Photon Control : Financial Statements Q4 2020

CONSOLIDATED FINANCIAL STATEMENTS OF

Photon Control Inc.

For the years ended December 31, 2020 and 2019

KPMG LLP

PO Box 10426 777 Dunsmuir Street Vancouver BC V7Y 1K3

Canada

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INDEPENDENT AUDITORS' REPORT

To the Shareholders of Photon Control Inc.

Opinion

We have audited the consolidated financial statements of Photon Control Inc. (the Entity), which comprise:

• • the consolidated statements of financial position as at December 31, 2020 and December 31, 2019

• • the consolidated statements of net income and comprehensive income for the years then ended

• • the consolidated statements of changes in shareholders' equity for the years then ended

• • the consolidated statements of cash flows for the years then ended

• • and notes to the consolidated financial statements, including a summary of significant accounting policies

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

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at December 31, 2020 and December 31, 2019, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS).

Basis for Opinion

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

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

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2020.

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These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have determined the matter described below to be the key audit matter to be communicated in our auditors' report.

Description of the matter

We draw your attention to Notes 2 and 13 to the financial statements. Uncertainties over income tax positions are evaluated as to whether it is probable that they will be accepted upon examination by the relevant taxing authorities. Uncertainties over income tax treatments are measured based on the most likely amount, or if there are a wide range of possible outcomes, the expected value.

Why the matter is a key audit matter

We identified the assessment of recognition and measurement of uncertain income tax positions as a key audit matter. This matter represented a risk of material misstatement due to a high degree of auditor judgment that was required in evaluating both the Entity's (1) determination of the probability that the taxing authorities would accept the Entity's tax positions, and (2) judgments regarding the ultimate resolution of the tax positions taken, including potential outcomes and associated probabilities, which impact the amount of taxes recognized. In addition, specialized skills and knowledge were required.

How the matter was addressed in the audit

The primary procedures we performed to address this key audit matter included the following.

We involved our Canadian and US income tax professionals with specialized skills and knowledge. They assisted in assessing if there was any uncertainty about a filing treatment and the amount recognized for any uncertain tax position identified by:

• • inspecting correspondence between the Entity and the relevant taxing authorities;

• • assessing tax positions, transfer pricing studies, and other information obtained from the Entity's external tax specialists and external legal counsel;

• • assessing the Entity's compliance with applicable laws and regulations; and

• • evaluating the Entity's uncertain tax position accruals by assessing potential outcomes and associated probabilities.

Other Information

Management is responsible for the other information. Other information comprises:

• • the information included in Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions.

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

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is

materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated.

We obtained the information included in Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions as at the date of this auditors' report.

If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditors' report.

We have nothing to report in this regard.

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

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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

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

Auditors' Responsibilities for the Audit of the Financial Statements

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

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

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

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

We also:

• • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.