SEDAR Interim Financial Statements

Consolidated Financial Statements of Zonetail Inc. For the years ended December 31, 2024 and December 31, 2023 (Expressed in Canadian Dollars) Independent Auditor's Report To the Shareholders of Zonetail Inc.: Opinion We have audited the consolidated financial statements of Zonetail Inc. and its subsidiaries (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2024 and December 31, 2023, and the consolidated statements of loss and comprehensive loss, cash flows and shareholders' deficiency for the years then ended, and notes to the consolidated financial statements, including material accounting policy information. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2024 and December 31, 2023, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board. Basis for Opinion We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated 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. Material Uncertainty Related to Going Concern We draw attention to Note 1 in the consolidated financial statements, which indicates that the Company incurred a net loss and comprehensive loss during the year ended December 31, 2024 and, as of that date, the Company had an accumulated deficit. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Except for the matter described in the Material Uncertainty Related to Going Concern section, we have determined that there are no other key audit matters to communicate in our report. MNP LLP 800-1600 Carling Avenue, Ottawa ON, K1Z 1G3 T: 613.691.4200 F: 613.726.9009 Other Information Management is responsible for the other information. The other information comprises Management’s Discussion and Analysis. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audits of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with --- the consolidated financial statements or our knowledge obtained in the audits or otherwise appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s 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. We have nothing to report in this regard. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS® Accounting Standards as issued by International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Company’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 Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor's Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's 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 these consolidated 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 consolidated 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. ? Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. 800-1600 Carling Avenue, Ottawa, Ontario, K1Z 1G3 T: 613.691.4200 F: 613.726.9009 MNP.ca ? Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. ? Conclude on the appropriateness of manageme --- nt's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern. ? Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. ? Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the Company as a basis for forming an opinion on the consolidated financial statements. We are responsible for the direction, supervision and review of the audit work performed for the purposes of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits and significant audit findings, including any significant deficiencies in internal control that we identify during our audits. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor's report is Milan Kshatriya. Ottawa, Ontario Chartered Professional Accountants April 30, 2025 Licensed Public Accountants 800-1600 Carling Avenue, Ottawa, Ontario, K1Z 1G3 T: 613.691.4200 F: 613.726.9009 MNP.ca December 31, 2024 P a g e | 5 Zonetail Inc. Consolidated Statements of Financial Position (In Canadian dollars) As at December 31 December 31 2024 2023 $ $ ASSETS Current Cash 716 3,342 Trade and other receivables (note 5) 14,834 117,057 Prepaid expenses 8,304 36,167 Total assets 23,854 156,566 LIABILITIES Current Trade and other payables (note 6) 736,842 612,546 Convertible debentures (note 7) 272,559 217,994 Promissory notes (note 8) 259,603 97,865 Current portion of bank loan (note 9) 7,560 - Deposits against shares to be issued in equity 31,000 - Government loan (note 10) - 60,000 Due to related parties (note 12) 112,225 74,232 1,419,789 1,062 --- ,637 Non-current Long term portion of bank loan (note 9) 26,318 - 1,446,107 1,062,637 SHAREHOLDERS' DEFICIENCY Share capital, warrants, equity portion of convertible debentures, share based compensation (note 11) 13,582,317 13,242,505 Deficit (15,004,570) (14,148,576) (1,422,253) (906,071) Total liabilities and shareholder’s deficiency 23,854 156,566 The accompanying notes are an integral part of these consolidated financial statements. Nature of operations and going concern (note 1) Subsequent events (note 16) Approved on behalf of the board: (signed) “Mark Holmes” (signed) “Paul Scott” Director Director December 31, 2024 P a g e | 6 Zonetail Inc. Consolidated Statements of Loss and Comprehensive Loss (In Canadian dollars) For years ended December 31 2024 December 31 2023 $ $ Revenue 36,885 39,262 Operating expenses Salaries and benefits (note 12) 570,183 801,555 Interest 79,195 175,423 Software development and maintenance - 101,355 Professional fees 122,311 78,764 Advertising and promotion - 74,000 General and administrative 33,224 52,784 Interest accretion 26,777 23,938 Public company cost 36,990 42,300 Software hosting 43,159 30,044 Share-based compensation (notes 11 and 12) 522 8,272 Bad debts 1,718 - Rent 8,305 7,581 Investor relations 26,000 20,517 948,384 1,416,533 Operating loss 911,499 1,377,271 Write-off of promissory note and accrued interest (note 14) - (571,625) Forgiveness of CEBA loan (note 10) (20,000) - Net loss and comprehensive loss for the year 891,499 805,646 Loss per share basic