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Zefiro Methane Corporation Management Reports 2026
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Management Reports
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Management's Discussions & Analysis
For the three and nine months ended March 31, 2026 and 2025
ZEFIRO METHANE CORP.
(also referred to as “Zefiro”, the “Corporation”, or the “Company”)
Management’s Discussion & Analysis
The following management discussion and analysis (“MD&A”) should be read in conjunction with the unaudited condensed interim consolidated financial statements of the Company for the three and nine months ended March 31, 2026, and accompanying notes, and the Company’s audited annual consolidated financial statements for the year ended June 30, 2025, and accompanying notes, all of which are available on Zefiro Methane Corp.’s issuer profile on SEDAR+ at www.sedarplus.ca. Unless otherwise indicated, all financial data in this MD&A has been prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting. Condensed interim consolidated financial statements do not include all of the information required for annual consolidated financial statements and should be read in conjunction with the audited annual consolidated financial statements of the Company for the year ended June 30, 2025 which have been prepared in accordance with IFRS Accounting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the IFRS Interpretations Committee (“IFRIC”).
All dollar figures included therein and in the following discussion analysis are quoted in United States dollars unless otherwise noted.
This MD&A is dated May 14, 2026. This MD&A has been prepared pursuant to the disclosure requirements under National Instrument 51-102 – Continuous Disclosure Obligations of the Canadian Securities Administrators.
Disclaimer for Forward-Looking Statements
This MD&A contains forward-looking statements relating to future events. In some cases, forward-looking statements can be identified by such words as “anticipate”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “should”, “believe” or similar expressions. These statements represent management’s best projections, but undue reliance should not be placed upon them as they are derived from numerous assumptions. These assumptions are subject to known and unknown risks and uncertainties, including the business risks discussed in the MD&A which may cause actual performance and financial results to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted.
Description of the Business
Zefiro Methane Corp. is a company incorporated on March 7, 2018, under the Business Corporations Act (British Columbia) as Caden Capital Corp. The company changed its name to Zefiro Methane Corp. on September 28, 2022. The registered records and head office of the Company is located at 2630 – 1075 West Georgia Street, Vancouver, BC V6E 3C9.
The principal business of the Company is providing remedial services to the oil and gas industry. The Company assists stakeholders in plugging end-of-life orphaned and abandoned oil and gas wells that currently or potentially emit methane, a harmful greenhouse gas (GHG) emission and a potent climate-warming gas.
On September 28, 2022, the Company completed a reverse takeover with Zefiro Methane Operations Corp., a corporation incorporated under the provisions of the Business Corporations Act (British Columbia) on September 9, 2021. Pursuant to the reverse takeover, the Company changed its name to “Zefiro Methane Corp.”
On May 12, 2023, the Company acquired 75% of Plants and Goodwin, Inc.’s (“P&G”) issued and outstanding shares. The purpose of the acquisition was to expand the Company’s oil and gas well abatement services into Pennsylvania’s Appalachians and add multi-generational project expertise in some of America’s most difficult terrains.
On September 30, 2024, the Company obtained control of the additional 25% of P&G’s issued and outstanding shares through a securities exchange agreement.
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On December 1, 2023, P&G acquired 100% of the issued and outstanding shares of Appalachian Well Surveys, Inc. ("AWS") pursuant to a stock purchase agreement dated November 17, 2023 (the "AWS Acquisition"). AWS is a Cambridge, Ohio based wireline company. The AWS Acquisition expands Zefiro's operations to include the activation of fourteen wireline units capable of deploying various downhole tools, two mast trucks that are designed to bolster abandonment projects, and current certifications to operate explosives in every Appalachian Basin state.
On April 23, 2024, the Company filed its final long form prospectus, completed its Initial Public offering ("IPO"), and listed its common shares on the Cboe Canada exchange under the trading symbol "ZEFI". The Company's common shares were also listed on the Frankfurt Stock Exchange ("FSE") on May 2, 2024, under the symbol "Y6B", and on the OTC Venture Market ("OTCQB") on July 19, 2024, under the trading symbol "ZEFIF".
During the year ended June 30, 2025, the Board of Directors made management changes in response to the Company's operating and financial performance for the year ended June 30, 2025.
On June 3, 2025, the Company announced the appointment of Michael Downs as Interim Chief Financial Officer.
On June 5, 2025, the Company announced the appointment of Catherine Flax as Interim Chief Executive Officer.
P&G Acquisition
On May 12, 2023, the Company successfully completed the acquisition of 75% of the outstanding shares of P&G for purchase price consideration of $3,325,000 in cash and a $2,000,000 promissory note. The promissory note has a principal balance of $2,000,000, is prepayable at any time and bears interest at a rate of 6% per annum compounded monthly. The note matures on the earlier of the second anniversary of the share purchase agreement and the occurrence of an event of default.
On May 27, 2025, the Company repaid the promissory note in full.
On August 6, 2024, the Company's subsidiary, P&G, executed a Securities Exchange Agreement (the "Agreement") to exchange the remaining common shares of P&G from its Chief Executive Officer (the "Shareholder") in exchange for 7,006,875 newly issued Series A Convertible Preferred Shares of P&G (the "Preferred Shares") in P&G. The Agreement closed on September 30, 2024 (the "Transaction").
The Preferred Shares entitle the Shareholder to, in addition to other customary rights, (a) a US$1.00 per share initial liquidation preference, and (b) a 10% per annum dividend, payable in kind, until the later of June 30, 2028 or the achievement of US $10 million in annual operating cash flow at P&G (after which dividends will be payable in cash). The Preferred Shares are redeemable at P&G's option at the liquidation preference (including any accrued but unpaid dividends) following the earlier of the Shareholder's termination as an employee of the Company or the second anniversary of the closing of the Transaction. The Preferred Shares will automatically convert at a conversion price of US$1.20 per share upon the completion of a qualified public offering of P&G or an affiliate of P&G (the "IPO Issuer") on a nationally recognized US stock exchange into common stock of the IPO Issuer.
With the Shareholder's recent exchange of his common shares for Preferred Shares, he no longer holds any voting rights in P&G. Additionally, the conversion rights attached to the Preferred Shares were assessed to not be substantive at this time and therefore the Company was assessed to have 100% control over the net assets of P&G.
