CHAR Technologies Ltd. - Management Reports 2024

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chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

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Introduction.................................................................................................................................................... 2 Our Business ................................................................................................................................................. 3 Operations ..................................................................................................................................................... 6 Corporate Highlights ..................................................................................................................................... 7 Trends ........................................................................................................................................................... 8 Discussion Of Operations ............................................................................................................................. 9 Cash Flow ...................................................................................................................................................11 Liquidity And Financial Position ..................................................................................................................11 Commitments ..............................................................................................................................................12 License Agreement & Termination ..............................................................................................................13 Transactions With Related Parties ..............................................................................................................13 Outstanding Share Data ..............................................................................................................................14 Off-Balance Sheet Arrangements ...............................................................................................................14 Proposed Transactions ...............................................................................................................................14 Subsequent Events .....................................................................................................................................15 Critical Accounting Judgments And Key Sources Of Estimation Uncertainty .............................................15 Capital Management ...................................................................................................................................17 Financial Instruments And Risk Management ............................................................................................17 Risk Factors ................................................................................................................................................18 Caution Note Regarding Forward-Looking Statements ..............................................................................20 Disclosure Of Internal Controls ...................................................................................................................21

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

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INTRODUCTION

CHAR Tech Tech audited consolidated financial statements and notes thereto as at and for the years ended September 30, 2022, and 2021.

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 January 29, 2024, unless otherwise indicated. These audited consolidated financial statements were approved for issuance by the Board of Directors on January 29, 2024.

For the purposes of preparing this MD&A, management, in conjunction with the Board of Directors (the 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 https://www.sedarplus.ca/.

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

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OUR BUSINESS

CHAR Technologies is a leading cleantech development and environmental services company, specializing in high temperature pyrolysis (HTP), converting woody biomass and organic materials into renewable TM energy (renewable natural gas (RNG) or green hydrogen) and valuable biocarbon (biocoal , biochar, or activated biochar TM ).

A leading solution advancing green hydrogen and RNG

TM content exceeding 80 wt% (equal to or better than metallurgical grade coal), offering a 91% reduction in greenhouse gas emissions, positioning it as a compelling drop-in replacement for metallurgical coal. SulfaCHAR, another innovative biocarbon product, derived from digestate/compost, serves as a supplement to activated carbon consumption, effectively reducing hydrogen sulfide and odours in biogas operations. Besides biocarbon, biomass-to-energy applications also exist CHAR Tech is actively developing the conversion of its produced clean syngas for use to fuel industrial needs or applied to generate renewable energy in many forms; heat, electricity, green hydrogen and renewable natural gas (RNG).

Working to advance the future of green steelmaking

Amongst the different applications, steelmaking is a pivotal focus area for the company. Earlier this year, CHAR Tech established a strategic partnership with the industry giant ArcelorMittal, who committed to procuring 5,000 tonnes of biocoal. Considering that steel, cement, and chemicals sectors account for 32% of emissions in Canada, the demand for biocoal is set to grow significantly, aligning with Canada's commitment to decarbonize industries.

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

Transitioning from a successful pilot to commercialization

To reinforce the importance of biocoal production, CHAR Tech is building a state-of-the-art facility in Thorold, Ontario. Set to be one of the largest facilities of its kind in Canada, and the only one in the country to exclusively process woody biomass waste, the facility will process approximately 72,000 tonnes of woody waste per year, generate 10,000 tonnes of biocarbon, and produce 500,000 GJ/year of RNG annually. It is currently in construction (a pilot system currently operates on-site), with commercial biocarbon production commencing in 2024.

Attracting investors and collaborators

CHAR Tech has secured significant funding commitments and investments, totaling over C$19 million from corporate and government institutions. In December 2022, the company secured total commitments of C$12.8M of funding from the Governments of Canada and Ontario to commercially expand ArcelorMittal also resulted in C$6.6 million investment from their XCarb® Innovation Fund, signifying a vote of confidence in the HTP technology to produce highquality biocoal.

CHAR Tech is well-positioned to address various environmental challenges. The company operates through services that range from custom equipment design and engineering solutions for clean water treatment to environmental consulting services including annual reporting, approvals and compliance management. These are driven by the following service units:

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CHAR Tech is now intensifying efforts to expand its build-own-operate facilities, ensuring alignment with the burgeoning pipeline of projects in North America. A summary of our all of our ongoing projects is below.