and diluted 0.00 0.00 Weighted average number of shares outstanding basic and diluted 255,341,398 220,513,118 The accompanying notes are an integral part of these consolidated financial statements. December 31, 2024 P a g e | 7 Zonetail Inc. Consolidated Statements of Cash Flows (In Canadian dollars) For the years ended December 31 2024 December 31 2023 $ $ Operating activities Net loss and comprehensive loss for the year (891,499) (805,646) Adjustment for non-cash items: Share based compensation (notes 11 and 12) 522 8,272 Interest accretion 26,777 23,938 Interest expense 45,789 82,324 Write-off of notes payable and accrued interest - (571,625) Forgiveness of CEBA loan (note 10) (20,000) - Net change in non-cash working capital balances related to operating activities: Trade and other receivables 102,223 (51,943) Prepaid expenses 27,863 18,501 Trade and other payables 124,296 235,064 Due to related parties 37,993 49,488 Net cash used in operating activities (546,036) (1,011,627) Financing activities Proceeds from private placement 382,868 720,257 Deposits against shares to be issued in equity 31,000 - Proceeds from promissory notes 143,737 70,000 Proceeds from convertible debentures - 203,800 Proceeds from bank loan 40,000 - Share issuance costs (8,073) (10,998) Repayment of government loan (40,000) - Repayment of convertible debentures - (140,000) Repayment of bank loan (6,122) - Convertible debenture issuance costs - (4,974) Net cash provided from financing activities 543,410 838,085 Net decrease in cash (2,626) (173,542) Cash, beginning of the year 3,342 176,884 Cash, end of the year 716 3,342 The accompanying notes are an integral part of these consolidated financial statements. Zonetail Inc. Consolidated Statements of Changes in Shareholders’ Deficiency (In Canadian dollars) Share capital Warrants Equity portion of debentures Share based compensation Sub-total Deficit Total # $ $ $ $ $ $ $ Balance, December 31, 2022 209,882,884 12,20 --- 8,044 56,634 20,040 653,300 12,938,018 (13,788,389) (850,371) Private placements 36,012,863 720,257 - - - 720,257 - 720,257 Share issuance costs - (14,488) 3,649 - - (10,839) - (10,839) Equity portion of convertible debenture - - - 11,876 - 11,876 - 11,876 Issuance of warrants with convertible debenture - - 20,380 - - 20,380 - 20,380 Repayment of convertible debentures - - - (20,040) - (20,040) 20,040 - Share based compensation (note 11) - - - 8,272 8,272 - 8,272 Expiry of stock options - - - - (425,419) (425,419) 425,419 - Net loss and comprehensive loss for the year - - - - - - (805,646) (805,646) Balance, December 31, 2023 245,895,747 12,913,813 80,663 11,876 236,153 13,242,505 (14,148,576) (906,071) Private placements 19,143,400 382,868 - - - 382,868 - 382,868 Share issuance costs (note 11) (8,321) 248 - - (8,073) - (8,073) Expiry of warrants - - (158) - - (158) 158 - Share based compensation (note 11) - - - - 522 522 - 522 Expiry of stock options - - - - (35,347) (35,347) 35,347 - Net loss and comprehensive loss for the year - - - - - - (891,499) (891,499) Balance, December 31, 2024 265,039,147 13,288,360 80,753 11,876 201,328 13,582,317 (15,004,570) (1,422,253) The accompanying notes are an integral part of these consolidated financial statements. Zonetail Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2024 and December 31, 2023 (In Canadian dollars) December 31, 2024 P a g e | 9 1. Nature of operations and going concern Zonetail Inc. (“Zonetail” or the “Company”) was incorporated on March 14, 2013 under the Canada Business Corporations Act. The corporate office is located at 70 University Avenue, Suite 1460, Toronto, Ontario, Canada. Zonetail provides mobile platforms to hi-rise residential condominiums and apartments connecting the resident or guest to the amenities and services of their building through their personal mobile device. Included on the platforms is an explore section highlighting the businesses and services in the local area. The Company trades on the TSX Venture Exchange (“TSXV”) under the symbol “ZONE” and the OTCPinks under the symbol “ZTLLF”. The consolidated financial statements have been prepared on a going concern basis which presumes the realization of assets and discharge of liabilities in the normal course of business for the foreseeable future. The Company has accumulated a deficit amounting to $15,004,570 as at December 31, 2024 (December 31, 2023 - $14,148,576). The Company's ability to continue as a going concern is dependent upon its ability to attain profitable operations and generate funds therefrom, and to continue to obtain equity investment and borrowings sufficient to meet current and future obligations. The Company had a net loss and comprehensive loss for the year ended December 31, 2024, of $891,499 (year ended December 31, 2023 - $805,646). As the Company continues to develop its core offerings, it will require additional financing through private placements to meet its working capital requirements. These conditions indicate a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. These financial statements do not reflect the adjustments or reclassification of assets and liabilities which would be necessary if the Company were unable to continue its operations. These adjustments could be material. Subsequent to the year end, the Company raised additional share capital of $134,631 through private --- placements (note 14). 2. Material accounting policies Statement of compliance These consolidated financial statements have been prepared in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board. The Board of Directors approved these consolidated financial statements on April 30, 2025. These consolidated financial statements have been prepared on a historical cost basis, except for certain financial instruments which are measured at fair value, as detailed in the Company’s accounting policies. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information. Changes in accounting policies IAS 1 – In February 2021, the IASB issued "Disclosure of Accounting Policies" with amendments that are intended to help preparers in deciding which accounting policies to disclose in their consolidated financial statements. The amendments are effective for year ends beginning on or after January 1, 2023. The impact of adopting this amendment on the Company's consolidated financial statements was not material. Zonetail Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2024 and December 31, 2023 (In Canadian dollars) December 31, 2024 P a g e | 10 IAS 8 – In February 2021, the IASB issued "Definition of Accounting Estimates" to help entities distinguish between accounting policies and accounting estimates. The amendments are effective for year ends beginning on or after January 1, 2023. The impact of adopting this amendment on the Company's consolidated financial statements was not material. Accounting standards and amendments issued but not yet effective Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or after January 1, 2025. Many are not applicable or do not have a material impact to the Company and have been excluded. Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or after January 1, 2025. Many are not applicable, or do not have a material impact to the Company and have been excluded. Principles of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Subsidiaries are entities over which the Company has control, where control is defined as the power to govern financial and operating policies of an entity so as to obtain benefit from its activities. All material intercompany transactions are eliminated upon consolidation. As at December 31, 2024, the following companies have been consolidated within these consolidated financial statements: Company Registered Zonetail Inc. Ontario, Canada Zonetail US Inc. Wyoming, United States of America 9827200 Canada Limited Ontario, Canada Functional and presentation currency These consolidated financial statements are presented in Canadian dollars. The functional currency for the Company is determined by the currency of the primary economic environment in which it operates (the “functional currency”). The functional currency of the Company is the Canadian dollar and its subsidiaries is the Canadian dollar. The consolidated financial statements presentation currency is the Canadian dollar. At the end of each reporting year, monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange prevailing at that date; non- --- monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates of exchange prevailing at the date when fair value was determined; and, non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are not retranslated. Such exchange differences arising from retranslation at year-end are recognized in the consolidated statement of loss and comprehensive loss. Financial instruments The standard contains three classifications categories for financial assets: measured at amortized cost, fair value through other comprehensive income (“FVOCI”) and fair value through profit or loss (“FVTPL”). The classification of financial assets under IFRS 9 is based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Zonetail Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2024 and December 31, 2023 (In Canadian dollars) December 31, 2024 P a g e | 11 The classification for each class of the Company’s financial assets and financial liabilities are summarized in the following table: Classification IFRS 9 Cash Amortized cost Trade and other receivables Amortized cost Trade and other payables Amortized cost Convertible debentures and notes Amortized cost Promissory note Amortized cost Due to related parties Amortized cost Deposits against shares to be issued in equity Amortized cost Financial assets Financial assets are initially measured at fair value. On initial recognition, the Company classifies its financial assets at either amortized cost, fair value through other comprehensive income or fair value through profit or loss, depending on its business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Financial assets are not reclassified subsequent to their initial recognition, unless the Company changes its business model for managing financial assets. A financial asset is measured at amortized cost if it meets both of the following conditions: a) the asset is held within a business model whose objective is to hold assets to collect contractual cash flows and b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial liabilities The Company classifies its financial liabilities into one of two categories, depending on the purpose for which the liabilities were incurred. The Company's accounting policy for each category is as follows: Financial liabilities at amortized cost: Financial liabilities are measured at amortized cost using the effective interest method, unless they are required to be measured at FVTPL, or the Company has opted to measure them at FVTPL. Financial liabilities at FVTPL are liabilities which include embedded derivatives and cannot be classified as amortized cost. Financial liabilities at FVTPL are initially recognized at the fair value with changes to fair values recognized in the consolidated statement of loss and comprehensive loss. The Company derecognizes financial liabilities only when its obligations are discharged, cancelled or expelled. The difference is recognized in the consolidated statement of loss and comprehensive loss. Impairment of financial assets For trade and other receivables, the Company applies the simplified approach to providing for --- expected credit losses prescribed by IFRS 9, which requires the use