 15) | 872,158 | 124,520 |
| Office expenses | 3,248,708 | 3,618,248 |
| Regulatory and filing fees | 39,047 | 43,655 |
| Depreciation (noted 5 and 6) | 515,804 | 569,982 |
| Amortization (note 7) | 573,536 | 1,348,132 |
| Share-based payments (note 12) | 1,692,710 | 1,837,907 |
| | 8,755,290 | 9,874,089 |
| Loss from operations | (8,123,708) | (9,233,923) |
| Interest Income | 125,321 | - |
| Grant income (notes 5 and 9) | 1,493,758 | 798,989 |
| Impairment of property plant and equipment (note 5) | (1,019,377) | - |
| Net loss before income taxes | (7,524,006) | (8,434,935) |
| Income tax recovery (note 17) | - | 5,114 |
| Net loss from continuing operations | (7,524,006) | (8,429,820) |
| Net loss and comprehensive loss from discontinued operations (note 7 and 18) | (808,506) | - |
| Net loss and comprehensive loss for the year | (8,332,512) | (8,429,820) |
| Net loss per share- basic and diluted | (0.074) | (0.08) |
| Net loss per share- basic and diluted from discontinued operations | (0.008) | - |
| Weighted average common shares outstanding - basic and diluted | 101,032,413 | 88,452,356 |

The accompanying notes to the consolidated financial statements are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in Canadian Dollars)

| | 2024
$ | Year Ended
September 30,
2023
$ |
| --- | --- | --- |
| Operating activities | | |
| Net loss and comprehensive loss for the year | (8,332,512) | (8,429,820) |
| Adjustments for: | | |
| Share-based payments (note 12) | 1,692,710 | 1,837,907 |
| Depreciation (note 5 & 6) | 523,535 | 569,982 |
| Amortization (note 7) | 575,557 | 1,348,132 |
| Accretion and interest (note 9) | 353,064 | 131,645 |
| Tax income recovery (note 18) | - | (5,114) |
| Impairment of property plant and equipment (note 5) | 1,019,377 | - |
| Impairment of Goodwill (note 7 and 18) | 398,003 | - |
| Deferred grant income | (1,493,758) | (798,989) |
| Net change in non-cash working capital | | |
| Amounts receivable (note 3) | (223,514) | (473,381) |
| Prepaid expenses | 45,457 | 33,210 |
| Work-in-progress (note 4) | (22,386) | 11,049 |
| Inventory | 8,933 | - |
| Deferred revenue (note 18) | (521,930) | 419,378 |
| Accounts payable and accrued liabilities (note 8) | 1,988,603 | 497,228 |
| Net cash used in operating activities | (3,988,861) | (4,858,773) |
| Investing activities | | |
| Maturity (Purchase) of term deposit | 4,000,000 | (4,000,000) |
| Purchase of Intangible assets | - | (8,222) |
| Purchase of property and equipment (note 5) | (3,451,573) | (4,587,273) |
| Net cash provided by investing activities | 548,427 | (8,595,495) |
| Financing activities | | |
| Proceeds of loans net of repayments | 817,572 | 2,012,634 |
| Proceeds from issuance of common shares, net of costs | - | 5,552,268 |
| Proceeds from warrants exercised | - | 2,308,956 |
| Proceeds from options exercised (note 12) | 111,712 | 132,000 |
| Proceeds from issuance of unit warrants | - | 834,829 |
| Lease payments (note 10) | (345,526) | (195,424) |
| Purchase of right of use assets (note 6 and note 10) | (16,517) | - |
| Proceeds from grants (note 5) | 1,728,729 | 4,441,676 |
| Net cash provided by financing activities | 2,295,970 | 15,086,939 |
| Net change in cash | (1,144,465) | 1,632,671 |
| Cash, beginning of the year | 2,093,154 | 460,483 |
| Cash, end of the year | 948,689 | 2,093,154 |

Assets held for sale (Note 18)

The Company has elected to present a consolidated statements of cash flows that includes an analysis of all cash flows in total – i.e. including both continuing and discontinued operations; amounts related to discontinued operations by operating, investing and financing activities are disclosed in Note 18.

The accompanying notes to the consolidated financial statements are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Expressed in Canadian Dollars)

	Share Capital		Share Based Payment Reserve	Contributed Surplus	Deficit	Total
	Number of Shares	Amount $
Balance, September 30, 2022	83,003,165	15,255,158	5,101,933	53,744	(15,713,010)	4,697,825
Common shares/warrants issued for cash (note 11)	11,000,000	5,765,171	834,829	-	-	6,600,000
Share issuance costs-cash (note 11)	-	(212,903)	-	-	-	(212,903)
Share-based payments (note 12)			1,837,907	-	-	1,837,907
Exercise of unit warrants (note 11)	4,504,385	2,435,681	(436,149)	-	-	1,999,532
Exercise broker warrants (note 11)	935,067	502,572	(193,148)	-		309,424
Exercise of stock options (note 11)	600,000	231,000	(99,000)	-	-	132,000
Exercise of Restricted Shares Units	67,913	30,561	(30,561)	-	-	-
Net and comprehensive loss for the year	-	-	-	-	(8,429,820)	(8,429,820)
Balance, September 30, 2023	100,110,530	24,007,240	7,015,811	53,744	(24,142,830)	6,933,965
Balance, September 30, 2023	100,110,530	24,007,240	7,015,811	53,744	(24,142,830)	6,933,965
Issuance of warrants (note 11)	-	-	65,815			65,815
Share-based payments (note 12)	-	-	1,692,710	-	-	1,692,710
Exercise of stock options (note 11)	680,727	205,500	(93,788)	-	-	111,712
Exercise of Restricted Shares Units	609,807	406,784	(406,784)	-	-	-
Net and comprehensive loss for the year					(8,332,512)	(8,832,512)
Balance, September 30, 2024	101,401,064	24,619,524	8,273,764	53,744	(32,475,342)	471,690

The accompanying notes to the consolidated financial statements are an integral part of these consolidated financial statements.

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

1. Nature of Business and Going Concern

CHAR Technologies Ltd. (the "Company" or "CHAR Tech") is a cleantech development and services company specializing in high-temperature pyrolysis, converting woody materials and organic waste into renewable gases (renewable natural gas and green hydrogen) and biocarbon (activated charcoal "SulfaCHAR" and biocoal "CleanFyre"). The Company is in the process of exiting operations related to environmental consulting services, including annual reporting, approvals, and compliance management, to focus on its core cleantech development. The Company is listed on the TSX Venture Exchange (the "Exchange") trading under the symbol YES. The Company's head office address is Morneau Shepell Centre II, 895 Don Mills Road, Suite 400, Toronto, Ontario, M3C 1W3.

These consolidated financial statements have been prepared on a going concern basis, which contemplates that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. Accordingly, they do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern, and therefore be required to realize its assets and liquidate its liabilities and commitments in other than the normal course of business and at amounts different from those in the accompanying consolidated financial statements. Such adjustments could be material. It is not possible to predict whether the Company will be able to raise adequate financing or to ultimately attain profitability of operations. These conditions indicate the existence of material uncertainties that may cause significant doubt about the Company's ability to continue as a going concern. Changes in future conditions could require material write downs of the carrying values of assets.

The Company has not yet realized profitable operations and has incurred significant losses to date resulting in a cumulative deficit of $32,475,342 as of September 30, 2024 (September 30, 2023 - $24,142,830). The recoverability of the carrying value of the assets and the Company's continued existence is dependent upon the achievement of profitable operations, or the ability of the Company to raise alternative financing, if necessary.

On January 27, 2025 the Board of Directors approved these consolidated financial statements.

2. Material Accounting Policies

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and interpretations of the IFRS Interpretations Committee ("IFRIC").

(b) Basis of consolidation

These consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated on consolidation. The consolidated financial statements of CHAR Tech and its wholly owned subsidiaries Char Biocarbon Inc., Chartech Services Inc. (formerly known as Altech Environmental Consulting Ltd.), Char Technologies Thorold Inc. Char Technologies Research Inc. and Char Technologies USA, LLC. are consolidated from the date that control commences until the date that control ceases.

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

2. Material Accounting Policies (continued)

(c) Property and equipment

Property and equipment are carried at historical cost less accumulated depreciation and any accumulated impairment losses. Each component of an item of property and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. Maintenance and repair expenditures that do not improve or extend life are expensed in the period incurred.

Depreciation is recognized so as to write off the cost or valuation of assets (other than land) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each year, with the effect of any changes in estimate accounted for on a prospective basis. No depreciation is recognized for property and equipment until it is completed and ready for intended use.

An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising from the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

Estimated useful lives for the principal asset categories are as follows:

Computer equipment	3 years
Production equipment	5 years
Pilot Kiln	5 years
Leasehold improvements	Amortized over the term of the lease

(d) Goodwill

Goodwill represents the excess of the price paid for the acquisition of an entity over the fair value of the net identifiable tangible and intangible assets and liabilities acquired. Goodwill is measured at historical cost and is evaluated for impairment annually or more often if events or circumstances indicate there may be an impairment. Impairment is determined for goodwill by assessing if the carrying value of cash generating units ("CGUs") which comprise the CGU segment, including goodwill, exceeds its recoverable amount determined as the greater of the estimated fair value less costs to sell and the value in use. Impairment losses recognized in respect of the CGUs are first allocated to the carrying value of goodwill and any excess is allocated to the carrying amount of assets in the CGUs. Any goodwill impairment is recorded in income in the reporting year in which the impairment is identified. Impairment losses on goodwill are not subsequently reversed.

(e) Intangible assets

Intangible assets with finite lives that are acquired separately are measured on initial recognition at cost, which comprises its purchase price plus any directly attributable costs of preparing the asset for its intended use. Following initial recognition, such intangible assets are carried at cost less any impairment losses and accumulated amortization on a straight-line basis over the estimated useful life. The estimated useful life and amortization methods are reviewed annually, with the effect of any change in estimate being accounted for on a prospective basis.

