ADF Group Inc. — Annual Report 2023

Apr 28, 2023

CONSOLIDATED FINANCIAL STATEMENTS Fiscal Year Ended January 31, 2023

Toronto Stock Exchange: TSX/ DRX

TABLE OF CONTENTS

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Management’s Report ............................................................................................................................................................................................................. 1 Independent Auditor’s Report ................................................................................................................................................................................................. 2 Consolidated Financial Statements .......................................................................................................................................................................................... 2 Consolidated Statements of Financial Position ........................................................................................................................................................................... 7 Consolidated Statements of Comprehensive Income ................................................................................................................................................................ 8 Consolidated Statements of Changes In Shareholders’ Equity .................................................................................................................................................. 9 Consolidated Statements of Cash Flows.................................................................................................................................................................................... 10 Notes To The Consolidated Financial Statements .................................................................................................................................................................. 11

ADF Group Inc.

CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JANUARY 31, 2023

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MANAGEMENT’S REPORT

To Our Shareholders

ADF Group Inc.’s (the "Corporation") consolidated financial statements and Management’s Discussion and Analysis ("MD&A Report") and all other information in the Annual Report, are the responsibility of the Corporation’s Management and have been approved by its Board of Directors.

The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). The MD&A Report has been prepared in accordance with the requirements of Canadian securities regulators. The consolidated financial statements and MD&A Report include items that are based on Management’s best estimates and judgments. Financial information provided elsewhere in the Annual Report is consistent with that shown in the consolidated financial statements.

Management maintains accounting and internal control systems that are designed to provide reasonable assurance that financial information is reliable and assets are safeguarded.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for the financial reporting and ultimately responsible for reviewing and approving the consolidated financial statements and MD&A Report, The Board of Directors carries out this responsibility principally through its Audit Committee, consisting of independent directors. The Audit Committee reviews the Corporation’s a consolidated financial statements and MD&A Report and formulates the appropriate recommendations to the Board of Directors. The independent auditor appointed by the shareholders has full access to the Audit Committee, with or without Management being present.

The consolidated financial statements have been audited by PricewaterhouseCoopers LLP, independent auditor, in accordance with Canadian generally accepted auditing standards on behalf of the shareholders. The independent auditor’s report, hereafter, outlines the scope of its audits and set forth its opinion on the consolidated financial statements.

Jean Paschini

Jean-François Boursier, CPA

/ Signed /

/ Signed /

Chairman of the Board of Directors and Chief Executive Officer

Chief Financial Officer

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ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

INDEPENDENT AUDITOR’S REPORT

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ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

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ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

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ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

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ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

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ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended January 31, 2023 and 2022

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at January 31,	2023	2022
(In thousands of Canadian dollars) ASSETS Current assets Cash and cash equivalents Accounts receivable (Note 4) Current income tax assets Contract assets (Note 13) Inventories (Note 5) Prepaid expenses and other current assets	$ 7,193 90,921 714 42,541 10,679 2,332	$ 7,130 40,424 1,548 29,998 9,690 2,312
Total current assets Non-current assets Property, plant and equipment (Note 6) Right-of-use assets (Note 7) Intangible assets (Note 8) Other non-current assets	154,380 90,378 21,848 3,640 1,371	91,102 83,629 21,587 3,357 1,375
Total assets	271,617	201,050
LIABILITIES Current liabilities Accounts payable and other current liabilities (Note 10) Current income tax liabilities Contract liabilities (Note 13) Other current liabilities Current portion of lease liabilities (Note 7) Currentportion of long-term debt(Note 11)	39,985 235 44,533 964 806 2,258	34,421 ― 13,770 ― 841 3,357
Total current liabilities Non-current liabilities Long-term debt (Note 11) Lease liabilities (Note 7) Deferred income tax liabilities (Note 18) Other non-current liabilities	88,781 44,927 3,528 9,240 156	52,389 28,702 3,772 7,571 166
Total liabilities	146,632	92,600
SHAREHOLDERS’ EQUITY Capital stock (Note 12) Contributed surplus Accumulated other comprehensive income Retained income	68,127 6,435 8,107 42,316	68,120 6,435 5,861 28,034
Total shareholders’ equity	124,985	108,450
Total liabilities and shareholders’ equity	271,617	201,050

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

ON BEHALF OF THE BOARD OF DIRECTORS,

Director

Director

/ Signed /

/ Signed /

Jean Paschini

Guy Pelletier, CPA, ASC

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ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF INCOME
Fiscal Years Ended January 31,	2023	2022
(In thousands of Canadian dollars, except the number of shares and the amounts per share) Revenues (Notes 13 and 25) Cost ofgoods sold(Note 14)	$ 250,890 215,321	$ 280,740 256,046
Gross Margin	35,569	24,694
Selling and administrative expenses (Note 14) Net financial expenses (Note 17) Foreign exchange loss	14,773 1,999 1,943	11,989 1,174 472
	18,715	13,635
Income before income tax expense Income tax expense(Note 18)	16,854 1,919	11,059 1,496
Net income for the fiscalyear	14,935	9,563
Earnings per share — Basic and dilutedper share(Note 19)	0.46	0.29
Average number of outstandingbasic and diluted shares(in thousands) (Note 19)	32,640	32,635

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Fiscal Years Ended January 31,	2023	2022
(In thousands of Canadian dollars) Net income for the fiscal year Other comprehensive income (loss): Exchange differences on translation of foreign operations(a)	$ 14,935 2,246	$ 9,563 (25)
Comprehensive income for the fiscalyear	17,181	9,538

a) Will subsequently be reclassified to net income.

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

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ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands of Canadian dollars) Balance,February1,2021	Capital Stock (Note 12) Contributed Surplus Accumulated Other Comprehensive Income Retained Income Total
	$ $ $ $ $ 68,120 6,435 5,886 19,124 99,565
Net income for the fiscal year Other comprehensive income(loss)	― ― ― 9,563 9,563 ― ― (25) ― (25)
Comprehensive income (loss) for the fiscal year Dividends	― ― (25) 9,563 9,538 ― ― ― (653) (653)
Balance,January31,2022	68,120 6,435 5,861 28,034 108,450

(In thousands of Canadian dollars) Balance,February1,2022	Capital Stock (Note 12) Contributed Surplus Accumulated Other Comprehensive Income Retained Income Total
	$ $ $ $ $ 68,120 6,435 5,861 28,034 108,450
Net income for the fiscal year Other comprehensive income	― ― ― 14,935 14,935 ― ― 2,246 ― 2,246
Comprehensive income for the fiscal year Dividends Shares Issuance	― ― 2,246 14,935 17,181 ― ― ― (653) (653) 7 ― ― ― 7
Balance,January31,2023	68,127 6,435 8,107 42,316 124,985

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

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ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

CONSOLIDATED STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years Ended January 31,	2023	2022
(In thousands of Canadian dollars) OPERATING ACTIVITIES Net income for the fiscal year Non-cash items: Amortization of property, plant and equipment (Note 6) Amortization of right-of-use assets (Note 7) Amortization of intangible assets (Note 8) Gain on disposal of property, plant and equipment Unrealized loss on derivative financial instruments Unrealized foreign exchange (gain) loss Share-based compensation (Note 12) Income tax expense (Note 18) Government grants (Note 14) Net financial expenses (Note 17) Others	$ 14,935 4,118 835 370 (802) 968 (1,158) 724 1,919 (1,280) 1,999 (250)	$ 9,563 3,543 1,013 498 (2,111) 513 705 361 1,496 ― 1,174 (148)
Net income adjusted for non-cash items Change in non-cash working capital items (Note 20) Income tax recovery (paid)	22,378 (25,850) 860	16,607 (12,511) (1,427)
Cash flows(used in)from operatingactivities	(2,612)	2,669
INVESTING ACTIVITIES Acquisition of property, plant and equipment (Note 6) Acquisition of intangible assets (Note 8) Others	(11,463) (698) 80	(21,477) (589) 77
Cash flows used in investingactivities	(12,081)	(21,989)
FINANCING ACTIVITIES Issuance of long-term debts (Notes 11 et 20) Repayment of the long-term debt (Note 20) Payment of lease liabilities (Note 20) Dividends paid Interest paid Others	20,000 (2,216) (804) (653) (2,177) 7	30,000 (17,878) (963) (653) (988) (316)
Cash flows from financingactivities	14,157	9,202
Impact of fluctuations in foreign exchange rate on cash flow	599	(558)
Net change in cash and cash equivalents during the fiscal year Cash,and cash equivalents,beginningof fiscalyear	63 7,130	(10,676) 17,806
Cash and cash equivalents,end of fiscalyear	7,193	7,130

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

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ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Fiscal Years Ended January 31, 2023 and 2022

All tabular figures are in thousands of Canadian dollars (CA$) and in dollars per share, unless otherwise specified.

NOTE 1 NATURE OF BUSINESS

ADF GROUP INC. ("ADF", "ADF Group" or "the Corporation") is the parent company and is incorporated under the Canada Business Corporations Act . Its head office is located at 300 Henry-Bessemer Street, in Terrebonne, Quebec. The Corporation’s securities are traded on the Toronto Stock Exchange under the ticker symbol DRX. The Corporation operates two fabrication plants and two paint shops, in Canada and in the United States. The Corporation concentrates its activities in the design and engineering of connections, fabrication, including industrial coating, and the installation of complex steel superstructures, heavy steel built-ups, as well as miscellaneous and architectural metalwork. The Corporation’s products and services are intended for the following five principal segments of the non-residential construction industry: office towers and high-rises, commercial and recreational buildings, airport facilities, industrial complexes, and transport infrastructure.

The consolidated financial statements were approved by the Corporation’s Board of Directors on April 12, 2023 and were signed on its behalf.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies are summarized below. These policies have been consistently applied to all the periods presented, except as otherwise stated.

2.1 Basis of Assessment

The consolidated financial statements are established in accordance with the International Financial Reporting Standards ("IFRS"), issued by the International Accounting Standards Board ("IASB"), and have been prepared under the historical cost convention, except for the evaluation of certain financial instruments, which are measured at their fair value, as described in the accounting policies hereinafter. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

2.2 Principles of Consolidation

The consolidated financial statements include the accounts of the Corporation and its subsidiaries. Subsidiaries are entities which the Corporation controls by having the power to govern the financial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Corporation controls another entity. Subsidiaries are fully consolidated from the date on which control is obtained by the Corporation and are de-consolidated from the date that control ceases. Inter-company transactions and balances have been eliminated.

As at January 31, 2023 and 2022, the percentage of ownership held directly or indirectly by the Corporation in its subsidiaries was 100%. These subsidiaries are all incorporated in the United States, and are summarized as follows:

Subsidiaries	Activity Sectors
ADF Group USA Inc. ADF Industrial Coating Inc. ADF International Inc. ADF Steel Corp.	Holding Sales and surface treatment Sales, fabrication and steel erecting services Sales and other services Sales,fabrication,steel erectingand engineeringservices
ADF Structural Steel Inc.

