NEO Battery Materials : Management Discussion & Analysis for the Year Ended February 29, 2024

NEO BATTERY MATERIALS LTD.

MANAGEMENT'S DISCUSSION & ANALYSIS

Year Ended February 29, 2024

MANAGEMENT DISCUSSION AND

ANALYSIS

For the Year Ended February 29, 2024

As at June 27, 2024

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NEO BATTERY MATERIALS LTD.

MANAGEMENT'S DISCUSSION & ANALYSIS

Year Ended February 29, 2024

INTRODUCTION

The following management's discussion and analysis (MD&A) of the Neo Battery Materials Ltd. ("the Company") has been prepared as of June 27, 2024. The MD&A should be read in conjunction with the consolidated financial statements of the Company and the notes thereto for the year ended February 29, 2024, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations of the International Financial Reporting Interpretations Committee ("IFRIC"). In addition, these consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information.

Management is responsible for the preparation and integrity of the financial statements, including the maintenance of appropriate information systems, procedures, and internal controls. Management is also responsible for ensuring that information disclosed externally in the MD&A is complete and reliable. Additional information of the Company is available on SEDAR at www.sedarplus.caand on its website at www.neobatterymaterials.com.Readers of the MD&A should be cautioned that information and statements derived from the Company's financial statements do not necessarily reflect the future financial performance of the Company. Statements in the MD&A that are not historical based facts are forward-looking statements which are made subject to cautionary language on pages 19-20 and involve known and unknown risks and uncertainties. Actual results could vary considerably from these statements. Readers should be cautioned not to put undue reliance on forward looking statements.

OVERALL PERFORMANCE

For the year ended February 29, 2024, the Company reported a net loss of $3,507,980, which is a significant increase from $1,980,749 net loss reported for the year ended February 28, 2023. The increase in loss was primarily due to higher expenses in payroll, consulting and management fees, and stock-based compensation. As at February 29, 2024, the Company's accumulated deficit had risen to $32,949,382 from $28,405,116 as of February 28, 2023. The Company continues to face operating losses, possesses limited financial resources, lacks operating cash flow, and there is no assurance that it will secure sufficient funding or adequate financing to sustain its operations.

Description Of the Business

NEO Battery Materials Ltd. (the "Company" or "NEO Battery") is a publicly listed company incorporated under the Business Corporations Act of British Columbia on February 10, 2006 as 0748496 B.C. Ltd. On March 1, 2006, the Company changed its name to BCGold Corp, and on March 16, 2017 to Pan Andean Minerals Ltd, and again on March 2, 2021, to NEO Battery Materials Ltd. The Company is a Canadian battery materials technology company focused on developing silicon anode materials for lithium-ion batteries in electric vehicles, electronics, and energy storage systems. With a patent-protected, low- cost manufacturing process, the Company enables longer-running and ultra-fasting charging batteries compared to existing state-of-the-art technologies. The Company aims to be a producer of silicon anode materials for the electric vehicle and energy storage industries. For more information, please visit the Company's website at: https://www.neobatterymaterials.com/.

Corporate Highlights

Highlights of the Company's activities during the year ended February 29, 2024, and up to the date of the MD&A:

Corporate Updates

• On March 13, 2023, the Company incorporated its first subsidiary in US, NEO Battery Materials America, LLC, in compliance with the provisions and requirement in the State of Delaware, as part of for its US business expansion.

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NEO BATTERY MATERIALS LTD.

