Financial statements
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 1 - ion
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Char Technologies Ltd. The accompanying notes to the condensed interim consolidated financial statements are an integral part of these consolidated financial statements. - 1 - TABLE OF CONTENTS Condensed Interim Consolidated Statements Of Financial Position 1 Condensed Interim Consolidated Statements Of Loss & Comprehensive Loss 2 Condensed Interim Consolidated Statements Of Cash Flows 3 Condensed Interim Consolidated Statements Of Changes In Shareholders' Equity 4 1. Nature of Business and Going Concern 5 2. Material Accounting Policies 5 3. Accounts Receivable 19 4. Work in Progress and Deferred Revenue 19 5. Property and Equipment 20 6. Right-of-use Assets 24 7. Intangible Assets and Goodwill 25 8. Receivables from Related Party 27 9. Investment in Joint Venture (Thorold LP) 27 10. Accounts Payable and Accrued Liabilities 29 11. Loans Payable 30 12. Lease Liabilities 33 13. Share Capital 35 14. Stock Options, Restricted Share Units, and Share Appreciation Rights 37 15. Capital Management 39 16. Financial Instruments and Risk Management 40 17. Related Party Balances and Transactions 41 18. Assets Held for Sale 43 19. Subsequent Events 45
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Char Technologies Ltd. The accompanying notes to the condensed interim consolidated financial statements are an integral part of these consolidated financial statements. - 1 - CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in Canadian Dollars) As at June 30, As at September 30, 2026 2025 $ $ ASSETS Current assets Cash 441,809 453,685 Accounts receivable (note 3) 2,842,348 1,503,826 Work-in-progress (note 4) - - Prepaid expenses 229,730 129,995 Assets held for sale (note 18) - - Total current assets 3,513,887 2,087,506 Property and equipment (note 5) 3,463,115 2,144,776 Right-of-use assets (note 6) 193,425 503,648 Intangible assets (note 7) 656,413 821,521 Receivables from Related Party (note 8) 2,343,580 - Investment in joint venture (note 9) 2,510,179 3,329,395 Total assets 12,680,599 8,886,846 SHAREHOLDERS' EQUITY AND LIABILITIES Liabilities Accounts payable and accrued liabilities (notes 10 & 17) 2,256,455 2,433,302 Loans payable (note 11) 2,726,793 32,214 Lease liabilities (note 12) 92,585 326,515 Deferred revenue (note 4) 339,721 339,567 Liabilities directly associated with assets held for sale (note 18) - - Total current liabilities 5,415,554 3,131,598 Lease liabilities (note 12) 110,439 336,005 Loans payable (note 11) 36,758 181,981 Deferred grant income (note 5) 1,311,726 338,505 Total liabilities 6,874,477 3,988,089 Shareholders’ equity Share capital (note 13) 33,709,997 29,764,951 Share-based payment reserves (note 14) 10,257,437 8,832,868 Contributed surplus 53,744 53,744 Deficit (38,215,057) (33,752,806) Total shareholders' equity 5,806,122 4,898,757 Total shareholders' equity and liabilities 12,680,599 8,886,846 Nature of business & going concern (note 1); Subsequent events (note 19)
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Char Technologies Ltd. The accompanying notes to the condensed interim consolidated financial statements are an integral part of these consolidated financial statements. - 2 - CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS & COMPREHENSIVE LOSS (Expressed in Canadian Dollars) Three Months Ended June 30, Nine Months Ended June 30, 2026 2025 2026 2025 $ $ $ $ Revenue Engineering technology revenue 599,811 437,806 1,904,754 1,569,545 Total revenue 599,811 437,806 1,904,754 1,569,545 Cost of revenue (332,435) (386,489) (1,000,338) (1,182,377) Gross profit 267,376 51,316 904,417 387,168 Expenses Accretion and interest 59,332 82,975 210,284 263,104 Research and development 46,342 21,471 250,044 274,275 Professional fees 455,460 779,934 959,881 1,538,134 Consulting fees (note 17) 148,370 173,710 370,570 471,129 Office expenses 1,173,840 497,342 1,829,836 1,925,295 Regulatory and filing fees 13,535 21,915 76,251 67,572 Depreciation (note 5 and 6) 268,328 256,133 717,210 575,007 Amortization (note 7) 48,178 147,037 202,951 440,620 Share-based payments (note 14) 270,311 231,403 606,692 509,841 2,483,696 2,211,920 5,223,719 6,064,978 Loss from operations (2,216,320) (2,160,603) (4,266,885) (5,677,810) Interest income 75,979 141 90,200 656 Other income 1,268 5,747 1,268 9,941 Grant income (notes 5 and 11) 218,365 159,575 594,143 457,819 Loss from equity accounted investment (note 9) (159,038) - (828,559) - Net loss before income taxes (2,079,746) (1,995,140) (4,462,250) (5,209,394) Income tax recovery - - - - Net loss and comprehensive loss from continuing operations (2,079,746) (1,995,140) (4,462,250) (5,209,394) Net loss and comprehensive loss from discontinued operations (note 18) - (7,853) - (141,159) Net loss and comprehensive loss for the period (2,079,746) (2,002,994) (4,462,250) (5,350,554) Net loss per share- basic and diluted (0.01) (0.02) (0.03) (0.05) Net loss per share- basic and diluted from discontinued operations - (0.0001) - (0.001) Weighted average common shares outstanding – basic and diluted 136,480,796 114,273,861 136,480,796 114,273,861
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Char Technologies Ltd. The accompanying notes to the condensed interim consolidated financial statements are an integral part of these consolidated financial statements. - 3 - CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in Canadian Dollars) Nine Months Ended June 30, 2026 2025 $ $ Operating activities Net loss and comprehensive loss for the period (4,462,250) (5,350,554) Adjustments for: Loss from equity accounted investment (note 9) 939,661 - Share-based payments (note 14) 606,692 509,841 Depreciation (note 5 & 6) 717,211 784,776 Amortization (note 7) 202,951 229,971 Accretion and interest (note 10) 157,867 244,889 Grant income (594,143) (457,819) Net change in non-cash working capital Accounts receivable (note 3) (1,338,522) 969,156 Prepaid expenses (99,735) 24,011 Work-in-progress (note 4) - 297,195 Deferred revenue (note 4) (26,625) 94,699 Right of Use Assets 156,262 - Accounts payable and accrued liabilities (note 10) (176,847) (1,707,026) Net cash (used) in operating activities (3,812,643) (4,360,860) Investing activities Loans to related companies (2,584,470) - Proceeds from asset held for sale (note 18) - 270,842 Purchase of property and equipment (note 5) (1,881,590) (1,350,411) Purchase of intangible assets (note 6) (37,844) - Net cash (used) provided by investing activities (4,503,904) (1,079,569) Financing activities (Repayments) Proceeds of loans net of repayments 2,432,974 98,494 Proceeds from issuance of common shares and units, net of costs (note 13) 3,849,196 5,168,540 Proceeds from options exercised (note 14) - - Proceeds from issuance of unit warrants 913,727 - Lease payments (note 12) (485,369) (290,354) Grant Income 1,594,143 479,919 Net cash provided by financing activities 8,304,671 5,456,599 Net change in cash (11,876) 16,169 Cash, beginning of the period 453,685 948,689 Cash, end of the period 441,809 964,858 Assets held for sale (Note 18) The Company has elected to present a condensed consolidated statements of cash flows that includes an analysis of all cash flows in total – i.e. including both continuing and discontinued operations; amounts related to discontinued operations by operating, investin g and financing activities are disclosed in Note 18.
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Char Technologies Ltd. The accompanying notes to the condensed interim consolidated financial statements are an integral part of these consolidated financial statements. - 4 - CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Expressed in Canadian Dollars) Number of Shares Share Capital Amount Share-Based Payment Reserve Contributed Surplus Deficit Total $ $ $ $ $ Balance, September 30, 2024 101,401,064 24,619,524 8,273,764 53,744 (32,475,342) 471,690 Common shares/warrants issued for cash (note 13) 26,359,451 5,271,890 - - - 5,271,890 Share issuance costs (note 13) - (155,100) - - - (155,100) Issuance of warrants (note 13) - - - - - - Share-based payments (note 14) - - 509,840 - - 509,840 Exercise of stock options (note 14) 450,000 89,789 (38,039) - - 51,750 Exercise of Restricted Shares Units 745,124 310,580 (310,580) - - - Net and comprehensive loss for the period - - - - (5,350,554) (5,350,554) Balance, June 30, 2025 128,962,139 30,136,684 8,434,985 53,744 (37,825,896) 799,515 Balance, September 30, 2025 129,121,214 29,764,951 8,832,868 53,744 (33,752,807) 4,898,756 Common shares/warrants issued for cash (note 13) 21,605,585 4,095,335 913,727 - - 5,009,062 Share issuance costs (note 13) - (224,248) (21,892) - - (246,139) Share-based payments (note 14) - - 606,692 - - 606,692 Exercise of stock options (note 14) - - - - - - Exercise of Restricted Shares Units 264,136 73,958 (73,958) - - - Net and comprehensive loss for the period - - - - (4,462,250) (4,462,250) Balance, June 30, 2026 150,990,935 33,709,997 10,257,437 53,744 (38,215,057) 5,806,122
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 5 - 1. Nature of Business and Going Concern CHAR Technologies Ltd. (the “Company” or “CHAR Tech”) is a cleantech development company specializing in high-temperature pyrolysis, converting woody materials and organic waste into renewable gases (renewable natural gas and green hydrogen) and biocarbon (activated charcoal “SulfaCHAR” and biocoal “CleanFyre”). In October 2024, t he Company sold the operations related to environmental consulting services, including annual reporting, approvals, and compliance management, to focus on its core cleantech development. The Company is listed on the TSX Venture Exchange (the “Exchange”) trading under the symbol YES and on the Frankfurt Stock Exchange (the “FSE”) trading under the symbol 68K. The Company’s head office address is Morneau Shepell Centre II, 895 Don Mills Road, Suite 400, Toronto, Ontario, M3C 1W3. These condensed interim consolidated statements have been prepared on a going-concern basis, which contemplates that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. Accordingly, they do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and liquidate its liabilities and commitments in other than the normal course of business and at amounts different from those in the accompanying condensed interim consolidated statements. Such adjustments could be material. It is not possible to predict whether the Company will be able to raise adequate financing or to ultimately attain profitability of operations. These conditions indicate the existence of material uncertainties that may cause significant doubt about the Company’s ability to continue as a going concern. Changes in future conditions could require material write downs of the carrying values of assets. The Company has not yet realized profitable operations and has incurred significant losses to date resulting in a cumulative deficit of $38,215,057 as of June 30, 2026 (September 30, 2025 - $33,752,806). The recoverability of the carrying value of the assets and the Company’s continued existence is dependent upon the achievement of profitable operations, or the ability of the Company to raise alternative financing, if necessary. On August 27, 2026, the Board of Directors approved these condensed interim consolidated statements. 2. Material Accounting Policies (a) Statement of compliance These condensed interim consolidated financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting of the IFRS Accounting Standards as issued by the International Accounting Standards Board (“IASB”). These interim financial statements comply with IFRS Accounting Standards applicable to interim financial reporting. The accounting policies used in the preparation of these consolidated financial statements are the same accounting polic ies used in the preparation of the consolidated financial statements for the most recent year-end of September 30, 2025. They do not include all of the information which is required in annual financial statements in accordance with IFRS Accounting Standards, and should be read in conjunction with the consolidated financial statements for the year ended September 30, 2025. (b) Basis of consolidation These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries. A subsidiary is an entity over which the Company has control, where control indicates exposure or rights to variable returns and the ability to affect those returns through power to direct the activities of the investee. Subsidiaries are consolidated from the date on which control is obtained by the
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 6 - 2. Material Accounting Policies (continued) (b) Basis of consolidation (continued) Company and are deconsolidated from the date on which control ceases. Inter-company transactions, balances and unrealized gains on transactions between entities are eliminated. The condensed interim consolidated financial statements of CHAR Technologies Ltd. and its wholly owned subsidiaries, Char Biocarbon Inc., Chartech Services Inc. (formerly known as Altech Environmental Consulting Ltd.), CHAR Technologies Thorold Inc., CHAR Technologies Research Inc., Services Chartech (Quebec) Inc., and CHAR Technologies USA, LLC, are consolidated from the date that control commences until the date that control ceases. (c) Derecognition of Assets and Liabilities The Company derecognizes assets and liabilities when control over the specific assets is transferred, in accordance with the terms of the transaction. This does not constitute a loss of control of a subsidiary. (d) Equity-accounted joint venture An equity-accounted investee is an associate or joint venture over which the Company has significant influence or joint control but not control. The Company’s equity -accounted investee relates to a joint venture. Investments in these investees are accounted for using the equity method of accounting in accordance with IAS 28 as the Company’s equity ownership ranges from 20% to 50%. Under the equity method of accounting, the investments are initially recognized at cost . The investment is increased for any additional capital contributions and reduced by any dividends received (there have been none to date). In addition, the investment is adjusted to recognize the Company’s share of the investee’s profits or losses and the investee’s other comprehensive income. In the event the Company’s share of losses in the joint venture exceeds the Company’s interest in that joint venture, the Company discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Company has incurred leg al or constructive obligations or made payments on behalf of the joint venture. If the joint venture subsequently reports a profit, the Company resumes recognizing its share of those profits only after its share of the profits equals the share of losses not recognized. No such events occurred during the period. When the Company transacts with a joint venture, profits or losses resulting from the transactions with the joint venture are recognized in the Company’s condensed interim consolidated financial statements only to the extent of interests in the joint venture that are not related to the Company. When the Company contributes a group of assets and related liabilities to a joint venture, the Company derecognizes the carrying amounts of the assets and liabilities transferred and recognizes an investment in the joint venture at the carrying amount of the net assets which is subsequently adjusted for the gain or loss of the unrelated investor’s interest in the joint venture based on the fair value of the consideration paid by the unrelated investor’s interest in joint venture. When the Company ceases to consolidate or equity account for an investment because of a loss of control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognized in net income. This fair value becomes the initial carrying amount for the purposes of subsequent accounting for the retained interest as an associate, joint venture or financial asset. No such remeasurements occurred during the period.