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Eddy Smart Home Solutions Ltd. — Audit Report / Information 2025
Apr 24, 2026
48019_rns_2026-04-23_1fc820d6-2a0c-4596-bb1c-2cdd92fcbf1c.pdf
Audit Report / Information
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Consolidated Financial Statements
Eddy Smart Home Solutions Ltd.
Audited
Years ended December 31, 2025 and 2024
Independent Auditor's Report
MNP
To the Shareholders of Eddy Smart Home Solutions Ltd.:
Opinion
We have audited the consolidated financial statements of Eddy Smart Home Solutions Ltd. and its subsidiaries (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2025 and December 31, 2024, and the consolidated statements of loss and comprehensive loss, changes in shareholders' (deficiency) and cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2025 and December 31, 2024, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2 in the consolidated financial statements, which indicates that the Company incurred a net loss and negative cashflow from operating activities during the year ended December 31, 2025 and, as of that date, the Company had a working capital deficiency and an accumulated deficit. As stated in Note 2, these events or conditions, indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Except for the matter described in the Material Uncertainty Related to Going Concern section, we have determined that there are no key audit matters to communicate in our report.
Other Information
Management is responsible for the other information. The other information comprises Management's Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
MNP LLP
50 Burnhamthorpe Road West, Suite 900, Mississauga ON, L5B 3C2
T: 416.626.6000 F: 416.626.8650
PRAXITY®
In connection with our audits of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits or otherwise appears to be materially misstated. We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
50 Burnhamthorpe Road West, Suite 900, Mississauga, Ontario, L5B 3C2
T: 416.626.6000 F: 416.626.8650 MNP.ca
MNP
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the Company as a basis for forming an opinion on the consolidated financial statements. We are responsible for the direction, supervision and review of the audit work performed for the purposes of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits and significant audit findings, including any significant deficiencies in internal control that we identify during our audits.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor's report is Isabella Lee.
Mississauga, Ontario
April 23, 2026
MNPLP
Chartered Professional Accountants
Licensed Public Accountants
50 Burnhamthorpe Road West, Suite 900, Mississauga, Ontario, L5B 3C2
T: 416.626.6000 F: 416.626.8650 MNP.ca
MNP
Eddy Smart Home Solutions Ltd.
Consolidated Statements of Financial Position
(in Canadian dollars)
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| Assets | $ | $ |
| Current assets | ||
| Cash | 646,772 | 340,175 |
| Restricted cash (note 4) | 68,399 | 66,968 |
| Accounts receivable and contract assets (note 5) | 1,501,373 | 1,601,080 |
| Prepaid expenses (note 6) | 117,336 | 76,732 |
| Inventory (note 7) | 2,199,838 | 1,783,587 |
| Cost to obtain and fulfill contracts (note 8) | 1,173,624 | 1,193,195 |
| Deposits on inventory purchases (note 7) | 330,935 | 968,113 |
| 6,038,277 | 6,029,850 | |
| Prepaid customer incentive (note 6) | 795,433 | 870,452 |
| Costs to obtain and fulfill contracts (note 8) | 6,156,088 | 4,709,691 |
| Property and equipment (note 9) | 34,343 | 78,538 |
| 6,985,864 | 5,658,681 | |
| Total Assets | 13,024,141 | 11,688,531 |
| Liabilities | ||
| Current liabilities | ||
| Accounts payable and accrued liabilities (notes 10, 14) | 3,426,850 | 4,383,994 |
| Deferred revenue (note 17) | 4,462,468 | 2,535,869 |
| Total Current Liabilities | 7,889,318 | 6,919,863 |
| Debt facilities (note 11) | 1,071,643 | - |
| Deferred revenue (note 17) | 8,788,329 | 7,060,837 |
| Total Liabilities | 17,749,290 | 13,980,700 |
| Shareholders’ (Deficiency) | ||
| Share capital (note 12) | 61,392,599 | 61,392,599 |
| Contributed surplus | 2,623,654 | 2,276,461 |
| Deficit | (68,856,783) | (66,043,362) |
| Accumulated other comprehensive income | 115,381 | 82,133 |
| Total Shareholders’ (Deficiency) | (4,725,149) | (2,292,169) |
| Going concern (note 2) | ||
| Contingencies (note 15) | ||
| Total Liabilities & Shareholders’ (Deficiency) | 13,024,141 | 11,688,531 |
See accompanying notes to consolidated financial statements
Approved on behalf of the Board of Directors:
"signature"
Mark Silver
Director
Eddy Smart Home Solutions Ltd.