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

Expanding Active Projects

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Thorold, Ontario

CHAR Tech project to process 72,000 tonnes per year woody waste

Est. output: 500,000 GJ/yr RNG & 10,000 Tonnes/yr biocarbon

In Construction (biocarbon pilot currently operating)

Saint-Félicien, Quebec

In collaboration with the emerging Écosystème Énergétique Régional (EER) in Saint-Félicien
Est. output: 250,000 GJ/yr syngas; 5,000 tonnes/yr biocarbon
In Development
Synagro
Add-on to existing Synagro Facilities
Est. output: Eliminate PFAS and produce biochar (soil amendment & carbon credits)
In Construction

Additional Project Pipeline

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Lake Nipigon, Ontario

Kirkland Lake

Project with First Nations CHAR Tech project where co-operative Lake Nipigon surveying and geo-technical Forest Management Inc. testing of biomass has begun Est. output: 500,000 GJ/yr Est. output: 500,000 GJ/yr RNG & 10,000 Tonnes/yr RNG & 10,000 Tonnes/yr biocarbon biocarbon In Development In Development

Terrace, British Columbia

Feasibility study to explore wood waste-energy production.

Est. output: 500,000 GJ/yr RNG & 10,000 Tonnes/yr biocarbon

head office address is Morneau Shepell Centre II, 895 Don Mills Road, Suite 400, Toronto, Ontario, M3C 1W3.

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

OPERATIONS

CHAR Tech continues to focus on commercial opportunities to deploy CHAR Tech used to produce various biocarbons, including CleanFyre and SulfaCHAR utilizing low value or waste streams as feedstock, including woody biomass, compost and biosolids. The Company is focused on both systems sales as well as owning and operating pyrolysis systems. The Company is now moving forward into the commercial phase for its proprietary HTP systems.

On July 4[th] ,2023 the c company, ArcelorMittal S.A., through ArcelorMittal XCarb S.à r.l in 16 countries, including ArcelorMittal Dofasco in Hamilton, Ontario. The Company also signed a Memorandum of Understanding under which ArcelorMittal Dofasco will purchase biocarbon produced at CHAR Tech -edge facility in Thorold, Ontario starting in 2024.

On June 28[th] , 2023 the company was awarded a $1.43M contribution from the Government of Canada through (NRCan) Clean Fuels Fund. The Clean Fuels Fund aims to significantly increase domestic -carbon future. The contribution will position CHAR Tech to conduct a comprehensive feasibility study, that includes assessing the engineering and design work needed to build a future commercial CHAR Tech facility. The facility will be designed to convert wood waste to renewable energy (green hydrogen or renewable natural gas) and biocarbon.

On December 21[st] , 2022, CHAR Tech completed the transfer of its existing HTP equipment from the former facility in London, Ontario, to the new facility in Thorold, Ontario. The equipment was shortly after recommissioned and producing biocarbon in January, 2023.

On November 7[th] , 2022 the Company signed a non-refundable contribution contract with the Department of Natural Resources, under the Investments in Forest Industry Transformation program. During the fiscal year 2023 the Company received a tranche of funding from the program in the amount of $4,938,168 for CHAR Tech HTP woody biomass waste into renewable natural gas and biocoal through its high temperature pyrolysis systems.

On September 29[th] , 2022, and CHAR Tech entered into a contribution agreement, in respect to the Thorold Project of up to $1,500,000. During the fiscal year 2023, the Company had received FedDev Agency funding of $1,350,000 in respect to the costs incurred up to September 30, 2023.

On April 20, 2022, CHAR Tech signed a $6,438,168 Conditional Loan Agreement with the Forest Sector - revolving term loan up to $6,438,168 for CHAR Tech

Under the Agreement there are performance incentives that relate to loan forgiveness amounts relating to the successful completion of stages and the ultimate completion of the Project. The maximum annual disbursement amounts are: $1,287,634 for Year 1, $4,635,481 for Year 2, and $515,052 for Year 3. The Year 1 disbursement payment was made in full on April 2023.

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

The Company initially obtained funding in previous years from the SD Natural Gas Fund, supported by project to build and run a 1-tonne per day pyrolysis system for producing biocarbon. This early funding was instrumental in enabling the commercial production of SulfaCHAR.