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

2. Material Accounting Policies (continued)

(e) Intangible assets (continued)

The estimated useful lives of the intangible assets are as follows:

Purchased technology	10 years
Patents	10 years
Technology license	3 years
Purchased technology (SLO)	5 years

(f) Impairment of tangible and intangible assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and definite life intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in consolidated statements of loss and comprehensive loss. For purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generate cash flows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (CGU). At each reporting date, management assesses whether there is an indication that a previously recognized impairment loss has reversed, and accordingly whether the impairment loss should be reversed.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized.

If an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately.

Goodwill is tested for impairment annually at year-end and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU to which the goodwill relates. Where the recoverable amount of the segment is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

2. Material Accounting Policies (continued)

(g) Financial instruments

The following table summarizes the classification and measurement under IFRS 9 for each financial instrument:

Classification	IFRS 9
Cash	FVTPL
Amounts receivable	Amortized cost
Accounts payable	Amortized cost
Loans payable	Amortized cost

i. Classification

The Company classifies its financial instruments in the following categories: at fair value through profit and loss ("FVTPL"), at fair value through other comprehensive income (loss) ("FVTOCI") or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company's business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL.

ii. Measurement

Financial assets and liabilities at amortized cost - Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.

Financial assets and liabilities at FVTPL - Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the consolidated statements of net (loss) income. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the consolidated statements of loss and comprehensive loss in the year in which they arise.

iii. Impairment of financial assets at amortized cost

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial assets have not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company recognizes in the consolidated statements of loss and comprehensive loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

2. Material Accounting Policies (continued)

(g) Financial Instruments (continued)

iii. Impairment of financial assets at amortized cost (continued)

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each period end. Financial assets are impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

Objective evidence of impairment could include the following:

significant financial difficulty of the issuer or counterparty.
default or delinquency in interest or principal payments; or
it has become probable that the borrower will enter bankruptcy or financial reorganization.

For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of the estimated future cash flows, discounted at the financial asset's original effective interest rate.

The carrying amount of all financial assets is directly reduced by the impairment loss. Changes in the carrying amount of the allowance account are recognized in consolidated statements of loss and comprehensive loss.

iv. Derecognition

Financial assets - The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the consolidated statements of loss and comprehensive loss.

Financial liabilities - A financial liability is derecognized when the obligation specified in the contract is discharged, cancelled or expired.

(h) Revenue from Contracts and Customers ("IFRS 15")

The Company derives revenues from the delivery of engineering services and technology.

When the Company earns revenue from engineering services before issuing an invoice, it acknowledges this income as work in progress. This is reported on the Company's consolidated statements of financial position as costs and estimated profits exceeding billings. The work-in progress is transferred to trade receivables when the invoice is issued indicating that the entitlement to payment has become unconditional. If payments are received from the customer prior to the rendering of services, the Company recognizes deferred revenue. The deferred revenue is transferred to revenues once related services have been rendered. If services are rendered and the invoices have not been issued to a customer, the Company recognizes work in progress.

Revenues from engineering technology services are measured based on the consideration specified in a contract with a customer. The Company typically recognizes revenues over time, using an input measure, as it fulfills its performance obligations in line with contracted terms.

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

2. Material Accounting Policies (continued)

(h) Revenue from Contracts and Customers ("IFRS 15") (continued)

Engineering revenues from cost-plus contracts with ceilings and from fixed-price contracts are recognized progressively based on a percentage-of-completion method, which is calculated on the ratio of contract costs incurred to total anticipated costs.

A performance obligation is a promise in the contract to transfer a distinct good or service to the customer. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenues when, or as, the performance obligation is satisfied. The Company's contracts have a single performance obligation as the promise to transfer individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. Any modifications or variations to contracts in progress are assessed to determine if they fall under the scope of the existing contract performance obligation or form part of a new performance obligation.

(i) Cost of sale recognition

The Company recognizes the cost of sales in accordance with its revenue recognition policies for engineering and technology services. Direct costs, including labor, materials, and sub-consultants, are recognized in the period in which the related services are rendered, following the percentage-of-completion method for cost-plus and fixed-price contracts. Overhead costs are recognized on an accrual basis, aligned with the performance obligations under the contract.

For contracts where costs are incurred but not immediately recognized as expenses, these costs are included in work in progress or deferred revenue, depending on the stage of the contract.

Certain costs incurred by the Company for subcontractors and other expenses that are recoverable directly from customers are billed to them and included in revenue.

The effect of revisions to estimate revenues and costs, including the impact of any modifications or variations to contracts in progress, is recorded when the amounts are known and can be reasonably estimated. These revisions can occur at any time and may be significant. If total contract costs exceed total contract revenues, the expected loss is recognized immediately through a provision for losses to completion, impacting on the cost of sales.

For product sales, the Company transfers control and satisfies its performance obligation when collection has taken place, compliant documentation has been signed, and the product has been accepted by the buyer.

(j) Share-based payments

The Company accounts for all share-based payments awarded to directors and officers and non-employees using the fair value method. For employees, cost is measured at the grant date at fair value using the Black-Scholes Option-Pricing Model that takes into account the exercise price, the expected life of the option, the current price of the underlying stock, the expected volatility, the expected dividends and the risk-free interest rate for the expected term of the option. For non-employees, the fair value of each tranche of options issued is determined by the fair value of goods and services received. If the fair value of such goods and services cannot be reliably measured, an option pricing model will be utilized. The compensation cost will be expensed in the consolidated statements of loss and comprehensive loss over the vesting period for directors and officers and over the performance period for awards provided to non-employees in exchange for goods and services.

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

2. Material Accounting Policies (continued)

(k) Share-based payment reserve

The share-based payment reserve records items recognized as stock-based compensation expense and other share-based payments until such time that the stock options or warrants are exercised, at which time the corresponding amount will be transferred to share capital.

(l) Government grants

Government grants are not recognized until there is reasonable assurance that they will be received and that the Company will be in compliance with any conditions associated with the grant. Grants that compensate the Company for expenses are recognized in the consolidated statements of loss and comprehensive loss with the same classification as the related expense and in the same period in which the expense is recognized. Grants related to assets are presented as deferred income and recognized in the consolidated statements of loss and comprehensive loss on a systematic basis over the useful life of the asset.

(m) Earnings or Loss per Share

Basic earnings (loss) per share is calculated using the weighted average number of common shares outstanding during the period. The dilutive effect on earnings per share is calculated presuming the exercise of outstanding options, warrants and similar instruments. It assumes that the proceeds of such exercise would be used to repurchase common shares at the average market price during the period. However, the calculation of diluted loss per share excludes the effects of various conversions and exercise of options and warrants that would be anti-dilutive.

(n) Income taxes

Income tax comprises current and deferred tax. Income tax is recognized in the consolidated statements of loss and comprehensive loss except to the extent that it relates to items recognized directly in equity or other comprehensive income, in which case the income tax is also recognized directly in equity or other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years. Current tax assets and current tax liabilities are only offset if a legally enforceable right exists to offset the amounts and the Company intends to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Deferred tax is recognized in respect of all qualifying temporary differences arising between the tax basis of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted at the end of the reporting period and are expected to apply when the deferred tax asset or liability is settled. Deferred tax assets are recognized to the extent that it is probable that the assets can be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.

Deferred tax assets are recognized to the extent future recovery is probable. At each reporting period end, deferred tax assets are reduced to the extent that it is no longer probable that sufficient taxable earnings will be available to allow all or part of the asset to be recovered.

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

2. Material Accounting Policies (continued)

(o) Foreign currency transactions

The functional currency of the Company and its subsidiaries is the Canadian dollar. The consolidated financial statements are presented in Canadian dollars which is the Company's presentation currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transaction or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in consolidated statements of loss and comprehensive loss.

(p) Leases

Leases are accounted for by recognizing a right-of-use asset and a lease liability except for:
Leases of low value assets; and
Leases with a duration of twelve months or less.

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by the incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.

On initial recognition, the carrying value of the lease liability also includes:

Amounts expected to be payable under any residual value guarantee.
The exercise price of any purchase option granted if it is reasonably certain to assess that option; and
Any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.

Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

Lease payments made at or before commencement of the lease.
Initial direct costs incurred; and
The amount of any provision recognized where the Company is contractually required to dismantle, remove or restore the leased asset.

Lease liabilities, on initial measurement, increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made.

Right-of-use assets are amortized on a straight-line basis over the term of the lease or over the remaining economic life of the asset if this is judged to be shorter than the lease term.

When the Company revises its estimate of the term of any lease, it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortized over the remaining (revised) lease term.

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

2. Material Accounting Policies (continued)

(q) Assets Held for Sale and Discontinued Operations

Non-current assets (or disposal group) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This classification requires:

Commitment to Sell: Management must be committed to a plan to sell the asset (or disposal group).
Available for Immediate Sale: The asset (or disposal group) must be available for sale in its present condition, subject only to terms that are usual and customary.
Highly Probable Sale: The completion of the sale should be highly probable within one year from the date of classification.

Once classified as held for sale, the non-current assets (or disposal group) are measured at the lower of their carrying amount and fair value less costs to sell. No further depreciation or amortization is recorded once an asset is classified as held for sale. Any subsequent decrease to fair value less costs to sell is recognized as an impairment loss in profit or loss. If the fair value less costs to sell increases after classification, a gain is recognized—but only to the extent of reversing previously recognized impairment losses (i.e., not exceeding the carrying amount that would have been determined had no impairment been recognized).

Assets classified as held for sale are presented separately under “Assets Held for Sale” in the statements of financial position. Similarly, any liabilities directly associated with those assets are presented as “Liabilities Directly Associated with Assets Held for Sale.”

Where the disposal group represents a separate major line of business of operations, it is also classified as a discontinued operation in the statements of loss and comprehensive loss. The results of discontinued operations are presented separately from continuing operations to enhance the comparability of financial performance.

(r) Future Accounting Pronouncements

The IASB issued amendments to IAS 1, effective for annual reporting periods beginning on or after January 1, 2024, clarifying the classification of liabilities as current or non-current. The amendments require entities to assess whether they have a substantive right to defer settlement of a liability at the end of the reporting period. The Company is evaluating the impact of these amendments, and at this time, it is not expected to have a material effect on the classification of liabilities in the consolidated financial statements. However, the Company will reassess its liabilities upon the effective date of the amendment.