MANAGEMENT'S DISCUSSION & ANALYSIS

Year Ended February 29, 2024

• On July 4, 2023, the Company entered Generation IACP Inc to provide market-making services. According to the term of agreement, Generation will receive $7,500 per month, plus applicable taxes. The initial term of the agreement is 6-month, and it will be automatically renewed for subsequent 6-month period.
• On July 24, 2023, the Company announced it has initially applied for a federal-level grant focused on EV Battery Technology for funding of CAD1.5 million for its Canadian expansion strategy.
• On July 27, 2023, NBM Korea Co has been selected as a recipient of the Intellectual Property Support Program administered by the Korea Invention Promotion Association. Selected among 10 IP-based companies, NBM Korea Co will receive a grant and pro-bono technology consulting to strengthen market competitiveness by implementing new R&D directions and securing indisputable patents.
• On August 16, 2023, the Company has registered the trademark NBMSiDE® at Korean Intellectual Property Office under the classes of active negative polar substances for secondary cell batteries.
• On September 5, 2023, the Company received the 1st purchase order for 0.4 metric tons/400 kg of proprietary silicon anodes, NBMSiDE®, by an Asian Chemical Materials Company. The Company plans to supply over one-year timeline, delivering gradually optimized samples.
• On September 13, 2023, the Company announced that several EV industry players including battery & automotive companies have requested NBMSiDE® to conduct evaluations, and the Company is filling orders in 2-kg batches.
• On September 26, 2023, the Company announced that it is underway to form a trilateral research collaboration with a government-funded research institute and a prominent engineering university. The project will focus on a) expanding NBMSiDE® performance; b) developing new silicon anode products complementary to existing portfolio, and c) securing non-dilutive financing in Korea and Canada.
• On November 3, 2023, the Company appointed Dr. Jae Ha Woo as the new Chief Science Officer and accepted Dr. Jong Hyeok Park's resignation as a director of the Company.
• On January 3, 2024, the Company has completed the R&D Scale-up Centre relocation from Yonsei Engineering Research Park to Gyeonggi Technopark in Ansan Science Valley, to accommodate the increased material evaluation pipeline with global battery cell manufacturers and EV automakers.
• On January 9, 2024, the Chief Executive Officer (the "CEO") of the Company provided a letter to shareholders to outline the Company's silicon anode business strategy and outlook for year 2024.
• On January 11, 2024, the Company filed its 9th patent to protect a significant process innovation in silicon anode materials.
• On January 19, 2024, the Company granted stock options to its directors, officers, employees, and consultants to acquire 5,760,000 shares at a price of $0.30 per share, with expiry date on January 19, 2029. The stock options will be vested after three months of date of grant.
• On January 29, 2024, the Company entered the share purchase agreement with A&P. The Company acquired 20% Korea Co's ownership from A&P with a purchase price of $1,708,707. As a result, the Company owns 80% ownership of the South Korean subsidiary.
• On March 14, 2024, the Company achieved pilot-scale capacity expansion to 4,000 kilograms per year without

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NEO BATTERY MATERIALS LTD.

MANAGEMENT'S DISCUSSION & ANALYSIS

Year Ended February 29, 2024

additional equipment or process changes.

• In early March 2024, the Company participated in two global lithium-ion battery conferences: Battery Japan in Tokyo and InterBattery 2024 in Seoul, South Korea.
• On March 14, 2024, the Company appointed Mr. Daniel Lim as the new Chief Financial Officer (the "CFO") to replace Ms. Nancy Zhao, the former CFO.
• On March 19, 2024, the Company appointed MNP LLP as the new auditor of the Company to replace De Visser Gray LLP.
• On April 3, 2024, the Company appointed Mr. Dongmok Whang to join the Board of Directors, and accepted Mr. Sung Rock Hwang resignation from the Board of Directors.
• On April 16, 2024, the Company appointed Mr. Ricky Lee as a managerial advisor.
• On May 4, 2024, 5,341,668 warrants expired without exercising.

Change of Business (the "COB")