AWS Acquisition
On December 1, 2023, P&G successfully closed a stock purchase agreement for the acquisition of a 100% interest in the outstanding shares of AWS for total purchase price per the agreement of $4,893,750, consisting of:
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$2,200,000 in cash, paid on closing of the agreement
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$1,569,750 promissory note. The initial principal balance of the promissory note per the agreement of $2,000,000 was reduced by $430,250 due to a provision in the agreement in which the principal balance is to be reduced by the amount of AWS's working capital that is less than $1,175,000 on closing. AWS's working capital was calculated as $744,750 on closing, and is defined in the stock purchase agreement as cash and cash equivalents, accounts receivable aged less than 90 days, less accounts payable. The promissory note bears interest at 7% per annum, and is repayable as follows:
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$600,000, and accrued interest, due on November 6, 2024 (paid December 4, 2024)
- $600,000, and accrued interest, due on November 5, 2025. It has been agreed with the lender that the Company makes this repayment as follows:
- $206,239 on November 10, 2025 (paid)
- $206,239 on December 10, 2025 (paid)
- $206,240 on January 10, 2026 (paid)
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$369,750, and accrued interest, due on November 4, 2026
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$724,000, payable on a quarterly instalment basis by the tenth business day of the month following quarter end under the following formula: If AWS's working capital (as defined above) is greater than One Million Two-Hundred Thousand Dollars ($1,200,000) at said quarter end, then 50% of AWS's quarterly pre-tax net income is due as a Quarterly Cash Payment. Any outstanding balance accrues interest at 7% per annum from the closing date, until such time until the balance is satisfied by the Company. Any balance of the Quarterly Cash Payment that is not satisfied by the second anniversary of the agreement (November 17, 2025) shall be added to the promissory note balance and due by November 4, 2026.
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$400,000, of which $141,182 was paid in cash on closing, and the remainder payable on a quarterly basis by the tenth business day of the month following quarter end under the following formula: 50% of all accounts receivables collected by AWS as previously invoiced to customers as of the closing date of the stock purchase agreement ("Receivable Realized Payment"). Any outstanding balance accrues interest at 7% per annum from the closing date, until such time until the balance is satisfied by the Company. Any balance of the Receivable Realized Payment that is not satisfied by the second anniversary of the stock purchase agreement (November 17, 2025) shall be added to the promissory note balance at due by November 4, 2026. The balance as at March 31, 2026 and June 30, 2025 was recorded as an advance payable.
The aggregate purchase price after adjustments was determined on February 13, 2024. The Company holds a 100% indirect interest in AWS through its shareholding in P&G.
Initial Public Offering
On April 23, 2024, the Company closed its IPO issuing 2,300,000 common shares at CA$1.50 per common share for gross proceeds of $2,520,770 (CA$3,450,000). The Company paid cash commission of $151,246 (CA$207,000) equal to 6% of the gross proceeds, and other cash share issuance costs of $267,102 (CA$365,562). The Company also granted 138,000 compensation warrants to its agent. The compensation warrants are exercisable at CA$1.50 until April 23, 2027.
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Secured Loan
On May 27, 2025, the Company obtained a $2,480,000 secured loan to repay the loans issued in conjunction with the P&G Acquisition. Of the proceeds received, $800,000 was from Catherine Flax, the CEO of the Company. The secured loan has a term of 18 months and accrues interest at a rate of 18% per annum. The Company is required to make quarterly payments of accrued interest beginning on August 31, 2025, with a final payment of all outstanding accrued interest and principal on November 27, 2026. The loan is secured by a pledge of 100% of Zefiro Methane Holding LLC's holdings of Plants & Goodwin common stock. The secured loan may be prepaid at any time, whether in part or in full, at the option of the Company.
The Company issued 14,950,000 warrants to the lenders in conjunction with the secured loan, of which 4,820,000 were issued to Catherine Flax. The warrants have an exercise price of CA$0.23 and carry a three-year term.
On January 27, 2026, the Company entered into loan satisfaction agreements with three of its four secured creditors, resulting in the full settlement of outstanding secured loan obligations totalling $1,838,958. The settlement was satisfied through the exercise of 10,790,000 warrants at CA$0.23 per warrant for $1,815,306 (CA$2,481,700) and the issuance of 2,424,494 common shares at a price of CA$0.46 per share for aggregate consideration of $815,792 (CA$1,115,267). $446,046 of cash proceeds were received from the secured creditors for the exercise of the warrants while the remaining $1,369,260 related to the warrants was settled against the secured loan.
The fair value of total consideration transferred exceeded the carrying value of the extinguished obligations, resulting in a loss on debt settlement of $346,094 during the three and nine months ended March 31, 2026.
Strategic partnership with Fiútur Information Exchange, Inc. ("Fiútur")
On August 15, 2024, the Company entered into a strategic partnership with Fiútur, a digital verification network ecosystem, to accelerate the scalable aggregation, verification, standardization, and delivery of environmental data for carbon credit issuance. Through this partnership, the Company aims to address deficiencies in the carbon markets, with respect to auditable data and end-to-end transparency.
As part of this strategic partnership, the Company invested $750,000 in Fiútur's Series A round, representing 1,200,000 Series A-1 Preferred Shares at a purchase price of $0.625 per share.
During the year ended June 30, 2025, the Company ended its strategic partnership with Fiútur. As a result, the fair value of the Fiútur investment was determined to be $Nil as at June 30, 2025.
Investment in Winterhawk Well Abandonment Ltd. ("Winterhawk")
On August 6, 2024, P&G entered into a subscription agreement (the "Subscription Agreement") to acquire common shares of Winterhawk, a Calgary, Alberta-based manufacturer of specialized downhole tools and technologies designed to expand casing in oil and gas wells to seal the leak pathways of surface casing vent flows. As a result of the Subscription Agreement, P&G acquired 10% of Winterhawk by investing $220,000 (CA$300,000) for 30,000 common shares of Winterhawk.
As at March 31, 2026, the fair value of the Winterhawk investment was $191,891 (CA$267,355) (June 30, 2025 - $195,836).
