Aether Global Innovations Corp. — Interim / Quarterly Report 2022

Dec 15, 2022

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INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the Period Ended August 31, 2022, 2021 and 2020 (with Comparative AUDITED Figures as at November 30, 2021) (Unaudited – Prepared by Management) (Expressed in Canadian Dollars)

PLYMOUTH ROCK TECHNOLOGIES INC.

(the “Company”)

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

Management of the Company is responsible for the preparation of the accompanying unaudited interim condensed consolidated financial statements. The unaudited interim condensed consolidated financial statements have been prepared using accounting policies in compliance with International Financial Reporting Standards (“IFRS”) for the preparation of interim condensed financial statements and are in accordance with IAS 34 – Interim Financial Reporting.

The Company’s auditor has not performed a review of these interim condensed consolidated financial statements in accordance with the standards established by the Canadian Institute of Chartered Professional Accountants for a review of interim financial statements by an entity’s auditor.

PLYMOUTH ROCK TECHNOLOGIES INC. Interim Condensed Consolidated Statements of Financial Position

(Expressed in Canadian dollars)

As at Note August 31, 2022	November 30, 2021
(Unaudited)	(Audited)
ASSETS
Current assets
Cash $ 41,058	$ 375,046
Accounts receivable 14,317	11,848
Sales tax receivable 7,412	56,237
Inventories 2,728	11,086
Prepaid expenses 4 51,036	178,321
Total current assets 116,551	632,538
Non-current assets
Equipment 5 270,363	294,188
Right of use asset 16 45,370	72,734
Intangible assets 6, 14 385,408	549,679
Total assets $ 817,692	$ 1,549,139
LIABILITIES
Current liabilities
Accounts payable 7 $ 1,367,818	$ 608,385
Lease liability 16 46,160	39,221
Current portion of loans payable 10 117,629	6,332
Due to related parties 8 499,850	52,728
Total current liabilities 2,031,457	706,666
Non-current liabilities
Lease liability 16 12,758	47,125
Loan payable 10 10,670	22,545
Total liabilities 2,054,885	776,336
SHAREHOLDERS' EQUITY (DEFICIT)
Share capital 8,12 11,851,771	11,834,582
Contributed surplus 12 2,709,790	2,709,790
Accumulated other comprehensive income 75,561	96,393
Deficit (15,874,315)	(13,867,962)
Total shareholders'equity (deficit) (1,237,193)	772,803
Total liabilities and shareholders'equity (deficit) $817,692	$1,549,139

Going concern – Note 1 Commitments – Note 15

Subsequent events – Note 19

These interim condensed consolidated financial statements are authorized for issuance by the Board of Directors on December 14, 2022.

Approved on behalf of the Board:

“Thomas Nash” “Khalid Al-Ali”

Thomas Nash, Director Khalid Al-Ali, Director

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

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PLYMOUTH ROCK TECHNOLOGIES INC.

Interim Condensed Consolidated Statements of Loss and Comprehensive Loss (Unaudited – Prepared by Management)

(Expressed in Canadian dollars)

Nine Months Ending August 31	Nine Months Ending August 31	Nine Months Ending August 31	Three months ended August 31,	Three months ended August 31,
Note 2022	2021	2020	2022 2021 2020
Sales 18 $ 553,540	$ 119,024	$ 45,748 23,084	$ 56,878 $ 96,484 $ 24,578 26,893 55,557 $ 11,604
Cost of sales 155,525	74,432			$ 11,604
Gross Profit 398,015	44,592	22,664	29,985 40,927 12,974
		1,050,537 967,927 249,270	640,514 636,167 279,229 75,753 123,637 361,726 100,119 162,533 76,057
OPERATING EXPENSES
General and administrative 17 1,858,299	2,294,102			279,229
Selling 17 232,388	333,996			361,726
Research and development 17 322,015	658,477			76,057
Total expenses 2,412,702	3,286,575	2,267,734 170 - (50,850)	816,386 922,337 717,012 - - 7 - 26 - 8,003 (6,393) 44,507
OTHER INCOME (EXPENSES)
Interest income -	-			7
Interest expense -	-			-
Foreign exchange gain (loss) 8,334	(19,486)			44,507
NET LOSS BEFORE INCOME TAX (2,006,353)	(3,261,469)	(2,295,750)	(778,398) (887,777) (659,524)
		-
Deferred tax recovery	-
NET LOSS (2,006,353)	(3,261,469)	(2,295,750)	(778,398) (887,777) (659,524)
			(20,090) 38,936 (41,427)
OTHER COMPREHENSIVE INCOME (LOSS)
		$(2,344,588)	$ (798,488) $ (848,841) $ (700,951)
TOTAL COMPREHENSIVE LOSS $(2,027,185)	$(3,234,304)
		$ (0.07)	$ (0.01) $ (0.02) $ (0.02)
LOSS PER SHARE, Basic and Diluted $ (0.03)	$ (0.06)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING,
Basic and Diluted 59,308,622	51,031,005	35,872,559	59,317,461 54,231,219 40,086,156

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

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PLYMOUTH ROCK TECHNOLOGIES INC. Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficit) (Unaudited – Prepared by Management)

(Expressed in Canadian dollars)

	Accumulated other comprehensive losses Subscriptions received Contributed Surplus Deficit
Share capital (Note 10) Shares to be issued (Note 14) Number of shares Amount
		Total
Balance, November 30, 2019 32,796,600 $ 5,676,498 $ 22,811	$- $ 736,271 $ (5,968,892) $ 46,244	$ 512,932
Net loss for the period - - -	- - (2,295,750) -	(2,295,750)
Shares issued for warrants exercised 983,334 196,667 -	- - - -	196,667
Foreign currency translation gain - - -	- - - 48,838	48,838
Private Placements 6,847,165 1,027,075 -	163,300 - - -	1,190,375
Share issuance costs - (38,728) -	- - - -	(38,728)
Stock-based compensation 250,000 $ 62,500 -	- 450,146 - -	512,646
Balance, August 31, 2020 40,877,099 $ 6,924,012 $ 22,811	$ 163,300 $ 1,186,417 $ (8,264,642) $ 95,082	$ 126,980
Balance, November 30, 2020 42,762,264 $ 7,376,763 $-	$- $ 1,298,487 $ (8,893,128) $ 65,790	$ (152,088)
Net loss for the period - - -	- - (3,261,469) -	(3,261,469)
Foreign currency translation loss - - -	- - - 27,165	27,165
Shares issued for warrants exercised 5,779,572 1,245,226 -	- - - -	1,245,226
Fair value of warrants exercised - 35,040 -	- (35,040) - -	-
Shares issued for options exercised 425,000 222,500 -	- - - -	222,500
Fair value of options exercised - 158,106 -	- (158,106) - -	-
Private placements 8,930,000 3,036,500 -	- - - -	3,036,500
Fair value of broker warrants granted - (214,820) -	- 214,820 - -	-
Shares issued to finders 336,250 (100,500) -	- - - -	(100,500)
Finders' fees - (74,180) -	- - - -	(74,180)
Shares issued as compensation 500,000 125,000 -	- - - -	125,000
Stock-based compensation - - -	- 929,208 - -	929,208
Balance, August 31, 2021 58,733,086 $11,809,635 $-	$- $ 2,249,369 $ (12,154,597) $ 92,955	$ 1,997,362
Balance, November 30, 2021 59,239,336 $11,834,582 $-	$- $ 2,709,790 $ (13,867,962) $ 96,393	$ 772,803
Net loss for the period - - -	- - (2,006,353) -	(2,006,353)
Foreign currency translation loss - - -	- - - (20,832)	(20,832)
Shares issued as compensation 78,125 17,189 -	- - - -	17,189
Balance, August 31, 2022 59,317,461 11,851,771 $ -	$ - $ 2,709,790 (15,874,315) $ 75,561	$(1,237,193)

