CHAR Technologies Ltd. — Interim / Quarterly Report 2021

Feb 25, 2021

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Decarbonizing for a Circular Economy through Advanced Design, Technology and Environmental Services.

Q1 REPORT 2021

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MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31, 2020 DISCUSSION DATED: FEBRUARY 25, 2021

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INTRODUCTION

This Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operation of CHAR Technologies Ltd. (the “Company” or “CHAR”) should be read in conjunction with CHAR’s audited consolidated financial statements and notes thereto as at and for the years ended September 30, 2020 and 2019.

The Company’s consolidated financial statements and the financial information contained in this MD&A are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and interpretations of the IFRS Interpretations Committee. Results are reported in Canadian dollars, unless otherwise noted.

Information contained herein is presented as of February 25, 2021, unless otherwise indicated.

For the purposes of preparing this MD&A, management, in conjunction with the Board of Directors (the “Board”), considers the materiality of information. Information is considered material if: (i) such information results in, or would reasonably be expected to result in, a significant change in the market price or value of the Company common shares; (ii) there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision; or (iii) it would significantly alter the total mix of information available to investors. Management, in conjunction with the Board, evaluates materiality with reference to all relevant circumstances, including potential market sensitivity.

Further information about the Company and its operations can be obtained from the offices of the Company or on SEDAR at www.sedar.com .

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

2 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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OUR BUSINESS

CHAR 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 solid biofuel “CleanFyre”). Additional services include custom equipment for industrial water treatment, and providing services in environmental compliance, environmental management, site investigation and remediation, engineering and resource efficiency.

The Company continues to be listed on the Exchange trading under the symbol YES.V. The Company’s head office address is 789 Don Mills Road, Suite 403, Toronto, Ontario, M3C 1T5.

CHAR has three operating groups: CharTech Solutions, CHAR Biocarbon and Altech Environmental Consulting,

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

3 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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OPERATIONS

CHAR continues to focus on commercial opportunities to deploy CHAR’s pyrolysis process, used to produce various biocarbons, including SulfaCHAR utilizing low value or waste streams as feedstock, including woody biomass, compost and biosolids. The Company has received the three tranches of funding from the SD Natural Gas Fund (supported by Sustainable Development Technology Canada (“SDTC”) and the Canadian Gas Association (“CGA”) to execute on a project to build and operate a 1-tonne per day pyrolysis system to produce biocarbon, which allowed the company to produce commercial quantities of SulfaCHAR. Commissioning was completed and operation began in the first quarter of fiscal 2019. The SD Natural Gas Fund provided a $750,000 non-repayable grant toward the project from SDTC and the CGA. In addition, the Ontario Centres of Excellence is provided a $1,000,000 non- repayable grant toward the project following the same milestones and payment schedules as the SD Natural Gas Fund which the Company has adhered to.

In October 2018, the Company initially announced that it had successfully commissioned the pyrolysis equipment used to produce biocarbons, including SulfaCHAR. The system has been operational for two years and is producing commercial quantities of SulfaCHAR and pilot quantities of CleanFyre. The system has showcased the Company’s proprietary pyrolysis technology using various waste streams to create quality byproducts. The Company is now confident it is able to move forward and move into the commercial phase for HTP systems.

On March 11, 2020, the World Health Organization characterized the outbreak of a strain of the novel coronavirus (“COVID-19”) as a pandemic which has resulted in a series of public health and emergency measures that have been put in place to combat its spread. The duration and impact of the continuing COVID-19 outbreak is unknown at this time and it is not possible to reliably estimate the impact that the length and severity of these developments will have on the financial results and condition of the Company in future periods.

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

4 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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CORPORATE HIGHLIGHTS

Private placements

In February 2021, the Company completed a non-brokered private placement whereby the Company issued 18,461,538 units at a price of $0.325 per unit for gross proceeds of $6,000,000. Each unit is comprised of one common share and one half of a warrant exercisable at $0.40 within two years.