2.3 Foreign Currency Translation

2.3.1 Functional and Reporting Currency

Items included in each of the Corporation’s entities financial statements are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The Corporation's functional currencies are the Canadian dollar for its Canadian entity, and the US dollar for its U.S. entities. The consolidated financial statements are presented in Canadian dollars, which is the Corporation's reporting currency.

The financial statements of entities whose functional currency differs from that of the Corporation (foreign operations) are translated into Canadian dollars as follows:

• Assets and liabilities – at the closing rate at the date of the statement of financial position, and

• Revenues and expenses – at the average rate of the monthly period (considered a reasonable approximation to the actual rates in effect at the date of transactions).

All resulting changes are recognized in other comprehensive income (loss) as exchange differences on translation of foreign operations.

When an entity disposes of its entire interest in a foreign operation, or loses control, joint control, or significant influence over a foreign operation, the accumulated exchange differences in other comprehensive income (loss) related to the foreign operation are recognized in net income.

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ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

2.3.2 Transactions and Balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Translation differences resulting from the settlement of foreign currency transactions and from the translation at the exchange rates effective at the reporting date of monetary assets and liabilities denominated in currencies other than an operation’s functional currency are recognized in "Foreign Exchange Loss (Gain) " in the Consolidated Statement of Income.

2.4

Revenue Recognition

Revenue from contracts with customers is recognized, for each performance obligation, either over a period of time or at a specific point in time, depending on which method reflects the transfer of control of the goods or services underlying the performance obligation to the customer.

In most cases, for performance obligations satisfied over time, such as cost-plus and fixed price contracts, the Corporation recognizes revenue over time using an input method, based on costs incurred to date relative to total estimated costs at completion, to measure progress toward satisfying such performance obligations. Under this method, costs that do not contribute to the performance of the Corporation in transferring control of goods or services to the customer are excluded from the measurement of progress toward satisfying the performance obligation. For certain contracts, notably certain cost-plus contracts or unit-rate contracts, the Corporation recognizes revenue based on its right to consideration when such amount corresponds directly with the value to the customer of the entity’s performance completed to date. In certain other situations, the Corporation might recognize revenue at a point in time, when the criteria to recognize revenue over time are not met. In any event, when the total anticipated costs exceed the total anticipated revenues on a contract, such loss is recognized in its entirety in the period it becomes known.

The amount of revenue recognized by the Corporation is based on the transaction price allocated to each performance obligation. Such transaction price corresponds to the amount of consideration to which the Corporation expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. The transaction price includes, among other things and when applicable, an estimate of variable consideration only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Variable consideration is usually derived from incentives, performance bonuses and penalties, and could include claims and unpriced change orders. When a contract includes a significant financing component, the value of such component is excluded from the transaction price and is recognized separately as financial revenue or expense, as applicable.

The Corporation may enter into contractual arrangements with a client to deliver services on one project which span more than one performance obligation, such as particularly in the context of the Corporation’s activities. When entering into such arrangements, the Corporation allocates the transaction price by reference to the stand-alone selling price of each performance obligation. Accordingly, when such arrangements exist on the same project, the value of each performance obligation is based on its stand-alone selling price and recognized according to the respective revenue recognition methods described above.

The Corporation accounts for a contract modification, which consists of a change in the scope or price (or both) of a contract, as a separate contract when the remaining goods or services to be delivered after the modification are distinct from those delivered prior to the modification and the price of the contract increases by an amount of consideration that reflects the Corporation’s stand-alone selling price of the additional promised good or services. When the contract modification is not accounted for as a separate contract, the Corporation recognizes an adjustment to revenue on a cumulative catch-up basis at the date of contract modification.

The Corporation may apply its revenue recognition accounting policy to a portfolio of contracts or performance obligations with similar characteristics if the effect on its financial statements of applying such policy to the portfolio is not reasonably expected to differ materially from applying its policy to the individual contracts or performance obligations within that portfolio.

Contract related balances include contract assets and liabilities presented separately in the consolidated statements of financial position.

• Contract assets are recognized when goods or services are transferred to customers before consideration is received or before the Corporation has an unconditional right to payment for performance completed to date. Contract assets are subsequently transferred to the accounts receivable when the right of payment becomes unconditional. Contract assets comprise cost incurred and recorded margins in excess of advances and progress billings on contracts.

• Contract liabilities are recognized when amounts are received or to be received from customers in advance of transfer of goods or services. Contract liabilities are subsequently recognized in revenue as or when the Corporation performs under contracts. Contract liabilities include advances and progress billings in excess of costs incurred and recorded margin on contracts.

A net position of contract asset or contract liability is determined for each contract. The cash flows in respect of advances and progress billings, including amounts received from third parties, are classified as cash flows from operating activities.

2.5

Cash and Cash Equivalents

The cash and cash equivalents items include cash on hand, the bank overdraft and short-term investments, the case may be, with maturities at the time of acquisition generally not exceeding three (3) months or redeemable at any time at full value and for which the risk of change in value is not significant. Bank overdrafts are presented as current liabilities, where applicable.

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ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

2.8

2.6 Inventories

Inventories, predominantly raw material (steel), are valued at the lower of cost or net realizable value. The cost is determined using the specific cost method. The net realizable value is the estimated selling price less the estimated costs required to realize the sale. An impairment is recognized if the carrying amount exceeds the net recoverable value. The impairment amount may be reversed during a subsequent period when circumstances justifying that impairment no longer exist.

2.7 Property, Plant and Equipment and Amortization

Property, plant and equipment are recorded at cost, less accumulated amortization and accumulated impairment. The cost includes expenses that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, where appropriate, only when it is likely that future economic benefits associated with the item will flow to the Corporation and the cost of this asset can be measured reliably. Costs of maintenance and repair are recorded as expenses in the consolidated statement of income in the period in which they are incurred.

The main property, plant and equipment categories are amortized using the straight-line method, which allocates the costs of depreciable assets over the estimated useful life of a component, as follows:

• Buildings and improvement to lands over periods varying from 15 to 110 years;

• Equipment and overhead cranes over periods varying from 2 to 30 years, and

• Office furniture, rolling stock and computer hardware over periods varying from 3 to 30 years.

The Corporation allocates the initially recognized amount of property, plant and equipment to its significant components and depreciates each component separately. The carrying amount of a replaced component is derecognized upon replacement. The residual value, amortization method and useful life of property, plant and equipment are reviewed every year and adjusted as required.

Borrowing Costs

Borrowing costs attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing costs are recognized as financial expenses in the consolidated statement of income in the period in which they are incurred.

2.9 Intangible Assets and Amortization

Identifiable intangible assets, which are mainly made up of software with a determined useful life are recognized at cost and amortized at fixed rates based on their estimated useful life that is, based on the straight-line method on a 3 to 24-year period.

The amortization method and useful life of intangible assets are reviewed every year and adjusted as required.

2.10 Impairment of Non-Financial Assets

Non-financial assets are tested for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units or "CGU"). The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use, being the present value of the expected future cash flows of the relevant asset or CGU.

The impairment losses, as well as profits and losses resulting from the disposal of non-financial assets, are included in the Consolidated Statement of Income. The Corporation evaluates impairment losses for potential reversals when events or circumstances warrant such consideration.

2.11

Lease Agreements

The Corporation leases various office space, equipment, office furniture, rolling stock and computer hardware. Lease agreements are typically made for fixed periods of 2 to 6 years and may be subject to extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

The accounting policies related to the lease agreements are described below.

• At inception, the Corporation assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

• Leases are recognized as a right-of-use asset and a corresponding lease liability at the commencement date of the lease, i.e. the date the underlying asset is available for use. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. The right-of-use asset is amortized over the shorter of the asset's useful life or the lease term on a straight-line basis except for lease agreements that have the effect, at the end of their term, of transferring ownership to the Corporation the property of the underlying good. In these cases, the Corporation amortize the right-of-use assets until the end of the useful life. Right-of-use assets are assessed for impairment whenever there is an indication that the right-of-use assets may be impaired.

• The lease liability is measured at the present value of lease payments to be made over the lease term, discounted using the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily available. Lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on index or a rate and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be

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ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

exercised by the Corporation or payment of penalties for termination of a lease. Each lease payment is allocated between the repayment of the principal portion of lease liability and the interest expense. The interest expense is charged income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in the Consolidated Statement of Income.

• After the commencement date, the carrying amount of lease liabilities is increased to reflect the accretion of interest and reduced to reflect lease payments made. In addition, the carrying amount of lease liabilities is revaluated when there is a change in future lease payments arising from a change in an index or specified rate, if there is a modification to the lease terms and conditions, a change in the estimate of the amount expected to be payable under residual value guarantee, or if the Corporation changes its assessment of whether it will exercise a termination, extension or purchase option. The revaluation amount of the lease liabilities is recognized as an adjustment to the right-ofuse asset, or in the Consolidated Statement of Income when the carrying amount of the right-of-use asset is reduced to zero.

2.12

Income Tax

Income tax expense includes current and deferred income tax expenses. Income tax is recognized in the Consolidated Statement of Income except to the extent that it relates to items recognized directly in other comprehensive income (loss) or in shareholders’ equity, in which case, the income tax is also recognized directly in other comprehensive income (loss) or in shareholders’ equity.

Current tax is the expected income tax payable on the taxable income for the fiscal year, using tax rates enacted or substantively enacted, at the end of the reporting period, and any adjustment to tax payable in respect of previous fiscal years.

In general, deferred income tax is recognized in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted at the closing date and are expected to apply when the deferred income tax asset or liability is settled. A deferred income tax asset is recognized to the extent that it is likely that the asset can be recovered.

Deferred income tax assets and liabilities are recognized on temporary differences arising on investments in subsidiaries, unless the timing of the reversal of the temporary difference is controlled by the Corporation and it is likely that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are classified as non-current assets and liabilities in the Consolidated Statement of Financial Position. They are offset only when the Corporation has a right and the intention to offset these tax assets and liabilities from the same tax authority.

2.13 Tax Credits and Government Grants

In the course of its business, the Corporation may receive government grants, which are accounted for in accordance with IAS 20, Accounting for Government Grants, and recorded against the expenses or in reduction of the related capital assets. The Corporation also benefits from tax credits derived from investments, jobs creation, labor force training and scientific research and experimental development ("SR&ED") activities. These tax credits are also recorded using the cost reduction method, under which the tax credits related to eligible expenditures, capitalized or expensed, as long as their realization is reasonably assured, are recognized in reduction of the related costs during the period in which they are incurred.

