SEDAR Interim Financial Statements

Railtown AI Technologies Inc. Condensed Consolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 Unaudited – Prepared by Management (Expressed in Canadian Dollars) NOTICE TO READER 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 financial statements have not been reviewed by an auditor. The accompanying unaudited interim consolidated financial statements have been prepared by and are the responsibility of the management. In the opinion of management, the unaudited condensed interim financial statements have been prepared within acceptable limits of materiality and in accordance with International Accounting Standard 34 – Interim Financial Reporting (“IAS 34”), consistent with International Financial Reporting Standards (“IFRS”) appropriate in the circumstances The Company's independent auditor has not performed a review of these financial statements in accordance with the standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity's auditor. RAILTOWN AI TECHNOLOGIES INC. Condensed Consolidated Interim Statements of Financial Position (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) December 31, 2025 September 30, 2025 Assets Current assets Cash $ 517,893 $ 752,474 Receivables 262,348 151,291 Prepaid expenses (Note 4) 88,470 242,909 868,711 1,146,674 Equipment 17,357 16,139 Right of use asset (Note 6) 49,251 57,943 Goodwill (Note 3) 22,591,378 - $ 23,526,697 $ 1,220,756 Liabilities and Shareholders’ Equity Current liabilities Trade payables and accrued liabilities (Note 5) $ 291,888 $ 208,711 Lease liability current portion (Note 6) 43,338 41,712 Derivative liability (Note 9) 1,481 1,308,049 336,707 1,558,472 Lease liability (Note 6) 19,964 31,436 356,671 1,589,908 Shareholders’ equity Share capital (Note 8) 40,108,710 16,842,101 Contribution surplus (Notes 7 and 8) 2,330,703 2,281,691 Deficit (19,269,387) (19,492,944) 23,170,026 (369,152) $ 23,526,697 $ 1,220,756 Nature of Operations (Note 1) Subsequent event (Note 12) Approved on behalf of the Board on March 2, 2026 "Cory Brandolini" "Paul Woodward" Director Director See accompanying notes to the condensed consolidated interim financial statements. RAILTOWN AI TECHNOLOGIES INC. Condensed Consolidated Interim Statements of Comprehensive Income (Loss) (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) Three months ended December 31, 2025 2024 Expenses Consulting fees $ 297,955 $ 111,909 Depreciation (Note 6) 10,472 12,312 Filing fees 53,932 31,726 Interest on lease (Note 6) 2,272 3,447 Investor relations 56,304 92,063 Marketing and promotion 19,375 422,756 Office 57,976 151,789 Product development 24,091 18,736 Professional fees 85,576 13,675 Salaries and benefits (Note 7) 411,401 367,720 Share-based compensation (Notes 7 and 8) 49,012 902,599 Travel 14,645 14,563 (1,083,011) (2,143,295) Gain on change in fair value of warrants (Note 9) 1,306,568 2,713 Net and comprehensive income (loss) for the period $ 223,557 $ (2,140,582) Weighted average number of common shares outstanding – basic and diluted 162,846,936 93,300,114 Basic and diluted loss per common shares $ (0.00) $ (0.02) See accompanying notes to the condensed consolidated interim financial statements. RAILTOWN AI TECHNOLOGIES INC. Condensed Co --- nsolidated Interim Statements of Cash Flows (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) Three months ended December 31, 2025 2024 Operating activities: Net income (loss) for the period $ 223,557 $ (2,140,582) Items not involving cash: Depreciation 10,473 12,312 Interest on lease liability 2,272 3,447 Gain on FV of warrants (1,306,568) (2,713) Share-based compensation 49,012 902,599 Changes in non-cash working capital items: Receivables (28,212) (8,757) Prepaid expense 154,439 125,160 Trade payables and accrued liabilities 83,177 (23,394) Net cash used in operating activities (811,850) (1,131,928) Investing activities: Cash from business acquisition 84,852 Purchase of equipment (2,999) - Net cash used in investing activities 81,853 - Financing activities: Proceeds from private placements - 2,100,000 Unit issuance costs – cash - (156,615) Proceeds from exercise of warrants 507,534 28,130 Lease payments (12,118) (11,866) Net cash provided by (used in) financing activities 495,416 1,959,649 Change in cash (234,581) 827,721 Cash, beginning of the period 752,474 1,668,521 Cash, end of the period $ 517,893 $ 2,496,242 See accompanying notes to the condensed consolidated interim financial statements. RAILTOWN AI TECHNOLOGIES INC. Condensed Consolidated Interim Statement of Changes in Shareholders’ Equity (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) Share Capital Shares Amount Equity portion of convertible debenture Contribution Surplus Deficit Total Balance, September 