SEDAR Interim Financial Statements

Unaudited condensed interim consolidated financial statements of Martello Technologies Group Inc. For the three and six months ended September 30, 2025 and 2024 Martello Technologies Group Inc. “Notice to Reader” The accompanying condensed unaudited interim consolidated financial statements of Martello Technologies Group Inc. for the three and six months ended September 30, 2025 and 2024 have been prepared by management and approved by the Audit Committee and the Board of Directors of the Company. These statements have not been reviewed by the Company’s external auditors. Dated: November 13, 2025 “Jim Clark” Jim Clark Chief Executive Officer “Nick Lungu” Nick Lungu Vice President Finance, Interim Chief Financial Officer Page 3 Martello Technologies Group Inc. The accompanying notes are an integral part of these condensed interim consolidated financial statements. For the three and six months ended September 30, 2025 and 2024 Table of contents Condensed interim consolidated statements of loss and comprehensive loss ............................................... 4 Condensed interim consolidated statements of financial position ................................................................ 5 Condensed interim consolidated statements of changes in shareholders’ equity (deficiency) ..................... 6 Condensed interim consolidated statements of cash flows ........................................................................... 7 Notes to the condensed interim consolidated financial statements ......................................................... 8-19 Page 4 Martello Technologies Group Inc. The accompanying notes are an integral part of these condensed interim consolidated financial statements. Condensed interim consolidated statements of loss and comprehensive loss For the three and six months ended September 30, 2025 and 2024 Unaudited (In Canadian dollars) September 30, September 30, September 30, September 30, 2025 2024 2025 2024 Sales 5,6 2,999,303 $ 3,639,585 $ 6,087,196 $ 7,436,847 $ Cost of goods sold 6 466,249 509,076 927,059 1,005,352 2,533,054 3,130,509 5,160,137 6,431,495 1 Research and development 7 1,373,617 1,390,046 2,879,449 2,717,253 Sales and marketing 7 1,153,359 1,377,072 2,531,468 2,705,980 General and administrative 7 717,614 944,141 1,874,271 1,851,068 Depreciation 13 12,433 58,513 57,138 121,834 Amortization 447,127 427,438 890,872 848,341 Impairment of intangible assets 10 5,907,037 - 5,907,037 - 9,611,187 4,197,210 14,140,235 8,244,476 (7,078,133) (1,066,701) (8,980,098) (1,812,981) Interest income 687 2,556 1,429 5,519 Interest expense 12 (421,990) (411,214) (856,580) (772,214) Accretion of long-term debt 12 (54,842) (46,785) (109,352) (90,355) Gain on Fed Dev Loan - 103,573 - 103,573 Revaluation of forward contract 4 (7,306) 14,430 54,837 11,434 Foreign exchange gain 17 101,845 112,052 298,772 108,981 Other income/expense 7,250 27,482 6,822 27,713 (7,452,489) (1,264,607) (9,584,170) (2,418,330) (2,292) 12,918 (2,292) 128,257 (7,454,781) (1,251,689) (9,586,462) (2,290,073) reclassified to net income (loss): Cumulative translation adjustment (233,302) 62,815 (34,111) 7,833 Pension plan settlement - 84,371 - 84,371 (7,688,083) (1,104,503) (9,620,573) (2,197,869) Weighted average shares outstanding 14 583,707,430 543,707,430 583,707,430 543,707,430 Net loss per share, basic and diluted 8 (0.01) $ (0.00) $ (0.02) $ (0.00) $ Total comprehensive loss Other comprehensive income (loss) that may be Net loss L --- oss before income tax Income tax recovery (expense) Other income (expense) Loss from operations Expenses Gross margin Income (6 months ended) Notes (3 months ended) Page 5 Martello Technologies Group Inc. The accompanying notes are an integral part of these condensed interim consolidated financial statements. Condensed interim consolidated statements of financial position As at September 30, 2025 and March 31, 2025 Unaudited (In Canadian dollars) Approved by the Board on November 13, 2025 and signed on its behalf by: Original signed “Colley Clarke” Director Original signed “Don Smith” Director September 30, March 31, Note 2025 2025 Assets Current assets Cash 1,998,575 $ 6,577,858 $ Short-term investment 109,607 108,391 Trade and other accounts receivable 9 4,202,307 4,841,734 Investment tax credits and grants receivable 7 275,519 298,464 Prepaid expenses 1,664,177 542,247 Inventories 38,200 38,200 Total current assets 8,288,385 12,406,894 Intangible assets 10 - 6,517,402 Equipment and leasehold improvements 45,577 54,689 Right-of-use assets 13 301,209 250,335 Total assets 8,635,171 19,229,320 Liabilities Current liabilities Accounts payable and accrued liabilities 11,17 1,990,836 2,716,719 Foreign exchange forward contract liability 4 - 54,837 Current portion of deferred revenue 5 4,082,948 4,616,454 Current portion of long-term debt 12,17 240,000 180,000 Current portion of lease obligation 13,17 55,311 120,129 Total current liabilities 6,369,095 7,688,139 Deferred revenue 5 2,290,174 2,545,091 Long-term debt 5 12,339,248 11,915,674 Lease obligation 