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 7 - 2. Material Accounting Policies (continued) (e) Property and equipment Property and equipment are carried at historical cost less accumulated depreciation and any accumulated impairment losses. Each component of an item of property and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. Maintenance and repair expenditures that do not improve or extend life are expensed in the period incurred. Depreciation is recognized so as to write off the cost or valuation of assets (other than land) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each year, with the effect of any changes in estimate accounted for on a prospective basis. No depreciation is recognized for property and equipment until it is completed and ready for intended use. An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. When property and equipment are contributed together with directly associated liabilities as part of a net asset transfer, the gain or loss on derecognition is determined based on the difference between the consideration received and the net carrying amount of the assets and liabilities transferred. Any resulting gain or loss is recognized in condensed interim consolidated statements of loss and comprehensive loss , subject to limitation or elimination as required by other applicable accounting standards, including IAS 28 when the transaction involves an equity - accounted investee. Estimated useful lives for the principal asset categories are as follows: Computer equipment 3 years Production equipment 5 years Pilot Kiln 5 years Leasehold improvements Amortized over the term of the lease (f) Goodwill Goodwill represents the excess of the price paid for the acquisition of an entity over the fair value of the net identifiable tangible and intangible assets and liabilities acquired. Goodwill is measured at historical cost and is evaluated for impairment annually or more often if events or circumstances indicate there may be an impairment. Impairment is determined for goodwill by assessing if the carrying value of cash generating units (“CGUs”) which comprise the CGU segment, including goodwill, exceeds its recoverable amount determined as the greater of the estimated fair value less costs to sell and the value in use. Impairment losses recognized in respect of the CGUs are first allocated to the carrying value of goodwill and any excess is allocated to the carrying amount of assets in the CGUs. Any goodwill impairment is recognized in condensed interim consolidated statements of loss and comprehensive loss in the reporting period in which the impairment is identified. Impairment losses on goodwill are not subsequently reversed.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 8 - 2. Material Accounting Policies (continued) (g) Intangible assets Intangible assets with finite lives that are acquired separately are measured on initial recognition at cost, which comprises its purchase price plus any directly attributable costs of preparing the asset for its intended use. Following initial recognition, such intangible assets are carried at cost less any impairment losses and accumulated amortization on a straight-line basis over the estimated useful life. The estimated useful life and amortization methods are reviewed annually, with the effect of any change in estimate being accounted for on a prospective basis. The estimated useful lives of the intangible assets are as follows: Purchased technology 10 years Patents 10 years Technology license 3 years Purchased technology (SLO) 5 years (h) Impairment of tangible and intangible assets At the end of each reporting period, the Company reviews the carrying amounts of its tangible and definite life intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in condensed interim consolidated statements of loss and comprehensive loss. For purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generate cash flows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (CGU). At each reporting date, management assesses whether there is an indication that a previously recognized impairment loss has reversed, and accordingly whether the impairment loss should be reversed. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre -tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash -generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized (generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 9 - 2. Material Accounting Policies (continued) (h) Impairment of tangible and intangible assets (continued) If an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately (generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately. Goodwill is tested for impairment annually at year-end and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU to which the goodwill relates. Where the recoverable amount of the segment is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods. (i) Financial instruments The following table summarizes the classification and measurement under IFRS 9 for each financial instrument: Classification IFRS 9 Cash FVTPL Amounts receivable Amortized cost Accounts payable Amortized cost Loans payable Amortized cost i. Classification The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument -by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 10 - 2. Material Accounting Policies (continued) (i) Financial instruments (continued) ii. Measurement Financial assets and liabilities at amortized cost - Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment. - Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment. Financial assets and liabilities at FVTPL - Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the condensed interim consolidated statements of net (loss) income. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the condensed interim consolidated statements of loss and comprehensive loss in the year in which they arise. iii. Impairment of financial assets at amortized cost The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial assets have not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company recognizes in the consolidated statements of loss and comprehensive loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized. Financial assets, other than those classified at FVTPL, are assessed for indicators of impairment at each period end. Financial assets are impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. Objective evidence of impairment could include the following: • significant financial difficulty of the issuer or counterparty. • default or delinquency in interest or principal payments; or • it has become probable that the borrower will enter bankruptcy or financial reorganization. For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of the estimated future cash flows, discounted at the financial asset’s original effective interest rate. The carrying amount of all financial assets is directly reduced by the impairment loss. Changes in the carrying amount of the allowance account are recognized in condensed interim consolidated statements of loss and comprehensive loss.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 11 - 2. Material Accounting Policies (continued) (i) Financial instruments (continued) iv. Derecognition Financial assets - The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the condensed interim consolidated statements of loss and comprehensive loss. Financial liabilities - A financial liability is derecognized when the obligation specified in the contract is discharged, cancelled or expired. (j) Revenue from Contracts and Customers (“IFRS 15”) The Company derives revenues from the delivery of engineering services and technology. When the Company earns revenue from engineering services before issuing an invoice, it acknowledges this income as work in progress. This is reported on the Company’s condensed interim consolidated statements of financial position as costs and estimated profits exceeding billings. The work-in progress is transferred to trade receivables when the invoice is issued indicating that the entitlement to payment has become unconditional. If payments are received from the customer prior to the rendering of services, the Company recognizes deferred revenue. The deferred revenue is transferred to revenues once related services have been rendered. If services are rendered and the invoices have not been issued to a customer, the Company recognizes work in progress. Revenues from engineering technology services are measured based on the consideration specified in a contract with a customer. The Company typically recognizes revenues over time, using an input measure, as it fulfills its performance obligations in line with contracted terms. Engineering revenues from cost-plus contracts with ceilings and from fixed-price contracts are recognized progressively based on a percentage -of-completion method, which is calculated on the ratio of contract costs incurred to total anticipated costs. A performance obligation is a promise in the contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenues when, or as, the performance obliga tion is satisfied. The Company’s contracts have a single performance obligation as the promise to transfer individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. Any modifications or variations to contracts in progress are assessed to determine if they fall under the scope of the existing contract performance obligation or form part of a new performance obligation.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 12 - 2. Material Accounting Policies (continued) (j) Revenue from Contracts and Customers (“IFRS 15”) (continued) Certain service arrangements, including operations and maintenance services provided under management agreements, are billed on a time -and-materials basis. Under these arrangements, revenue consists of reimbursable employee and consultant labour costs incurred, together with a contractual management fee, where applicable. Revenue from time-and-materials contracts is recognized over time, using an input method based on actual labour hours and costs incurred, as this method faithfully depicts the Company’s performance in transferring services to the customer. Certain other out-of-pocket expenses which are obligations of the customer to third-party are incurred on behalf of the customer and reimbursed at cost, without margin, do not represent services controlled by the Company and are accounted for as pass -through reimbursements. These amounts are excluded from revenue and presented net against the related expense accounts. (k) Cost of sale recognition Cost of sales is recognized in alignment with the Company's revenue recognition policies for engineering and technology services. Direct costs, including labor, materials, and sub -consultants, are recognized in the period in which the related services are rendered, following the percentage -of-completion method for cost-plus and fixed-price contracts. Overhead costs are recognized on an accrual basis, aligned with the performance obligations under the contract. For contracts where costs are incurred but not immediately recognized as expenses, these costs are included in work in progress or deferred revenue, depending on the stage of the contract. Certain costs incurred by the Company for subcontractors and other expenses that are recoverable directly from customers are billed to them and included in revenue. The effect of revisions to estimate revenues and costs, including the impact of any modifications or variations to contracts in progress, is recorded when the amounts are known and can be reasonably estimated. These revisions can occur at any time and may be significant. If total contract costs exceed total contract revenues, the expected loss is recognized immediately through a provision for losses to completion, impacting on the cost of sales. (l) Share-based payments The Company accounts for all share-based payments awarded to directors and officers and non- employees using the fair value method. For employees, cost is measured at the grant date at fair value using the Black Scholes Option Pricing Model that takes into account the exercise price, the expected life of the option, the current price of the underlying stock, the expected volatility, the expected -based payments awarded to directors and officers and non -employees using the fair value method. For employees, cost is measured at the grant date at fair value using the Black-Scholes Option-Pricing Model that takes into account the exercise price, the expected life of the option, the current price of the underlying stock, the expected volatility, the expected dividends and the risk-free interest rate for the expected term of the option. For non -employees, the fair value of each tranche of options issued is determined by the fair value of goods and services received.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 13 - 2. Material Accounting Policies (continued) (l) Share-based payments (continued) If the fair value of such goods and services cannot be reliably measured, an option pricing model will be utilized. The compensation cost will be expensed in the condensed interim consolidated statements of loss and comprehensive loss over the vesting period for directors and officers and over the performance period for awards provided to non-employees in exchange for goods and services. (m) Share-based payment reserve The share-based payment reserve records items recognized as stock-based compensation expense and other share-based payments until such time that the stock options or warrants are exercised, at which time the corresponding amount will be transferred to share capital. (n) Government grants Government grants are not recognized until there is reasonable assurance that they will be received and that the Company will be in compliance with any conditions associated with the grant. Grants that compensate the Company for expenses are recognized in the condensed interim consolidated statements of loss and comprehensive loss separately from loss from operation and in the same period in which the expense is recognized. Grants related to assets are presented as deferred income and recognized in the condensed interim consolidated statements of loss and comprehensive loss on a systematic basis over the useful life of the asset. (o) Earnings or Loss per Share Basic earnings (loss) per share is calculated using the weighted average number of common shares outstanding during the period. The dilutive effect on earnings per share is calculated presuming the exercise of outstanding options, warrants and similar inst ruments. It assumes that the proceeds of such exercise would be used to repurchase common shares at the average market price during the period. However, the calculation of diluted loss per share excludes the effects of various conversions and exercise of options and warrants that would be anti-dilutive. (p) Income taxes Income tax comprises current and deferred tax. Income tax is recognized in the condensed interim consolidated statements of loss and comprehensive loss except to the extent that it relates to items recognized directly in equity or other comprehensive income, in which case the income tax is also recognized directly in equity or other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years. Current tax assets and current tax liabilities are only offset if a legally enforceable right exists to offset the amounts and the Company intends to settle on a net basis, or to realize the asset and settle the liability simultaneously.