(s) Critical accounting judgments and key sources of estimation uncertainty

The preparation of these consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

2. Material Accounting Policies (continued)

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods.

Critical areas of estimation and judgments in applying accounting policies include the following:

Going concern

As discussed in note 1, these consolidated financial statements have been prepared in accordance with IFRS on a going concern basis, which assumes the realization of assets and discharge of liabilities in the normal course of business within the foreseeable future. Management uses judgment in determining assumptions for cash flow projections, such as anticipated financing, anticipated sales and future commitments to assess the Company's ability to continue as a going concern. A critical judgment is that the Company continues to raise funds going forward and satisfy their obligations as they become due.

Work in Progress (WIP) and Percentage of Completion

The Company applies the percentage-of-completion method to recognize revenue from engineering contracts. This method relies on estimates of contract budgets, progress, and costs incurred. The calculation of WIP requires significant judgment and estimation by management. WIP reflects the portion of the contract price earned to date, less amounts billed, based on the percentage of completion method. The percentage of completion is determined by using an input measure, typically the ratio of contract costs incurred to total estimated costs.

The total estimated costs to complete a contract are subject to management's judgment, considering factors such as changes in project scope, unforeseen costs, and the accuracy of labor and material tracking. These estimates are regularly reviewed and updated as the project progresses. Adjustments to WIP are recognized in the period when the estimates are revised, which may significantly impact the timing and amount of revenue and cost recognition.

WIP is considered a critical estimate because changes in contract budgets or progress assessments can lead to material adjustments in revenue, costs, and the financial position of the Company.

Useful lives of property and equipment and intangibles

The Company reviews the estimated useful lives of property and equipment and intangibles with finite useful lives at the end of each year and assesses whether the useful lives of certain items should be shortened or extended, due to various factors including technology, competition and revised service offerings. During the year ended September 30, 2024, the Company was not required to adjust the useful lives of any assets based on the factors described above.

Share-based payments

The Company estimates the fair value of warrants and options using the Black-Scholes Option Pricing Model which requires significant estimation around assumptions and inputs such as expected term to maturity, expected volatility and expected dividends.

Notes to the Consolidated Financial Statements

Years Ended September 30, 2024, and 2023

(Expressed in Canadian Dollars)

2. Material Accounting Policies (continued)

Discontinued Operations

Management exercises significant judgment when determining whether an operation qualifies for classification as a discontinued operation and how the comparative information should be presented in the consolidated financial statements. In evaluating the requirements under IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, the Company concluded it was appropriate to classify the operation as discontinued (note 18).

Impairment testing goodwill

The Company performs annual impairment tests for impairment of goodwill at the end of each fiscal year or when events occur or circumstances change that would, more likely than not, indicate an impairment loss is present. Key assumptions in the impairment assessment include underlying recoverable amounts of respective CGUs, the discount rates applied, future growth rates and forecast cash flows (note 7).

3. Accounts Receivable

	As at September 30, 2024	As at September 30, 2023
	$	$
Trade Receivables net of allowances	851,742	230,224
Government grants receivable	653,166	502,817
HST receivable	77,002	590,355
Loans receivable from related parties (note 15)	307,314	342,314
Total amounts receivable	1,889,224	1,665,710

Based on the evaluation of credit risk and probability of default, the company has recorded an allowance for doubtful account of $15,003.

Loans receivable from related parties consist of loans extended by the Company to officers of the Company of $307,314 (2023: $342,314) to be paid on demand at the rate of 2.45% (note 15). The table below is a summary of the loans extended to the officers of the Company:

	As at September 30, 2024	As at September 30, 2023
	$	$
Andrew White (CEO)	307,314	307,314
Mark Korol (former CFO)	-	35,000
Total	307,314	342,314

Notes to the Consolidated Financial Statements

Years Ended September 30, 2024, and 2023

(Expressed in Canadian Dollars)

4. Work in Progress

The Company records the work in progress (WIP) related to unbilled work from contracts referring to the value of services performed, or products developed under a contract that has not yet been billed to the client. This can include partially completed work or fully completed work awaiting the invoicing process. The balance recognized related to unbilled work is $297,195 as of September 30, 2024 (September 30, 2023- $303,598). The WIP balance related to assets held for sale is $28,789 as of September 30, 2024 (note 18).

5. Property and Equipment

Cost	Computer Equipment	Production Equipment	Pilot Kiln	Leasehold Improvements	Construction in progress	Total	Assets held for sale
Balance, September 30, 2022	$47,412	$326,351	$1,633,124	$55,216	$3,171,787	$5,233,890	$3,919
Additions	10,068	30,976	50,169	-	4,492,660	4,583,873	3,400
Balance, September 30, 2023	$57,480	$357,327	$1,683,293	$55,216	$7,664,447	$9,817,763	$7,319
Additions	29,898	154,917	2,520,687	-	782,719	3,488,221	-
Impairment	-	-	-	-	(1,019,377)	(1,019,377)	-
Reclassification	-	-	-	-	(927,938)	(927,938)	-
Balance, September 30, 2024	$87,378	$512,244	$4,203,980	$55,216	$6,499,851	$11,358,669	$7,319
Accumulated depreciation	Computer Equipment	Production Equipment	Pilot Kiln	Leasehold Improvements	Construction in progress	Total	Assets held for sale
---	---	---	---	---	---	---	---
Balance, September 30, 2022	$26,182	$115,017	$1,306,499	$13,649	$-	$1,461,347	$3,919
Additions	13,212	16,995	376,794	12,437	-	419,438	803
Balance, September 30, 2023	$39,394	$132,012	$1,683,293	$26,086	$-	$1,880,785	$4,722
Additions	19,402	77,767	167,973	8,129	-	273,272	1,133
Balance, September 30, 2024	$58,797	$209,779	$1,851,266	$34,215	$-	$2,154,057	$5,855
Net book value	Computer Equipment	Production Equipment	Pilot Kiln	Leasehold Improvements	Construction in progress	Total	Assets held for sale
---	---	---	---	---	---	---	---
Balance, September 30, 2023	$18,086	$225,315	-	$29,130	$7,664,447	$7,936,978	$2,597
Balance, September 30, 2024	$28,582	$302,465	$2,352,714	$21,000	$6,499,851	$9,204,611	$1,464

Government grants

On April 15th, 2021, the Company entered into a commercialization services agreement with Bioindustrial Innovation Canada ("BIC") where BIC is supporting the balance of plant requirements for upgrading and moving the existing CHAR biocarbon production facility from London Ontario to Thorold, Ontario, as well as design and engineering for the production of renewable natural gas ("RNG") from High Temperature Pyrolysis. Commercialization of Sustainable Innovation ("COMM SCI") is providing $95,000 in a non-repayable contribution and $105,000 in in-kind support from BIC. Balance of plant work includes the civil,

Notes to the Consolidated Financial Statements Years Ended September 30, 2024, and 2023 (Expressed in Canadian Dollars)

5. Property and Equipment (continued)

Government grants (continued)

structural, mechanical, electrical and other engineering disciplines required to connect the CHAR production system to the various utility requirements. BIC approves all eligible expenditures and pays the invoices directly to the suppliers.

On September 22, 2021, the Company entered into a contribution agreement with Natural Gas Innovation Fund ("NGIF"), where NGIF will be providing $300,000 in non-repayable grant funding towards the installation of a renewable natural gas ("RNG") production system at CHAR Tech's Thorold

site. The grant includes a 10% holdback to be disbursed on project completion, with the remaining funds being disbursed at the commencement of each of three milestones. The milestones are as follows:

Milestone 1: Detailed Engineering Design. This milestone was completed in December 2023.

Milestone 2: Fabrication and Commissioning. This milestone is in progress.

Milestone 3: Validation. This milestone has not yet begun.

The grant receivable includes a 10% holdback for the initial $90,000 advance, (30% of total NGIF contribution) invoiced during the year ended September 30, 2022, and on the $120,000 Milestone 1 payment (40% of total NGIF contribution) invoiced during the year ended September 30, 2024, while $108,000 of the funds received is recognized as deferred grant income.

The grants received from SDTC & CGA, OCE, NGIF and LCIF are recorded as deferred grant income until the full completion of the construction and production. The grant income is recognized as grant income on a systematic basis consistent with the amortization of the related assets.

During the year ended September 30, 2024, the Company recognize $23,613 grant income from SDTC & CGA, OCE, NGIF and LCIF (2023: $440,814), recorded under grant income on the consolidated statements of loss and comprehensive loss for the grant received from projects above.

On November 8, 2022, the Company signed a non-refundable contribution agreement with the Department of Natural Resources, under the Investments in Forest Industry Transformation ("IFIT") program. During the fiscal year ended September 30, 2023, the Company received two tranches of funding as part of the program: one amounting to $2,254,595 and another totaling $2,189,755. The funding program will ultimately cover production plant costs up to a maximum amount of funding assistance of $4,938,168.

On March 8, 2024, CHAR Technologies was granted $6,651,242 from Natural Resources Canada's Clean Fuels Fund to support the expansion and replication of its Thorold facility across five new sites in Canada. The funds are disbursed based on a structured claim process during the next 3 years that ensure funding disbursement aligns with project milestones and compliance with government oversight. As of September 30, 2024, a total of $1,245,133 grant income have been recognized on the consolidated statements of loss and comprehensive loss corresponding to the claim period up to September 2024. Included in the grant receivable is the 10% holdback for the total claims approved by NRCan during the year ended September 30, 2024.