• On March 16, 2023, the Company was granted an extension till April 20, 2023 on the basis of a minimum financing for gross proceeds of $3,900,000.
• On April 27, 2023, the Company was granted an extension till June 19, 2023 on the condition that the Company must continue to control NBM Korea posting-financing with a minimum of 51% interest.
• On June 30, 2023, the Company announced its intention to raise a minimum of $3.9 million in financing in connection with COB into an Industrial, Technology, or Life Sciences Tier 2 Issuer. The specific terms, nature and price of each unit of the financing are yet to be finalized. The net proceeds of the financing will primarily be allocated towards groundwork for the South Korean silicon anode commercial plant, material and equipment, expansion of North American R&D efforts, and general working capital purpose.
• On September 26, 2023, trading in shares of the Company halted, pending receipt and review of acceptable documentation of COB pursuant to Policy 5.2.
• On October 10, 2023, the Company announced a non-broker private placement to issue a minimum of 12,187,500 units for gross proceeds of $3,900,000 up to a maximum of $5,000,000. One unit consists of one common share of the Company and one non-transferable common share warrant, with an exercise price of $0.75 per share for a period of 24 months after the closing date of financing. The offering is expected to be completed by the end of October and will satisfy the COB minimum financing requirement by TSX Venture Exchange. The proceeds of financing will be used to develop silicon anode materials provide and general corporate purposes.
• On November 24, 2023, the Company completed a non-brokered private placement of 11,386,860 units at a price of $0.32 per unit for gross proceeds of $3,643,795. Each unit consisted of one common share and one common share warrant, with each warrant entitling the holder to purchase one common share at a price of $0.75 per common share for 24 months from the closing date of the private placement. In connection with the private placement, the Company paid cash commissions of $9,352 and issued 29,225 finder's warrants, fair valued at $3,693, entitling the holder to purchase one common share at a price of $0.75 per common share until November 24, 2025.

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NEO BATTERY MATERIALS LTD.

MANAGEMENT'S DISCUSSION & ANALYSIS

Year Ended February 29, 2024

• On December 27, the Company filed the Filing Statement for COB that prepared in accordance with Policy 5.2, and on January 9, 2024, Exchange accepted the documentation of COB filing application.
• Effective on January 11, 2024, the Company's common shares resumed trading.

Financings during fiscal 2024 and up to the date of this report

• 1,466,667 and 100,000 stock options were exercised at a price of $0.06 and $0.20 per option, respectively, for total proceeds of $108,000.
• 1,900,000 warrants were exercised at a price of $0.16 per warrant for total proceeds of $304,000.
• The Company completed a non-brokered private placement of 11,386,860 units at a price of $0.32 per unit for gross proceeds of $3,643,795. Each unit consisted of one common share and one common share warrant, with each warrant entitling the holder to purchase one common share at a price of $0.75 per common share for 24 months from the closing date of the private placement. In connection with the private placement, the Company paid cash commissions of $9,352 and issued 29,225 finder's warrants entitling the holder to purchase one common share at a price of $0.75 per common share until November 24, 2025.

Calendar Year 2024 Strategy & Outlook: An Efficient Route-To-Commercialization

Over the forthcoming 12 months, the Company has configured the commercialization strategy to emphasize prudent operational execution, capital efficiency and conservation, and business risk mitigation: the Company will prioritize optimizing NBMSiDE® electrochemical performance and cost competitiveness to establish advanced commercial agreements (i.e., joint development agreement or collaboration agreement) with testing partners in the global EV battery supply chain. 2024 strategy will be executed through a 5-pillared approach.

Pillar 1: Fulfilling Growing Silicon Anode Need by Expanding Supply Chain Network

In 2023, the Company executed a record number of non-disclosure agreements (NDA) with global battery cell manufacturers, EV original equipment manufacturers (OEM), and chemical material companies. Technological breakthroughs primarily drove battery supply chain interest and demand for NEO's silicon anode materials. The Company has developed a proprietary, energy-efficient manufacturing process, enabling low-cost silicon anode production. Compared to competing silicon anodes, NEO realizes substantial cost reductions with increased specific capacity for longer driving ranges. Delivering battery cost reductions and performance improvements, the Company aims to supply NBMSiDE® to all EV lithium-ion batteries to accelerate global EV adoption efforts. To become one of the top 10 silicon anode producers, the Company will continue to secure new battery supply chain relationships to expand material evaluations and commercialization opportunities.

Pillar 2: Advancing Silicon Anode Evaluations with Battery Supply Chain Partners

The Company is currently engaged in various material evaluations at different stages - late, intermediate, and initial - with small-to-medium enterprises (SME) and global companies in the battery, EV, and electronics supply chain. These evaluations are systematically conducted wherein progressively performance improved NBMSiDE® are delivered over multiple phases. The Company will focus on further developing these late-stage relationships with downstream companies to convert them into advanced agreements that can be publicly disclosed. Along with downstream relationships, NEO will commit to expanding collaborations with SMEs and global chemical material companies in the upstream supply chain including horizontal partners. Reinforcing silicon input precursors, nanocoating materials, binders, and performance-enhancing processes will predictably improve NBMSiDE® cycle life, capacity, and mechanical durability.