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 14 - 2. Material Accounting Policies (continued) (p) Income taxes (continued) Deferred tax is recognized in respect of all qualifying temporary differences arising between the tax basis of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted at the end of the reporting period and are expected to apply when the deferred tax asset or liability is settled. Deferred tax assets are recognized to the extent that it is probable that t he assets can be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Deferred tax assets are recognized to the extent future recovery is probable. At each reporting period end, deferred tax assets are reduced to the extent that it is no longer probable that sufficient taxable earnings will be available to allow all or part of the asset to be recovered. (q) Foreign currency transactions The functional currency of the Company and its subsidiaries is the Canadian dollar. The condensed interim consolidated statements are presented in Canadian dollars which is the Company’s presentation currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transaction or valuation where items are re -measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year -end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in condensed interim consolidated statements of loss and comprehensive loss. (r) Leases • Leases are accounted for by recognizing a right-of-use asset and a lease liability, except for: • Leases of low value assets; and • Leases with a duration of twelve months or less. Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by the incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease paymen ts are expensed in the period to which they relate. On initial recognition, the carrying value of the lease liability also includes: • Amounts expected to be payable under any residual value guarantee. • The exercise price of any purchase option granted if it is reasonably certain to assess that option; and • Any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 15 - 2. Material Accounting Policies (continued) (r) Leases (continued) Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:-: • Lease payments made at or before commencement of the lease. • Initial direct costs incurred; and • The amount of any provision recognized where the Company is contractually required to dismantle, remove or restore the leased asset. Lease liabilities, on initial measurement, increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortized on a straight-line basis over the term of the lease or over the remaining economic life of the asset if this is judged to be shorter than the lease term. Right-of-use assets When the Company revises its estimate of the term of any lease, it adjusts the carrying amount of the lease liability to reflect the payments to be made over the revised term, which are discounted at the same discount rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revis ed. In both cases an equivalent adjustment is made to the carrying value of the right -of-use asset, with the revised carrying amount being amortized over the remaining (revised) lease term. When the Company reassesses the lease term due to a change in facts and circumstances that is within the Company’s control and affects whether the Company is reasonably certain to exercise a renewal or termination option, the lease liability is remeasured to reflect the revised lease payments over the revised lease term, discounted using a revised incremental borrowing rate determined at the date of reassessment. The corresponding adjustment is recognized against the carrying amount of the right-of-use asset. (s) Assets Held for Sale and Discontinued Operations Non-current assets (or disposal group) are classified as held for sale if their carrying amount is recovered principally through a sale transaction rather than through continuing use. This classification requires: • Commitment to Sell: Management must be committed to a plan to sell the asset (or disposal group). • Available for Immediate Sale: The asset (or disposal group) must be available for sale in its present condition, subject only to terms that are usual and customary. • Highly Probable Sale: The completion of the sale should be highly probable within one year from the date of classification. Once classified as held for sale, the non-current assets (or disposal group) are measured at the lower of their carrying amount and fair value less costs to sell. No further depreciation or amortization is recorded once an asset is classified as held for s ale. Any subsequent decrease to fair value less costs to sell is recognized as an impairment loss in condensed interim consolidated statements of loss and comprehensive loss. If the fair value less costs to sell increases after classification, a gain is recognized— but only to the extent of reversing previously recognized impairment losses (i.e., not exceeding the carrying amount that would have been determined had no impairment been recognized).
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 16 - 2. Material Accounting Policies (continued) (s) Assets Held for Sale and Discontinued Operations (continued) Assets classified as held for sale are presented separately under “Assets Held for Sale” in the condensed interim consolidated statements of financial position. Similarly, any liabilities directly associated with those assets are presented as “Liabilities Directly Associated with Assets Held for Sale.” There are no Assets Held for Sale in Fiscal 2026. Where the disposal group represents a separate major line of business of operations, it is also classified as a discontinued operation in the condensed interim consolidated statements of loss and comprehensive loss. The results of discontinued operations are presented separately from continuing operations to enhance the comparability of financial performance. (t) Future Accounting Pronouncements Future accounting pronouncements issued by the IASB but not yet effective for the Company include amendments to IFRS 9 and IFRS 7, effective for annual periods beginning on or after January 1, 2026, which provide updated guidance on the classification and measurement of financial instruments and introduce additional disclosure requirements. The IASB has also issued IFRS 18, effective for annual periods beginning on or after January 1, 2027, which replaces IAS 1 and introduces revised presentation and disclosure requirements. The Company is evaluating these amendments and does not expect them to have a material impact on recognition or measurement, although presentation and disclosure changes are anticipated. The Company is also monitoring the development of IFRS S1 and IFRS S2 for sustainability-related disclosures, which are not yet mandatory in Canada. (u) Critical accounting judgments and key sources of estimation uncertainty The preparation of these condensed interim consolidated 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 resul ts 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:
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 17 - 2. Material Accounting Policies (continued) (u) Critical accounting judgments and key sources of estimation uncertainty (continued) Going concern As discussed in note 1, these condensed interim consolidated statements have been prepared in accordance with IFRS on a going concern basis, which assumes the realization of assets and discharge of liabilities in the normal course of business within the foreseeable future. Management uses judgment in determining assumptions for cash flow projections, such as anticipated financing, anticipated sales and future commitments to assess the Company’s ability to continue as a going concern. A critical judgment is that the Company continues to raise funds going forward and satisfy their obligations as they become due. Work in Progress (WIP) and Percentage of Completion The Company applies the percentage -of-completion method to recognize revenue from engineering contracts. This method relies on estimates of contract budgets, progress, and costs incurred. The calculation of WIP requires significant judgment and estimation by management. WIP reflects the portion of the contract price earned to date, less amounts billed, based on the percentage of completion method. The percentage of completion is determined by using an input measure, typically the ratio of contract costs incurred to total estimated costs. The total estimated costs to complete a contract are subject to management’s judgment, considering factors such as changes in project scope, unforeseen costs, and the accuracy of labor and material tracking. These estimates are regularly reviewed and updated as the project progresses. Adjustments to WIP are recognized in the period when the estimates are revised, which may significantly impact the timing and amount of revenue and cost recognition. WIP is considered a critical estimate because changes in contract budgets or progress assessments can lead to material adjustments in revenue, costs, and the financial position of the Company. Useful lives of property and equipment and intangibles The Company reviews the estimated useful lives of property and equipment and intangibles with finite useful lives at the end of each year and assesses whether the useful lives of certain items should be shortened or extended, due to various factors includi ng technology, competition and revised service offering. During the Nine Months Ended June 30, 2026, the Company was not required to adjust the useful lives of any assets based on the factors described above. Lease term judgment Determining the lease term requires judgment in assessing whether the Company is reasonably certain to exercise renewal options.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 18 - 2. Material Accounting Policies (continued) (u) Critical accounting judgments and key sources of estimation uncertainty (continued) Share-based payments The Company estimates the fair value of warrants and options using the Black -Scholes Option Pricing Model which requires significant estimation around assumptions and inputs such as expected term to maturity, expected volatility and expected dividends. Discontinued Operations Management exercises significant judgment when determining whether an operation qualifies for classification as a discontinued operation and how the comparative information should be presented in the condensed interim consolidated statements . In evaluating the requirements under IFRS 5, Non -current Assets Held for Sale and Discontinued Operations, the Company concluded it was appropriate to classify the operation as discontinued (note 18). Impairment testing goodwill The Company performs annual impairment tests for impairment of goodwill at the end of each fiscal year or when events occur or circumstances change that would, more likely than not, indicate an impairment loss is present. Key assumptions in the impairment assessment include underlying recoverable amounts of respective CGUs, the discount rates applied, future growth rates and forecast cash flows (note 7). Income taxes Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that at some future date an additional liability could result from audits by taxing authorities. Where the final outcome of these tax ‑related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made. Joint Arrangements and Joint Ventures The Company assesses all contractual arrangements to determine whether they give rise to joint control, which exists when decisions about the relevant activities require the unanimous consent of the parties sharing control. Joint arrangements are classified as either joint operations or joint ventures depending on the rights and obligations arising from the arrangement. There is a judgment required to make the determination of whether an arrangement is a joint venture or a joint operation in accordance with IFRS 11. A joint operation exists when the Company has direct rights to the assets and obligations for the liabilities of the arrangement. A joint venture exists when the Company has rights only to the net assets of the arrangement. In making this determination, management considers the legal form of the arrangement, the terms of the contractual agreements, and other facts and circumstances that indicate whether the parties share rights to assets or to net assets.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 19 - 3. Accounts Receivable As at June 30, As at September 30, 2026 2025 $ $ Trade Receivables net of allowances 2,160,129 973,790 Government grants receivable 122,725 149,505 HST/QST receivable 117,824 44,507 Loans receivable from related parties (note 17) 441,670 336,024 Total amounts receivable 2,842,348 1,503,826 An amount of $493,818 related to a government grant receivable, representing a holdback under the Investments in Forest Industry Transformation (“IFIT”) program, was assigned and contributed to the Thorold LP as part of the contribution of Thorold project assets (see Note 8). Accordingly, this amount has been derecognized from accounts receivable as at July 10, 2025. Loans receivable from related parties consist of loans extended by the Company to one officer, including accrued interest, totaling $341,670 (2025: $336, 024), payable on demand at a rate of 2.45% (note 17). While the loan accrues interest, no new principal has been extended. In June 2026, the Company extended a non -interest-bearing demand loan of $100,000 to Char Bioveld Thorold LP to support short-term liquidity needs, no interest was charged or accrued on the transaction. The table below is a summary of the loans extended to the officers of the Company: As at June 30, As at September 30, 2026 2025 $ $ Andrew White (CEO) 341,670 336,024 Char Bioveld Thorold LP 100,000 - Total 441,670 336,024 4. Work in Progress and Deferred Revenue The Company records the work in progress (WIP) related to unbilled work from contracts referring to the value of services performed, or products developed under a contract that has not yet been billed to the client. This can include partially completed wor k or fully completed work awaiting the invoicing process. The balance recognized related to unbilled work is $nil as of June 30, 2026 (September 30, 2025: $nil). Deferred revenue represents amounts received or invoiced in advance for services or goods that have not yet been delivered or fully earned as of the reporting date. The Company records deferred revenue when cash payments are received from customers before the satisfaction of performance obligations. As of June 30, 2026, the Company had deferred revenue of $339,721 (September 30, 2025: $339,567).