Consolidated Statements of Loss and Comprehensive Loss
For the years ended December 31, 2025 and 2024
(in Canadian dollars)
| 2025 | 2024 | |
|---|---|---|
| $ | $ | |
| Revenue (note 17) | 4,717,421 | 3,778,126 |
| Expenses | ||
| Cost of sales (note 18) | 1,835,014 | 1,755,452 |
| Selling (note 19) | 1,458,248 | 864,743 |
| General and administrative (note 20) | 5,188,719 | 4,347,106 |
| 8,481,981 | 6,967,301 | |
| Operating loss | (3,764,560) | (3,189,175) |
| Reversal of provision due to settlement of claim (notes 10, 15) | 1,041,431 | - |
| Loss on property and equipment disposal (note 9) | (13,910) | - |
| Insurance recovery on property and equipment (note 9) | 19,488 | - |
| Interest income | 8,965 | 20,177 |
| Loss on foreign exchange | (33,192) | (84,398) |
| Finance costs (notes 11, 21) | (71,643) | (392,052) |
| Net loss before income taxes | (2,813,421) | (3,645,448) |
| Income taxes (note 22) | - | - |
| Net loss | (2,813,421) | (3,645,448) |
| Other comprehensive income: | ||
| Items that may subsequently be reclassified to income | ||
| Gain on foreign currency translation, of foreign operation | 33,248 | 38,575 |
| Total comprehensive loss | (2,780,173) | (3,606,873) |
| Net loss per share - basic and diluted (note 23) | ($0.46) | ($1.04) |
| Weighted average number of common shares outstanding - basic and diluted (note 23) (1) | 6,128,623 | 3,503,673 |
(1) Prior period share amounts have been retrospectively adjusted to reflect the (100:1) Share Consolidation, which became effective on June 28, 2024 (see note 12).
See accompanying notes to consolidated financial statements
Eddy Smart Home Solutions Ltd.
Consolidated Statements of Changes in Shareholders' (Deficiency)
For the years ended December 31, 2025 and 2024
(in Canadian dollars)
| Common Shares (1) | ||||||
|---|---|---|---|---|---|---|
| Number of Common Shares | Common Shares | Contributed Surplus | Accumulated OCI | Accumulated Deficit | Shareholders' (Deficiency) | |
| Balance, December 31, 2024 | 6,128,623 | $ 61,392,599 | $ 2,276,461 | $ 82,133 | $ (66,043,362) | $ (2,292,169) |
| Employee and director share-based comp (note 13) | - | - | 312,834 | - | - | 312,834 |
| Share-based compensation to a developer and customer | - | - | 34,359 | - | - | 34,359 |
| Cumulative translation adjustment | - | - | - | 33,248 | - | 33,248 |
| Net loss for the year | - | - | - | - | (2,813,421) | (2,813,421) |
| Balance, December 31, 2025 | 6,128,623 | $ 61,392,599 | $ 2,623,654 | $ 115,381 | $ (68,856,783) | $ (4,725,149) |
| Common Shares (1) | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| Number of Common Shares | Common Shares | Contributed Surplus | Accumulated OCI | Accumulated Deficit | Shareholders' (Deficiency) | |
| Balance, December 31, 2023 | 795,290 | $ 53,539,723 | $ 2,256,180 | $ 43,558 | $ (62,397,914) | $ (6,558,453) |
| Private placement (note 12) | 4,557,413 | 6,836,120 | 6,836,120 | |||
| Conversion of Credit Facility to Common Shares (note 12) | 775,920 | 1,163,880 | 1,163,880 | |||
| Share issue costs (note 12) | (147,123) | (147,123) | ||||
| Employee and director share-based comp (note 13) | - | - | (6,391) | - | - | (6,391) |
| Share-based compensation to a developer and customer | - | - | 26,672 | - | - | 26,672 |
| Cumulative translation adjustment | - | - | - | 38,575 | - | 38,575 |
| Net loss for the year | - | - | - | - | (3,645,448) | (3,645,448) |
| Balance, December 31, 2024 | 6,128,623 | $ 61,392,599 | $ 2,276,461 | $ 82,133 | $ (66,043,362) | $ (2,292,169) |
(1) Prior period share amounts have been retrospectively adjusted to reflect the (100:1) Share Consolidation, which became effective on June 28, 2024 (see note 12).
See accompanying notes to consolidated financial statements
Eddy Smart Home Solutions Ltd.