30, 2024 131,727,647 13,371,624 $ - $ 1,262,681 $(14,114,390) $ 519,915 Private placements 7,000,000 2,100,000 - - - 2,100,000 Unit issuance costs – cash - (156,615) - - - (156,615) Unit issuance costs – warrants - (196,800) - 196,800 - - Exercise of warrants 105,850 28,130 - - - 28,130 Share-based compensation - - - 902,599 - 902,599 Net and comprehensive loss - - - - (2,140,582) (2,140,582) Balance, December 31, 2024 138,833,497 $15,146,339 $ - $ 2,362,080 $(16,254,972) $ 1,253,447 Private placements 1,200,000 600,000 - - - 600,000 Unit issuance costs – warrants - 93,100 - (93,100) - - Exercise of warrants 3,113,286 1,002,662 - (98,859) - 903,803 Share-based compensation - - - 111,570 - 111,570 Net and comprehensive loss - - - - (3,237,972) (3,237,972) Balance, September 30, 2025 143,146,783 $16,842,101 $ - $ 2,281,691 $(19,492,944) $ (369,152) Shares issued on the acquisition of AIP 49,476,251 22,759,075 - - - 22,759,075 Exercise of warrants 1,763,742 507,534 - - - 507,534 Share-based compensation - - - 49,012 - 49,012 Net and comprehensive income - - - - 223,557 223,557 Balance, December 31, 2025 194,386,776 $40,108,710 $ - $ 2,330,703 $(19,269,386) $23,170,026 See accompanying notes to the condensed consolidated interim financial statements. RAILTOWN AI TECHNOLOGIES INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) 1. Nature of operations Railtown AI Technologies Inc. (the “Company” or “Railtown”) was incorporated by a Certificate of Incorporation issued pursuant to the provisions of the Business Corporations Act (British Columbia) on May 11, 2011. The head office of the Company is located at Unit 104, 8337 Eastlake Drive, Burnaby, Briitish Columbia, V6C 2E7. The registered office of the Company is located at 3148 Highland Boulevard, North Vancouver, British Columbia, V7R 2X6. These condensed in --- terim financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As at December 31, 2025, the Company is not able to finance day to day activities through operations and incurs losses. The Company is in the business of research and development that by its nature involves a high degree of risk. There can be no assurance that the Company’s business and strategy will enable it to become profitable or sustain profitability in future periods. The Company’s information technology systems are subject to disruption, damage or failure from a number of sources. This may result in a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects. Additionally, the Company estimates that it will need additional capital to operate for the upcoming year. These material uncertainties may cast significant doubt on the Company’s ability to continue as a going concern. Management intends to finance operating costs with loans from directors and companies controlled by directors and or private placement of common shares. These condensed interim financial statements do not reflect adjustments that would be necessary if the going concern assumption was not appropriate. The Company’s business may be affected by changes in political and market conditions, such as interest rates, availability of credit, inflation rates, changes in laws, and national and international circumstances. Recent geopolitical events and potential economic global challenges such as the risk of higher inflation and energy crises, may create further uncertainty and risk with respect to the prospects of the Company’s business. 2. Significant accounting policies and basis of presentation Statement of compliance These unaudited condensed interim financial statements, including comparatives have been prepared using accounting policies consistent with IFRS Accounting Standards as issued by the International Accounting Standards Board (“IASB”) and in accordance with International Accounting Standards (‘IAS”) 34, Interim Financial Reporting. The policies applied in the condensed interim financial statements are presented below and are based on IFRS’ issued and outstanding as of March 2, 2026; the date the Board of Directors approved the condensed interim financial statements. Any subsequent changes to IFRS that are given effect in the Company’s annual financial statements for the year ending September 30, 2025 could result in restatements of these condensed interim financial statements. None of these standards are expected to have a significant effect on the condensed interim financial statements. Basis of preparation The condensed interim financial statements of the Company have been prepared on an accrual basis and are based on historical costs, modified where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. The financial statements are presented in Canadian dollars unless otherwise noted. RAILTOWN AI TECHNOLOGIES INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) 2. Significant accounting policies and basis of presentation (continued) Basis of consolidation These consolidated --- financial statements include the accounts of the Company and its subsidiaries as at December 31, 2025. Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries as if they formed a single entity. All inter-company transactions and balances between the companies are therefore eliminated in full. The consolidated financial statements include the financial information of the Company and its subsidiaries listed in the following table: Name of subsidiary Country of incorporation Ownership interest at December 31, 2025 Ownership interest at December 31, 2024 Railtown AI Tool Co. Limited Canada 100% 100% AI Partnerships Corp. Canada 100% 0% Significant estimates and assumptions The preparation of the condensed interim financial statements in accordance with IFRS requires the Company to make estimates and assumptions concerning the future. The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised. The most significant estimate is the discount rate used to determine the Company’s convertible debenture fair value on initial recognition. Significant judgments The preparation of the condensed interim financial statements in accordance with IFRS requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying the Company’s financial statements include the assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty. Equipment Equipment are recorded at cost and depreciated using the straight line method at the following rates per annum. Computer 3 years Equipment 5 years Equipment that is withdrawn from use, or has no reasonable prospect of being recovered through use or sale, are regularly identified and written off. The assets’ residual values, deprecation methods and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Subsequent expenditures relating to an item of equipment are capitalized when it is probable that future economic benefits from the use the assets will be increased. All other subsequent expenditures are recognized as repairs and maintenance. RAILTOWN AI TECHNOLOGIES INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) 2. Significant accounting policies and basis of presentation (continued) Loss per share Basic loss per share is calculated by dividing the loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. For all periods presented, the loss attributable to common shareholders equals the reported loss attributable to owners of the Company. Diluted loss per share is calculated by the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding for the calc --- ulation of diluted loss per share assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the period. For the period ended December 31, 2025, 7,175,000 (2024 – 7,175,000) stock options and 20,021,944 (2024 – 26,547,872) warrants were not included in the calculation of diluted loss per shares because their inclusion was anti-dilutive. Financial instruments Financial assets and financial liabilities are recognized on the statements of financial position when the Company becomes a party to the contractual provisions of the financial instrument. Classification The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL. Measurement Financial assets and liabilities at amortized cost Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment. Financial assets and liabilities at FVTPL Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are recognized in the profit and loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in profit or loss in the period in which they arise. Debt investments at FVOCI These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss. Equity investments at FVOCI These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss. RAILTOWN AI TECHNOLOGIES INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) 2. Significant accounting policies and basis of presentation (continued) Financial Instruments (continued) Impairment of financial assets at amortized cost The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the fina --- ncial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in profit or loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized. Financial instruments (continued) Derecognition Financial assets The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Financial liabilities The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expired. The Company also derecognizes a financial liability when the terms of the liability are modified such that the terms and / or cash flows of the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value. Gains and losses on derecognition are generally recognized in profit or loss. The Company’s financial assets and liabilities are recorded and measured as follows: Asset or liability Category Measurement Cash FVTPL Fair value Trade payable and accrued liabilities Other financial liabilities Amortized cost Convertible debenture Other financial liabilities Amortized cost The Company determines the fair value of financial instruments according to the following hierarchy based on the amount of observable inputs used to value the instrument. There were no transfers between levels of the fair value hierarchy during the year. Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace. RAILTOWN AI TECHNOLOGIES INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) 2. Significant accounting policies and basis of presentation (continued) Financial Instruments (continued) Level 3 – Valuations in this level are those with inputs for the asset or liability that are not based on observable market data. Cash has been measured at fair value using Level 1 inputs. Valuation of equity units issued in private placements The Company records proceeds from issuances of equity net of issue costs and any related tax effects. The Company has adopted the residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first attrib --- utes value to the shares based on their quoted trading price at issuance, and the residual amount, if any, is attributed to the value of the warrants. Any fair value attributed to the warrants is recorded within the warrant reserve. Share-based payments Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant are measured using the Black-Scholes option pricing model and charged to profit or loss over the vesting period. Performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether these vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied. Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period. Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in profit or loss, unless they are related to the issuance of shares. Amounts related to the issuance of shares are recorded as a reduction of share capital. When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. All equity-settled share-based payments are reflected in reserves, until exercised. Upon exercise, shares are issued from treasury and the amount reflected in reserves is credited to share capital, adjusted for any consideration paid. If the options expire unexercised, the share-based payments remain in share-based payment reserve. Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vesting conditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration of vesting and recognizes the amount that otherwise would have been recognized for services received over the remainder of the vesting period. Any payment made to the employee on the cancellation is accounted for as the repurchase of an equity interest except to the extent the payment exceeds the fair value of the equity instrument granted, measured at the repurchase date. Any such excess is recognized as an expense. RAILTOWN AI TECHNOLOGIES INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) 2. Significant accounting policies and basis of presentation (continued) Leases At inception, the Company assesses whether a contract contains an embedded lease. A contract contains a lease when the contract conveys a right to control the use of an identified asset for a period of time in exchange for --- consideration. The Company, as lessee, is required to recognize a right-of-use asset (“ROU asset”), representing its right to use the underlying asset, and a lease liability, representing its obligation to make lease payments. The Company may elect to not apply IFRS 16 to leases with a term of less than 12 months or to low value assets, which is made on an asset by asset basis. The Company recognizes a ROU asset and a lease liability at the commencement of the lease. The ROU asset is initially measured based on the present value of lease payments, plus initial direct cost, less any incentives received. It is subsequently measured at cost less accumulated amortization, impairment losses and adjusted for certain remeasurements of the lease liability. The ROU asset is amortized from the commencement date over the shorter of the lease term or the useful life of the underlying asset. The ROU asset is subject to testing for impairment if there is an indicator of impairment. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by the interest rate implicit in the lease, or if that rate cannot be readily determined, the incremental borrowing rate. The incremental borrowing rate is the rate which the operation would have to pay to borrow over a similar term and with similar security, the funds necessary to obtain an asset of similar value to the ROU asset in a similar economic environment. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or a rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised. Variable lease payments that do not depend on an index or a rate not included in the initial measurement of the ROU asset and lease liability are recognized as an expense in profit or loss the in the period in which they are incurred. Adoption of new accounting standards, interpretations and amendments The Company has performed an assessment of new standards issued by the IASB that are not yet effective. The Company has assessed that the impact of adopting these accounting standards on its financial statements would not be significant. 3. Acquisition of AIP On November 26, 2025 the “Effective Date”), the Company issued 49,476,251 common shares (the “Consideration Shares”) at a fair value of 22,759,075 pursuant to an Amalgamation Agreement with AI Partnerships Corp. (“AIP”) to acquire all the outstanding share of AIP. These common shares are subject to certain escrow and contractual obligations on the following basis: i) Approximately 10 million common shares (the “Escrow Shares”) are placed in escrow upon closing on the following basis: RAILTOWN AI TECHNOLOGIES INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) 3. Acquisition of AIP (continued) a. Approximately 1 million Escrow Shares (the “Indemnity Shares”) will be subject to cancellation for no consideration in the event Railtown makes an indemnification claim prior to the --- date that is 12 months from the Effective Date, with one common share being cancelled for every $0.50 of the Company’s claim; and b. 50% of the Escrow Shares (including any Indemnity Shares that were not cancelled) will be eligible for release from escrow upon the Company recording annual recurring revenue from AIP Affiliates equal to or greater than $1 million from the Effective Date to the date that is 36 months from the Effective Date (the "First Milestone") and the remaining 50% of the Escrow Shares will be eligible for release from escrow upon Railtown recording annual recurring revenue from AIP Affiliates equal to or greater than $2,000,000 (the "Second Milestone") from the Effective Date to the date that is 36 months from the Effective Date. If the First Milestone and/or Second Milestone are not met by the date that is 36 months from the Effective Date, the Escrow Shares that were to be released upon satisfaction of such milestone will be cancelled for no consideration. c. All other Consideration Shares received by the Key AIP Shareholders (the “Key Shareholder Shares”) are placed into escrow on the Effective Date and released in equal quarterly instalments during the 36 months following the Effective Date; and d. All other Consideration Shares are subject to a contractual restriction on transfer pursuant to the Amalgamation Agreement with 10% of such shares being released from any restriction on transfer as of the Effective Date and the remainder being released in six equal instalments of 15% on a quarterly basis until the date that is 18 months from the Effective Date. The acquisition was accounted for under IFRS 3 – Business Combinations and not as an asset acquisition. The consideration paid and the allocation of the consideration to the fair value of the assets acquired and liabilities assumed in the acquisition on November 26, 2025 are as follows: Goodwill is attributed to AIP’s partnerships and world-wide affiliate network of AI-as-a-Service based companies. Purchase Consideration: Share capital $ 22,759,075 22,759,075 Net assets acquired Cash 84,852 Non-trade receivables 82,845 Fair Value of net assets 167,697 Goodwill $ 22,591,378 RAILTOWN AI TECHNOLOGIES INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) 4. Prepaid expenses December 31, 2025 September 30, 2025 Rental deposits $ 9,497 $ 9,497 Insurance and other 48,104 46,238 Investor relations 30,869 77,174 Consulting - 110,000 Prepaid expenses $ 88,470 $ 242,909 5. Trade payables and accrued liabilities December 31, 2025 September 30, 2025 Trade payables $ 158,876 $ 35,581 Accrued liabilities 133,012 173,130 Trade payables and accrued liabilities $ 291,888 $ 208,711 6. Right-of-use asset On June 1, 2022, the Company entered into a 5-year office lease agreement. In analysing the identified agreement, the Company applied the lease accounting model pursuant to IFRS 16 and considered all the facts and circumstances surrounding the inception of the agreement. The lease term matures on May 31, 2027. The right of use asset is depreciated on a straight-line basis over the term of the lease. The continuity of the ROU asset for the period ended December 31, 2025 and year ended September 30, 2025 is as follows: Right of use asset, September 30, 2024 $ 92,708 Amortization of ROU asset (34,765) Right of use