Q1 Financial Statement (Q1 Financial Statements 1)

(In thousands of Canadian dollars unless otherwise stated)

(Unaudited)

(In thousands of Canadian Dollars)

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

(In thousands of Canadian Dollars, except per share amounts)

(1)Certain prior period amounts have been restated as a result of a change in presentation for continuing and discontinued operations under IFRS. Please refer to Note 4 - Discontinued Operations

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

(In thousands of Canadian Dollars)

(1)Please refer to Note 4 - Discontinued Operations for details related to the cash flow from discontinued operations.

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

(In thousands of Canadian Dollars)

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

For the first quarter ended March 29, 2025

(In thousands of Canadian dollars unless otherwise stated)

1. ‌NATURE OF OPERATIONS‌

   GreenFirst Forest Products Inc. ("GreenFirst", or the "Company") operates as a forest products business consisting of four operating sawmills located in Ontario. On July 2, 2024, GreenFirst announced its plan to spin-out Kap Corporation. Kap Corporation housed GreenFirst's paper mill operations until the spin-out. The spin-out was part of the natural progression of the decentralization and deconsolidation of the paper mill that was originally disclosed by GreenFirst in the fall of 2023. The spin-out of Kap Corporation was completed on November 4, 2024 and as a result the Company has distributed the assets and liabilities associated with the Company's paper operations. The consolidated statement of comprehensive income (loss) and other relevant notes have been prepared to separately show the discontinued operations from the Company's continuing operations.

   The Company manufactures and markets a wide range of spruce-pine-fir ("SPF") lumber products for use in residential and commercial construction with by-products from production sold to pulp-producers.

   The Company's head office and registered records office is 10 Four Seasons Place, 10 FL, Toronto, ON, M9B 6H7. The Company's common shares are listed on the Toronto Stock Exchange ("TSX") under the trading symbol "GFP".

2. ‌BASIS OF PREPARATION

   Statement of Compliance

   These condensed consolidated interim financial statements ("Financial Statements") are prepared in accordance and in compliance with International Accounting Standards ("IAS 34"), Interim Financial Reporting, as issued by the International Accounting Standards Board ("IASB"), using the same accounting policies, including estimates and judgments and methods of application as those disclosed in the Company's annual audited consolidated financial statements for the year ended December 31, 2024 ("Annual Financial Statements"), except as disclosed in note 3. These Financial Statements should be read in conjunction with the Company's Annual Financial Statements, which have been prepared in accordance with IFRS Accounting Standards ("IFRS") as issued by the IASB.

   These Financial Statements were approved by the Company's Board of Directors ("Board") on May 13, 2025.

   Basis of Measurement

   These Financial Statements have been prepared under the historical cost basis, except where otherwise stated in the applicable accounting policies.

   Going Concern

   These Financial Statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and meet its obligations in the normal course of business as they become due.

   For the first quarter ended March 29, 2025, the Company reported a net income from continuing operations of $0.9 million (March 30, 2024 - $0.1 million).

   For the first quarter ended March 29, 2025, the Company reported cash used in operating activities of

   $29.7 million (March 30, 2024 - $24.9 million). Excluding the cash impact from the discontinued operations, for the first quarter ended March 29, 2025, the Company's cash used in operating activities from continuing operations was $29.7 million (March 30, 2024 - $6.9 million).

   Notes to the Condensed Consolidated Interim Financial Statements

   For the first quarter ended March 29, 2025

   (In thousands of Canadian dollars unless otherwise stated)

   As at March 29, 2025, the Company has working capital of $74.8 million (December 31, 2024 - $64.4 million) including cash of $2.5 million (December 31, 2024 - $27.8 million).

   In addition, as at March 29, 2025, the excess availability under the revolving portion of the credit facility was $40.3 million less $8.6 million of outstanding letters of credit (December 31, 2024 - $39.3 million less

   $8.3 million of outstanding letter of credit).