of the lifetime expected credit loss provision for all trade and other receivables. Expected credit losses are measured as the difference in the present value of the contractual cash flows that are due under the contract and the cash flows that the Company expects to receive. The expected cash flows reflect all available information, including the Company’s historical experience, the past due status, the existence of third-party insurance and forward-looking macroeconomic factors. Zonetail Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2024 and December 31, 2023 (In Canadian dollars) December 31, 2024 P a g e | 12 Impairment of non-financial assets At the end of each reporting period, the Company reviews the carrying amounts of its non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. Where such an indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. The recoverable amount is the higher of an asset’s fair value less cost to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognized immediately in the consolidated statement of loss and comprehensive loss. Fair value hierarchy IFRS 13 establishes a fair value hierarchy that prioritizes the input to valuation techniques used to measure fair value as follows: • Level 1 - valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level 2 - valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and • Level 3 - valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs). The carrying value of cash, trade and other receivables, trade and other payables, convertible debentures and notes, promissory note and due to related parties are considered to be a reasonable approximation of fair value because of the short-term maturity of these instruments. Income taxes and deferred taxes Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted at year end, adjusted for amendments to tax payable with regards to previous years. Deferred tax is provided using the asset and liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are not provided for goodwill not deductible for tax purposes and the initial recognition of assets or liabilities that affect neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realization --- or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the financial position reporting date. Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Zonetail Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2024 and December 31, 2023 (In Canadian dollars) December 31, 2024 P a g e | 13 Convertible debentures The convertible debentures are separated into their debt and equity components. The value of the debt component of the debentures is determined, at the time of issuance, by discounting the future interest obligations and the principal payment due at maturity, using a discount rate which represents the estimated borrowing rate available to the Company for similar debentures having no conversion rights. The remaining portion of the gross proceeds of the debentures issued is presented as an option to convert debentures in equity net of the tax implications, and the attributed amount remains over the term of the related convertible debentures. Convertible debenture issue costs are applied against the two components on a pro rata basis of the allocated proceeds of issue. Loss per share The Company presents basic and diluted loss per share data for its common shares, calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year. Diluted loss per share is determined by adjusting the loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all instruments outstanding that may add to the total number of common shares. The effects of anti-dilutive potential common shares are ignored in calculating diluted earnings per share. Share-based transactions The fair value of share options granted is recognized as an expense with a corresponding increase in equity. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee, including directors of the Company. The fair value of share-based payments to employees is measured at the grant date and recognized on a graded-vesting basis over the period during which the options vest. Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The fair value of the options granted to employees is measured using the Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted. Consideration paid for the shares on the exercise of stock options is credited to share capital. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of share options that are expected to vest. On expiry of options any corresponding amount is charged to deficit. Revenue recognition The Company accounts for revenue under IFRS 15 Revenue from Contracts and Customers (“IFRS 15”). The standard is based on the principle that revenue is recognized when control of a good or servi --- ce transfers to a customer – so the notion of control replaces the existing notion of risks and rewards. The standard requires companies to follow a five-step model to determine if revenue should be recognized: 1. Identify the contracts with customers 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations in the contract 5. Recognize revenue when the entity satisfies a performance obligation The Company generates revenue on a monthly basis from the sale of advertising placed on its apps. Contracts or agreements or invoices are entered into with the customers that define the performance obligations and pricing. Revenue is recognised once the service outlined in the contract or agreement or invoice is met and no further obligation remains as per the contract or agreement or invoice. Zonetail Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2024 and December 31, 2023 (In Canadian dollars) December 31, 2024 P a g e | 14 Research and software development costs Research costs are charged to earnings in the period in which