Consolidated Statements of Cash Flows
For the years ended December 31, 2025 and 2024
(in Canadian dollars)
| 2025 | 2024 | |
|---|---|---|
| $ | $ | |
| Cash provided by (used in) | ||
| Operating activities | ||
| Net loss for the year | (2,813,421) | (3,645,448) |
| Add items not affecting cash | ||
| Reversal of provision due to settlement of claim (notes 10, 15) | (1,041,431) | - |
| Depreciation of property and equipment (note 9) | 30,285 | 37,180 |
| Amortization of fulfillment assets (note 8, 18) | 360,855 | 344,750 |
| Shares earned/issued to customers for exclusive supplier arrangement | 34,359 | 26,672 |
| Finance cost (notes 11, 21) | 71,643 | 392,052 |
| Prepaid customer incentive | 75,019 | 58,215 |
| Foreign currency loss/(gain) | 734 | (582) |
| Interest income | (2,165) | (923) |
| Loss on property and equipment disposal (note 9) | 13,910 | 5,918 |
| Insurance recovery on property and equipment (note 9) | (19,488) | - |
| Share-based compensation (note 13) | 312,834 | (6,391) |
| (2,976,866) | (2,788,557) | |
| Changes in non-cash working capital | ||
| Accounts receivable and contract assets (note 5) | 99,707 | (415,101) |
| Prepaid expenses (note 6) | (40,604) | 122,375 |
| Deposits on inventory purchases (note 7) | 637,178 | 351,966 |
| Cost to obtain and fulfill a contract (note 8) | (1,787,681) | (1,754,424) |
| Inventory (note 7) | (416,251) | 104,290 |
| Deferred revenue (note 17) | 3,654,091 | 3,081,669 |
| Accounts payable and accrued liabilities (note 10) | 84,287 | (594,418) |
| 2,230,727 | 896,357 | |
| Net cash flow used in operating activities | (746,139) | (1,892,200) |
| Investing activities | ||
| Restricted cash (note 4) | - | (7,195) |
| Proceeds from insurance recovery (note 9) | 19,488 | - |
| Net cash flow (used in)/from investing activities | 19,488 | (7,195) |
| Financing activities | ||
| Proceeds from equity private placement (note 12) | - | 6,836,120 |
| Share issuance costs (note 12) | - | (147,123) |
| Proceeds from debt facility (note 11) | 1,000,000 | - |
| Repayment of working capital facility (note 12) | - | (5,589,671) |
| Repayment of loans payable (note 12) | - | (40,000) |
| Net cash flow from financing activities | 1,000,000 | 1,059,326 |
| Foreign exchange | 33,248 | 38,575 |
| Change in cash during the year | 306,597 | (801,494) |
| Cash, beginning of year | 340,175 | 1,141,669 |
| Cash, end of year | 646,772 | 340,175 |
See accompanying notes to consolidated financial statements
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
1. Nature of operations and basis of presentation
Eddy Smart Home Solutions Ltd. ("Eddy" or the "Company"), was listed on the TSX Venture Exchange (the "Exchange") subsequent to the completion of a Reverse Takeover (the "RTO Transaction") on January 12, 2022.
The Company is a North American provider and developer of commercial and residential smart water metering products and monitoring services, helping property owners and developers protect, control and conserve water usage by combining water sensing devices with behavioural learning software. The Company operates in three segments: Multi-Family Residential ("MFR"), Single-Family Residential ("SFR") and Commercial and Industrial ("C&I").
The wholly owned operating subsidiaries of the Company are Eddy Smart Home Solutions Inc., Eddy Solutions USA Corp., and Reed Controls Inc.
The TSX-V approved the consolidation of the Company's issued and outstanding common shares on the basis of one (1) post-consolidation common share for every hundred (100) pre-consolidation common shares (the "Share Consolidation"). The Share Consolidation became effective on June 28, 2024, which was approved by the Company's board of directors on April 24, 2024, and received Shareholder approval at the annual general and special meeting on June 17, 2024 (see note 12).
The Company's shares are listed on the TSX Venture Exchange under the symbol "EDY". The Company's corporate and registered office is 6 Eglinton Avenue East, Suite 200, Toronto, Ontario M4N 1A6.
2. Material accounting policies
Statement of compliance
The consolidated financial statements have been prepared using accounting policies in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards"). Certain comparative balances were reclassified to conform with current financial statements presentation.
The consolidated financial statements of the Company were approved by the Board of Directors on April 22, 2026.
Going concern basis of accounting
These consolidated financial statements have been prepared on a going concern basis which contemplates that the Company will continue in operation and be able to realize its assets and discharge its liabilities and commitments in the normal course of business for the foreseeable future. In assessing whether this going concern assumption is appropriate and whether there are material uncertainties that may cast significant doubt on the Company's ability to continue as a going concern, management considers all available information and actions within its control with respect to the future which is at least, but not limited to, twelve months from the end of the reporting period.
During the year ended December 31, 2025, the Company generated a net loss of $2,813,421 (2024 - $3,645,448) and negative cash flows from operating activities of $746,139 (2024 - $1,892,200). As at December 31, 2025, the Company had a negative working capital position of $1,851,041 (2024 - $890,013) and an accumulated deficit of $68,856,783 (2024 - $66,043,362). Material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern and, therefore, the Company may be unable to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company is dependent on its ability to achieve positive cash flow from operations, to obtain the necessary equity or debt financing to continue with expansion in the water monitoring services market, including continued support from its lenders, to ultimately attain and maintain profitable operations.
These consolidated financial statements do not give effect to any adjustments to the carrying value of recorded assets and liabilities, revenue and expenses, the statement of financial position classifications used and disclosures that might be necessary should the Company be unable to continue its operations. Such adjustments could be material and there is no assurance that the Company will be successful in closing additional financings in the future or that the Company will achieve profitable operations.
Consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries (Eddy Smart Home Solutions Inc. and Reed Controls Inc., which are both domiciled in Ontario, Canada and Eddy Solutions USA Corp., which is domiciled in California, United States of America). All inter-company transactions and balances have been eliminated on consolidation.
Subsidiaries are those entities controlled by the Company. Control exists when the Company has existing rights that give it the current ability to direct the relevant activities of the subsidiary, has exposure or rights to variable returns from its involvement in the subsidiary, and has the ability to use its power to affect its returns. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences (date of acquisition) until the date that control ceases (date of disposal or loss of control). A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
6
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
Business combination
Business combinations are accounted for using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the Company. In determining whether a particular set of activities and assets is a business, the Company assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.
Intangible assets
Intangible assets are considered to be identifiable if they arise from contractual or other right, or if they are separable (i.e., they can be disposed of either individually or together with other assets).
FINANCIAL INSTRUMENTS
(i) Recognition and initial measurement
Trade receivables are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Company becomes a party to the contractual provisions of the instrument.
A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus or minus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.
(ii) Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified as measured at: amortized cost, FVOCI or FVTPL.
Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
(i) It is held within a business model whose objective is to hold assets to collect contractual cash flows; and
(ii) Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
(i) It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
(ii) Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss. The Company has not classified any financial assets as FVTPL.
Financial assets at amortized cost
These assets are subsequently measured using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Financial assets at FVOCI
Debt investments at FVOCI subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
7
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
Equity investments at FVOCI subsequently measured at fair value. Dividends are recognised 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 recognised in OCI and are never reclassified to profit or loss. The Company has not classified any financial assets as FVTOCI.
Financial liabilities
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.
The following table summarizes the classification of the Company's financial instruments under IFRS 9:
| Financial assets | |
|---|---|
| Cash | Amortized cost |
| Restricted cash | Amortized cost |
| Accounts receivable and contract assets | Amortized cost |
| Financial liabilities | |
| Accounts payable and accrued liabilities | Amortized cost |
| Debt facilities | Amortized cost |
(iii) Derecognition
Financial assets
The Company derecognises a financial asset when:
(i) the contractual rights to the cash flows from the financial asset expire; or
(ii) it transfers the rights to receive the contractual cash flows in a transaction in which either:
(a) substantially all of the risks and rewards of ownership of the financial asset are transferred; or
(b) the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the
The Company enters into transactions whereby it transfers assets recognised in its statement of financial position but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised.
Financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. The Company also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in the statement of profit or loss.
(iv) Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
Impairment of trade receivables, contract assets and prepaid customer incentive
For trade receivables and contract assets, the Company measures its credit loss allowances using the simplified expected credit loss ("ECL") model which estimates expected lifetime credit losses on initial recognition of the receivables. In determining the expected credit loss allowance, the Company utilized a provision matrix and groups trade receivables and contract assets based on shared credit characteristics and the days past due and takes into account evidence of non-payment risk, which may include account aging, previous experience and general economic conditions. The contract assets have substantially the same risk characteristics as the trade receivables for the same types of contracts. The Company has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company's historical experience and informed credit assessment, that includes forward-looking information. The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.
The Company considers a financial asset to be in default when
The debtor is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realising security (if any is held); or the financial asset is more than 90 days past due.
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.
At each reporting date, the Company assesses whether financial assets carried at amortised cost and debt securities are credit-impaired. A financial asset is 'credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data
(i) significant financial difficulty of the debtor;
(ii) a breach of contract such as a default or being more than 90 days past due;
(iii) it is probable that the debtor will enter bankruptcy or other financial reorganisation.
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognised in OCI.
Costs to Obtain and Fulfill Contracts
The Company capitalizes costs incurred to fulfill its contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy the Company's performance obligation under the contract and (iii) are expected to be recovered through revenue generated under the contract. These costs primarily pertain to hardware and sales commission costs that relate to the satisfaction of a future performance obligation in the Company's contracts. Contract fulfillment costs are amortized on a straight-line basis over the expected contract term to cost of sales, which is consistent with the performance obligation of providing the water monitoring services to which the contract fulfillment asset relates (the weighted average term of the contracts is approximately eight years).
Incremental direct costs of obtaining a contract primarily include sales commissions paid to sales people and agents in connection with water monitoring service contracts. These costs are deferred and amortized on the straight-line basis over the estimated contract term. Sales commissions that relate directly to a contract with terms of 12 months or less (or nominal amounts) are immediately recognized as a cost of sale in the year incurred.
The Company will recognize an impairment loss in profit or loss to the extent that the recoverable amount of the contract fulfillment asset recognized exceeds the remaining amount of consideration that the entity expects to receive in exchange for the water monitoring services to which the asset relates; less the costs that relate directly to providing those goods or services and that have not been recognized as expenses.
If the impairment conditions no longer exist or have improved, the Company recognizes a reversal of some or all of an impairment loss previously recognized in profit or loss. The increased carrying amount of the contract fulfillment asset shall not exceed the amount that would have been determined (net of amortization) if no impairment loss had been recognized previously.