Pillar 3: Silicon Anode Material Research & Development Direction

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NEO BATTERY MATERIALS LTD.

MANAGEMENT'S DISCUSSION & ANALYSIS

Year Ended February 29, 2024

From past years to the present, NEO's research and development (R&D) focused on optimizing the electrochemical performance of a pure 100% silicon-based anode. Demonstrating the feasibility of a pure 100% NBMSiDE® anode without graphite for 300 charging cycles was essential in progressing to later-stage evaluations. Material stability, cycle life replicability, and other key performance indicators (KPI) at the 300-charging cycle level will heavily contribute to establishing the advanced agreements.

In the upcoming 2024 year, the Company will initiate testing with graphite anode materials to replicate actual lithium-ion battery anode compositions. The Company has also been active in integrating NBMSiDE® materials for solid-state batteries (SSB). NEO is completing material evaluations with SSB companies to develop compatible product lines for sulfide-based and polymer-based SSBs.

Pillar 4: Mass Production Plans & Inclination Towards Canadian Operations

For the best interest of the Company and its shareholders, the management has judged that pursuing advanced commercial agreements will create a capital-efficient and risk-mitigatedroute-to-commercialization. The following factors have also influenced the decision-making process.

Aggressive Canadian Government Effort to Fund EV-Related Projects

With Canada's mandate for 100% zero-emission vehicle sales by 2035, various policies, programs, and funding opportunities were presented to the Company for investment attraction and mass production initiation in Canada. The Company prioritizes minimizing dilution and risk to shareholders during the commercialization process. Canada's aggressive support measures, such as non-dilutive funding for EV-related projects, interest-free or low-interest debt financing for real estate and capital expenditures, refundable investment tax credits (ITC) for clean technology manufacturing equipment, beneficial land lease rates, and newly established Crown funds like the Canada Innovation Corp., have prompted management and the engineering team to logically consider situating the first commercial plant in Canada.

Potential Strategic Investment Opportunities

NEO's emphasis on advanced commercial agreements also stems from the potential of receiving strategic investments. We are currently balancing the scales and determining the most advantageous location to initiate our commercial plant construction. Concurrently, as communicated, we will concentrate our focus on securing governmental funding opportunities and strategic investments to finance our route-to-commercialization in a less dilutive manner.

Pillar 5: Expanding Battery Technology Portfolio with Value-Added Projects

Management is currently conducting late-stage discussions with Asian and European companies regarding collaborations on value-added project developments. Project details will be disclosed through news releases shortly.

Completion Of Change Of Business Application ("COB")

On April 13, 2022, the Company commenced a COB application with the Exchange. In the past, the Company was a Vancouver- based junior resource company with exploration in North America. The Company deems that a classification to a Tier 2 Technology issuer on the Exchange instead of a junior Mineral Exploration and Mining issuer will better reflect the Company's long-term goal and serve its shareholders' best interests. On November 21, 2022, the Company received conditional approval from Exchange for the proposed COB into an Industrial, Technology, or Life Sciences Tier 2 Issuer. On April 28, 2023, the Company was granted an extension, up to June 19, 2023, to complete the COB upon a minimum financing for gross proceeds of $3,900,000 and the continued control of at least 51% of NBM Korea. On November 24, 2023, the Company completed a non-brokered private placement of 11,386,860 units at a price of $0.32 per unit for gross proceeds of $3,643,795. On December 27, 2023, the Company filed the Filing Statement for COB that prepared in accordance with Exchange's policy 5.2.

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NEO BATTERY MATERIALS LTD.

MANAGEMENT'S DISCUSSION & ANALYSIS

Year Ended February 29, 2024

On January 9, 2024, the Exchange accepted COB fling application; and effective on January 11, 2024, the common shares of the Company resumed trading on Exchange.