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 20 - 5. Property and Equipment Computer Production Pilot Leasehold Construction Assets held Cost Equipment Equipment Kiln Improvements in progress Total for sale Balance, September 30, 2024 $87,378 $512,244 $4,203,980 $55,216 $6,499,851 $11,358,669 $7,319 Additions - 110 5,079 - 1,098,340 1,103,529 - Reclassification - 167,484 - - (167,484) - - Disposal (1,343) - - - (34,582) (35,925) (7,319) Contribution of assets to joint venture (note 8) - - - - (7,391,990) (7,391,990) - Balance, September 30, 2025 $86,035 $679,838 $4,209,059 $55,216 $4,135 $5,034,283 $- Additions 17,785 1,867,941 - - - 1,885,726 - Reclassification - - - - - - - Disposal - - - - - - - Contribution of assets to joint venture (note 8) - - - - (4,135) (4,135) - Balance, June 30, 2026 $103,820 $2,547,778 $4,209,059 $55,216 $- $6,915,873 $- Accumulated Computer Production Pilot Leasehold Construction Assets held depreciation Equipment Equipment Kiln Improvements in progress Total for sale Balance, September 30, 2024 $58,797 $209,779 $1,851,266 $34,215 $- $2,154,057 $5,855 Additions 17,010 211,159 504,137 7,637 - 739,943 95 Disposal (746) - - - - (746) (5,950) Reclassification - (3,747) - - 3,747 - - Contribution of assets to joint venture (note 8) - - - - (3,747) (3,747) - Balance, September 30, 2025 $75,061 $417,191 $2,355,403 $41,852 - $2,889,507 $- Additions 8,043 170,616 378,865 5,727 - 563,251 - Disposal - - - - - - - Reclassification - - - - - - - Contribution of assets to joint venture (note 8) - - - - - - - Balance, June 30, 2026 $83,104 $587,807 $2,734,268 $47,579 $- $3,452,758 $- Net book Computer Production Pilot Leasehold Construction Assets held value Equipment Equipment Kiln Improvements in progress Total for sale Balance, September 30, 2025 $10,974 $262,647 $1,853,656 $13,364 $4,135 $2,144,776 $- Balance, June 30, 2026 $20,716 $1,959,972 $1,474,790 $7,637 $- $3,463,115 $- Asset Acquisition On April 17, 2026, Services CharTech ( Québec) Inc., a wholly owned subsidiary of the Company, completed the acquisition of certain business assets and operations of Elkem Metal Canada Inc. in connection with the establishment of the Company’s Saguenay, Quebec operations. The acquired assets are primarily comprised of equipment and related operational assets. The transaction also included the assumption of certain employee benefit obligations and lease payment obligations. Certain permits and licences associated with the operations are being transferred or re-registered under the name of Services CharTech (Quebec) Inc.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 21 - 5. Property and Equipment (continued) The total acquisition cost of $1,842,980 was determined as follows: Description $ CAD Cash purchase price 1,372,000 Employee benefit obligations assumed 308,507 Assumed lease payment obligations 13,404 Directly attributable acquisition costs, including legal fees 149,070 Total acquisition cost 1,842,980 Management determined that the acquired assets and activities do not constitute a business as defined in IFRS 3, Business Combinations. Accordingly, the transaction has been accounted for as an asset acquisition under IAS 16 with the total acquisition cost allocated to the acquired equipment and other identifiable assets based on their relative fair values. The acquisition cost was allocated to the identifiable assets acquired based on their relative fair values. No goodwill or bargain purchase gain was recognized in connection with the transaction. Government grants Natural Gas Innovation Fund (“NGIF”) On September 22, 2021, the Company entered into a contribution agreement with NGIF, where NGIF will be providing $300,000 in non-repayable grant funding towards the installation of a renewable natural gas (“RNG”) production system at CHAR Tech’s Thorold site. The grant includes a 10% holdback to be disbursed on project completion, with the remaining funds being disbursed at the commencement of each of three milestones. The milestones are as follows: Milestone 1: Detailed Engineering Design. This milestone was completed in December 2023. Milestone 2: Fabrication and Commissioning. This milestone is in progress. Milestone 3: Validation. This milestone has not yet begun. The grant receivable includes a 10% holdback for the initial $90,000 advance, (30% of total NGIF contribution) invoiced during the year ended September 30, 2022, and on the $120,000 Milestone 1 payment (40% of total NGIF contribution) invoiced during the y ear ended September 30, 2024, while $108,000 of the funds received is recognized as deferred grant income. Forest Industry Transformation (“IFIT”) On November 8, 2022, the Company signed a non-refundable contribution agreement with the Department of Natural Resources, under the Investments in IFIT program. During the fiscal year ended September 30, 2023, the Company received two tranches of funding as part of the program: one amounting to $2,254,595 and another totaling $2,189,755. The IFIT program provides funding assistance for eligible production plant costs up to a maximum amount of $4,938,168, inclusive of a 10% holdback. During the year ended September 30, 2025, as part of the Company’s contribution of Thorold assets and related liabilities to the Thorold LP (note 8), the Company performed an assessment of the remaining IFIT deferred grant balance under IAS 20 and IAS 37. As part of the contribution transaction, the IFIT contribution agreement was assigned to Thorold LP. Upon transfer of the underlying assets and assignment of the IFIT agreement, the Company ceased to control the assets and no longer retained a present obligation or liability associated with the IFIT funding. Accordingly, the deferred IFIT grant balance was derecognized and included as part of the net assets and liabilities contributed to the joint venture.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 22 - 5. Property and Equipment (continued) Government grants (continued) Natural Resources Canada’s Clean Fuels Fund On March 8, 2024, CHAR Technologies was approved for $6,651,242 in grant funding from Natural Resources Canada's Clean Fuels Fund to support the expansion and replication of its Thorold facility across five new sites in Canada. The funds are disbursed based on a structured claim process during the next 3 years that ensure funding disbursement aligns with project milestones and compliance with government oversight. In addition, the Company participates as a co-proponent with Walker Environmental Group Inc. (“Walker”) under a separate Clean Fuels Fund project, which was approved as a collaborative feasibility study. Although Walker is the signatory and administrator of the contribution agreement, CHAR contributes eligible in-kind technical services and accounts for its share of the funding as government grant income in accordance with IAS 20, recognizing grant revenue as the related project costs are incurred. During the Nine Months ended June 30, 2026, a total of $ 521,388 (2025: $217,579) grant income has been recognized on th e condensed interim consolidated statements of loss and comprehensive loss for claims submitted through September 2025. Grant receivable includes the 10% holdback $ 101,726 for the total claims approved by NRCan until the end of June 30, 2025. During the year ended September 30, 2024, CHAR Technologies received $75,000 in grant revenue from the National Research Council of Canada’s Industrial Research Assistance Program (NRC IRAP). This funding supports the Company’s innovation and research and development initiatives, enhancing its financial stability and reinforcing its commitment to advancing sustainable technologies in Canada’s clean energy sector. The grant was recognized on the condensed interim consolidated statements of loss and comprehensive loss as of September 30, 2024. Innovation Bois Program During the period ended June 30, 2026, the Company received $1,000,000 in grant funding from the Innovation Bois program. This funding supports pre-commercial technological innovation and greenhouse gas (GHG) reduction milestones at the Company's project facilities. The amount is recorded under deferred grant income. Forest Biomass Program On November 30, 2025, the Thorold LP signed a non-refundable contribution agreement with the Ontario Ministry of Natural Resources , under the Forest Biomass Program (“FBM program”). The FBM program provides up to $2 ,259,142 in non -refundable grant contributions to accelerate and optimize the commercialization of biocoal from wood waste. During the period ended June 30, 2026, the Company received $174,481 in grant funding from the FBM program, representing reimbursement of 49.9% of direct costs incurred in support of the program’s project activities. The following are the list of Deferred Grants Income as of June 30, 2026, and September 30, 2025:
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 23 - 5. Property and Equipment (continued) Government grants (continued) Deferred Grant Income As at As at 30-Jun-26 30-Sep-25 $ $ Advance received from NGIF 189,000 189,000 NGIF 10% holdback (note 3) 21,000 21,000 Grant Income from Innovation Bois 1,000,000 - CFF holdback (note 3) 101,726 128,505 Total Deferred Grant Income 1,311,726 338,505 Less current portion - - Long-term portion 1,311,726 338,505 The following is the list of Grants recognized as Income as of June 30, 2026, and September 30, 2025: Amount Recognised as Grant Income As at As at 30-Jun-26 30-Sep-25 $ $ Grant received from SDTC 768,750 768,750 Grant received from OCE 1,000,000 1,000,000 Grant received from LCIF 903,027 903,027 Grant Income from IRAP 75,000 75,000 Grant Income from FedDev 391,262 391,262 Grant Income from Forest Biomass 174,481 - Grant received from CFF. NRCan 2,630,738 2,211,082 IFIT program - 4,444,350 IFIT 10% holdback (note 3) - 493,818 Contribution of IFIT grant to joint venture (note 8) - (4,938,168) Total Accumulated Recognized Grant Income 5,943,258 5,349,121 Construction in progress Prior to the formation of the Thorold LP, CHAR Tech’s Thorold renewable energy facility was under active construction, with total assets under construction of carrying value of $7,391,990 recorded as at July 9, 2025. The project included engineering design, process equipment, pelletization system upgrades, site preparation, and commissioning-related construction expenditures. On July 10, 2025, CHAR Technologies Thorold Inc. contributed these assets under construction to the limited partnership, in exchange for a 50% interest in the limited partnership units (note 8) . Following this contribution, the Company ceased recognizing further additions related to the Thorold construction project in its consolidated financial statements and recognizes the investment as in the Thorold LP using the equity method. The Company is party to a High Temperature Pyrolysis (“HTP”) system acquisition and operation contract with Kompogas SLO LLC (“SLO”), a subsidiary of Kanadevia EN (formerly known as “HZI”), entered into on July 21, 2021. Under the contract, the Company is to design, construct and commission a HTP system for processing anaerobic digestate into green hydrogen and biocarbon at SLO’s facility in San Luis Obispo, California, and provide related technical and commercial services, including arranging of hydrogen and biocarbon offtake agreements. The HTP system will be owned by the Company and operated at SLO for a term of 5 years from the date of acceptance at an annual rent of USD $1. SLO has an option to purchase
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 24 - 5. Property and Equipment (continued) Construction in progress (continued) a term of 5 years from the date of acceptance at an annual rent of USD $1. SLO has an option to purchase the HTP system at any time after the first year of operation . If the purchase option is exercised, the Company is required to assign the hydrogen and biochar offtake agreements to SLO and continue to market the hydrogen and biocarbon on a commission basis. As part of its financial review for the year ended September 30, 2024, CHAR Technologies Ltd. reassessed the classification and valuation of costs associated with its HZI SLO project. This project was the Company’s first large-scale high-temperature pyrolysis (HTP)-to-hydrogen initiative, designed under a Build-Own-Operate-Transfer (BOOT) model. The project was set on hold due to unresolved permitting and strategic deployment issues. There are no updates to this project as at June 30, 2026. The Company had capitalized $1,947,317 under "Assets Under Construction" within Property, Plant, and Equipment (PP&E) as of September 30, 2024. Due to delays in physical deployment and limited future applicability of certain project -specific expenditures, the Company determined that $1,019,377 of these costs should be impaired as of September 30, 2024. The impaired amount primarily pertain ed to project- specific costs related to site preparation, early -phase designs, and expenditures that lack scalability or relevance to future projects. The amount was recorded under impairment of property, plant and equipment on the condensed interim consolidated statements of loss and comprehensive loss. The remaining balance of $927,939 was reclassified as intangible assets as of September 30, 2024. These costs are related to the development of intellectual property (IP), including engineering designs, modular fabrication drawings, process flow diagrams (PFDs), and control system narratives. The reclassification align ed with the recognition of intangible assets. 6. Right-of-use Assets Office space Cost Vehicles Equipment and land Total Balance, September 30, 2024 $166,388 $258,919 $1,590,290 $2,015,597 Additions - 77,412 - 77,412 Remeasurement - - (681,778) (681,778) Contribution of assets to joint venture (note 8) - (77,412) - (77,412) Balance, September 30, 2025 $166,388 $258,919 $908,512 $1,333,819 Additions - - - - Derecognized - - (271,059) (271,059) Balance, June 30, 2026 $166,388 $258,919 $637,453 $1,062,760 Office space Accumulated depreciation Vehicles Equipment and land Total Balance, September 30, 2024 $107,839 $39,015 $430,642 $577,496 Additions 20,354 61,915 189,759 272,028 Contribution of assets to joint venture (note 8) - (19,353) - (19,353) Balance, September 30, 2025 $128,193 $81,577 $620,401 $830,171 Additions 15,266 31,921 106,773 153,960 Derecognized - - (114,798) (114,798) Balance, June 30, 2026 $143,459 $113,498 $612,377 $869,334 Office space Net book value Vehicles Equipment and land Total Balance, September 30, 2025 $38,195 $177,343 $288,110 $503,648 Balance, June 30, 2026 $22,929 $145,421 $25,076 $193,426