they are incurred, net of related tax credits. Software development costs related to internal-use software and business solutions are charged to earnings in the year they are incurred, net of related tax credits, unless they meet specific capitalization criteria related to technical, market and financial feasibility. Warrants The Company engages in equity financing transactions necessary to continue operations. These transactions may involve the issuance of common shares or units. A unit may consist of a certain number of common shares and a certain number of share purchase warrants (“Warrants”). Depending on the terms and conditions of each equity financing agreement, the Warrants are exercisable into additional common shares prior to expiry at a price stipulated by the agreement. When Warrants are issued as part of units, the Company uses the residual method where it first allocates the proceeds received on the units issued to the attached shares based on the closing trading price at the time of issuance and the residual is allocated to the value of warrant. Warrants that are issued as payment for an agency fee or other transaction cost may be accounted for as share-based payments, depending on the terms of the issuance. When warrants expire, the ascribed value is transferred to deficit. Significant accounting judgments and estimates The preparation of these consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. These consolidated financial statements include estimates that, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circu --- mstances. Critical accounting estimates Significant assumptions about the future that management has made that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following: • the inputs used in the Black-Scholes valuation model (volatility; interest rate; expected life and forfeiture rate) in accounting for share-based payment transactions; • effective interest rate used in determining equity and liability components of convertible debentures; • the valuation of income tax accounts. Critical accounting judgments • the going concern presentation of the consolidated financial statements which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations as they come duet; and • determining the treatment of the conversion feature of convertible debt as a derivative liability versus equity. Zonetail Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2024 and December 31, 2023 (In Canadian dollars) December 31, 2024 P a g e | 15 3. Capital risk management The Company manages its capital with the following objectives: • to ensure sufficient financial flexibility to achieve the ongoing business objectives including funding of future growth opportunities, and pursuit of accretive acquisitions; and • to maximize shareholder return through enhancing the share value. The Company monitors its capital structure and makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business and industry in general. The Company may manage its capital structure by issuing new shares, repurchasing outstanding shares, adjusting capital spending, or disposing of assets. The capital structure is reviewed by management and the Board of Directors on an ongoing basis. The Company considers its capital to be equity, which comprises share capital, share issuance costs, warrants, share based compensation, equity portion of convertible debentures and deficit, which at December 31, 2024 , the shareholders’ deficiency totaled $1,422,253 (December 31, 2023 – shareholders’ deficiency of $906,071). The Company manages capital through its financial and operational forecasting processes. The Company reviews its working capital and forecasts its future cash flows based on operating expenditures, and other investing and financing activities. Selected information is provided to the Board of Directors of the Company. The Company is not subject to any capital requirements imposed by a lending institution or regulatory body. 4. Financial instruments Financial risk The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate and foreign currency risk). Risk management is carried out by the Company's management team under policies approved by the Board of Directors. The Board of Directors also provides regular guidance for overall risk management. There were no changes to credit risk, liquidity risk or market risk for the year ended December 31, 2024. Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company’s financial instruments that are exposed --- to concentrations of credit risk relate primarily to cash, and trade and other accounts receivables. The Company mitigates its risk by maintaining its funds with large reputable financial institutions. Management assesses the credit quality of the borrower for receivables and believes there is not significant credit risk. Liquidity risk Liquidity risk is the risk that the Company encounters difficulty in meeting its obligations associated with financial liabilities. Liquidity risk includes the risk that, as a result of operational liquidity requirements, the Company will not have sufficient funds to settle a transaction on the due date; will be forced to sell financial assets at a value, which is less than what they are worth; or may be unable to settle or recover a financial asset. Liquidity risk arises from trade and other payables, promissory note, convertible debentures and commitments. The Company limits its exposure to this risk by closely monitoring the cash flow. All liabilities accept the bank loan are due within 1 year (see going concern note 1). Zonetail Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2024 and December 31, 2023 (In Canadian dollars) December 31, 2024 P a g e | 16 Market risk Market risk is the risk of loss that may arise from changes in market factors such as