P&G and Winterhawk also entered into an exclusive patent license agreement ("Exclusive License Agreement") for Winterhawk's US patents. The Exclusive License Agreement will position P&G as the only company that can use, deploy, distribute, offer for sale, sell or otherwise dispose of Winterhawk's innovative "Casing Expansion Tool" and other covered products ("Winterhawk Products") on project sites in the United States. The Exclusive License Agreement also allows P&G to sublicense Winterhawk Products to other entities operating in the United States, which can generate additional revenue.
Consolidation
The Company's condensed interim consolidated financial statements include the accounts of the Company and its controlled entity. Control occurs when the Company is exposed to, or has right to, variable returns from its involvement with an investee and has the ability to affect those returns through its power over the investee. Details of controlled entities are as follows:
| Name | Principal activities | Country of Incorporation | Percentage Owned |
|---|---|---|---|
| Zefiro Methane Operations Corp. | Oil and gas remedial services | Canada | 100% |
| Zefiro Methane LLC | Oil and gas remedial services | USA | 100% |
| Zefiro Methane Holding LLC | Holding company | USA | 100% |
| Plants and Goodwin Inc. | Oil and gas remedial services | USA | 100% |
| Appalachian Well Surveys, Inc. | Oil and gas remedial services | USA | 100% |
Selected Quarterly Financial Information
The following table sets out selected quarterly financial information for the Company, which has been prepared in accordance with IFRS:
| Three months ended | Nine months ended | |||
|---|---|---|---|---|
| March 31, 2026 | March 31, 2025 | March 31, 2026 | March 31, 2025 | |
| $ | $ | $ | $ | |
| Revenue | 11,006,543 | 6,947,691 | 33,191,174 | 24,436,105 |
| Gross profit | 2,563,419 | 1,011,445 | 10,663,350 | 4,855,817 |
| Total operating expenses | (3,761,274) | (4,377,816) | (9,975,252) | (13,314,557) |
| Net loss and comprehensive loss | (997,619) | (3,488,208) | (559,174) | (9,402,456) |
| Basic and diluted loss per share | (0.01) | (0.05) | (0.01) | (0.13) |
| Basic and diluted weighted average number of shares outstanding | 85,963,947 | 73,924,956 | 79,686,669 | 71,488,965 |
| As at | March 31, 2026 | June 30, 2025 | ||
| --- | --- | --- | ||
| $ | $ | |||
| Cash | 274,032 | 52,603 | ||
| Current assets | 6,643,489 | 4,649,923 | ||
| Total assets | 21,089,217 | 20,616,747 | ||
| Total liabilities | 17,046,046 | 19,832,463 | ||
| Total equity | 4,043,171 | 784,284 |
Results of Operations
For the three months ended March 31, 2026 and 2025
The Company incurred a net loss and comprehensive loss of $997,619 (2025: net loss of $3,488,208). The net loss for the three months ended March 31, 2026 was driven by revenues of $11,006,543 (2025: $6,947,691) and gross profit of $2,563,419 (2025: $1,011,445), which was partially offset by operating expenses of $3,761,274 (2025: $4,377,816).
Significant changes in the Company's net income and comprehensive income are highlighted below:
- Revenues increased to $11,006,543 (2025: $6,947,691) during the three months ended March 31, 2026, attributable to increased revenue from service rig, cementing, and construction operations, together with the commencement of carbon credit sales;
- Gross profit increased to $2,563,419 (2025: $1,011,445) during the three months ended March 31, 2026, which was attributable to a $4,058,852 increase in revenue;
- Amortization expense decreased to $802,492 (2025: $944,898) during the three months ended March 31, 2026. This decrease was primarily due to the additional amortization recorded on the Company's property and equipment following the AWS Acquisition in the previous period.
- General and administrative expenses decreased to $397,909 (2025: $795,637) during the three months ended March 31, 2026. The decrease was mainly driven by higher advertising, insurance, office, travel and entertainment costs in the comparative period;
- Consulting and management fees decreased to $66,503 (2025: $176,252) during the three months ended March 31, 2026;
- Salaries and benefits expenses decreased to $1,375,979 (2025: $1,499,721) during the three months ended March 31, 2026. This decrease was attributed to salaries paid to Company management and to employees from AWS who joined as part of the AWS Acquisition during the comparative period;
- Shared based compensation expense decreased to $188,120 (2025: $501,629) for the three months ended March 31, 2026. This decrease was primarily driven by the significant portion of previously granted options which have fully vested.
For the nine months ended March 31, 2026 and 2025
The Company incurred a net loss and comprehensive loss of $559,174 (2025: $9,402,456). The net income for the nine months ended March 31, 2026 was driven by revenues of $33,191,174 (2025: $24,436,105) and gross profit of $10,663,350 (2025: $4,855,817), which was partially offset by operating expenses of $9,975,252 (2025: $13,314,557).
Significant changes in the Company's operating expenses and other expenses are highlighted below:
- Revenues increased to $33,191,174 (2025: $24,436,105) during the nine months ended March 31, 2026 attributable to increased revenue from service rig, cementing, and construction operations, together with the commencement of carbon credit sales;
- Amortization expense decreased to $2,407,078 (2025: $2,922,556) during the nine months ended March 31, 2026. This decrease was primarily due to disposal of Company's property and equipment following the AWS Acquisition;
- General and administrative expenses decreased to $1,232,737 (2025: $2,820,325) during the nine months ended March 31, 2026. The decrease was mainly driven by higher advertising, insurance, office, travel and entertainment costs in the comparative period;
- Consulting and management fees decreased to $350,292 (2025: $713,438) during the nine months
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ended March 31, 2026. Higher consulting fees were incurred during the comparative period;
- Salaries and benefits expenses decreased to $3,751,187 (2025: $4,403,089) during the nine months ended March 31, 2026. This decrease was attributed to salaries paid to Company management and to employees from AWS who joined as part of the AWS Acquisition during the comparative period;
- Shared based compensation expense decreased to $462,287 (2025: $1,215,054) for the nine months ended March 31, 2026. This decrease was primarily driven by the significant portion of previously granted options which are fully vested.