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

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PLYMOUTH ROCK TECHNOLOGIES INC. Interim Condensed Consolidated Statements of Cash Flows (Unaudited – Prepared by Management) (Expressed in Canadian dollars)

	Nine months Ended August 31	Nine months Ended August 31	Nine months Ended August 31	Nine months Ended August 31
	2022		2021		2020
Cash Provided By (Used In)
Operating Activities
Net loss for the period	$ (2,006,353)		$ (3,261,469)	$	(2,295,750)
Items not affecting cash:
Stock based compensation	-		929,208		450,146
Amortization expense	203,952		32,206		2,389
Foreign exchange (gain) loss	(20,832)		27,165		48,941
Interest accretion	7,827		11,476		-
Consulting Fees	204,689		125,000		-
Changes in non-cash working capital:
Sales tax receivable	48,825		(21,378)		(6,071)
Accounts receivable	(2,469)		(16,840)		1,140
Inventories	8,358		(1,313)		(2,739)
Prepaid expenses	127,285		(125,017)		(44,637)
Due from related parties	-		2,500		25,070
Due to related parties	259,622		46,423		(4,535)
Accounts payable and accrued liabilities	759,433		21,814		396
Deferred income liability	-		-		23,449
Net cash used in operating activities	(409,663)		(2,230,225)		(1,802,201)
Investing Activities
Purchase of equipment	-		(119,078)		-
Acquisition of Business	-		(127,716)		-
Net cash provided by (used in) investing activities	-		(246,794)		-
Financing Activities
Common shares issued for cash, options and
warrants exercised, net of share issuance costs	-		4,329,546		1,247,514
Subscription received, net of subscription receivable	-		-		163,300
Lease payments	(27,428)		(31,866)		-
Loan payable	99,422		(222)		-
Net cash provided by (used in) financing activities	71,994		4,297,458		1,410,814
Increase (decrease) in cash	(337,669)		1,820,439		(391,387)
Effect of foreign exchange rate changes on cash	3,681		22,465		-
Cash, beginning of the period	375,046		24,713		583,119
Cash, end ofthe period	$ 41,058		$1,867,617	$	191,732

Supplemental cash flow information – Note 14

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

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PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

1. NATURE OF OPERATIONS AND ABILITY TO CONTINUE AS A GOING CONCERN

Plymouth Rock Technologies Inc. (the “Company”) was incorporated under the Business Corporations Act of British Columbia on October 17, 2011. The head office, principal address and registered and records office of the Company are located at 700 – 1199 West Hastings Street, Vancouver, B.C., V6E 3T5.

On March 10, 2016, the Company’s common shares commenced trading on the CSE. On January 8, 2019, the Company’s common shares commenced trading on the Frankfurt Stock Exchange in Germany under the Symbol: 4XA, WKN# - A2N8RH. Effective August 27, 2019, the Company’s common shares commenced trading on the OTC Markets Group (“OTCQB”) under the symbol: PLRTF.

Since the Company completed its business acquisition with Plymouth Rock Technologies Inc. (“Plymouth Rock USA”) in 2018, the Company’s principal business activity through its subsidiary, Plymouth Rock USA (“PRT USA”), focused on developing technologies related to remotely detecting assault firearms and suicide bombs concealed on the person or a carry bag. The Company focuses on detection methods with and without the need for a checkpoint of the suspect who is being screened. The Company’s planned products encompass the very latest radar, imaging, and Unmanned Aerial System (“UAS”) technologies for quickly detecting, locating and identifying the presence of threats and for search and rescue missions for law enforcement.

On March 26, 2021, the Company incorporated a subsidiary in United Kingdom, Plymouth Rock Technologies UK Limited (“PRT UK”). The purpose of PRT UK is to augment the Company’s existing research and development of its drone technologies for the US and EMEA markets.

On June 4, 2021, the Company completed its acquisition of Tetra Drones Limited (“Tetra”) (Note 3). The acquisition of Tetra provides the Company with drones production line in the United Kingdom.

Going Concern

These consolidated financial statements are prepared on a going concern basis, which contemplates that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. At present, the Company’s operations do not generate cash flows from operations. The Company has incurred losses since inception and has a comprehensive loss of $2,027,185 for the period ended August 31, 2022 (2021 - $3,234,304) and had an accumulated deficit of $15,874,315 (November 30, 2021 - $13,861,962). The ability of the Company to continue as a going concern is dependent on achieving profitable operations, commercializing its technologies, and obtaining the necessary financing in order to develop these technologies further. The outcome of these matters cannot be predicted at this time. The Company will continue to review the prospects of raising additional debt and equity financing to support its operations until such time that its operations become self-sustaining, to fund its research and development activities and to ensure the realization of its assets and discharge of its liabilities. While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate sufficient funds for future operations. These factors and uncertainty casts significant doubt about the Company’s ability to continue as a going concern and therefore it may be unable to realize its assets and discharge its liabilities in the normal course of business.

The Company is not expected to be profitable during the ensuing 12 months, and therefore, must rely on securing additional funds from either issuance of debt or equity financing for cash consideration. During the period ended August 31, 2022, the Company received net cash proceeds of $71,994 (August 31, 2021 – $4,297,458) pursuant to financing activities. Management has been successful in raising capital through periodic private placements of the Company's common shares in the past, however there is no certainty that financing will be available in the future, or certainty that management’s planned actions to address this situation will be successful.

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PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

1. NATURE OF OPERATIONS AND ABILITY TO CONTINUE AS A GOING CONCERN (continued)

These interim condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future rather than a process of forced liquidation. These interim condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. Such adjustments could be material.

In March 2020, the World Health Organization declared a global pandemic known as COVID-19. The expected impacts on global commerce are expected to be far reaching. Material uncertainties may come into existence that could influence management’s going concern assumption. The duration and impact of the COVID-19 outbreak is currently unknown and it is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its subsidiary, in future periods. This has impacted demand and testing for the Company’s products and services in the near term and will and has impacted the Company’s supply chains. Management continues to closely evaluate the impact of COVID-19 on the Company’s business.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

These interim condensed consolidated financial statements (“Financial Statements”) have been prepared using accounting policies consistent with IFRS as issued by the International Accounting Standard Board (“IASB”) and in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting, using accounting policies that the Company expects to adopt in its interim condensed consolidated financial statements for the period ended August 31, 2022. These interim condensed consolidated financial statements do not include all the information required for the annual consolidated financial statements and should be read in conjunction with the Company’s most recent audited consolidated financial statements for the year ended November 30, 2021, which are available on www.sedar.com.

These Financial Statements are authorized for issue by the Board of Directors on December 14, 2022.

These Financial Statements have been prepared on a historical cost basis. In addition, these Financial Statements have been prepared using the accrual basis of accounting.

These Financial Statements are presented in Canadian dollars, which is the Company’s functional currency. The functional currency of Plymouth Rock USA is U.S. Dollars and the functional currency of PRT UK and Tetra Drones is British Pound Sterling. The assets and liabilities of Plymouth Rock USA and PRT UK are translated into Canadian dollars at the rate of exchange prevailing at the reporting date and their income and expense items are translated at average exchange rates for the period. Exchange differences arising on the translation are recognized in other comprehensive income.

Significant accounting judgments, estimates and assumptions

The preparation of these Financial Statements in conformity with IFRS requires management to make judgments and estimates and form assumptions that affect the reported amounts of assets and liabilities at the date of the Financial Statements and reported amounts of income and expenses during the period. Actual results could differ from these estimates.

