SEDAR Interim Financial Statements

American Aires Inc. CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024 (EXPRESSED IN CANADIAN DOLLARS) MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING The accompanying unaudited condensed consolidated interim financial statements of American Aires Inc. (the "Company") are the responsibility of management and the Board of Directors. The unaudited condensed consolidated interim financial statements have been prepared by management, on behalf of the Board of Directors, in accordance with the accounting policies disclosed in the notes to the unaudited condensed consolidated interim financial statements. Where necessary, management has made informed judgments and estimates in accounting for transactions which were not complete at the statement of financial position date. In the opinion of management, the unaudited condensed consolidated interim financial statements have been prepared within acceptable limits of materiality and are in accordance with International Accounting Standard 34 - Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards appropriate in the circumstances. Management has established processes, which are in place to provide it with sufficient knowledge to support management representations that it has exercised reasonable diligence in that (i) the unaudited condensed consolidated interim financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of, and for the periods presented by, the unaudited condensed consolidated interim financial statements and (ii) the unaudited condensed consolidated interim financial statements fairly present in all material respects the financial condition, results of operations and cash flows of the Company, as of the date of and for the periods presented by the unaudited condensed consolidated interim financial statements. The Board of Directors is responsible for reviewing and approving the unaudited condensed consolidated interim financial statements together with other financial information of the Company and for ensuring that management fulfills its financial reporting responsibilities. The Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the financial reporting process and the unaudited condensed consolidated interim financial statements together with other financial information of the Company. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the unaudited condensed consolidated interim financial statements together with other financial information of the Company for issuance to the shareholders. Management recognizes its responsibility for conducting the Company’s affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities. NOTICE TO READER The accompanying condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of management. The condensed consolidated interim financial statements have not been reviewed by the Company's auditors. AMERICAN AIRES INC. Condensed Consolidated Interim Stat --- ements of Financial Position (Unaudited) (Expressed in Canadian Dollars) 1 Nature of Operations and Going Concern (note 1) Subsequent Events (note 19) Approved on behalf of the Board of Directors: "Josh Bruni" "Drew Green" Director Director The accompanying notes are an integral part of these condensed consolidated interim financial statements AMERICAN AIRES INC. Condensed Consolidated Interim Statements of Loss and Comprehensive Loss (Unaudited) (Expressed in Canadian Dollars) 2 The accompanying notes are an integral part of these condensed consolidated interim financial statements AMERICAN AIRES INC. Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity (Unaudited) (Expressed in Canadian Dollars) 3 The accompanying notes are an integral part of these condensed consolidated interim financial statements AMERICAN AIRES INC. Condensed Consolidated Interim Statements of Cash Flows (Unaudited) (Expressed in Canadian Dollars) 4 The accompanying notes are an integral part of these condensed consolidated interim financial statements AMERICAN AIRES INC. Notes to Condensed Consolidated Interim Financial Statements (Unaudited) Nine months Ended September 30, 2025 and 2024 (Expressed in Canadian Dollars) 5 1. Nature of Operations and Going Concern American Aires Inc. (the “Company”) was incorporated on May 15, 2012 and organized under the laws of Ontario, Canada. The registered office of the Company is located at 400 Applewood Crescent, unit 100, Vaughan, Ontario, L4K 0C3. The Company is engaged in the business of production, distribution and sales of electromagnetic protection devices. These condensed consolidated interim financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the ordinary course of operations. The Company has a deficit of $43,271,861 as of September 30, 2025 (December 31, 2024 - $37,567,868) and incurred a loss of $5,703,993 for the nine months ended September 30, 2025 (September 30, 2024 - $4,630,128). The Company had a working capital deficiency of $5,541,178 as at September 30, 2025 (December 31, 2024 – working capital of $53,310). Management has taken steps to improve the Company’s financial position, including the implementation of cost-cutting measures, capital-raising efforts, and the exploration of strategic alternatives. The Company’s ability to continue as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, obtain additional financing, and ultimately achieve profitable operations. There can be no assurance that the Company will be successful in these efforts. If the Company is unable to generate sufficient cash flows from operations, obtain additional financing or achieve profitable operations, it may be required to curtail or cease operations, which could have a material adverse effect