Summary of Quarterly Results
| Three months ended, | Quarter | Total revenue | Net income (loss) | Basic earnings (loss) per share | Diluted earnings (loss) per share |
|---|---|---|---|---|---|
| $ | $ | $ | $ | ||
| March 31, 2026 | Q3 | 11,006,543 | (1,003,394) | (0.01) | (0.01) |
| December 31, 2025 | Q2 | 10,046,083 | (327,283) | (0.00) | (0.00) |
| September 30, 2025 | Q1 | 12,138,548 | 627,270 | 0.01 | 0.01 |
| June 30, 2025 | Q4 | 7,970,088 | (1,196,697) | (0.02) | (0.02) |
| March 31, 2025 | Q3 | 6,947,691 | (3,462,056) | (0.05) | (0.05) |
| December 31, 2024 | Q2 | 7,481,927 | (4,456,228) | (0.06) | (0.06) |
| September 30, 2024 | Q1 | 10,006,487 | (1,644,323) | (0.02) | (0.02) |
| June 30, 2024 | Q4 | 9,385,252 | (2,916,263) | (0.04) | (0.04) |
The Company incurred a net loss of $1,003,394 during the three months ended March 31, 2026 in comparison to a net loss of $327,283 during the three months ended December 31, 2025. The increase in net loss was primarily due to the increase of professional fees of $453,744, and increase of general and administrative expenses of $114,628. The decrease in net income was partially offset by the increase of revenue of $960,460. The increase of revenue was driven by the increase of $2,227,844 in service rig revenue and offset by the decrease of cementing revenue of $470,682 and the decrease of $987,533 of wireline services revenue.
The Company incurred a net loss of $327,283 during the three months ended December 31, 2025 in comparison to a net income of $627,270 during the three months ended September 30, 2025. The decrease in net income was primarily due to the decrease in revenue from $12,138,548 during the three months ended September 30, 2025 to $10,046,083 during the three months ended December 31, 2025. The main driver behind the decrease in revenue is a $1,343,939 decrease in service rig revenue, a $452,279 decrease in cementing revenue, a $346,709 decrease in transportation revenue, and a $215,117 decrease in carbon credit sales during the three months ended December 31, 2025 compared to the prior quarter. This was partially offset by a $420,169 increase in wireline services revenue and $77,208 increase in construction revenue during the three months ended December 31, 2025 compared to the prior quarter.
The Company incurred a net income of $627,270 during the three months ended September 30, 2025 in comparison to a net loss of $1,196,697 during the three months ended June 30, 2025. The increase in net income was primarily due to the increase in revenue from $7,970,088 during the three months ended June 30, 2025 to $12,138,548 during the three months ended September 30, 2025. The main driver behind the increase in revenue is a $2,053,772 increase in service rig revenue during the three months ended September 30, 2025, an $838,928 increase in cementing revenue and a $749,193 increase in transportation revenue in comparison to the three months ended June 30, 2025. The increase in net income was partially offset by a $420,169 increase in operating expenses during the three months ended September 30, 2025. The increase in operating expenses is primarily due to a $628,835 increase in share-based compensation during the three months ended September 30, 2025.
The Company incurred a net loss of $1,196,697 during the three months ended June 30, 2025 in comparison to a net loss of $3,462,056 during the three months ended March 31, 2025. The decrease in net loss was primarily due to gross profits increasing to $2,612,113 during the three months ended June 30, 2025, compared to $1,011,445 during the three months ended March 31, 2025. The main driver behind the increase in gross profits was the increase in revenues of $7,970,088 during the three months ended June 30, 2025, compared
to $6,947,691 during the three months ended March 31, 2025, mainly due to an increase in service rig and construction revenues. Cost of revenues also decreased to $5,357,975 during the three months ended June 30, 2025 in comparison to $5,936,246 during the three months ended March 31, 2025, which was mainly driven by a decrease in material costs, subcontracted labor, and equipment rental expense. The decrease in net loss was offset by change in fair value of investments expense increasing to $868,697 during the three months ended June 30, 2025 in comparison to an expense of $1,343 during the three months ended March 31, 2025 due to changes in the fair values of the Winterhawk and Fiútur investments.
The Company incurred a net loss of $3,462,056 during the three months ended March 31, 2025 in comparison to a net loss of $4,456,228 during the three months ended December 31, 2024. The decrease in net loss was primarily due to gross profits increasing to $1,011,445 during the three months ended March 31, 2025, compared to $582,214 during the three months ended December 31, 2024. The main driver behind the increase in gross profits was the decrease in cost of revenues of $5,936,246 during the three months ended March 31, 2025, compared to $6,899,713 during the three months ended December 31, 2024 due to a decrease in material costs, subcontracted labor, and equipment rental expense. The Company also recognized a loss of $99,419 on the settlement of the Capwell Note during the three months December 31, 2024.
The Company incurred a net loss of $4,456,228 during the three months ended December 31, 2024 in comparison to a net loss of $1,644,323 during the three months ended September 30, 2024. The increase in net loss was primarily due to gross profit decreasing to $582,214 during the three months ended December 31, 2024, compared to $3,262,158 during the three months ended September 30, 2024. The decrease in gross profit was due to the seasonality of the business, which resulted in revenues decreasing to $7,481,927 during the three months ended December 31, 2024, compared to $10,006,487 during the three months ended September 30, 2024. The Company also recognized a loss of $99,419 on the settlement of the Capwell Note during the three months December 31, 2024.
The Company incurred a net loss of $1,644,323 during the three months ended September 30, 2024 in comparison to a net loss of $2,916,263 during the three months ended June 30, 2024. The decrease in net loss was primarily due to other expenses decreasing to $376,089 during the three months ended September 30, 2024, compared to $955,240 during the three months ended June 30, 2024, which was mainly attributed to the Company recognizing IPO listing expenses of $415,379 during the three months ended June 30, 2024. No such expense was recognized during the three months ended September 30, 2024.
The Company incurred a net loss of $2,916,263 during the three months ended June 30, 2024 in comparison to net loss of $949,890 during the three months ended March 31, 2024. The decrease in net loss was primarily due to operating expenses increasing to $4,331,734 during the three months ended June 30, 2024 compared to $3,448,913 during the three months ended March 31, 2024. The increase in operating expenses was primarily due to the acquisition of P&G at the end of fiscal 2023. Salaries and expenses increased to $1,505,927 during the three months ended June 30, 2024 compared to $731,284 during the three months ended March 31, 2024. This was offset by gross profit generated from P&G and AWS's oil and gas well abatement services increasing to $2,937,349 compared to the $2,657,229 of gross profit earned during the three months ended March 31, 2024.