interest rates and foreign exchange rates. Interest rate risk The Company currently does not have any short-term or long-term debt that is variable interest bearing. Foreign currency risk Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the foreign exchange rates. The Company enters into foreign currency purchase transactions and has assets that are denominated in foreign currencies and thus is exposed to the financial risk of earnings fluctuations arising from changes in foreign exchange rates and the degree of volatility of these rates. The Company does not currently use derivative instruments to reduce its exposure to foreign currency risk. As at December 31, 2024, the Company had no material foreign currency balances as at year end that would have a material impact in the net loss and comprehensive loss (December 31, 2023, no material foreign currency balances). 5. Trade and other receivables December 31 2024 December 31 2023 $ $ Sales tax receivable 6,924 54,803 Trade and accrued receivables 7,910 22,254 Share subscription receivable - 40,000 14,834 117,057 6. Trade and other payables December 31 2024 December 31 2023 $ $ Trade payables 531,244 461,345 Accrued liabilities 205,598 151,201 736,842 612,546 7. Convertible debentures December 31 2024 December 31 2023 $ $ Convertible debentures 203,800 203,800 Unaccreted portion of convertible debentures (2,187) (15,992) Accrued interest 70,946 30,186 272,559 217,994 Zonetail Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2024 and December 31, 2023 (In Canadian dollars) December 31, 2024 P a g e | 17 On April 25, 2023, the Company closed a non-brokered private placement of convertible debenture securities generating aggregate gross proceeds of $203,800. The private placement involved the issuance of secured convertible debentures bearing interest at 20% per annum, with a 24-month term from issuance and providing for a conversion price of $0.05 per share. The debentures are convertible by the holder at any time. The debentures are convertible a --- t the option of the Company, if the Company’s shares trade in excess of $0.125 over any period of 10 trading days during the term, whether or not consecutive. The issuance cost of the debentures was $5,132 and has been allocated against the convertible debentures and is being amortized over 2 years. 8. Promissory notes On June 30, 2023 and July 11, 2023, the Company issued short-term promissory notes in the amount of $30,000 and $20,000 respectively. The notes pay a commitment fee of 10% of the face value of the note along with 10% interest from the maturity date. The principal amount along with the commitment fee totaling $55,000 is payab le 12 months from issuance or five business days after the Company completes a financing in excess of $250,000. The term on the notes has been extended to June 30, 2025 and July 11, 2025. On December 15, 2023 and December 21, 2023, the Company issued short-term promissory notes in the amount of $15,000 and $5,000 respectively. The notes pay a commitment fee of 10% of the face value of the note along with 10% interest from the maturity date. The principal amount along with the commitment fee totaling $22,000 is payable 12 months from issuance or five business days after the Company completes a financing in excess of $500,000. The term on the notes has been extended to December 15, 2025 and December 21, 2025. On October 15, 2023, the Company issued a short-term promissory note in the amount of $24,800 in lieu of the repayment of the convertible debentures in the amount of $20,000. The note bears interest at 10% interest from the issue date and is due December 31, 2024. The term on the notes has been extended to October 15, 2025. In March, April and May 2024, the Company issued short term promissory notes totaling $71,869. The notes pay a commitment fee of 10% of the face value of the note along with 10% interest from the maturity date. The principal amount along with the commitment fee are payable 12 months from issuance or five business days after the Company completes a financing in excess of $500,000. In June, July and September 2024, the Company issued short term promissory notes totaling $28,000. The notes pay a commitment fee of 10% of the face value of the note along with 10% interest from the maturity date. The principal amount along with the commitment fee are payable 12 months from issuance or five business days after the Company completes a financing in excess of $500,000. In September and October 2024, the Company issued short term promissory notes totaling $16,869. The notes pay a commitment fee of 10% of the face value of the note along with 10% interest from the maturity date. The principal amount along with the commitment fee are payable 12 months from issuance or five business days after the Company completes a financing in excess of $500,000. 9. Bank loan On January 18, 2024, the Company received bank term loan in the amount of $40,000 in order to repay the CEBA Loan (refer to note 10). The bank term loan bears interest at prime plus 2.34% payable in blended principal and interest payments of $840 per month. Zonetail Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2024 and December 31, 2023 (In Canadian dollars) December 31, 2024 P a g e | 18 10. Government loan During 2020 and 2021, the Company received a $40,000 loan and a $20,000 loan respectively from a recognized Canadian financial institution from the Canada Emergency Business Account (the “CE --- BA Loan”). The CEBA Loan bears 0% interest until December 31, 2023. On January 18, 2024, $40,000 of the CEBA loan was reapid and $20,000 loan forgiveness was received. 