13,16 310,593 180,287 Total liabilities 21,309,110 22,329,191 Shareholders' equity Share capital 14 61,597,108 61,598,108 Contributed surplus 14 4,095,181 4,047,676 Warrants 14 2,319,977 2,319,977 Accumulated other comprehensive income (701,468) (667,357) Deficit (79,984,737) (70,398,275) Total shareholders' deficiency (12,673,939) (3,099,871) Total liabilities and equity 8,635,171 19,229,320 Page 6 Martello Technologies Group Inc. Condensed interim consolidated statements of changes in shareholders’ (deficiency)for the six months ended September 30, 2025 and 2024 (In Canadian Dollars) The accompanying notes are an integral part of these condensed interim consolidated financial statements. Notes Shares outstanding Share capital Warrants Contributed surplus Other Cumulative translation adjustment Deficit Total shareholders' equity (deficiency) # $ $ $ $ $ $ $ Balance at April 1, 2024 543,707,430 59,616,608 2,319,977 3,990,745 985,001 (1,471,636) (64,702,012) 738,683 Net loss for the period - - - - - - (2,290,073) (2,290,073) Pension plan settlement - - - - 84,371 - - 84,371 Other comprehensive income - - - - - 7,833 - 7,833 Total comprehensive loss for the period - - - - 84,371 7,833 (2,290,073) (2,197,869) Less: Transaction costs attributable to share issuance - (8,500) - - - - - (8,500) Share-based compensation 14 - - - 39,042 - - - 39,042 Balance as at September 30, 2024 543,707,430 59,608,108 2,319,977 4,029,787 1,069,372 (1,463,803) (66,992,085) (1,428,644) Balance at April 1, 2025 583,707,430 61,598,108 2,319,977 4,047,676 1,073,595 (1,740,952) (70,398,275) (3,099,871) Net loss for the period - - - - - - (9,586,462) (9,586,462) Other comprehensive income - - - - - (34,111) - (34,111) Total comprehensive loss - - - - - (34,111) (9,586,462) (9,620,573) Less: Transaction costs attributable to share issuance - (1,000) - - - - - (1,000) Share-based compensation 14 - - - 47,505 - - - 47,505 B --- alance as at September 30, 2025 583,707,430 61,597,108 2,319,977 4,095,181 1,073,595 (1,775,063) (79,984,737) (12,673,939) Accumulated other comprehensive Martello Technologies Group Inc. Condensed interim consolidated statements of cash flows For the three and six months ended September 30, 2025 and 2024 (in Canadian Dollars) Page 7 The accompanying notes are an integral part of these condensed interim consolidated financial statements. September 30, September 30, Note 2025 2024 Operating activities Net loss from continuing operations before income tax (9,584,170) $ (2,418,330) $ Items not affecting cash: Depreciation 12 57,138 121,834 Amortization of intangible assets 10 890,872 848,341 Amortization of debt issuance cost 13,541 13,541 Impairment of intangible assets 10 5,907,037 - ease Increase in fair value of hedge liability 4 (54,837) (11,434) Accretion of long-term debt 12 109,352 90,355 Gain on issuance of FedDev Loan 12 - (103,573) Share-based compensation 14 47,505 39,042 Deferred share units compensation 124,794 29,116 Defined benefit plan expense - 10,405 Lease interest expense 13 74,492 35,284 Gain on termination of lease - (16,919) Accrued interest expense 12 765,280 715,780 Accrued interest on guaranteed investment contract (1,217) (2,164) alise Unrealised foreign exchange gain (479,655) (169,272) Net change in operating components of working capital 15 (2,264,973) (2,469,947) Total cash flows used in operating activities (4,394,841) (3,287,941) Investing activities Additions to equipment and leasehold improvements (6,830) (13,879) Total cash flows used in investing activities (6,830) (13,879) Financing activities Common stock issuance costs (1,000) (8,500) Proceeds from long-term debt 12 - 250,000 Repayment of long-term debt 12 (90,000) - Repayment of lease obligations 13 (101,986) (133,331) Total cash flows provided by (used in) financing activities (192,986) 108,169 Net change in cash (4,594,657) (3,193,651) Cash, beginning of period 6,577,858 7,613,668 Effects of currency translation on cash 15,374 40,966 Cash, end of period 1,998,575 4,460,983 Martello Technologies Group Inc. Notes to condensed interim consolidated financial statements For the three and six months ended September 30, 2025 and 2024 (in Canadian Dollars) Page 8 1. Corporate information Martello Technologies Group Inc. (the “Corporation”) is a provider of digital experience monitoring (DEM) solutions. The Corporation’s common shares are traded on the TSX Venture Exchange (“TSXV”) under the trading symbol MTLO. 2. Basis of preparation and accounting policies The condensed interim consolidated financial statements have been prepared under the going concern assumption and using the historical cost basis, except for foreign exchange forward contracts which are measured at fair market value. These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, and should be read in conjunction with the Corporation’s most recent annual audited consolidated financial statements, which are for the year ended March 31, 2025. Significant accounting policies The significant accounting policies used in preparing these condensed interim consolidated financial statements are