In October 2020, the Company completed a small private placement for 6,950,000 common shares at a price of $0.10 for gross proceeds of $695,000. The proceeds are intended to be used for technology commercialization and working capital purposes.

Previously, on December 31, 2018, CHAR closed 1,147,619 flow-through shares at a price of $0.21 per share for gross proceeds of $241,000. The net proceeds from the non-brokered private placement were used for continued technology development.

Stock option grants

On January 29, 2021, the Company’s Board of Directors approved the grant of 1,333,000 options at a strike price of $0.49 per share. The options have an exercise period of five years from the date of grant.

On January 30, 2020, the Company granted 930,000 stock options to officers, directors, employees and consultants of the Company at a strike price of $0.115. On February 27th, 2020, the Company issued 100,000 options to an officer at a strike price of $0.15. On April 1st, 2020, the Company issued 160,000 options to a new officer at a strike price of $0.075 followed by a grant of 50,000 options on July 1, 2020 at $0.105 to a new director. All the options granted during the fiscal year have an exercise period of five years from the date of the grant.

In the previous fiscal year on February 7th, 2019, the Company granted 961,000 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 $0.20 per share. These stock options vest as follows: 505,000 stock options vested when granted and 426,000 stock options were to vest based on the achievement of specific performance criteria.

Furthermore, on August 16, 2019, the Company granted 78,125 stock options to an officer of the Company. The stock options are exercisable for a period of five years at a price of $0.16 per share. These stock options vested at the time of the grant.

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

5 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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TRENDS

Management regularly monitors economic conditions and estimates their impact on the Company’s operations and incorporates these estimates in both short-term operating and longer-term strategic decisions. During the quarter, equity markets in Canada showed signs of improvement, with equities increasing significantly during this period. Strong equity markets are favourable conditions for completing a public merger or financing. Apart from these and the risk factors noted under the heading “Risk Factors”, management is not aware of any other trends, commitments, events or uncertainties that would have a material effect on the Company’s business, financial condition or results of operations. See “Risk Factors” below.

Selected Annual Financial Information

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Quarter ended Quarter Ended Quarter ended
December 31, 2020 December 31, 2019 December 31, 2018
($) ($) ($)
Revenue 319,970 595,735 435,395
Net loss (194,470) (159,832) (278,918)
Net loss per share –
(0.00) (0.00) (0.01)
basic and diluted
As at As at As at
December 31, 2020 December 31, 2019 December 31, 2018
($) ($) ($)
Total assets 3,817,836 4,162,045 5,201,117
Total long-term
1,247,056 1,499,494 1,376,658
liabilities
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MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

6 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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Summary of Quarterly Result

NET INCOME OR (LOSS)
Revenue Total Basic and diluted income (loss) per share(13) (14)	Total assets
Period ($) ($) ($)	($)
December 31, 2020 319,970 (194,470)(1) (0.00)	3,817,836
September 30, 2020 278,634 (12,087)(2) (0.00)	3,408,115
June 30, 2020 351,193 (205,570)(3) (0.01)	3,601,453
March 31, 2020 534,343 (326,313)(4) (0.01)	3,775,859
December 31, 2019 595,735 (159,832)(5) (0.00)	4,162,045
September 30, 2019 424,442 (466,351)(6) (0.01)	4,274,249
June 30, 2019 464,824 237,372(7) 0.01	4,187,343
March 31, 2019 298,003 (313,312)(8) (0.01)	4,893,986
December 31, 2018 435,398 (278,918)(9) (0.01)	5,201,117
September 30, 2018 328,880 (502,184)(10) (0.01)	5,395,109
June 30, 2018 324,201 (249,673)(11) (0.01)	5,244,426
March 31, 2018 388,707 (379,735)(12) (0.01)	4,716,969

• (1) Net loss of $194,470 consisted of $82,749 of professional fees, $120,965 of depreciation, $234,611 of office expenses offset by gross profit of $171,976 and grant income of $132,087.