11. Shareholders’ equity Authorized share capital The Company is authorized to issue an unlimited number of common shares with no par value. Common shares issued # $ Balance, December 31, 2022 209,882,884 12,208,044 Private placements for cash 36,012,863 720,257 Share issuance costs - (14,488) Balance, December 31, 2023 245,895,747 12,913,813 Private placements for cash 19,143,400 382,868 Share issuance costs - (8,321) Balance, December 31, 2024 265,039,147 13,288,360 On September 27, 2024 and October 16, 2025, the Company completed the first and second tranches of a private placement of shares issued at a price of $0.02 per share. The Company issued an aggregate of 8,750,000 shares, for gross proceeds of $175,000. On April 22, 2024, April 29, 2024, and May 3, 2024, the Company completed the first, second, and third tranches of a private placement of shares issued at a price of $0.02 per share. The Company issued an aggregate of 6,327,425, 2,702,375, and 1,363,600 shares, for gross proceeds of $207,868. The Company paid cash compensation as finders fees of $840 and issued 42,000 finders warrants of the Company to such eligible finders (“Finders Warrants”). Each Finder Warrant entitles the holder to purchase one Share of the Company at an exercise price of $0.05, for a period of thirty-six months from the closing date of the Offering. The fair value of the finder warrants was estimated to be $248 using the Black-Scholes option pricing model with the following weighted average assumptions - share price - $0.02, dividend yield - 0%; expected volatility – 100%; risk-free interest rate – 3.77%; and an expected life - 3 years. On October 12, 2023, October 19, 2023, November 28, 2023 and December 29, 2023, the Company completed the first, second, third and fourth tranches of a private placement of shares issued at a price of $0.02 per share. The Company issued an aggregate of 11,250,000, 6,019,925, 3,000,000 and 2,000,000 shares, for gross proceeds of $445,399. The Company paid cash compensation as finders fees of $4,800 and issued 240,000 Finders Warrants of the Company to such eligible finders. The fair value of the finder warrants was estimated to be $2,208 using the Black-Scholes option pricing model with the following weighted average assumptions - share price - $0.02, dividend yield - 0%; expected volatility – 100%; risk-free interest rate – 4.93% and 4.85%; and an expected life - 3 years. On June 2 and September 8, 2023, the Company completed the first and second tranches of a private placement of shares issued at a price of $0.02 per share. The Company issued an aggregate of 6,600,000 and 7,142,938 shares, for gross proceeds of $132,000 and 142,859 respectively. The Company paid cash compensation as finders fees of $5,820 and issued 291,000 Finders Warrants. The fair value of the finder warrants was estimated to be $2,663 using the Black-Scholes option pricing model with the following weighted average assumptions - share price - $0.02, dividend yield - 0%; expected volatility – 100%; risk-free interest rate – 4.22% and 4.85%; and an expected life - 3 years. Zonetail Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2024 and December 31, 2023 (In Canadian dollars) December 31, 2024 P a g e | 19 As at December 31, 2024, cumulative share i --- ssuance costs totaled $566,190 (December 31, 2023 - $557,869). Warrants Warrants Amount # $ Balance, December 31, 2022 10,097,375 56,634 Issued 4,076,000 20,380 Finder warrants 414,960 3,649 Balance, December 31, 2023 14,588,335 80,663 Finder warrants 42,000 248 Expired (33,960) (158) Balance, December 31, 2024 14,596,375 80,753 Date of issuance Remaining life Number of warrants Exercise price # $ October 4, 2022 0.76 years 6,652,375 0.05 December 21, 2022 0.97 years 3,445,000 0.05 April 4, 2023 1.26 years 3,876,000 0.05 April 18, 2023 1.30 years 200,000 0.05 May 30, 2023 1.41 years 141,000 0.05 September 29, 2023 1.75 years 150,000 0.05 October 13, 2023 1.79 years 90,000 0.05 April 18, 2024 2.30 years 42,000 0.05 14,596,375 During 2023, the Company issued 4,076,000 warrants (the “Warrants”) with each Warrant exercisable into one common share of the Company for one year from the closing date at an exercise price of $0.05 per warrant. The debentures may also be extended for an additional 12 months by the Company or may be prepaid, subject in each case to certain bonus payments. The Company may, at its option, make payment of such interest and bonus amounts due in cash or in common shares, subject to the receipt of any required regulatory or stock exchange approvals. During previous year, the Company paid eligible finders cash compensation as finders fees of $1,698 and has issued an aggregate of 33,960 finders warrants of the Company (“Finders Warrants”). Each Finder Warrant entitles the holder to purchase one share of the Company at an exercise price of $0.05, for a period of twelve months from the closing date of the Offering. As at December 31, 2023, the fair value of the Warrants and Finder Warrants was estimated to be $20,380 and $158 respectively, using the Black-Scholes option pricing model with the following weighted average assumptions share price - $0.05, dividend yield - 0%; expected volatility – 100%; risk-free interest rate – 3.52%; and an expected life - 1 years. On April 4, 2024, the Company issued 42,000 Finder Warrants with each Warrant exercisable into one common share of the Company, expiring April 18, 2027 at an exercise price of $0.05 per warrant. On April 3, 2024, the Company announced an extension of the Warrants for an additional one year and on March 27, 2025, the Company announced an extension of the debentures and Warrants for an additional one year. Zonetail Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2024 and December 31, 2023 (In Canadian dollars) December 31, 2024 P a g e | 20 Share based compensation The Company adopted a fixed stock option plan (the "Plan") whereby the Board of Directors may grant to