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PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Significant accounting judgments, estimates and assumptions (continued)

Significant estimates used in preparing the Financial Statements include, but are not limited to the following:

a. Deferred taxes

The calculation of deferred tax is based on the ability of the Company to generate future taxable income, the estimation of which is subject to significant uncertainty as to the amount and timing. The calculation of deferred tax is also based on assumptions, which are subject to uncertainty as to timing and which tax rates are expected to apply when temporary differences reverse. Deferred tax recorded is also subject to uncertainty regarding the magnitude on non-capital losses available for carry forward and of the balances in various tax pools as the corporate tax returns have not been prepared as of the date of financial statement preparation.

b. Stock-based payments

The fair value of stock options and finders’ warrants issued are subject to the limitations of the Black-Scholes option pricing model that incorporates market data and involves uncertainty in estimates used by management in the assumptions. Because the Black-Scholes option pricing model requires the input of highly subjective assumptions, including the expected lift, volatility of share prices, risk-free rate and dividend yield, changes in subjective input assumptions can materially affect the fair value estimate.

c. Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit (“CGU”) exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model.

Significant judgments used in the preparation of these Financial Statements include, but are not limited to the following:

(i) Going concern

Management has applied judgements in the assessment of the Company's ability to continue as a going concern when preparing its Financial Statements for the period ended August 31, 2022. Management prepares the Financial Statements on a going concern basis unless management either intends to liquidate the entity or to cease trading or has no realistic alternative but to do so.

In assessing whether the going concern assumption is appropriate, management accounts for all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period.

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PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Significant accounting judgments, estimates and assumptions (continued)

(ii) Business combinations

Determination of whether a set of assets acquired and liabilities assumed constitute the acquisition of a business or asset may require the Company to make certain judgments as to whether or not the assets acquired and liabilities assumed include the inputs, processes and outputs necessary to constitute a business as defined in IFRS 3 – Business Combinations. Based on an assessment of the relevant facts and circumstances, the Company concluded that the acquisition disclosed in Note 3 met the criteria for accounting as a business combination.

(iii) Intangible assets

Intangible assets can be capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. To determine if the future economic benefit is probable depends on the successful commercialization of its technologies and that in turn depends on the management’s judgement and knowledge. As at August 31, 2022, the development costs are not capitalized as management was unable to demonstrate the future economic benefits to be generated from the utilization of the associated expenditures.

Cash

Cash consists of amounts held in banks and highly liquid investments with limited interest and credit risk.

Consolidation

The Financial Statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances, transactions and any unrealized gains and losses arising from intercompany transactions, have been eliminated. The Company’s subsidiary is presented in the table below. Plymouth Rock USA was incorporated under the General Corporation Law of the State of Delaware on March 22, 2018. Plymouth Rock UK was incorporated under the General Corporation Law for England and Wales on March 26, 2021.

	Entity Country of Incorporation Effective Economic Interest
	Plymouth Rock Technologies Inc. (“Plymouth Rock USA”) Plymouth Rock Technologies Inc. (“PRT UK”) Tetra Drones Ltd. (“Tetra Drones”) Te USA 100% UK 100% UK 100%

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PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Intangible assets

Intangible assets that are reflected in the consolidated statements of financial position consist of assets acquired through business combinations. Intangible assets acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair value at the acquisition date (which is regarded as their cost). An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Accordingly, the Company does not amortize these intangible assets, but reviews them for impairment, annually or more frequently if events or changes in circumstances indicate that the assets might be impaired.

Development costs for internally-generated intangible assets are capitalized when all of the following conditions are met:

• technical feasibility can be demonstrated;

• management has the intention to complete the intangible asset and use it;

• management can demonstrate the ability to use the intangible asset;

• it is probable that the intangible asset will generate future economic benefits;

• the Company can demonstrate the availability of adequate technical, financial and other resources to complete the development and to use the intangible asset; and

• costs attributable to the asset can be measured reliably.

The amount initially recognized for internally-generated intangible assets is the sum of the expenditures incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, development expenditures are charged to the consolidated statements of loss and comprehensive loss in the period in which they are incurred.

Customer relationships acquired through the acquisition of subsidiary, Tetra Drones, are amortized for a period of three years from acquisition date.

Equipment

Recognition and measurement

On initial recognition, equipment is valued at cost, being the purchase price and directly attributable cost of acquisition or construction required to bring the asset to the location and condition necessary to be capable of operating in the manner intended by the Company, including appropriate borrowing costs and the estimated present value of any future unavoidable costs of dismantling and removing the items. The corresponding liability is recognized within provisions.

Equipment is subsequently measured at cost less accumulated depreciation, less any accumulated impairment losses.

When parts of an item of equipment have different useful lives, they are accounted for as separate items (major components) of equipment.

Gains and losses

Gains and losses on disposal of an item of equipment are determined by comparing the proceeds from disposal with the carrying amount and are recognized net within other income in profit or loss.

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PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Equipment (continued)

Depreciation

Half of the normal depreciation is taken in the year of acquisition for equipment with declining balance method. The depreciation rates applicable to each category of property and equipment are as follows:

Computer equipment 55% declining balance Vehicles 30% declining balance Furniture 20% declining balance Leasehold improvements 30% declining balance

Inventories

The Company values inventories at the lower of cost and net realizable value. Cost includes the costs of purchases net of vendor allowances plus other costs, such as transportation, that are directly incurred to bring the inventories to their present location and condition.

Business combinations

Business combinations are accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values at the date of acquisition, of assets transferred, liabilities incurred or assumed, and equity instruments issued by the Company. The acquiree’s identifiable assets and liabilities assumed are recognized at their fair value at the acquisition date. Acquisition-related costs are recognized in profit or loss as incurred. The excess of consideration over the fair value of the net identifiable assets and liabilities acquired is recorded as goodwill. Any gain on a bargain purchase is recorded in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. Any goodwill that arises is tested annually for impairment.

Share capital

The Company records proceeds from the issuance of its common shares as equity. Proceeds received on the issuance of units, consisting of common shares and warrants, are allocated between the common share and warrant component. The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the most easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component.

The fair value of the common shares issued in the private placement was determined to be the more easily measurable component and were valued at their fair value, as determined by the closing quoted price on the issuance date. The remaining proceeds, if any, are allocated to the attached warrants. Any fair value attributed to the warrants is recorded as warrant reserve. Management does not expect to record a value to the warrant in most equity issuances as unit private placements are commonly priced at market or at a permitted discount to market. If the warrants are issued as share issuance costs, the fair value of agent’s warrants are measured using the Black-Scholes option pricing model and recognized in equity as a deduction from the proceeds.

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PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Share capital (continued)

If the warrants are exercised, the related amount is reclassified as share capital. If the warrants expire unexercised, the related amount remains in warrant reserve.

Incremental costs directly attributable to the issue of new common shares are shown in equity as a deduction, net of tax, from the proceeds. Common shares issued for consideration other than cash are valued based on their market value at the date that shares are issued.

Stock-based payment

The Company recognizes share-based payment expense for the estimated fair value of equity-based instruments granted to both employees and non-employees. Compensation expense is recognized when the options are granted with the same amount being recorded as contributed surplus. The expense is determined using an option pricing model that accounts for the exercise price, the term of the option, the current share price, the expected volatility of the underlying shares, the expected dividend yield, and the risk-free interest rate for the term of the option. If the options are exercised, the contributed surplus will be reduced by the applicable amount. Share-based payment calculations have no effect in the Company’s cash position.

Earnings (loss) per share

Basic earnings (loss) per share are calculated using the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are calculated using the treasury stock method. This method assumes that common shares are issued for the exercise of options, warrants and convertible securities and that the assumed proceeds from the exercise of options, warrants and convertible securities are used to purchase common shares at the average market price during the period. The difference between the number of shares assumed issued and the number of shares assumed purchased is then added to the basic weighted average number of shares outstanding to determine the fully diluted number of common shares outstanding. No exercise or conversion is assumed during the periods in which a net loss is incurred as the effect is anti-dilutive.

Financial instruments

Financial assets

The Company recognizes financial assets when it becomes party to the contractual provisions of the

instrument. Financial assets are measured initially at their fair value plus, in the case of financial assets not subsequently measured at fair value through profit or loss, transaction costs that are directly attributable to their acquisition. Transaction costs attributable to the acquisition of financial assets subsequently measured at fair value through profit or loss are expensed in profit or loss when incurred.