asset, September 30, 2025 $ 57,943 Amortiza --- tion of ROU asset (8,692) Right of use asset, December 31, 2025 $ 49,251 The continuity of lease liabilities for the period ended December 31, 2025 and year ended September 30, 2024 is as follows: Lease liability, September 30, 2024 $ 108,860 Interest expense 12,088 Lease payments (47,800) Lease liability, September 30, 2025 $ 73,148 Interest expense 2,272 RAILTOWN AI TECHNOLOGIES INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) Lease payments (12,118) Lease liabilities, December 31, 2025 $ 63,302 Current lease liability $ 43,338 Long-term lease liability 19,964 Total lease liabilities at December 31, 2025 $ 63,302 7. Related party transactions and Key management compensation During the period ended December 31, 2025, the Company paid or accrued: i) salaries of $112,933 (2024 - $105,000) paid or accrued to directors and officers of the Company. and ii) consulting fees of $nil (2024 - $15,000) to a company with common directors of the Company.. As at December 31, 2025, trade payables and accrued liabilities include $nil (2024 – $93) owing to related parties. The amount due to related parties is unsecured, non-interest bearing and has no specific terms of repayment. Related party transactions are conducted in the normal course of business and are measured at the exchange amount, which is the amount of consideration established and agreed to by the parties. 8. Share capital Authorized Unlimited number of common shares without par value. Shares issued During the period ended December 31, 2025, the Company issued: i) Issued 49,476,251 common shares (the “Consideration Shares”) on November 26, 2025 (the “Effective Date”), pursuant to an Amalgamation Agreement with AI Partnerships Corp. (“AIP”) to acquire all the outstanding share of AIP. ii) issued 1,763,742 common shares pursuant to the exercise of warrants. During the year ended September 30, 2025, the Company: i) issued 7,000,000 units at a price of $0.30 per unit for gross proceeds of $2,100,000. Each unit is comprised of one common share and one-half share purchase warrant. Each warrant will entitle the holder to purchase one common share at a price of $0.60, expiring on or before a 24-month period after the closing date. In connection with the financing, the Company paid cash of $156,616 and granted 545,602 brokers’ warrants valued at $103,700. Each brokers’ warrant will entitle the holder to purchase one common shares at a price of $0.30, expiring on or before a 24-month period after the closing date. ii) issued 1,200,000 units at a price of $0.50 per unit for gross proceeds of $600,000. Each unit is comprised of one common share and one-half share purchase warrant. Each warrant will entitle the iii) RAILTOWN AI TECHNOLOGIES INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) 8. Share capital (continued) iv) holder to purchase one common share at a price of $0.75, expiring on or before a 18-month period after the closing date. v) issued 3,219,136 common shares pursuant to the exercise of warrants. The Company received cash proceeds of $896,459 and transferred fair value of $98,859 from contributed surplus and fair value of $35,474 from derivative liability to share capital upon exercise. Stock options The Company adopted --- a stock option plan to grant options to individuals exercisable up to 10 years from the date of grant to purchase shares at the market price, less applicable discount, if any. Such grants not to exceed an aggregate of 10% of the issued and outstanding shares and vesting periods will be determined by the Board of Directors. During the period ended December 31, 2025, the Company did not grant any stock options During the year ended September 30, 2025, the Company granted 2,800,000 stock options at a price of $0.50 per share, expiring on November 22, 2029. The stock options are valued at $1,098,300. The options vest as follows: i) 1,950,000 options vest immediately. ii) 850,000 options vest as follows: a. 405,000 options vest on November 22, 2025; b. 405,000 options vest on November 22, 2026; and c. 40,000 options vest on November 22, 2027. During the three months ended December 31, 2025, the Company recognized share-based compensation of $49,012 (2024 - $902,599) Details of stock option activities for the period ended December 31, 2025 and year ended September 30, 2025: Stock options outstanding Period ended December 31, 2025 Year ended September 30, 2025 Number of Options Weighted average exercise price Number of Options Weighted average exercise price # $ # $ Outstanding – beginning of period/year 7,175,000 0.35 4,375,000 0.25 Granted - - 2,800,000 0.50 Outstanding – end of period/year 7,175,000 0.35 7,175,000 0.35 RAILTOWN AI TECHNOLOGIES INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) 8. Share capital (continued) Stock Options (continued) The following table discloses the number of options outstanding and exercisable as at December 31, 2025: Expiry Date Exercise Price Number of Options Outstanding Number of Options Exercisable March 15, 2026 $0.25 1,900,000 1,900,000 May 13, 2026 $0.25 125,000 125,000 February 9, 2028 $0.25 1,250,000 1,250,000 November 1, 2028 $0.25 1,100,000 580,000 November 22, 2029 $0.50 2,800,000 2,355,000 7,175,000 6,210,000 As at December 31, 2025, the options outstanding had a weighted average remaining life of 2.38 years (September 30, 2025 – 2.64 years). The fair value of options granted and vested was calculated using the Black-Scholes Model for total share-based compensation based on the following weighted average assumptions: Period Ended December 31, 2025 Year Ended September 30, 2025 Risk-free interest rate - 3.27% Expected life of warrants - 5.00 years Annualized volatility - 181.43% Dividend yield - 0% Volatility is determined based on comparable publicly listed entities. Warrants During the period ended December 31, 2025, the Company did not grant any warrants: During the year ended September 30, 2025, the Company granted: i) 545,602 brokers’ warrants exercisable at $0.30 per share until December 9, 2026 in connection with the issuance of a non-brokered private placement. The estimated fair value of these warrants at the grant date was $103,700. ii) 3,500,000 warrants exercisable at $0.60 per share until December 9, 2026. The estimated fair value of these warrants at the grant date was $Nil. iii) 600,000 warrants exercisable at $0.75 per share until January 9, 2027. The estimated fair value of these warrants at the grant date was $Nil. Details of warrant activity for the period ended December 31, 2025 and year ended September 30, 2025: RAILTOWN AI TECHNOLOGIES INC. N --- otes to the Condensed Consolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) 8. Share capital (continued) Warrants (continued) Warrants outstanding Period ended December 31, 2025 Year ended September 30, 2025 Number of Warrants Weighted average exercise price Number of Warrants Weighted average exercise price # $ # $ Outstanding – beginning of period/year 24,034,586 0.38 22,608,120 0.32 Granted - - 4,645,602 0.58 Exercised (1,763,742) 0.29 (3,219,136) 0.27 Expired (2,248,900) 0.24 - - Outstanding – end of period/year 20,021,944 0.36 24,034,586 0.38 The following table discloses the number of warrants outstanding as at December 31, 2025: Expiry Date Exercise Price Number of Warrants Outstanding January 12, 2026 US$0.42 3,405,250 January 12, 2026 US$0.21 475,946 February 15, 2026 $0.30 25,000 February 15, 2026 $0.15 7,500 February 28, 2026 $0.30 5,585,500 February 28, 2026 $0.15 1,428,500 March 1, 2026 $0.30 200,000 March 1, 2026 $0.15 14,400 June 21, 2026 $0.25 3,155,833 June 21, 2026 $0.15 51,447 June 27, 2026 $0.25 977,000 June 27, 2026 $0.15 26,800 December 9, 2026 $0.60 3,282,500 December 9, 2026 $0.30 523,602 June 7, 2029 US$0.125 262,666 January 9, 2027 $0.75 600,000 20,021,944 As at December 31, 2025, the warrants outstanding had a weighted average remaining life of 0.42 years (September 30, 2025 – 0.59 years). The fair value of broker’s warrants was calculated using the Black-Scholes Model based on the following weighted average assumptions: RAILTOWN AI TECHNOLOGIES INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) 8. Share capital (continued) Stock Warrants (continued) Period Ended December 31, 2025 Year Ended September 30, 2025 Risk-free interest rate - 2.91% Expected life of warrants - 2 years Annualized volatility - 124.81% Dividend yield - 0% Volatility is determined based on comparable publicly listed entities. 9. Derivative liability During the year ended September 30, 2024 the Company: i) recognized a derivative liability valued at $160,037 associated with the warrants on grant date. As at September 30, 2024, the Company revalued the derivative liability to $648,646 (2023 - $Nil), resulting in an unrealized loss on change in fair value of warrants of $488,609 (2023 - $Nil) through profit and loss for year ended September 30, 2024. ii) recognized a derivative liability valued at $373,208 associated with the warrants on grant date. As at September 30, 2024, the Company revalued the derivative liability to $631,419 (2023 - $Nil), resulting in an unrealized loss on change in fair value of warrants of $258,211 (2023 - $Nil) through profit and loss for year ended September 30, 2024. The continuity of the derivative liability for the years ended September 30, 2024 and 2023 is as follows: September 30, 2023 $ - Initial recognition 533,245 Change in fair value of warrants 746,820 September 30, 2024 1,280,065 Fair value