Tax credits and government grants receivable are discounted when the effect of the time value of money is material.

2.14 Share-Based Compensation and Other Share-Based Payments

The Corporation awards stock options to certain of its employees and external directors. These options vest equally over a period of up to fiveyear and all options have 10-years life from the grant date. Each tranche is considered as a separate award with its own vesting period and its own fair value at the grant date. The fair value of each tranche is measured using the Black-Scholes valuation model at the date of the grant. The compensation expense is recognized over the tranche’s vesting period of the options, and increases contributed surplus. The number of options expected to vest is revised at least once a year, and changes in estimates are immediately charged to compensation expense, with a corresponding amount recognized as a contributed surplus adjustment.

2.15

Deferred Share Units ("DSU")

The DSU Plan allows every external director, who elects to participate, to defer in whole or in part his director’s compensation (including annual and attendance fees), by choosing to receive a percentage of this compensation in the form of DSU. When an external director elects to participate in this plan, the Corporation credits the director’s account for a number of units equal to the deferred compensation, divided by the market value of the Corporation’s subordinate voting shares calculated using the average closing price of the five (5) trading days preceding the date of award. DSU are not convertible into shares of the Corporation and do not result in a dilution to shareholders.

In addition, and independently to DSU that can be granted to external directors for the purposes of deferring their directors’ compensation, the DSU Plan also allows the Corporation’s Board of Directors to grant, at its discretion, DSU to any external director, executive officer and key employee. If it sees fit, the Board of Directors can attach conditions related to time and/or to the Corporation’s performance to the vesting of these DSU. In the event a condition is attached to a DSU, every unvested DSU at the date of repurchase will be cancelled without consideration. However, in the event of a change of control, unvested DSU will be considered vested, immediately prior to the occurrence of this change of control.

These DSU usually vest gradually over a 2 to 5-year period, at a rate of 20% to 50% per year. The vested DSU will be bought back in cash by the Corporation on the date its holder ceases to be an officer or employee of the Corporation by reason of death, retirement or loss of function as officer or employee.

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ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

When the Corporation pays dividends on subordinate voting shares, the accounts of the Directors, Executive Officers and key employees are credited for the amount in the form of additional units using the same calculation method previously described.

For each DSU awarded and changes in the fair value, the Corporation recognizes a compensation expense with the counterpart entry in "Accounts Payable and Other Current Liabilities" of the Consolidated Statement of Financial Position.

2.16

Performance Share Units Plan ("PSU")

As part of its long-term compensation plan, the Corporation may issue PSU to its Executive Officers and key employees. PSU are not convertible into shares of the Corporation and do not result in dilution for shareholders. The acquired PSU are only redeemable in cash by the Corporation upon the expiration of three (3) years after their grant (the "PSU Settlement Date"), subject to the achievement of financial targets. PSU tranches whose vesting conditions have not been met on the applicable vesting date are canceled, without compensation.

PSU also entitle holders to receive additional units each time dividends are paid on the Corporation’s subordinate voting shares.

Compensation expense is recognized in the Consolidated Statement of Income over the vesting period and the counterpart is recognized in current liabilities in the Consolidated Statement of Financial Position. Changes in fair value between the grant date and the valuation date result in a change in liability and compensation expense.

The fair value of a PSU at any given date (for example, its grant date, vest date or PSU settlement date, etc.) is equal to the market value of the subordinate voting shares of the Corporation on that date, calculated using the average closing price subordinate voting shares of the Corporation on the Toronto Stock Exchange during the five (5) trading days immediately preceding that date.

2.17

Earnings Per Share

Basic earnings per share are based using the weighted average number of voting shares issued and outstanding and is obtained by dividing net income by the weighted average number of outstanding shares during the period. Diluted earnings per share are obtained by dividing basic net income by the sum of the weighted average number of voting shares used to calculate basic earnings per share and the weighted average number of voting shares that would be issued if all of the potentially dilutive outstanding voting shares were converted using the treasury stock method for stock options.

2.18

Financial Instruments

Financial instruments are recognized in the consolidated statement of financial position when the Corporation becomes a party to the contractual obligations of the instrument.

a) Classification

The Corporation determines the classification of financial instruments at initial recognition and classifies its financial instruments in the following measurement categories:

• Those to be measured subsequently at fair value, either through net income ("FVTPL") or through other comprehensive income (loss) ("FVOCI"), or

• Those to be measured at amortized cost.

The classification of debt instruments held is driven by the Corporation’s business model for managing the financial assets and their contractual cash flow characteristics. Assets that are held to collect contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Equity instruments that are held for trading and all derivative instruments are classified as FVTPL. For other equity instruments, on the day of acquisition, the Corporation may irrevocable elect (on an instrument-byinstrument basis) to classify them at FVOCI whereby subsequent gains and losses will never be reclassified to net income. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Corporation was eligible and elected to measure them at FVTPL. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

b) Measurement

 Financial Instruments at Amortized Cost

Financial instruments at amortized cost are initially recognized at fair value, and subsequently carried at amortized cost less any impairment. The transaction costs are capitalized to the costs of financial assets and liabilities. Therefore, the transaction costs applied to the long-term debt are classified against the long-term debt and amortized using the effective interest method.

Currently, the Corporation classifies cash and cash equivalents and accounts receivable as financial assets measured at amortized cost and credit facilities, accounts payable and other current liabilities and long-term debt as financial liabilities measured at amortized cost.

Page 15 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

 Financial Instruments at Fair Value

Financial instruments are initially recorded at fair value and are remeasured at each reporting date with any change thereto recognized as a gain or loss in the Consolidated Statement of Income. The transaction costs are expensed in the consolidated statements of income. When the Corporation has elected to classify a financial liability at FVTPL, any changes associated with the Corporation’s own credit risk will be recognize in Other Comprehensive Income (Loss).

Currently, the Corporation’s derivative financial instruments are classified at FVTPL.

c) Impairment

The Corporation prospectively assesses the expected credit losses associated with debt instruments and contract assets carried at amortized cost or at FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

The Corporation assumes that there is no significant increase in the credit risk regarding low-credit risk instruments.

For accounts receivable and contract assets, the Corporation applies the simplified approach permitted by IFRS 9, which requires lifetime expected losses to be recognized at the time of initial recognition.

d) Derecognition

 Financial Assets

The Corporation derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and nearly all the associated risks and rewards of ownership to another entity. Gains and losses upon derecognition are generally recognized in the Consolidated Statements of Comprehensive Income.

 Financial Liabilities

The Corporation derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid or payable, including any non-cash assets transferred or liabilities assumed, is recognized in the Consolidated Statements of Income.

e) Compensation

Financial assets and liabilities are offset with the net balance recorded in the Consolidated Statement of Financial Position when there is an unconditional and legally enforceable and unconditional right to set off the recognized amounts, and there is an intention to settle on a net basis or to realize the asset and settle the liability simultaneously.

2.19

Hedging Relationships

In accordance with its foreign currency hedge policy, the Corporation can use financial derivative instruments such as foreign exchange contracts and foreign currency options to eliminate or mitigate the risk of exchange rate fluctuations on its foreign currency transactions, assets and liabilities. Management is responsible for establishing acceptable risk levels and does not use derivatives for speculation purposes.

The Corporation only uses these derivatives to hedge possible future transactions. Since the Corporation did not elect to apply hedge accounting, the foreign exchange forward contracts and foreign currency options are recognized at their fair value at the end of each period. Consequently, the gains or losses from the revaluation are presented in net income under "Foreign Exchange (Gain) Loss" as previously defined under Note 2.18.

The Corporation is also exposed to a foreign exchange risk stemming from net investments in its foreign subsidiaries having a functional currency that differs from the Corporation’s functional currency. To protect itself against this risk, the Corporation can use hedge accounting by assigning certain of its U.S.-denominated debts as a hedge of net investments in foreign operations.

Hedges of net investments are as follows:

• All gains or losses on the hedging instrument relating to the effective portion of the hedge are recognized in other comprehensive income (loss). The gains or losses relating to the ineffective portion are directly recognized in the Consolidated Statement of Income , and

• The gains or losses accumulated in shareholders’ equity are included in the Consolidated Statement of Income when the foreign operation is partially divested or sold.

2.20

Pension Plans

The Corporation offers its eligible employees defined contribution pension plans for which it can contribute an amount equal to the employee’s contribution or an amount predetermined under the collective bargaining agreements. The contributions to the pension plans are primarily disbursed on a monthly basis. Contributions are charged to net income under "Cost of goods sold" and "Selling and administrative expenses", when they are payable.

2.21

Segmented Information

The Corporation operates in the non-residential construction industry, primarily in the United States and Canada. The Corporation operational areas are consistently presented with the internal reports provided to the Chief Executive Officer (the chief operating decision–maker).

Page 16 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

2.22 Dividends

The dividends on shares approved by the Board of Directors are recognized in the financial statements in the period in which they are declared.

2.23 Future Changes to Accounting Standards

The IASB has issued the following amendments to accounting standards, which will take effect from the fiscal year beginning on February 1, 2023:

• Amendments to IAS 1, Presentation of Financial Statements – Disclosures of Accounting Policies , to require entities to disclose material accounting policies information rather than significant accounting policies ;

• Amendments to IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors , to clarify the terms “accounting policy” and “accounting estimate” ;

• Amendments to IAS 12, Income Taxes – Deferred Income Tax Related to Assets and Liabilities Arising from a Single Transaction , to restrict the scope of the exemption related to the recognition of deferred income taxes.

The Corporation does not expect these amendments to accounting policies to have a material impact on its consolidated financial statements.

NOTE 3 ESTIMATION UNCERTAINTY AND CRITICAL ACCOUNTING JUDGEMENTS

The preparation of financial statements in accordance with IFRS requires Management to make judgements in the application of accounting policies used and to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods. Because financial reporting involves accounting judgements and entails the use of estimates, actual results could differ from those estimates. Underlying estimates and assumptions are periodically reviewed, and the impact of any changes is immediately recognized.

The significant accounting judgements and estimates used by the Corporation to prepare the financial statements are:

3.1 Revenues Recognition

The identification of revenue-generating contracts with customers, the identification of performance obligations, the determination of the transaction price and its allocation between identified performance obligations, the use of the appropriate revenue recognition method (over time or at a specific point in time) for each performance obligation and the measure of progress for performance obligation satisfied over time are the main aspects of the revenue recognition process, all of which require judgment and the use of assumptions.