the same as those disclosed in note 2.2 of the Corporation’s annual audited consolidated financial statements for the year ended March 31, 2025. Going Concern These financial statements have been pre --- pared on a going concern basis, which assumes that the Company will continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. For the six months ended September 30, 2025, the Company reported loss from operations of $7,078,133; net cash flows used in operating activities of $4,394,841 and an accumulated deficit of $79,984,737. Existing funds on hand, when combined with operational cash flow, are not sufficient to meet the Company’s short-term liquidity requirements. The Company’s ability to continue as a going concern is dependent upon its ability to generate sufficient cash flows from operations, secure additional financing, and achieve profitable operations in the future. Management has developed plans to address these matters, which could include the issuance of new public equity, cost reduction initiatives, supplemented with operating cash inflows from operations. While these actions are expected to improve the Company’s financial position, there remains a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern. These financial statements do not reflect the carrying values of assets and liabilities and the reported expenses and balance sheet classifications that would be necessary if the Company were unable to realize its assets and its liabilities as a going concern in the normal course of operations. Such adjustments could be material. 3. Significant judgments and estimates The preparation of the Corporation’s condensed interim consolidated financial statements requires management to make judgments, estimates, and assumptions that affect the reported amounts of revenues, expenses, assets, and liabilities, and the disclosure of contingent liabilities, at each reporting date. The outcome of these uncertainties about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. The judgments, estimates and assumptions applied in the preparation of these condensed interim consolidated financial statements are the same as those disclosed in note 3 to the 2025 annual audited consolidated financial statements. 4. Fair value measurement The carrying amounts of the Corporation’s cash, short-term investments, trade and other receivables, investment tax credits and grants receivable, foreign exchange contract, accounts payable and accrued liabilities approximate their fair values due to the short-term nature of these instruments. The line of credit is a demand instrument at a variable rate and therefore the carrying amount approximates fair value. The Martello Technologies Group Inc. Notes to condensed interim consolidated financial statements For the three and six months ended September 30, 2025 and 2024 (in Canadian Dollars) Page 9 Fair value measurement (continued) market interest rates that would apply to the Corporation’s long-term debt is not significantly different from the effective interest rates used to amortize these debts. Therefore, the carrying amounts are comparable to fair values. Long-term debt is measured using observable interest rates at initial recognition and is categorized within Level 2 of the fair value hierarchy. The fair value of foreign exchange forward contracts were $Nil at September 30, 2025 (March 31, 2025 – net liability of $54,837). The fair value is estima --- ted using a market approach with forward exchange rates observable at the end of the reporting period and contract forward rates as inputs. Forward contracts are categorized within Level 2 of the fair value hierarchy. The hierarchy is described in Note 20 of March 31, 2025 annual financial statements. 5. Revenue The geographic location of revenues, based on the location of its customers, is as follows: The Corporation’s revenue can be analyzed by type and by basis of their recognition as follows for the three months periods ended: At each reporting date, there are no unfulfilled performance obligations extending beyond a year for which the Corporation has not collected funds or deposits. September 30, September 30, September 30, September 30, 2025 2024 2025 2024 $ $ $ $ Canada 1,366,537 1,375,545 2,701,042 2,767,492 Europe 946,111 1,446,497 1,962,304 2,875,668 United States 531,697 665,955 1,109,986 1,450,624 Australia 97,629 6,311 198,074 226,699 Asia 51,014 47,899 101,159 94,882 Latin America 6,315 97,378 14,631 21,482 Total revenue 2,999,303 3,639,585 6,087,196 7,436,847 3 Months Ended 6 Months Ended September 30, September 30, September 30, September 30, 2025 2024 2025 2024 $ $ $ $ Revenue at a point in time Hardware - - - 1,919 Training and professional services 56,915 19,963 63,569 53,145 Revenue recognized over time Subscription licenses 2,713,613 3,301,500 5,527,789 6,733,805 Maintenance and support 207,778 274,706 450,142 560,988 Term licenses 20,997 43,416 45,696 86,990 Total revenue 2,999,303 3,639,585 6,087,196 7,436,847 3 Months Ended 6 Months Ended Martello Technologies Group Inc. Notes to condensed interim consolidated financial