Disclosure of Outstanding Share Data
Authorized share capital of the Company consists of an unlimited number of common shares without par value.
The Company securities outstanding are as follows:
| Security description | March 31, 2026 | Date of MD&A |
|---|---|---|
| Common shares | 92,189,863 | 103,170,651 |
| Stock options | 3,381,174 | 3,056,174 |
| Restricted share units | 1,466,163 | 816,625 |
| Warrants | 9,813,000 | 18,556,750 |
| Fully diluted shares | 106,850,200 | 125,600,200 |
Share issuances are as follows:
Activities for the nine months ended March 31, 2026:
During the nine months ended March 31, 2026, the Company received $36,393 (CA$50,375) in proceeds on exercise of 503,750 warrants at an exercise price of CA$0.10. The Company also received $446,046 of gross proceeds in relation to the exercise of 10,790,000 warrants at an exercise price of CA$0.23 per warrant while the remaining $1,369,260 related to the warrants was settled against loans with three secured creditors.
During the nine months ended March 31, 2026, the Company issued 197,525 common shares related to vesting of 197,525 RSUs. The Company issued 20,350 common shares which had been previously withheld for tax purposes, which resulted in a transfer of $27,543 from obligation to issue shares to share capital. The Company is obligated to issue 13,750 common shares to an RSU holder as at March 31, 2026.
During the nine months ended March 31, 2026, the Company issued 5,085,508 common shares related to debt settlements with vendors and recognized a loss of $234,416 in relation to these shares for debt settlements. The Company granted 400,000 stock options to a vendor in relation to the debt settlements.
During the nine months ended March 31, 2026, the Company incurred $15,559 of share issuance costs in relation to the share issuances during the period.
Activities for the nine months ended March 31, 2025:
During the nine months ended March 31, 2025, the Company received $1,973,668 (CA$2,706,938) in gross proceeds on exercise of 8,324,700 warrants at exercise prices of CA$0.10 and CA$0.75. Of this amount, $1,732 (CA$2,500) related to a warrant exercise for 25,000 common shares of the Company. These shares were issued subsequent to March 31, 2025, and have been presented as an obligation to issue shares.
The Company also issued shares related to funds of $1,098 (CA$1,500) received for warrant exercises in the prior year, which were recorded as obligation to issue shares as of June 30, 2024.
Liquidity and Capital Resources
Historically and prospectively, the Company's primary source of liquidity and capital resources has been and will continue to be proceeds from the issuance of shares. Based on our current level of operations and our expected results of operations over the next 12 months, we believe that cash generated from future operations and cash on hand and anticipated future capital raises, will be adequate to meet our anticipated liquidity requirements, capital expenditures and working capital needs for the next 12 months. However, we cannot be certain that our business will be able to raise capital through the issuance of equity to continue operations.
As at March 31, 2026, the Company had a working capital deficit of $5,255,158 (June 30, 2025 - deficit of $6,002,184) and cash on hand of $274,032 (June 30, 2025 - $52,603).
Net cash provided by operating activities for the nine months ended March 31, 2026 was $4,124,457 (March 31, 2025 - $1,447,154). The increase in cash provided by operating activities was primarily driven by an overall decrease in net loss, which was offset by the changes in non-cash operating working capital, including the change in accounts receivables, prepaid expenses and accounts payable and accrued liabilities during the nine months ended March 31, 2026.
Net cash used in investing activities for the nine months ended March 31, 2026 was $885,322 (March 31, 2025 - $1,794,118). During the nine months ended March 31, 2026, cash used in investing activities consisted of $905,477 for the purchase of equipment offset by $20,155 of proceeds from the sale of equipment.
Net cash used in financing activities for the nine months ended March 31, 2026 was $2,999,330 (March 31, 2025 - $419,933). During the nine months ended March 31, 2026, cash used in financing activities consisted of $3,336,884 of repayments of long-term debt, $713,278 repayment of line of credit, $104,911 repayment of insurance loans and $74,960 of lease liability payments, and share issuance costs of $15,559. This was partially offset by $763,823 of cash received from borrowings on long-term debt, and $482,439 of proceeds from the exercise of warrants.
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The Company does not have any material commitments to make capital expenditures in future fiscal periods.
Other Factors Affecting Liquidity
The Company may also raise additional equity or debt capital or enter into arrangements to secure necessary financing to fund the completion of projects, to meet obligations or for the general corporate purposes of the Company. Such arrangements may take the form of loans, strategic agreements, or other agreements. The sale of additional equity could result in additional dilution to the Company's existing shareholders, and financing arrangements may not be available to the Company, or may not be available in sufficient amounts or on acceptable terms.
From time to time, the Company may pursue various strategic business opportunities. These opportunities may include proposed development and/or management of investment in or ownership of additional businesses through direct investments, acquisitions, joint venture arrangements and other transactions.
The Company can provide no assurance that it will successfully identify additional opportunities or that, if it identifies and pursues existing opportunities, any of them will be consummated.
Off-Balance Sheet Arrangements
No off-balance sheet arrangements.
Transactions with Related Parties
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. Key management personnel comprise officers and directors of the Company.