The transaction price corresponds to the amount of consideration to which the Corporation expects to be entitled in exchange for transferring promised goods or services to a customer. Such amount may require the Corporation to estimate an amount of a variable consideration, notably from estimated volume of work, claims and unpriced change orders, incentives or penalties, among others. Furthermore, the Corporation needs to constraint the transaction price by including only the amount for which it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The amount of variable consideration to be included in the transaction price of a given contract is determined by using various estimates and assumptions, which could be based on historical experience with the same customer or other similar contracts, third-party assessments, legal interpretation of relevant contractual clauses and probabilistic methodologies, among others. Due to the uncertain nature of the estimations, the amount of a variable consideration may vary significantly over time. Such estimated amount of a variable consideration then needs to be updated at the end of each reporting period.

The determination of total anticipated costs for completing a contract is based on estimates that can be affected by a variety of factors such as potential variances in scheduling and cost of materials along with the availability and cost of qualified labour and subcontractors, productivity, and possible claims from subcontractors. A change in any of those factors could affect revenues recognition.

3.2 Assessment and Amortization of Long-Lived Assets

Management reviews the useful lives of its amortizable assets at each reporting date.

As at January 31, 2023, and 2022, Management estimated that the useful lives represented the expected useful life of the Corporation’s assets. The carrying amounts are analyzed at the end of each fiscal year. Actual results could however differ because of technical obsolesce, particularly with regard to hardware and software.

3.3 Significant Judgment in Determining the Lease Term of Contracts

The Corporation determines the lease term as the non-cancellable period of the lease, together with any periods covered by an option to extend the lease, if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Corporation applies judgment in assessing whether it is reasonably certain to exercise its options to extend its leases or to not exercise its options to terminate its leases, by considering all facts and circumstances that create an economic incentive to exercise an extension option or not to exercise a termination option. The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the Corporation’s control.

3.4 Income Tax

The Corporation calculates the income tax expense for each jurisdiction where it operates. However, the actual income tax amounts become definitive only upon the filing of income tax returns and acceptance thereof by the competent authorities, which occur after the financial statements are published.

Page 17 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

Judgements must periodically be made to determine if deferred income tax assets must be recognized in the Consolidated Statement of Financial Position. Deferred income tax assets, including unused tax losses, require Management to assess whether the Corporation will generate taxable income in subsequent periods, in order to use deferred income tax assets. Once the assessment is done, if the Corporation believes that it is likely that a portion of its deferred income tax assets will not be realized, the deferred income tax asset is derecognized. The estimate of future taxable income is based on cash flow from operations forecasts and applicable tax laws in effect in each jurisdiction. Should future cash flows and taxable profit differ materially from these estimates, it could have an impact on the Corporation’s ability to realize the net deferred income tax assets at the reporting date of the financial position.

3.5 Impairment of Non-Financial Assets

The Corporation’s management reviews the carrying value of the Corporation’s non-financial assets when there are events or circumstances that may indicate impairment.

Management makes judgments in assessing whether changes to certain factors would be considered an indicator of impairment, which include both internal and external factors such as:

• changes in signed backlog,

• changes in adjusted earnings before interest depreciation and amortization (adjusted EBITDA) margin,

• changes in EBITDA multiples of comparable companies and

• the Corporation’s market capitalization compared to its net assets.

An impairment loss is recognized, if any, for the amount by which an assets or CGUs carrying amount exceeds its recoverable amount, which is the higher of fair value less cost of disposal and value in use.

For the purpose of assessing the potential impairment of the Corporation's non-financial assets, management would use the fair value less costs of disposal model to estimate the fair value based on earnings before interest depreciation and amortization (EBITDA) multiple approach. The significant assumptions, which affect the financial analysis include revenues, operating costs and margins, foreign exchange rates and comparable companies EBITDA multiple. These estimates are subject to certain risks and uncertainties that may affect the determination of the recoverability of the Corporation’s non-financial assets.

As at January 31, 2023, and 2022, the Corporation’s management has determined that there is no indicator of impairment and therefore no impairment test has been performed.

NOTE 4 ACCOUNTS RECEIVABLE

NOTE 4 ACCOUNTS RECEIVABLE
As at January 31,	2023	2022
(In thousands of CA$) Trade receivables Holdbacks on contracts(Note 13)	$ 75,793 15,128	$ 26,391 14,033
	90,921	40,424

NOTE 5 INVENTORIES

NOTE 5 INVENTORIES
As at January 31,	2023	2022
(In thousands of CA$) Inventories Inventories depreciation	$ 11,297 (618)	$ 10,280 (590)
	10,679	9,690

During the fiscal year ended January 31, 2023, the inventories amount recognized as cost of goods sold totalled $78,480,000 and $90,562,000 during the fiscal year ended January 31, 2022.

Page 18 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

NOTE 6 PROPERTY, PLANT AND EQUIPMENT

	Land	Buildings and Improvement to Lands	Equipment and Overhead Cranes	Office Furniture, Rolling Stock, and Computer Hardware	Total
(In thousands of CA$)	$	$	$	$	$
As at February 1, 2021
Cost	5,701	61,732	43,249	6,561	117,243
Accumulated amortization	―	(22,404)	(27,737)	(4,879)	(55,020)
Net book value	5,701	39,328	15,512	1,682	62,223
Acquisitions	―	2,029	22,432	979	25,440
Disposals	―	―	(228)	(151)	(379)
Effect of fluctuations in exchange rates	(7)	(49)	(51)	(5)	(112)
Amortization expenses	―	(1,209)	(1,949)	(385)	(3,543)
Balance at January 31, 2022	5,694	40,099	35,716	2,120	83,629
As at January 31, 2022
Cost	5,694	63,710	59,058	7,289	135,751
Accumulated amortization	―	(23,611)	(23,342)	(5,169)	(52,122)
Net book value	5,694	40,099	35,716	2,120	83,629
Acquisitions(1)	436	4,102	4,525	893	9,956
Disposals	―	―	―	(97)	(97)
Effect of fluctuations in exchange rates	60	478	413	57	1,008
Amortization expenses	―	(1,243)	(2,456)	(419)	(4,118)
Balance at January31,2023	6,190	43,436	38,198	2,554	90,378
As at January 31, 2023
Cost	6,190	68,364	62,957	8,008	145,519
Accumulated amortization	―	(24,928)	(24,759)	(5,454)	(55,141)
Net book value	6,190	43,436	38,198	2,554	90,378

(1) Includes public grants totaling $1,640,000 from an interest-free loan (see Note 11 (2)) "Long-Term Debt") obtained for the automation of the fabrication process at the plant located in Terrebonne, Quebec.

For the fiscal year ended January 31, 2023, the amortization of property, plant and equipment totalled $4,118,000 ($3,543,000 for the fiscal year ended January 31, 2022) of which $3,710,000 is included in the cost of goods sold, and $408,000 is included in the selling and administrative expenses (respectively $3,119,000 and $424,000 for the fiscal year ended January 31, 2022).

The book value of the property, plant and equipment under construction and not amortized stood at $1,067,000 as at January 31, 2023 ($21,807,000 as at January 31, 2022). These amounts were mainly related to addition of new state-of-the-art equipment at the Corporation’s facilities located in Terrebonne, Quebec, and in addition of new equipment as well at the Corporation’s facilities located in the United States.

Page 19 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

NOTE 7 LEASE AGREEMENTS

7.1 Right-of-Use Assets

During the fiscal years ended January 31, 2023 and 2022, the Corporation entered into lease agreements relating primarily for office spaces, equipment and rolling stock. The net book value of the right-of- use assets, are as follows:

	Land	Buildings and Improvement to Land	Office Space	Equipment and Overhead Cranes	Office Furniture, Rolling Stock and Computer Hardware	Total
(In thousands of CA$) As at February 1, 2021 Cost Accumulated amortization	$ 1,593 ―	$ 22,582 (3,844)	$ 524 (310)	$ 291 (16)	$ 2,171 (513)	$ 27,161 (4,683)
Net book value	1,593	18,738	214	275	1,658	22,478
New leases Disposals of leases Amortization expenses Effect of fluctuations in exchange rates	― ― ― (8)	49 ― (472) (96)	80 ― (215) (4)	― ― (11) (2)	617 (514) (315) ―	746 (514) (1,013) (110)
Balance as January31,2022	1,585	18,219	75	262	1,446	21,587
As at January 31, 2022 Cost Accumulated amortization	1,585 ―	22,524 (4,305)	603 (528)	289 (27)	1,938 (492)	26,939 (5,352)
Net book value	1,585	18,219	75	262	1,446	21,587
New leases Disposals of leases Amortization expenses Effect of fluctuations in exchange rates	― ― ― 79	― ― (494) 894	― (26) (49) ―	― (273) (8) 19	743 (343) (284) 3	743 (642) (835) 995
Balance as January31,2023	1,664	18,619	―	―	1,565	21,848
As at January 31, 2023 Cost Accumulated amortization	1,664 ―	23,642 (5,023)	― ―	― ―	2,129 (564)	27,435 (5,587)
Net book value	1,664	18,619	―	―	1,565	21,848

For the fiscal year ended January 31, 2023, the amortization of right-of-use assets totalled $835,000 ($1,013,000 for the fiscal year ended January 31, 2022), of which $349,000 is included in the cost of goods sold, and $486,000 is included in selling and administrative expenses ($504,000 and $509,000 respectively for the fiscal year ended January 31, 2022).

7.2 Lease Liabilities

The balance of lease liabilities is detailed as follows:

Lease Liabilities The balance of lease liabilities is detailed as follows:
As at January 31,	2023	2022
(In thousands of CA$) Current portion Non-currentportion	$ 806 3,528	$ 841 3,772
	4,334	4,613

The most important of these liabilities was contracted on April 18, 2014, by a subsidiary of the Corporation from a U.S. government agency. This loan was structured according to a sale and leaseback contract, resulting in a lease liability in the amount of US$4,999,800. This liability bears a below-market interest rate of 1.98% and was measured at fair value based on the prevailing market interest rate. Consequently, monthly interest is calculated using the annual implicit rate of 4.48%. The US$794,000 difference between the fair value of US$4,206,000 and the cash received, in the amount of US$4,999,800, was recorded as a grant against the related property, plant and equipment.

The capital of this liability is repayable in equal monthly installments estimated at US$28,000 began in May 2014 and ending in May 2029, with a bargain purchase option for $10. This lease is also subject to certain covenants, including covenants related to job creation.

Page 20 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

This lease will be eligible for a maximum tax credit of up to US$5,783,000, corresponding to payments of principal and interest, the use of which is dependent on future taxable profits in Montana, U.S.A. Based on the level of historical taxable income and uncertainty on projected taxable income in that state. At the date hereof Management believes there is no reasonable assurance that this asset will be realized, and consequently no asset related to these investment tax credits were recorded as at January 31, 2023 and 2022.