• (2) Net loss of $12,087 consisted of $40,326 of professional fees, $126,843 of depreciation $153,489 of office expenses and other general working capital expenses offset by gross profit of $216,984 and grant income of $172,460.

• (3) Net loss of $205,570 consisted of $84,552 of professional fees, $105,619 of depreciation $162,046 of office expenses and other general working capital expenses offset by gross profit of $173,405 and grant income of $29,256.

• (4) Net loss of $326,313 consisted of $128,224 of professional fees, $105,619 of depreciation $345,005 of office expenses and other general working capital expenses offset by gross profit of $219,378 and grant income of $210,506.

• (5) Net loss of $159,832 consisted of $85,585 of professional fees, $103,762 of depreciation $365,196 of office expenses and other general working capital expenses offset by gross profit of $299,654 and grant income of $142,853.

• (6) Net loss of $466,351 consisted of $119,008 of professional fees, $185,702 of depreciation $359,514 of office expenses and other general working capital expenses offset by gross profit of $241,513 and grant income of $207,332.

• (7) Net profit of $237,372 consisted of $84,903 of professional fees, $184,690 of depreciation $351,531 of office expenses and other general working capital expenses offset by gross profit of $302,873 and grant income of $644,204.

• (8) Net loss of $313,312 consisted of $84,631 of consulting fees, $184,720 of depreciation $354,237 of office expenses and other general working capital expenses offset by gross profit of $189,200 and grant income of $308,179.

• (9) Net loss of $278,918 consisted of $72,131 of consulting fees, $184,720 of depreciation $303,538 of office expenses and other general working capital expenses offset by gross profit of $265,612 and grant income of $150,428.

• (10) Net loss of $502,184 consisted of $82,388 of consulting fees, $157,375 of professional fees, $218,392 of office expenses, $38,517 of amortization and other general working capital expenses offset by gross profit of $82,066 and deferred tax recovery of $50,800.

• (11) Net loss of $249,673 consisted of $52,298 of professional fees, $395,448 of office expenses, $34,650 of consulting fees and $29,500 of amortization offset by $266,094 of gross profit.

• (12) Net loss of $379,735 consisted of $304,364 of office expenses, $95,404 of consulting fees, $82,245 of professional fees, $108,259 of share-based payments, $29,500 of amortization and other general working capital expenses offset by gross profit of $252,661 and grant income of $30,920.

• (13) Per share amounts are rounded to the nearest cent, therefore aggregating quarterly amounts may not reconcile to year-to-date per share amounts.

• (14) As the Company has reported a net loss, it has not calculated the diluted loss per common share as its effect would be anti-dilutive.

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

7 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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DISCUSSION OF OPERATIONS

Quarter ended December 31, 2020 compared with the Quarter ended December 31, 2019

The Company’s net loss totaled $194,470 for the quarter ended December 31, 2020, with basic and diluted loss per share of $0.00. This compares with a net loss of $159,832 with basic and diluted loss per share of $0.00 for the quarter ended December 31, 2019. The increase in net loss of $34,638 was principally because:

• During the quarter ended December 31, 2020, the Company recognized $132,087 of grant income compared to $142,853 the previous year. This $10,766 decrease was primarily related to OCE and SDTC funding initiatives and milestone achievement.

• During the first quarter ended December 31, 2020, the Company realized gross profit of $171,976 compared to $299,654 for the same quarter ended in 2019. The decrease in gross profit of $127,678 is mainly derived from lower revenues due to the economic impact of COVID-19 due to project delays and an increased focus on future technology projects with long lead times. As a result of the aforementioned, revenues declined from $595,735 in the first quarter of 2020 compared to $319,970 for the first quarter of 2021, a decline of 46%. Gross margins improved from 50% to 54% on a year over year basis.