The related parties of Zefiro Methane Corp. consist of the following individuals:
- Catherine Flax – Interim CEO and Director
- Michael Downs – Interim CFO
- Tina Reine – Chief Commercial Officer
- Elijah Dumaresq – Corporate Secretary, Former CFO, and Former Director
- Daryl Heald – Director
- Jonson Sun – Director
- Correne Loeffler – Director
- Hudheifa Moawalla – Director
- Luke Plants – CEO, Zefiro Services, EVP, Business Development
- Paul Plants – Family member to Stephen Plants and Luke Plants
- Roman Kosecki – Spouse of Catherine Flax
- PhiCap Advisors LLC – Company related to Michael Downs
- GIC Merchant Bank Corp. – Company related to Jonson Sun
- 1325118 BC Ltd. – Company related to Elijah Dumaresq (Former CFO)
- Pashleth Merchant Capital – Company related to Elijah Dumaresq (Former CFO)
- Curt Hopkins – Former CEO
- Consilium Ventures Ltd – Company related to Curt Hopkins (Former CEO)
- Jeff Frase – Former President of Corporate Development
- Talal Debs – Former Zefiro CEO and Former Director
- X Machina Sustainable Technologies – Significant shareholder and Company with majority ownership by Talal Debs (Former CEO)
- Mohit Gupta – Former CFO
- Richard Walker – Former Chief Technology Officer
- Token Innovations LLC – Company founded by Richard Walker (Former Chief Technology Officer)
- Matthew Brooks – Former Head of Operations
- Stephen Plants – Former President of P&A Services of P&G
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| Three months ended | Nine months ended | |||
|---|---|---|---|---|
| March 31, 2026 | March 31, 2025 | March 31, 2026 | March 31, 2025 | |
| $ | $ | $ | $ | |
| Salaries and benefits | ||||
| Talal Debs | - | 43,022 | - | 117,384 |
| Mohit Gupta | - | 50,908 | - | 118,780 |
| Catherine Flax | 72,862 | - | 217,759 | - |
| Tina Reine | 56,158 | 57,911 | 167,396 | 166,624 |
| Matthew Brooks | - | 30,842 | - | 153,821 |
| Mike Downs | 60,000 | - | 120,000 | - |
| Stephen Plants | 14,862 | 53,099 | 53,819 | 159,943 |
| Luke Plants | 72,554 | 53,099 | 177,496 | 159,778 |
| Richard Walker | - | 65,991 | - | 149,490 |
| 276,436 | 354,872 | 736,470 | 1,025,820 | |
| Consulting and management fees | ||||
| PhiCap Advisors LLC | 42,000 | - | 186,020 | - |
| GIC Merchant Bank Corp. | - | 22,500 | - | 67,500 |
| Token Innovations LLC | - | - | - | 6,273 |
| 42,000 | 22,500 | 186,020 | 73,773 | |
| Directors' fees | ||||
| Jonson Sun | 22,500 | 22,500 | 67,500 | 82,500 |
| Correne Loeffler | 4,984 | - | 22,708 | - |
| 27,484 | 22,500 | 90,208 | 82,500 | |
| Share-based compensation | ||||
| Talal Debs | - | 177,306 | - | 433,102 |
| Mohit Gupta | - | 104,725 | - | 203,108 |
| Tina Reine | 3,631 | 3,356 | 14,856 | 3,356 |
| Catherine Flax | 29,539 | 30,548 | 112,913 | 79,739 |
| Daryl Heald | 29,539 | 30,548 | 112,913 | 79,739 |
| Jonson Sun | 19,085 | 39,190 | 82,731 | 93,453 |
| Richard Walker | - | 50,851 | - | 139,444 |
| Token Innovations LLC | - | 20,977 | - | 20,977 |
| PhiCap Advisors LLC | 7,495 | - | 26,746 | - |
| 89,289 | 457,501 | 350,159 | 1,052,918 | |
| 435,209 | 857,373 | 1,362,857 | 2,235,011 |
As of March 31, 2026, $124,419 (June 30, 2025: $149,687) in accounts payable and accrued liabilities was owing to a director and a company controlled by that director. The balance owing did not bear interest, was unsecured and had no fixed terms of repayment.
As of March 31, 2026, a balance of $36,247 (June 30, 2025: $36,957) is included in accounts receivable owing from a significant shareholder and a balance of $123,352 (June 30, 2025: $109,150) is included in accounts payable and accrued liabilities owing to a significant shareholder. The balances owed and owing did not bear interest, were unsecured and had no fixed terms of repayment.
As of March 31, 2026, the long-term debt includes a promissory note with an outstanding balance of $Nil (June 30, 2025: $1,301,211) owing to the spouse of a director of the Company.
As of March 31, 2026, the long-term debt includes a promissory note with an outstanding balance of $Nil (June 30, 2025: $307,035) owing to a significant shareholder.
As of March 31, 2026, the long-term debt includes a secured loan with an outstanding balance of $Nil (June 30, 2025: $808,993) owing to a director and Chief Executive Officer ("CEO"). On January 27, 2026, the Company entered into a loan satisfaction agreement with the director and CEO, resulting in the full settlement
of outstanding secured loan obligation totalling $821,881. The settlement was satisfied through the exercise of 4,820,000 warrants at CA$0.23 per warrant for $810,915 (CA$1,108,600) and the issuance of 1,083,573 common shares at a price of CA$0.46 per share for aggregate consideration of $364,600 (CA$498,444). $198,953 of cash proceeds were received from the director and CEO for the exercise of the warrants while the remaining $611,962 related to the warrants was settled against the secured loan. The Company recognized a loss of $154,681 on the debt settlement.
As of March 31, 2026, a balance of $66,000 (June 30, 2025: $82,150) in accounts payable and accrued liabilities was owing to a Company controlled by the interim CFO. The balance owing did not bear interest, was unsecured and had no fixed terms of repayment.
Convertible Preferred Units
On November 19, 2024, Zefiro Methane LLC ("LLC"), entered into an agreement with X Machina Capital Strategies Fund II LP ("XMC" or "Preferred Unit Member"), a company controlled by Zefiro Methane Corp.'s former CEO, who was serving as CEO at the time of the agreement. In conjunction with the agreement, LLC created a new class of equity securities, the Preferred Units and issued 926,612 newly issued Preferred Units to XMC for an aggregate purchase price of $500,000. The funds were received on November 22, 2024.
The Preferred Units are entitled to cumulative returns at a rate of 10% per annum. The amount accrued will be paid in kind in the form of additional Preferred Units until the later of June 30, 2028, or June 30 of any calendar year in which LLC generates at least $10 million or more of operating cash flows (the "Trigger Date"). After the Trigger Date, all cumulative returns are to be paid in cash.
On the closing of a successful uplisting of the Company's shares on a US Exchange, or a qualified public offering of Zefiro Methane LLC, all of the outstanding Preferred Units will automatically convert, along with any unpaid cumulative returns, into an aggregate number of Common Units at $0.54. If LLC completes any financing or issues any convertible securities with strike prices below $0.54 subsequently, the conversion price will be adjusted to the lower price.