   The Company's ability to continue as a going concern is dependent on its ability to realize positive cash flows from operations. The ability to generate positive cash flows from operations is dependent on market prices for lumber, demand for the Company's products and/or increases in productivity resulting in higher volumes produced and lower costs. In addition, the Company is dependent on supply and demand factors related to the sale of its by-products in the region within which its sawmills are located. The financial viability of pulp and paper mills and their reliance on government assistance in our industry may reduce market demand for by-products, leading to lower market prices and possibly even sawmill closures and/or curtailments. The Company has forecasted its cash flows over the next twelve months based on current lumber prices, duty rates, operating costs and production and sales volumes consistent with the past twelve months. Based on these forecasts, the Company believes that it has sufficient cash/working capital and available lines of credit to finance its operations for the next twelve months.

   However, as a result of the potential imposition of tariffs announced and subsequently paused throughout the first quarter of 2025, the uncertainty and impacts of any such potential tariffs related to generating positive cash flows from operations are unknown and indeterminable (See Note 17 Subsequent Events). The uncertainty related to this condition may cast significant doubt about the Company's ability to continue as a going concern.

   These condensed consolidated interim financial statements do not include adjustments to the recoverability and classifications of recorded assets and liabilities and related expenses that might be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.

   Basis of Consolidation

   These Financial Statements include the accounts of the Company and the subsidiaries over which the Company exercises control. Control is achieved when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in these Financial Statements from when control commences until the date on which control ceases. The financial statements of the subsidiaries are prepared for the same reporting period and apply the same accounting policies as the Company. All transactions between consolidated entities are eliminated in the consolidation of these Financial Statements. Set out below is a list of subsidiaries of the Company:

   Subsidiary Jurisdiction Direct or Indirect Ownership Date of control and consolidation

   2776034 Ontario Inc. Ontario, Canada 100% September 8, 2020 GreenFirst Forest Products (QC) Inc. Quebec, Canada 100% March 16, 2021 GreenFirst Forest Products (Ontario) Inc. Ontario, Canada 100% January 1, 2024

   Use of Estimates and Judgments

   The preparation of these Financial Statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses and disclosures at the date of these Financial

   Notes to the Condensed Consolidated Interim Financial Statements

   For the first quarter ended March 29, 2025

   (In thousands of Canadian dollars unless otherwise stated)

   Statements. It also requires management to exercise judgment in the process of applying accounting policies. Significant areas requiring estimation and judgment include: assessing the net realizable value of inventory based on estimated selling prices, costs of completion, applicable duties, transportation costs and disposal costs; recoverability of trade and other receivables; estimated useful lives of property, plant and equipment; recoverability of long-lived assets; and employee future benefits. Actual amounts could differ materially from these and other estimates, the impact of which would be recorded in future periods.

   Functional and Presentation Currency

   These Financial Statements are presented in Canadian dollars, which is the Company's functional currency.

3. ‌MATERIAL ACCOUNTING POLICIES AND ESTIMATES New Accounting Pronouncements Adopted in 2025

   We did not adopt any accounting pronouncements or amendments this period.

   Recent Accounting Pronouncements Not Yet Adopted

   Certain IASB pronouncements have been issued but are not mandatory for the current period and have not been early adopted. The standards applicable to the Company are not expected to have a material impact to these Financial Statements.

4. ‌DISCONTINUED OPERATIONS

On November 4, 2024, the Company completed its spin-out transaction of its paper operations as the next step of its decentralization plan announced earlier in the year. As a result of the spin-out, the Company distributed the assets and liabilities associated with the Company's paper operations to Kap Paper Inc., a wholly owned subsidiary of Kap Corporation, at book value through an equity distribution. The Company closed the Plan of Arrangement that resulted in the distribution of the outstanding shares of Kap Corporation to the Company's shareholders on the basis of one common share of Kap Corporation for each ten common shares (post-consolidation) of the Company. The fair market value of these shares was equal to the equity distribution from the Company's share capital for the assets and liabilities distributed to the shareholders of Kap Corporation on November 4, 2024.