on the Company’s financial position, results of operations, and cash flows. Management anticipates that the Company may not be in a financial position to settle certain accounts payable as they become due. Consequently, the Company could be in breach of certain contractual arrangements with vendors and service providers. Any such breach may restrict or delay product supply, specific marketing and advertising initiatives, which could, in turn, have a material adv --- erse impact on the Company’s sales performance, operating results, and cash flows. The above factors indicate the existence of material uncertainties that may cast significant doubt on the ability of the Company to continue as a going concern. The condensed consolidated interim financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. If management is unsuccessful in securing financing and or capital, the Company’s assets may not be realized or its liabilities get discharged at their carrying amounts and these differences could be material. See “Note 19 - Subsequent Events” for a more detailed discussion. 2. Basis of Presentation Statement of Compliance These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements required by IFRS as issued by IASB and interpretations issued by IFRIC. These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2024. These condensed consolidated interim financial statements have been prepared on a historical cost basis. In addition, these condensed consolidated interim financial statements are using the accrual basis of accounting, except for cash flow information. In addition, these condensed interim consolidated financial statements have been prepared in accordance with the same accounting policies and methods of application as the most recent audited consolidated financial statements for the year ended December 31, 2024, except that they do not include all the disclosures required for the annual audited consolidated financial statements. In the preparation of these condensed consolidated interim financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated interim financial statements and the reported amounts of expenses during the period. Actual results could differ from these estimates. AMERICAN AIRES INC. Notes to Condensed Consolidated Interim Financial Statements (Unaudited) Nine months Ended September 30, 2025 and 2024 (Expressed in Canadian Dollars) 6 These condensed consolidated interim financial statements were approved by the Board of Directors on November 26, 2025. Accounting Standards Issued and Adopted The following new accounting standards and amendments have been issued effective for annual periods beginning on or after January 1, 2025: • Lack of Exchangeability – Amendments to IAS 21 • IFRS S1 and IFRS S2 – Sustainability-related Disclosures The Company has evaluated the potential impact of these new standards and amendments and concluded that they are either not applicable or not expected to have a significant impact on the Company’s financial statements. 3. Financial Instruments and Risk Management Fair Values The carrying value of all of the Company’s financial instruments (assets and liabilities) approximate their fair values due to the short-term maturity of these financial instruments. The Company’s activities expose it to a variety of financial risks: credit risk, liquidity risk, market risk (includi --- ng interest rate risk). Risk management is carried out by the Company’s management team with guidance from the Board of Directors. The Board of Directors also provides regular guidance for overall risk management. Credit Risk Credit risk is the risk of loss associated with a counterparty’s inability to fulfil its payment obligations. The Company’s credit risk is primarily attributable to cash and cash equivalents and prepaid and sundry receivables. The Company has no significant concentration of credit risk arising from operations. Cash and cash equivalents are in accounts at reputable financial institutions, from which the risk of loss is remote. The Company’s customer base is well diversified with no reliance on any one client. Sundry receivables consist primarily of advances to the Company’s supplier of its electromagnetic protection devices. The Company has a long relationship with the supplier and assesses the risk of loss as low. Liquidity Risk Liquidity risk refers to the risk that the Company will not be able to meet its financial obligations as they become due or can only do so at excessive cost. The Company's liquidity and operating results may be adversely affected if the Company's access to capital markets is hindered, whether due to the general state of the economy or conditions specific to the Company. As at September 30, 2025, the Company had cash and cash equivalents of $228,734 (December 31, 2024 - $1,521,242) to settle current liabilities (excluding deferred revenue) of $8,275,275 (December 31, 2024 - $5,147,298). The Company regularly evaluates its cash position to ensure preservation and security of capital as well as maintenance of liquidity. As the Company does not yet generate profits, managing liquidity risk is dependent upon the ability to secure additional financing, controlling expenses, and preserving cash. The following table shows the remaining contractual maturities of financial liabilities as at September 30, 2025 and December 31, 2024. It is not expected that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts. See “Note 19 - Subsequent Events” for a more detailed discussion. AMERICAN AIRES INC. Notes to Condensed Consolidated Interim Financial Statements (Unaudited) Nine months Ended September 30, 2025 and 2024 (Expressed in Canadian Dollars) 