The commissioning of the system was completed, with operations starting in the first quarter of fiscal 2019. Specifically, the SD Natural Gas Fund provided a $750,000 non-repayable grant from SDTC and CGA in a prior year for this initiative. Moreover, the Ontario Centres of Excellence contributed a $1,000,000 nonrepayable grant in an earlier period toward the project. Back in October 2018, the Company had already announced the successful commissioning of its pyrolysis equipment, crucial for producing biocarbons, including SulfaCHAR. Having been operational for over four years now, the system produces commercial proprietary pyrolysis technology, utilizing various waste streams to create quality byproducts, with initial funding received in the preceding years.

CORPORATE HIGHLIGHTS

Private placements

On July 4, 2023, CHAR Technologies Ltd. closed a $6.6 million equity investment by Arcelor Mittal and signed an annual biocarbon supply contract. The offering was a non-brokered private placement of 11,000,000 units at a price of $0.60 per unit. Each unit consists of one common share and ¼ of a warrant at $0.70 expiring in two years.

During Fiscal 2023, 988,891 warrants were exercised at $0.60 per common share. The warrants were issued in connection with CHAR Tech d in March of 2022. This financing was a non-brokered private placement whereby the Company issued 10,877,514 units at a price of $0.45 per unit for gross proceeds of $4,894,881. Each unit is comprised of one common share and one half of a warrant exercisable at $0.60 within eighteen months and expire in September of 2023. As of September 30[th,] 2023, 4,449,856 warrants and 335,372 broker warrants expired without being exercised.

In February of 2023, 3,515,494 warrants were exercised at $0.40 per common share and 914,967 broker warrants were exercised at $0.325 per common share. The warrants were issued in connection with CHAR Tech .

Stock option grants - Prog)

On September 29[th] , 2023, the Company made an additional grant of 500,000 stock options to a consultant of the Company that vested in six equal monthly tranches commencing on Oct 1, 2023. The stock options may be exercised for a period of five years at a price of $0.50 per common share.

On April 25[th] , 2023, the Company granted 500,000 stock options to a consultant of the Company who subsequently joined the Board of Directors on June 2, 2023. The stock options were issued in two tranches of 250,000 exercisable into common shares of CHAR Tech at prices of $0.75 and $1.00. The options vest upon the completion of deliverables in both phases.

On February 22, 2023, the Company made an additional grant of 1,000,000 stock options to a consultant of the Company that vested immediately. The stock options may be exercised for a period of five years at a price of $0.66 per common share.

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for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

On February 6th of 2023, the Company granted 1,991,391 stock options to employees, consultants, directors and officers of the Company. The stock options are exercisable into common shares of CHAR Tech at a price $0.4125 per common share for a period of five years The options vested immediately except for officers of the Company whose options primarily vest with time and performance milestones over 12 months. The Company also granted to employees, consultants and officers of the Company that vest after one year from the date of issue.

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. The stock options vested immediately.

On November 15, 2022, the Company granted 40,000 RSUs to a consultant of the Company.

On May 26, 2022, the Company granted 12,500 RSUs to an employee of the Company.

On March 17th, 2022, CHAR Tech granted 1,669,075 stock options to employees, directors, consultants, and officers of the Company. The stock options may be exercised for a period of five years at a price of $0.45. The Board of Directors approved 160,416

TRENDS

operations and incorporates these estimates in both short-term operating and longer-term strategic decisions. Volatile capital markets present a challenge for equity financings. However, as conditions continue to improve, opportunities will likely present themselves for equity financings. Apart from these and comm

Selected Annual Financial Information

	Year Ended	Year Ended	Year Ended
	September 30, 2023	September 30, 2022	September 30, 2021
	($)	($)	($)
Revenue	2,000,326	1,459,442	1,378,007
Net loss	(8,429,820)	(6,904,353)	(3,261,831)
Net loss per share basic and diluted	(0.08)	(0.09)	(0.05)

	As at	Year Ended	Year Ended
	September 30, 2023	September 30, 2022	September 30, 2021
	($)	($)	($)
Total assets	18,868,473	9,949,370	10,322,759
Total liabilities	11,934,508	5,251,544	4,778,776

