HTC Purenergy : 2020 Annual Report - MDA

MANAGEMENT DISCUSSION AND ANALYSIS

YEAR END DECEMBER ,

CLEAN ENERGY

Introduction

The following Management's Discussion and Analysis ("MD&A") is prepared as of December 31, 2020, and should be read together with the HTC Purenergy Inc. dba HTC Extraction SystemsTM ("HTC" or the "Corporation") audited annual consolidated financial statements for the year ending December 31, 2020 (the "Period" or the "Year") and related notes attached thereto (collectively referred to as the "Financial Statements"), which are prepared in accordance with International Financial Reporting Standards ("IFRS"). All amounts are stated in Canadian dollars unless otherwise indicated. The Corporation has adopted National Instrument 51-102F1 as the guideline in representing the MD&A. Terms used but not defined in this MD&A shall bear the meaning as set out in Part 1 of National Instruments ("NI") 51-102 and NI 14-101Definitions and accounting terms that are not defined herein shall bear the meaning as described or used in IFRS applicable to publicly accountable enterprises.

This MD&A is dated July 30, 2021.

FORWARD-LOOKING STATEMENTS DISCLAIMER

Statements in this MD&A that are not historical facts are forward-looking statements involving known and unknown risks and uncertainties that may cause the Corporation's actual results or outcomes to be materially different from those anticipated and discussed herein. In assessing forward-looking statements contained herein, readers are urged to read carefully all cautionary statements contained in this MD&A and accompanying Financial Statements, and in those other filings with the Corporation's Canadian regulatory authorities as found at 'www.sedar.com' and to not put undue reliance on such forward-looking statements. Forward-looking statements in this MD&A include statements with respect to: the expected performance of the Corporation's business and operations and the Corporation's intentions to expand its business and operations; the Corporation's expectations regarding revenue, expenses and anticipated cash needs; the Corporation's plans to expand its extraction capabilities; the ability of the Corporation to meet consumer demand; the ability of the Corporation to execute on its strategic priorities and objectives; the size of the market that the Corporation operates in; the Corporation's business strategy for the extraction and purification of hemp biomass; the receipt of all necessary regulatory and other third-party approvals to conduct its CBD extraction operations; future processing expectations; the Corporation's ability to enter into new hemp biomass tolling agreements; and the Corporation's expectations regarding the future operations and objectives of KF Hemp Corp. and Kase Farma Inc.. Although HTC's management ("Management") believes that the expectations reflected in the forward-looking statements are reasonable, Management cannot guarantee future results, levels of activity, performance or achievements, or other future events. Forward-looking statements in this MD&A speak only as of the date on which they are made and Management is under no duty to update any of its forward-looking statements after the date of this MD&A, other than as required and governed by applicable securities laws.

Additional information related to the Corporation is available for view on SEDAR at www.sedar.com.

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Corporate Overview

HTC Extraction Systems™ has developed proprietary extraction and purification systems, that have been designed to extract from biomass, liquids and gas, as well as for the distillation and purification of ethanol, ethanol and hydrocarbon-based solvents, used for this extraction in the Hemp-CBD/Biofibre/Protein business sector and also used for CO2 extraction and solvent and glycol purification in the Delta CleanTech energy business sector

These 2 business units benefit from the pedigree, management, experience, proprietary intellectual property and historic brand HTC has developed.

HTC's - Delta CleanTech Division

HTC's historic success as a technology leader in: CO2 extraction; Solvent Reclamation used in CO2 capture/utilization; Hydrogen Fuel production; and Carbon Credit Certification and Trading; has been industry

recognized since 2007.

CO2 Capture & Utilization

Environmental Social Governance ("ESG") is driving Identity Preserved Waste ("IPWTM") Solutions. The advanced adoption and success of electric vehicle transportation refocuses the call for decarbonized electricity, which will be achieved through CO2 capture/utilization, while renewable energy such as wind and solar become a growing and larger part of the energy mix in the next 25 years. Hydrocarbon combustion for electricity production will dominate the electric grid and CO2 capture/utilization is required.

HTC // Management's Discussion & Analysis	2020

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HTC's Delta CleanTech Division has developed an improved proprietary CO2 capture system that has been designed to significantly reduce the cost of CO2 capture. Brand named the Delta LCDesign®, this proprietary system has been engineered to deliver superior performance while reducing energy usage, lowering emissions, and improving the quality and purity of CO2 product captured.

HTC's CO2 capture technology, is the selected technology to provide the CO2 for the NRG COSIA Carbon XPRIZE competition announced in Calgary, Alberta earlier this year.

Solvent, Glycol and Ethanol Reclamation Systems

Delta Purification® is a solvent, glycol and ethanol purification subdivision focused on the field of purifying and reclaiming, recycling and reusing ethanol, solvents and glycols providing energy processors and heavy industry the option of not disposing of these waste materials in underground disposal wells.

HTC has completed the WTO patenting, commercialization and the construction and commissioning of the Delta Purification® System. A Delta Purification® System reclaimer unit is like a kidney in the human body, in that it removes the impurities that build up in solvents, ethanol, glycols and liquids used as solvents in commercial clean energy and biomass extraction systems. This. system allows these liquids to be reclaimed, recycled and reused

HTC // Management's Discussion & Analysis	2020

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The Delta Purification® System offers the following commercial products:

• Delta Solvent Reclaiming System™ - Reclaiming hydrocarbon based and other solvents, such as single, mixed, and formulated amines, for use in natural gas processing, ethanol-based solvents and post-combustion CO2 capturing processes.
• Delta Glycol Reclaiming System™ - Reclaims and purifies glycols, such as mono- ethylene glycol and tri-ethylene glycol, used for natural gas dehydration processes.
• Delta CBD Reclaiming System™ - Reclaims and purifies ethanol for use in CBD extraction from biomass. The end product meets food-grade requirements for human and animal consumption through reduced heat processing that prevents damage of the chemical attributes of CBD molecules.

HTC continues to pursue a strategy of Build, Own, Operate and Maintain ("BOOM"), whereby it will own physical assets at processing and storage facilities, serving the energy clean tech sector. The business model calls for either participating equity ownership, tolling revenue, or a combination thereof, whereby HTC will utilize its technologies, constructability experience and operating skills, to extract and purify at targeted facilities.

Hydrogen Fuel Production and Related CO2

Capture

The efficiency and acceptance of electric drive vehicles, and the improvements in cost and efficiency of Hydrogen Fuel Cell technology, has created the opportunity for rapid growth in the Fuel Cell Electric Vehicles ("FCEV").

Heavy trucks and passenger busses will lead the way with commercial vehicle sales expected to grow to $7 billion annually in 8 years.

Fuel stations are required for the production of hydrogen through methane (natural gas) reforming, which is the most cost effective and practical approach utilizing the natural gas (methane) pipeline network already serving gas stations. CO2 capture is required at these hydrogen reforming fuel stations to ensure the hydrogen is produced without a CO2 footprint.

United States Fueling Stations:

• 160,000 gas stations in the United States;
• 20,000 electric battery charging stations; and
• 61 hydrogen fueling stations.

HTC // Management's Discussion & Analysis	2020