Subsequent to initial recognition, all financial assets are classified and subsequently measured at amortized cost. Interest income is calculated using the effective interest method and gains or losses arising from impairment, foreign exchange and derecognition are recognized in profit or loss. Financial assets measured at amortized cost are comprised of cash, accounts receivable and due from related parties.

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PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial assets (continued)

The Company reclassifies debt instruments only when its business model for managing those financial assets has changed. Reclassifications are applied prospectively from the reclassification date and any previously recognized gains, losses or interest are not restated.

The Company recognizes a loss allowance for the expected credit losses associated with its financial assets. Expected credit losses are measured to reflect a probability-weighted amount, the time value of money, and reasonable and supportable information regarding past events, current conditions and forecasts of future economic conditions.

The Company applies the simplified approach for accounts receivable that do not contain a significant financing component. Using the simplified approach, the Company records a loss allowance equal to the expected credit losses resulting from all possible default events over the assets’ contractual lifetime.

Financial assets are written off when the Company has no reasonable expectations of recovering all or any portion thereof.

The Company derecognizes a financial asset when its contractual rights to the cash flows from the financial asset expire.

Financial liabilities

The Company recognizes a financial liability when it becomes party to the contractual provisions of the instrument. At initial recognition, the Company measures financial liabilities at their fair value plus transaction costs that are directly attributable to their issuance, with the exception of financial liabilities subsequently measured at fair value through profit or loss for which transaction costs are immediately recorded in profit or loss.

Subsequent to initial recognition, all financial liabilities are measured at amortized cost using the effective interest rate method. Interest, gains, and losses relating to a financial liability are recognized in profit or loss. Financial liabilities measured at amortized cost are comprised of accounts payable, lease liability, and due to related parties.

The Company derecognizes a financial liability only when its contractual obligations are discharged, cancelled or expire.

Interest

Interest income and expense are recognized in profit or loss using the effective interest method.

The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments over the expected life of the financial instrument to the gross carrying amount of the financial asset or the amortized cost of the financial liability. The effective interest rate is calculated considering all contractual terms of the financial instruments, except for the expected credit losses of financial assets.

The ‘amortized cost’ of a financial asset or financial liability is the amount at which the instrument is measured on initial recognition minus principal repayments, plus or minus any cumulative amortization using the effective interest method of any difference between the initial amount and maturity amount and adjusted for any expected credit loss allowance. The ‘gross carrying amount’ of a financial asset is the amortized cost of a financial asset before adjusting for any expected credit losses.

• 14 -

PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Interest (continued)

Interest income and expense is calculated by applying the effective interest rate to the gross carrying amount of the financial asset (when the asset is not credit-impaired) or the amortized cost of the financial liability.

Where a financial asset has become credit-impaired subsequent to initial recognition, interest income is calculated in subsequent periods by applying the effective interest method to the amortized cost of the financial asset. If the asset subsequently ceases to be credit-impaired, calculation of interest income reverts to the gross basis.

Offsetting

Financial assets and financial liabilities are offset, with the net amount presented in the statement of financial position, when, and only when, the Company has a current and legally enforceable right to set off the recognized amounts and intends either to settle on a net basis or realize the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted under IFRS, or when arising from a group of similar transactions if the resulting income and expenses are not material.

Goodwill

Goodwill is initially measured as the excess of the aggregate of the consideration transferred over the fair value of net identifiable assets acquired and liabilities assumed. Separately recognized goodwill is tested for impairment on an annual basis or when there is an indication of impairment. Impairment losses on goodwill are not reversed.

Revenue recognition

Revenue is recognized by applying the five-step model under IFRS 15. The Company recognizes revenue when, or as the goods or services are transferred to the control of the customer and performance obligations are satisfied. The Company’s revenue is comprised of sales of its radar systems, radar components and engineering design and development services. The Company’s revenue is recognized when control of the goods has been transferred, being when the goods are delivered to customers and when all performance obligations have been fulfilled. The amounts recognized as revenue represent the fair values of the considerations received or receivable from third parties on the sales of goods to customers, net of goods and services taxes and less returns, and discounts, at which time there are no conditions for the payment to become due other than the passage of time. For its engineering design and development services, revenue is recognized when the service has been rendered.

Government Grants

Government grants are recognized at fair value once there is reasonable assurance that the Company will comply with the conditions attached to the grants and that the grants will be received. Government grants are recognized in profit or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate. A forgivable loan from government is treated as a government grant when there is reasonable assurance that the entity will meet the terms for forgiveness of the loan.

• 15 -

PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Income taxes

Income tax is recognized in profit or loss except to the extent that it relates to equity items, in which case it is recognized in equity. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted at period end, adjusted for amendments to tax payable with regards to previous years. Deferred tax is recorded using the liability method, providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences do not result in deferred tax assets or liabilities: goodwill not deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting profit (loss) nor taxable profit (loss); and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the financial position date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Related party transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.

Parties are also considered to be related if they are subject to common control and related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

Leases

The company adopted IFRS 16 effective December 1, 2019. The Company chose to adopt the modified retrospective approach on transition to IFRS 16 and has chosen not to restate comparative information in accordance with the transitional provisions in IFRS 16. As a result, the comparative information continues to be presented in accordance with the Company’s previous accounting policies. The adoption of IFRS 16 resulted in the recognition of a right-of-use asset and a lease liability measured at the present value of the future lease payments on the consolidated statements of financial position. An amortization expense on the right-of-use asset and an interest expense on the lease liability has replaced the operating lease expense. IFRS 16 has changed the presentation of cash flows relating to leases in the Company’s consolidated statements of cash flows, however, it does not cause a difference in the amount of cash transferred between the parties of the lease. In accordance with the transition of IFRS 16, as at December 1, 2019, the Company recognized a right-of-use asset and lease liability of $152,864. When measuring lease liabilities, the Company’s incremental borrowing rate applied was 15% per annum.

• 16 -

PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting standards, amendments and interpretations not yet effective

Certain new standards, interpretations and amendments to existing standards have been issued by the IASB or the IFRIC during the period but are not yet effective. Some updates that are not applicable or are not consequential to the Company may have been excluded from the list below.

IAS 1 – Presentation of Financial Statements (“IAS 1”) – Classification of Liabilities as Current or Noncurrent were amended to clarify that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period, specify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability, explain that rights are in existence if covenants are complied with at the end of the reporting period, and introduce a definition of ‘settlement’ to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. The amendments are effective for annual reporting periods beginning on or after January 1, 2023. Earlier adoption is permitted.

IAS 16 – Property, Plant and Equipment — Proceeds before Intended Use – The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced before that asset is available for use, i.e. proceeds while bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Consequently, an entity recognizes such sales proceeds and related costs in profit or loss. The entity measures the cost of those items in accordance with IAS 2 Inventories. The amendments are effective for annual reporting periods beginning on or after January 1, 2022. Earlier adoption is permitted.

These new and amended standards are not expected to have a material impact on the Company’s Financial Statements.

3. ACQUISITION

On June 4, 2021, the Company acquired the 100% issued and outstanding ordinary shares of Tetra from two arm’s length parties for £350,000. Tetra was a privately held UK-based company which develops custommade, Unmanned Aircraft Systems (“UAS”). The consideration of £350,000 ($579,682) is payable as follows:

• 1) An amount of £35,000 ($60,021) (paid) within 7 days after the date the Definitive Agreement were executed and delivered by all parties;

• 2) An amount of £35,000 ($60,479) (paid) within 21 days of the initial payment as described in instalment 1 above;

• 3) An amount of £140,000 ($236,411) (paid) within 120 days of the second instalment as described above; and

• 4) The remaining balance of £140,000 ($222,771) (see Note 19 – Subsequent Events) is included in accounts payable and accrued liabilities) and will be paid within 120 days of the third instalment.