NOTE 8 INTANGIBLE ASSETS

NOTE 8 INTANGIBLE ASSETS
	Total
(In thousands of CA$)	$
As at February 1, 2021
Cost	9,547 (6,281)
Accumulated amortization
Net book value	3,266
Acquisitions	589 (498)
Amortization expenses
Balance at January31,2022	3,357
As at January 31, 2022	9,979 (6,622)
Cost
Accumulated amortization
Net book value	3,357
Acquisitions	653
Amortization expenses	(370)
Balance at January31,2023	3,640
As at January 31, 2023 Cost Accumulated amortization	10,615 (6,975)
Net book value	3,640

As at January 31, 2023 and 2022, all intangible assets were subject to amortization and were mostly comprised of in-house software development. The remaining weighted average amortization period of intangible assets was 9 years as at January 31, 2023.

For the fiscal year ended January 31, 2023, amortization of intangible assets totalled $370,000 ($498,000 for the fiscal year ended January 31, 2022) of which $68,000 is included in the cost of goods sold, and $302,000 is included in selling and administrative expenses (respectively $107,000 and $391,000 for the fiscal year ended January 31, 2022).

NOTE 9 CREDIT FACILITIES

9.1 Canadian Operating Credit Facility

The Corporation has a $30,000,000 credit facility granted by a Canadian financial institution. This credit facility was renewed on October 27, 2022, without any change in the terms and conditions, and is renewable annually. The available amount of $30,000,000 is subject to a monthly margination calculation on accounts receivable, inventory and contract assets, which could limit the amount of the eligible credit facility.

Taking into account this calculation and the letter of credit issued for US$3,419,000 ($4,564,000) as security for two long-term debts, the available balance of this credit facility as at January 31, 2023, was $25,461,000 and $13,960,000 as at January 31, 2022. As at January 31, 2023 and 2022, no amount was drawn from the credit facility.

This credit facility bears interest at the Canadian bank’s variable base rates, plus 1.0%, and is secured by the universality of movable, present and future, tangible and intangible assets as well as inventories and accounts receivable, excluding holdbacks receivable.

This credit agreement contains covenants that, among other things, require the Corporation to maintain certain financial ratios, which were all respected as at January 31, 2023.

9.2 U.S. Revolving Credit

The Corporation has a revolving credit agreement with a U.S. bank. This revolving credit agreement was renewed on November 1, 2022, without changing the terms and conditions, and is renewable annually. This revolving credit bears interest at the SOFR rate (US$) for one month plus 2.11%. The limit available was US$2,939,000 ($3,924,000) as at January 31, 2023 and US$2,659,700 ($3,382,900) as at January 31, 2022. As at January 31, 2023 and 2022, this revolving credit was unused.

This credit, which is subject to the same guarantees as the long-term bank loan (see Note 11 "Long-Term Debt"), is renewable annually and can also be used to issue letters of credit.

Page 21 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

NOTE 10 ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES

NOTE 10 ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
As at January 31,	2023	2022
(In thousands of CA$) Accounts payable Salaries and fringe benefits payable Accrued liabilities Share-based compensation (Note 12) Indirect taxes	$ 18,807 7,184 8,624 1,485 3,885	$ 14,773 8,516 8,653 1,001 1,478
	39,985	34,421

NOTE 11 LONG-TERM DEBT

NOTE 11 LONG-TERM DEBT
As at January 31,	2023	2022
(In thousands of CA$) Bank loan, secured by a hypothec totaling $40,000,000 on the main building of the parent company, ADF Group Inc., including future additions and certain equipment.(1) Bank loan, secured by a first rank movable security hypothec totaling $24,000,000 on the universality of machinery and equipment, present and future of ADF Group Inc., the parent company.(2) Bank loan secured by a first rank movable security interest on certain property, plant, and equipment of a subsidiary of the Corporation and by a US$3,419,000 ($4,564,000) letter of credit (Note 9). This US- denominated loan amounted to US$383,000 ($512,000) as at January 31, 2023 and US$754,000 ($959,000) as at January 31, 2022.(3) Secured term loan by a second rank movable security interest on certain property, plant, and equipment of a subsidiary of the Corporation. This US-denominated loan amounted to US$84,000 ($112,000) as at January 31, 2023 and US$192,000 ($244,000) as at January 31, 2022. (4) Bank loan secured by a US$3,419,000 ($4,564,000) letter of credit (Note 9). This US-denominated loan was fully refunded as at January 31, 2023 and amounted to US$47,000 ($60,000) as at January 31, 2022.(5) Bank loan issued on May 5, 2020 and guaranteed by the US Small Business Administration (SBA). This loan, denominated in US dollars, was fully repaid as at January 31, 2023 and amountedtoUS$930,000 ($1,183,000) as at January31, 2022.(6)	$ 28,275 18,286 512 112 ― ―	$ 29,613 ― 959 244 60 1,183
Currentportion	47,185 2,258	32,059 3,357
	44,927	28,702

(1) On November 9, 2021, the Corporation obtained a $30,000,000 bank loan from Business Development Bank of Canada ("BDC"). This loan bears interest at the annual variable interest rate of the BDC, less 1.5%, and is payable monthly. The capital is repayable by a first installment of $140,800 on March 2022, followed by 215 equal monthly installments of $138,880 beginning on April 2022, and ending on February 2040. Under this loan, the Corporation has committed to complying annually with financial ratios, which were all respected as at January 31, 2023.

• (2) As at January 14, 2022 and January 18, 2022, the Corporation obtained from Investissement Québec ("IQ") two authorized bank loans with progressive disbursements totaling $20,000,000 to finance its equipment modernization and robotization program at its Terrebonne plant. These two loans, which progressive disbursements began in February 2022, are detailed as follows:

• The first of these two bank loans, totalling $12,300,000, bears interest at IQ's annual prime rate plus 1.5% and benefit from a 24-month capital repayment moratorium at the end of which it will be repayable by 96 capital payments of $128,125 starting in March 2024 and ending in February 2032.

As at January 31, 2023, the Corporation had drawn all of this loan.

• The second of these two bank loans, totalling $7,700,000 benefits from a 36-month capital repayment moratorium, at the end of which it will be repayable by 83 capital instalments of $91,667 beginning in March 2025 to end with a final capital payment of $91,639 in February 2032.

As at January 31, 2023, the Corporation had drawn all of this loan. This loan, which bears no interest, has been valued at fair value using an interest rate commonly practiced on the market. Therefore, interest at the implicit annual rate of 3.95% is calculated monthly. The difference of $1,640,000 between this fair value of $6,060,000 and the cash received in the amount of $7,700,000 has been accounted for as a grant against property, plant and equipment to which it relates (Note 6).

These two loans are guaranteed by a first rank movable hypothec in the total amount of $24,000,000 on the universality of machinery and equipment, present and future. They are also subject to compliance with certain financial ratios.

Page 22 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

• (3) Debt contracted by a subsidiary of the Corporation to the initial amount of US$3,419,000 with a U.S. bank. This debt bears a below-market rate of interest of 2.721% and was measured at fair value based on the prevailing market interest rate. Therefore, monthly interest is calculated using the annual implicit rate of 3.42%. The capital of this debt is repayable in monthly installments estimated at US$31,000 which began in February 2014 and will end in January 2024.

• (4) A subsidiary of the Corporation contracted a US$990,000 debt with the U.S. government agency. This debt bears a below-market interest rate of 2.785% and was measured at fair value based on the prevailing market interest rate. Consequently, monthly interest is calculated using the annual implicit rate of 3.5%. The capital of this debt is repayable in monthly installments estimated at US$9,000 which began in November 2013 and will end in October 2023.

• (5) In May 2017, a subsidiary of the Corporation contracted a new loan to finance the purchase of equipment for its fabrication plant in Great Falls, Montana. This loan from a U.S. bank for the initial amount of US$520,000 has a 5-year term and bears an annual 3.84% fixed interest rate. The principal will be repaid by monthly installments of approximately US$9,000 which began in July 2017 and ended in May 2022.

• (6) On May 5, 2020, under the US Care Act and as part of a paycheck protection program, the SBA in response to COVID-19, the Corporation obtained a US$969,000 loan from a US bank. This loan is guaranteed by the SBA and was issued to a US subsidiary of the Corporation. According to the initial terms, the principal of this loan was to be repaid over a 2-year period. However, if certain conditions are met, this loan could be partially or fully forgiven.

In May 2022, this loan met the conditions to be forgiven in full. The balance of this loan at that date of $1,205,000 (US$930,000) was recognized as a government grant against the expenses in the Consolidated Statement of Income for the fiscal year ended January 31, 2023 (Note 14).

Certain property, plant and equipment having a carrying value of $66,831,000 as at January 31, 2023, and $33,920,000 as at January 31, 2022, are given as security for the long-term debt.

As at January 31, 2023, the Corporation was in compliance with its covenants of its long-term loans and bonding agreements (See Note 21 "Commitments and Contingencies").

NOTE 12 CAPITAL STOCK

12.1 Capital Stock

Authorized: Unlimited number of subordinate voting shares, carrying one (1) vote per share. Unlimited number of multiple voting shares, carrying ten (10) votes per share. Unlimited number of preferred shares, issuable in series.

	Subordinate voting shares	Multiple Voting Shares	Total
(In thousands of CA$ and in number of shares) As at January 31, 2022 and 2021 Shares Issuance	Number $ 18,292,099 52,119 5,000 7	Number $ 14,343,107 16,001 — —	Number $ 32,635,206 68,120 5,000 7
As at January31,2023	18,297,099 52,126	14,343,107 16,001	32,640,206 68,127

12.2 Deferred Share Units Plan (“DSU”)

The DSU are recognized progressively in the Consolidated Statement of Income over the vesting period and their costs is determined using a valuation model based on the market price of the Corporation’s subordinate voting shares. The DSU are re-evaluated at fair value at the end of each reporting period, using the market price of the Corporation’s subordinate voting shares.

a) External Directors

During the fiscal years ended January 31, 2023 and 2022, DSU compensation to External Directors recorded in the Consolidated Statement of Income amounted to an expense of $234,000 and $161,000 respectively, including the impact of the variation in the Corporation’s share price.

Fluctuations in DSU for External Directors were as follows:

price. Fluctuations in DSU for External Directors were as follows:
Fiscal Years Ended January 31,	2023	2022
(In number of deferred share units) Outstanding, at the beginning of fiscal year Granted Distributed	Number 54,996 111,657 —	Number 619,521 140,603 (705,128)
Outstandingand vested,at the end of fiscalyear	166,653	54,996

The carrying amount and the intrinsic value of the liabilities related to the External Directors vested DSU amounted to $355,000 as at January 31, 2023 (immaterial amount as at January 31, 2022), and is recorded in "Accounts Payable and Other Current Liabilities" in the Consolidated Statements of Financial Position.

b) Executive Officers and Key Employees

The DSU compensation for Executive Officers and key employees, amounted to $258,000 for the fiscal years ended January 31, 2023 (an immaterial amount for the fiscal years ended January 31, 2022), includes the impact of the variation in the Corporation’s share price.