• Depreciation increased by $17,203 or 17% for the year ended December 31, 2020 compared to the year ended December 30, 2019. The increase is attributable to increased capital expenditures on equipment relating to future technology commercialization.

• During the quarter ended December 31, 2020, office expenses decreased by $130,585 or 36% over the 2019 comparative period due to cost efficiencies achieved in primarily relating to overhead expenses. Office expenses include salaries, rent, insurance, travel and administrative services as well as government subsidies due to COVID-19.

• During the quarter ended December 31, 2020, the Company incurred $13,000 on research and development compared to $14,061 for the first quarter ended December 31, 2019. During the 2020 fiscal year, the Company completed further research and development to prepare the pyrolysis technology for the commercialization phase.

• Professional fees decreased by $2,836 to $82,749 in fiscal 2020 compared to $85,585 in fiscal 2019.

All other expenses related to general working capital.

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

8 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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CASH FLOW

At December 31, 2020, the Company had cash of $644,906 compared to $129,127 at September 30, 2020. The increase in cash of $515,779 from September 30, 2020 resulted from the following:

Operating activities were affected by non-cash items of depreciation of $120,965, amortization of $31,756, deferred grant income of $110,203. The net change in non-cash working capital balances of $53,248 comprised of a decrease in amounts receivable of $35,041, a decrease in work-in-progress of $15,358, offset by an increase in inventory of $6,188, a decrease in prepaid expenses of $1,291, and an increase in accounts payable and accrued liabilities of $7,746.

The Company spent $109,817 for capital expenditures for the purchase of equipment for its production facility.

The Company received $695,000 of proceeds from an equity issue during the quarter to strengthen the Company’s financial position and provide capital to continue its commercialization efforts of its proprietary pyrolysis technology. As a result of the Company being more focused on technology commercialization it is less dependent on grant funding at this stage of its life cycle.

LIQUIDITY AND FINANCIAL POSITION

The Company’s total assets at December 31, 2020 were $3,817,836 (September 30, 2020 - $3,408,115) against total liabilities of $2,009,256 (September 30, 2020 - $2,100,064). The increase in total assets of $409,721 resulted from the equity raise completed in October 2020 for $695,000, offset by a reduction in grant income of $110,203 and an investment in capital expenditures of $109,817.

The activities of the Company have been primarily financed by private placements of securities, the exercise of warrants and options and its initial public offering.

The SD Natural Gas Fund project includes a $750,000 non-repayable grant from SDTC and a $1,000,000 non-repayable grant from the Ontario Centres of Excellence. The project builds on the previous research and development work conducted by CHAR. The project is split into 3 milestones. The first milestone, which is the design and fabrication of a 1-tonne per day biocarbon (including SulfaCHAR) production system is completed. The second milestone, which is the commissioning and initial operation of the 1- tonne per day biocarbon (including SulfaCHAR) production system is completed. The third and final milestone, which is testing of the use of SulfaCHAR for gas cleaning and agricultural applications is complete, and CHAR is finalizing the final report with SDTC. The previous completion of phase 2 of this project allowed the Company to begin producing commercial quantities of SulfaCHAR, and is an

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

9 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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important next step in the commercialization of SulfaCHAR. The Company also received approval for approximately $1 million from the Government of Ontario through LCIF for the commercialization of CleanFyre. The Company has received payments of $903,028. The first milestone has been successfully completed. The second milestone, which consists of a 20 tonne industrial trial of CleanFyre, is anticipated to be completed by the end of calendar Q3, 2021.

During fiscal 2021, the Company’s corporate head office costs are estimated to average approximately $500,000 per quarter. Head office costs include professional fees, reporting issuer costs, consulting fees, salaries and general and administrative costs.

The Company’s cash at December 31, 2020 is sufficient to fund its operations for fiscal 2021. The Company is estimated to earn revenue of $3,000,000 for fiscal 2021. See “Risk Factors” and “Caution Note Regarding Forward-Looking Statements” below.

