This Management's Discussion and Analysis of Financial Condition and Results of Operations contain certain forward-looking statements. Historical results may not indicate future performance. Our forward-looking statements reflect our current views about future events; are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited to, those discussed in the section titled "Risk Factors" of our Annual Report on Form 10K filed on July 29, 2022. We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements





Forward-Looking Statements

Some of the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Quarterly Report on Form 10-Q constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "should," and "would" or the negatives of these terms or other comparable terminology.

You should not place undue reliance on forward-looking statements. The cautionary statements set forth in this Quarterly Report on Form 10-Q identify important factors, which you should consider in evaluating our forward-looking statements. These factors include, among other things:





   ·  The unprecedented impact of the COVID-19 pandemic on our business,
      customers, employees, consultants, service providers, stockholders,
      investors and other stakeholders;




  · The speculative nature of the business we intend to develop;




  · Our reliance on suppliers and customers;




   ·  Our dependence upon external sources for the financing of our operations,
      particularly given that there are concerns about our ability to continue as
      a "going concern;"




  · Our ability to effectively execute our business plan;




  · Our ability to manage our expansion, growth and operating expenses;




  · Our ability to finance our businesses;




  · Our ability to promote our businesses;




   ·  Our ability to compete and succeed in highly competitive and evolving
      businesses;




   ·  Our ability to respond and adapt to changes in technology and customer
      behavior; and




   ·  Our ability to protect our intellectual property and to develop, maintain
      and enhance strong brands.

Although the forward-looking statements in this Quarterly Report on Form 10-Q are based on our beliefs, assumptions and expectations, taking into account all information currently available to us, we cannot guarantee future transactions, results, performance, achievements or outcomes. No assurance can be made to any investor by anyone that the expectations reflected in our forward-looking statements will be attained, or that deviations from them will not be material and adverse. We undertake no obligation, other than as may be required by law, to update this Quarterly Report on Form 10-Q or otherwise make public statements updating our forward-looking statements.






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Organization and Nature of Business





DESCRIPTION OF COMPANY

Carbon Ion is developing next generation supercapacitor technology aimed at the grid and other energy storage applications.

We see 'Hybrid' solutions, by combining the best in class battery solutions with super capacitors, as the way forward to deliver sustainable energy for the next three decades and a grid which is fit for the future. Super Capacitors are different but complimentary technology to batteries.

We are at the beginning of a forecasted once-in-a-century shift in moving away from fossil fuels to power our energy requirements across all demands for electricity.

For example, while current battery technology has demonstrated the benefits of EVs, principally in the premium passenger car market, there are fundamental limitations inhibiting widespread adoption of battery technology. They can catch fire easily, they use rare earth materials and have limited life span and the power delivery is compromised. They are not a universally applicable energy store.

Lamborghini recognized this in their recently launched supercar costing $3.5m the 'Sian' that has adopted regenerative braking using super capacitors as their first move to electric powertrains. Supercapacitors can deliver more power, more quickly than a battery solution. As part of the VW Group, Lamborghini elected to go a different route to the rest with their first ever hybrid car, and not follow the industry orthodoxy of a Lithium battery solution. As a result, we believe a hybrid solution using new super capacitor technology with complimentary battery technology represents the most promising path to unlock a mass market shift. A super capacitor can provide that immediate fast delivery (kick) mechanism and then once momentum and velocity is achieved the system moves over to battery power. In this way, the system can be better optimized for both cost and performance.

After 30 years of gradual improvements in conventional lithium-ion batteries we believe (like others in the industry) the market needs a step change in battery technology to make mass market EVs competitive with the fossil fuel alternative. We have gone, like Lamborghini's Terzo Millenio does, down a direct route to achieve this goal.

We have spent the last decade developing a proprietary supercapacitor technology to meet this challenge. We believe that our technology enables a new category of supercapacitor that meets the requirements for broader market adoption. The Carbon-ion (C-ion) Super Capacitor technology that we are developing is being designed to offer greater energy density and safety when compared to today's conventional super capacitors and longer life and faster charging than batteries.

We are focused on energy storage applications, which have a stringent set of requirements for super capacitor but our super capacitor technology also has applicability in other large and growing markets such as frequency response and fast recovery storage. Supercapacitors are best used when you need energy fast.

We will continue developing our C-ion super capacitor carbon-ion technology with the goal of beginning transfer to commercial production in the first half of 2025. We have evaluated each of the elements required for initial success and calculated the high performance which we expect from their combination. We are now working to combine and optimize all components of the cell. We will then further develop volume manufacturing processes to enable high volume manufacturing and minimize manufacturing costs.

We are looking to raise funds that will enable us to expand and accelerate research and development activities and undertake additional initiatives. As well as continuing to develop our scientific and engineering capabilities at Milton Park Abingdon England, we will use third party pilot lines, to achieve our goal of being prepared to begin the transition to high volume manufacturing capability from 2025.

We intend to work closely with original equipment manufacturers ("OEMs") to make our cells widely available over time. We recognize that our super capacitor technology has applicability in other large and growing markets including energy storage and other electricity grid type environments such a frequency response. We expect that the heavy transport industries such as shipping, trains, planes and nascent infrastructure charging will also feature.

Our technology enables a variety of business models. In addition to joint ventures, we may look to operate solely-owned manufacturing facilities or license technology to other manufacturers. Where appropriate, we may sell know how, electrodes or other subassemblies rather than complete super capacitor cells. We intend to continue to invest in research and development beyond Gen 4.0 to improve super capacitor cell performance, improve manufacturing processes, and reduce cost subject to having raised sufficient funds to do this.