transfer upon warrant exercises (35,474) Change in fair value of warrants 63,458 September 30, 2025 $ 1,308,049 Expiry and change in fair value of warrants (1,306,568) December 31, 2025 $ 1,481 The fair value of the warrant component was calculated using the Black-Scholes Model based on the following weighted average assumptions: RAILTOWN AI TECHNOLOGIES INC. Notes to the Condensed C --- onsolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) 9. Share capital (continued) Derivative liability (continued) Period Ended December 31, 2025 Year Ended September 30, 2025 Risk-free interest rate 2.58% 2.47% Expected life of warrants 0.03 years 0.24 years Annualized volatility 115.93% 115.82% Dividend yield 0% 0% 10. Financial instruments Fair value Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are: Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and Level 3 – Inputs that are not based on observable market data. The fair value of the Company’s trade payables and accrued liabilities and lease liability approximate their carrying values due to their short-term maturity or capacity of prompt liquidation. Level 1 Level 2 Level 3 As at December 31, 2025 Cash $ 517,893 $ - $ - Derivative liability $ - $ - $ 1,481 As at September 30, 2025 Cash $ 752,474 $ - $ - Derivative liability $ - $ - $ 1,308,049 Financial risk management The Company is exposed in varying degrees to a variety of financial instrument related risks. Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its bank account. All of its cash is deposited in a bank account held with a major bank in Canada. As most of the Company’s cash is held by one bank there is a concentration of credit risk. This risk is managed by using a major bank that is a high credit quality financial institution as determined by rating agencies. RAILTOWN AI TECHNOLOGIES INC. Notes to the Condensed Consolidated Interim Financial Statements Three months ended December 31, 2025 and 2024 (Unaudited – Prepared by Management) (Expressed in Canadian Dollars) 10. Financial instruments (continued) Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company operates only in Canada and is therefore not exposed to foreign exchange risk arising from transactions denominated in a foreign currency. Interest rate risk Interest rate risk is the risk that an investment's value will change due to a change in the level of interest rates. The Company is exposed to interest rate risk as its bank account earns interest income at variable rates. The income earned on the bank account is subject to the movements in interest rates. Management considers the risk to be minimal. Liquidity risk Liquidity risk arises through the excess of financial obligations over available financial assets due at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements at any point in time. Historically, the Company’s main source of funding has been the issuance of equity securities for cash, primarily through private placements. The Company’s access to financing is always uncertain. There can be no assur --- ance of continued access to significant equity funding. At December 31, 2025, the Company had cash of $517,893 (September 30, 2025 - $752,474) to settle trade payables and accrued liabilities of $291,888 (September 30, 2025 - $208,711) and current undiscounted lease payments of $49,061 (September 30, 2025 – $48,809). Management considers the risk to be minimal. 11. Capital disclosure Management’s objective is to manage its capital to ensure that there are adequate capital resources to safeguard the Company’s ability to continue as a going concern through the optimization of its capital structure. The capital structure consists of share capital and working capital. In order to achieve this objective, management makes adjustments to it in light of changes in economic conditions and risk characteristics of the underlying assets. To maintain or adjust capital structure, management may invest its excess cash in interest bearing accounts of Canadian chartered banks and/or raise additional funds externally as needed. The Company is not subject to externally imposed capital requirements. The Company’s management of capital did not change during the period ended December 31, 2025. 12. Subsequent events Subsequent to the period ended December 31, 2025, the Company: i) issued 5,664,472 common shares pursuant to the exercise of warrants. ii) Issued 11,333,334 units of the Company at a price of $0.30 per Unit, with each Unit comprised of one common share in the capital of Railtown and one-half of one common share purchase. Each Warrant is exercisable into one (1) Share at a price of $0.45 per Share for a period of 18 months from the date of issuance, subject to acceleration in certain limited circumstances.