Zentek : ZEN Mar 31 2022 FS w BDO Audit report FINAL

ZENTEK LTD.

(FORMERLY ZEN GRAPHENE SOLUTIONS LTD.)

CONSOLIDATED FINANCIAL STATEMENTS

For the years ended March 31, 2022 and 2021

(Expressed in Canadian Dollars)

	ZENTEK LTD.
	(FORMERLY ZEN GRAPHENE SOLUTIONS LTD.)
MARCH 31, 2022 AND 2021	PAGE

Independent Auditor's Report

Report of Independent Registered Public Accounting Firm

(BDO Canada LLP; Vancouver, British Columbia; (PCAOB ID#1227)

Consolidated Statements of Financial Position	1
Consolidated Statements of Loss and Comprehensive Loss	2
Consolidated Statements of Cash Flows	3
Consolidated Statements of Changes in Equity	4
Notes to the Consolidated Financial Statements	5-39

Tel: [phone]	BDO Canada LLP
Fax: [phone]	1100 Royal Centre
www.bdo.ca	1055 West Georgia Street
	Vancouver, BC
	V6E 3P3

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Zentek Ltd.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statement of financial position of Zentek Ltd. (formerly Zen Graphene Solutions Ltd.) (the "Company") as of March 31, 2022 and the related consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the year ended March 31, 2022, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at March 31, 2022, and the results of its operations and its cash flows for the year ended March 31, 2022, in conformity with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

Chartered Professional Accountants

Vancouver, British Columbia

June 29, 2022

We have served as the Company's auditor since 2022

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms

1

ZENTEK LTD. (FORMERLY ZEN GRAPHENE SOLUTIONS LTD.)

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

	March 31,	March 31,
	2022	2021
(Stated in Canadian Dollars)	$	$
ASSETS
Current assets	26,675,000
Cash and cash equivalents [note 13]	3,091,549
Accounts and other receivables [note 4]	656,164	119,349
Loan receivable [note 5]	2,950,000	-
Inventories [note 6]	665,572	-
Prepaids and deposits [note 6]	1,012,363	174,480
Total current assets	31,959,099	3,385,378
Non-current assets	6,025,421
Property and equipment [note 7]	705,221
Exploration and evaluation assets [note 8]	-	26,159,729
Total non-current assets	6,025,421	26,864,950
Total assets	37,984,520	30,250,328
LIABILITIES
Current liabilities	1,204,587
Accounts payable and accrued liabilities [note 9]	373,103
Current portion of lease liability [note 10]	149,317	122,452
Current portion of long-term debt [note 11]	950,930	-
Unit subscriber deposits	-	2,008,728
Deferred premium on flow-through shares	-	1,884
Total current liabilities	2,304,834	2,506,167
Non-current liabilities	132,555
Lease liability [note 10]	281,873
Long-term debt [note 11]	998,070	-
Total non-current liabilities	1,130,625	281,873
Total liabilities	3,435,459	2,788,040
SHAREHOLDERS' EQUITY	85,494,266
Share capital [note 12(a)]	43,801,952
Warrants [note 12(b)]	-	407,264
Share-based payment reserve [note 12(c)]	7,761,541	3,270,399
Shares to be issued	472,500	472,500
Deficit	(59,179,246)	(20,489,827)
Total shareholders' equity	34,549,061	27,462,288
Total shareholders' equity and liabilities	37,984,520	30,250,328
Nature of Business [note 1]

Commitments and Contingencies [note 18]

Subsequent Events [note 22]

The accompanying notes are an integral part of these consolidated financial statements

These consolidated financial statements were authorised for issue by the Board of Directors on June 29, 2022.

Approved on behalf of the Board of Directors:

"Eric Wallman"

, Director

"Brian Bosse"

, Director

2

ZENTEK LTD. (FORMERLY ZEN GRAPHENE SOLUTIONS LTD.)

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(Stated in Canadian Dollars)	2022	2021
FOR THE YEARS ENDED MARCH 31	$	$
REVENUE	339,666
Sales	-
Other income	7,517	2,355
	347,183	2,355
EXPENSES	614,710
Amortization [note 7]	126,799
Consulting fees	898,208	392,752
Investor relations and promotion	280,740	175,932
Listing and filing fees	325,167	52,466
Professional fees	1,849,888	548,922
Rent	196,994	51,570
Research and development	1,541,902	-
Salaries and benefits [note 15]	1,436,708	516,784
Stock-based compensation [notes 12(c) and 15]	4,726,840	2,018,416
Supplies and materials	376,787	196,028
Other expenses [note 21]	661,904	236,406
	12,909,848	4,316,075
Loss from continuing operations	(12,562,665)	(4,313,720)
Discontinued operations	26,671,935
Impairment of exploration and evaluation assets [note 8]	-
Loss from discontinued operations [note 8]	26,671,935	-
Loss before the undernoted	(39,234,600)	(4,313,720)
Interest and other income	20,597	4,107
Interest expense	(63,777)	(6,460)
Premium on flow-through shares	1,884	109,795
Government grants [note 20]	581,848	337,628
Total other items	540,552	445,070
Net and comprehensive loss for the year	(38,694,048)	(3,868,650)
Basic and diluted net loss per share [note 19]	0.13
Continuing operations	0.05
Discontinued operations	0.29	-
	0.42	0.05

The accompanying notes are an integral part of these consolidated financial statements