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 25 - 6. Right-of-use Assets (continued) During the year ended September 30, 2025, the Company reassessed the lease term associated with its Thorold production facility following a change in facts and circumstances, including the execution of a binding Letter of Intent with a third -party partner relating to the future operation of the facility. As a result of this reassessment, the Company updated its estimate of the lease term to reflect the period for which it is reasonably certain to continue using the leased asset. Effective April 1, 2026, the Company transferred the Thorold Plant facility lease from CHAR Technologies Thorold Inc. ("CTT") to the Thorold LP. Concurrently, the Company derecognized the associated Right-of- Use (ROU) asset and the related lease liabilities from its consolidated financial statements. The reassessment resulted in a remeasurement of the lease liability, with a corresponding adjustment to the carrying amount of the related ROU asset, in accordance with IFRS 16. 7. Intangible Assets and Goodwill Cost Technology License Purchased Technology Patents Total Assets Held for Sale Balance, September 30, 2024 $3,203,713 $2,107,939 $30,415 $5,342,067 $62,197 Additions - - 3,091 3,091 - Disposals - - - - ($62,197) Balance, September 30, 2025 $3,203,713 $2,107,939 $33,505 $5,345,157 $- Additions - - 37,844 37,844 - Disposals - - - - - Balance, June 30, 2026 $3,203,713 $2,107,939 71,349 $5,383,002 $- Accumulated Amortization Technology License Purchased Technology Patents Total Assets Held for Sale Balance, September 30, 2024 $3,203,713 $1,003,000 $10,295 $4,217,007 $48,563 Additions - 303,588 3,041 306,629 168 Disposals - - - - (48,731) Balance, September 30, 2025 $3,203,713 $1,306,588 $13,337 $4,523,639 $- Additions - 198,191 4,760 202,951 - Disposals - - - - - Balance, June 30, 2026 $3,203,713 $1,504,779 $18,097 $4,726,590 $- Net book value Technology License Purchased Technology Patents Total Assets Held for Sale Balance, September 30, 2025 $- $801,351 $20,170 $821,521 $- Balance, June 30, 2026 $- $603,160 $53,252 $656,412 $- During the year ended September 30, 2021, CHAR Biocarbon Inc., (“CHAR Biocarbon”) a wholly -owned subsidiary of the Company, signed an exclusive technology licensing agreement (“the ELA”) with Actinon Pte Ltd, (“Actinon”) the parent company of CHAR's former principal kiln technology supplier, Anergy Pte Ltd. (“Anergy”). Under the ELA, CHAR Biocarbon had the technology rights to all the equipment intellectual property, including patents and designs. The effective date of the ELA is July 1, 2021, and it was du e to be effective for 3 years (and any further extension of the term was subject to the satisfaction of certain conditions).
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 26 - 7. Intangible Assets and Goodwill (continued) Pursuant to the ELA, CHAR Biocarbon was to make minimum advance royalty payments of US$3,000,000, in respect of the first 3 years of the term, broken down as follows: US$500,000 in respect of year 1, US$1,000,000 in respect of year 2 and US$1,500,000 in respect of year 3. The payment of these minimum royalties was due to take place under the ELA as follows: US$750,000 in 2021 and US$2,250,000 in 2022. CHAR Biocarbon paid Actinon US$750,000 during the year end September 30, 2021, and US$1,253,502 during the year ended September 30, 2022. These payments were in respect of the first two years of the contract and part of year three that was due to end on June 30th, 2024. The ELA was terminated by CHAR Biocarbon by written notice on August 27th, 2022, and a further purported notice of termination was provided by Actinon effective July 1, 2023. CHAR Biocarbon and Actinon are currently engaged in litigation relating to amounts which Actinon alleges are owed to it pursuant to the ELA, as well as amounts which CHAR Biocarbon alleges are repayable to it as a result of its counterclaim against Actinon for recission of the ELA. The amounts accrued and disclosed relating to the ELA and Actinon during the previous periods were on a contingent basis, pending the outcome of the dispute, as they have been, and continue to be, disputed by CHAR Biocarbon. On January 21st, 2026 the High Court of Justice in the United Kingdom found in favour of Actinon Pte Ltd. in respect of its summary judgment application against the Company’s subsidiary, CHAR Biocarbon Inc., and determined that US$635,810 was payable to Actinon Pte Ltd. The amount had previously been recorded as a contingent liability in royalty payable in the Company’s consolidated financial statements. On April 16, 2026, CHAR Biocarbon Inc. paid the judg ement amount to Actinon’s solicitors to be held in escrow pending a consequential hearing. On April 24, 2026, the High Court ordered the escrowed amount to be released to Actinon Pte Ltd. CHAR Biocarbon believes that the judge erred in his decision to grant summary judgment and has made an application to the Court of Appeal to appeal the decision. In addition to the application to the Court of Appeal, CHAR Biocarbon continues to pursue its counterclaim against Actinon. Subsequent to quarter end, on July 6th, 2026, CHAR Biocarbon Inc. received permission from the Court of Appeal to appeal against the judge’s ruling. The appeal is listed to be heard in December 2026. The technology license value was fully amortized as at September 30, 2024. Goodwill On January 1, 2018, the Company acquired all outstanding shares of the Altech Group (“Altech”). The acquisition was accounted for as a business combination and a goodwill of $1,122,619 was recorded during the year ended September 30, 2018. The carrying value of the goodwill as at September 30, 2024, was $652,916. During the year ended September 30, 2024, Altech entered into an agreement in principle to divest its consulting division to another consulting firm, including employees, active contracts, and selected assets. This intended transaction aligns with the Company strategic shift toward focusing on its Build -Own- Operate (BOO) projects by transitioning out of consulting operations. In anticipation of this transaction, as of September 30, 2024, the consulting division was classified as “held for sale” and as a discontinued operation in compliance with IFRS 5. The classification as held for sale resulted in the reclassification of assets associated with the consulting division to “Assets Held for Sale” on the condensed interim consolidated statements of financial position.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 27 - 7. Intangible Assets and Goodwill (continued) In connection with the held -for sale classification, an impairment test was conducted under IAS 36 Impairment of Assets. The recoverable amount was determined using the Fair Value Less Costs to Sell (FVLCTS) method, which resulted in a value of $270,840. The amount of goodwill was $652,917 while the carrying value of other assets within the CGU totaled $15,928 and was reclassified as ‘Assets Held for Sale,’ bringing the CGU’s total carrying amount to $668,843. Since the carrying amount exceeded the FVLCTS, an impairment of goodwill amounting to $398,005 was recognized as of September 30, 2024. This impairment loss was reported under “Net loss and comprehensive loss on discontinued operations” in the Statements of Loss and Comprehensive Loss. The carrying value of the goodwill as at September 30, 2024 was $254,914 and was included in the “Assets Held for Sale” on the condensed interim consolidated statements (Note 18). The divestiture of the consulting division was completed on October 30, 2024, during the year ended September 30, 2025. As a result, as at September 30, 2025, the Company no longer holds any assets or liabilities classified as held for sale, and no goodwil l remains on the condensed interim consolidated statements of financial position related to the disposed consulting operations. 8. Receivables from Related Party In March 2026, the Company advanced an unsecured loan of $2.5 million to the Thorold LP bearing contractual interest at 11.0% per annum and maturing on March 17, 2029. In accordance with IFRS 9, the loan receivable was initially recognized at fair value using an estimated market interest rate of 13.75% for a comparable unsecured instrument. As a result, the loan was initially recognized at $2.259 million, with the differ ence of $0.241 million recognized as part of the Company’s investment-related carrying value assessment. Subsequent to initial recognition, the loan is measured at amortized cost using the effective interest method, with interest income recognized using the effective interest rate of 13.75%. As at June 30, 2026, the carrying value of the loan receivable was $2.34 million. 9. Investment in Joint Venture (Thorold LP) On July 10, 2025, CHAR Technologies Thorold Inc. (“CTT”), a wholly owned subsidiary of the Company, entered into definitive agreements with Bioveld Canada I nc. (“Bioveld”) and BMI Industrial Inc. (“BMI Industrial”) to form Thorold LP. CTT holds a 50% ownership interest in the Thorold LP, Bioveld holds a 45% ownership interest, and BMI Industrial holds a 5% ownership interest in the Class A limited partnership units, and decisions about the relevant activities of the Thorold LP require unanimous consent of the partners. Accordingly, the Thorold LP is classified as a joint venture under IFRS 11 Joint Arrangements and is accounted for using the equity method under IAS 28 Investments in Associates and Joint Ventures. Contribution of Assets and Liabilities As part of the formation of the Thorold LP , CTT contributed a group of assets and related liabilities associated with the Thorold high-temperature pyrolysis project to the Thorold LP in exchange for Class A limited partnership units representing a 50% equity interest.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 28 - 9. Investment in Joint Venture (Thorold LP) (continued) Upon contribution, Char Technologies Thorold Inc. derecognized the carrying amounts of the assets and liabilities transferred to Thorold LP. These carrying amounts represent the historical book values of the individual line items contributed, as summarized in the table below. CHAR recognized its initial investment in Thorold LP at cost, measured in accordance with IFRS 13 Fair Value Measurement. The fair value of the contribution was estimated using a market approach, based on the fair value of Bioveld and BMI Industrial cash contribution to Thorold LP. Key valuation inputs included a discount rate of 16% applied over a five-month period. Gain on Contribution to Joint Venture The gain on contribution arises because the fair value of CHAR’s 50% equity interest in the Thorold LP exceeded the net carrying amount of the assets and liabilities derecognized at the contribution date. The table below summarizes the historical carrying amounts of the assets and liabilities derecognized by CHAR upon contribution to the joint venture at July 10, 2025: Assets under construction (note 5) $7,388,243 Deferred Grant revenue (IFIT-10% Holdback) (note 5) (4,938,168) Grant receivable (IFIT-10% Holdback) (note 3) 493,818 Accounts payable (note 10) (107,270) Net lease liability (note 12) (1,958) Promissory note (note 10) (383,135) Loans (note 11) (2,974,793) Net carrying amount of assets and liabilities derecognized (523,262) Fair value of contribution at July 10, 2025 $7,740,156 Downstream elimination on gain of contribution investment to joint venture (4,131,709) Total investment to joint venture $3,608,447 Following initial recognition, CHAR accounts for its investment in the LP using the equity method. The carrying amount of the investment is adjusted each period for CHAR’s share of the Thorold LP’s net income or loss, for any additional contributions made or distributions received, and for any impairment losses recognized if indicators of impairment exist in accordance with IAS 36. In accordance with IAS 28, unrealized gains or losses arising from transactions between CHAR and Thorold LP are eliminated to the extent of the Company’s interest . Such eliminations apply only to downstream transactions . The downstream elimination presented below reflects CHAR’s share of such unrealized amounts for the period.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 29 - 9. Investment in Joint Venture (Thorold LP) (continued) The continuity of the Company’s investment in Thorold LP is as follows: Investment to joint venture on July 10, 2025 $3,608,447 Loss from equity accounted investment (204,252) Downstream elimination of unrealized gains for the period (74,800) Investment in joint venture at September 30, 2025 $3,329,395 Loss from equity accounted investment (322,461) Downstream elimination of unrealized gains for the Nine Months Ended June 30, 2026 (561,649) Gain on Contribution to LP 64,894 Investment in joint venture at June 30, 2026 $2,510,178 The following summarized financial information of Thorold LP, presented at 100%, as at June 30, 2026, is as follows: As at June 30, 2026 $ Current assets 711,723 Non- current assets 26,146,533 Current liabilities 7,034,949 Non-Current Liabilities 5,874,799 Partner’s equity 15,480,312 Net loss and comprehensive loss as of last year (September 30, 2025) 408,504 Net & Comprehensive Loss for the Nine months period ended June 30, 2026 1,123,299 10. Accounts Payable and Accrued Liabilities As at June 30, As at September 30, 2026 2025 $ $ Trade accounts payable (note 16) 1,366,377 1,101,142 Royalties payable (note 7) - 898,344 HST Payable 85,725 150,369 Accrued liabilities 804,352 283,447 Total accounts payable and accrued liabilities 2,256,455 2,433,302