19 -

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

5. Property and Equipment (continued)

Government grants (continued)

During the year ended September 30, 2024, CHAR Technologies received $75,000 (2023: $NIL) in grant revenue from the National Research Council of Canada's Industrial Research Assistance Program (NRC IRAP). This funding supports the Company's innovation and research and development initiatives, enhancing its financial stability and reinforcing its commitment to advancing sustainable technologies in

Canada's clean energy sector. As of September 30, 2024, a total of $75,000 grant income have been recognized on the consolidated statements of loss and comprehensive loss corresponding to this grant (2023: $NIL)

The following is a cumulative summary of grants received:

	As at September 30, 2024	As at September 30, 2023
	$	$
Grant received from SDTC	768,750	768,750
Grant received from OCE	1,000,000	1,000,000
Grant received from LCIF	903,027	903,027
Advance received from NGIF	189,000	81,000
NGIF 10% holdback (note 3)	21,000	9,000
Grant Income from IRAP	75,000	-
Grant Income from FedDev	291,178	141,178
Grant received from CFF. NRCan	1,245,150	-
CFF 10% holdback (note 3)	138,350	-
IFIT program	4,444,350	4,444,350
IFIT 10% holdback (note 3)	493,818	493,818
Total accumulated recognized grant income	(4,283,106)	(2,789,341)
Total deferred grant income	5,286,517	5,051,782
Less current portion	-	(23,614)
Long-term portion	5,286,517	5,028,168

Construction in Progress

As at September 30, 2024, CHAR Tech's Thorold facility was under construction, with an aggregate asset under construction recorded at $6,499,851.

The Company is party to a High Temperature Pyrolysis ("HTP") system acquisition and operation contract with Kompogas SLO LLC ("SLO"), a subsidiary of Kanadevia EN (formerly known as "HZI"), entered into on July 21, 2021. Under the contract, the Company is to design, construct and commission a HTP system for processing anaerobic digestate into green hydrogen and biocarbon at SLO's facility in San Luis Obispo, California, and provide related technical and commercial services, including arranging of hydrogen and biocarbon offtake agreements. The HTP system will be owned by the Company and operated at SLO for a term of 5 years from the date of acceptance at an annual rent of USD $1. SLO has an option to purchase the HTP system at any time after the first year of operation. If the purchase option is exercised, the Company is required to assign the hydrogen and biochar offtake agreements to SLO and continue to market the hydrogen and biocarbon on a commission basis.

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

5. Property and Equipment (continued)

Construction in Progress (continued)

As part of its financial review for the year ended December 31, 2024, CHAR Technologies Ltd. has reassessed the classification and valuation of costs associated with its HZI SLO project. This project represents the Company's first large-scale high-temperature pyrolysis (HTP)-to-hydrogen initiative, designed under a Build-Own-Operate-Transfer (BOOT) model. The project is currently on hold due to unresolved permitting and strategic deployment issues. The Company had capitalized $1,947,317 under "Assets Under Construction" within Property, Plant, and Equipment (PP&E) as of September 30, 2023.

Due to delays in physical deployment and limited future applicability of certain project-specific expenditures, the Company has determined that $1,019,377 of these costs should be impaired. The impaired amount primarily pertains to project-specific costs related to site preparation, early-phase designs, and expenditures that lack scalability or relevance to future projects. The amount has been recorded under impairment of property, plant and equipment on the consolidated statements of loss and comprehensive loss. The remaining balance of $927,939 has been reclassified as intangible assets. These costs relate to the development of intellectual property (IP), including engineering designs, modular fabrication drawings, process flow diagrams (PFDs), and control system narratives.

The reclassification aligns with the recognition of intangible assets. The intangible assets will be amortized over their estimated useful lives, reflecting their contribution to future projects such as the Saint-Félicien hydrogen initiative (note 7).

6. Right-of-use Assets

Cost			Vehicles	Equipment	Office space and land	Total
Balance, September 30, 2022			$ 84,971	-	$ 137,159	$ 222,130
Additions			54,779	-	1,273,483	1,328,262
Balance, September 30, 2023			$139,750	-	$1,410,642	$1,550,392
Additions			26,638	258,919	179,648	465,205
Balance, September 30, 2024			$166,388	$258,919	$1,590,290	$2,015,597
Accumulated depreciation			Vehicles	Equipment	Office space and land	Total
---	---	---	---	---	---	---
Balance, September 30, 2022			$ 65,611	-	$ 113,014	$ 178,625
Additions			17,171	-	132,570	149,741
Balance, September 30, 2023			$82,782	-	$245,584	$328,366
Additions			25,057	39,015	185,058	249,130
Balance, September 30, 2024			$107,839	$39,015	$430,642	$577,496
Net book value			Vehicles	Equipment	Office space and land	Total
---	---	---	---	---	---	---
Balance, September 30, 2023			$56,968	-	$1,165,058	$1,222,027
Balance, September 30, 2024			$58,549	$219,904	$1,159,648	$1,438,101

Notes to the Consolidated Financial Statements

Years Ended September 30, 2024, and 2023

(Expressed in Canadian Dollars)

7. Intangible Assets and Goodwill

Cost	Technology License	Purchased Technology	Patents	Total	Assets Held for Sale
Balance, September 30, 2022	$4,352,054	$1,180,000	$22,195	$5,554,249	$62,197
Additions	-	-	8,220	8,220	-
Write down of intangible asset	(1,148,341)	-	-	(1,148,341)	-
Balance, September 30, 2023	$3,203,713	$1,180,000	$30,415	$4,414,128	$62,197
Reclassification (Note 5)	-	927,939		927,939	-
Balance, September 30, 2024	$3,203,713	$2,107,939	$30,415	$5,342,067	$62,197
Accumulated depreciation	Technology License	Purchased Technology	Patents	Total	Assets Held for Sale
---	---	---	---	---	---
Balance, September 30, 2022	$1,528,083	$767,000	$4,417	$2,299,500	$42,384
Additions	1,223,135	118,000	2,836	1,343,971	4,160
Balance, September 30, 2023	$2,751,218	$885,000	$7,253	$3,643,471	$46,544
Additions	452,495	118,000	3,042	537,537	2,020
Balance, September 30, 2024	$3,203,713	$1,003,000	$10,295	$4,217,009	$48,563
Net book value	Technology License	Purchased Technology	Patents	Total	Assets Held for Sale
---	---	---	---	---	---
Balance, September 30, 2023	$452,495	$295,000	$23,162	$770,657	$15,653
Balance, September 30, 2024	-	$1,104,939	$20,120	$1,125,059	$13,633

During the year ended September 30, 2021, CHAR Biocarbon Inc., ("CHAR Biocarbon") a wholly-owned subsidiary of the Company, signed an exclusive technology licensing agreement ("the ELA") with Actinon Pte Ltd, ("Actinon") the parent company of CHAR's former principal kiln technology supplier, Anergy Pte Ltd. ("Anergy"). Under the ELA, CHAR Biocarbon had the technology rights to all the equipment intellectual property, including patents and designs. The effective date of the ELA is July 1, 2021, and it was due to be effective for 3 years (and any further extension of the term was subject to the satisfaction of certain conditions). Pursuant to the ELA, CHAR Biocarbon was to make minimum advance royalty payments of US$3,000,000, in respect of the first 3 years of the term, broken down as follows: US$500,000 in respect of year 1, US$1,000,000 in respect of year 2 and US$1,500,000 in respect of year 3. The payment of these minimum royalties was due to take place under the ELA as follows: US$750,000 in 2021 and US$2,250,000 in 2022.

CHAR Biocarbon paid Actinon US$750,000 during the year end September 30, 2021, and US$1,253,502 during the year ended September 30, 2022. These payments were in respect of the first two years of the contract and part of year three that was due to end on June 30th, 2024.

The ELA was terminated by CHAR Biocarbon by written notice on August 27th, 2022, and a further purported notice of termination was provided by Actinon effective July 1, 2023.

22 -

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

7. Intangible Assets and Goodwill (continued)

CHAR Biocarbon and Actinon are currently engaged in litigation relating to amounts which Actinon alleges are owed to it pursuant to the ELA, as well as amounts which CHAR Biocarbon alleges are repayable to it as a result of its counterclaim against Actinon for recission of the ELA.

The amounts accrued and disclosed relating to the ELA and Actinon in the FY2023 consolidated financial statements were on a contingent basis, pending the outcome of the dispute, as they have been, and continue to be, disputed by CHAR Biocarbon.

For Fiscal Year 2024, by virtue of the extant litigation, there is a risk that CHAR Biocarbon may be deemed to owe liabilities to Actinon in excess of the sums already paid. Reflective of that, and solely on a contingent basis, the Company has provided for a potential liability in the sum of approximately $US675,000. The technology license value was fully amortized as at September 30,2024.

Goodwill

On January 1, 2018, the Company acquired all outstanding shares of the Altech Group ("Altech"). The acquisition was accounted for as a business combination and a goodwill of $1,122,619 was recorded during the year ended September 30, 2018. The carrying value of the goodwill as at September 30, 2023 was $652,916.

As of September 30, 2024, Altech reached an agreement in principle to divest its consulting division to another consulting firm, including employees, active contracts, and selected assets. This intended transaction aligns with the Company strategic shift toward focusing on its Build-Own-Operate (BOO) projects by transitioning out of consulting operations. In anticipation of this transaction, as of September 30, 2024, the consulting division was classified as "held for sale" and as a discontinued operation in compliance with IFRS 5. The classification as held for sale resulted in the reclassification of assets associated with the consulting division to "Assets Held for Sale" on the consolidated statements of financial position.

An impairment test was conducted under IAS 36 Impairment of Assets. The recoverable amount was determined using the Fair Value Less Costs to Sell (FVLCTS) method, which resulted in a value of $270,840. The amount of goodwill was $652,917 while the carrying value of other assets within the CGU totaled $15,928 and was reclassified as 'Assets Held for Sale,' bringing the CGU's total carrying amount to $668,843. Since the carrying amount exceeded the FVLCTS, an impairment of goodwill amounting to $398,005 was recognized as of September 30, 2024. This impairment loss was reported under "Net loss and comprehensive loss on discontinued operations" in the Statements of Loss and Comprehensive Loss. The carrying value of the goodwill as at September 30, 2024 was $254,914 and has been included in the "Assets Held for Sale" on the consolidated financial statements (Note 18).