statements For the three and six months ended September 30, 2025 and 2024 (in Canadian Dollars) Page 10 Revenue (continued) Deferred revenue is comprised of the following: The following table summarized the contract acquisition cost activity during the year: Amortization of contract acquisition costs is recorded in Sales and marketing expense on the condensed interim consolidated statements of loss and comprehensive loss. 6. Operating segment information The Corporation has assessed that it operates in two operating segments, those being Modern Workplace Optimization and Mitel. These operating segments engage in business activities from which they earn revenues from subscription and perpetual software licenses, hardware, maintenance and support, and training and professional services. September 30, March 31, 2025 2025 $ $ Current: Subscription licenses 3,512,534 3,726,848 Maintenance and support 508,747 806,753 Term licenses 61,667 82,853 Long-term: Subscription licenses 2,064,266 2,243,176 Maintenance and support 202,806 256,941 Term licenses 23,102 44,974 Total deferred revenue 6,373,122 7,161,545 September 30, March 31, 2025 2025 $ $ Balance, beginning of year 99,416 169,344 Additions 307,827 523,421 Amortization (273,763) (593,349) Balance, end of year 133,480 99,416 Modern Workplace Optimization Mitel Total Three months ended September 30, 2025 $ $ $ Revenue at a point in time Training and professional services 56,915 - 56,915 Revenue recognized over time Subscription licenses 1,226,564 1,487,049 2,713,613 Maintenance and support 206,118 1,660 207,778 Term licenses 20,997 - 20,997 Total revenue 1,510,594 1,488,709 2,999,303 Martello Technologies Group Inc. Notes to condensed interim consolidated financial statements For the three and six months ended September 30, 2025 and 2024 (in Canadian D --- ollars) Page 11 Operating segment information (continued) Sales and gross margin for the three months ended are as follows: Modern Workplace Optimization Mitel Total Six months ended September 30, 2025 $ $ $ Revenue at a point in time Training and professional services 63,569 - 63,569 Revenue recognized over time Subscription licenses 2,543,468 2,984,321 5,527,789 Maintenance and support 446,823 3,319 450,142 Term licenses 45,696 - 45,696 Total revenue 3,099,556 2,987,640 6,087,196 Modern Workplace Optimization Mitel Total Three months ended September 30, 2024 $ $ $ Revenue at a point in time Training and professional services 19,963 - 19,963 Revenue recognized over time Subscription licenses 1,737,227 1,564,274 3,301,500 Maintenance and support 266,596 8,110 274,706 Term licenses 43,416 - 43,416 Total revenue 2,067,201 1,572,384 3,639,585 Modern Workplace Optimization Mitel Total Six months ended September 30, 2024 $ $ $ Revenue at a point in time Hardware - 1,919 1,919 Training and professional services 53,145 - 53,145 Revenue recognized over time Subscription licenses 3,476,317 3,257,488 6,733,805 Maintenance and support 545,424 15,563 560,988 Term licenses 86,990 - 86,990 Total revenue 4,161,877 3,274,970 7,436,847 Modern Workplace Optimization Mitel Total Three months ended September 30, 2025 $ $ $ Sales 1,510,594 1,488,709 2,999,303 Cost of goods sold 410,969 55,280 466,249 Gross margin 1,099,625 1,433,429 2,533,054 Modern Workplace Optimization Mitel Total Six months ended September 30, 2025 $ $ $ Sales 3,099,556 2,987,640 6,087,196 Cost of goods sold 817,392 109,667 927,059 Gross margin 2,282,164 2,877,973 5,160,137 Martello Technologies Group Inc. Notes to condensed interim consolidated financial statements For the three and six months ended September 30, 2025 and 2024 (in Canadian Dollars) Page 12 Operating segment information (continued) 7. Additional disclosures related to the statements of loss and comprehensive loss i. Research and development expense for the three and six months ended September 30, 2025, is net of investment tax credits recognized of -$164,128 and - $41,553, respectively (September 30, 2024: $17,309 and -$7,789). The Corporation has investment tax credits receivable of $275,519 as of September 30, 2025 (March 31, 2025 – $298,464) which are earned as a result of qualifying Crédit d'Impôt Recherche expenditure in France and qualifying Scientific Research and Experimental Development expenditures in Canada. The investment tax credits are recognized when the expenditures are made, and their realization is reasonably assured. On December 20, 2024, the Corporation entered into a contribution agreement with the National Research Council of Canada ("NRC") to support the application of Generative AI to enhance unified communications as a service (uCaaS) using Vantage DX. Under the terms of the agreement, NRC committed to contribute up to $70,000 toward eligible costs incurred by the Corporation between December 2, 2024, and May 31, 2025. As of September 30, 2025, the Corporation had received the full $70,000 under this agreement, including $15,000 received during the period ended June 30, 2025, and $55,000 received in the period ended March 31, 2025. On December 5, 2024, the Corporation entered into a