NBMSiDE® Products And Purchase Order

On December 6, 2021, the Company launched its product called NBMSiDE®. This product is developed using the Company's proprietary nanocoating technology, which involves a single-step,one-pot nanocoating process. The application of this technology allows the Company to economically manufacture silicon anode active materials that are crucial in the production of electric vehicles.

The primary objective of NBMSiDE® is to enhance the rate capability (charging speed) and specific capacity of the anode active materials, ultimately leading to increased energy density and life span for lithium-ion batteries ("LiBs") in electric vehicles, consumer electronics, and energy storage applications. The Company has employed lean and efficient process steps in the development of this unique product, ensuring cost-effectiveness and scalability in production.

During NBMSiDE manufacturing, special additives effectively prevent silicon particle clustering or agglomeration by acting as an interparticle buffer layer. These layers (i) stabilize the interfacial energy between particles, (ii) reduce unnecessary particle damage during the milling process, thereby preventing excessive milling, and (iii) induce the uniform dispersion of particles in the solvents to improve manufacturing efficiency directly. The patented technology direct implementation has resulted in the improvement of both NBMSiDE yield and quality, increasing the pilot-scale capacity to approximately 4,000 kg per year from several hundred kg based on continuous processing.

In September 2023, the Company received the 1st purchase order for 0.4 metric tons/400 kg of proprietary silicon anodes, NBMSiDE®, by an Asian Chemical Materials company. The Company plans to supply over a one-year timeline, delivering gradually optimized samples.

R&D Scale-Up Center

In September 2023, the Company initiated the relocation of its R&D Scale-Up Center to Gyeonggi Technopark and completed the relocation as of January 2024. Including an increased headcount of battery research engineers, the augmented workspace accommodates expanded manufacturing and testing equipment to increase overall optimization productivity. NEO prioritizes moving forward late-stage testing relationships into advanced commercial contracts like joint development and/or collaboration agreements. The revised strategy will mitigate operational and financial risk and reduce the capital requirements for mass production commercialization.

NBMSiDE® Sample Evaluation Progress

The Company is continuously undertaking NBMSiDE® sample evaluation and product optimization with global battery cell manufacturers under NDAs. As different nanocoating materials, performance requirements, and silicon loadings are required, the silicon anode products are being finetuned with specifications requested from each cell manufacturer, creating lead times between delivery and performance testing. NEO Korea Co is progressing through sending optimized products for evaluation. Most recently, an initial coin cell test was completed with a non-Asia-based cell manufacturer that NEO has been engaged with for over 9 months since the NDA. Both companies have mutually agreed to advance to pouch cell testing, which is larger in capacity and format, and NEO will accordingly provide optimized silicon anode products to the manufacturer for further evaluation. Several EV industry players including battery & automotive companies have requested NBMSiDE® to conduct evaluations, and the Company is filling orders in 2-kg batches.

Site For Commercial Plant - Oseong Foreign Investments Zone

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NEO BATTERY MATERIALS LTD.

MANAGEMENT'S DISCUSSION & ANALYSIS

Year Ended February 29, 2024

On January 26, 2022, through its Korean subsidiary, the Company received approval from the Province of Gyeonggi, the largest economic province in South Korea, to build its commercial plant on a 10-year lease term. The site is situated in Oseong Foreign Investment Zone and is approximately 106,700 square feet (or 2.5 acres).

The use of the Production Building will entail the installation of future NBMSiDE® mass production lines and utility facilities, and the Research Office Building will house the current equipment, testing facilities, and personnel of the NBM Korea Scale- Up Centre located at Gyeonggi Technopark.

Construction Plan

The Company has submitted the plant's construction permit application to the City of Pyeongtaek through its South Korean subsidiary, NBM Korea. In late 2022, NEO's management and commercialization engineering team had discussed with the city's construction and relevant departments and performing the necessary due diligence and regulatory work to gain permit approval. Upon the approval of the construction permit, the initial construction process from site clearance to basic civil engineering work is expected to be carried out sequentially.