The current and comparative consolidated statement of comprehensive income (loss) along with all other relevant notes have been prepared to separately show the discontinued operations from the Company's continuing operations.

For the first quarter ended March 29, 2025

(In thousands of Canadian dollars unless otherwise stated)

Transaction related costs amounting to $0.2 million was incurred by the Company in continuing operations and have been included in the equity disbursement to Kap Paper Inc as part of the spin-off during the year ended December 31, 2024.

The Company sells a portion of its by-products to Kap Paper Inc. as a key input in its operations. These chip sales have previously, been recorded as intercompany chip transfers and eliminated on consolidation for the purposes of preparing the group financial statements. Since Kap Paper Inc. is an external third-party customer to the Company post spin-out, the consolidated statement of comprehensive income (loss) and other relevant notes have been revised to include chip sales to Kap Paper Inc. as external chip sales with the recognition of its associated cost of sales. The revenue associated with these transactions for the first quarter ended March 29, 2025 was $3.4 million (March 30, 2024 - $3.6 million).

There are certain overhead costs allocated to or from for the Company such as employee salaries, electricity usage and other overhead costs which are determined by the TSA agreement entered into with the Kap Paper Inc. In addition, the Company has a contractual agreement, whereby it leases land, buildings and services from Kap Paper Inc.

(1)Certain prior period amounts have been restated as a result of a change in presentation for continuing and discontinued operations under IFRS. Please refer to Note 4 - Discontinued Operations.

(1)Certain prior period amounts have been restated as a result of a change in presentation for continuing and discontinued operations under IFRS. Please refer to Note 4 - Discontinued Operations.

For the first quarter ended March 29, 2025

(In thousands of Canadian dollars unless otherwise stated)

As at March 29, 2025, the Company recorded an inventory valuation reserve of nil (December 31, 2024 -

$0.02 million) to reflect net realizable value being lower than cost.

Contractual minimum principal repayments related to the credit facility are due as follows:

During the first quarter ended March 29, 2025, the Company made a net drawdown of $12.0 million on the revolving portion of the credit facility. As at March 29, 2025, the Company has $13.0 million drawn down under the equipment financing portion of the credit facility in the form of a term loan. The Equipment Term Loan has a 60-month term, with monthly amortizing repayments that include both principal and interest. The borrowing is based on select strategic capital expenditure projects and value of existing equipment.

The Company remains subject to a maximum annual capital expenditure amount relative to budget, as these terms are defined in the Credit Agreement. The Company can draw down on the facility based on a prescribed percentage of accounts receivable and its inventory carrying value, less reserves. As at March 29, 2025, the Company was in compliance with all covenants under the credit facility.

Under the amended and restated credit agreement, the Company's maximum borrowing capacity under the revolving portion of the credit facility is $60.0 million (March 30, 2024 - $75.0 million) and equipment financing portion of $25.0 million (March 30, 2024 - $25.0 million).

For the first quarter ended March 29, 2025

(In thousands of Canadian dollars unless otherwise stated)

During the first quarter ended March 29, 2025, $1 thousand (March 30, 2024 - $49 thousand) of deferred financing costs were amortized relating to the credit facility.

At March 29, 2025, there were $8.6 million (March 30, 2024 - $5.4 million) of outstanding standby letters of credit issued, which reduces the amounts available to draw under the credit facility. Additionally, as at March 29, 2025, the Company also had $5.4 million (March 30, 2024 - $5.4 million) of outstanding standby letters of credit issued backstopped by another third party, thereby not impacting the amounts available to draw under the credit facility. The letter of credit as at March 29, 2025 issued to Kap Paper Inc. as the applicant was issued and guaranteed (March 30, 2024 - nil) by a financial institution for which the Company has indemnified the financial institution.