Page 23 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

Fluctuations in DSU for the Executive Officers and key employees were as follows:

Fluctuations in DSU for the Executive Officers and key employees were as follows:
Fiscal Years Ended January 31,	2023	2022
(In number of deferred share units) Outstanding, at the beginning of fiscal year Granted	Number 330,570 47,697	Number 293,460 37,110
Outstanding,at the end of fiscalyear	378,267	330,570
Vested, at the end of fiscalyear	280,016	234,987

The carrying amount of the liabilities related to Executive Officers and key employees’ DSU, amounting to $740,000 as at January 31, 2023 ($470,000 as at January 31, 2022), is recorded in "Accounts Payable and Other Current Liabilities" in the Consolidated Statements of Financial Position, and of which $596,000 correspond to the intrinsic value of vested DSU as at January 31, 2023 ($374,000 as at January 31, 2022).

12.3 Performance Share Units Plan ("PSU")

During the fiscal year ended January 31, 2023, PSU compensation for Executive Officers and key employees amounted to an expense of $232,000 (an immaterial expense for the fiscal year ended January 31, 2022) including the impact of the variation in the Corporation's share price.

Fluctuations in PSU for Executive Officers and key employees were as follows:

Fluctuations in PSU for Executive Officers and key employees were as follows:
Fiscal Years Ended January 31,	2023	2022
(In number of performance share units) Outstanding, at the beginning of fiscal year Granted Distributed	Number 317,744 74,786 (174,152)	Number 346,248 93,549 (122,053)
Outstanding,at the end of fiscalyear	218,378	317,744
Vested, at the end of fiscalyear	91,641	178,624

As at January 31, 2023, the carrying amount of the liabilities related the Executive Officers and key employees’ PSU, amounted to $390,000 ($443,000 as at January 31, 2022), including an amount of $195,000 which corresponds to the intrinsic value of the vested PSU as at January 31, 2023 ($284,000 as at January 31, 2022).

NOTE 13 INFORMATION RELATED TO CONTRACTS WITH CUSTOMERS

All revenues recognized during the fiscal years ended January 31, 2023 and 2022, derived from contracts with customers and have been included in revenues of the reporting period. The amounts recorded in the Consolidated Statement of Financial Position relate to current contracts at the end of the reporting period.

The amounts are calculated as net incurred costs, plus recognized profits, less recognized losses and progress billings for the period. The carrying amount of assets and liabilities is as follows:

of assets and liabilities is as follows:
As at January 31,	2023	2022
(In thousands of CA$) Total amount of costs incurred, and margins recorded on all ongoing contracts Less advances andprogress billings	$ 919,902 (921,894)	$ 862,486 (846,258)
	(1,992)	16,228
Recognized as follows:
As at January 31,	2023	2022
(In thousands of CA$) Amount owed by clients for work performed on contracts, recorded in contract assets Amount owed to clients for workperformed on contracts,recorded in contract liabilities	$ 42,541 (44,533)	$ 29,998 (13,770)
	(1,992)	16,228

Holdbacks on contracts amounted to $15,128,000 as at January 31, 2023, will be received at the time of the client’s approval of the work performed during the next 12 months ($14,033,000 as at January 31, 2022) and are included under "Accounts receivable" in current assets in the Consolidated Statement of Financial Position.

In addition to the foreign exchange fluctuations, the variation in contract assets and liabilities is mainly attributable to additional revenues recognized within the Corporation's normal course of business, and the billing of these activities to customers. The Corporation can also receive advances and deposits from its customers before revenues are recognized.

Page 24 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

The Corporation determined that less than 5% of its total revenues from performance obligations, recorded during the fiscal year ended January 31, 2023, were earned during previous periods. These revenues are primarily attributable to price adjustments approved by customers during the fiscal year ended January 31, 2023, for services earned in prior fiscal years as per the Corporation’s normal course of business.

In addition, revenues recorded during the fiscal year ended January 31, 2023, included the amount of $13,770,000 ($22,983,000 during the fiscal year ended January 31, 2022) as part of the opening balance of contract liabilities.

The amount of the transaction price related to performance obligations that were not fulfilled (or partially fulfilled) as at January 31, 2023, on all contracts with customers, is expected to be recognized in revenues as follows: 2024: $297,651,000 and thereafter: $78,838,000. It should be noted that these amounts exclude any estimated amounts of variable considerations that are excluded from the transaction price.

NOTE 14 CLASSIFICATION OF EXPENSES BY NATURE

Fiscal Years Ended January 31,	2023	2022
(In thousands of CA$) Raw material, consumables, and subcontracting(1) Salaries and employees’ benefit expenses(1)(Note 15) Transportation Drawings and engineering(1) Amortization expenses Travelling and representation expenses Professional fees Maintenance and repairs Rental equipment Electricity and heating Management fees with related companies (Note 16) Insurance Taxes and permits Gain on disposal of property, plant and equipment Other(1)	$ 113,609 72,211 6,844 7,597 5,323 3,850 3,545 2,149 8,071 1,566 1,247 2,625 1,104 (802) 1,155	$ 171,887 55,791 11,088 7,481 5,054 2,290 2,500 1,538 5,383 1,356 1,240 2,379 1,044 (2,111) 1,115
	230,094	268,035

(1) Net of a government grant totaling $1,205,000 for the year ended January 31, 2023 relating to a forgiveness of loan (note 11 (6) "Long-Term Debt") including an amount of $307,000 as a reduction in raw materials, consumables and subcontracting, $229,000 against salaries and employee benefit expenses, $479,000 as a reduction in drafting and engineering and a final amount of $190,000 against other expenses. Net of a government grant of $1,879,000 for the fiscal year ended January 31, 2022, relating to the program implemented by the Government of Canada during the COVID-19 health crisis and booked as a reduction in salaries and employees’ benefit expenses .

Distributed as follows :

salaries and employees’ benefit expenses. Distributed as follows :
Fiscal Years Ended January 31,	2023	2022
(In thousands of CA$) Cost of goods sold Sellingand administrative expenses	$ 215,321 14,773	$ 256,046 11,989
	230,094	268,035
Cost of goods sold is as follows:
Fiscal Years Ended January 31,	2023	2022
(In thousands of CA$) Cost of goods sold excluding amortization Amortization ofproperty, plant and equipment,intangible assets and right-of-use assets	$ 211,194 4,127	$ 252,316 3,730
	215,321	256,046

Page 25 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

NOTE 15 SALARIES AND EXPENSES RELATED TO EMPLOYEES’ BENEFITS

NOTE 15 SALARIES AND EXPENSES RELATED TO EMPLOYEES’ BENEFITS
Fiscal Years Ended January 31,	2023	2022
(In thousands of CA$) Salaries and other short-term benefits(1) Social security costs Pension plan contributions Share-based compensation (Note 12) Others	$ 52,651 16,560 2,010 724 266	$ 40,326 12,816 2,021 361 267
	72,211	55,791

(1) Net of government grants totaling $229,000 for the fiscal year ended January 31, 2023, and $1,879,000 for the fiscal year ended January 31, 2022 (see Note 14).

NOTE 16 EXECUTIVE OFFICER’S COMPENSATION

The Corporation’s principal Executive Officers are members of the Board of Directors and of the Management Committee of ADF Group Inc. (the parent company) and their related persons. Their compensation includes the following expenses:

Fiscal Years Ended January 31,	2023	2022
(In thousands of CA$) Salaries and other short-term benefits Social security costs Management fees(1) Pension plan contributions Share-based compensation Attendance fees	$ 3,403 299 1,247 166 724 266	$ 2,848 290 1,240 148 361 267
	6,105	5,154

(1) In the normal course of business, management agreements have been reached with companies held by a group of majority shareholders and are measured at exchange amount.

NOTE 17 NET FINANCIAL EXPENSES

Net financial expenses were as follows:

Fiscal Years Ended January 31,	2023	2022
(In thousands of CA$) Interest on long-term debt Interest on lease liabilities (Note 7) Interest on credit facilities Capitalization of interest on property, plant and equipment under construction Others	$ 2,139 172 143 (477) 22	$ 669 209 180 — 116
	1,999	1,174

NOTE 18 INCOME TAX

18.1 Income Tax Expense

8 INCOME TAX Income Tax Expense
Fiscal Years Ended January 31,	2023	2022
(In thousands of CA$) Current Income tax expense duringthe fiscalyear	$ 250	$ (448)
Deferred Recognized deferred income tax assets from the United States Adjustments for prior fiscal years Recognition and reversal of temporarydifferences	(2,431) 87 4,013	(1,126) 48 3,022
	1,669	1,944
Income tax expense	1,919	1,496

Page 26 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

The next table reconciles the Corporation’s income tax expense and the amount which would be obtained by multiplying income before income tax expense and the combined Canadian federal and provincial tax rate:

tax expense and the combined Canadian federal and provincial tax rate:
Fiscal Years Ended January31,	2023	2022
(In thousands of CA$ and in percentage) Allowance using basic income tax rates Increase (decrease) resulting from: Non-taxable income related to the forgiveness of a COVID-19-related loan Recognized deferred income tax assets from the United States (1) Others	$ % 4,466 26.5 (373) (2.21) (2,431) (14.42) 257 1.52	$ % 2,930 26.5 ― ― (1,126) (10.2) (308) (2.8)
Income tax expense	1,919 11.39	1,496 13.5

• (1) During the fiscal year ended January 31, 2023, in light of the results of its U.S. subsidiaries, the Corporation recognized an amount of $2,431,000 in deferred income tax assets related to U.S. operations, for which no deferred tax benefit was previously recognized ($1,126,000 during the fiscal year ended January 31, 2022).