23 -

Notes to the Consolidated Financial Statements

Years Ended September 30, 2024, and 2023

(Expressed in Canadian Dollars)

8. Accounts Payable and Accrued Liabilities

	As at September 30,	As at September 30,
	2024	2023
	$	$
Trade accounts payable (note 15)	2,999,886	1,440,554
Royalties payable (note 7)	898,344	898,343
Accrued liabilities	601,391	162,120
Total accounts payable and accrued liabilities	4,499,621	2,501,017

9. Loans Payable

	As at September 30,	As at September 30,
	2024	2023
	$	$
CEBA Loan	120,000	120,000
RRRF Loan	88,366	112,613
Dodge Caravan loan	-	2,457
FedDev	1,264,778	1,222,564
FSSIP	1,091,370	1,041,222
Kia Niro Car Loan	36,648	-
Promissory Notes	855,765	-
Total Loans Payable	3,456,927	2,498,856
Less Current Portion	1,031,430	32,136
Non-current Portion Loans Payable	2,425,497	2,466,720

During the year ended September 30, 2020, the Company obtained a loan relating to Regional Relief and Recovery Fund for $148,323 ("the RRRF loan"). The terms are as follows: principal: $148,323, annual interest rate: 0%, repayment starting: January 15, 2023, maturity: December 15, 2027, and monthly installments of $2,472.

During the year ended September 30, 2020, the Company obtained two Canada Emergency Business Account ("CEBA") loans from TD Bank, for $40,000 each ("the CEBA loans"). The terms of the loan are as follows: principal $60,000, interest rate: 0% per annum during Initial Term and 5% during Extended Term, Initial Term date: December 31, 2023, Extended Term date: December 31, 2026, First Interest Payment date: January 31, 2023. During the year ended September 30, 2021, the Company obtained two additional CEBA loans from TD Bank, for $20,000 each ("the CEBA loans"). The terms of the loan are as follows: principal $20,000, interest rate: 0% per annum during Initial Term and 5% during Extended Term, Initial Term date: December 31, 2023, Extended Term date: December 31, 2025.

The CEBA loans and RRRF loans were discounted at the inception date using a market interest rate of 5%.

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

9. Loans Payable (continued)

On September 29, 2022, the Federal Economic Development Agency for Southern Ontario ("FedDev") and CHAR Tech entered into a Contribution Agreement, under the Jobs & Growth Fund (JGF), where the Ministry of Economic Development, Job Creation and Trade will make a repayable Contribution to CHAR Tech in respect to the Thorold Project for 50% of eligible costs, starting from the date of April 19, 2021, up to $1,500,000. During the year ended September 30, 2023, the Company received $1,350,000 under the Contribution Agreement above. In July 2024 the Company fulfilled the requirements of use of funds and received the remaining $150,000. The Loan is recorded in the consolidated financial statements with a total of $150,000 as a short-term liability, and $1,114,779 as a long-term liability, discounted at an interest rate of 4.87% and a value of $1,264,778. The total accretion for the year ended September 30, 2024, is $42,528 (2023: $13,429) and a grant revenue income of $150,000 (2023: $141,178) recorded under grant income on the consolidated statements of loss and comprehensive loss.

On April 20, 2022, the Minister of Economic Development, Job Creation and Trade and CHAR Tech entered into a Conditional Loan Agreement, under the Forest Sector Investment and Innovation Program ("FSIIP"), where the Minister will make a non-revolving loan in the maximum amount of $6,438,168 for the Thorold Project. The repayments of principal and interest will start after the third year of the Agreement. The interest rate is 4.87%. The Loan does not bear interest on the first three years and no principal payments are due over this period as long as there are no material defaults under the Agreement. During the year ended September 30, 2023, the Company received $1,287,634 under the Contribution Agreement above. The loan is recorded in the consolidated financial statements as a long-term liability, discounted at an interest rate of 4.87% and a present value of $1,091,370. The total accretion for the year ended September 30, 2024, is $49,835 (2023: $10,585).

During the year ended September 30, 2020, the Company obtained a loan for the purchase of a vehicle (Dodge Caravan). The terms of the loan are as follows: principal: $16,769, annual interest rate: 6.14%, maturity: October 17, 2024, and bi-weekly instalments of $150. The table below is a summary of the continuity of the loan as of September 30, 2024:

Balance, September 30, 2023	$ 2,457
Repayments	(2,457)
Balance, September 30, 2024	$ -
Current portion at September 30, 2024	$ -
Non-current portion at September 30, 2024	$ -

During the year ended September 30, 2024, the Company obtained another loan for the purchase of a vehicle (Kia Niro). The table below is a summary of the continuity of the loan as of September 30, 2024:

Balance, September 30, 2023	$ -
Addition of Loan	36,649
Repayments	-
Balance, September 30, 2024	$ 36,649
Current portion at September 30, 2024	$ 4,063
Non-current portion at September 30, 2024	$ 32,586

The terms of the loan are as follows: principal: $36,649, annual interest rate: 7.99%, maturity: September 15, 2031, and bi-weekly instalments of $264.

25 -

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

9. Loans Payable (continued)

On July 17, 2024, the Company obtained an unsecured financing among the Company five arm's-length lenders and four non-arm's-length lenders, in the form of term promissory notes, whereby the Company received $850,000 principal amount. The loans bear interest at 10% per year and mature in ninety days from issuance. (note 11 and note 15). As further consideration for providing the financing the Company agreed to issue to the lenders 850,000 non-transferable share purchase warrants with the promissory notes (each, a "Bonus Warrant"). The warrants were issued on July 17, 2024, and expire on July 17, 2025. The promissory note is recorded in the consolidated financial statements as a short-term liability, discounted at an interest rate of 10% and a present value of $855,765. The total accretion for the year ended September 30, 2024, is $54,114, and the total interest incurred as at September 30, 2024 is $17,466.

	Original Amount	September 30, 2024
	$	$
Total promissory notes 2024	850,000	-
Total	850,000	-

Promissory Notes

During the quarter ended March 31, 2023, the Company obtained a non-convertible unsecured financing among the Company and two non-arm's-length lenders, in the form of term promissory notes, whereby the Company received $93,500 principal amount (note 15). The loans bear interest at 1% per month and mature in five months from issuance. These amounts were paid in full during the third quarter of 2023. The table below is a summary of the loans:

	Original Amount	September 30, 2024
	$	$
Covista Value Fund LP	60,000	-
Debric Holdings Inc. (note 15)	13,500	-
Dimitris Stubos (former officer of the Company)	20,000	-
Total	93,500	-

10. Lease Liabilities

The Company entered into a lease effective July 1, 2022 or when the facility could be occupied for its 17,000 square foot production facility in Thorold, Ontario. The term of the lease is five years with two additional options to renew of 5 years each. The annual basic rent for the first year is $153,000 for the building and $50,094 for the land area. The lease liabilities reflect the present value of the lease payments.

On June 19, 2023, the Company entered into a three-year office lease commencing on November 1, 2023. The lease is the office where the Company is currently located in 895 Don Mills Road, Toronto. The term of the new lease expires on October 30, 2026, with a total commitment of payments of $212,802 and it requires monthly lease payments of approximately $5,700.

26 -

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

10. Lease Liabilities (continued)

On November 23, 2023, the Company entered into a six-year equipment lease. The lease is for a wheel loader located at the Thorold plant. The lease required a downpayment of $22,050 and expires on November 23, 2029, with a total commitment of payments of $280,578 and it requires monthly lease payments of $3,952.

On December 8, 2023, the Company entered into a four-year vehicle lease. The lease expires on December 8, 2027, with a total commitment of payments of $29,734 and it requires monthly lease payments of $619.

The table below is a summary of the continuity of the lease liabilities as of September 30, 2024:

			Office Space and land
Balance, September 30, 2023			$1,249,947
Additions			179,648
Accretion			157,173
Repayments			(273,453)
Balance, September 30, 2024			$1,313,315
			Vehicles
Balance, September 30, 2023			$58,268
Additions			26,638
Accretion			$4,114
Repayments			(28,602)
Balance, September 30, 2024			$60,418
			Equipment
Balance, September 30, 2023			$-
Additions			242,401
Accretion			12,344
Repayments			(43,470)
Balance, September 30, 2024			$211,275
Current portion at September 30, 2024			$198,059
Non-current portion at September 30, 2024			$1,386,949
Total			$1,585,008

Future commitments for lease Payments

At September 30, 2024, the future minimum lease payments under leases were payable as follows:

One year	$ 359,137
Between one year and five years	1,476,546
More than five years	432,206
Total Commitments	$2,267,889

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

11. Share Capital

(a) Authorized share capital

Unlimited number of common shares, with no par value.

(b) Issued common shares

	Number of Shares	Amount
Balance, September 30, 2022	83,003,165	15,255,158
Common shares issued for cash (i)	11,000,000	6,600,000
Unit warrants (i)	-	(834,829)
Share issuance costs-cash	-	(212,903)
Shares issued on exercises of stock options (note 12)	600,000	132,000
Shares issued on exercise of unit warrants	4,504,385	1,999,532
Shares issued on exercise of broker warrants	935,067	309,424
Shares issued on exercise of RSUs	67,913	-
Fair value of RSUs exercised	-	30,561
Fair value of stock options exercised	-	99,000
Fair value of broker warrants exercised	-	193,148
Fair value of unit warrants exercised	-	436,149
Balance, September 30, 2023	100,110,530	24,007,240
Shares issued on exercises of stock options (note 12)	680,727	111,712
Shares issued on exercise of RSUs (note 12)	609,807	-
Fair value of RSUs exercised	-	406,784
Fair value of stock options exercised	-	93,788
Balance, September 30, 2024	101,401,064	24,619,524

(i) On July 4, 2023, the Company issued 11,000,000 units (each, a "Unit") to ArcelorMittal XCarb S.à r.l. by way of private placement at a price of $0.60 per Unit, for aggregate cash consideration of CAD$6,600,000, with each Unit comprised of one common share in the capital of the Company (each, a "Common Share") and one-quarter of one non-transferrable Common Share purchase warrant (each whole warrant, a "Warrant") (collectively, the "Offering"). Each Warrant is exercisable for one Common Share at an exercise price of CAD$0.70 per share for a period of 24 months. Prior to the Offering, ArcelorMittal did not own or have control over any securities of CHAR, and following completion of the Offering, ArcelorMittal holds approximately 10.98% of the Company's Common Shares on a non-diluted basis. The fair value of the warrants was $834,829 and valued using Black Scholes method with a share price of 0.69, exercise price of 0.7, a risk-free rate of 4.63% and a volatility of 78%.