COMMITMENT

The Company has no further obligations with respect to flow through shares. As at December 30, 2020, $0 remains to be spent as part of the flow-through funding agreement for shares issued in December 2018. The Company had indemnified the subscribers for any related tax amounts that could have become payable by the subscribers as a result of the Company not meeting its expenditure commitments.

The Company’s operating lease agreement for its kiln building location which expired on December 11, 2020 was subsequently renewed on a month-to-month basis.

The Company’s minimum rental payments for its office space is as follows:

Yearly Minimum Rental Payments

Fiscal Year	Amount ($)
2021	27,136
2022	27,136
2023	27,136
2024	2,261
Total	83,669

The Company entered into two insurance policies during the year ended September 30th, 2020. The Company has a commitment of insurance premium payments for $9,561 payable in the fiscal quarter ending March 31, 2021.

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

10 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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TRANSACTIONS WITH RELATED PARTIES

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:

Transactions with Related Parties Breakdown

	Quarter ended	Quarter ended
	December 31, 2020	December 31, 2019
Marrelli Support Services Inc. (“MSSI”)(1)	($) Nil	($) 6,000
DSA Corporate Services (“DSA”)(2) 1456087 Ontario Inc. (“1456087”)(3)	2,952 15,000	2,305 15,000
Mark Korol, CFO(4)	18,000	Nil
Numbers & Co.(5)	Nil	15,000

(1) The former Chief Financial Officer of the Company was a senior employee of MSSI.

(2) DSA is affiliated with Marrelli Support through a common officer. DSA provides corporate secretarial services. As at December 31, 2020, DSA was owed $847,50 (September 30, 2020 - $849). These amounts are included in accounts payable and accrued liabilities.

• (3) 1456087 Ontario Inc. is a company controlled by James Sbrolla, a director of the Company. 1456087 Ontario Inc. provides consulting services to the Company.

(4) Mark Korol was appointed Chief Financial Officer on April 1, 2020.

(5) Numbers & Co. is a company controlled by the former Chief Administration Officer of the Company. Numbers & Co. provides consulting services to the Company. As at December 31, 2020, Numbers & Co. was owed $nil (September 30, 2020-$nil).

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

11 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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Remuneration of directors and key management of the Company was as follows:

Remuneration of Directors and Key Management

Quarter ended	Quarter ended
December 31, 2020	December 31, 2019
($)	($)
Salaries 62,640	63,136
Total 62,640	63,136

OUTSTANDING SHARE DATA

The number of common shares of the Company outstanding and the number of common shares issuable pursuant to other outstanding securities of CHAR as at February 25, 2021 are as follows:

Total Securities

Securities	As at February 25,
	2021
Common shares outstanding	70,608,852
Issuable under options	5,171,125
Warrants	9,230,770
Broker Warrants	914,967
Total securities	85,925,714

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

12 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the results of operations or financial condition of CHAR.

PROPOSED TRANSACTIONS

The Company closed a financing transaction on February 5[th] , 2021 to raise $6,000,000 at a share price of $0.325 with half of a warrant per share. It is awaiting final TMX approval.

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.

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 above, 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.

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

13 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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Deferred taxes

The calculation of deferred taxes is based on assumptions which are subject to uncertainty as to timing and which tax rates are expected to apply when temporary differences reverse. Deferred tax recorded is also subject to uncertainty regarding the magnitude of non-capital losses available for carry forward and of the balances in various tax pools. By their nature, these estimates are subject to measurement uncertainty, and the effect on the financial statements from changes in such estimates in future period could be material. Deferred tax assets are recognized to the extent that it is probable that they will be able to be utilized against future taxable income. Deferred tax assets are reviewed at each statement of financial position date and adjusted to the extent that it is no longer probable that the related tax benefit will be realized.