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

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Net income or (loss)
Period Revenue Total Basic & diluted income Total Assets
(loss) per share
($) ($) ($) ($)
September 30, 2023 672,401 (3,367,414) (0.04) 18,868,473
June 30, 2023 427,326 (1,928,450) [(2)] (0.02) 13,793,152
March 31, 2023 401,798 (2,182,166) [(3)] (0.02) 14,941,617
December 31, 2022 498,801 (951,788) [(4)] (0.01) 12,015,271
September 30, 2022 322,479 (2,185,240) [(5)] (0.03) 9,949,370
June 30, 2022 363,653 (1,424,925) [(6)] (0.02) 10,204,379
March 31, 2022 461,121 (1,830,270) [(7)] (0.02) 11,879,781
December 31, 2021 312,189 (1,463,918) [(8)] (0.02) 8,523,405
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1) Net Loss of $3,367,414 consists of professional fees of $381,786 $147,638 for depreciation, $339,062 for amortization, $ 1,077,913 for office expenses, $212,347 for R&D expenses, non-cash share-based expenses of $540,620 and offset by grant income of $590,301 and partially offset by gross profit of $-29,489.
2) Net Loss of $1,928,450 consists of professional fees of $355,236, $150,180 for depreciation, $335,712 for amortization, $963,932 for office expenses, $194,210 for R&D expenses, non-cash share-based expenses of $252,564 and intangible asset write down of 1,148,341 offset by grant income of $110,204 and a reduction of financial liability of $1,148,341 and partially offset by gross profit of $219,320.
3) Net Loss of $2,182,166 consists of professional fees of $462,392, $159,574for depreciation, $332,401 for amortization, $1,061,166 of office expenses, $175,163 for R&D expenses, non-cash share-based expenses of $862,325, offset by grant income of $672,391 and Gross Profit of $230,622.
4) Net Loss of 951,788 consisted of professional fees of $243,182, $$112,590 of depreciation, $340,957 for amortization, $743,718 of office expenses, $148,848 of R&D expenses, non-cash share-based expenses of $182,398, offset by grant income of $606,695 and Gross Profit of $219,713.
5) Net loss of $2,185,240 consisted of $422,712 of professional fees, $111,537 of depreciation, $341,796 of amortization, $853,651 of office expenses, $63,623 of R&D, non-cash share-based expenses of $646,648, offset by grant income of $110,204 and $134,645 of Gross Profit.
6) Net loss of $1,424,925 consisted of $343,971 of professional fees, $112,174 of depreciation, $337,606 of amortization, $666,946 of office expenses, $181,318 of R&D, offset by grant income of $110,204 and $164,865 of Gross Profit.
7) Net loss of $1,830,270 consisted of $347,043 of professional fees, $109,758 of depreciation, $334,255 of amortization, $605,076 of office expenses, $209,022 of R&D expenses and $452,580 of payments, offset by Gross Profit of $188,154.
8) Net loss of $1,463,918 consisted of $302,574 of professional fees, $107,956 of depreciation, $620,468 of office expenses offset by gross profit of $154,346 and grant income of $110,204.

DISCUSSION OF OPERATIONS

For the year ended September 30, 2023, compared with the year ended September 30, 2022.

8,429,820 for the year ended September 30, 2023, with basic and diluted loss per share of $0.08. This compares with a net loss of $6,904,353 with basic and diluted loss per share of $0.09 for the year ended September 30, 2022. The increase in net loss of $1,525,465 was principally because:

During the year ended September 30th, 2023, the Company recognized $798,989 of grant income compared to $440,814 the same as the previous Year end. The grant income recognized was related to the OCE and SDTC funding initiatives.
During the year ended September 30, 2023, the Company realized gross profit of $640,166 compared to $642,010 for the same year ended in 2022. The gross profit remained consistent as per last fiscal year. The revenue increase from $1,459,442 last year compared to $2,000,326 on a year over year basis.

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

The increase in revenue of $540,884 is mainly the result of increased technology sales business partially offset by staffing resources focused on proposal generation and an internal focus on the BOO high temperature pyrolysis projects. Increased resources were needed to pursue and develop new business opportunities along with additional resource allocations to support the business. The Company continues to invest in commercialization, in both staffing and technology enhancements, as it progresses on its projects in both the U.S. and Canada.