contribution agreement with the National Research Council of Canada ("NRC") to support a strategic review of technology platform options and potential markets. Under the terms of the agreement, NRC committed to contr --- ibute up to $65,000 toward eligible costs incurred by the Corporation through May 31, 2025. As of September 30, 2025, the Corporation had received the full $65,000 under this agreement, including $13,000 received during the period ended June 30, 2025 and $52,000 received in the period ended March 31, 2025. ii. For the three and six months ended September 30, 2025 the total staff expenses are $2,149,264 and $5,305,246, respectively (September 30, 2024 - $2,706,602 and 5,228,340) 8. Loss per share Basic loss per share amounts are calculated by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share amounts are calculated by dividing the net loss attributable to common shareholders of the Corporation by the weighted average number of common shares outstanding during the period plus the weighted average number of common shares, if any, that would be issued on conversion of all the dilutive potential effects. Modern Workplace Optimization Mitel Total Three months ended September 30, 2024 $ $ $ Sales 2,067,201 1,572,384 3,639,585 Cost of goods sold 454,486 54,590 509,076 Gross margin 1,612,715 1,517,794 3,130,509 Modern Workplace Optimization Mitel Total Six months ended September 30, 2024 $ $ $ Sales 4,161,877 3,274,970 7,436,847 Cost of goods sold 911,138 94,214 1,005,352 Gross margin 3,250,739 3,180,756 6,431,495 Martello Technologies Group Inc. Notes to condensed interim consolidated financial statements For the three and six months ended September 30, 2025 and 2024 (in Canadian Dollars) Page 13 Loss per share (continued) As at September 30, 2025 and 2024, all instruments were anti-dilutive. The share options could potentially dilute basic net loss per share in the future but have not been included in diluted loss per share because their effect was anti-dilutive. Total share options at September 30, 2025 and 2024 were 28,881,000 and 33,224,143, respectively. 9. Trade and other accounts receivable The aging analysis of trade and other accounts receivable is as follows: There were no movements in the expected credit losses as of September 30, 2025 and March 31, 2025. 10. Intangible assets Intangible assets A continuity of the intangible assets for the year ended September 30, 2025 is as follows: Intangible assets are evaluated for impairment annually in the fourth quarter or more often if events or circumstances indicate there may be impairment. Impairment is determined by assessing if the carrying value of a CGU, including intangible assets, exceeds its recoverable amount determined as the greater of the estimated fair value less costs to dispose and the value in use. Neither past due Total nor impaired < 30 days 30-60 days 60-90 days over 90 days $ $ $ $ $ $ September 30, 2025 4,202,307 3,450,142 636,131 91,603 - 24,431 March 31, 2025 4,841,734 3,893,691 777,411 170,558 - 74 Past due but not impaired March 31, Acquisition Translation September 30, 2025 of subsidiary Impairment Adjustments 2025 $ $ $ $ $ Cost Customer relationships 7,539,764 - - 400,217 7,939,981 Technology 7,266,550 - - 374,307 7,640,857 Brand 1,178,234 - - 62,542 1,240,775 Total 15,984,548 - - 837,065 16,821,613 March 31, Translation September 30, 2025 Amortization Impairment Adjustments 2025 $ $ $ $ $ Accumulated amortization Customer relationships 5,353,754 531,234 1,743,618 311,374 7,939,981 Technology 4,088,093 359,638 2,956,467 236,660 7,640,857 Brand 25,299 - 1,206,952 8,525 1,240,775 Total 9,467,146 8 --- 90,872 5,907,037 556,558 16,821,613 Net book value 6,517,402 - Martello Technologies Group Inc. Notes to condensed interim consolidated financial statements For the three and six months ended September 30, 2025 and 2024 (in Canadian Dollars) Page 14 Intangible assets (continued) At September 30, 2025 management assessed the recoverable amount of its intangible assets. Modern Workplace Optimization Management reviewed the recoverable amount of intangible assets for the CGU and determined that an impairment charge was required. The recoverable amount was assessed primarily by reference to a value-in- use (“VIU”) calculation. The VIU was based on discounted cash flow projections reflecting management’s assessment of expected operating results over a five-year period, including projected revenue growth rates of - 39.2% to 2.0%, reflecting renewal of Vantage DX and Legacy products. A discount rate (WACC) of 19.3% per annum was applied, reflecting interest rates, equity risk, and size risk premiums. Cash flows beyond the five- year period were extrapolated using a terminal growth rate of 3%. The assumptions used were validated against pricing, independent market data, and actual sales results to date. The impairment charge of $5,907,037 was recognized, with fair value less costs of disposal considered using a market-based approach. The CGU falls within Level 3 of the fair value hierarchy, as not all inputs are observable in the market. For valuation purposes, a range of revenue multiples from comparable transactions was applied. 