7 Market Risks Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices. (i) Interest Rate Risk The Company’s borrowings are at fixed rates of interest. Although it is not exposed to interest rate risk on its current borrowings, because of its heavy reliance on borrowing there is a risk that future costs of borrowing will increase if interest rates rise further. (ii) Foreign Exchange Risk The Company's functional currency is the United States Dollar, and it transacts all its sales and major purchases primarily in that currency. To fund its operations, the Company maintains United States Dollar, Canadian Dollar, British Pound and Euro denominated bank accounts, containing sufficient funds to support monthly forecasted cash outflows. Management does not hedge its foreign exchange risk. As at September 30, 2025, a 5% fluctuation in the foreign exchange rates would have an impact of approximately $58,867 (December 31, 2024 - $157,877) in the Company's condensed consolidated interim statements of loss a --- nd comprehensive loss. 4. Intellectual Property 5. Furniture and Equipment AMERICAN AIRES INC. Notes to Condensed Consolidated Interim Financial Statements (Unaudited) Nine months Ended September 30, 2025 and 2024 (Expressed in Canadian Dollars) 8 6. Government Loan As a response to COVID-19, the Canadian Federal government introduced the CEBA for businesses that met various eligibility requirements. The purpose of the CEBA loan was to support businesses and employers to meet their non- deferrable expenses. The loan was interest free until January 18, 2024 and there was a forgivable portion of $20,000 if repaid before that date. Subsequently the unpaid balance is subject to interest of 5% per annum and final payment is due on December 31, 2026. The Company has not recognized any forgiveness revenue in the consolidated statement of loss and comprehensive loss in connection with this loan, as it has determined the full amount of the loan will be repayable. 7. Loan Payable On December 13, 2024, the Company entered into a loan agreement whereby the lender advanced USD $520,000. The term of the loan was 6 months, repayable in weekly instalments of USD $21,900 (the rate of interest is 36% per annum). The loan was paid off in full in June 2025. On April 29, 2024, the Company entered into a new loan agreement whereby the lender advanced USD $800,000. The term of the new loan is 6 months, repayable in weekly instalments of USD $33,231 (the rate of interest is 30% per annum). The following is a continuity schedule of the loan payable: 8. E-commerce Platform Loan Payable In January 2025, the Company received a working capital advance of $2,770,000 from its e-commerce service provider. Under the terms of the agreement, the Company shall remit an amount totaling $2,991,600 as full repayment for principal and implied interest on the advance. Payments are required to be made daily based on 15% of the Company's daily sales until such time that the advances are repaid in full. The financing charge in the amount of $199,440 related to the paid portion of the loan has been recorded as interest expense in the condensed consolidated interim statements of loss and comprehensive loss for the nine months ended September 30, 2025 (2024 - $224,502). In July 2025, the Company received another working capital advance of $900,000 and shall remit an amount totaling $963,000 as full repayment for principal and implied interest on the advance. The annualized interest rate on these advances is upwards of 27%. The exact interest amount and therefore rate cannot be determined as there is insufficient information to amortize repayments made between principal and interest. The following is a continuity of the e-commerce platform loan payable: 9. Share Capital (a) Authorized The Company is authorized to issue an unlimited number of common shares without par value. (b) Issued and outstanding - Common Shares AMERICAN AIRES INC. Notes to Condensed Consolidated Interim Financial Statements (Unaudited) Nine months Ended September 30, 2025 and 2024 (Expressed in Canadian Dollars) 9 10. Warrants The following table reflects the continuity of warrants for the nine months ended September 30, 2025 and 2024: The following table reflects warrants outstanding as at September 30, 2025: 11. Stock Options The following table reflects the continuity of stock options for the nine months ended September 30, 2025 and 2024: The following table reflects stock options outstanding as at September --- 30, 2025: AMERICAN AIRES INC. Notes to Condensed Consolidated Interim Financial Statements (Unaudited) Nine months Ended September 30, 2025 and 2024 (Expressed in Canadian Dollars) 10 On September 24, 2024, the Company issued 988,334 options to an investor relations consulting firm. The options were valued at $309,257 estimated using the Black-Scholes valuation model with the following assumptions: dividend yield 0%, share price of $0.36, expected volatility of 142%, a risk-free rate of return of 2.74% and an expected life of 5 years. The options gradually vest at the end of every six-month period. During the nine months ended September 30, 2025, the Company recognized $140,648 as stock-based compensation expense to recognize the partial vesting of these options. 