Progressive Planet : 2023 Consolidated Financial Statments

PROGRESSIVE PLANET SOLUTIONS INC.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED APRIL 30, 2023 AND 2022

(Expressed in Canadian Dollars)

Registered Head Office

724 Sarcee Street East

Kamloops, British Columbia

V2H 1E7

KPMG LLP	Telephone	[phone]
Chartered Professional Accountants	Fax	[phone]
PO Box 10426 777 Dunsmuir Street	Internet	www.kpmg.ca

Vancouver BC V7Y 1K3

Canada

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Progressive Planet Solutions Inc.

Opinion

We have audited the consolidated financial statements of Progressive Planet Solutions Inc. (the Entity), which comprise:

• the consolidated statements of financial position as at April 30, 2023 and April 30, 2022
• the consolidated statements of loss and comprehensive loss for the years then ended
• the consolidated statements of changes in shareholders' equity for the years then ended
• the consolidated statements of cash flows for the years then ended
• and notes to the consolidated financial statements, including a summary of significant accounting policies

(Hereinafter referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at April 30, 2023 and April 30, 2022, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditor's Responsibilities for the Audit of the Financial Statements" section of our auditor's report.

We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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Material Uncertainty Related to Going Concern

We draw attention to Note 1 in the financial statements, which indicates that the Entity has incurred losses to date, and for the year ended April 30, 2023, the Entity recorded a loss of $1,164,472 and had overall negative cash flows of $1,066,129.

As stated in Note 1 in the financial statements, these events or conditions, along with other matters as set forth in Note 1 in the financial statements, indicate that a material uncertainty exists that may cast significant doubt on the Entity's ability to continue as a going concern.

Our opinion is not modified in respect of this matter.

Emphasis of Matter - Comparative Information

We draw attention to Note 3 and Note 4 to the financial statements ("Notes 3 and 4"), which explain that certain comparative information presented for the year ended April 30, 2022 has been adjusted. Notes 3 and 4 explain the reasons for the adjustments and also explain the adjustments that were applied to adjust certain comparative information.

Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended April 30, 2023. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

In addition to the matter described in the "Material Uncertainty Related to Going Concern" section of the auditor's report, we have determined the matters described below to be the key audit matters to be communicated in our auditor's report.

Evaluation of the fair value of property, plant and equipment acquired in the Absorbent Products Ltd. ("APL") acquisition

Description of the matter

We draw attention to Note 2(e) and Note 3 to the financial statements. On February 18, 2022, the Entity completed the acquisition of APL through a business combination. As a result of the business combination, the Entity acquired property, plant and equipment with a fair value of $13,447,850. During the year ended April 30, 2023, adjustments were made by the Entity to finalize the preliminary amounts recorded for the property, plant and equipment acquired in the acquisition of APL.

The determination of the fair value of this property, plant and equipment which included:

• land
• buildings
• plant and equipment

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involved significant estimates, including depreciated replacement cost and direct sales comparison. The Entity engaged certified independent third-party appraisers to determine the depreciated replacement cost estimates for buildings and certain acquired plant and equipment and the direct sales comparison estimates for the remaining acquired plant and equipment.

Why the matter is a key matter

We identified the evaluation of the fair value of property, plant and equipment acquired in the APL acquisition as a key audit matter. Significant auditor judgment was required in evaluating the results of our audit procedures regarding depreciated replacement cost and direct sales comparison estimates. Further, the assessment of the depreciated replacement cost and direct sales comparison estimates required the use of professionals with specialized skills and knowledge in valuation.

How the matter was addressed in the audit

The following are the primary procedures we performed to address this key audit matter:

We evaluated the competence, capabilities and objectivity of the certified independent third-party appraisers engaged by the Entity.

We involved valuation professionals with specialized skills and knowledge who assisted in:

• Assessing the reasonableness of the Entity's depreciated replacement cost estimates of the fair value of acquired buildings by comparing the Entity's estimates to market data for comparable assets
• Assessing the reasonableness of the Entity's direct sales comparison estimates of the fair value of certain acquired plant and equipment by comparing the Entity's estimates to market data for comparable assets
• Assessing the reasonableness of the Entity's depreciated replacement cost estimates of the fair value of remaining acquired plant and equipment by comparing the Entity's estimated depreciated replacement cost to a depreciated replacement cost range that was independently developed by the valuation professionals using data on the assets' historical acquisition cost, original acquisition date and market data for comparable assets.

Other Information

Management is responsible for the other information. Other information comprises the information included in Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

We obtained the information included in Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditor's report.

We have nothing to report in this regard.

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Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.

Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
  The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

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