On January 17, 2023, the Company received approval of a construction permit for Silicon Anode Commercial Plant in Oseong Foreign Investment Zone, Pyeongtaek City. In early 2023, the Company engaged in discussions with three contractors for request for quotation process for South Korean Commercial Plant, with the aim of selecting contractors based on critical procurement factors. In April 2023, the Company had completion of Request for Quote process for its commercial plant construction. On May 19, 2023, the Company designated preferred contractor for its commercial plant located in South Korea. On July 5, 2023, the Company entered into a binding agreement with the preferred contractor.

While construction remains part of the Company's long-term plan, recent slowdowns in the overall electric vehicle market and decreased buyer demand, the management has decided not to pursue construction within the next 12 months. The Company will continue to closely monitor overall market performance and economic conditions before making further decisions.

Neo Battery Materials Korea Co - Share Issuance To Automobile & PCB Inc ("A&P")

On July 1, 2022, NBM Korea, a wholly owned subsidiary of the Company entered the Investment Agreement with A&P. Pursuant to the terms of the agreement, NBM Korea issued 517,657 common shares at a price of KRW5,796 per common share to A&P for gross proceeds of 2,999,820,383 KRW (equivalent to CAD2,978,822). As a result, A&P represents 40% of the issued and outstanding shares of NBM Korea.

According to the agreement, the proceeds shall be used for operations of NBM Korea and shall not be lent to a third party or shall not be used to purchase shares of any third party. A&P may conduct due diligence over the use of the proceeds by NBM Korea and the proceeds shall be deposited into and managed from a separate bank account of NBM Korea. Further, NBM Korea cannot transfer or collateralize any of these funds without the consent by A&P. NBM Korea cannot acquire an interest in another entity and cannot increase or decrease its capital or grant stock options to other parties. A&P is required to be consulted on the appointment or dismissal of the NBM Korea CEO.

On January 29, 2024, the Company entered into the share purchase agreement with A&P. The Company acquired 20% Korea Co's ownership from A&P with a purchase price of $1,708,707. The Company currently owns 80% ownership of Korea Co after the completion of the transaction as of the date of this report. Considering recent silicon anode technological advancements, acquiring ownership was deemed necessary to realize increased proportions of economic benefit, value creation, and future cash flows for NEO and its shareholders.

SELECTED ANNUAL INFORMATION

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NEO BATTERY MATERIALS LTD.

MANAGEMENT'S DISCUSSION & ANALYSIS

Year Ended February 29, 2024

The following financial data is derived from the Company's audited financial statements years ended February 29, 2024, February 28, 2023, and February 28, 2022.

				February 29, 2024			February 28, 2023		February 28, 2022
Expenses		$		3,330,055	$	1,944,215	$	2,037,226
Other expenses (income)			27,435			(36,534)		27,586
Net loss and comprehensive loss			3,509,596			1,925,051		2,030,297
Basic and diluted loss per share			0.03			0.02		0.02
Total current assets			1,120,288			1,751,718		1,438,948
Total assets			2,953,808			3,295,753		1,916,897
Total current liabilities			558,356			189,486		187,441
Total liabilities			725,427			357,099		371,514

RESULTS OF OPERATIONS

For the three-month ended February 29, 2024

Significant items that contributed to the net loss and comprehensive loss for the periods ended February 29, 2024 and February 28, 2023 were as follows:

• Advertising and marketing of $80,314 (February 28, 2023 - $16,011)
• Consulting and management fees of $217,769 (February 28, 2023 - $98,635)
• Corporate listing and filing fees $17,234 (February 28, 2023 - $19,153)
• Investor relation of $18,441 (February 28, 2023 - $21,464)
• Office and general $40,493 (February 28, 2023 - $18,164)
• Professional fees of $85,247 (February 28, 2023 - $80,762)
• Payroll expenses of $193,619 (February 28, 2023 - $151,368)
• Research and development costs of $39,579 (February 28, 2023- $89,934)
• Rent recovery $17,660 (February 28, 2023 - $12,319)
• Travel $7,081 (February 28, 2023 - $12,847)
• Stock-basedcompensation $548,928 (February 28, 2023 - $Nil)
• Income tax expenses $150,490 (February 28, 2023 - $Nil)

During the three-month period ended February 29, 2024, the Company reported a net loss of $1,478,616, compared to a net loss of $624,316 for the same period in 2023, an increase of $854,300. The rise of $757,324 in operating expenses went up to $1,380,886 from $551,562 in the prior year's quarter.