1. U.S. COUNTERVAILING AND ANTI-DUMPING DUTY DEPOSIT

   In late 2016, a petition was filed by the U.S. Lumber Coalition and other petitioners seeking CVD and ADD on Canadian softwood lumber imports to the U.S. On January 6, 2017, a preliminary determination was announced by the U.S. International Trade Commission ("ITC") that there was reasonable indication that the U.S. industry is materially injured by imports of softwood lumber products from Canada and the

   U.S. Department of Commerce ("DOC") imposed duties on Canadian shipments of softwood lumber into the U.S.

   The initial duty deposit rate, totaling 20.23%, was imposed upon the Company's acquisition of its sawmill assets on August 28, 2021.

   The following table summarizes the cash deposit rates that were in effect along with the preliminary and final revised rates by period:

   Effective dates for combined CVD and ADD Fourth administrative review Cash deposit rates in effect Final Rate

   August 28, 2021 - December 31, 2021 20.23 % 8.05 %

   Fifth administrative review

   January 1, 2022 - December 31, 2022 20.23 % 14.40 %

   January 1, 2023 - August 1, 2023	20.23 %	Pending
   August 2, 2023 - December 31, 2023	8.05 %	Pending
   eventh administrative review January 1, 2024 - August 18, 2024	8.05 %	Pending
   August 19, 2024 - September 18, 2024	14.54 %	Pending
   September 19, 2024 - December 31, 2024	14.40 %	Pending

   Sixth administrative review S

   Each Period of Inquiry ("POI") is subject to independent administrative review by the US DOC, and the results of each POI may not be offset but the results within a POI in respect of ADD and CVD may be offset.

   The Company will continue to reassess the duties deposit estimate at each quarter-end applying the US DOC's methodology to updated sales and cost data as this becomes available. Quarterly revisions to the duties deposit rate may result in a material adjustment to the consolidated statement of income (loss) and comprehensive income (loss) while the Administrative Reviews are taking place. Changes to the US DOC's existing countervailing duties and anti-dumping duties rates during the course of each administrative review may also result in material adjustments to the consolidated statement of income (loss) and comprehensive income (loss).

   Notes to the Condensed Consolidated Interim Financial Statements

   For the first quarter ended March 29, 2025

   (In thousands of Canadian dollars unless otherwise stated)

2. ‌SHAREHOLDERS' EQUITY

   Share Capital

   Authorized

   • Unlimited number of common voting shares with no par value.

   • 100,000,000 preferred shares with no par value, none of which are outstanding for the reporting periods presented.

     Issued and outstanding

     Changes to common shares and share capital issued and outstanding are as follows:

     Number of

     	Common Shares	Amount
     Balance, December 31, 2024	22,602,750	273,991
     Balance, March 29, 2025	22,602,750	273,991

     Warrants

     Changes in outstanding common share purchase warrants were as follows:

     Number of Warrants Weighted Average Exercise Price(1) Carrying Amount in reserves

     Balance, December 31, 2024	3,175,262	$ 16.23	$ 9,132
     Balance, March 29, 2025	3,175,262	$ 16.23	$ 9,132
     (1)In dollars per common share.
     Earnings (Loss) Per Share
     For the first quarter ended		March 29, 2025	March 30, 2024(1)
     Net income (loss)		$ 920	$ (13,351)
     Net income (loss) from continuing operations		920	$ 141
     Net income (loss) from discontinued operations		-	$ (13,492)
     Basic weighted average number of common shares outstanding		22,602,750	17,757,227
     Basic earnings (loss) per share		$ 0.04	$ (0.75)
     Basic earnings (loss) per share from continuing operations		$ 0.04	$ 0.01
     Basic earnings (loss) per share from discontinued operations		$ -	$ (0.76)

     Notes to the Condensed Consolidated Interim Financial Statements

     For the first quarter ended March 29, 2025

     (In thousands of Canadian dollars unless otherwise stated)