Useful lives of property and equipment and intangibles

As described above, the Company reviews the estimated useful lives of property and equipment and intangibles with definite 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, 2020, the Company was not required to adjust the useful lives of any assets based on the factors described above.

Business combinations

In a business combination, all identifiable assets, liabilities and contingent liabilities acquired are recorded at their fair values. One of the most significant estimates relates to the determination of the fair value of these assets and liabilities. For any intangible asset identified, depending on the type of intangible asset and the complexity of determining its fair value, an independent valuation expert or management may develop the fair value, using appropriate valuation techniques, which are closely to the assumptions made by management regarding the future performance of the assets concerned and any changes in the discount rate applied.

Share-based payments

The Company estimates the fair value of convertible securities such as 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.

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

14 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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CAPITAL MANAGEMENT

The Company includes equity comprised of share capital, reserves and deficit, in the definition of capital.

The Company’s objective when managing its capital is to safeguard the 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. To secure the additional capital necessary to pursue these plans, the Company may attempt to raise additional funds through the issuance of equity or by securing strategic partners.

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

15 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

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.

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 consists of receivables from its customers and have historically been subject to very few bad debts. Credit risk is assessed as low.

Market risk

Market risk is the risk that the fair value of the future cash flows of a financial instrument will fluctuate because of changes in the market prices. The Company’s cash includes cash held in bank accounts that earn interest at variable interest rates. Due to the short-term nature of these financial instruments, fluctuations in market rates do not have a significant impact on estimated fair values.

Interest rate risk

Interest rate risk is the risk 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.

Liquidity risk

Liquidity risk is the risk that the Company may not be able to generate sufficient cash resources to settle its obligations as they fall due. The Company’s strategy is to satisfy its liquidity needs using cash on hand, and cash flow provided by financing activities. As at December 31, 2020, the Company had cash of $644,906 to settle current liabilities of $762,200. The Company’s accounts payable and accrued liabilities, and deferred grant income are due within one year from the date of the statement of financial position.

Fair value

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. The fair value of the Company’s cash, amounts receivable, accounts payable and loans payable are estimated by management to approximate their carrying values due to their short-term nature.

Subsequent Event

The Company completed a non-brokered private financing in February 2021 for $6,000,000 through the issuance of 18,461,537 common shares at $0.325 and half a warrant per share exercisable at $0.40 within two years.

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

16 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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RISK FACTORS

An investment in the securities of the Company is highly speculative and involves numerous and significant risks. In addition to the risks identified therein, additional risks not presently known to the Company may arise from to time and may cause a material adverse effect on the Company and any investment in the Company. Investors are cautioned not to rely upon any forward-looking statements in this MD&A as such statements are subject known and unknown risks.

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No History of Profits

CHAR has not earned profits to date and there is no assurance that CHAR will earn profits in the future, or that profitability, if achieved, will be sustained. The success of CHAR ultimately depends upon its abilities to generate significant revenues to finance operations as opposed to external funding. There is no assurance that future revenues will be sufficient to generate the funds required to continue operations without external funding. If CHAR does not have sufficient capital to fund its operations, it may be required to forego certain business opportunities;

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Future Capital Requirements

CHAR will require additional financing in order to grow and expand its operations. It is possible that required future financing will not be available, or if available, will not be available on favourable terms. There can be no assurances that CHAR will be able to raise additional capital if its capital resources are exhausted;

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Management of Growth

CHAR may be subject to growth-related risks including capacity constraints and pressure on its internal systems and controls. Any expansion of CHAR’s business may place a significant strain on its financial, operational and managerial resources. There can be no assurances that CHAR will be able to manage growth successfully;

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Limited Operating History

CHAR began carrying on business in February, 2011 and is therefore subject to many of the risks common to early-stage enterprises;

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Reliance on Management

The success of CHAR is dependent upon the ability, expertise, judgment, discretion and good faith of their respective senior management;

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

17 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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Additional Financing