12. Related Party Balances and Transactions Remuneration of key management personnel of the Company was as follows: The Company defines key management as the Company's directors and officers of the Company. As at September 30, 2025, amounts due to key management for remuneration totaled $328,252 (December 31, 2024 - $656,505). During the nine months ended September 30, 2025, the Company expensed $1,090,457 (2024 - $922,617) for digital marketing services provided by a firm controlled by an officer of the Company. As at September 30, 2025, $nil (December 31, 2024 - $nil) was included in accounts payable and accrued liabilities in connection with these services. During the nine months ended September 30, 2025, the Company expensed $90,000 (2024 - $70,000) for capital markets consulting services provided by a firm whose chief executive officer is the CFO of the Company. As at September 30, 2025, $nil was included in accounts payable and accrued liabilities in connection with these services. During the nine months ended September 30, 2025, the Company expensed $62,910 (2024 - $30,375) as consulting fees for customer service work provided by the spouse of an officer of the Company and $nil is due as of September 30, 2025. During the nine months ended September 30, 2025, the Company made payments totaling $3,895,788 (2024 – $nil) to its sole overseas manufacturing supplier. Effective September 26, 2024, the spouse of a then-senior officer and director of the Company acquired a 50% ownership interest in the supplier. Based on the Company’s preliminary assessment, these dealings may constitute related party transactions under IAS 24. The above noted transactions, other than payments to the manufacturing supplier, were in the normal course of business and measured at the exchange amount agreed to by the parties and approved by the Board. Payments to Technano are currently under review by the Board in light of governance findings and may not be considered in the normal course of business. See “Note 16 - Cost of Goods Sold” and “Note 19 - Subsequent Events” for additional information. 13. Segmented Information The Company's operations consist of a single operating segment, located in Canada. During the nine months ended September 30, 2025, 75% (2024 - 81%) of sales were to US customers and 8% (2024 - 6%) being sold to customers in Canada. The Company’s remaining customers are distributed widely throughout the world. 14. Net Loss Per Share The calculation of basic and diluted loss per share for the nine months ended September 30, 2025 was based on the loss attributable to common shareholders of $5,703,993 (2024 - $4,630,128) and the weighted average number of common shares outstanding of 1 --- 04,607,000 (2024 – 86,330,981). The impact of conversion of options and warrants have been excluded from the weighted average number of common shares calculation as it would be antidilutive. 15. Prepaid and Receivable AMERICAN AIRES INC. Notes to Condensed Consolidated Interim Financial Statements (Unaudited) Nine months Ended September 30, 2025 and 2024 (Expressed in Canadian Dollars) 11 16. Cost of Goods Sold Cost of goods sold is comprised of the following: All of the Company’s products are manufactured by a sole supplier located overseas. This concentration creates a dependency on that supplier for production. If the relationship were to cease unexpectedly, the Company could experience a significant disruption in supply, and developing alternate sources may require substantial time and cost. See “Note 12 - Related Party Balances and Transactions” and “Note 19 - Subsequent Events” for additional information. 17. Accounts Payable and Accrued Liabilities Sales taxes payable include an estimated provision for interest and penalty for late payment of $681,351. 18. Contractual Commitments As at September 30, 2025, the Company has entered into various non-cancellable marketing and advertising contracts, including agreements with professional athletes and sports organizations, to promote its products and brand. Most of these agreements are denominated in U.S. dollars and have been translated into Canadian dollars using the period-end exchange rate of 1.39. The following table summarizes the Company’s undiscounted contractual commitments over the next five fiscal years: All amounts above are presented in Canadian dollars (CAD). The US dollar obligations total USD $1,559,000 and Canadian dollar obligations total $100,000. 19. Subsequent Events Liquidity and Going Concern Discussion Following the release of its Q2/2025 results, the Company recorded strong operating performance during the month of August 2025. This period reflected continued progress in executing the Company’s advertising strategy, resulting in improved sales momentum and enhanced efficiency in advertising spend. August represented one of the Company’s strongest months to date in terms of sales, advertising spend as a percentage of revenue, and EBITDA contribution. This solid performance supported management’s expectations for a typical seasonal uplift in the third and fourth quarters, particularly during the holiday period. Historically, the fourth quarter has represented a significant portion of annual sales, with 2024 fourth-quarter revenue approximately 88% higher than the third quarter. Based on this seasonality and recent trends, management anticipated a robust finish to 2025, which, if achieved, would be expected to further strengthen the Company’s financial position. AMERICAN AIRES INC. Notes to Condensed Consolidated Interim Financial Statements (Unaudited) Nine months Ended September 30, 2025 and 2024 (Expressed in Canadian Dollars) 12 Beginning in mid-September and continuing into October 2025, the Company’s largest advertising platform implemented significant algorithmic and ad-delivery changes12 that adversely affected the performance of the Company’s advertising campaigns. These changes resulted in higher advertising costs, lower sales conversion rates, and reduced effectiveness of certain campaign strategies, which collectively contributed to increased