The Company applied the optional concentration test permitted under IFRS 3 to the acquisition which resulted in the acquired assets being accounted for as an asset acquisition. As such the purchase price was allocated to the identifiable assets and liabilities based on their fair values at the date of acquisition.

• 17 -

PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

3. ACQUISITION (continued)

The allocation of the consideration for the purposes of the consolidated statements of financial position is as follows:

	Total Consideration Cash $ 579,682 Net assets acquired (liabilities assumed) Cash indebtedness $ (12,127) Equipment 27,799 Prepaid expenses 11,131 Due to a related party (13,699) Bank loan (40,447) Accounts payable (19,210) Vehicle loan (30,859)
	Net assets acquired (liabilities assumed) $ (77,412)
	Purchase price allocation Net identifiable assets acquired $ (77,412) Customer relationships 657,094
	$ 579,682

4. PREPAID EXPENSES

As at August 31, 2022 and November 30, 2021, the Company’s prepaid expenses consist of the following:

	August 31, 2022	November 30, 2021
Advertising and Promotions	$ 7,937	$ 127,664
Rent	19,413	11,211
Transfer agent and filing fees	18,330	13,020
Insurance	2,608	8,382
Others	2,748	18,044
	$51,036	$178,321

The prepayments for advertising include prepayments for marketing and awareness programs handled by an arms’ length parties for a six to twelve-month period.

Others include prepayments for some office expenses.

As at August 31, 2022, others include $Nil prepayment to related parties (November 30, 2021 – $5,513) (Note 8).

• 18 -

PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022

(Expressed in Canadian Dollars)

5. EQUIPMENT

				Leasehold	Demo
	Computer	Furniture	Vehicles	Improvement	Equipment	Total
	$	$	$	$	$	$
Cost:
Balance at November 30, 2020	1,684	12,151	-	-	57,518	71,353
Additions	22,664	7,244	16,243	3,881	184,484	234,516
Foreign currency translation adjustment	(320)	(124)	(229)	(55)	(2,255)	(2,983)
Balance at November 30, 2021	24,028	19,271	16,014	3,826	239,747	302,886
Foreign currency translation adjustment	(2,299)	(582)	(1,662)	(397)	(6,768)	(11,708)
Balance at August 31, 2022	21,729	18,689	14,352	3,429	232,979	291,178
Accumulated Depreciation:
Balance at November 30, 2020	1,134	3,401	-	-	-	4,535
Amortization	561	2,055	1,201	287	-	4,104
Foreign currency translation adjustment	21	17	17	4	-	59
Balance at November 30, 2021	1,716	5,473	1,218	291	-	8,698
Amortization	3,987	1,408	1,960	468	-	7,823
Foreign currency translation adjustment	2,575	622	855	212	-	4,294
Balance at August 31, 2022	8,278	7,503	4,063	971	-	20,815
Net Book Value:
At November 30, 2021	22,312	13,798	14,796	3,535	239,747	294,188
At August 31, 2022	13,451	11,186	10,289	2,458	232,979	270,363

As at August 31, 2022, the demo equipment is under construction and thus it is not available for use. As a result, there was no amortization taken on the equipment.

PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

6. INTANGIBLE ASSETS

During the year ended November 30, 2021, the Company acquired Tetra, see Note 3. Included in the acquisition is the identifiable intangible asset, customer relationships valued at $657,094. The intangible asset is being amortized over its estimated useful life of three years.

	Customer
Cost:	relationship
Balance at November 30, 2020	$ -
Additions	657,094
Balance at November 30, 2021 and
August 31, 2022	657,094
Accumulated amortization:
Balance at November 30, 2020	-
Amortization	(107,415)
Balance at November 30, 2021	(107,415)
Amortization	(164,271)
Balance at August 31, 2022	(271,686)
Net book value
Balance at November 30, 2021	$ 549,679
Balance atAugust 31,2022	$385,408

7. ACCOUNTS PAYABLE

As at August 31, 2022 and November 30, 2021, the Company’s accounts payable consist of the following:

	August 31, 2022	August 31, 2022	November 30, 2021
Professional fees	$	346,848	$ 92,078
Funds to be returned to investors		43,046	43,046
Due to former shareholder of Tetra (Note 3, 19)		222,771	222,771
Advertising costs		29,992	42,241
Payroll		179,406	33,173
Development costs		333,983	123,334
Customer deposit		80,992	-
VAT Payable		54,110	4,735
Others		76,670	47,007
	$	1,367,818	$ 608,385

8. RELATED PARTY TRANSACTIONS AND BALANCES

Key management compensation

The amounts due to and from related parties are due to the directors and officers of the Company. The balances are unsecured, non-interest bearing and due on demand. These transactions are in the normal course of operations and have been valued in these consolidated financial statements at the exchange amount, which is the amount of consideration established and agreed to by the related parties. Key management is comprised of directors and officers of the Company.

• 20 -

PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

8. RELATED PARTY TRANSACTIONS AND BALANCES (continued)

As at August 31, 2022, $Nil (November 30, 2021 – $5,513) prepayment to directors and officers of the Company.

As at August 31, 2022, $499,850 (November 30, 2021 - $52,728) was due to directors and officers of the Company:

	August 31, 2022	November 30, 2021
Company controlled by the CFO	$ 59,884	$ -
Company controlled by the Corporate Secretary	-	10,500
CEO of the Company	19,666	561
Director	420,300	41,667
	$ 499,850	$ 52,728

During the periods ended August 31, 2022 and 2021 and 2020, the Company entered into the following transactions with related parties:

	August 31, 2022	August 31, 2021	August 31, 2020
Management fees	$ 96,391	$ 81,750	$ 74,125
Consulting fees	236,022	187,500	62,500
Accounting fees	-	26,079	22,852
Rent	-	3,500	20,000
Share-based payments	-	346,805	255,230
Salaries and benefits to CEO	233,631	242,337	109,303
	$566,044	$ 887,971	$ 544,010

Management fees consisted of the following:

		August 31, 2022	August 31, 2021	August 31, 2020
Company	controlled by CEO	$ 42,131	$ 36,750	$ 34,125
Company	controlled by the Former CFO	-	45,000	40,000
Company	controlled by the CFO	54,260	-	-
		$96,391	$ 81,750	$74,125

Consulting fees consisted of the following:

					August	31, 2022	August 31, 2021	August 31, 2020
Company Secretary	controlled	by	Corporate	$		35,500	$ -	$ -
Directors						200,522	187,500	62,500
				$		236,022	$187,500	$ 62,500

During the period ended August 31, 2022, accounting fees of $Nil (2021 – $26,079) and rent of $Nil (2021$3,500) were paid or accrued to a Company controlled by the former CFO.

• 21 -

PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

8. RELATED PARTY TRANSACTIONS AND BALANCES (continued)

During the period ended August 31, 2022, the Company had 1,650,000 (2021 –1,725,000) stock options held by the CEO, Former CFO, the Former Corporate Secretary, and the Company’s directors. The amount recognized as expense for these options for the periods ended August 31, 2022, 2021 and 2020 are as follows:

follows:
	August	31, 2022		August	31, 2021	August	31, 2020
	Number of Options held	Expense for theyear (vested)		Number of options held	Expense for theyear (vested)	Number of Options held	Expense for theyear (vested)
CEO	600,000	$	-	600,000	$ 112,167	400,000	$ 40,553
Former CFO	150,000		-	150,000	28,042	100,000	10,138
Former Corporate	150,000		-
Secretary				150,000	28,042	100,000	10,138
Directors	750,000		-	825,000	178,554	1,050,000	194,401
	1,650,000	$	-	1,725,000	$ 346,805	1,650,000	$255,230

As at August 31, 2022, 4,025,000 options were vested, and stock-based compensation amounting to $Nil (2021 – $929,208) was recognized in profit or loss; of which $Nil (2021 – $346,805 ) were for the Company’s officers and directors as above (Note 12).