     March 29, For the first quarter ended 2025	March 30, 2024(1)
     Net income (loss) $ 920	$ (13,351)
     Net income (loss) from continuing operations 920	$ 141
     Net income (loss) from discontinued operations -	$ (13,492)
     Basic weighted average number of common shares outstanding 22,602,750	17,757,227
     Dilutive effect of exercisable warrants outstanding 763,537	-
     Diluted weighted average number of common shares outstanding 23,366,287	17,757,227
     Diluted earnings (loss) per share $ 0.04	$ (0.75)
     Diluted earnings (loss) per share from continuing operations $ -	$ 0.01
     Diluted earnings (loss) per share from discontinued operations $ 0.04	$ (0.76)
     (1)Certain prior period amounts have been restated as a result of a change in presentation	for continuing and

     discontinued operations under IFRS. Please refer to Note 4 - Discontinued Operations

     As at March 29, 2025, 403,298 stock options (March 30, 2024 - 451,647), granted by the Company were either not vested or not in-the-money and therefore non-exercisable (See Note 12 - Equity-Based Compensation).

     There were no shareholder dividends declared during the first quarter ended March 29, 2025 and March 30, 2024.

3. ‌EQUITY-BASED COMPENSATION

   Omnibus Equity Incentive Plan

   In 2021, the Company established the 2021 Omnibus Equity Incentive Plan ("Omnibus Plan") for directors, officers, employees and contractors. Under the Omnibus Plan, the Company may grant stock options, Restricted Share Units ("RSUs"), Performance Share Units ("PSUs"), Deferred Share Units ("DSUs") and Dividend-Equivalent Rights. The maximum number of common shares which can be reserved for issuance under the Plan is 10% of the prevailing issued and outstanding shares of the Company. The Omnibus Plan was amended and restated in 2024.

   Stock Options

   During the first quarter ended March 29, 2025 the Company granted nil stock options, under the Omnibus Plan (March 30, 2024 - nil). During the first quarter ended March 29, 2025 the Company forfeited/expired nil stock options, due to terminations/expirations under the Omnibus Plan (March 30, 2024 - 100,000). As at March 29, 2025, 403,298 stock options to directors, officers, employees and contractors were outstanding (March 30, 2024 - 451,647), of which 266,884 stock options were vested and exercisable (March 30, 2024 - 374,515).

   Number of Options Weighted Average Exercise Price(1) Years Before Expiration Outstanding, December 31, 2024 403,298 $ 16.81 $ 2.38

   Forfeited/expired - - -

   Outstanding, March 29, 2025 403,298 $ 16.81 $ 2.14

   (1)In dollars per option.

   The Company recorded an expense related to the stock options outstanding under the Omnibus Plan for the first quarter ended March 29, 2025 of $0.1 million (March 30, 2024 - recovery of 0.1 million).

   Notes to the Condensed Consolidated Interim Financial Statements

   For the first quarter ended March 29, 2025

   (In thousands of Canadian dollars unless otherwise stated)

   Restricted Share Units

   During the first quarter ended March 29, 2025, the Company granted nil RSUs (March 30, 2024 - nil). During the first quarter ended March 29, 2025, the Company recorded a expense of $0.1 million (March 30, 2024 - 0.2 million) related to the RSUs outstanding under the Omnibus Plan.

   As at March 29, 2025, the Company had 118,363 RSUs outstanding (March 30, 2024 - 97,087 RSUs).

   Deferred Share Units (Equity-settled)

   During the first quarter ended March 29, 2025, the Company granted 26,803 DSUs, (March 30, 2024 -21,367 DSUs). During the first quarter ended March 29, 2025, the Company recorded a expense of $0.9 million (March 30, 2024 - nil) related to the issuance of equity-settled DSUs under the Omnibus Plan.

   As at March 29, 2025, the Company had 132,574 equity-settled DSUs outstanding (December 31, 2024 -

   105,771 DSUs). As at March 29, 2025.