operating losses during the period. The combination of these higher operating losses, more negative cash flows, --- and the Company’s existing working capital deficiency further constrained liquidity. While management remains focused on adapting its advertising strategy to the new platform environment and expects to improve efficiency over time, these developments have impacted the Company’s near- term ability to fully capitalize on the typically stronger holiday season. As a result, management acknowledges increased uncertainty in short-term performance, which may take several operating cycles to address, as well as uncertainty over long-term sales potentials and profitability. In addition, management had anticipated that seasonally higher sales in November would accelerate repayment of the existing Shopify Capital loan (see “Note 8 - E-commerce Platform Loan Payable”), which is repaid at a rate of 15% of daily sales. A faster repayment schedule was expected to make the Company eligible for a new, and possibly larger, advance facility under the Shopify Capital program. Such a facility would have supported short-term liquidity through an increase in available cash resources. Furthermore, throughout the year, the Company had been preparing to launch an in-house investor relations initiative designed to enhance market awareness of American Aires Inc. among investors. This initiative, in conjunction with potential debt and equity financings, was intended to address working capital requirements and support growth objectives for 2026. However, developments during the summer relating to the misconduct of former Chief Executive Officer Dimitry Serov, along with unresolved matters concerning repayment, intellectual property rights, and manufacturing agreements, have created elevated uncertainty and investor risk perception. These factors have, to date, constrained the Company’s ability to raise external financing. The combination of all three factors taking place at the same time contributed to the material increase in working capital deficiency to $5,541,178 as at September 30, 2025 from $3,931,125 as at June 30, 2025. With worse than expected performance in October and November, 2025, the Company found itself in the position where its inability to settle certain critical Accounts Payables as they become due may restrict or delay product supply, specific marketing and advertising initiatives, which could, in turn, have a material adverse impact on the Company’s future sales performance, operating results, and cash flows. The current level of inventory provides the Company with a short-term opportunity to support cash flow generation. Inventory (an IFRS measure) was reported at $2.21 million as at September 30, 2025, compared to Q3/2025 Cost of Inventory (a non-IFRS measure)* of $1.64 million, which generated Sales (an IFRS measure) of $7.39 million. *Cost of Inventory is a non-IFRS measure, that reflects only the direct cost of products sold, and excludes fulfilment costs ($0.4 million), transaction fees (0.28 million) and other costs ($0.03 million) which together form the reported $2.35 million in Cost of Sales (an IFRS measure). In light of the Company’s current liquidity constraints and working capital deficiency, management’s near-term business objectives are focused on preserving cash, stabilizing operations, and securing the financial resources required to support continuity of operations. The Company’s key objectives are as follows: 1. Liquidity Preservation and Cost Management Management is prioritizing disciplined cash flow management and the impl --- ementation of additional cost-reduction measures across all functional areas. The objective is to extend the Company’s operating runway by reducing spending, optimizing marketing expenditures, and renegotiating vendor terms where possible. 2. Capital Raising and Financing Initiatives The Company is actively pursuing both equity and non-dilutive financing alternatives to strengthen its balance sheet and address its working capital deficiency. While there are no assurances a financing could be completed in 1 Source: https://themtmagency.com/blog/meta-andromeda-october-2025-update-why-creative-diversity-now-defines-ad- performance 2 Source: https://www.jonloomer.com/meta-andromeda/ AMERICAN AIRES INC. Notes to Condensed Consolidated Interim Financial Statements (Unaudited) Nine months Ended September 30, 2025 and 2024 (Expressed in Canadian Dollars) 13 the near-term, successful completion of one or more of these initiatives is essential to maintaining operations and funding ongoing business activities. 3. Operational Continuity and Revenue Generation Despite the current financial pressures, management remains focused on maintaining product availability and supporting existing sales channels to sustain revenue generation. Where necessary, the Company will adjust its marketing and distribution priorities to align with available financial resources, with the goal of maximizing cash flow generation. 4. Strategic Review and Long-Term Sustainability Management continues to evaluate strategic alternatives designed to enhance shareholder value and improve the Company’s long-term financial position. These may include potential partnerships, joint ventures, or other strategic transactions that provide access to new capital, markets, or operational efficiencies. Management acknowledges that achieving these objectives is contingent upon the successful execution of its financing and cost-reduction plans. Failure to secure adequate funding or materially improve operating cash flows within the near term may adversely affect the Company’s ability to continue as a going concern.