On July 17, 2024, the Company entered into loan agreements (the "Loan Agreements") with lenders (the "Lenders") for a total amount of $850,000 (the "Loan") repayable in full within 90 days of entry into the Loan Agreements. The Lenders include existing shareholders, and current and former directors, executive officers and business associates, some of whom are insiders of the Company. As further consideration

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

11. Share Capital (continued)

for providing the Loan, the Company agreed to issue to the Lenders 850,000 non-transferable share purchase warrants (each, a "Bonus Warrant"). Each bonus warrant will be exercisable into one (1) Common Share for a period of one (1) year at a strike price of $0.38 per share. The fair value of the warrants was $65,815 and valued using Black Scholes method with a share price of 0.33, exercise price of 0.38, a risk-free rate of 3.52% and a volatility of 62.35%.

The following table reflects the continuity of unit warrants for the periods presented:

	Number of Unit Warrants	Exercise Price
Balance, September 30, 2022	14,402,716
Warrants from Units	2,750,000	$0.60
Unit warrants exercised	(3,515,494)	$0.40
Unit warrants exercised	(988,891)	$0.60
Unit warrants expired	(4,449,856)	$0.60
Unit warrants expired	(5,448,475)	$0.40
Balance, September 30, 2023	2,750,000
Warrants from Bonus Warrants	850,000	$0.38
Balance, September 30, 2024	3,600,000

The average share price of the Company stock on the dates exercise of the warrants in fiscal year 2023 was $0.62.

12. Stock Options, Restricted Share Units, and Share Appreciation Rights

Stock Options

The following table reflects the continuity of stock options for the years presented:

	Number of Stock Options	Weighted Average Exercise Price (B)
Balance, September 30, 2022	5,676,200	0.25
Granted (i)	4,031,391	0.54
Exercised	(600,000)	0.22
Expired	(448,032)	0.25
Balance, September 30, 2023	8,659,559	0.46
Granted (ii)	2,448,040	0.42
Exercised	(680,727)	0.16
Expired	(1,665,267)	0.21
Balance, September 30, 2024	8,761,605	0.47

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

12. Stock Options, Restricted Share Units, and Share Appreciation Rights (continued)

Stock Options (continued)

(i) On November 15, 2022, the Company granted 40,000 stock options to a consultant of the Company. The stock options may be exercised for a period of five years at a price of $0.36 per share. These stock options vest immediately. The fair value of the options was $12,958 recorded using the Black-Scholes model with a share price of $0.36, exercise price of $0.36, volatility of 143% and a risk-free rate of 3.35%.

On February 6, 2023, the Company granted 1,991,391 stock options to directors, officers, employees, and consultants of the Company. The stock options may be exercised for a period of five years at a price of $0.4125 per share. These stock options vest as follows: 1,072,641 stock options immediately, 93,750 on quarterly milestones, 775,000 on year-end milestones and 50,000 on performance milestones. The fair value of the options was $731,726 recorded using the Black-Scholes model with a share price of $0.4125, exercise price of $0.4125, volatility of 140% and a risk-free rate of 2.82%.

On February 22, 2023, the Company granted 1,000,000 stock options to a consultant of the Company. The stock options may be exercised for a period of five years at a price of $0.66 per share. These stock options vest immediately. The fair value of the options was $587,089 recorded using the Black-Scholes model with a share price of $0.66, exercise price of $0.66, volatility of 139% and a risk-free rate of 2.82%.

On April 25, 2023, the Company granted 500,000 stock options to a consultant of the Company. 250,000 stock options may be exercised for a period of five years at a price of $0.75 per share. 250,000 stock options may be exercised for a period of five years at a price of $1.00 per share. These stock options vest as follows: 250,000 vests on performance milestones and 250,000 vest on performance milestones. The fair value of the options was $307,226 recorded using the Black-Scholes model with a share price of $0.67, exercise price of $0.75, volatility of 136% and a risk-free rate of 2.85%.

(ii) On September 29, 2023, the Company granted 500,000 stock options to a consultant of the Company. 500,000 stock options may be exercised for a period of three years at a price of $0.50 per share. These 500,000 stock options vest in six equal monthly tranches commencing on October 1, 2023. The fair value of the options was $162,343 recorded using the Black-Scholes model with a share price of $0.52, exercise price of $0.50, volatility of 95% and a risk-free rate of 4.10%.

On December 20, 2023, the Company granted 988,213 stock options to employees and consultants of the Company. The stock options may be exercised for a period of five years at a price of $0.42 per share. These stock options vest: 732,999 stock options; 25% January 1st, 2024, 25% July 1st, 2024, 25% January 1st, 2025, 25% July 1st, 2025. 155,214 vests on performance milestones and time, 25% January 1st, 2025, 25% July 1st, 2025, 25% January 1st, 2026, 25% July 1st, 2026. 50,000 stock options vest equally over the next 6 months, and 50,000 stock options vests in 6 months and on performance. The fair value of the options was $380,458 recorded using the Black-Scholes model with a share price of $0.45, exercise price of $0.42, volatility of 124% and a risk-free rate of 3.18%.

On April 16, 2024, the Company granted 1,116,159 stock options to directors, officers, employees, and consultants of the Company. The stock options may be exercised for a period of five years at a price of $0.42 per share. These stock options vest as follows: 321,500 stock

30 -

Notes to the Consolidated Financial Statements

Years Ended September 30, 2024, and 2023

(Expressed in Canadian Dollars)

12. Stock Options, Restricted Share Units, and Share Appreciation Rights (continued)

Stock Options (continued)

options vested immediately; 352,192 options vest after 12 months and subject to performance criteria. 451,567; 25% after 12 months, 25% after each subsequent 12 months. The fair value

of the options was $372,676 recorded using the Black-Scholes model with a share price of $0.34, exercise price of $0.42, volatility of 121% and a risk-free rate of 3.76%.

On July 2, 2024, the Company granted 155,453 stock options to an officer of the Company. The stock options may be exercised for a period of five years at a price of $0.45 per share. These stock options vested immediately. The fair value of the options was $42,934 recorded using the Black-Scholes model with a share price of $0.345, exercise price of $0.45, volatility of 117% and a risk-free rate of 3.52%.

On September 12, 2024, the Company granted 38,217 stock options to a consultant of the Company. The stock options may be exercised for a period of five years at a price of $0.29 per share. These stock options vested immediately. The fair value of the options was $9,020 recorded using the Black-Scholes model with a share price of $0.29, exercise price of $0.29, volatility of 114% and a risk-free rate of 2.88%.

The following table reflects the actual stock options issued and outstanding as of September 30, 2024:

Expiry Date	Exercise Price ($)	Weighted Average Remaining Contractual Life (years)	Number of Options Outstanding	Number of Options Vested (exercisable)	Number of Options Unvested
January 30, 2025	$0.115	0.33	670,000	670,000	-
January 29, 2026	$0.49	1.33	926,000	926,000	-
March 31, 2026	$0.72	1.50	150,000	150,000	-
April 5, 2026	$0.72	1.51	80,000	80,000	-
July 21, 2026	$0.52	1.81	75,000	75,000	-
September 28, 2026	$0.50	1.99	500,000	500,000	-
March 17, 2027	$0.45	2.46	1,264,349	1,264,349	-
November 15, 2027	$0.36	3.13	40,000	40,000	-
February 6, 2028	$0.41	3.35	1,350,724	1,350,724	-
February 22, 2028	$0.66	3.40	1,000,000	1,000,000	-
April 25, 2028	$0.75	3.57	250,000	250,000	-
April 25, 2028	$1.00	3.57	250,000	250,000	-
December 20, 2028	$0.42	4.22	956,323	456,955	499,368
April 19, 2029	$0.42	4.55	1,055,539	312,500	743,039
September 11, 2029	$0.29	4.95	38,217	38,217	-
July 2, 2029	$0.45	4.75	155,453	155,453	-
	$0.52	3.16	8,761,605	7,519,198	1,242,407

During the year ended September 30, 2024, a total of 680,727 stock options (2023: 600,000) were exercised by officers, consultants and employees of the Company and 1,665,267 were cancelled or expired (2023: 448,032).

Notes to the Consolidated Financial Statements

Years Ended September 30, 2024, and 2023

(Expressed in Canadian Dollars)

12. Stock Options, Restricted Share Units, and Share Appreciation Rights (continued)

Restricted Share Units ("RSUs")

The following table reflects the actual restricted share units issued and outstanding as of September 30, 2024:

Grant Date	Number of RSU Outstanding	Number of RSU Vested (exercisable)	Number of RSU Unvested
August 31, 2021	541,100	541,100	-
March 17, 2022	48,388	48,388	-
May 26, 2022	12,500	12,500	-
November 15, 2022	40,000	40,000	-
February 6, 2023	313,219	313,219	-
June 19, 2023	35,453	35,453	-
December 20, 2023	408,227	-	408,227
April 16, 2024	878,531	174,020	704,511
July 2, 2024	153,235	153,235
	2,430,653	1,317,915	1,112,738

On November 15, 2022, the Company granted 40,000 RSUs to an employee of the Company that vested immediately. The fair value of the RSUs was $14,400. The RSUs may be exercised for a period of five years.

On February 6, 2023, the Company granted 712,114 RSUs to employees and consultants of the Company that vest in one year. The fair value of the RSUs was $306,209. The RSUs may be exercised for a period of five years.

On June 19, 2023, the Company granted 35,453 RSUs to employees of the Company that vest in one year. The fair value of the RSUs was $24,463. The RSUs may be exercised for a period of five years.

On December 20, 2023, the Company granted a total of 485,342 RSUs to employees, and consultants of the Company. 331,826, vesting after 12 months and 153,516, vesting on performance and after 12 months. The fair value of the RSUs was $203,844. The RSUs may be exercised for a period of five years.