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
Inventory
The Company's inventory consists of installation supplies and equipment to be deployed to fulfill future contracts. Installation supplies are valued at the lower of cost, which is determined on a weighted average basis, and net realizable value. When the equipment comes under contract with customers it becomes a fulfillment asset. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and estimated costs necessary to make the sale. Equipment includes the cost of the individual water monitoring units. Inventory is considered for obsolescence based on current estimates of future sales and use. When circumstances that previously required inventory to be written down below cost no longer exist, the amount of the write-down is reversed.
Most of the inventory purchases are made to the Company's specifications which requires longer lead times for procurement. As such, inventory purchase deposits requirements are a common practice to secure the orders and are reflected in the consolidated statements of financial position as an asset.
Foreign currencies
The Company's presentation currency is the Canadian dollar.
Functional currency is determined for each of the Company's entities.
The Company has a subsidiary in the United States (Eddy Solutions USA Corp.) whose functional currency is the US Dollar. All other entities within the Company have the Canadian dollar as a functional currency. On consolidation, the assets and liabilities of each foreign entity are translated into Canadian dollars at the rate of exchange prevailing at the reporting date. Revenue and expense items are translated at the average rate of the exchange for the year. Unrealized translation gains and losses are recorded as cumulative translation adjustments, which are included in other comprehensive income/(loss) ("OCI") which is a component of shareholders' equity.
Transactions in currencies other than an entities functional currency are recognized at the rates of exchange prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the prevailing exchange rate at the reporting date. Non-monetary assets and liabilities, and revenue and expense items denominated in foreign currencies are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Foreign exchange differences are recognized in profit or loss in the period in which they arise.
Property and equipment
Items of property and equipment are measured at cost, and subsequently measured at cost less accumulated depreciation and accumulated impairment losses, if any. Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company. Depreciation is recognized on a straight-line bases at rates designed to apportion the cost of the asset over their useful lives as follows:
| Computer equipment | 5 years |
|---|---|
| Vehicles | 5 years |
The estimated useful lives and depreciation methods are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Items of property and equipment are derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of items of property and equipment are determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.
Repairs and maintenance costs that do not improve or extend productive life are recognized in profit or loss in the period in which the costs are incurred.
10
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
Impairment of non-financial assets
The Company assesses the recoverable amount of non-financial assets, at each reporting date, for indicators of impairment. If these indications exist the Company estimates the recoverable amount for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or cash generating unit ("CGU") exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount which is the higher of fair value less costs of disposal and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. In determining fair value less costs of disposal, recent market transactions are considered or an appropriate valuation model is used.
The Company bases its impairment calculation on most recent budgets and/or forecast calculations, which are prepared for the Company's CGUs or group of CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five to seven years. An impairment loss is recognized in the statement of profit or loss if the carrying amount of an asset or CGU exceeds its recoverable amount.
Leases
At the inception of an arrangement, the Company assesses whether the arrangement is, or contains, a lease. An arrangement is, or contains, a lease if the arrangement conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To determine whether an arrangement conveys the right to control the use of an identified assets, the Company assesses whether:
(i) the arrangement involves the use of an identified asset;
(ii) the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
(iii) the Company has the right to direct the use of the asset.
The Company applies an exemption for short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). A lessee can apply this practical expedient on a lease-by-lease basis.
Provisions
A provision is recognized in the statement of financial position when the Company has a legal or constructive obligation, as a result of a past event, and it is probable that the Company will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured using managements best estimate as to the outcomes, based on known facts, risks and uncertainties at the reporting date.
A warranty provision is recognized for the estimated costs of fulfilling warranty obligations as a liability in the same period as the related product sale is recognized.
Revenue recognition
The Company provides water monitoring solutions to its customers. A customer contract is accounted for as revenue only when it is probable that the Company will collect the consideration to which it is entitled in exchange for the services provided. Revenue is recognized over time as the Company provides water monitoring services, as customers simultaneously receive and consume the benefits of these services. Services are typically billed on a monthly basis. In certain circumstances, revenue may be recognized in advance of billing. In such cases, the Company recognizes a contract asset, representing its right to consideration in exchange for services transferred to the customer when that right is conditional on something other than the passage of time. Contract assets are reclassified to accounts receivable when the Company's right to consideration becomes unconditional (i.e., when an invoice is issued). Conversely, if billing occurs in advance of service delivery, the Company recognizes a contract liability, representing its obligation to transfer services to the customer in the future. The Company assesses at contract inception and throughout the contract term whether it remains probable that it will collect the consideration to which it is entitled. This assessment is updated if there are significant changes in facts and circumstances.