11. Accounts payable and accrued liabilities 12. Debt On July 23, 2025, the Company executed an amendment to its loan agreement with Wesley Clover International, extending the maturity date from August 28, 2026 to August 28, 2028. As part of the amendment, the interest rate was revised to a fixed rate of 12%. September 30, 2025 March 31, 2025 $ $ Trade payables 286,106 227,962 Accrued key management compensation 565,865 885,933 Accrued professional fees 250,272 365,789 Salaries, benefits, and vacation payable 613,070 847,935 Commissions payable 20,857 30,682 Taxes payable 62,157 69,722 Other payables 192,510 288,696 Total 1,990,836 2,716,719 September 30, 2025 March 31, 2025 $ $ FedDev loan - Jobs and Growth; advanced to support the commercialization of the Corporation's activities; non-interest bearing, unsecured and repayable in increasing monthly payments between April 2025 and March 2031. The incremental borrowing rate is 13.85%. 1,606,049 1,586,697 Wesley Clover International Loan: US 5,292,031 subordinated term loan advanced in three tranches in August 2022, May 2023 and Aug 2023, interest accrued at US Prime plus 8.75% until July 23, 2025 and at 12% fixed rate thereafter, to be be paid at loan maturity on Aug 28, 2028. The effective interest rate is 15.10%. 10,973,199 10,508,977 Total debt 12,579,248 12,095,674 Amounts due within one year (240,000) (180,000) Long-term debt 12,339,248 11,915,674 Martello Technologies Group Inc. Notes to condensed interim consolidated financial statements For the three and six months ended September 30, 2025 and 2024 (in Canadian Dollars) Page 15 13. Right-of-use assets For the three and six months ended September 30, 2025, the Corporation recognized $4,296 and $40,843, respectively (September 30, 2024 - $48,521 and $101,196) as depreciation on right-of-use assets, and $65,543 and 74,492, respectively (September 30, 2024 - $15,957 and $35,284) as interest expense on the lease lia --- bility. For the three and six months ended September 30, 2025, the Corporation recognized variable non-lease payment of $24,506 and $49,012 respectively (September 30, 2024 - $26,140 and $53,841). The Company’s lease for the office space in France commenced in January 2019 and expires in September 2025. The incremental borrowing on this lease is 3.18%. The Company entered into a new lease agreement on September 19, 2025, which will commence on October 1, 2025, for a term of one year. The Corporation originally entered into a 5-year lease agreement for office premises located in Kanata, Ontario, Canada, commencing on March 1, 2017 and expiring on February 28, 2022. This lease was subsequently renewed, extending the maturity date to February 28, 2028, with an incremental borrowing rate of 14.08%. On July 14, 2025, the Corporation signed an agreement with the same lessor to lease a new office space at the existing rental rate. This new agreement extends the lease term to July 31, 2030. This lease modification resulted in an addition of $90,790 in right- of -use asst and in lease obligation. The Corporation has applied judgment in the process of applying IFRS 16 and determining the appropriate lease term on a lease-by-lease basis, which has a significant effect on the measurement of the lease liability and right-of-use assets recognized. Management considers many factors including any events that create an economic incentive to exercise a renewal option including expected future performance and past business practice. The Corporation has also exercised judgment in determining the incremental borrowing rate based on the term, security, the lessee entity’s economic environment, credit rating, level of indebtedness and asset specific adjustments. 14. Equity instruments i.Warrants During the six months ended September 30, 2025 and 2024 no warrants were issued and no warrants expired. At September 30, 2025 and 2024 the Corporation had no outstanding warrants. ii.Share-based payments The Corporation has a stock option plan (the “Plan”) open to certain members of management, employees and consultants. Unless otherwise determined by the Board of Directors, options issued Right-of-use asset: $ Balance at March 31, 2025 250,335 Additions 90,790 Depreciation for the period (40,843) Foreign exchange translation 927 Balance at September 30, 2025 301,209 Lease obligation: $ Balance at March 31, 2025 300,416 Additions 90,790 Interest expense 74,492 Payments (101,986) Foreign exchange translation 2,192 Balance at September 30, 2025 365,904 Martello Technologies Group Inc. Notes to condensed interim consolidated financial statements For the three and six months ended September 30, 2025 and 2024 (in Canadian Dollars) Page 16 Equity instruments (continued) under the Plan vest over a three-year period and have expiry dates which are 5 years from issuance. The maximum number of common shares reserved for issuance of options that may be granted under the Plan is 10% of the total outstanding common shares of the Corporation, calculated on a