The Preferred Units do not hold any voting rights in LLC. Additionally, the conversion rights attached to the Preferred Units were assessed to not be substantive at this time and therefore the Company, through Zefiro Methane Operations, retains 100% control over LLC.
The Preferred Units were assessed under IAS 32 Financial Instruments: Presentation and IFRS 9 Financial Instruments, and were determined to be a hybrid financial liability, consisting of a debt host and a derivative liability that were not closely related and therefore accounted for separately. The debt host liability consists of the cumulative returns as there is a contractual obligation to pay cash. The conversion feature was assessed to be a derivative liability, as it failed the fixed-for-fixed rule, and was assigned a fair value of $500,000 on initial recognition. The residual value, being $Nil, was allocated to the debt host liability.
As at March 31, 2026, management determined the fair value of the derivative liability to be $640,000 (June 30, 2025 - $640,000) by using the weighted average of three possible scenarios. For each scenario, the present value of the quarterly dividend and distributions on the Preferred Units were determined based on a market participant rate of return and an estimated Trigger Date.
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14
Financial Risks
Fair Value
The Company's financial instruments include cash, accounts receivable, convertible notes receivable, investments, accounts payable, line of credit, insurance loans payable, long-term debt, lease liabilities, and advances payable. IFRS 7 Financial Instruments: Disclosures establishes a fair value hierarchy for financial instruments measured at fair value. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The three levels of the fair value hierarchy are as follows:
- Level 1 - applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
- Level 2 - applies to assets or liabilities for which there are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly, such as quoted prices for similar assets or liabilities in active markets or indirectly, such as quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions.
- Level 3 - applies to assets or liabilities for which there are unobservable market data.
The recorded amounts of cash, accounts receivable, accounts payable, line of credit, insurance loans payable, and advance payable approximate their respective fair values due to their short-term nature. The carrying value of debt where interest is charged at a fixed rate is not significantly different from the fair value. Convertible notes receivable are measured at fair value using Level 2 inputs. The investments and derivative liability are measured at fair value using Level 3 inputs. During the three and nine months ended March 31, 2026, there were no transfers into or out of Level 1, Level 2 or Level 3.
Risk management
The Company considers managing risk as being an integral part of its development and diversification strategies. The Company's activities expose it to a variety of financial risks. The Company focuses on actively securing short-to-medium term cash flows by minimizing the exposures to financial markets. The Company does not enter into financial instrument agreements, including derivative financial instruments, for speculative purposes.
Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations.
Financial instruments that are potentially subject to credit risk for the Company consist primarily of cash and trade accounts receivable. The Company manages credit risk pertaining to its cash balances by ensuring funds are kept at reputable financial institutions. Credit risk pertaining to accounts receivable is mitigated through active management and monitoring of customer receivable balances. The Company also carefully evaluates the creditworthiness of customers prior to conducting business with them and monitors its exposure to credit losses with existing customers. Accounts receivable are shown net of any provision made for impairment of the receivables. The Company believes that no additional credit risk, beyond amounts provided for collection loss, is inherent in accounts receivable.
Expected credit loss ("ECL") analysis is performed at each reporting date using an objective approach to measure expected credit losses. The provision amounts are based on direct management interface with the customer. The calculations reflect the probability-weighted outcome, the time value of money, and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Accounts receivable are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, business failure, the failure of a debtor to engage in a repayment plan, and a failure to make contractual payments over the negotiated contract period.
The following table provides disclosures about credit risk exposure and expected credit losses on trade receivables as at March 31, 2026:
| 0 – 30 days | 31 – 60 days | 61 – 90 days | Over 90 days | Total | |
|---|---|---|---|---|---|
| Gross carrying amount | 4,670,557 | 1,063,862 | 58,539 | 118,677 | 5,911,635 |
| Loss allowance | - | - | - | - | - |
| Net | 4,670,557 | 1,063,862 | 58,539 | 118,677 | 5,911,635 |
| ECL rate | 0% | 0% | 0% | 0% | 0% |
The following table provides disclosures about credit risk exposure and expected credit losses on trade receivables as at June 30, 2025:
| 0 – 30 days | 31 – 60 days | 61 – 90 days | Over 90 days | Total | |
|---|---|---|---|---|---|
| Gross carrying amount | 3,934,662 | 62,944 | - | 53,323 | 4,050,929 |
| Loss allowance | - | - | - | - | - |
| Net | 3,934,662 | 62,944 | - | 53,323 | 4,050,929 |
| ECL rate | 0% | 0% | 0% | 0% | 0% |
The Company applies a direct customer analysis approach to measure expected credit losses. The Company assesses the collectability of receivables of each customer on an individual basis using quantitative and qualitative information available to management. The historical loss rates are adjusted to reflect the current and forward-looking information on economic factors affecting the ability of the customers to make regular monthly payments on the receivables.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company is exposed to this risk primarily through its accounts payable, line of credit, insurance loans payable, and long-term debt. The Company's approach to managing liquidity is to maintain sufficient cash to meet obligations when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The key to success in managing liquidity is the degree of certainty in the cash flow projections. If future cash flows are fairly uncertain, the liquidity risk increases. Liquidity risk is assessed as high.
Contractual undiscounted cash flow requirements for financial liabilities as at March 31, 2026, are as follows:
| Less than 1 year | 1 – 5 years | After 5 years | Total | |
|---|---|---|---|---|
| $ | $ | $ | $ | |
| Accounts payable and accrued liabilities | 5,338,348 | - | - | 5,338,348 |
| Advances payable | 261,984 | - | - | 261,984 |
| Line of credit | 2,203,953 | - | - | 2,203,953 |
| Long-term debt | 2,904,752 | 2,602,781 | 80,951 | 5,588,484 |
| Lease liabilities | 167,400 | 621,200 | - | 788,600 |
| 10,876,437 | 3,223,981 | 80,951 | 14,181,369 |
The Company endeavors to ensure that it has sufficient cash on demand to meet its obligations as they become due by preparing expenditure budgets, which are regularly monitored and updated as considered necessary. The Company also manages its liquidity risk through the financial support of its shareholders and key management personnel. Liquidity risk is assessed as high.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in the market interest rates. The Company is exposed to this risk through its line of credit. As at March 31, 2026, an increase in interest rates by 1% would affect comprehensive loss by approximately $22,040 (June 30, 2025: $29,172).