The increase in operating expenses can be attributed primarily to higher payroll expenses, consulting and management fees, which increased by $42,251, and $119,134, respectively. These increases were mainly driven by hiring additional staff at Korea Co, and costs associated with the closing COB. Additionally, the Company incurred more in advertising/marketing costs of $64,303 in the current quarter attributed to enhanced marketing awareness programs.

In this quarter, stock-based compensation amounted to $548,928, a cost not incurred in the same quarter of the previous year. The Company granted 5,760,000 stock options to its directors, officers, and consultants in the current quarter, compared to 300,000 stock options actually granted in the same quarter in 2023. The Company records an income tax expense of $150,490, resulting from an estimated income tax payable from a forgiveness of loan from Peru entities for the past fiscal years.

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NEO BATTERY MATERIALS LTD.

MANAGEMENT'S DISCUSSION & ANALYSIS

Year Ended February 29, 2024

The increased costs were partially offset by a reduction in research and development expenses of $50,355 in the current quarter. The decrease in research and development activities was due to disruption caused by the relocation of R&D Center from Yonsei University to Gyeonggi Technopark in the current quarter.

For the year ended February 29, 2024

Significant items that contributed to the net loss and comprehensive loss for the years ended February 29, 2024, and February 28, 2023 were as follows:

• Advertising and marketing of $183,906 (February 28, 2023 - $46,664)
• Consulting and management fees of $695,955 (February 28, 2023 - $470,177)
• Corporate listing and filing fees $86,363 (February 28, 2023 - $50,921)
• Investor relation of $90,296 (February 28, 2023 - $48,602)
• Office and general $100,344 (February 28, 2023 - $49,393)
• Professional fees of $291,046 (February 28, 2023 - $241,864)
• Payroll expenses of $818,120 (February 28, 2023 - $489,558)
• Research and development costs of $150,679 (February 28, 2023 - $304,527)
• Rent $45,855 (February 28, 2023 - $71,130)
• Travel $111,598 (February 28, 2023 - $45,054)
• Stock-basedcompensation $548,928 (February 28, 2023 - $Nil)
• Income tax expenses $150,490 (February 28, 2023 - $Nil)

During the year ended February 29, 2024, the Company reported a net loss of $3,507,980, compared to a net loss of $1,980,749 for the same period in 2023, an increase of $1,527,231. The operating expenses rose by $1,385,840, reaching $3,330,055, up from $1,944,215 in the previous year 2023.

The increase in operating expenses can be attributed primarily to higher payroll expenses, consulting and management fees, and professional fees, which increased by $328,562, $225,778, and $49,182, respectively. These increased costs were mainly driven by hiring additional staff at Korea Co, and the costs associated with closing COB. Additionally, the Company incurred more in advertising/marketing costs of $137,242, and investor relation expenses of $41,694 in the current year due to enhanced marketing awareness including presentations, conferences, and YouTube initiatives, etc. Additional increases were recorded in travel expenses, which rose by of $66,544, office expenses by $50,951, and listing and filing fees by $35,442, compared to the previous period in 2023. These increased costs were associated with closing the COB and participating in the battery conferences in Asia.

In the current year, the stock-based compensation of $548,928 was recorded, compared to $nil was recorded in the previous period in 2023, according to vesting schedule. This year, the Company granted 5,760,000 stock options to its directors, officers, and consultants. This is a significant increase from the 300,000 stock options actually granted in the same quarter of 2023, which had been reduced from 1,300,000 initially. The Company records an income tax expense of $150,490, resulting from an income tax payable from a forgiveness of loan from Peru entities for the past fiscal years.

Those increased costs were partially offset by a reduction in research and development expenses of $153,848 in the current year. The focus of research and development activities this year was mainly on improving the product yield and manufacturing the samples, shifting away from the preliminary stage of R&D. The decrease in research and development activities was partially due to disruptions caused by the relocation of R&D Center from Yonsei University to Gyeonggi Technopark during this year.

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