fully diluted basis. The following table summarizes the continuity of options issued under the Plan: At September 30, 2025, the fair value of share-based compensation to be recognized as an expense in future periods totaled $63,405 (March 31, 2025 – $114,373). In determining the amount of share-based compensation, the Corporation uses the Black-Scholes option pricing model to establish the fair value of options granted. There --- were 220,000 options granted in the six months ended September 30, 2025 (September 30, 2024 – 6,960,000). The fair value of options granted in the six months ended September 30, 2025, was established by applying the following assumptions: Option exercise price Total $ # Balance outstanding at March 31, 2024 0.05-0.33 29,254,412 Granted 0.05 8,735,000 Forfeited 0.05- 0.33 (7,188,269) Expired 0.33 (740,476) Balance outstanding at March 31, 2025 0.05-0.21 30,060,667 Granted 0.05 220,000 Expired 0.05-0.21 (1,399,667) Balance outstanding at September 30, 2025 0.05-0.135 28,881,000 Options exercisable: At September 30, 2025 0.05-0.135 16,392,268 At March 31, 2025 0.05-0.21 11,281,927 Option Number Grant date exercise price exercisable Remaining life $ # Years June 30, 2021 0.135 20,000 0.75 January 13, 2022 0.060 500,000 1.29 May 2, 2022 0.050 1,500,000 1.59 January 12, 2023 0.050 5,935,629 2.28 February 14, 2023 0.050 156,666 2.38 May 29, 2023 0.050 5,349,980 2.66 November 21, 2023 0.050 543,330 3.15 February 14, 2024 0.050 66,666 3.38 June 25, 2024 0.050 2,319,997 3.74 November 19, 2024 0.050 - 4.14 February 19, 2025 0.050 - 4.39 June 16, 2025 0.050 - 4.71 Weighted average 0.050 2.55 Total 16,392,268 Martello Technologies Group Inc. Notes to condensed interim consolidated financial statements For the three and six months ended September 30, 2025 and 2024 (in Canadian Dollars) Page 17 Equity instruments (continued) Volatility was determined by using the historical volatility of the Corporation’s common shares over a 3.5- year period. The expected life in years represents the period of time that options granted are expected to be outstanding. The risk-free rate is based on zero-coupon Canada government bonds with a remaining term equal to the expected life of the options. 15. Supplementary cash flow information The net change in the operating components of working capital is as follows: 16. Related party transactions and balances During the period the Corporation entered into the following transactions with related parties in the normal course of operations. i. For the three and six months ended September 30, 2025, the Corporation paid rent to WCI, which is reflected in the results as depreciation of right-of-use assets of $-15,390 and $1,957, respectively (September 30, 2024 – $17,346 and $34,693) and rent expense of $24,506 and $49,494, respectively (September 30, 2024 – $23,870 and $45,528). ii. On August 22, 2022, the Corporation obtained a subordinated loan from Wesley Clover International (WCI), a related party. Between August 2022 and August 2023, a total of US $5,292,031 was advanced under this loan amendment. On July 23, 2025, the Corporation executed an amendment to extend the loan’s maturity date from August 28, 2026 to August 28, 2028 and revising the interest rate to a fixed rate of 12% on the outstanding balance. All other terms remained unchanged. iii. The WCI loan bears interest of US Prime plus 8.75% until July 23, 2025 and a fixed rate of 12% thereafter, with interest payable at maturity. For the three and six months ended September 30, 2025, interest expense of $348,607 and 765,280 respectively was accrued (September 30, 2024 – $383,040 and $715,780) and recorded in the consolidated statement of loss and comprehensive loss. iv. The chairman of Wesley Clover International Corporation is a shareholder of the Corporation. September 30, 2025 Fair market value on grant date $0.01 Exercise price $0.05 Risk-free interest rate 2.79 --- % Expected life in years 3.5 Expected dividend yield 0% Volatility 247.17% Fair value of options issued in the periods $0.009576 September 30, September 30, Note 2025 2024 $ $ Net change in operating components of working capital: Trade and other accounts receivable 9 742,770 (621,302) Investment tax credits and grants receivable 7 36,833 9,293 Prepaid expenses (1,057,107) 7,938 Inventories - 923 Accounts payable and accrued liabilities 11 (881,176) (1,143,438) Deferred revenue 5 (1,106,293) (723,361) Total (2,264,973) (2,469,947) Martello Technologies Group Inc. Notes to condensed interim consolidated financial statements For the three and six months ended September 30, 2025 and 2024 (in Canadian Dollars) Page 18 Related party transactions and balances (continued) v. Included in accounts payable and accrued liabilities are balances as at September 30, 2025 totaling $565,865 (March 31, 2025 - $885,933) due to key management personnel for compensation, earned vacation pay and DSU expenses. vi. The remuneration of directors and key management personnel for the three and six months ended September 30, 2025 was as follows: 17. Financial risk management objectives