Revenue is recognized upon transfer of control of products or services to customers at an amount that reflects the consideration the Company expects to receive in exchange for the products or services. The transaction price is measured based on the consideration specified in a contract with a customer, including any variable consideration, net of any discounts or rebates paid or payable to the customer. Non-cash consideration, including shares and warrants, received or receivable from the customer or paid or payable to a customer is measured at fair value at the date of contract inception. Variable consideration is estimated and recognized as revenue only to the extent it is highly probable that a significant reversal in the cumulative revenue for the contract will not occur. The Company considers that non-payment of the recurring monthly water monitoring services amount due for a period greater than three months is an indication that it is no longer probable that the consideration will be collected for future services provided and revenue recognition for that contract ceases at that point. When the service ceases before the completion of the contracted terms, the capitalized costs to obtain and fulfill contracts will be recognized as cost of sales.
11
12
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
The Company enters into contracts that contain multiple products and services such as hardware, installation, commissioning, and cloud hosting. The Company evaluates these arrangements to identify the performance obligations for revenue recognition purposes based on whether the product or service is distinct from some or all of the other products or services in the arrangement. A product or service is distinct if the customer can benefit from it on its own or together with other readily available resources and the Company's promise to transfer the good or service is separately identifiable from other promises in the contractual arrangement with the customer.
The transaction price is allocated to the separate performance obligations on a relative stand-alone selling price ("SSP") basis. The SSP reflects the price the Company would charge for a specific product or service if it was sold separately in similar circumstances and to similar customers. The Company estimates the SSP using the expected cost plus a margin. Estimating SSP requires judgement that could impact the amount and timing of revenue recognized.
For its Multi-Family Residence ("MFR") and Commercial & Institutional ("C&I") segments, a portion of the Company's integrated smart water monitoring contracts require installation for some parts of the hardware. These installation services can be performed by third parties and therefore are recognized as a separate performance obligation. Installation revenue is recognized when the installation services are performed. Consistent with the Single-Family Residences ("SFR") segment, the Company has made significant judgements in determining that sale of hardware is not a distinct performance obligation for separate revenue recognition as the hardware, technical installation, commissioning, and monitoring services are integrated together to fulfill the integrated smart water monitoring performance obligation to customers which is satisfied over the contract term as the Company satisfies a portion of its performance obligation each day it provides the smart water monitoring service and revenue is recognized on a straight-line basis over the contract term.
Some SFR contracts require a non-refundable upfront fee in addition to a monthly fee and month-to-month term. These contracts contain a material right for a period that is equal to the average life determined based on historic customer trends. The material right provides for the continuation of the Company's integrated smart water monitoring service and as such forms part of the integrated smart water monitoring service performance obligation. Revenue is recognized as the Company provides its integrated smart water monitoring services to its customers on a straight-line basis over the contract term/average customer life, as the Company satisfies a portion of its performance obligation each day it provides the smart monitoring service.
Under all contracts, the timing of revenue recognition often differs from contract payment schedules, resulting in revenue that has been recognized but not billed. These amounts are included in accounts receivable and contract assets. Amounts paid in accordance with customer contracts, but not yet recognized, are recorded and presented as part of deferred revenue.
Share-based compensation
The Company has established share-based compensation plans for employees and directors, including Restricted Share Units ("RSUs"), Performance Share Units ("PSUs"), and stock options.
Equity-settled share-based payments are measured at the fair value of the equity instruments at the grant date. The fair value of stock options is determined using an option pricing model, such as the Black-Scholes model, which incorporates market-based conditions. Non-market vesting conditions, including service and performance conditions, are not reflected in the grant date fair value but are instead considered in estimating the number of awards expected to vest.
For PSUs, vesting is subject to the achievement of specified performance criteria over a defined performance period. Performance conditions may include market and/or non-market conditions. Market conditions are incorporated into the grant date fair value, while non-market conditions are reflected through adjustments to the estimated number of awards expected to vest.
RSUs generally vest over a specified period, subject to continued service with the Company.
Compensation expense is recognized over the requisite service period, with a corresponding increase in contributed surplus, using the graded vesting method, whereby each tranche of an award is treated as a separate award with its own vesting period. At each reporting date, the Company revises its estimate of the number of awards expected to vest based on expected forfeitures and non-market vesting conditions. The impact of any revision is recognized in profit or loss with a corresponding adjustment to contributed surplus such that the cumulative expense reflects the revised estimate.
Stock options granted to non-employees are measured at the fair value of the goods or services received except where the fair value cannot be estimated, in which case it is measured at the fair value of the equity instrument granted at the date the entity obtains the goods or the counterparty renders service.
The number of options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.
13
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
Upon exercise of stock options, consideration received on exercise of these equity instruments is recorded as share capital and the related share-based payment reserve is transferred to share capital.
If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree's employees (acquiree's awards), than all or a portion of the amount of the acquirer's replacement awards is included in measuring the consideration transferred. This determination is based on the market-based measure of the replacement awards compared with the market-based measure of the acquiree's awards and the extent to which the replacement awards relate to pre-combination service.
Taxation
Income tax expense of the Company comprises current and deferred taxes.