18.2 Deferred Income Tax Assets and Liabilities

The tables below provide the movement in deferred income tax assets and liabilities during the fiscal year, without taking into account the offsetting of the balances within the same tax jurisdiction:

a) Deferred Income Tax Assets

	Tax Loss Carryovers	SR&ED Expenses	Financial Expenses and Other Deferred Charges	Foreign Exchange Forward Contracts	Others	Total
(In thousands of CA$) As at February 1, 2021 Recognized in the Consolidated Statement of Income	$ ― 1,435	$ 550 46	$ 591 42	$ ― ―	$ 503 194	$ 1,644 1,717
As at January 31, 2022 Recognized in the Consolidated Statement of Income	1,435 2,902	596 ―	633 (124)	― 233	697 (208)	3,361 2,803
As at January 31, 2023	4,337	596	509	233	489	6,164

• b) Deferred Income Tax Liabilities

Recognized in the Consolidated Statement of Income As at January 31, 2023 Deferred Income Tax Liabilities	2,902 4,337	― 596	(124) 509	233 233	(208) 489	2,803 6,164
	Property, Plant and Equipment, Right- of-Use Assets and Intangible Assets	Holdbacks on Contracts Receivable	Investment Tax Credits	Contract Assets	Foreign Exchange Forward Contracts	Total
(In thousands of CA$) As at February 1, 2021 Recognized in the Consolidated Statement of Income	$ 4,662 529	$ 1,690 293	$ 353 ―	$ 429 2,976	$ 137 (137)	$ 7,271 3,661
As at January 31, 2022 Recognized in the Consolidated Statement of Income	5,191 3,372	1,983 678	353 ―	3,405 422	― ―	10,932 4,472
As at January 31, 2023	8,563	2,661	353	3,827	―	15,404

Page 27 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

The deferred income tax assets and liabilities are presented as follows in the Consolidated Statements of Financial Position:

As at January 31,	2023	2022
(In thousands of CA$) Non-current deferred income tax assets Compensationper fiscaljurisdiction	$ 6,164 (6,164)	$ 3,361 (3,361)
	―	―
Non-current deferred income tax liabilities Compensationper fiscaljurisdiction	(15,404) 6,164	(10,932) 3,361
	(9,240)	(7,571)
Deferred income tax liabilities (net)	(9,240)	(7,571)

As at January 31, 2023, the Corporation had operating tax losses of $25,401,000 available in the United States ($31,773,000 as at January 31, 2022) for carry-forward purposes for which no deferred tax asset was not recognized. These losses carry forwards expire between 2024 and 2040.

The movement in the net deferred income tax assets and liabilities is provided in the table below:

As at January 31,	2023	2022
(In thousands of CA$) Beginning of fiscal year Recognized in the Consolidated Statement of Income	$ (7,571) (1,669)	$ (5,627) (1,944)
End of fiscalyear	(9,240)	(7,571)

NOTE 19 EARNINGS PER SHARE

Diluted income per share was calculated using the treasury stock method. The table hereafter reconciles the numerator and denominator used in the calculation of basic and diluted earnings per share.

calculation of basic and diluted earnings per share.
Fiscal Years Ended January31,	2023	2022
Numerator(in thousands of CA$) Numerator applicable to basic and diluted earningsper share	14,935	9,563
Denominator(in thousands) Basic and diluted weighted average number of shares	32,640	32,635

NOTE 20 SUPPLEMENTAL CASH FLOWS INFORMATION

20.1 Change in Non-Cash Working Capital Items

The following table sets out in detail the components of the "Change in non-cash working capital items":

Fiscal Years Ended January 31,	2023	2022
(In thousands of CA$) Accounts receivable Contract assets Inventories Prepaid expenses and other current assets Accounts payable and other current liabilities Contract liabilities Others	$ (48,647) (12,011) (550) 103 5 478 29 787 (10)	$ 20,342 (21,099) (2,714) 2,382 (2,041) (9,366) (15)
Change in non-cash workingcapital items	(25,850)	(12,511)

20.2 Non-Cash Transactions

The following transactions had no cash impact for the fiscal years ended January 31, 2023 and 2022:

• Acquisition of property, plant and equipment in exchange for other property, plant and equipment for an amount of $3,180,000 during the fiscal year ended January 31, 2022 (no amount during the fiscal year ended January 31, 2023).

• No acquisitions of property, plant and equipment remained unpaid as at January 31, 2023 ($1,484,000 as at January 31, 2022).

Page 28 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

20.3 Changes in Liabilities Arising from Financing Activities

The following tables reconcile the beginning and ending balances of the Consolidated Statement of Financial Position for long-term debt, lease liabilities and credit facilities, including the current portions:

a) Long-Term Debts

Long-Term Debts
Fiscal Years Ended January 31,	2023	2022
(In thousands of CA$) Balance, beginning of fiscal year Repayment of the long-term debt Issuance of long-term debts Government grants (Note 11) Effect of fluctuations in exchange rates Others	$ 32,059 (2,216) 20,000 (2,845) 67 120	$ 20,272 (17,878) 30,000 ― (19) (316)
Balance, end of fiscal year	47,185	32,059

b) Lease Liabilities

Lease Liabilities
Fiscal Years Ended January 31,	2023	2022
(In thousands of CA$) Balance, beginning of fiscal year New leases Disposal of leases Lease liabilities payment Effect of fluctuations in exchange rates	$ 4,613 743 (367) (804) 149	$ 5,309 688 (397) (963) (24)
Balance,end of fiscalyear	4,334	4,613

NOTE 21 COMMITMENTS AND CONTINGENCIES

21.1 Bonding Agreements

In the normal course of business, the Corporation may be required by clients to provide performance bonds for the execution of work. In order to provide such bonds, some subsidiaries of the Corporation have entered into general indemnity agreements with bonding companies. To guarantee their obligations under the terms of these agreements, the Corporation and these subsidiaries have granted the bonding companies a movable hypothec on certain assets such as rights, titles, licences, and equipment, work in progress and accounts receivable. The bonding issued on the ongoing projects as at January 31, 2023, stood at $627,519,000.

21.2 Long-Term Contracts

As at January 31, 2023, the Corporation’s commitments totalled $311,000 under long-term contracts with suppliers for the provision of current and future services. The minimum annual payments due are spread over the next three (3) fiscal years, including $150,000 during the fiscal year 2024, $131,000 during fiscal year 2025 and $30,000 during fiscal year 2026.

NOTE 22 CAPITAL DISCLOSURES

The Corporation’s objectives when managing capital are to:

• Maintain a structure in order to optimize the cost of capital based on an acceptable risk level, while offering an adequate return to shareholders;

• Manage capital in an optimal manner, while ensuring that the lenders’ financial covenants are respected;

• Manage capital in order to uphold a bonding capacity in line with the Corporation’s growth objectives; and

• Further increase capital in order to preserve the trust of investors, lenders, suppliers and clients.

The Corporation defines capital as the sum of shareholders’ equity, long-term debt and lease liabilities, including current portion, and short-term bank loans, where appropriate.

The Corporation has not made any changes to its capital management since the last fiscal years. Generally, the Corporation manages its capital structure and make adjustments based on the objectives previously mentioned, economic trends, as well as all underlying risks related to the contracts in hand.

In order to uphold or readjust its capital structure, the Corporation can:

• Issue new treasury shares;

• Amend the dividend paid to shareholders;

• Redeem Subordinate Voting Shares;

• Incur new debts, and

• Sell certain assets to reduce indebtedness.

Page 29 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

In addition, the Corporation periodically monitor its capital, namely regarding a number of financial indicators, of which the “Total of the credit facilities and long-term debt including lease liabilities, net of cash and cash equivalents, to shareholders’ equity” ratio. This ratio measures the level of the credit facilities and long-term financing including lease liabilities, net of cash and cash equivalents, in relation to the capital invested by shareholders. This financial indicator does not have standardized meaning as prescribed by IFRS and therefore may not be comparable to similar measurements presented by other issuers.

by other issuers.
As at January 31,	2023	2022
Total credit facilities and current portion and long-term debt and lease liabilities, net of cash and cash equivalents(In thousands of CA$) Shareholders’ equity(In thousands of CA$) Total credit facilities and current portion and long-term debt and lease liabilities, net of cash and cash equivalents,to shareholders’ equityratio	44,326 124,985 0.35:1	29,542 108,450 0.27 :1

The Corporation’s goal is to maintain a positive ratio of 0.50:1 or less. Moreover, this goal could be revised in light of developing projects that will be considered strategic and conducive.

NOTE 23 FINANCIAL RISK MANAGEMENT

The Corporation is party to financial instruments, and thus, is particularly exposed to market risks (Section 23.1), credit and credit concentration risks (Section 23.2), and liquidity risks (Section 23.3).

23.1 Market Risk

The risk that the fair value of future cash flows of financial instruments will fluctuate because of changes in market prices, whether those changes are caused by factors specific to distinct financial instruments or its issuer, or factors affecting all similar financial instruments traded in the market. The Corporation is particularly exposed to the following market risks:

• a) Foreign exchange risk

• b) Interest rate risk

The Corporation is exposed to risks of various importance that could have an impact on its capacity to reach its strategic growth objectives. The Corporation aims to control and mitigate its financial risks through management practices that require the identification and analysis of the risks related to its operations. Periodic monitoring and review of these risks are performed based on market conditions and the Corporation’s level of activity.

A description of the main financial risks to which the Corporation is exposed is provided below:

a) Foreign Exchange Risk

The Corporation is exposed to exchange rate fluctuations between the Canadian and US dollar, since a significant portion of its revenues is generally recorded in US dollars. For the fiscal year ended January 31, 2023, 85% of the Corporation’s revenues were recorded in U.S. dollars (86% during the fiscal year ended January 31, 2022). Notwithstanding these variations and pursuant to its foreign currency hedge policy, the Corporation uses different mechanisms to mitigate the impact of these fluctuations on its results, such as:

• Maximizing purchases in US dollars when possible to avail itself of a natural hedging;

• Acquiring fabrication equipment in US dollars;

• Issuance of long-term debt in US dollars;

• Using hedge accounting, the case may be, and

• Using foreign exchange forward contracts and/or foreign currency options to hedge part of the residual exchange risk.

In line with its hedging policy, to manage its net risk between the future US-denominated cash inflows and outflows, the Corporation entered into foreign exchange forward contracts.

As at January 31, 2023, the Corporation was party to foreign exchange forward contracts for the sale of US$44,568,000 (US$24,522,000 as at January 31, 2022) with maturities varying between three (3) months to twelve (12) months with rates between 1.2744 and 1.3544 (between 1.2578 and 1.2950 as at January 31, 2022). These derivative financial instruments are classified as held for trading and are measured at their fair value at the end of each period since they are not designated as part of an effective hedging relationship.

For this purpose, the fair value of foreign exchange forward contracts recorded was $964,000 as at January 31, 2023, under “Other current liabilities” in the Consolidated Statements of Financial Position (no material amount as at January 31, 2022).

During the fiscal year ended January 31, 2023 a realized and unrealized loss of $2,496,000 (a realized and unrealized gain of $609,000 for the fiscal year ended January 31, 2022), was recorded in the Consolidated Statement of Income under the item "Foreign Exchange Loss".

The following table summarizes significant non-derivative financial assets and liabilities that are subject to a foreign currency exposure as at January 31, 2023 and 2022, and whose foreign currency exposure is recognized in income:

Page 30 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

As at January 31,	2023	2022
(In thousands of US$) Financial assets Cash and cash equivalents Accounts receivable Current advances to subsidiaries(1)	$ 1,614 31,924 4,321	$ 624 9,905 12,384
	37,859	22,913
Financial liabilities Accountspayable and other current liabilities	871	4,107
	871	4,107
Net exposure	36,988	18,806

• (1) Although these balances are eliminated in the Consolidated Statement of Financial Position, the effects of currency fluctuations are recorded in net income.