Depreciation increased by $119,914, or 27%, for the year ended September 30th, 2023, compared to $450,068 at September 30, 2022. This increase is attributable to increased capital expenditures on in use equipment. The remainder of capital expenditures relate to current and future technology projects that have not been commissioned at this point in time and have not started depreciating while under construction.
Amortization stayed relatively flat at $1,348,132 during the fiscal year of 2023 compared to $1,353,592. The amortization expense is mainly attributable to intangible assets acquired through an exclusive licensing agreement with its original kiln supplier which was entered into in the fourth quarter of fiscal 2021. No cash royalty payments were made in fiscal year of 2023.
During the year ended September 30, 2023, office expenses increased by $1,083,547 or 40% over the 2022 comparative twelve months period due to cost increases incurred in hiring additional engineering staff and key executive management positions, new facility leases at Thorold and to a lesser extent: travel, insurance, advertising, and marketing initiatives. Office expenses include salaries, rent, insurance, travel, and administrative services.
During the year ended September 30th, 2023, the Company incurred $730,568 on research and development expenses compared to $660,403 for the year ended September 30, 2022. Over the past three fiscal years, the Company has accelerated its research and development initiatives to rollout the pyrolysis technology for the commercialization phase while demonstrating the technology to potential customers.
Professional fees increased by $26,296 to $1,442,596 during fiscal 2023 compared to $1,416,300 over the fiscal 2022 year. The increase in fees related primarily to legal, public relations, business development initiatives, new contracts. Consulting fees increased to $124,520 for the twelve months ended September 30, 2023, compared to $45,000 in the same period last year.
The Company incurred noncash share-based payments of $1,837,907 during fiscal year 2023, for employees, officers and directors and consultants from its Omnibus long-term incentive plan that was introduced in fiscal 2021. There was an expense recognized of $1,340,724 for the twelve months ended September 30, 2022. The increase of $497,183 was due to increased RSU and stock option grant amounts compared to last year, attributable to increased staffing levels including key management positions.
Regulatory expenses increased to $43,655 in the fiscal year 2023 compared to $27,888 last year, primarily because of increased costs incurred and increased size of the Company.

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for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

CASH FLOW

At September 30, 2023, the Company had cash of $2,093,154 compared to $460,483 at September 30, 2022. The company also invested in a Term Deposit for $4,000,000 at September 30[th] , 2023 (nil at September 30[th] , 2022). The increase in cash and Term Deposit of $5,632,671 for the twelve-month period from September 30, 2022, resulted from the following:

placement at a price of CAD$0.60 per Unit, for aggregate cash consideration of CAD$6,600,000, with each Unit comprised of one common share in the capit .

Operating activities were affected by non-cash items of depreciation of $569,982 amortization of $1,348,132, deferred grant income of $798,989 and share-based payments of $1,837,907 accretion and interest of $ 131,645. The net change in non-cash working capital balances used cash in operating activities of $(487,484) was comprised of an increase in amounts receivable of $473,389, an increase in work-inprogress of $11,049, an increase in prepaid expenses of $33,210, and an increase in accounts payable and accrued liabilities of $497,228 offset by deferred revenue of $419,378. For the twelve-month period net cash provided by operating activities was $(4,858,773) compared to $(5,032,216) used in operations for the comparable period last year. The Company spent $4,594,273 for capital expenditures during the fiscal year primarily for the purchase of equipment for its production facility in Thorold. Last year, the Company spent $ 2,782,829 on capital expenditures. The company also invested in a Term Deposit for $4,000,000. Net cash used in investing activities in total amounted to $8,595,495 compared to $2,790,200 for the same twelve months period ending on September 30, 2022.

The Company had financing activities during the fiscal year with cash provided by financing activities of $15,026,939 with majority of the cash inflows derived from issuance of common shares and proceeds from warrants exercised in the year ended September 30, 2023 and proceeds from loan payable. Cash provided by financing activities was $5,281,517 at the end of September 30, 2022. Most of the cash provided from financing activities in the prior twelve months period came from equity investment, proceeds from exercise of equity instruments and government grants.

LIQUIDITY AND FINANCIAL POSITION

September 30, 2023, were $18,868,473 (September 30, 2022 - $9,949,369) against total liabilities of $11,934,508 (September 30, 2022 - $5,251,544). The increase in total assets of $8,919,104 resulted primarily from an increase of $4,167,032 in property and equipment, an increase in cash and term deposit of $5,632,671 and an decrease of $11,049 in Work-in-Progress, and increase in right of use assets of $1,178,522 offset by a decrease of $2,488,251 on intangibles because of amortization and a non-cash intangible asset write-down of $1,148,341.The write-down was offset by a financial liability decrease of the same amount. The asset expenditures for the right of use assets of $1,178,522 were offset by increased lease liabilities of $1,259,457.