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 30 - 11. Loans Payable As at June 30, As at September 30, 2026 2025 $ $ RRRF Loan 42,678 62,782 CEBA Loan 120,000 120,000 FedDev - - FSSIP - - Kia Niro Car Loan 27,386 31,413 Loan from Bioveld Canada 2,573,487 - Promissory Notes - - Total Loans Payable 2,711,134 214,195 Less Current Portion 2,674,376 32,214 Non-Current Portion Loan Payable 36,758 181,981 Loan from Bioveld Canada Inc. In April 2026, the Company secured a $3,500,000 credit facility from Bioveld Canada Inc. bearing interest at 12.50% per annum with a maturity date of October 31, 2026. The loan is secured by the acquired Québec facility assets and included the issuance of 2,000,000 bonus common share purchase warrants at an exercise price of $0.35. As at June 30, 2026, the outstanding balance drawn under this facility is $2,573,487 including accrued interest for $52,418. During the year ended September 30, 2020, the Company obtained a loan relating to Regional Relief and Recovery Fund for $148,323 (“the RRRF loan”). The terms are as follows: principal: $148,323, annual interest rate: 0%, repayment starting: January 15, 202 3, maturity: December 15, 2027, and monthly installments of $2,472. During the year ended September 30, 2020, the Company obtained two Canada Emergency Business Account (“CEBA”) loans from TD Bank, for $40,000 each (“the CEBA loans”). The terms of the loan are as follows: principal $ 40,000, interest rate: 0% per annum during Initial Term and 5% during Extended Term, Initial Term date: December 31, 2023, Extended Term date: December 31, 202 6, First Interest Payment date: January 31, 2023. During the year ended September 30, 2020, the Company obtained a loan for the purchase of a vehicle (Dodge Caravan). The terms of the loan are as follows: principal: $16,769, annual interest rate: 6.14%, maturity: October 17, 2024, and bi-weekly instalments of $150. The loan was fully repaid as at September 30, 2024. During the year ended September 30, 2021, the Company obtained two additional CEBA loans from TD Bank, for $20,000 each (“the CEBA loans”). The terms of the loan are as follows: principal $20,000, interest rate: 0% per annum during Initial Term and 5% duri ng Extended Term, Initial Term date: December 31, 2023, Extended Term date: December 31, 2026. The CEBA loans and RRRF loans were discounted at the inception date using a market interest rate of 5%.On September 29, 2022, the Federal Economic Development Agency for Southern Ontario (“FedDev”) and CHAR Tech entered into a Contribution Agreement, under the Jobs & Growth Fund (JGF), where the Ministry of Economic Development, Job Creation and Trade will make a repayable contribution to CHAR Tech in respect to the Thorold Project for 50% of eligible costs, starting from the date of April 19, 2021, up to $1,500,000. During the year ended September 30, 2023, the Company received $1,350,000 under the
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 31 - 11. Loans Payable (continued) Contribution Agreement above. In July 2024, the Company fulfilled the requirements of use of funds and received the remaining $150,000. On March 27, 2025, FedDev approved an amendment of the payment schedule and extending the maturity date of the repayable contribution to October 2031. In assessing the accounting treatment of the amendment, management evaluated whether the change in terms constituted a modification or an extinguishment of the existing financial liability in accordance with IFRS 9. This assessment involved comparing the p resent value of the remaining contractual cash flows under the amended agreement with the present value of the remaining cash flows under the original agreement, discounted at the original effective interest rate. Based on this analysis, management conclud ed that the amendment did not result in substantially different terms and therefore represented a modification rather than an extinguishment of the liability , resulting in a modification gain recognized in condensed interim consolidated statements of loss and comprehensive loss during the year. In accordance with IFRS 9 and IAS 20, the loan is recorded at fair value on initial recognition and subsequently measured at amortized cost. As part of the modification assessment, the carrying amount of the liability was recalculated by discounting the revised contractual repayment schedule using the same discount rate applied prior to the amendment, The resulting reduction in the carrying amount of the liability of $100,084 , arising from the modification , was recognized as government grant income, as the amendment effectively provided a benefit to the Company through revised repayment terms. In July 2025, as part of the Contribution Agreement between CHAR Tech and the Thorold LP , the outstanding repayable contribution and its related obligations were contributed to and assumed by the Thorold LP. At the time of the contribution, the unsecured FedDev loan was recorded in the condensed interim consolidated statements of financial position with a total of $ 92,250 as a short-term liability, and $1,107,436 as a long-term liability, discounted at an interest rate of 5.73%. Subsequent to the formation of the Thorold LP and contribution of the unsecured loan, no accretion was recorded on the condensed interim consolidated statements of loss and comprehensive loss during the quarter ended June 30, 2026 (2025: $18,166). On April 20, 2022, the Minister of Economic Development, Job Creation and Trade and CHAR Tech entered into a Conditional Loan Agreement, under the Forest Sector Investment and Innovation Program (“FSIIP”), where the Minister will make a non-revolving secured loan in the maximum amount of $6,438,168 for the Thorold Project. The repayments of principal and interest will start after the third year of the Agreement. The interest rate is 4.87%. The loan does not bear interest on the first three years and no principal payments are due over this period as long as there are no material defaults under the Agreement. During the year ended September 30, 2023, the Company received $1,287,634 . On February 20, 2025, the Company received another tranche of the loan for an additional $732,395. In July 2025, as part of the Contribution Agreement between CHAR Tech and the Thorold LP, the outstanding FSIIP loan and all related obligations were contributed to and assumed by the Thorold LP. At the time of the contribution, the loan was recorded in the condensed interim consolidated statements as a long-term liability, discounted at an interest rate of 4.87% and a present value of $ 1,775,106. The total accretion for the quarter ended June 30, 2026 is $nil (2025: $12,757). On July 17, 2024, the Company obtained an unsecured financing among the Company, five arm’s-length lenders and four non-arm’s-length lenders, in the form of term promissory notes, whereby the Company received $850,000 principal amount. The loans bear interest at 10% per year and mature in ninety days from issuance (note 10 and note 16 ). As further consideration for providing the financing the Company agreed to issue to the lenders 850,000 non -transferable share purchase warrants with the promissory notes (each, a “Bonus Warrant”). The warrants were issued on July 17, 2024, and expired unexercised on July 17, 2025. The promissory notes were recorded in the consolidated financial statements as a short - term liability, discounted at an interest rate of 10% and a present value of $855,765.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 32 - 11. Loans Payable (continued) On September 23, 2024, the Company obtained a loan for the purchase of a vehicle (Kia Niro). The terms of the loan are as follows: principal: $36,649, annual interest rate: 7.99%, maturity: September 15, 2031, and bi-weekly instalments of $264. The table below is a summary of the continuity of the loan as of June 30, 2026: Balance, September 30, 2025 $ 31,413 Repayments $ 4,027 Balance, June 30, 2026 $ 27,386 Current portion at June 30, 2026 $ 5,236 Non-current portion at June 30, 2026 $ 22,150 On October 30, 2024, a total of $568,989 representing promissory notes payable together with the accrued interest from the unsecured financing transaction which closed in July 2024, were converted into subscriptions to the private placement which closed on October 30, 2024 . The balance of $ 302,436 representing promissory notes payable together with the accrued interest were paid to the lenders. During the quarter ended December 31, 2024, the total accretion was $17,466, and the total interest incurred during the quarter ended December 31, 2024 was $3,959 from the unsecured financing transaction closed in July 2024. No interest or accretion are recorded for the nine months period ended June 30, 2026. On June 11, 2025, CHAR Technologies Thorold Inc. entered into a convertible promissory note with Bioveld Canada Inc. for a principal amount of $383,135. The funds were provided to facilitate payments related to equipment purchases for the Thorold project. The note bears no interest unless it converts into a repayable loan, which will occur automatically if a joint venture agreement was not reached within three months of the date of issuance. In such a case, interest will accrue at 8.5% per annum and the total amount will be repayable for 12 months from the date’s note. Upon formation of the joint venture, the principal amount of the promissory note was converted into a cash commitment contribution in Char Technologies Thorold limited partnership units in the Thorold LP. On July 10, 2025, CHAR Technologies Thorold Inc., Bioveld Canada Inc. and BMI Industrial Inc. finalized definitive agreements for the joint venture. As part of the contribution of assets and related liabilities to Thorold LP, the promissory note was assigned to Thorold LP and included as part of the net assets contributed to the joint venture. The table below is a summary of the liabilities associated with assets contributed to the Thorold LP that were derecognized upon transfer. Original Amount $ Total promissory notes 2025 383,135 FedDev 1,199,685 FSSIP 1,775,106 Total Contributed loans to joint venture (note 8) 3,357,928
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 33 - 12. Lease Liabilities The Company entered into a lease effective July 1, 2022, or when the facility could be occupied , for its 17,000 square foot production facility in Thorold, Ontario. The term of the lease is five years with two additional options to renew of 5 years each. The annual basic rent for the first year is $153,000 for the building and $50,094 for the land area. The lease liabilities reflect the present value of the lease payments. During the fiscal year 2025, the Company reassessed the lease term in accordance with IFRS 16 following a change in facts and circumstances arising from the execution of a binding Letter of Intent on May 1, 2025, which reflects management’s revised intent regarding the long -term ope rating structure of the Thorold project. Based on this reassessment, management concluded that it is no longer reasonably certain that the renewal options will be exercised. Accordingly, the lease term was reassessed to include only the non-cancellable period ending June 30, 2027. As required by IFRS 16, the reassessment of the lease term resulted in a remeasurement of the lease liability using a revised incremental borrowing rate applicable at the reassessment date. Management determined a market-based discount rate of 7.49%, which resulted in a reduction of the lease liability from $1,126,320 to $444,542, with a corresponding adjustment to the right -of-use asset of $681,778. No gain or loss was recognized in condensed interim consolidated statements of loss and comprehensive loss, as the adjustment was fully recorded against the carrying amount of the right-of-use asset. Following the remeasurement, binding Letter of Intent on May 1, 2025 the right-of-use asset had a carrying amount of $271,060, which will be depreciated prospectively over the remaining lease term. Interest expense on the lease liability will also be recognized prospectively using the revised discount rate. Effective April 1, 2026, the Company transferred the Thorold Plant facility lease from CHAR Technologies Thorold Inc. ("CTT") to Thorold LP. Concurrently, the Company derecognized the associated lease liabilities of $267,363 and the related Right-of-Use asset from its consolidated financial statements. On June 19, 2023, the Company entered into a three-year office lease commencing on November 1, 2023. The lease is the office where the Company is currently located in 895 Don Mills Road, Toronto. The term of the new lease expires on October 30, 2026, with a total commitment of payments of $212,802 and it requires monthly lease payments of approximately $5,700. This lease will not be renewed. On November 23, 2023, the Company entered into a six -year equipment lease. The lease is for a wheel loader located at the Thorold plant. The lease required a downpayment of $22,050 and expires on November 23, 2029, with a total commitment of payments of $2 80,578 and it requires monthly lease payments of $3,952. On December 8, 2023, the Company entered into a four-year vehicle lease for Nissan Rogue. The lease expires on December 8, 2027, with a total commitment of payments of $29,734 and it requires monthly lease payments of $619.