Deferred tax is recorded using the asset-liability method, providing for temporary differences, between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax liabilities are not recognized if they arise from initial recognition of goodwill. Deferred tax assets and liabilities are recognized whether the carrying amount of an asset or liability differs from its tax base, except for taxable temporary differences arising on the initial recognition of goodwill, temporary differences arising from investments in subsidiaries that are not expected to reverse in the foreseeable future and the initial recognition of assets or liabilities that affect neither accounting nor taxable loss which at the time of the transaction, does not give rise to equal taxable and deductible temporary differences.
Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
The Company offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
Loss per share
Basic loss per share is calculated by dividing the net loss attributable to shareholders by the weighted average number of common shares outstanding during each of the years presented. Class A preferred shares and Class B preferred shares are not considered to be ordinary shares as the common shares are more subordinated to these classes of shares.
Diluted loss per share is calculated by adjusting the weighted average number of common shares outstanding to assume conversion of all dilutive potential common shares. In order to determine diluted loss per share, it is assumed that any proceeds from the exercise of dilutive stock options would be used to repurchase common shares at the average market price during the period. The diluted loss per share calculation excludes any potential conversion of stock options and warrants that would increase earnings per share or decrease loss per share.
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
Share capital
Incremental costs directly attributable to the issuance of capital stock are recognized as a deduction from equity. Income tax relating to transaction costs of an equity transaction is accounted for in accordance with IAS 12.
Non-redeemable preference shares are classified as equity, because they bear discretionary dividends, do not contain any obligations to deliver cash or other financial assets and do not require settlement in a variable number of the Company's equity instruments. Discretionary dividends thereon are recognised as equity distributions on approval by the Company's shareholders.
Related party transactions
Parties are considered to be related if one party has the ability, directly, or indirectly, to control or jointly control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
Future accounting pronouncements
The Company has not early adapted they standards, interpretations or amendments that have been issued but not yet effective, the impact of adopting these amendments on its future financial statements is still being assessed.
Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9, Financial Instruments and IFRS 7, Financial Instruments: Disclosures)
Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9, Financial Instruments and IFRS 7, Financial Instruments: Disclosures) clarify financial assets and financial liabilities are recognized and derecognized at settlement date except for regular way purchases or sales of financial assets and financial liabilities meeting conditions for new exception. The new exception permits companies to elect to derecognize certain financial liabilities settled via electronic payment systems earlier than the settlement date. They also provide guidelines to assess contractual cash flow characteristics of financial assets, which apply to all contingent cash flows, including those arising from environmental, social, and governance (ESG)-linked features. This is effective for annual reporting periods beginning on or after January 1, 2026, and are to be applied retrospectively.
IFRS 18, Presentation and Disclosure in Financial Statements
IFRS 18 replaces IAS 1, which sets out presentation and base disclosure requirements for financial statements. The changes, which mostly affect the income statement, include the requirement to classify income and expenses into three new categories – operating, investing and financing – and present subtotals for operating profit or loss and profit or loss before financing and income taxes. Further, operating expenses are presented directly on the face of the income statement – classified either by nature (e.g. employee compensation), by function (e.g. cost of sales) or using a mixed presentation. Expenses presented by function require more detailed disclosures about their nature. IFRS 18 also provides enhanced guidance for aggregation and disaggregation of information in the financial statements, introduces new disclosure requirements for management-defined performance measures (MPMs) and eliminates classification options for interest and dividends in the statement of cash flows. This is effective for annual reporting periods beginning on or after January 1, 2027.
14
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
3. Accounting judgements, estimates and assumptions
Management makes judgements, estimates and assumptions in the application of the Company's accounting policies. These may affect the carrying amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses for the periods presented. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant, the results of which form the basis of the valuation of assets and liabilities that are not readily apparent from other sources. The estimates and the underlying assumptions are reviewed on an ongoing basis.
Judgements
As the basis for its judgements, management uses estimates and related assumptions which are based on previous experience and various commercial, economic and other factors that are considered reasonable under the circumstances. These estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised. Actual outcomes may differ from these estimates under different assumptions and conditions.
Judgements, made by management in the application of IFRS that have a significant impact on the consolidated financial statements relate to the following:
Revenue recognition
Contracts with customers often include promises to deliver multiple products and services, such as hardware, installation, commissioning, monitoring and cloud hosting. Determining whether such bundled products and services are considered i) distinct performance obligations that should be separately recognized or ii) non-distinct and therefore should be combined with another product or service and recognized as a combined unit of accounting may require significant judgement. The determination of the standalone selling prices ("SSP") for distinct performance obligations can also require judgement and estimates, as the SSP is an estimate of the price that would be charged if the distinct product or service was sold separately in similar circumstances and to similar customers.
