SEDAR Interim Financial Statements

Page 1 of 16 Covalon Technologies Ltd. CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) For the three months ended December 31, 2025, and 2024 Contents Condensed Consolidated Interim Statements of Financial Position 3 Condensed Consolidated Interim Statements of Operations and Comprehensive Income (Loss) 4 Condensed Consolidated Interim Statements of Changes in Equity 5 Condensed Consolidated Interim Statements of Cash Flows 6 Notes to the Consolidated Financial Statements 7-16 Page 2 of 16 MANAGEMENT’S COMMENTS ON UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS Under National Instrument 51-102, Part 4, subsection 4.3(3) (a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the interim financial statements have not been reviewed by an auditor. The accompanying unaudited condensed consolidated interim financial statements of Covalon Technologies Ltd. (the “Company”) have been prepared by and are the responsibility of the Company’s management. The unaudited condensed consolidated interim financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS Accounting Standards”) and reflect management’s best estimates and judgment based on information currently available. The Company’s independent auditor has not performed a review of these unaudited condensed consolidated interim financial statements. Covalon Technologies Ltd. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION (UNAUDITED) Expressed in Canadian Dollars Page 3 of 16 December 31, 2025 September 30, 2025 Assets Current assets Cash and cash equivalents $17,878,098 $17,367,288 Accounts receivable 2,183,719 5,840,217 Inventories (Note 3) 6,822,490 7,400,787 Prepaid expenses 860,061 835,456 Finance lease receivable (Note 8) - 87,102 Total current assets 27,744,368 31,530,850 Non-current assets Property, plant and equipment (Note 5) 1,920,595 1,355,082 Intangible assets (Note 4) 1,324,165 1,350,674 Right-of-use assets (Note 6) 1,809,994 1,886,981 Total non-current assets 5,054,754 4,592,737 Total assets $32,799,122 $36,123,587 Liabilities and shareholders’ equity Current liabilities Accounts payable and accrued liabilities $3,811,606 $3,142,938 Lease liabilities (Note 7) 530,394 627,256 Deferred revenue 530,800 - Total current liabilities 4,872,800 3,770,194 Non-current liabilities Lease liabilities (Note 7) 1,534,677 1,626,484 Total non-current liabilities 1,534,677 1,626,484 Total liabilities 6,407,477 5,396,678 Shareholders’ equity Share capital (Note 9) 52,105,143 51,817,143 Contributed surplus 8,350,948 8,571,418 Foreign exchange translation reserve 3,591,291 3,976,750 Accumulated deficit (37,655,737) (33,638,402) Total shareholders’ equity 26,391,645 30,726,909 Total liabilities and shareholders’ equity $32,799,122 $36,123,587 On behalf of the Board: (signed) “Abe Schwartz” (signed) “Brent Ashton” Director Director The accompanying notes are an integral part of these condensed consolidated interim financial statements. Covalon Technologies Ltd. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED) Expressed in Canadian Dollars Page 4 of 16 Three months ended December 31, 2025 2024 Revenue Product $6,888,302 $8,077,940 Development and consulting services - 5, --- 826 Licensing and royalty fees - 82,214 Total revenue 6,888,302 8,165,980 Cost of sales 2,880,071 3,171,514 Gross profit 4,008,231 4,994,466 Operating expenses Operations 689,707 371,069 Research and development activities 289,258 373,339 Sales, marketing, and agency fees 1,011,929 1,209,820 General and administrative 1,965,093 1,725,570 3,955,987 3,679,798 Finance income (123,718) (41,068) Loss on finance lease receivable (Note 8) 50,585 149,690 Net income $125,377 $1,206,046 Other comprehensive income(loss) Amount that may be reclassified to profit or loss Foreign currency translation adjustment (385,459) 1,850,454 Total comprehensive income (loss) $(260,082) $3,056,500 Earnings per common share Basic earnings per share (Note 15) $0.00 $0.04 Diluted earnings per share (Note 15) $0.00 $0.04 The accompanying notes are an integral part of these condensed consolidated interim financial statements. Covalon Technologies Ltd. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY (UNAUDITED) Expressed in Canadian Dollars Page 5 of 16 Number of shares Share capital Contributed surplus Accumulated deficit Foreign exchange translation reserve Total Balance at October 1, 2024 27,398,077 $ 51,748,095 $8,322,591 $(35,696,491) $3,130,413 $27,504,608 Share-based payment expense (Note 10) - - 90,523 - - 90,523 Net income for the period - - - 1,206,046 - 1,206,046 Foreign currency translation Adjustment - - - - 1,850,454 1,850,454 Balance at December 31, 2024 27,398,077 $ 51,748,095 $8,413,114 $(34,490,445) $4,980,867 $30,651,631 Balance at October 1, 2025 27,418,077 $ 51,817,143 $8,571,418 $(33,638,402) $3,976,750 $30,726,909 Share-based payment expense (Note 10) - - 67,530 - - 67,530 Vesting of DSUs (Note 10) 200,000 288,000 (288,000) - Dividend paid - - - (4,142,712) - (4,142,712) Net income for the period - - - 125,377 - 125,377 Foreign currency translation adjustment - - - - (385,459) (385,459) Balance at December 31, 2025 27,618,077 $ 52,105,143 $8,350,948 $(37,655,737) $3,591,291 $26,391,645 The accompanying notes are an integral part of these condensed consolidated interim financial statements. Covalon Technologies Ltd. CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (UNAUDITED) Expressed in Canadian Dollars Page 6 of 16 Three months ended December 31, 2025 2024 Cash flows from (used in) operating activities Net income for the period $125,377 $1,206,046 Adjustments to reconcile net income to net cash used in operating activities: Depreciation of property, plant and equipment (Note 5) 67,268 101,636 Amortization of intangible assets (Note 4) 72,914 95,138 Depreciation - right of use assets (Note 6) 102,335 60,351 Share-based payment expense (Note 10) 67,530 90,523 Interest expense and accretion 31,735 9,740 Loss on finance lease receivable (Note 8) 50,585 149,690 Cash flows from operating activities before net changes in working capital balances: 517,744 1,713,124 Net changes in working capital balances: Accounts receivable 3,611,955 (1,500,680) Prepaid expenses (34,087) 262,005 Inventories 498,825 (490,795) Accounts payable and accrued liabilities 629,727 211,143 Deferred revenue 527,786 (70,266) Total net changes in working capital balances 5,234,206 (1,588,593) Total cash flows from operating activities 5,751,950 124,531 Cash flows from (used in) investing activities Purchase of property, plant and equipment (Note 5) (652,547) (108,947) Purchase of intangible assets (Note 4) (66,005) (83,175) Total cash flows used in investin --- g activities (718,552) (192,122) Cash flows from (used in) financing activities Dividends paid (4,142,712) - Finance lease receivable (Note 8) 34,220 65,700 Payment of lease liabilities (Note 7) (213,729) (181,745) Total cash flows used in financing activities (4,322,221) (116,045) Effect of foreign exchange rate changes on cash (200,367) 934,462 Total cash flows during the period 510,810 750,826 Cash and cash equivalents, beginning of period $17,367,288 $16,746,781 Cash and cash equivalents, end of period $17,878,098 $17,497,607 The accompanying notes are an integral part of these condensed consolidated interim financial statements. Covalon Technologies Ltd. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) Expressed in Canadian Dollars Page 7 of 16 1. CORPORATE INFORMATION Covalon Technologies Ltd. (“the Company”) is incorporated under the laws of Ontario and is engaged in the business of researching, developing, manufacturing, and marketing of patent-protected medical products that improve patient outcomes and save lives in the areas of infection management, advanced wound care and surgical procedures. The unaudited condensed consolidated interim financial statements of Covalon Technologies Ltd. for the three months ended December 31, 2025, comprise the results of the Company and its wholly owned subsidiaries. The Company leverages its patented medical technology platforms and expertise in two ways: (i) by developing products that are sold under the Company’s name; and, (ii) by developing and commercializing medical products for other medical companies under development and license contracts. The Company has received regulatory approval on numerous products and both manufactures certain products, leverages contract manufacturers to make certain products, and utilizes distribution contracts to sell its commercialized products to medical customers. The Company generates its revenues through development contracts, licensing agreements, distribution contracts, and sales of products. The Company is listed on the TSX Venture Exchange (the “TSX-V”), having the symbol COV. The Company also trades on the OTCQX Best Market, having the symbol of CVALF. The address of the Company’s corporate office and principal place of business is 1660 Tech Avenue, Unit 5, Mississauga, Ontario, Canada. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION The Company’s unaudited condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS Accounting Standards”) applicable to the preparation of interim financial statements, under IAS 34, Interim Financial Reporting. These condensed consolidated interim financial statements are presented in Canadian dollars and should be read in conjunction with the Company’s annual financial statements for the year ended September 30, 2025, which were prepared in accordance with IFRS Accounting Standards. The accounting policies adopted are consistent with those of the previous financial year. The unaudited condensed consolidated interim financial statements were authorized for issue by the Board of Directors on February 24, 2026. Accounting pronouncements issued but not yet effective The IASB has issued classification, measurement and disclosure amendments to IFRS 9, Financial Instruments and IFRS 7, Financial Instruments: Disclosures with an effe --- ctive date for annual reporting periods beginning on or after January 1, 2026. The amendments clarify the date of recognition and derecognition of some financial assets and liabilities and introduce a new exception for some financial liabilities settled through an electronic payment system. Other changes include a clarification of the requirements when assessing whether a financial asset meets the solely payments of principal and interest criteria and new disclosures for certain instruments with contractual terms that can change cash flows (including instruments where cash flows changes are linked to environment, social or governance targets). IFRS 18, Presentation and Disclosure in Financial Statements (IFRS 18) is a new standard that will provide new presentation and disclosure requirements, and which will replace IAS 1, Presentation of Financial Statements (IAS 1). IFRS 18 introduces changes to the structure of the income statement; provides required disclosures in financial statements for certain profit or loss performance measures that are reported outside an entity’s financial statements; and provides enhanced principles on aggregation and disaggregation in financial Covalon Technologies Ltd. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) Expressed in Canadian Dollars Page 8 of 16 statements. Many other existing principles in IAS 1 have been maintained. IFRS 18 is effective for years beginning on or after January 1, 2027. The impact of the adoption of these pronouncements is currently being assessed. 3. INVENTORIES Inventories consist of the following: December 31, September 30, 2025 2025 Raw materials $4,011,221 $4,065,394 Finished goods 3,176,164 3,750,901 Inventory provision (364,895) (415,508) $6,822,490 $7,400,787 Cost of product sales for the three months ended December 31, 2025, includes $2,838,534 (2024 - $3,101,889), in inventoried materials. The company wrote-off inventories against the inventory provision during the three months ended December 31, 2025, totaling $115,221 (2024 - $357,363). Inventory provisions to write-downs inventories to net realizable value amounted to $64,608 (2024 – ($114,645)) and is included in cost of sales in the condensed consolidated interim statements of operations and comprehensive income (loss). 4. INTANGIBLE ASSETS Intangible assets are comprised of the following amounts: Deferred Development Costs ($) Patents ($) Trademarks ($) Computer Software ($) Total ($) Cost Balance at September 30, 2025, 2,322,058 1,162,573 83,648 1,259,935 4,828,214 Additions - 46,460 - 19,545 66,005 Foreign exchange (35,863) (17,955) (1,292) (19,458) (74,568) Balance at December 31, 2025 2,286,195 1,191,078 82,356 1,260,022 4,819,651 Accumulated amortization Balance at September 30, 2025 2,322,058 711,022 - 444,460 3,477,540 Amortization - 11,909 - 61,005 72,914 Foreign exchange (35,863) (11,186) - (7,919) (54,968) Balance at December 31, 2025 2,286,195 711,745 - 497,546 3,495,486 Carrying amounts At September 30, 2025 - 451,551 83,648 815,475 1,350,674 At December 31, 2025 - 479,333 82,356 762,476 1,324,165 As at December 31, 2025, included in computer software is an amount of $62,402 (September 30, 2025 - $45,622) which primarily relates to new information systems where amortization has not yet commenced as they had not yet been placed into service. Covalon Technologies Ltd. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) Expressed in Canadian Dollars --- Page 9 of 16 5. PROPERTY, PLANT AND EQUIPMENT Furniture and Fixtures ($) Production and Lab Equipment ($) Leasehold Improvements ($) Total ($) Cost Balance at September 30, 2025 508,785 3,326,520 377,830 4,213,135 Additions 43,115 557,473 51,959 652,547 Foreign exchange (7,858) (51,375) (5,835) (65,068) Balance at December 31,2025 544,042 3,832,618 423,954 4,800,614 Accumulated depreciation Balance at September 30, 2025 453,989 2,085,008 319,056 2,858,053 Depreciation 12,798 53,829 641 67,268 Foreign exchange (7,233) (33,131) (4,938) (45,302) Balance at December 31, 2025 459,554 2,105,706 314,759 2,880,019 Carrying amounts At September 30, 2025 54,796 1,241,512 58,774 1,355,082 At December 31, 2025 84,488 1,726,912 109,195 1,920,595 As at December 31, 2025, included in production and lab equipment is an amount of $1,284,681 which primarily relates to new production equipment where amortization has not yet commenced as they had not yet been placed into service. 