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Foreign currency risk
Foreign currency risk is the risk that the fair values or future cash flows of a financial instrument will fluctuate due to being denominated in currencies that differ from the respective functional currency. The Company operates in an international environment, some of the Company's financial instruments and transactions are denominated in currencies other than its functional currency. The fluctuation in foreign currencies will consequently impact the profitability of the Company and may also affect the value of the Company's assets and liabilities and the amount of shareholders' equity. At March 31, 2026, Zefiro Methane Corp. and Zefiro Methane Operations Corp. held net financial liabilities of CA$295,489 denominated in US dollars (US$212,085). A 10% change in the foreign exchange rate would result in a change in the net income for the period of approximately CA$15,200 (June 30, 2025: CA$26,200).
Other price risk
Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk. As at March 31, 2026, the Company is not exposed to significant other price risk.
Capital Management
The Company monitors its cash and common shares as capital. The Company's objectives are to preserve its ability to continue its operation to ensure its sustainability and to provide an adequate return to its shareholders, and to ensure sufficient equity financing in a way that maximizes the shareholders' return given the assumed risks of its activities. The Company may issue new shares following approval by the Board of Directors.
The Company's objectives in terms of capital management have not changed during the period ended March 31, 2026.
The Company is not subject to any external capital requirements as of March 31, 2026.
Material Accounting Policy Information
The accounting policies followed by the Company are set out in Note 3 to the audited consolidated financial statements for the years ended June 30, 2025 and 2024, and Note 3 to the unaudited condensed interim consolidated financial statements for the three and nine months ended March 31, 2026 and 2025.
a) Inventory
Inventory comprises carbon credits held for sale in the ordinary course of business. Carbon credits are recognised as inventory when the entity obtains control of the credits, and it is probable that the future economic benefits associated with the credits will flow to the entity.
Carbon credits are initially measured at cost, which includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventory to their present location and condition. Subsequent to initial recognition, inventory is measured at the lower of cost and net realisable value.
b) Revenue recognition
Revenue arises from the sale of carbon credits acquired by the company. The company recognises revenue in accordance with IFRS 15 Revenue from Contracts with Customers when control of the carbon credits is transferred to the customer, in an amount that reflects the consideration to which the company expects to be entitled in exchange for those credits.
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Critical Accounting Estimates and Judgments
The preparation of the condensed interim consolidated financial statements requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. The significant accounting estimates and judgments are set out in Note 4 to the audited consolidated financial statements for the years ended June 30, 2025 and 2024, and Note 4 to the unaudited condensed interim consolidated financial statements for the three and nine months ended March 31, 2026 and 2025.
Adoption of New Standards and Interpretations, and Recent Accounting Pronouncements
New IFRS pronouncements that have been issued but are not yet effective at the date of this MD&A are, if any, listed in in Note 3 to the audited consolidated financial statements for the years ended June 30, 2025 and 2024, and Note 3 to the unaudited condensed interim consolidated financial statements for the three and nine months ended March 31, 2026 and 2025.
Inventory
Prior to June 30, 2025, the Company expensed certain costs that were directly attributable to inventory. During the three and nine months ended March 31, 2026, all directly attributable costs have been capitalized as part of the Company's inventory balance.
Events Subsequent to the Nine Months Ended March 31, 2026
On April 13, 2026, the Company issued a promissory note for $300,000 to a related party. The note has a term of 12 months, and bears interest at a rate of 18% per annum. The full principal and accrued interest are due April 12, 2027.
The note is unsecured for the first 120 days following the effective date, after which it automatically becomes secured by collateral mutually agreed upon in writing with a first-priority security interest granted to the Holder. Should any equity financing be completed prior to the Maturity Date, a minimum of 10% of gross proceeds must be applied against the outstanding balance within five days of closing.
On April 15, 2026, the Company received CA$3,750 of gross proceeds for the exercise of 37,500 warrants at an exercise price of CA$0.10.
On April 23, 2026, subsequent to the reporting period, the Company closed a private placement with two European strategic investors, issuing 9,375,000 units at a price of CA$0.48 per unit for gross proceeds of CA$4,500,000. Each unit consists of one common share and one common share purchase warrant, with each warrant exercisable into one common share at CA$0.60 for a period of 24 months from the date of issuance.
On May 7, 2026, the Company completed the acquisition of equipment from Viking Well Service for total consideration of $4,300,000 USD. The acquired assets include five derrick rigs and several additional units of machinery, which will be added to the Company's existing fleet. The acquisition expands the Company's operational presence into five new states (New Jersey, Michigan, Indiana, Illinois, and Iowa) and further extends its footprint in four states where it currently operates. The purchase price was satisfied through a cash payment of $1,400,000 USD and the issuance of a seller's note of $2,900,000 USD bearing interest at 7% per annum. The seller's note requires interest-only payments during its term, with the full principal balance due by way of balloon payment on April 30, 2027.
Management's Responsibility for Financial Statements
Management of the Company, under the supervision of the Chief Executive Officer and the Chief Financial Officer, is responsible for the design and operations of internal controls over financial reporting. There have been no changes in the Company's disclosure controls and procedures during the year ended June 30, 2025, and during the three and nine months ended March 31, 2026.
The Company's management is responsible for establishing and maintaining adequate internal controls over financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. Any system of internal control over financial reporting, no matter how well designed, has
inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
There have been no changes in the Company's internal control over financial reporting during the year ended June 30, 2025, and during the three and nine months ended March 31, 2026, that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.
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19
Limitations of Controls and Procedures
The Company's management, including the Chief Executive Officer and Chief Financial Officer, believe that any disclosure controls and procedures or internal controls over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control.
The design of any systems of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Additional information regarding the Corporation, including the Corporation's Annual Information Form, can be found under the Corporation's profile on the System of Electronic Document Analysis and Retrieval (SEDAR+) at www.sedarplus.com