   Deferred Share Units (Cash-settled)

   During the first quarter ended March 29, 2025, the Company granted nil DSUs, (March 30, 2024 - nil DSUs). During the first quarter ended March 29, 2025, the Company recorded a recovery of $0.6 million (March 30, 2024 - $0.04 million) related to the change in the DSUs liability under the Omnibus Plan.

   As at March 29, 2025, the Company had 79,421 liability-settled DSUs outstanding (December 31, 2024 -79,421 DSUs). As at March 29, 2025, the liability related to DSUs is $0.3 million (December 31, 2024 -

   $1.0 million).

4. ‌RELATED PARTY TRANSACTIONS

   Investment in Boreal Carbon Corporation

   On November 30, 2021, the Company purchased 1,428,571 common shares in Boreal Carbon Corporation ("Boreal") for $0.5 million which is currently fair valued at $1.4 million. Boreal is an entity focused on acquiring and managing forestry projects in North America to generate carbon credits. The Chairman and a former director of GreenFirst are members of the Boreal board. See Note 14 - Financial Instruments and Risk Management.

   There was no change in the investment carrying value during the first quarter ended March 29, 2025 (March 30, 2024 - nil). This investment is accounted for at fair value with changes in fair value recorded in net income (loss).

   Management Services Agreements

   Certain directors of the Company, or their related parties, hold positions in other companies that result in them having control or significant influence over these companies. Some of these companies transacted with the Company during the first quarter ended March 29, 2025 and March 30, 2024. Following are the aggregate values of such transactions:

   March 29, March 30, For the first quarter ended 2025(1) 2024(1)

   Fees incurred for services - officers and companies controlled by

   officers 52 785

   (1)Includes fees for management services, administrative support, and reimbursement of expenses. These fees were paid to entities controlled by or affiliated with a director of the Company.

   Notes to the Condensed Consolidated Interim Financial Statements

   For the first quarter ended March 29, 2025

   (In thousands of Canadian dollars unless otherwise stated)

5. ‌FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

   As at March 29, 2025, the Company's financial instruments categorization and values are as follows:

   Category Carrying and fair value

   Cash and cash equivalents Amortized cost $ 2,465 Trade and other receivables, excluding value added tax Amortized cost 23,059

   Accounts payable and other current liabilities, excluding lease liabilities

   Amortized cost

   58,513

   Long-term debt, current	Amortized cost	2,871
   Long-term debt	Amortized cost	22,105
   Lease liabilities, current	Amortized cost	1,508
   Lease liabilities, long-term	Amortized cost	4,825
   Vendor-takeback mortgage	Amortized cost	1,404
   Investment	Fair value	1,429

   Except for the Company's investment asset, the fair value of all other financial instruments approximates the carrying value due to their short-term nature. Long-term debt and the vendor take-back mortgage are recorded at amortized cost based on the amount at initial recognition, less principal payments or receipts respectively, plus cumulative amortization using the effective interest rate method of the difference between initial amount and the maturity amount.

   The Company has classified its investment in Boreal as fair value through profit and loss. The Company uses Level 3 inputs to assess the fair value of the investment at the reporting date as there is no public information available regarding the value of Boreal's common shares.

   The Company's financial instruments expose the Company to credit, liquidity and market risk.

   Credit Risk

   Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises primarily from the Company's cash deposits and receivables from customers.

   The Company's maximum exposure to credit risk attributable to cash deposits as at March 29, 2025 is

   $2.5 million (December 31, 2024 - $27.8 million). The Company holds these deposits with a Canadian Schedule 1 financial institution.

   The Company's exposure to credit risk with respect to accounts receivable is dependent upon individual characteristics of each customer. Each new customer is assessed for creditworthiness before payment and delivery terms and conditions are offered, with such review encompassing external ratings, and bank and other references. Purchase limits are established for each customer and are regularly reviewed. The Company does not require specific credit guarantees for its customers and mitigates the risk of potential losses through the active monitoring of its receivables, considering past experience with its customer base, current economic conditions and any known specific customer issues.