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 as well as Government funding programs.

In November 2022, the Company signed a non-refundable contribution contract with the Department of Natural Resources, under the Investments in Forest Industry Transformation program. During the fiscal year the Company received a tranche of funding from the program in the amount of $4,444,350 for CHAR Tech .

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for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

CHAR Tech entered into a Contribution Agreement where the Minister 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. As of September 2023, the Company had received the full amount of the contribution agreement.

On April 20, 2022, CHAR Tech signed a $ $6,438,168 Conditional Loan Agreement with the Forest Sector - revolving term loan up to $6,438,168 for CHAR Tech performance incentives that relate to loan forgiveness amounts relating to the successful completion of stages and the ultimate completion of the Project. The maximum annual disbursement amounts are: $1,287,634 for Year 1, $4,635,481 for Year 2, and $515,052 for Year 3. The Year 1 disbursement payment was made in full as at September 30, 2023.

The SD Natural Gas Fund project included a $750,000 non-repayable grant from SDTC and a $1,000,000 non-repayable grant from the Ontario Centres of Excellence. The project built on the previous research and development work conducted by CHAR Tech. The project was split into 3 milestones. The first milestone, which was the design and fabrication of a 1-tonne per day biocarbon (including SulfaCHAR) production system was completed. The second milestone, which was the commissioning and initial operation of the 1- tonne per day biocarbon (including SulfaCHAR) production system was completed. The third and final milestone, which was testing of the use of SulfaCHAR for gas cleaning and agricultural applications was completed.

At September 30, 2023 and debt markets, government programs and other funding sources is anticipated to be sufficient to fund its operations for the remainder of fiscal 2024 and 2025.

COMMITMENTS

2020, and was terminated production facility in Thorold, Ontario for a fifty thousand square foot facility.

production facility in Thorold, Ontario are as follows:

Yearly Minimum Rental Payments

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Fiscal Year Amount
2024 214,119
2025 218,196
2026 222,474
2027 226,716
2028 231,252
2029 235,881
2030 240597
2031 245,409
2032 186,804
Total 2,021,448
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for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

LICENSE AGREEMENT & TERMINATION

During the fiscal year ending September 30, 2021, the Company signed an exclusive technology licensing agreement which included intellectual property rights and exclusivity with its original kiln supplier (based in Asia). The effective date of the Agreement was July 1st, 2021, and was effective for three years. Pursuant to this exclusive license agreement the Company was obligated to make minimum advance royalty payments of USD $3,000,000 in respect of its sales of HTP systems.

The minimum royalty payment required payments in US dollars related to the following periods: $500,000 for year 1, $1,000,000 for year 2 and $1,500,000 for year 3 and $2,000,000 for year 4, if extended. The Company paid $750,000 USD in the FY 2021 and $1,253,502 USD in fiscal year 2022. These payments covered the first two years of the contract and part of year three that ends on September 30, 2024. The contract was terminated by both parties effective July 1, 2023. As a result, the Company would have approximately $675,000 USD outstanding to complete the payment for year 3 which ends on September 30, 2024, if deemed necessary. This financial liability is reflected in the financial statements even though there is uncertainty as to its enforceability. The intangible asset has been written down by 1,148,341, the same amount as the financial liability has been reduced during the fiscal year.

To bolster the development of our showcase facility in Thorold, Ontario, and to support our expanding project pipeline, CHAR Tech has strategically shifted its focus to a network of North American-based equipment suppliers. This transition not only ensures that our Thorold facility progresses as planned but also significantly mitigates our supply chain and project delivery risks, enhancing our operational resilience.

In line with this strategy, on August 28th, 2022, CHAR Biocarbon Inc., a wholly owned subsidiary, initiated the termination of its Exclusive Licence Agreement with Actinon Pte. Ltd, the parent company of Anergy, a Singapore-based kiln equipment provider. This decision, which aligns with our broader operational objectives, is a proactive measure to streamline our processes and fortify our supply chain. CHAR Tech has subsequently received a notice of termination effective July 1st, 2023 from Actinon Pte. Ltd, and a claim for additional licence fees from Actinon. CHAR Tech firmly disputes these claims. We are committed to taking appropriate actions to safeguard our interests and maintain the integrity of our business operations.