9. GOVERMENT ASSISTANCE RECEIVED

On May 4, 2020, the Company received a CARES Act Paycheck Protection Program Loan (“PPP Loan”) of USD$75,000. The PPP Loan bears interest at 1% per annum and is repayable monthly staring on December 4, 2020. The loan is forgivable if PRT USA meets the requirements outlined below.

• i) The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 24-week period after the loan is made; and

• ii) Employee and compensation levels are maintained. Payroll costs are capped at $100,000 on an annualized basis for each employee.

During the year ended November 30, 2021, it was determined that the Company met the requirements for loan forgiveness, and Company received notice of loan forgiveness on March 16, 2021, therefore there was no loan recognized. As such, the PPP Loan was treated as a government grant and was offset against operating expenses on the consolidated statement of loss and comprehensive loss for the year ended November 30, 2021.

10. LOANS PAYABLE

Upon acquisition of Tetra Drones (Note 3, 19), the Company assumed the latter’s outstanding loans. These loans pertain to the following:

	Principal	Principal	Interest	Commencement	Maturity	Balance,
	(in GBP)	(in CAD)				August 31,
						2022
Vehicle	£ 13,000	$ 30,859	6.95%	May 2, 2019	June 2, 2024	$ 21,559
Current portion						10,889
Loans Payable	£ 13,000	$ 30,859				$ 10,670

The vehicle is a collateral for the loan. This loan also adds an interest of 13.91% of the overdue amount in case of default.

• 22 -

PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

10. LOANS PAYABLE (continued)

For the period ended August 31, 2022, the current loan payable of $117,629 consisted of $75,000 plus interest of $1,775 payable to a third party (Note 15) and $29,965 payable to another third party. The $75,000 loan is subject to 12% interest per annum payable on demand.

11. CAPITAL MANAGEMENT

The Company considers its capital structure to include net residual equity of all assets, less liabilities. The Company’s objectives when managing capital are to (i) maintain financial flexibility in order to preserve its ability to meet financial obligations and continue as a going concern; (ii) maintain a capital structure that allows the Company to pursue the development of its projects and products; and (iii) optimize the use of its capital to provide an appropriate investment return to its shareholders commensurate with risk.

The Company’s financial strategy is formulated and adapted according to market conditions in order to maintain a flexible capital structure that is consistent with its objectives and the risk characteristics of its underlying assets. The Company manages its capital structure and adjusts it in light of changes in economic conditions and the risk characteristics of its underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares or acquire or dispose of assets.

12. SHARE CAPITAL

(a) Common Shares

Authorized: Unlimited number of common shares without par value

As at August 31, 2022, there were 59,317,461 common shares issued and outstanding (November 30, 2021 – 59,239,336).

During the period ended August 31, 2022:

On December 31, 2021, the Company issued 78,125 common shares were issued as compensation for consulting fees to a director valued at a total of $17,189.

During the year ended November 30, 2021:

On June 1, 2021, 30,240 warrants were exercised at a price of $0.25 per share.

On June 1, 2021, 4,240 warrants were exercised at a price of $0.25 per share.

On August 9, 2021, the Company issued 5,750,000 Units at $0.40 per unit for proceeds of $2,300,000. Each unit comprised one common share and one full non-transferable common share purchase warrant, with each warrant entitling the holder to purchase one additional common share at a price of $0.50 for five years. The Company paid finders’ fees in the amount of $63,700, issued 325,500 common shares to finders, and issued 166,250 “Finders’ Units” comprising of one common share and one full non-transferable common share purchase warrant for each unit. The Units, Finders Units, common shares, share purchase warrants, finders' warrants and shares issued upon exercise of the share purchase warrants and/or the finders' warrants are subject to a four month hold period, expiring December 9, 2021.

On October 8, 2021, 275,000 warrants were exercised at a price $0.25 per share.

On October 13, 2021, 75,000 warrants were exercised at a price $0.25 per share.

On January 29, 2021, the Company issued 3,180,000 Units at $0.20 per unit for proceeds of $636,000. Each unit comprised one common share and one full non-transferable common share purchase warrant, with each

• 23 -

PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

12. SHARE CAPITAL (continued)

• (a) Common Shares (continued)

warrant entitling the holder to purchase one additional common share at a price of $0.25 for five years The Company paid finders’ fees in the amount of $10,480, issued 170,000 common shares to finders, and issued 8% broker warrants in connection with some subscribers.

During the year ended November 30, 2021, the Company issued 100,000 common shares pursuant to the exercise of 100,000 stock options at $0.60 per share and 325,000 common shares pursuant to the exercise of 325,000 stock options at $0.50 per share.

During the year ended November 30, 2021, the Company issued 5,745,332 common shares pursuant to the exercise of 5,745,332 share purchase warrants at $0.20 to $0.50 per share.

During the year ended November 30, 2021, the Company issued 656,250 common shares were issued as compensation for consulting fees to a director (Note 8) valued at a total of $250,000.

As at November 30, 2021, the Company has Nil common shares (2020 – 607,500) held in escrow.

During the year ended November 30, 2020:

On September 30, 2020, the Company issued 50,000 common shares pursuant to the exercise of 50,000 share purchase warrants at $0.20 per share.

On September 30, 2020, the Company issued 250,000 common shares were issued as compensation for consulting fees to a director (Note 8) valued at a total of $62,500.

On September 30, 2020, the Company issued an aggregate of 1,335,165 units at a price of CDN$0.30 per unit for gross proceeds of $400,550. Each Unit consists of one common share and one-half of one nontransferable common share purchase warrant (a "Warrant"). Each whole Warrant entitles the holder to purchase one additional common share at a price of $0.50 for two years until September 30, 2022. The fair value of the warrants is determined to be $40,055.

On September 30, 2020, the Company issued 50,000 units at a fair value of $22,811 pursuant to the binding agreement with Aerowave Corporation. Each Unit consists of one common share and one-half of one nontransferable common share purchase warrant (a “Warrant”). Each whole Warrant entitles the holder to purchase one additional common share at a price of $0.50 for two years until September 30, 2022. The fair value of the warrants is determined to be $1,500.

On September 24, 2020, the Company issued 100,000 common shares pursuant to the exercise of 100,000 share purchase warrants at $0.20 per share.

On September 22, 2020, the Company issued 100,000 common shares pursuant to the exercise of 100,000 share purchase warrants at $0.20 per share.

On August 21, 2020, the Company issued 250,000 common shares were issued as compensation for consulting fees to a Director (Note 8) valued at a total of $62,500.

On August 13, 2020, the Company issued 483,334 common shares pursuant to the exercise of 483,334 share purchase warrants at $0.20 per share.

On July 3, 2020, the Company issued 500,000 common shares pursuant to the exercise of 500,000 share purchase warrants at $0.20 per share.

• 24 -

PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

12. SHARE CAPITAL (continued)

(a) Common Shares (continued)

On May 15, 2020, the Company issued an aggregate of 3,718,831 units at a price of $0.15 per unit for gross proceeds of $557,825. Each unit consists of one common share in the capital of the Company and one whole transferable common share purchase warrant (a "Warrant"). Each whole Warrant is exercisable to acquire one common share at an exercise price of $0.20 per share until May 15, 2022.

On April 24, 2020, the Company issued an aggregate of 3,128,334 units at a price of $0.15 per unit for gross proceeds of $469,250. Each unit consists of one common share in the capital of the Company and one whole transferable common share purchase warrant (a "Warrant"). Each whole Warrant is exercisable to acquire one common share at an exercise price of $0.20 per share until April 24, 2022.

In connection with the April 24, 2020 and May 15, 2020 private placements, the Company paid $38,727 in share issuance costs.