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 34 - 12. Lease Liabilities (continued) The table below is a summary of the continuity of the lease liabilities as of June 30, 2026: Office Space and land Balance, September 30, 2025 $446,659 Additions - Accretion 17,324 Remeasurement / Derecognized (267,363) Repayments (165,344) Balance, June 30, 2026 $31,276 Vehicles Balance, September 30, 2025 $40,545 Additions - Accretion 1,403 Repayments (17,096) Balance, June 30, 2026 $24,852 Equipment Balance, September 30, 2025 $175,315 Additions - Accretion 7,148 Repayments (35,566) Contributed lease to joint venture (note 8) - Balance, June 30, 2026 $146,897 Current portion at June 30, 2026 $92,585 Non-current portion at June 30, 2026 $110,439 Total $203,024 Future commitments for lease Payments At June 30, 2026, the future minimum lease payments under leases were payable as follows: One year $93,827 Between one year and five years $118,319 Total Commitments $212,146
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 35 - 13. Share Capital (a) Authorized share capital Unlimited number of common shares, with no par value. (b) Issued common shares Number of Shares Amount $ Balance, September 30, 2024 101,401,064 24,619,524 Common shares issued for cash (i) 26,359,451 4,878,867 Share issuance costs-cash - (155,100) Share issuance costs- warrants - (45,521) Shares issued on exercises of stock options (note 13) 450,000 51,750 Fair value of stock options exercised - 38,039 Shares issued on exercise of RSUs (note 13) 910,699 - Fair value of RSUs exercised - 377,392 Balance, September 30, 2025 129,121,214 29,764,951 Common shares issued for cash (i) 21,605,585 4,095,335 Share issuance costs-cash - - Share issuance costs- warrants - (224,248) Shares issued on exercises of stock options (note 13) - - Fair value of stock options exercised - - Shares issued on exercise of RSUs (note 13) 264,136 - Fair value of RSUs exercised - 73,958 Balance, June 30, 2026 150,990,935 $33,709,997 (i) On July 17, 2024, the Company entered into loan agreements (the “Loan Agreements”) with lenders (the “Lenders”) for a total amount of $850,000 (the “Loan”) repayable in full within 90 days of entry into the Loan Agreements. The Lenders include existing sha reholders, and current and former directors, executive officers and business associates, some of whom are insiders of the Company. As further consideration for providing the Loan, the Company agreed to issue to the Lenders 850,000 non-transferable share purchase warrants (each, a “Bonus Warrant”). Each Bonus Warrant will be exercisable into one common share for a period of one year at a strike price of $0.38 per share. The fair value of the warrants was $65,815 and valued using Black Scholes method with a share price of $0.33, exercise price of $0.38, a risk -free rate of 3.52% and a volatility of 62.35%. See Note 11 regarding loan conversion and repayment. On May 9, 2025, the Company completed a non -brokered private placement with Bioveld Canada Inc., issuing 10,000,000 shares at $0.20 per share for gross proceeds of $2,000,000. All securities issued under this Offering were subject to a statutory hold period ending four months and one day from the closing date of the Offering. No bonuses, finders’ fees or commissions were paid in connection with the Offering. On June 20, 2025, the Board of Directors approved the amendment of up to 2,750,000 common share purchase warrants (the “Warrants”). The Warrants were part of the Unit Offering with ArcelorMittal XCARB S.à r.l . (“ArcelorMittal”), as previously announced July 5th, 2023, have an exercise price of $0.70, and would have expired on July 5, 2025. Starting on June 20, 2025,
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 36 - 13. Share Capital (continued) (b) Issued common shares the expiration date of the Warrants held by ArcelorMittal was extended until July 5th, 2026. The Warrant extension was approved by the TSX Venture Exchange. On December 22, 2025, the Company completed a non -brokered private placement, issuing 4,550,000 units at a price of $0.22 per unit for gross proceeds of $1,001,000. Each unit consists of one common share and one non -transferable common share purchase warra nt, with each whole warrant exercisable at $0.32 per share for a period of 24 months from the closing date. The Company incurred finder’s fees of approximately $60,000 in connection with the offering. The private placement received final approval of the TSX Venture Exchange, and the proceeds are intended to be used for general working capital and the advancement of the Company’s project pipeline. On March 18, 2026, the Company completed a non-brokered private placement, issuing 17,055,585 units at a price of $0.2 35 per unit for gross proceeds of $ 4,008,062. Each unit consists of one common share and half non-transferable common share purchase warrant, with each whole warrant exercisable at $0.3 5 per share for a period of 24 months from the closing date. The Company incurred finder’s fees of approximately $ 186,079 in connection with the offering. The private placement received final approval of the TSX Venture Exchange, and the proceeds are intended to be used for general working capital and the advancement of the Company’s project pipeline. The following table reflects the continuity of unit warrants for the periods presented: Number of Unit Warrants Exercise Price Balance, September 30, 2024 3,600,000 Expired Warrants from bonus warrants (850,000) $0.38 Warrants from private placement Oct 2024 8,179,725 $0.30 Warrants for finder fees private placement Oct 2024 775,500 $0.30 Balance, September 30, 2025 11,705,225 Expired Warrants from bonus warrants - - Warrants from private placement Dec 2025 4,550,000 $0.32 Warrants from private placement March 2026 8,527,793 $0.35 Warrants issued against Loan 2,000,000 $0.35 Balance, June 30, 2026 26,783,018
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 37 - 14. Stock Options, Restricted Share Units, and Share Appreciation Rights Stock Options The following table reflects the continuity of stock options for the years presented: Number of Stock Options Weighted Average Exercise Price ($) Balance, September 30, 2024 8,761,605 0.47 Granted (i) - - Exercised (450,000) 0.115 Expired (1,670,930) 0.53 Balance, September 30, 2025 7,935,950 0.44 Granted (ii) 2,555,907 0.30 Exercised - - Expired (1,298,339) 0.51 Balance, June 30, 2026 9,193,518 0.39 On February 6, 202 5, the Company granted 1,270,275 stock options to employees , directors and consultants of the Company. The stock options may be exercised for a period of five years at a price of $0.42 per share. These stock options vest: 525,000 vested immediately, balance 734,480 stock options; 25% August 6, 2025, 25% February 6, 2026, 25% August 6, 2026, 25% February 6, 2027. The fair value of the options was $191,396 recorded using the Black-Scholes model with a share price of $0.15, exercise price of $0.42, volatility of 104% and a risk-free rate of 2.64%. On June 18, 2025, the Company granted 25,000 stock options to a consultant of the Company. The stock options may be exercised for a period of five years at a price of $0.2 8 per share. These stock options vested immediately. The fair value of the options was $4,895 recorded using the Black-Scholes model with a share price of $0.27, exercise price of $0.29, volatility of 94.69% and a risk-free rate of 2.85%. On January 30, 2026, the Company granted 1,618,042 stock options to employees, directors, consultants of the Company. The stock options may be exercised for a period of five years at a price of $0. 30 per share. These stock options vest: 400,000 vested immediately, balance 1,218,042 stock options; 25% July 30, 2026, 25% January 30, 2027, 25% July 30, 2027, 25% January 30, 2028. The fair value of the options was $277,509 recorded using the Black-Scholes model with a share price of $0.27, exercise price of $0.30, volatility of 79.63% and a risk-free rate of 3.03%. On April 8, 2026, the Company granted 937,865 stock options to an officer, employees and a consultant of the Company. The stock options may be exercised for a period of five years at a price of $0.30 per share, expiring on April 8, 2031. These stock options vest as follows: 50,000 vested immediately; 706,846 options vest 25% after 12 months, then 25% every 6 months; 150,000 options vest 25% every 3 months; and 31,019 options vest 25% after 6 months, then 25% every 6 months.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 38 - 14. Stock Options, Restricted Share Units, and Share Appreciation Rights (continued) Stock Options (Continued) The following table reflects the actual stock options issued and outstanding as of June 30, 2026: During the nine months period ended June 30 , 2026, no stock options were exercised by officers, consultants and employees of the Company and 1,298,339 were cancelled or expired (2025: 1,107,699). Restricted Share Units (“RSUs”) The following table reflects the actual restricted share units issued and outstanding as of June 30, 2026: Expiry Date Exercise Price ($) Weighted Average Remaining Contractual Life (years) Number of Options Outstanding Number of Options Vested (exercisable) Number of Options Unvested July 21, 2026 $0.52 0.06 75,000 75,000 - September 28, 2026 $0.50 0.25 500,000 500,000 - March 17, 2027 $0.45 0.71 1,158,266 1,158,266 - November 15, 2027 $0.36 1.38 40,000 40,000 - February 6, 2028 $0.41 1.61 1,233,802 1,233,802 - April 25, 2028 $0.75 1.82 250,000 250,000 - April 25, 2028 $1.00 1.82 250,000 250,000 - December 20, 2028 $0.42 2.48 698,432 690,755 7,677 April 19, 2029 $0.42 2.80 1,055,529 829,796 225,734 September 11, 2029 $0.29 3.20 38,217 38,217 - July 2, 2029 $0.45 3.01 155,453 155,453 - February 6, 2030 $0.23 3.61 1,221,980 873,490 348,490 June 18, 2030 $0.28 3.97 25,000 25,000 - January 31, 2031 $0.30 4.59 1,553,974 400,000 1,153,974 April 8, 2031 $0.30 4.78 937,865 756,846 181,019 $0.39 2.74 9,193,518 7,276,624 1,916,894 Grant Date Number of RSU Outstanding Number of RSU Vested (exercisable) Number of RSU Unvested August 31, 2021 541,100 541,100 - March 17, 2022 35,055 35,055 - February 6, 2023 93,148 93,148 - June 19, 2023 10,453 10,453 - December 20, 2023 181,530 181,530 - April 16, 2024 601,311 378,047 223,264 February 6, 2025 400,000 400,000 - June 18, 2025 83,629 83,629 - January 30, 2026 1,337,098 - 1,337,098 April 8, 2026 303,092 303,092
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 39 - 14. Stock Options, Restricted Share Units, and Share Appreciation Rights (continued) Restricted Share Units (“RSUs”) (Continued) On February 6, 2025, the Company granted a total of 611,111 RSUs to employees and consultants of the Company. All of them will be vested after 12 months. The fair value of the RSUs was $122,222. On June 18, 2025, the Company granted a total of 83,629 RSUs to a consultant of the Company. All of them will be vested after 12 months. The fair value of the RSUs was $22,580. On January 30, 2026, the Company granted a total of 1,337,098 RSUs to Officers, consultants, an employee of the Company. Out of total RSU 1,235,258 of them will be vested after 12 months and balance 101,839 will vest: 50% after 12 months and balance 50% after 12 subsequent months. The fair value of the RSUs was $229,324. On April 8, 2026, the Company granted a total of 303,092 RSUs to an officer of the Company. Out of the total RSUs, all 303,092 of them will vest 25% after 12 months from the date of signing and the balance 75% will vest 25% after each subsequent 6 months Share Appreciation Rights (“SARs”) On August 31, 2021, the Company granted 480,000 SARs to an officer of the Company. The SARs may be exercised for a period of five years at a strike price of $0.72 per share. The SARs vested as follows: 160,000 immediately, 160,000 on August 31, 2022, and 160,000 on August 31, 2023. On April 16, 2024, the Company granted a total of 100,000 SARs to an officer of the Company. The SARs may be exercised for a period of five years at a strike price of $0.42 per share. The SARs vested immediately. On January 30, 2026, the Company granted a total of 824,000 SARs to an officer of the Company. The SARs may be exercised for a period of five years at a strike price of $0. 30 per share. The SARs vested immediately. Share-based payment reserve During the Nine Months Ended June 30, 2026, the Company recognized $606,692 share-based payments for options, RSUs and SARs vested during the year (2025: $278,438). 15. Capital Management The Company includes equity, which is comprised of share capital and working capital, in its definition of capital. The Company's objective when managing capital is to safeguard its ability to continue as a going concern in order to provide returns for its shareholders, and other stakeholders and to maintain a strong capital base to support the Company's core activities. The Company has no externa lly imposed capital requirements and there were no changes to its capital management approach. To secure the additional capital necessary to pursue these plans, the Company may attempt to raise additional funds through the issuance of equity and debt or by securing strategic partners. 3,586,416 1,722,962 1,863,454