and policies There have been no significant changes to the nature and magnitude of risk exposures and to management's objectives and processes for managing them since the prior period. Credit risk The Corporation’s largest customer, which is included in the Monitoring - Mitel UC segment reporting, accounted for revenue of $1,434,747 and $2,879,208 approximately 47% of total revenue, for the three and six months ended September 30, 2025 (for the three and six months ended September 30, 2024 - $1,516,039 and $3,160,585, 42%). At September 30, 2025 the account receivable from this customer totaled $1,603,237 (March 31, 2025- $1,851,686). The Corporation maintains strict credit policies and limits in respect to counterparties. Liquidity risk The following table summarizes the maturities of financial instruments by fiscal year on an undiscounted basis, including interest payments, as at September 30, 2025: Foreign currency risk For the three and six months ended September 30, 2025, 99% of revenue were in foreign currencies (September 30, 2024 – 99% of revenue). For the three and six months ended September 30, 2025, 22% and 28% of expenses were in foreign currencies (September 30, 2024 – 32% and 55%). The Corporation’s exposure to the risk of changes in foreign exchange rates relates primarily to the Corporation’s operating activities where revenue and/or expense transactions are denominated in a currency other than the Canadian dollar Martello’s functional currency). The Corporation’s net exposure to the USD and EUR is denominated in CAD and is summarized in the following table: September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 $ $ $ $ 511,393 628,859 1,148,478 1,148,551 Other employee benefits 19,498 17,364 40,816 31,765 (45,708) 30,936 168,747 79,736 Total 485,183 677,158 1,358,041 1,260,051 Salaries, wages and bonuses Share-based compensation 3 Months ended 6 Months ended 2026 2027 2028 2029 Thereafter Total $ $ $ $ $ $ Accounts payable and accrued liabilities 1,990,836 - - - - 1,990,836 Lease obligation 51,675 103,350 103,350 103,350 147,800 509,525 Debt liabilties 90,000 300,000 420,000 16,102,873 1,066,672 17,979,545 Total 2,132,511 403,350 523,350 16,206,223 1,214,472 20,479,905 Maturities of Financial Instruments Martello Technologies Group Inc. Notes t --- o condensed interim consolidated financial statements For the three and six months ended September 30, 2025 and 2024 (in Canadian Dollars) Page 19 Financial risk management objectives and policies (continued) A 10% change of the US$ against the CAD$ at September 30, 2025 would have increased or decreased net loss by $618,690 (March 31, 2025: $563,580). 18. Capital management Management defines capital as total shareholders’ equity. The Board of Directors has not established capital benchmarks or other targets. There have been no changes in the Corporation’s approach to capital management during the six months ended September 30, 2025. The Corporation will continually assess the adequacy of its capital structure and capacity and make adjustments within the context of the Corporation’s strategy, economic conditions, and the risk characteristics of the business. 19. Commitments On August 24, 2021, the Company entered into a consumption commitment agreement with Microsoft to utilize $4 million of eligible Azure services over a four-year period. Under the terms of the agreement, if total usage is below the committed amount at maturity, the remaining balance may be prepaid and consumed within 12 months following the end of the term. As of July 31, 2025, the Company had utilized $3,274,765 of its $4,000,000 Microsoft Azure Consumption Commitment (MACC), leaving an unspent balance of $725,235. The MACC expired on July 31, 2025. During August and September 2025, the Company incurred additional Azure usage of $125,443, reducing the unspent balance to $599,792 as of September 30, 2025. 20. Subsequent events After the reporting period, the Group approved a workforce reduction plan as part of its ongoing cost optimization initiatives. The implementation of this plan, communicated to affected employees after the reporting date, will result in termination benefits recognized in the subsequent quarter. In accordance with IAS 10 – Events after the Reporting Period, this is considered a non-adjusting subsequent event, as the decision and related conditions arose after the end of the reporting period. Pursuant to IAS 19 – Employee Benefits, the estimated termination cost of approximately $2,398,278 will be recognized as an expense in the next reporting period, when the Group can no longer withdraw the offer of those benefits. September 30, 2025 March 31, 2025 September 30, 2025 March 31, 2025 USD USD EUR EUR 1,603,857 2,839,985 128,114 381,530 3,186,530 2,760,195 434,235 296,201 (177,454) (209,471) (364,163) (1,102,060) Foreign exchange forward contract liability - (54,837) - - Long-term debt (10,998,022) (10,547,343) - - Net exposure (6,385,089) (5,211,471) 198,186 (424,329) Accounts payable and accrued liabilities Cash and restricted cash Trade and other accounts receivable