On April 16, 2024, the Company granted a total of 968,933 RSUs to employees, directors and consultants of the Company. 174,020 vested immediately, 348,385 vesting after 12 months and on performance and 446,528 vesting 25% after 12 months, 25% after each subsequent 12 months. The fair value of the RSUs was $406,952. The RSUs may be exercised for a period of five years.

On July 2, 2024, the Company granted a total of 153,235 RSUs to an employee of the Company that vested immediately. The fair value of the RSUs was $52,866. The RSUs may be exercised for a period of five years.

During the year ended September 30, 2024, a total of 609,807 RSUs were exercised by officers and employees of the Company (2023: 67,913). During the year ended September 30, 2024, a total of 528,015 RSUs were cancelled or expired (2023: 68,907).

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

12. Stock Options, Restricted Share Units, and Share Appreciation Rights (continued)

Share Appreciation Rights ("SARs")

On August 31, 2021, the Company granted 480,000 SARs to an officer of the Company. The SARs may be exercised for a period of five years at a strike price of $0.72 per share. The SARs vested as follows: 160,000 immediately, 160,000 on August 31, 2022, and 160,000 on August 31, 2023.

On April 16, 2024, the Company granted a total of 100,000 SARs to an officer of the Company. The SARs may be exercised for a period of five years at a strike price of $0.42 per share. The SARs vested immediately.

During the year ended September 30, 2024, no SARs were exercised by officers of the Company.

Share-based payment reserve

During the year ended September 30, 2024, the Company recognized $1,692,709 share-based payments for options, RSUs and SARs vested during the year (2023: $1,837,907).

13. Capital Management

The Company includes equity, which is comprised of share capital and working capital, in its definition of capital. The Company's objective when managing capital is to safeguard its ability to continue as a going concern in order to provide returns for its shareholders, and other stakeholders and to maintain a strong capital base to support the Company's core activities. The Company has no externally imposed capital requirements and there were no changes to its capital management approach. To secure the additional capital necessary to pursue these plans, the Company may attempt to raise additional funds through the issuance of equity and debt or by securing strategic partners.

14. Financial Instruments and Risk Management

The Company's financial instruments consist of cash, accounts receivable, accounts payable and loans payable.

The fair value of the Company's financial assets and liabilities approximates the carrying amount. Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and
Level 3 – Inputs that are not based on observable market data.

The Company's cash is measured using level 1 inputs.

Risk management

In the normal course of its business, the Company is exposed to a number of financial risks that can affect its operating performance. These risks, and the actions taken to manage them, are as noted below.

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

14. Financial Instruments and Risk Management (continued)

Credit Risk

Credit risk is the risk that one party to a financial instrument fails to discharge an obligation and causes financial loss to another party. Financial instruments that potentially subject the Company to credit risk consist primarily of cash and accounts receivable. The risk related to cash is managed through the use of a major financial institution which has high credit quality as determined by the rating agencies. Accounts receivable mainly consist of receivables from its customers and have historically been subject to very few bad debts. Credit risk is assessed as low.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not hold any significant interest-bearing assets or liabilities that are variable. Interest rate risk is assessed as low.

Liquidity risk

Liquidity risk is the risk that the Company may not be able to settle its obligations as they fall due. To manage liquidity requirements, the Company strategically plans its cash flows to ensure sufficient capital is available to meet both short-term and long-term obligations. As of September 30, 2024, the Company had cash of $948,689 to cover current liabilities of $5,781,818. The Company is actively exploring additional funding sources, with a focus on project level funding opportunities, over the next 12 months.

Foreign exchange risk

A portion of the Company's revenues are denominated in US dollars. As such, the Company's results of operations are subject to foreign currency fluctuation risks and these fluctuations may adversely affect the financial position and operating results of the Company. As of September 30, 2024, the Company does not use derivative instruments to reduce its exposure to foreign currency risk. The foreign exchange risk is assessed as low.

15. Related Party Balances and Transactions

Related parties include the Board of Directors, close family members and enterprises that are controlled by these individuals as well as certain persons performing similar functions.

The transactions with related parties are as follows:

Fees for services charged by the related parties are as follow:

| | Year Ended
September 30, | |
| --- | --- | --- |
| | 2024 | 2023 |
| | $ | $ |
| DSA Corporate Services ("DSA") (i) – corporate services | 11,028 | 14,507 |
| 1456087 Ontario Inc. ("1456087") (ii) - consulting | 120,000 | 126,000 |
| Mark Korol, CFO (iii) – management & consulting fees | 78,000 | 151,200 |
| Anton Szpitalak (iv) | 110,000 | 84,262 |

Notes to the Consolidated Financial Statements

Years Ended September 30, 2024, and 2023

(Expressed in Canadian Dollars)

15. Related Party Balances and Transactions (continued)

(i) DSA is affiliated with the Company through a common officer. DSA provides corporate secretarial services. As at September 30, 2024, DSA was owed $1,780 (September 30, 2023 - $1,610). These amounts are included in accounts payable and accrued liabilities.

(ii) 1456087 is a company controlled by James Sbrolla, a director of the Company. 1456087 provides consulting services to the Company. As at September 30, 2024, 1456087 was owed $51,027 related to the promissory note plus interest accrued. (note 9) (September 30, 2023 - $nil).

(iii) Mark Korol was appointed Chief Financial Officer as of April 1, 2020. As at September 30, 2024, Mark Korol was owed $nil (September 30, 2023 - $nil). Mark Korol ceased to be the CFO on November 20, 2023. The fees charged during the year are for management and consulting fees.

(iv) Anton Szpitalak, a director of the Company, provides consulting services to the Company. As at September 30, 2024, Anton Szpitalak, was owed $10,205 related to the promissory note plus interest accrued. (note 9) (September 30, 2023 - $nil).

At September 30, 2024, accounts payable balance due to related parties consist of $115,000 (September 30, 2023: $36,250) owed to Directors and Officers of the Company. These amounts are unsecured, non-interest bearing and due on demand (note 8).

As at September 30, 2024, included in receivables is an amount of $307,314 (September 30, 2023: $342,314) related to loans extended to officers of the Company (note 3).

As at September 30, 2024, included in Loan Payables is an amount of $86,747 (September 30, 2023: $nil) related to Promissory notes issued to directors of the Company (note 9).

Remuneration of key management of the Company was as follows:

| | Year Ended
September 30, | |
| --- | --- | --- |
| | 2024 | 2023 |
| | $ | $ |
| Salaries | 708,350 | 572,900 |
| Stock base compensation | 1,025,238 | 900,545 |

Notes to the Consolidated Financial Statements

Years Ended September 30, 2024, and 2023

(Expressed in Canadian Dollars)

15. Related Party Balances and Transactions (continued)

The Company Board of Directors' compensation during the year ended September 30, 2024, was as follows:

	Year EndedSeptember 30,
	2024$	2023$
William White	22,500	22,500
James Sbrolla	20,000	20,000
Nikita Nanos	22,500	20,000
Hugh Cleland	20,000	20,000
Anton Szpitalak	20,000	-
Irina Gorbounova	10,000	-
Eric Beutel	-	11,250
Jane Pagel	-	10,000
Benj Gallander	-	10,000
Paul Pellegrini	-	10,000
Total Balances	115,000	123,750

16. Commitments

The Company has commitments to build, own, and operate a plant in Thorold, Ontario (note 5). The Thorold project has commitments for government support of $12,876,335 as at September 30, 2024.

The Thorold facility is projected to cost approximately $50,000,000.

17. Income Tax

The reconciliation of the combined Canadian federal and provincial statutory income tax rate of $26.5\%$ (2023 - 26.5%) to the effective tax rate is as follows:

	Year EndedSeptember 30,
	2024$	2023$
Net (Loss) before recovery of income taxes	(8,332,512)	(8,434,935)
Expected income tax (recovery) expense	(2,208,120)	(2,235,257)
Tax rate changes and other adjustments	-	54,655
Share-based payments & Other non-deductible expenses	559,450	492,780
Change in tax benefits not recognized	1,648,670	1,682,709
Income Tax (Recovery)	-	(5,114)
The Company's income tax (recovery) is allocated as follows:	$	$
Current Year (recovery) expense	-	-
Deferred tax(recovery) expense	-	(5,114)
	-	(5,114)

Notes to the Consolidated Financial Statements

Years Ended September 30, 2024, and 2023

(Expressed in Canadian Dollars)

17. Income Tax (continued)

Deferred tax

The following table summarizes the components of deferred tax:

| | Year Ended
September 30, | |
| --- | --- | --- |
| | 2024 | 2023 |
| | $ | $ |
| Property, plant and equipment | 290,130 | - |
| Intangible assets | 249,520 | - |
| Capital lease obligation | 381,100 | 323,837 |
| Operating tax losses carried forward | 511,620 | 870,202 |
| Subtotal of Assets | 1,432,370 | 1,194,039 |
| Deferred Tax Liabilities | | |
| Property, plant and equipment | (734,630) | (870,202) |
| Right of use assets | (381,100) | (323,837) |
| Intangible assets | (249,520) | - |
| Loan payable | (67,120) | - |
| Subtotal of Liabilities | (1,432,370) | (1,194,039) |
| Net Deferred Liability | - | - |

Deferred tax assets and liabilities have been offset where they relate to income taxes levied by the same taxation authority and the Company has the legal right and intent to offset.

Movement in net deferred tax liabilities:

| | Year Ended
September 30, | |
| --- | --- | --- |
| | 2024 | 2023 |
| | $ | $ |
| Balance at the beginning of the year | - | (5,114) |
| Recognized in Profit/Loss | - | 5,114 |
| Balance at the end of the year | - | - |

Unrecognized deferred tax assets

Deferred taxes are provided as a result of temporary differences that arise due to the differences between the income tax values and the carrying amount of assets and liabilities. Deferred tax assets have not been recognized in respect of the following deductible temporary differences:

Notes to the Consolidated Financial Statements

Years Ended September 30, 2024, and 2023

(Expressed in Canadian Dollars)

17. Income Tax (continued)

	Year EndedSeptember 30,
	2024%	2023%
Intangible Assets	1,869,900	2,272,980
Capital Lease Obligations	146,910	86,190
Deferred Grant Income	5,286,520	1,338,720
Share Issuance Cost	331,000	516,260
Operating Tax Losses carried forward	16,747,220	10,350,660
Investment Tax Credits	27,836	27,840
	24,409,386	14,592,650

The Canadian operating tax loss carry forwards expire as noted in the table below:

Investment tax credit expires from 2027 - 2029. The remaining deductible temporary differences may be carried forward indefinitely. Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the group can utilize the benefits therefrom.