TRANSACTIONS WITH RELATED PARTIES

Transactions with Related Parties Breakdown

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:

Year ended September 30, 2023 ($) Year ended September 30, 2022 ($)	Year ended September 30, 2023 ($) Year ended September 30, 2022 ($)	Year ended September 30, 2023 ($) Year ended September 30, 2022 ($)	Year ended September 30, 2023 ($) Year ended September 30, 2022 ($)	Year ended September 30, 2023 ($) Year ended September 30, 2022 ($)
				(1) 14,507 10,077
(2) 126,000 120,000
Mark Korol, CFO(3) 151,200 144,000
Lewis Smith- Consulting(4) - 113,000

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

(1) DSA is affiliated with MSSI through a common officer. DSA provides corporate secretarial services. As at September 30, 2023, DSA was owed $1,610 (September 30, 2022 $847). These amounts are included in accounts payable and accrued liabilities.
(2) 1456087 is a company controlled by James Sbrolla, a director of the Company. 1456087 provides consulting services to the Company. As at September 30, 2023, 1456087 was owed $nil (September 30, 2022 $nil).
(3) Mark Korol was appointed Chief Financial Officer as of April 1, 2020. As at September 30, 2023, Mark Korol was owed $nil (September 30, 2022 $nil). The fees charged during the year are for management fees.
(4) Lewis Smith was appointed Chief Commercial Officer of the Company and is now an employee. As at September 30, 2022, Lewis Smith was owed $nil.

Remuneration of Directors and Key Management

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

	Year ended	Year ended
	September 30, 2023	September 30, 2022
	($)	($)

Salaries	572,900	221,667
Total	572,900	221,667

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 Tech as of January 29, 2024, are as follows:

Total Securities

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Securities As at January 29, 2024
Common Shares 101,126,637
Stock Options Outstanding 9,067,045
Unit Warrants 2,750,000
Broker Warrants -
RSUs 1,913,180
SARs 480,000
Total Securities 115,336,861
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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 Tech.

PROPOSED TRANSACTIONS

There are no proposed material transactions relating to assets or business acquisitions or dispositions as of January 29, 2024.

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

SUBSEQUENT EVENTS

On June 19, 2023, the Company entered into a three-year office lease agreement commencing on November 1, 2023. The lease is the office where the Company is currently located in Morneau Shepell Centre II, 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.

On December 20th of 2023, the Company granted 988,213 stock options to employees and consultants of the Company. The stock options are exercisable into common shares of CHAR Tech at a price $0.42 per common share for a period of five years. Of the options granted, 732,999 vest with time, and 255,214 vest with time and performance. and consultants of which 244,753 vest over time, and 240,589 vest with time and performance.

As at January 29th, 2024, a total of 580,727 of outstanding stock options and 435,380 RSUs were exercised by directors, officers, employees of the Company.

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 continues to raise funds going forward and satisfy their obligations as they become due.

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

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, 2023, 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.

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

CAPITAL MANAGEMENT

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

concern in order to provide returns for its shareholders, and other stakeholders and to maintain a strong 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.

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 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 and cash flow provided by financing activities. As at September 30, 2023 the Company had cash of $2,093,154 and total current assets of $8,267,644. The Company had current liabilities of $3,326,204 of which $574,638, can be deferred. deferred grant income are generally due within one year from the date of the statement of financial position.

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

Fair value

Fair value is the amount for which an asset could be exchanged, or a liability settled, between amounts receivable, accounts payable and loans payable are estimated by management to approximate their carrying values due to their short-term nature.

RISK FACTORS

Investment Risk

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.

No History of Profits

To date, CHAR Tech has not generated profits and there is no guarantee of future profitability. The company's success hinges on generating significant revenue to finance operations independently of external funding. There is no certainty that future revenues will be adequate to sustain operations without additional external funding. Insufficient capital may compel CHAR Tech to pass up potential business opportunities.

Future Capital Requirements

CHAR Tech 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 Tech will be able to raise additional capital if its capital resources are exhausted.

Management of Growth

CHAR Tech may be subject to growth-related risks including capacity constraints and pressure on its internal systems and controls. Any expansion of CHAR Tech its financial, operational, and managerial resources. There is no guarantee that CHAR Tech can manage this growth effectively.