employees, officers, directors, management consultants and external consultants of the Company or of its subsidiary thereof, options to acquire common shares in such numbers, for such terms and at such exercise prices as may be determined by the Board. The exercise price of each option may not be lower than the market price of the common shares at the time of the grant of the options. The options vest at the date of the grant unless additional restrictions on the vesting of the options are imposed by the Board of Directors except for the consultants working in investor relations, whose options are vested in quarterly installments over a twelve-month period from grant. The option period is a period of time fixed by the Board of Directors but cannot exceed 5 years. Weight --- ed average Options exercise price # $ Balance, December 31, 2022 15,860,000 0.07 Expired (6,860,000) 0.09 Balance, December 31, 2023 9,000,000 0.06 Expired (1,250,000) 0.08 Balance, December 31, 2024 7,750,000 0.05 Exercisable at December 31, 2024 7,750,000 0.05 A summary of the outstanding stock options as at December 31, 2024 is presented below: Date of grant Remaining life Number of options Exercisable Exercise price # # $ July 16, 2020 1.46 years 7,000,000 7,000,000 0.05 September 16, 2021 2.47 years 500,000 500,000 0.065 June 9, 2022 3.20 years 250,000 250,000 0.05 7,750,000 7,750,000 A summary of the outstanding stock options as at December 31, 2023 is presented below: Date of grant Remaining life Number of options Exercisable Exercise price # # $ October 30, 2019 0.84 years 1,000,000 1,000,000 0.09 July 16, 2020 1.46 years 7,250,000 7,250,000 0.05 September 16, 2021 2.47 years 500,000 500,000 0.065 June 9, 2022 3.20 years 250,000 187,500 0.05 9,000,000 8,937,500 Zonetail Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2024 and December 31, 2023 (In Canadian dollars) December 31, 2024 P a g e | 21 12. Key management compensation and related party transactions Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non- executive) of the Company. Remuneration of directors and key management personnel of the Company was as follows: For the years ended December 31 2024 2023 $ $ Salaries and benefits 317,376 357,880 Share based compensation - 1,006 Due to related parties includes $112,225 (December 31, 2023 - $74,232) accrued for director’s fees which have no terms of repayment and are unsecured. On April 4, 2023, three directors subscribed for $115,500 of the convertible debentures as described in note 7 above. On November 21, 2023 and December 20, 2023, an officer and director of the Company subscribed for $40,000 of the private placement described in note 9 above. 13. Income taxes Income tax recovery differs from the amount that would be computed by applying Canadian statutory income tax rate of 26.5% (2020 - 26.5%) to income before taxes. The reasons for the differences are as follows: For the year ended December 31 2024 2023 $ $ Loss before income taxes (891,499) (805,646) Statutory income tax rate 26.5% 26.5% Expected income tax recovery (236,247) (213,496) Items not deductible for income tax purposes 8,231 10,812 Change in estimates 794,015 - Share based compensation 138 2,192 Tax benefits not recognized (566,137) 200,492 - - The Company's deductible temporary differences and unused tax losses for which no deferred tax asset is recognized consist of the following amounts: For the year ended December 31 2024 2023 $ $ Property and equipment 18,908 21,528 Financing fees 22,555 45,726 Non-capital losses 11,914,874 12,273,562 Intangibles - 1,745,213 11,956,337 14,086,029 Zonetail Inc. Notes to the Consolidated Financial Statements For the years ended December 31, 2024 and December 31, 2023 (In Canadian dollars) December 31, 2024 P a g e | 22 The Company has Canadian non-capital losses of approximately $11,479,689 available to apply against the future taxable income, expiring has follows. For the year ended December 31 2024 2023 $ $ 2036 - 2037 694,893 2038 2,537,465 2039 2,125,951 2040 1,154,933 2041 2,049,233 2042 2,192,880 2043 1,534,200 204 --- 4 823,273 1,552,881 857,771 1,982,907 991,622 1,922,727 2,030,693 894,475 858,525 - 11,914,874 12,289,555 14. Commitments and contingencies From June 2019 to December 2023, the Company was involved in a dispute related to a promissory note advanced to the Company by a third party. On December 21, 2023, the third party and the Company executed a settlement agreement and mutual release, on a without cost basis, resulting on the Company writing off all indebtedness to Belgravia in the amount of $571,625. 15. Loss per share For the year ended December 31, 2024, basic and diluted loss per share has been calculated based on the loss attributable to common shareholders of $891,499 (year ended December 31, 2023 - $805,646) and the weighted average number of common shares outstanding of 255,341,398 (year ended December 31, 2023 – 220,513,118). Diluted loss per share did not include the effect of stock options, warrants and conversion features as they are anti-dilutive. 16. Subsequent events On January 10, 2025, the Company completed a private placement of shares issued at a price of $0.02 per share. The Company issued an aggregate of 2,300,000 shares, for gross proceeds of $46,000. On March 20, 2025, the Company completed a private placement of shares issued at a price of $0.02 per share. The Company issued an aggregate of 4,431,525 shares, for gross proceeds of $88,631. On April, 2025, the Company issued short term promissory notes totaling $75,000. The notes pay a commitment fee of 10% of the face value of the note along with 10% interest from the maturity date. The principal amount along with the commitment fee are payable 12 months from issuance or five business days after the Company completes a financing in excess of $500,000.