   The Company regularly reviews the collectability of its accounts receivable and establishes an allowance for expected credit losses based on its best estimate of expected credit losses. At March 29, 2025, a $0.2 million (December 31, 2024 - $0.2 million) allowance for expected credit losses was recorded.

   Notes to the Condensed Consolidated Interim Financial Statements

   For the first quarter ended March 29, 2025

   (In thousands of Canadian dollars unless otherwise stated)

   The carrying amount of accounts receivable, excluding value added tax, of $23.1 million, represents the maximum credit exposure for its accounts receivables as at March 29, 2025 (December 31, 2024 - $13.7 million).

   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 manages its liquidity to fulfill its obligations when due and monitors cash flow requirements daily and projections weekly.

   The Company can draw down on the revolving portion of the credit facility based on a prescribed percentage of accounts receivable and its inventory carrying value, less reserves. The facility matures on September 23, 2028. Drawings under the equipment financing portion are either project specific or based on a prescribed percentage of appraised equipment value.

   The Company had drawn down $12.0 million on the revolving portion of the credit facility at March 29, 2025 (December 31, 2024 - nil). Additionally, the Company had excess liquidity of $40.3 million (December 31, 2024 - $39.3 million) less open letters of credit of $8.6 million (December 31, 2024 - $8.3 million) backed by the credit facility. Additionally, as at March 29, 2025, the Company also had $5.4 million (March 30, 2024 - $5.4 million ) of outstanding standby letter of credit issued backstopped by another third party, thereby not impacting the amounts available to draw under the credit facility. The letter of credit as at March 29, 2025 issued to Kap Paper Inc. as the applicant was issued and guaranteed (March 30, 2024 - nil) by a financial institution for which the Company has indemnified the financial institution. The Company also had $13.0 million drawn against the equipment financing portion of the credit facility at March 29, 2025 (December 31, 2024 - nil) with an additional $12.0 million (December 31, 2024 - $11.3 million) available to draw down.

   Market Risk

   The Company is exposed to market risk primarily through changes in commodity prices, interest rates and the US dollar to Canadian dollar exchange rate.

   Commodity Prices

   The Company's products are commodities that are widely available from other producers; because these products have few distinguishing qualities from producer to producer, competition is based primarily on price, which is determined by supply relative to demand. The Company attempts to minimize the economic impact of these changes through continuously looking for cost reductions in its operations and employing flexible manufacturing schedules that can increase or decrease in response to supply and demand fluctuations. The Company currently does not hedge its exposure to commodity prices.

   Interest Rate Risk

   Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has borrowings under its credit facility which creates interest rate risk exposure for the Company. The revolving portion of the credit facility bears a variable rate of Canadian Prime Rate plus a premium, currently at 5.45% annualized at March 29, 2025. The Equipment Term Loan portion of the credit facility bears a fixed rate of 7.70%.

   As at March 29, 2025 a 100 basis point increase in the interest rate on the revolving portion of the credit facility would decrease the net earnings in the statement of loss and comprehensive loss by $0.1 million on an annual basis. Similarly, as at March 29, 2025 a 100 basis point reduction in the interest rate on the revolving portion of the credit facility would increase the net income (loss) by $0.1 million on an annual basis.

   Notes to the Condensed Consolidated Interim Financial Statements

   For the first quarter ended March 29, 2025

   (In thousands of Canadian dollars unless otherwise stated)

   Currency Risk

   The Company is exposed to foreign exchange risk on revenues and expenditures denominated in foreign currencies, principally US dollars. The Company's US dollar denominated sales accounts for a significant volume of its sales. Except for duties and transportation, the majority of the Company's expenditures are in Canadian dollars.