Limited Operating History

CHAR Tech began operations in February 2011 and has now begun to commercialize its proprietary technology across North America. Common to emerging technology companies like CHAR Tech, however, there are inherent risks in advancing new designs and processes.

Reliance on Management

The success of CHAR Tech is dependent upon the ability, expertise, judgment, discretion and good faith of their respective senior management. CHAR Tech knowledge and relationships that we depend on to implement our business plan.

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

Additional Financing

To realize its growth strategies, CHAR Tech may need to secure additional equity or debt financing. This financing is necessary to support ongoing operations, capital expenditures, and potential acquisitions or business combinations.

Competition

CHAR Tech operates in a competitive environment and may face challenges from companies with longer histories, greater financial resources, and more experience in manufacturing and marketing.

Operating Risk and Insurance Coverage

CHAR Tech has insurance to protect its assets, operations, and employees. While CHAR Tech 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 Tech is exposed.

Fluctuation of Market Price

Dividends

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

Limited Market for Securities

any securities of the Company.

Environmental and Employee Health and Safety Regulations

CHAR Tech 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.

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

CAUTION NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this MD&A and in certain documents incorporated by reference in this - - r than statements of historical fact are forward- looking statements. Often, but not always, forward-looking statements can be identified by the use of words such

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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 identifi

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 Com anticipated. These forward look-statements as well as the other forward-looking statements contained herein, are based upon certain material assumptions, in 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 may cause such assumptions and/or the forward-looking statements to be untrue.

Inherent in forwardcautioned 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.

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

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 - Company does not include representations relating to the establishment and maintenance of disclosure 52-109. In particular, the certifying officers filing such certificate are not making any representations relating to the establishment and maintenance of:

Controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, 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
A process to provide reasonable assurance regarding the reliability of financial reporting and the generally accepted accounting principles (IFRS).

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 annual filings and other reports provided under securities legislation.

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

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HEAD OFFICE

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

CONTACT

1-800-323-4937 [email protected]

chartechnologies.com

for the Year Ended: September 30, 2023 Discussion Dated: January 29[th] , 2024

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CHAR Technologies Ltd. — Management Reports 2024

47171_rns_2024-01-29_035cbad5-83ae-4e95-9d26-f06effd8aff1.pdf

TABLE OF CONTENTS

INTRODUCTION

OUR BUSINESS

A leading solution advancing green hydrogen and RNG

Working to advance the future of green steelmaking

Transitioning from a successful pilot to commercialization

Attracting investors and collaborators

Expanding Active Projects

Thorold, Ontario

Additional Project Pipeline

Lake Nipigon, Ontario

Kirkland Lake

Terrace, British Columbia

OPERATIONS

CORPORATE HIGHLIGHTS

Private placements

Stock option grants - Prog)

TRENDS

Selected Annual Financial Information

DISCUSSION OF OPERATIONS

CASH FLOW

LIQUIDITY AND FINANCIAL POSITION

COMMITMENTS

Yearly Minimum Rental Payments

LICENSE AGREEMENT & TERMINATION

TRANSACTIONS WITH RELATED PARTIES

Transactions with Related Parties Breakdown

Remuneration of Directors and Key Management

OUTSTANDING SHARE DATA

Total Securities

OFF-BALANCE SHEET ARRANGEMENTS

PROPOSED TRANSACTIONS

SUBSEQUENT EVENTS

CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Going concern

Deferred taxes

Useful lives of property and equipment and intangibles

Business combinations

Share-based payments

CAPITAL MANAGEMENT

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Risk management

Credit Risk

Market risk

Interest rate risk

Liquidity risk

Fair value

RISK FACTORS

Investment Risk

No History of Profits

Future Capital Requirements

Management of Growth

Limited Operating History

Reliance on Management

Additional Financing

Competition

Operating Risk and Insurance Coverage

Fluctuation of Market Price

Dividends

Limited Market for Securities

Environmental and Employee Health and Safety Regulations

CAUTION NOTE REGARDING FORWARD-LOOKING STATEMENTS

DISCLOSURE OF INTERNAL CONTROLS

HEAD OFFICE

CONTACT

More from CHAR Technologies Ltd.

CHAR Technologies Ltd. Management Reports 2024