On February 4, 2020, the Company arranged a non-brokered private placement financing of up to 10,000,000 units of securities at a price of $0.40 per unit for aggregate gross proceeds of up to $4,000,000 (the “Offering”). Each unit will be comprised of one common share and one-half of one nontransferable common share purchase warrant, with each whole warrant entitling the holder to purchase one additional common share at a price of $0.80 for two years from closing of the Offering. On March 16, 2020, due to the instability in the financial markets caused by the COVID-19 pandemic, the Company cancelled this private placement. And paid $4,400 to investors in connection with this cancelled private placement.

(b) Stock Options

On November 12, 2014 the Company adopted an incentive stock option plan (the “Option Plan”) which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with the Exchange requirements, grant to directors, officers, employees, and consultants to the Company, non-transferable options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares in the capital of the Company at the time of granting of options.

During the period ended August 31, 2022:

125,000 stock options with an exercise price of $0.50 were cancelled.

75,000 stock options with an exercise price of $0.50 expired unexercised.

During the year ended November 30, 2021:

On June 10, 2021, the Company granted 150,000 incentive stock options to a consultant with an exercise price of $0.50 per share for a period of five years from the date of grant. The fair value was estimated using the Black-Scholes pricing model with estimated, stock price of $0.485, volatility 100%, risk-free rate 0.82%, dividend yield 0%, and expected life of 5 years. With these assumptions, the fair value of options was determined to be $53,677, which will be expensed over the vesting period.

On January 21, 2021, the Company granted 1,550,000 incentive stock options to directors, consultants, and employees with an exercise price of $0.75 per share for a period of five years from the date of grant. The fair value was estimated using the Black-Scholes pricing model with estimated, stock price of $0.75, volatility 100%, risk-free rate 0.43%, dividend yield 0%, and expected life of 5 years. With these assumptions, the fair value of options was determined to be $859,401, which will be expensed over the vesting period.

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PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

12. SHARE CAPITAL (continued)

• (b) Stock Options (continued)

Stock-based compensation recognized in profit or loss for the period ended August 31, 2022 amounted to $Nil (August 31, 2021 – $929,208.

Stock option transactions and the number of stock options outstanding as at August 31, 2022, November 30, 2021 and November 30, 2020 are summarized as follows:

	Number of Weighted Average
	Options Exercise Price
Balance, November 30, 2020	2,950,000 $ 0.58
Granted	1,700,000 0.75
Exercised	(425,000) 0.50
Balance, November 30, 2021	4,225,000 $ 0.64
Expired	(75,000) 0.50
Cancelled	(125,000) 0.50
Balance, August 31, 2022	4,025,000 $0.66

The following summarizes the stock options outstanding at August 31, 2022 :

				Weighted
				average	Weighted
		Numbers of	Numbers of	remaining	average
	Exercise	options	options	contractual	exercise
Expiry Date	Price	outstanding	exercisable	life (year)	price
	$				$
January 15, 2024	0.60	2,050,000	2,050,000	0.70	0.31
March 20, 2024	0.60	150,000	150,000	0.06	0.02
November 28, 2024	0.50	125,000	125,000	0.07	0.02
January 21, 2026	0.75	1,550,000	1,550,000	1.31	0.29
June 10, 2026	0.50	150,000	150,000	0.14	0.02
		4,025,000	4,025,000	2.28	0.66

• (c) Share purchase warrants

During the period ended August 31, 2022

During the period ended August 31, 2022, 160,499 warrants with exercise price of $0.20 expired unexercised.

During the year ended November 30, 2021

On August 9, 2021, the Company granted 5,750,000 common share purchase warrants as part of a nonbrokered private placement. Each warrant is exercisable to acquire one common share at an exercise price of $0.50 per share until August 9, 2026.

On August 9, 2021, the Company also granted 492,000 warrants to finders in connection with the Private Placement. Each warrant is exercisable to acquire one common share at an exercise price of $0.50 per share until August 9, 2026. The fair value was estimated using the Black-Scholes pricing model with estimated, stock price of $0.35, volatility 100%, risk-free rate 0.88%, dividend yield 0%, and expected life of 5 years. With these assumptions, the fair value of options was determined to be $119,425.

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PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

12. SHARE CAPITAL (continued)

• (c) Share purchase warrants (continued)

On January 29, 2021, the Company granted 3,350,000 common share purchase warrants as part of a non-brokered private placement. Each warrant is exercisable to acquire one common share at an exercise price of $0.25 per share until January 29, 2026. During the year ended November 30, 2021, 30,000 warrants were exercised at $0.25 per share.

On January 29, 2021, the Company also granted 222,400 warrants to finders in connection with the Private Placement. Each warrant is exercisable to acquire one common share at an exercise price of $0.50 per share until August 9, 2026. During the year ended November 30, 2021, 4,240 warrants were exercised at $0.25 per share. The fair value was estimated using the Black-Scholes pricing model with estimated, stock price of $0.52, volatility 100%, risk-free rate 0.43%, dividend yield 0%, and expected life of 5 years. With these assumptions, the fair value of options was determined to be $95,395.

During the year ended November 30, 2020

On September 30, 2020, the Company granted 692,583 common share purchase warrants as part of a non-brokered private placement and binding agreement with Aerowave Corporation. Each warrant is exercisable to acquire one common share at an exercise price of $0.50 per share until September 30, 2022. On February 28, 2021, 292,000 warrants were exercised at $0.50 per share.

On May 15, 2020, the Company granted 3,718,831 common share purchase warrants as part of a nonbrokered private placement. Each warrant is exercisable to acquire one common share at an exercise price of $0.20 per share until May 15, 2022. On February 28, 2021, 3,208,333 warrants were exercised at $0.20 per share.

On April 24, 2020, the Company granted 3,128,334 common share purchase warrants as part of a nonbrokered private placement. Each warrant is exercisable to acquire one common share at an exercise price of $0.20 per share until April 24, 2022. On February 28, 2021, 2,145,000 warrants were exercised at $0.20 per share.

Share purchase warrant transactions and the number of share purchase warrants outstanding as of August 31, 2022, November 30, 2021 and November 30, 2020 are summarized as follows:

Number of Warrants	Weighted Average Exercise Price
Balance, November 30, 2020 6,306,414	$ 0.23
Warrants granted 9,814,400	0.08
Warrants exercised (6,129,573)	0.01
Balance, November 30, 2021 9,991,241	$ 0.42
Warrants expired (160,499)	0.20
Balance, August 31, 2022 9,830,742	$0.42

The following summarizes the stock warrants outstanding at August 31, 2022:

	Exercise	Number of Warrants	Weighted average	Weighted average
Expiry Date	Price	outstanding and	remaining	exercise price
	$	exercisable	contractual life (year)	$
September 30, 2022	0.50	400,582	-	0.02
January 29, 2026	0.25	3,188,160	1.11	0.08
August 9, 2026	0.50	6,242,000	2.17	0.32
		9,830,742	3.28	0.42

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PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

13. FINANCIAL RISK MANAGEMENT

The Company’s financial assets consist of cash, and due from related parties. The estimated fair values of cash, subscription receivable, and due from related parties approximate their respective carrying values due to the short period to maturity.

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

• a. Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities;

• b. Level 2 – inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

• c. Level 3 – inputs that are not based on observable market data.

For the periods ended August 31, 2022, and November 30, 2021, the fair value of the cash, accounts receivable, accounts payable, and due to and from related parties approximate the book value due to the shortterm nature.

The Company is exposed to a variety of financial instrument-related risks. The Board approves and monitors the risk management processes, inclusive of counterparty limits, controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations when they become due. The Company ensures, as far as reasonably possible, it will have sufficient capital in order to meet shortterm business requirements, after taking into account cash flows from operations and the Company’s holdings of cash. The Company believes that these sources will be sufficient to cover the likely short-term cash requirements.

The Company’s cash is currently invested in business accounts which is available on demand by the Company for its operations.