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 40 - 16. Financial Instruments and Risk Management The Company’s financial instruments consist of cash, accounts receivable, accounts payable and loans payable. The fair value of the Company’s financial assets and liabilities approximates the carrying amount. Financial instruments measured at fa ir value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are: • Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. • Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and • Level 3 – Inputs that are not based on observable market data. The Company’s cash is measured using level 1 inputs. Liquidity risk arises from the Company’s general and capital funding requirements. The Company has planning, budgeting and forecasting processes to help determine funding requirements to meet various contractual and other obligations. Contractual undiscounted cash flow requirements for financial liabilities as at June 30, 2026, are as follows: The accounts receivable aging as at June 30, 2026, are as follows: Liabilities Less than 1 Year 2 - 3 Years 4 - 5 Years More than 5 Years Total Accounts payable and accrued liabilities 2,256,455 - - - 2,256,455 Lease Liabilities 93,827 98,560 19,759 - 212,146 Loans Payable 2,730,004 28,541 13,706 1,581 2,773,832 Total 5,080,285 127,101 33,465 1,581 5,242,433 Less than 1 Year 2 - 3 Years 4 - 5 Years More than 5 Years Total Trade accounts receivables 2,160,129 - - - 2,160,129 HST Receivables 117,824 - - - 117,824 Loans Receivables 341,670 2,343,580 - - 2,685,250 Intercompany Receivable 100,000 - - - 100,000 Grant Receivables 122,725 - - - 122,725 Total 2,842,348 - - - 5,185,928
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 41 - 16. Financial Instruments and Risk Management (continued) 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 consist of receivables from customers and have historically been subject to very few bad debts. Credit risk is assessed as low. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company does not hold any significant interest-bearing assets or liabilities that are variable. Interest rate risk is assessed as low. Liquidity risk Liquidity risk is the risk that the Company may not be able to settle its obligations as they fall due. To manage liquidity requirements, the Company strategically plans its cash flows to ensure sufficient capital is available to meet both short -term and l ong-term obligations. As of June 30, 2026, the Company had cash of $441,809 (September 30, 2025: $453,685) to cover current liabilities of $ 5,415,554 (September 30, 2025: $3,131,598) The Company is actively exploring additional funding sources, with a focus on project level funding opportunities, over the next 12 months. Foreign exchange risk A portion of the Company’s revenues are denominated in US dollars. As such, the Company’s results of operations are subject to foreign currency fluctuation risks and these fluctuations may adversely affect the financial position and operating results of the Company. As of June 30, 2026, the Company’s exposure to foreign currency denominated balances was not material . The Company does not use derivative instruments to reduce its exposure to foreign currency risk. Management assesses the Company’s foreign exchange risk as low. 17. Related Party Balances and Transactions Related parties include the Board of Directors, close family members and enterprises that are controlled by these individuals as well as certain people performing similar functions. The transactions with related parties are as follows: Nine Months Ended June 30, 2026 2025 $ $ DSA Corporate Services ("DSA") (i) – corporate services 6,964 8,057 1456087 Ontario Inc. ("1456087") (ii) - consulting 90,000 90,000 Anton Szpitalak (iii) - consulting 45,625 30,000 Char Bioveld Thorold LP (iv) 2,119,435 - Andrew White (v) 5,647 5,647
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 42 - 17. Related Party Balances and Transactions (continued) (i) DSA is affiliated with the Company through a common officer. DSA provides corporate secretarial services. As at June 30, 2026, DSA was owed $4,395 (September 30, 2025 - $1,780). These amounts are included in accounts payable and accrued liabilities. (ii) 1456087 is a company controlled by James Sbrolla, a former director of the Company. 1456087 provides consulting services to the Company. As at June 30 , 202 6, 1456087 was owed $ 11,300 (September 30, 2025 - $11,300 related to consulting fees and t he promissory note plus interest accrued (note 10)). (iii) Anton Szpitalak, a director of the Company, provides consulting services to the Company. As at June 30, 2026, Anton Szpitalak, was owed $10,625 (September 30, 2025, $10,000) related consulting fees and the promissory note plus interest accrued. (note 10). (iv) Char Bioveld Thorold LP is affiliated with CharTech Services Inc. Char Tech Services Inc. provides Operations and Management services. As at June 30, 2026, Thorold LP owed CHAR $2,119,435 these amounts are included in accounts receivable (September 30, 2025 - $216,595). (v) Andrew White is the CEO of the Company. The Company extended a loan to Andrew White payable on demand at a rate of 2.45%. For the nine months ended June 30, 2026, interest accrued on the loan totaled $5,647. As at June 30, 2026, the balance receivable including accrued interest was $341,670 (September 30, 2025 - $336,024). (note 3). At June 30, 2026, accounts payable balance due to related parties consists of $31,393 (September 30, 2025: $115,000) owed to Directors of the Company. These amounts are unsecured, non-interest bearing and due on demand (note 10). Remuneration of key management of the Company was as follows: Nine Months Ended June 30, 2026 2025 $ $ Salaries 301,305 349,667 Stock base compensation 329,010 454,496
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 43 - 17. Related Party Balances and Transactions (continued) The Company’s Board of Directors’ compensation during the Nine Months Ended June 30, 2026, was as follows: Nine Months Ended June 30, 2026 2025 $ $ William White 16,875 16,875 James Sbrolla 10,000 15,000 Nikita Nanos 11,250 16,875 Hugh Cleland 10,000 15,000 Anton Szpitalak 15,625 8,333 Irina Gorbounova 15,000 15,000 David Campbell 5,625 - Stephanie Bird 5,625 - Paul Veldman 5,000 - Total Balances 95,000 87,083 18. Assets Held for Sale As of September 30, 2024, the Company had committed to a plan to dispose of the consulting operations carried on through Altech Environmental Consulting Ltd. (Altech) as part of a strategic realignment of its business activities. In connection with this decision, the Company entered into a Letter of Intent (“LOI”) with Cambium Inc., which outlined the principal terms and conditions for the sale of the consulting business and contemplated the execution of an Asset Purchase Agreement (“APA”). The decision to exit the consulting business reflects the Company’s commitment to focusing on its core Build-Own-Operate (BOO) projects, which are central to the Company’s long-term growth strategy. The transaction was completed on October 31, 2024, when the Company entered into and executed an Asset Purchase Agreement (“APA”) with Cambium Inc. for total consideration of $275,000. As a result, the assets previously classified as held for sale were derecognized upon completion of the transaction. Classification as Assets Held for Sale and Discontinued Operations In compliance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, the consulting division’s assets were reclassified as Assets Held for Sale as of September 30, 2024 , as management had committed to a plan to dispose of the business and the sale was considered highly probable at that date. These assets were measured at the lower of their carrying amount and fair value less cost to sell. No liabilities were transferred or classified as “Liabilities Held for Sale,” as all obligations, including accounts payable, were retained by the Company. Additionally, accounts receivable were not included in the “Assets Held for Sale”, as they were also retained by the Company and not transferred as part of the transaction. The consulting division also met the criteria for classification as a discontinued operation, as it represented a defined separate line of business that the Company had committed to exit. Accordingly, the results of the consulting division have been presented separately from continuing operations in the consolidated financial statements to provide enhanced comparability and a clear distinction between discontinued and ongoing activities.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 44 - 18. Assets Held for Sale (continued) Statement of Comprehensive Loss: The discontinued operations relate to environmental consulting services, including annual reporting, approvals, and compliance management which were previously conducted through the consulting division. These operations were classified as discontinued operations as of September 30, 2024, following management’s commitment to a plan to exit this defined line of business. In accordance with IFRS 5, comparative information for the year ended September 30, 2024, continues to reflect the results of the consulting division for the full year, consistent with the classification of the operation as discontinued as at that date. The transaction was completed on October 31, 2024. Accordingly, the results of discontinued operations presented for the year ended September 30, 2025 relate only to the period from October 1, 2024, to October 31, 2024, being the period between the classification as held for sale and the completion of the disposal. The financial results of the consulting division are presented separately under Income from Discontinued Operations in the condensed interim consolidated statements of loss and comprehensive loss, in order to provide greater transparency and a clear distinction between discontinued and continuing operations. Three Months Ended June 30, Nine Months Ended June 30, 2026 2025 2026 2025 $ $ $ $ Revenue Consulting Revenue - - - 55,638 Cost of Revenue - - - (35,819) Gross Margin - - - 19,819 Office and general - 7,853 - 160,978 - 7,853 - 160,978 Net Loss before impairment loss - (7,853) - (141,159) Impairment loss on goodwill (note 7) - - - - Net loss and comprehensive loss on discontinued operations - (7,853) - (141,159)
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 45 - 18. Assets Held for Sale (continued) Statement of Cash Flows: The condensed interim statement of cash flows includes cash flow information related to the discontinued operations. Cash flow information directly related to the discontinued operations is presented in this table. Nine Months Ended June 30, 2026 2025 Net loss and comprehensive loss for the year - $ (141,159) Adjustments for Amortization - - Depreciation - - Impairment loss on goodwill - - Net change in non-cash working capital Amounts Receivable - 185,282 Work-in-progress - 28,789 Deferred income - (27,958) Intercompany current account - (18,466) Accounts payable and accrued liabilities - (26,488) Cash flows used in operating activities - - Cash flows used in investing activities - - Cash flows used in financing activities - - Net decrease in cash - - Cash, beginning of year - - Cash, end of the period - - 19. Subsequent Events On July 1, 2026, the company leased a new plant in Saguenay, Quebec. The lease agreement has a 12- month term with a total value of $ 302,729. Since this agreement became effective after the current reporting period, these future lease payments will be added to our official commitment disclosures starting next quarter. On August 5, 2026, the Company announced the completed installation of its commercial high - temperature pyrolysis ("HTP") kiln at the Thorold Renewable Energy Facility. The installation included the kiln's heat tube, which represents a long -lead critical pa th component. Commissioning of the feedstock handling system has also been completed. The remaining construction step involves the completion of the pyrogas piping and instrumentation, with commercial operations targeted by the end of September 2026. Management has evaluated these events up to the date these financial statements were authorized for issue and determined that they represent non-adjusting subsequent events. Accordingly, no adjustments have been made to these financial statements.
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Char Technologies Ltd. Notes to the Condensed Interim Consolidated Financial Statements Three & Nine Months Ended June 30, 2026, and 2025 (Expressed in Canadian Dollars) - 46 - HEAD OFFICE Morneau Shepell Centre II, 895 Don Mills Road, Suite 400, Toronto, Ontario, M3C 1W3 CONTACT 1-800-323-4937 info@chartechnologies.com