Carbon-Ion was founded to develop a new class of energy storage device with considerable functional improvements over commercially available supercapacitors or 'ultra-capacitors'.






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The C-Ion cell will provide specific power characteristics much higher than a Li-ion cell. It is designed to be classified as non-flammable and non-hazardous for transport, allowing the product to be shipped easily and to comply with both current and future regulations.

Due to the method of energy storage, the cell has fewer moving parts electrochemically and can go through significantly more charge/discharge cycles and/or operate for many years of normal use.

The C-Ion cell is being designed for manufacture using technologies well known in high volume manufacture. This will enable Carbon-Ion to quickly scale-up production. Carbon-ion allows new products to be made and extra functions to be added to existing products, for example:





    ·   Improved energy storage allows the cell to be used as the principal method
        of energy storage in a far wider range of technologies than conventional
        supercapacitors

    ·   High specific power allows very fast charging

    ·   High specific power enables the extension of Li-ion battery lifetimes and
        reduction in battery size through peak shaving in hybrid applications

    ·   Improved safety protects customers, allows easy shipping and opens up
        applications in hazardous areas

    ·   Long cycle life allows energy storage to be installed for the entire
        lifetime of the device, reducing design complexity, eliminating service
        intervals and saving money




Results of Operations

Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021





Revenues

Revenues for the three months ended September 30, 2022 were $0 as compared with $0 for the comparable prior period, a change of $0, or 0%. The lack of revenue is due to the fact that the Company did not generate any sales for the three months ended September 30, 2022 and 2021 from its supercapacitor technology.





Operating Expenses

Operating expenses for the three months ended September 30, 2022 were $672,539 as compared with $557,510 for the comparable prior period, an increase of $115,029, or approximately 21%. The increase in operating expenses resulted primarily from a $101,430 decrease in salaries and wages, a $230,435 increase in legal and professional fees, and a $58,530 decrease in general and administrative expenses compared to the comparable prior period. Such changes result from a reduction in staff in the third quarter of 2022 and an increased in legal and professional fees and general and administrative expenses in the third quarter of 2022 in anticipation of commencing operations in the fourth quarter of 2022.





Net Operating Loss

Our net operating loss for the three months ended September 30, 2022 was $672,539 as compared with a net operating loss of $557,510 for the comparable prior period, an increase of $115,029, or approximately 21%. The increase in net operating loss is directly due to the overall net increase in operating expenses recorded in the current period compared to the comparable prior period as described in the caption immediately above.





Other Income (Expenses)

Other expenses for the three months ended September 30, 2022 was $34,998 as compared with $31,183 for the comparable prior period, an increase of $3,815, or approximately 12%, and is directly related to interest expense being consistent to the comparable period.





Net Loss

Our net loss for the three months ended September 30, 2022 was $651,136 as compared with a net loss of $513,781 for the comparable prior year period, an increase of $137,355, or approximately 27%. The increase in net loss is primarily related to the increase net operating loss as described in the captions above.






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Comprehensive Loss

Our net comprehensive loss for the three months ended September 30, 2022 was $651,271 as compared with a net loss of $644,714 for the comparable prior year period, an increase of $6,557 or approximately 1%. The increase in net comprehensive loss is comprised of the change in net loss described above plus a decrease of $130,798 in the foreign currency translation adjustment which is attributable to changes in exchange rates.

Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021





Revenues

Revenues for the nine months ended September 30, 2022 were $0 as compared with $0 for the comparable prior period, a change of $0, or 0%. The lack of revenue is due to the fact that the Company did not generate any sales for the nine months ended September 30, 2022 and 2021 from its supercapacitor technology.





Operating Expenses

Operating expenses for the nine months ended September 30, 2022 were $2,191,708 as compared with $1,874,412 for the comparable prior period, an increase of $317,296, or approximately 17%. The increase in operating expenses resulted primarily from a $203,144 increase in officers' salaries, a $372,571 decrease in salaries and wages, a $346,004 increase in legal and professional fees, and a $145,636 increase in general and administrative expenses compared to the comparable prior period. Such changes result from a reduction in staff in the first nine months of 2022 and an increased in legal and professional fees and general and administrative expenses in the first nine months of 2022 in anticipation of commencing operations in the fourth quarter of 2022.





Net Operating Loss

Our net operating loss for the nine months ended September 30, 2022 was $2,191,708 as compared with a net operating loss of $1,874,412 for the comparable prior period, an increase of $317,296, or approximately 17%. The increase in net operating loss is directly due to the overall net increase in operating expenses recorded in the current period compared to the comparable prior period as described in the caption immediately above.





Other Income (Expenses)

Other expenses for the nine months ended September 30, 2022 was $44,093 as compared with $68,193 for the comparable prior period, a decrease of $24,100, or approximately 35%, directly related to decreased interest expense.





Net Loss

Our net loss for the nine months ended September 30, 2022 was $1,997,087 as compared with a net loss of $1,642,192 for the comparable prior year period, an increase of $354,895, or approximately 22%. The increase in net loss is primarily related to the increase net operating loss as described in the captions above.





Comprehensive Loss

Our net comprehensive loss for the nine months ended September 30, 2022 was $2,134,528 as compared with a net loss of $1,781,493 for the comparable prior year period, an increase of $353,035 or approximately 20%. The increase in net comprehensive loss is comprised of the change in net loss described in the caption immediately above.

Current Liquidity and Capital Resources for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021

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