Interest Rate Risk

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. The Company has no significant interest rate risk due to the short-term nature of its interest generating assets.

Credit Risk

Credit risk is the risk of a loss when a counterparty to a financial instrument fails to meet its contractual obligations. The Company’s exposure to credit risk is limited to its cash. The Company limits its exposure to credit risk by holding its cash in deposits with high credit quality Canadian financial institutions.

Foreign Currency Risk

The Company is exposed to foreign currency risk on fluctuations related to cash, leases, due from related parties and accounts payable and accrued liabilities that are denominated in US dollars. 10% fluctuations in the US dollar and UK Sterling Pound against the Canadian dollar have affected comprehensive loss for the year by approximately $80,052 (August 31, 2021 – $10,512).

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PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

14. SUPPLEMENTAL CASH FLOW INFORMATION

During the period ended August 31, 2022, 2021 and 2020, the Company has the following non-cash investing and financing activities:

investingand financingactivities:
	August 31,	August 31,	August 31,
	2022	2021	2020
Non-cash financing activities:
Fair value of options granted and vested	$ -	$ 929,208	$ 450,146
Fair value of options exercised	-	158,106	-
Fair value of warrants granted	-	214,820	-
Fair value of warrants exercised	-	35,040	-
Non-cash investing activities:
Shares issued for consulting services	$ 17,189	125,000	-

15. COMMITMENTS

As at August 31, 2022, the Company has the following commitments:

In November 2018, Plymouth Rock USA entered into two-year lease agreement for leased premises (Note 16) in Plymouth, Massachusetts, commencing December 1, 2018 and ending on November 30, 2020. On December 31, 2020, the Company renewed this lease agreement to November 30, 2023. The minimum base rent for the remaining lease term are: USD$3,005 (CAD$3,726) per month from December 1, 2019 to November 01, 2020; USD$3,095 (CAD$3,838) per month from December 1, 2020 to November 30, 2021; USD$3,188 (CAD$3,953) per month from December 1, 2021 to November 30, 2022; and USD$3,284 (CAD$4,072) per month from December 1, 2022 to November 30, 2023 (Note 16).

On April 1, 2020 the Company entered into an agreement with a Director of the Company to provide consulting services. In line with this, the Company shall pay $250,000 annually either through cash in 12 monthly installments at the end of each calendar month or through the issuance of 1,000,000 common shares of the Company in four equal quarterly installments, in arrears (see Transactions with Related Parties).

PRT UK has a license fee agreement whereby it will lease a parcel of land for an annual fee of £1,500 until April 30, 2024.

On September 13, 2021, the Company signed a consulting agreement with an unrelated party whereby the consultant will assist the expansion of the Company’s network in Europe. The agreement commenced in October 2021 for a period of 12 months with a fee of $90,000.

On July 12, 2022, Plymouth Rock Canada entered into loan agreement amounted to £18,962 ($29,965).

On July 20, 2022, Plymouth Rock Canada entered into loan agreement amounted to $75,000 that incurs 12% interest per annum, payable on demand.

The Company has certain commitments related to key management compensation for $35,875 per month with no specific expiry of terms (Note 8).

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PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

16. RIGHT-OF-USE ASSETS AND LEASE LIABILITY

Right-of-use Assets

The following is the continuity of the cost and accumulated depreciation of right-of-use assets, for the period ended August 31, 2022 and for the year ended November 30, 2021:

	As at August 31, 2022
Balance, November 30, 2020	$ 114,648
Amortization expense	(35,654)
Cumulative translation adjustment	(6,260)
Balance, November 30, 2021	$ 72,734
Amortization Expense	(27,222)
Cumulative translation adjustment	(142)
Balance, August 31, 2022	$ 45,370

During the year ended November 30, 2021, the Company recognized right-of-use assets and corresponding lease liabilities upon the adoption of IFRS 16 related to its Massachusetts premises under lease (Note 15). The right-of-use building is depreciated on a straight-line basis over the terms of the underlying lease agreements.

Lease liability

The following is the continuity of lease liability, for the period ended August 31, 2022 and for the year ended November 30, 2021:

	As at August 31, 2022
Balance, November 30, 2020	$ 113,340
Lease payments	(48,175)
Interest on lease liability	14,760
Cumulative translation adjustment	(5,079)
Balance, November 30, 2021	$ 86,346
Lease payments	(37,618)
Interest on lease liability	7,827
Cumulative translation adjustment	2,364
Balance, August 31, 2022	$ 58,918
Current Portion	$ 46,160
Long-termportion	**$ 12,758 **

As at August 31, 2022 and November 30, 2021, the minimum lease payments for the lease liabilities are as follows:

	August 31,	November 30,
	2022	2021
Period Ended:
2022	$ 25,079	$ 48,943
2023	51,668	50,403
	76,747	99,346
Less: Interest expense on lease liabilities	(17,829)	(13,000)
Total present value of minimum lease payments	$58,918	$86,346

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PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

17. BREAKDOWN OF EXPENSES

		Nine	months Ending August 31
General and Administrative Expenses	Note	2022	2021	2020
Accounting and audit fees	8	$ 200,594	$ 70,013	$ 35,282
Amortization	5, 16	203,995	32,206	2,239
Consulting fees	8	287,001	256,467	104,720
General office expenses		111,366	132,889	88,464
Insurance		24,244	28,364	8,958
Interest and accretion	16	7,827	11,476	-
Legal fees		68,581	152,780	34,680
Management fees	8	96,391	81,750	74,125
Rent		51,511	30,333	46,726
Stock-based compensation	8, 12	-	929,208	450,146
Transfer agent and filing fees	12	50,368	58,795	55,954
Wages, salaries and benefits	8	756,461	509,821	149,243
Total		$ 1,858,299	$ 2,294,102	$ 1,050,537
Research and Development	Note	2022	2021	2020
Labor		$ 256,797	$ 568,498	$ 249,270
Materials		65,218	89,979	-
**Total **		$322,015	$ 658,477	$249,270

Selling expenses consist of business development expenses amounting to $232,388 (2021 - $333,996; 2020 - $967,927).

18. SEGMENTED INFORMATION

The Company operates in one business segment, focusing on developing technologies as described in Note 1. With the acquisition of PRT USA, the Company’s principal business activity through its subsidiary was changed to focus on developing technologies related to remotely detecting assault firearms and suicide bombs concealed on the person or a carry bag. The Company now focuses on detection methods with and without the need for a checkpoint of the suspect who is being screened. The Company’s planned technologies encompass the very latest radar, imaging and Unmanned Aerial System (UAS) technologies for quickly detecting, locating and identifying the presence of threats and for search and rescue missions for law enforcement.

The Company’s revenues were generated in the US and were mostly composed of sales of engineering design services and radar components to well-known US government agencies and prime contractors. All the long-lived assets are located in the U.S. as of August 31, 2022 and 2021 The following table summarizes the revenue by geographical location:

	Canada			USA		UK	Total
For the period ended August 31, 2022
Revenues	$	-	$	122,786	$	430,754	$ 553,540
Gross Profit		-		78,469		319,546	398,015
For the period ended August 31, 2021
Revenues	$	-	$	45,038	$	73,986	$ 119,024
Gross Profit		-		12,127		32,465	44,592

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PLYMOUTH ROCK TECHNOLOGIES INC. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As at and for the period ended August 31, 2022 (Expressed in Canadian Dollars)

19. SUBSEQUENT EVENTS

On September 30, 2022, 400,582 of the outstanding share warrants expired unexercised.

On October 25, 2022, the outstanding balance of £140,000 ($222,771) which is part of the consideration for acquiring Tetra was forgiven by former shareholder of Tetra in return of the full release of the leased vehicle and allowing him to continue working within the industry. The release of the vehicle comes with the transfer of the outstanding car loan to him. As of the date of release, the Company has no liabilities for this vehicle.

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