The Company's Canadian operating tax losses expire as follows:

2039	284,610
2040	399,270
2041	1,286,630
2042	3,872,910
2043	4,936,050
2044	5,967,750
	16,747,220

18. Assets Held for Sale

As of September 30, 2024, the Company was in the process of realigning its strategic priorities to better position the Company for sustainable growth and operational efficiency. In line with this strategic realignment, the Company decided to discontinue the consulting operations of Altech Environmental Consulting Ltd. (Altech) and transition these activities to Cambium Inc. This decision was formalized through a Letter of Intent (LOI), which laid the foundation for an Asset Purchase Agreement (APA).

The decision to exit the consulting business reflects the Company's commitment to focusing on its core Build-Own-Operate (BOO) projects, which are central to the Company's long-term growth strategy.

The Company finalized the agreement on October 31, 2024 and in accordance to IFRS 5 as at September 30, 2024 the Company reclassified the consulting division's operations as asset held for sale or discontinued operations.

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

18. Assets Held for Sale (continued)

Classification as Assets Held for Sale and Discontinued Operations

In compliance with IFRS 5, the consulting division's assets were reclassified as Assets Held for Sale as of September 30, 2024. These assets were measured at the lower of their carrying amount and fair value less cost to sell. No liabilities were transferred or classified as "Liabilities Held for Sale," as all obligations, including accounts payable, were retained by the Company. Additionally, accounts receivable were not included in the "Assets Held for Sale", as they were also retained by the Company and not transferred as part of the agreement.

This reclassification reflects the Company's commitment to completing the divestiture within the following fiscal year, with final details disclosed under Subsequent Events. (note 19).

The classification also qualified the consulting division as a Discontinued Operation, as it represented a defined line of business that the Company intended to exit. This distinction ensures that the financial performance of the consulting division are separately presented, offering a clear distinction between the results of continuing and discontinued operations.

The breakdown of assets classified as "Held for Sale" is as follows:

| | ASSET FOR SALE
$ |
| --- | --- |
| Work in progress | 28,789 |
| Property plan and equipment | 7,319 |
| Accumulated depreciation PPE | (5,855) |
| Goodwill | 254,914 |
| Intangible assets | 62,197 |
| Accumulated depreciation Intangibles | (48,564) |
| Assets Held for sale | 298,800 |
| Deferred revenue | 27,958 |
| Liabilities Directly associated with assets held for sale | 27,958 |
| Net Assets held for sale | 270,842 |

Statement of Comprehensive Loss:

The discontinued operations relate specifically to environmental consulting services, including annual reporting, approvals, and compliance management. These activities, previously part of the consulting division, have been removed from continuing operations and have been classified as Discontinued Operation as at September 30, 2024. This classification reflects the Company's strategic decision to exit this defined line of business. Presenting the financial results of the consulting division separately ensures greater transparency and provides a clearer focus on the Company's ongoing core activities and continuing operations.

The financial results of the consulting division are presented separately under Income from Discontinued Operations:

Notes to the Consolidated Financial Statements

Years Ended September 30, 2024, and 2023

(Expressed in Canadian Dollars)

Assets Held for Sale (continued)

	Year EndedSeptember 30,
	2024$	2023$
Revenue
Consulting Revenue	672,571	897,517
Cost of Revenue	(335,449)	(424,855)
Gross Margin	337,122	472,662
Office and general	700,046	625,986
Professional Fees	40,891	60,000
Amortization	2,020	4,160
Depreciation	6,737	3,354
Interest income	(2,069)	-
	747,625	693,500
Net Loss before impairment loss	(410,503)	(220,838)
Impairment loss on goodwill (note 8)	(398,005)	-
Net loss and comprehensive loss on discontinued operations	(808,508)	(220,838)

Statement of Cash Flows:

Cash flows from the consulting division are separately disclosed under Discontinued Operations, highlighting its contributions during the reporting period.

	Year EndedSeptember 30,
	2024	2023
Net loss and comprehensive loss for the year	$ (808,508)	$(220,838)
Adjustments for
Amortization	2,020	4,160
Depreciation	6,737	3,354
Impairment loss on goodwill	398,005	-
Net change in non-cash working capital
Amounts Receivable	(9,781)	(26,384)
Work-in-progress	161,792	(3,092)
Deferred income	27,958	-
Intercompany current account	-	474,446
Accounts payable and accrued liabilities	225,139	(228,286)
Cash flows used in operating activities	3,362	3,360
Investing activities
Purchase of property and equipment	(905)	-
Cash flows used in investing activities	(905)	-
Repayment of Loan	(2,457)	(3,360)
Cash flows used in Financing activities	(2,457)	(3,360)
Net decrease in cash	-	-
Cash, beginning of year	-	-
Cash, end of year	-	-

Notes to the Consolidated Financial Statements
Years Ended September 30, 2024, and 2023
(Expressed in Canadian Dollars)

19. Subsequent Events

On October 30, 2024, the Company completed a non-brokered private placement, issuing 16,359,451 units at $0.20 per unit for gross proceeds of $3,271,890. Each unit consists of one common share and one-half of one common share purchase warrant. Each whole warrant entitles the holder to purchase one additional share at $0.30 until October 31, 2026. A total of $568,989 representing promissory notes payable together with the accrued interest from the unsecured financing transaction closed in July 2024, were converted into subscriptions to the private placement. Additionally, $302,435 of the promissory notes payable together with the accrued interest was paid after the year-end.

Insiders acquired a total of 729,410 units in this offering. The Company plans to use the net proceeds for general working capital and to advance the Thorold Project.

Finder's fees totaling $155,100 and 775,500 warrants were issued to Leede Financial Inc. in connection with this offer. Each finder's warrant is exercisable at $0.30 per share until October 30, 2026. The offering is subject to TSX Venture Exchange approval, with securities under a statutory hold period of four months and one day from issuance.

On October 31, 2024, the Company entered into and executed an Asset Purchase Agreement (APA) with Cambium Inc. to sell its consulting practice for a total purchase price of $275,000. The transition of the Altech Environmental Consulting team and assets to Cambium Inc. aligns with the Company's strategic focus on renewable energy projects, ensuring continuity for Altech's clients and supporting Cambium's environmental consulting services across Ontario. The Company has received full payment in connection with this transaction.

On December 18, 2024, the Company announced the approval of an additional $2.5M in funding from the Government of Québec, through the Programme Innovation Bois, to support the advancement of its build, own, and operate project to convert wood waste and residuals into both biocarbon for metallurgical coal replacement and green hydrogen, which the project intends to upgrade further into renewable natural gas. The non-repayable grant funding will be disbursed on predetermined project milestones.

41 -

CHARTECH

HEAD OFFICE

Morneau Shepell Centre II, 895 Don Mills Road, Suite 400, Toronto, Ontario, M3C 1W3

CONTACT

1-800-323-4937
[email protected]

42 -

AI assistant

CHAR Technologies Ltd. — Audit Report / Information 2024

47171_rns_2025-01-28_8e199b42-f221-44bd-82ca-1daf720ced4c.pdf

CONSOLIDATED FINANCIAL STATEMENTS

Opinion

Basis for Opinion

Material Uncertainty Related to Going Concern

Key Audit Matters

Valuation of Work in Progress and Percentage of Completion

Key Audit Matter Description

Audit Response

Other Information

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

TABLE OF CONTENTS

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

CONSOLIDATED STATEMENTS OF LOSS & COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF CASH FLOWS

Assets held for sale (Note 18)

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

1. Nature of Business and Going Concern

2. Material Accounting Policies

(a) Statement of compliance

(b) Basis of consolidation

2. Material Accounting Policies (continued)

(c) Property and equipment

(d) Goodwill

(e) Intangible assets

2. Material Accounting Policies (continued)

(e) Intangible assets (continued)

(f) Impairment of tangible and intangible assets

2. Material Accounting Policies (continued)

(g) Financial instruments

i. Classification

ii. Measurement

iii. Impairment of financial assets at amortized cost

2. Material Accounting Policies (continued)

(g) Financial Instruments (continued)

iii. Impairment of financial assets at amortized cost (continued)

iv. Derecognition

(h) Revenue from Contracts and Customers ("IFRS 15")

2. Material Accounting Policies (continued)

(h) Revenue from Contracts and Customers ("IFRS 15") (continued)

(i) Cost of sale recognition

(j) Share-based payments

2. Material Accounting Policies (continued)

(k) Share-based payment reserve

(l) Government grants

(m) Earnings or Loss per Share

(n) Income taxes

2. Material Accounting Policies (continued)

(o) Foreign currency transactions

(p) Leases

2. Material Accounting Policies (continued)

(q) Assets Held for Sale and Discontinued Operations

(r) Future Accounting Pronouncements

(s) Critical accounting judgments and key sources of estimation uncertainty

2. Material Accounting Policies (continued)

Going concern

Work in Progress (WIP) and Percentage of Completion

Useful lives of property and equipment and intangibles

Share-based payments

2. Material Accounting Policies (continued)

Discontinued Operations

Impairment testing goodwill

3. Accounts Receivable

4. Work in Progress

5. Property and Equipment

Government grants

5. Property and Equipment (continued)

Government grants (continued)

5. Property and Equipment (continued)

Government grants (continued)

Construction in Progress

5. Property and Equipment (continued)

Construction in Progress (continued)

6. Right-of-use Assets

7. Intangible Assets and Goodwill

7. Intangible Assets and Goodwill (continued)

Goodwill

CHAR Technologies Ltd. Audit Report / Information 2024