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In order to execute the anticipated growth strategies, CHAR will likely require additional equity and/ or debt financing beyond order to support on-going operations, to undertake capital expenditures or to undertake acquisitions or other business combination transactions;

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Competition

There is potential that CHAR will face intense competition from other companies, some of which can be expected to have longer operating histories and more financial resources and manufacturing and marketing experience than CHAR;

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Operating Risk and Insurance Coverage

CHAR has insurance to protect its assets, operations and employees. While CHAR believes its insurance, coverage addresses all material risks to which it is exposed and is adequate and customary in its current state of operations, such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which CHAR is exposed;

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Fluctuation of Market Price

The market price of the Company’s Shares may be subject to wide fluctuations in response to many factors;

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Dividends

The Company has no earnings or dividend record, and does not anticipate paying any dividends on the Common Shares in the foreseeable future;

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Limited Market for Securities

The Company’s are listed on the Exchange, however, there can be no assurance that an active and liquid market for the Company’s Shares will develop or be maintained and an investor may find it difficult to resell any securities of the Company; and

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Environmental and Employee Health and Safety Regulations

CHAR’s operations are subject to environmental and safety laws and regulations concerning, among other things, emissions and discharges to water, air and land, the handling and disposal of hazardous and non-hazardous materials and wastes, and employee health and safety.

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

18 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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CAUTION NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this MD&A and in certain documents incorporated by reference in this MD&A, contain “forward-looking information” for the purposes of applicable Canadian securities laws (the “forward-looking statements”). All statements other than statements of historical fact are forwardlooking statements. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”, “anticipates” or “believes”, or variations of, or the negatives of, such words and phrases, or statements that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated in such forward-looking statements, including those risk factors identified below in the section “Risk Factors. The forward-looking statements in this MD&A speak only as of the date of this MD&A unless an alternative date is specified in such statement. Certain forward-looking statements contained in this MD&A relate to the Company’s ability to continue its business activities and to execute on its business plan as currently anticipated. These forward look-statements as well as the other forwardlooking statements contained herein, are based upon certain material assumptions, including the Company’s expectation that its costs will remain consistent with the costs currently anticipated and that financing through equity raises, debt financing or a combination thereof will continue to be available to the Company and on terms anticipated and reasonably acceptable to the Company. The risk factors identified in the “Risk Factors” section below may cause such assumptions and/or the forward-looking statements to be untrue.

Inherent in forward-looking statements are risks, uncertainties and other factors beyond the Company’s ability to predict or control. Please see the “Risk Factors” section included in this MD&A. Readers are cautioned that actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this MD&A.

The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements whether as a result of new information or future events or otherwise, except as may be required by law. If the Company does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements, unless required by law.

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

19 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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DISCLOSURE OF INTERNAL CONTROLS

Management has established processes to provide them with sufficient knowledge to support representations that they have exercised reasonable diligence to ensure that (i) the consolidated financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by the consolidated financial statements; and (ii) the consolidated financial statements fairly present in all material respects the financial condition, financial performance and cash flows of the Company, as of the date of and for the periods presented.

In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”), the Venture Issuer Basic Certificate filed by the Company does not include representations relating to the establishment and maintenance of disclosure controls and procedures (“DC&P”) and internal control over financial reporting (“ICFR”), as defined in NI 52-109. In particular, the certifying officers filing such certificate are not making any representations relating to the establishment and maintenance of:

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Controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

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A process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with the issuer’s generally accepted accounting principles (IFRS).

The Company’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in such certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost-effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

MANAGEMENT’S DISCUSSION & ANALYSIS FOR THE QUARTER ENDED: DECEMBER 31 , 2020 DISCUSSION DATED: FEBRUARY 25 , 2021

20 Q1 2021 REPORT

CHAR TECHNOLOGIES.COM

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HEAD OFFICE

789 Don Mills Road North York, Ontario M3C 1T5

1-800-323-4937

info@chartechnologies.com

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