Based on the balance, as at January 31, 2023, of the Corporation’s financial instruments denominated in foreign currencies, a 10% fluctuation in the exchange rate between the Canadian and US dollars, while all other variables remaining constant, would have had no impact on net income before tax (no impact for the year ended January 31, 2022).

b) Interest Rate Risk

The Corporation is exposed to interest rate fluctuations mainly because of the floating interest rate of its credit facilities and a portion of its long-term debt, where applicable (Notes 9 and 11). In addition, the interest rate fluctuations could also affect the Corporation’s financial revenues generated by the cash and cash equivalents.

The Corporation’s interest rate policy generally requires that an appropriate mix between fixed interest and floating interest debts be maintained in order to reduce the net impact of interest rate fluctuations. According to this policy, if this combination is unsuitable, the Corporation can use interest-rate swaps so as to achieve a less volatile interest expense.

To this end, on October 18, 2022, the Corporation entered interest rate options for a nominal value of $10,000,000 to hedge interest rate fluctuations greater than 4.5% (based on the one-month CDOR) of its Canadian dollar denominated floating interest long-term debt, until October 23, 2025. The change in the fair value of these interest rate options as at January 31, 2023, was a gain of $84,000 recognized in net financial expenses in the Consolidated Statement of Income.

According to the Corporation’s Management, as at January 31, 2022, the use of interest rate swap was no longer required to hedge the interest rate risk, given that the balance of the long-term debt, including the short-term credit facilities, included a reasonable combination of fixed and floating interest rates.

Based on the balance of the floating interest debt as at January 31, 2023 and 2022, the impact of an upward or downward 0.5% change in interest rates, assuming all other variables remain constant, would have had an immaterial impact on the Corporation's net income over a horizon of 12 months.

23.2

Credit and Credit Concentration Risks

a) Credit Risk

Risk, that a party to a financial instrument neglecting its obligations will cause a financial loss for the other party.

b) Credit Concentration Risk

Risk that the business deals with a limited number of clients and financial institutions, which might increase the credit risk, as defined above.

In the normal course of business, the Corporation's exposure to credit risks results from the possibility that a client or financial institution may default, in part or in whole, on their financial obligations as they come due. Concentration of credit risk relates to cash equivalents, when applicable and accounts receivable.

Cash equivalents are usually risk-free or low risk investments. Where this is the case, the Corporation deposit its cash equivalents with recognized financial institutions, the most important of which are Canadian chartered banks.

In the normal course of business, the Corporation grants credit to its clients. The Corporation carries out credit checks on its clients, declares their contracts directly to the owner and when relevant, to the bonding company involved in the project. Finally, the Corporation establishes allowances for credit losses, if applicable, using the expected credit losses to estimate this allowance. This method takes into account the credit risks of its customers, the expected life of these financial assets, historical trends and economic conditions.

Credit risk with respect to accounts receivable is mitigated by the available mechanisms of protection in case of non-payment, including liens on buildings, and given that the Corporation's clients tend to be general contractors, or companies doing business with contractors governed by rigorous practices and servicing adequately funded projects.

Page 31 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

As at January 31, 2023, 0.5% of accounts receivable, representing $341,000 (8% or $2,143,000 as at January 31, 2022) was overdue under contractual terms (over 90 days). Management believes that most of these accounts are with established corporations or were cashed since, and therefore, the Corporation does not believe that it is exposed to an unusual or significant level of risk as at January 31, 2023 and 2022.

As previously described, credit risk arising from the concentration of its clients is also mitigated through monitoring and the measures available to the Corporation. As at January 31, 2023, 72% of accounts receivable was concentrated with three (3) clients (77% of accounts receivable attributable to four (4) clients as at January 31, 2022). It should be noted that given the specialization of its market niches and the nature of the contracts that the Corporation submits bids for, such concentration regularly occurs in the Corporation’s activities.

23.3 Liquidity Risk

Liquidity risk is the risk that the Corporation is unable to fulfill its obligations as they come due. The Corporation manages its liquidity risk by forecasting cash flows from operating, investing and financing activities. The senior management is also actively involved in the review and approval of contracts with clients and planned capital expenditures. To fund its liquidity requirements, the Corporation uses cash flows from its operating activities, the credit facilities, issuance of debts and shares. In addition, in order to alleviate this risk, the Corporation has a policy that essentially targets contracts that can generate positive cash flows throughout their execution.

As at January 31, 2023, the contractual maturities analysis of financial liabilities was as follows:

	Book Value as at January 31, 2023	Less than 1 Year	From 1 to 3 Years	From 4 to 5 Years	More than 5 Years	Total
(In thousands of CA$) Accounts payable and other current liabilities Long-term debt Principal Interest Lease liabilities Principal Interest	$ 39,985 47,185 4,334	$ 39,985 2,290 2,973 806 171	$ ― 7,380 5,356 1,692 238	$ ― 8,608 4,375 1,165 112	$ ― 30,816 9,713 671 21	$ 39,985 49,094 22,417 4,334 542
	91,504	46,225	14,666	14,260	41,221	116,372

As at January 31, 2022, the maturity analysis of financial liabilities was as follows:

	Book Value as at January 31, 2022	Less than 1 Year	From 1 to 3 Years	From 4 to 5 Years	More than 5 Years	Total
(In thousands of CA$) Accounts payable and other current liabilities Long-term debt Principal Interest Lease liabilities Principal Interest	$ 34,421 32,059 4,613	$ 34,421 3,382 858 841 172	$ ― 3,927 1,652 1,634 250	$ ― 3,333 1,436 1,059 145	$ ― 21,804 4,380 1,079 59	$ 34,421 32,446 8,326 4,613 626
	71,093	39,674	7,463	5,973	27,322	80,432

Balances in U.S. dollars and/or subject to floating interest rates are established based on the relevant spot rates at the respective dates.

Page 32 of 34

ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

NOTE 24 FINANCIAL INSTRUMENTS

24.1 Categories for Measurement

The next table provides the book value per class of financial instruments:

4 FINANCIAL INSTRUMENTS Categories for Measurement The next table provides the book value per class of financial instruments:
As at January 31,	2023	2022
(In thousands of CA$) Financial assets at amortized cost Cash and cash equivalents Accounts receivable	$ 7,193 90,921	$ 7,130 40,424
	98,114	47,554
Financial assets at fair value through net income Derivative financial instruments	84	4
	84	4
Financial liabilities at fair value through net income Derivative financial instruments	964	―
	964	―
Financial liabilities to amortized cost Accounts payable and other current liabilities(1) Long-term debt(2)	27,431 47,185	23,426 32,059
	74,616	55,485

(1) Excludes amounts due for statutory liabilities, employee benefits and share-based payments.

(2) Excludes lease liabilities.

As at January 31, 2023 and 2022, given the upcoming maturity dates of cash and cash equivalents, accounts receivable, other current assets, contract assets, credit facilities, accounts payable and other current liabilities, as well as contract liabilities, their fair value was approximately equal to their book value.

The fair value of the long-term debt (excluding the lease liabilities) did not differ significantly from its book value as at January 31, 2023 and 2022, as the effective interest rates reflect current market conditions.

24.2 Fair Value Hierarchy of Financial Assets and Liabilities

In accordance with IFRS, the Corporation measures its financial assets and liabilities using the following fair value hierarchies, which have been defined as follows:

• Fair value - Level 1: Quoted price (unadjusted) in active markets for identical assets or liabilities.

• Fair value - Level 2: For inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices).

• Fair value - Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

For all financial instruments measured at fair value, the Corporation classified fair value measurements at level 2, as they are primarily based on observable data other than in an active market.

NOTE 25 SEGMENTED INFORMATION

The Corporation operates one operational sector, being, the non-residential construction industry, primarily in the United States and Canada. This sector includes the following areas of expertise: the design and engineering of connections, fabrication, including industrial coating, and installation of complex steel structures, heavy steel built-ups, as well as miscellaneous and architectural metalwork.

steel structures, heavy steel built-ups, as well as miscellaneous and architectural metalwork.
Fiscal Years Ended January 31,	2023	2022
(In thousands of CA$) Revenues Canada United States	$ 36,913 213,977	$ 39,810 240,930
	250,890	280,740

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ADF Group Inc.

Consolidated Financial Statements for the Fiscal Year Ended January 31, 2023

As at January 31,	2023	2022
(In thousands of CA$) Non-current assets(1) Canada United States	$ 74,424 42,813	$ 68,907 41,041
	117,237	109,948

(1) The non-current assets mainly include property, plant and equipment, intangible assets, right-of-use assets, investment tax credits and others non-current assets.

Revenues from external clients were allocated to each country on the basis of the project’s location.

During the fiscal year ended January 31, 2023, 62% of the Corporation’s revenues was realized with three (3) clients, each representing 10% and more of its revenues (86% with three (3) clients during the fiscal year ended January 31, 2022).

The following table presents the breakdown of revenues for each of these clients:

its revenues (86% with three (3) clients during the fiscal year ended January 31, 2022). The following table presents the breakdown of revenues for each of these clients:
Fiscal Years Ended January 31,	2023	2022
(In thousands of CA$) Client A(1) Client B(1) Client C(2) Client D(1) Client E(1)	$ ― 57,386 ― 46,069 52,886	$ 168,950 40,610 31,381 ― ―
	156,341	240,941

(1) From the United States

(2) From Canada

NOTE 26 SUBSEQUENT EVENTS

26.1 Dividend

On April 12, 2023, the Corporation’s Board of Directors approved a semi-annual dividend of $0.01 per share payable on May 17, 2023 to Shareholders of Record as at April 28, 2023.

26.2 New Financing Agreement

On February 10, 2023, the Corporation reached an agreement with its Canadian financial institution on the terms and conditions amending its Canadian operating credit facility. Once finalized, the credit facility will increase from $30,000,000 to $40,000,000 ; this amount remains subject to a margination calculation, but only when the Corporation draws an amount greater than $20,000,000. The other conditions will remain similar to the current ones.

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ADF Group Inc.

ADF GROUP INC. 300 Henry-Bessemer Terrebonne, Quebec, Canada J6Y 1T3 T. (450) 965-1911 / 1 (800) 263-7560 infos@adfgroup.com / www.adfgroup.com

CONSOLIDATED FINANCIAL STATEMENTS Fiscal Year Ended January 31, 2023

The electronic version of this document is also available at www.adfgroup.com and at www.sedar.com.

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