   The Company is exposed to currency risk on US dollar cash and cash equivalents, accounts receivable and accounts payable balances.

   As at March 29, 2025, the portion of the Company's monetary assets and liabilities held in US dollars are as follows:

   March 29,

   As at (in thousands of US dollars)	2025
   Cash and cash equivalents	$ 446
   Accounts receivable	5,882
   Accounts payable and other liabilities	(3,535)
   Net monetary assets in US Dollars	$ 2,793

   Based on the US dollar statement of financial position exposure at March 29, 2025, with other variables unchanged, if the Canadian dollar were to weaken against the US dollar by 1%, relative to the rate at March 29, 2025, the net earnings in the statement of loss and comprehensive loss would be approximately $0.04 million greater. If the Canadian dollar were to strengthen against the US dollar by 1%, relative to the rate at March 29, 2025, the net earnings in the statement of loss and comprehensive loss would be approximately $0.04 million less.

6. ‌CAPITAL MANAGEMENT

   The Company's objectives when managing capital are to maintain a strong statement of financial position and to continuously improve its cost structure to maintain liquidity throughout commodity price cycle and to support access to additional capital for expansion. The Company defines capital as net debt and shareholders' equity.

   March 29,

   As at	2025
   Total debt outstanding1	$ 24,976
   Less: cash and cash equivalents	(2,465)
   Net debt	22,511
   Shareholders' equity	147,392
   Total capital	$ 169,903

   (1)Total debt outstanding consists of the carrying amounts of the Company's borrowings under the credit facility.

   The Company manages its capital through detailed operating and capital expenditure budgeting combined with frequent forecasting. The Company's strategic capital expenditure decisions are predicated on adequate cash flow from operations and through sale of non-core assets to support those expenditures.

   The Company's credit facility contains restrictive covenants that limit the Company's ability to undertake certain actions without the lender's consent, and it also includes the following financial covenant test performed quarterly: a maximum annual capital expenditure amount relative to budget, as defined in the Credit Agreement. The Company monitors its performance monthly as well as its future performance

   Notes to the Condensed Consolidated Interim Financial Statements

   For the first quarter ended March 29, 2025

   (In thousands of Canadian dollars unless otherwise stated)

   expectations, adjusting as required, so it remains in compliance with the covenants. The Company was in compliance with its covenants under the Credit Agreement as at March 29, 2025.

7. ‌SEGMENT AND GEOGRAPHICAL INFORMATION

The Company manages its business as a single operating segment, being lumber products. The Company harvests and purchases logs which are then either manufactured into lumber and other wood products at the Company's operations. All operations are located in Ontario in Canada.

For the first quarter ended March 29, 2025, there was one customer that represented 10% or more of total net sales for the Company (March 30, 2024 - one customer).

(1)Certain prior period amounts have been restated as a result of a change in presentation for continuing and discontinued operations under IFRS. Please refer to Note 4 - Discontinued Operations

imports from Canada, which came into effect on March 4, 2025. In parallel, on March 1, 2025, the U.S. administration launched a new trade investigation focused on potential anti-dumping measures targeting

For the first quarter ended March 29, 2025

(In thousands of Canadian dollars unless otherwise stated)

imported Canadian lumber. This investigation has contributed to an environment of financial uncertainty for Canadian-based lumber manufacturers.

On March 6, 2025, the U.S. administration signed an executive order temporarily pausing tariffs on Canadian goods compliant with the United States-Mexico-Canada Agreement ("USMCA"), including products like lumber, until April 2, 2025.

On April 2, 2025, the U.S. administration issued a new executive order imposing a 10% tariff on all imports into the U.S. from all countries, with much higher tariffs applied to certain other goods. However, goods compliant with the USMCA, such as lumber, are exempt from the additional tariffs.

The actual impact of these tariffs is subject to a number of factors including the effective date, duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any countermeasures that the Canadian government may take, and any mitigating actions that may become available.