6. RIGHT-OF-USE ASSETS Right-of-use assets ($) Balance at October 1, 2025 1,886,981 Depreciation (102,335) Foreign exchange 25,348 Balance at September 30, 2025 1,809,994 The Company leases office space in Mississauga, Canada and Seattle, USA. Covalon Technologies Ltd. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) Expressed in Canadian Dollars Page 10 of 16 7. LEASE LIABILITIES Lease liabilities are comprised of the following amounts: Lease liabilities ($) Balance at October 1, 2025 2,253,740 Interest 29,910 Payments (213,729) Foreign exchange (4,850) Balance at December 31, 2025 2,065,071 Current portion 530,394 Non-current portion 1,534,677 Following the impairment of the right of use asset related to the Company’s Seattle lease agreement, an onerous contract liability at December 31, 2025, of $91,247 (September 30, 2025 - $121,841) has been recognized in accounts payable and accrued liabilities related to future variable lease payments that are not included in the lease liability. 8. FINANCE LEASE RECEIVABLE The Company entered into two sublease agreements for a total of 10,451 square feet out of a total of 18,246 square feet that comprises its Seattle facility. Both subleases were considered finance leases as it was reasonably certain that the sublease term will match that of the Company’s existing lease agreements to April 2026. As a result of this transaction the company recognized a finance lease receivable at the inception of the subleases in the amount of $610,008 with an offsetting gain recognized in the condensed consolidated interim statements of operations and comprehensive income (loss). On December 19, 2024, one sublease tenant notified Covalon of their intention to terminate their sublease early, providing a 60-day notice. The tenant vacated the premises on February 28, 2025. This resulted in a loss on the finance lease receivable of $149,690 during the year ended September 30, 2025. Effective December 31, 2025, the remaining tenant vacated the premises. The company recognized a loss on the finance lease receivable of $50,585 during the three months ended December 31, 2025. The movement in finance lease receivable during the period is as follows: Finance lease receivables ($) Balance at October 1, 2025 87,102 Loss on finance lease receivable (50,585) Interest income 740 Brokerage fees (2,565) Payments received (34,220) Foreign exchange (472) Balance at December 31, 2025 - Covalon Technologies Ltd. NOTES TO THE CONDENSED CONSOLIDATED I --- NTERIM FINANCIAL STATEMENTS (UNAUDITED) Expressed in Canadian Dollars Page 11 of 16 9. SHAREHOLDERS’ EQUITY Common Shares The Company is authorized to issue an unlimited number of common shares with no par value. All shares are fully paid. Warrants The following is a summary of all warrants outstanding: Number of Warrants Weighted average exercise Price Weighted Average Expiry (years) Balance at September 30, 2025 200,000 $4.00 0.83 Exercised during the period - - - Balance at December 31, 2025 200,000 $4.00 0.58 10. SHARE-BASED PAYMENTS Long-Term Incentive Plan On March 8, 2023, the shareholders approved the Plan. Stock Options Stock options outstanding are non-transferable options to purchase common shares of the Company which may be granted to Directors, officers, employees, or service providers of the Company. The terms of the stock options provide that the Directors have the right to grant options to acquire common shares of the Company at not less than the closing market price of the shares on the day preceding the grant at terms of up to ten years. No amounts are paid or payable by the recipient on receipt of the stock option. All stock options issued to date will vest as follows: 34% of the options vest in one year, with a further 33% vesting in each of the subsequent two years on the anniversary of the initial grant date. Future grants of stock options may vest over alternative periods as authorized by the Directors. RSUs and DSUs RSUs and DSUs vest over a period of three years on each anniversary of the grant date unless a different vesting schedule is approved by the Board of Directors. DSUs are only eligible to be converted into common shares of the Company when the holder ceases their relationship to the Company. The maximum number of common shares which may be issued under the Plan cannot exceed 10% of the common shares issued and outstanding at any given time, calculated on a non-diluted basis. Grants held by non- employee directors of the Company are at all times limited to no more than 1% of the common shares issued and outstanding, calculated on a non-diluted basis, and the total annual grant to any one non-employee director under the Plan cannot exceed a grant value of $150,000 in total equity. Covalon Technologies Ltd. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) Expressed in Canadian Dollars Page 12 of 16 The following is a summary of changes in stock options from October 1, 2025, to December 31, 2025: Deferred Share Units The following is a summary of changes in Deferred Share Units from October 1, 2025 to December 31, 2025: Share Based Payment Expense Total share-based payment expense recognized during the three months ended December 31, 2025, was $67,530 (2024 - $90,523). 11. FINANCIAL RISK MANAGEMENT The following is a discussion of market, credit, and liquidity risks and related mitigation strategies that have been identified. Credit Risk The Company is exposed to credit risk associated with its cash and cash equivalents, accounts receivable and finance lease receivable. The risk is reduced by having accounts receivables insured or obtaining letters of credit when the Company determines that it is warranted. The Company applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all accounts receivables. To measure the expected credit losses, accounts receivables are grouped based on shared credit risk characteristics and --- the days past due. On the basis, the loss allowance as at December 31, 2025 and 2024 is nominal as the Company only transacts with hospitals, distributors and private clinics and has not incurred a sustained trend of any credit losses. Grant Date Expiry Date Exercise Price Opening Balance Granted Exercised Forfeited/ Expired Closing Balance Vested Unvested Weighted Average Expiry (years) 28-Mar-22 28-Mar-27 $2.19 357,500 - - (12,500) 345,000 345,000 - 1.24 06-Sep-22 06-Sep-27 $2.50 126,668 - - (16,668) 110,000 110,000 - 1.68 10-Jan-24 10-Jan-29 $1.50 800,000 - - - 800,000 100,000 700,000 3.03 30-May-25 30-May-30 $2.50 150,000 - - - 150,000 - 150,000 4.42 1,434,168 - - (29,168) 1,405,000 555,000 850,000 2.63 $1.86 - - $2.37 $1.85 $2.13 $1.68 Weighted Average Exercise Price Grant Date Exercise Price Opening Balance Granted Vested Forfeited/ Expired Closing Balance Vested Unvested 20-Oct-23 $1.44 280,000 - (200,000) - 80,000 53,333 26,667 280,000 - (200,000) - 80,000 53,333 26,667 $ 1.44 $ - $ 1.44 $ - $ 1.44 $ 1.44 $ 1.44 Weighted Average Exercise Price Covalon Technologies Ltd. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) Expressed in Canadian Dollars Page 13 of 16 The Company’s cash management policies include ensuring cash and cash equivalents are deposited in Canadian chartered banks. Accounts receivables are written off when there is no reasonable expectation of recovery which may be supported by failure to make contractual payments for more than 180 days as well as other factors. Accounts receivables are subject to normal industry risks in each geographic region in which the Company operates. The Company attempts to manage these risks by dealing with creditworthy customers; however, due to the limited number of potential customers in each market this is not always possible. As at December 31, 2025, five customers accounted for 77% (September 30, 2025 – five customers for 89%) of the accounts receivable balance. These customers, who are distributors and strategic partners of the Company, represent a large portion of the Company’s sales. Credit risk exposure is mitigated by strong credit granting policies, the use of letters of credit, and due diligence procedures for new customers. The aging of accounts receivable is as follows: December 31, September 30, 2025 2025 Current $2,005,023 $5,097,136 30-60 days past due 178,696 743,081 $2,183,719 $5,840,217 Interest Rate Risk The Company is subject to interest rate risk on its cash, cash equivalents. The Company believes that interest rate risk is low due to market based variable interest rates. Currency Risk The Company’s exposure to foreign currency risk at the end of the reporting period, expressed in Canadian dollars, was as follows: December 31, 2025 September 30, 2025 Canadian USD Total CAD USD Total Cash and cash equivalents $178,857 $17,699,241 $17,878,098 $100,136 $17,267,152 $17,367,288 Accounts receivable $74,151 $2,109,568 $2,183,719 $107,163 $5,733,054 $5,840,217 Finance lease receivable - - - - $87,102 $87,102 Accounts payable and accrued liabilities $266,484 $3,545,122 $3,811,606 $300,291 $2,842,647 $3,142,938 Lease liabilities $1,858,966 $206,105 $2,065,071 $1,943,138 $310,602 $2,253,740 Covalon Technologies Ltd. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) Expressed in Canadian Dollars Page 14 of 16 If exchange rates were to change by 5% at December 31, 2025 total comprehensive income (loss) would change by $ --- 802,879 (2024 - $804,372). Fair Value The fair values of cash and cash equivalents, accounts receivable, finance lease receivable, accounts payable and accrued liabilities and lease liabilities approximate their carrying values, due to their relatively short periods to maturity. Liquidity risk The Company continually monitors working capital to ensure sufficient cash is available to meet operational and capital expenditure requirements. The Company has contractual obligations related to lease liabilities and accounts payable and accrued liabilities that are due as reflected in the following table: Carrying amount ($) Future cash flows ($) Less than 1 year ($) Between 1 and 5 years ($) Greater than 5 years ($) Accounts payable and accrued liabilities 3,811,606 3,811,606 3,811,606 - - Lease liabilities 2,065,071 2,315,361 658,936 1,656,425 - Total 5,876,677 6,126,967 4,470,542 1,656,425 - 12. CAPITAL MANAGEMENT The Company defines capital that it manages as its shareholders’ equity comprising share capital, contributed surplus, foreign exchange translation reserve and accumulated deficit. Its objectives when managing capital are to ensure that the Company will continue as a going concern, so that it can provide services to its customers and returns to its shareholders. The capital at December 31, 2025 is $26,391,645 (September 30, 2025 – $30,726,909). The Company manages its capital structure and adjusts it considering economic conditions. The Company, upon approval from its Board of Directors, will make changes to its capital structure as deemed appropriate under the specific circumstances. Covalon Technologies Ltd. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) Expressed in Canadian Dollars Page 15 of 16 13. RELATED PARTY TRANSACTIONS Key management personnel includes the Company’s directors and senior management team. These individuals are responsible for planning, directing and controlling the activities of an entity. Key management personnel compensation comprised: Three months ended December 31, 2025 2024 Compensation and short-term employee benefits $466,383 $494,772 Share based payment expense 67,530 73,343 $533,913 $568,115 The Company had previously accrued $667,969 for termination benefits owing to a former member of senior management during the fiscal year end September 30, 2023. This provision included entitlements under the Employment Standards Act, 2000, which have since been paid. The amount continues to represent management’s best estimate of the termination benefits owed. On April 5, 2024, this former senior executive filed a claim for wrongful dismissal. An additional amount of $1,832,031 has been claimed, which the Company has not accrued for and believes to be unwarranted. There can be no assurance as to the final outcome of the claim and termination benefits owed. During the year end September 30, 2013, a non-interest-bearing loan of $50,000 was made to a key employee. As of December 31, 2025, $10,000 of this loan remained outstanding. 14. EXPENSES BY NATURE The consolidated statements of operations and comprehensive income include the following expenses by nature: Three months ended December 31, 2025 2024 Inventoried materials $2,838,534 $3,101,889 Wages, benefits, consulting fees, director compensation 2,398,228 2,340,624 Share based payments 67,530 90,523 Depreciation and amortization 242,517 257,125 Facilities 59,661 86,455 Patent and trademark maintenance 8,224 75,792 Insurance 95,0 --- 67 101,162 Information technology system costs 230,059 202,169 Professional fees 253,658 243,182 Other expenses 642,580 352,391 Total $6,836,058 $6,851,312 Covalon Technologies Ltd. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) Expressed in Canadian Dollars Page 16 of 16 Depreciation and amortization Three months ended December 31, 2025 2024 Cost of product sales $41,537 $69,625 Operations 57,393 22,676 Research and development activities 24,201 22,703 General and administrative 119,386 142,121 Total depreciation and amortization $242,517 $257,125 15. EARNINGS PER SHARE Three months ended December 31, 2025 2024 Weighted average number of common shares outstanding – basic 27,576,319 27,398,077 Dilutive effect of securities outstanding Stock Options/DSU’s 196,838 645,342 Weighted average number of common shares outstanding – diluted 27,773,157 28,043,419 16. SEGMENT REPORTING During the three months ended December 31, 2025, the Company generated revenue of $6,305,480 (2024 – $7,137,832) in the USA, $507,546 (2024 – $977,977) in the Middle East, $25,488 (2024 – $8,477) in Canada, $45,060 (2024 – $20,719) in Latin America, and $4,728 (2024 – $20,975) in the rest of the world. As of December 31, 2025, the Company had $5,052,964 (September 30, 2025 - $4,590,373) of its property, plant, and equipment, right-of-use assets and intangible assets located in Canada and $1,790 (2024 – $2,364) in the USA.