Percentage of completion
The estimation of total contract costs requires significant judgement and is based on assumptions related to material costs, labour productivity, subcontractor performance, and the allocation of indirect costs. These estimates are reviewed on an ongoing basis and revised as new information becomes available. Revenue recognized for performance obligations satisfied over time is dependent on the stage of completion, which is measured using an input method based on costs incurred to date relative to total estimated contract costs (percentage of completion). Changes in estimates of total contract costs or project scope may result in adjustments to the percentage of completion and, as a result, revenue and profit recognized in the period. Such adjustments may be material.
Going concern
The determination as to the Company's ability to continue as a going concern is dependent on its ability to secure debt and equity financing, and to achieve profitable operations. Certain judgements were made when determining if and when the Company will secure debt and equity financing and achieve profitable operations and that there are material uncertainties regarding the Company's ability to continue as a going concern (see note 2 – Going Concern).
Estimates
Critical accounting estimates are those that require management to make assumptions about matters that are highly uncertain at the time the estimate or assumption is made. Critical accounting estimates are also those that could potentially have a material impact on the Company's financial results where a different estimate or assumption is used.
Expected credit losses
The Company recognizes an amount equal to the lifetime ECL on trade receivables and contract assets. Loss allowances are measured based on historical experience and associated credit risk and rate of default applicable to customers. The Company primarily estimates this rate based on the credit rating and historical experience with the customer and aging. The amount of ECL is sensitive to changes in circumstances of forecast economic conditions.
Costs to obtain and fulfill contracts
Costs are capitalized when they are directly related to a specific contract, generate or enhance resources that will be used in satisfying performance obligations, and are expected to be recovered. Such costs are classified between current and non-current assets. Costs to obtain and fulfill a contract are amortized on a systematic basis consistent with the transfer of the related goods or services to the customer. In determining the amortization period, the Company considers the expected contract term, including renewal and extension options, as well as the likelihood of incurring additional costs to obtain or fulfill the contract."
15
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
Impairment
In assessing the value of costs to obtain and fulfill contracts, non-financial assets and intangible assets for potential impairment, assumptions are made regarding the fair value. These calculations require the use of estimates. If these estimates change in the future, the Company may be required to record additional impairment charges. Inventory net recoverable value is assessed by considering future project deployments, current market conditions and the replacement cost.
Management assesses at each reporting date whether there are any indicators of impairment relating to costs to obtain and fulfill contracts and prepaid customer incentives, and estimates the recoverable amount where such indicators exist. The calculation incorporates key assumptions, including, but not limited to, projected cash flow growth rates and the applicable discount rate.
Share-based compensation
The Company uses the Black-Scholes option pricing model to determine the fair value of stock options. In estimating the fair value, management is required to make certain assumptions and estimates such as the expected life of options, volatility of the Company's future share price, risk-free rate, future dividend yields and estimated forfeitures at the initial grant date. Changes in assumptions used to estimate fair value could result in different outcomes.
Fair value
When measuring the fair value of an asset or a liability, the Company uses observable market data to the extent possible. Fair values are categorized into different levels of fair value hierarchy based on the inputs in the valuation techniques as follows:
Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
The carrying values of cash, accounts receivables and contract assets, other receivables, accounts payables and accrued liabilities, and debt facilities, due to the short-term nature of these instruments approximated their fair value. There has been no significant change in credit and market interest rates since the date of their issuance.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
16
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
4. Restricted cash
As at December 31, 2025, the Company was subject to externally imposed credit card borrowing limits that required it to maintain cash balances to support these facilities. The amount subject to this restriction totaled $68,399 (2024 – $66,968), inclusive of $14,577, being the Canadian dollar equivalent of $10,635 held in U.S. dollars.
5. Accounts receivable and contract assets
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Accounts receivable | 1,485,656 | 1,546,850 |
| Contract assets | 239,517 | 325,549 |
| Expected credit losses | (223,800) | (271,319) |
| 1,501,373 | 1,601,080 |
As at December 31, 2025, the Company has contract assets of $239,517 (2024 - $325,549) which is net of an allowance for expected credit losses of $nil (2024 - $nil).
6. Prepaid expenses
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Current prepaid expenses | ||
| Prepaid expenses | 101,336 | 66,313 |
| Advance | 16,000 | 10,419 |
| Total current prepaid expenses | 117,336 | 76,732 |
| Non-current prepaid expenses | ||
| Prepaid customer incentive | 806,540 | 870,452 |
| Loss on termination | (11,107) | - |
| Total non-current prepaid expenses | 795,433 | 870,452 |
Prepaid customer incentive
On December 15, 2021, the Company entered into an addendum (the "Addendum") to amend the exclusive supplier agreement. Pursuant to the Addendum, the Company agreed to issue, or cause to be issued, 7,500 Common Shares (100:1 Share Consolidation, see note 12) which are contingent on the developer permitting the Company to install equipment in at least 12,500 units (5,000 units prior to the Addendum) of its condominium projects. As each unit is installed, the Company recognized a reduction to revenue based on the relative proportion of the share consideration expected to be provided to the developer. The Addendum also provided upfront consideration in the form of shares and warrants. The incremental value assigned to the upfront share and warrant consideration provided by the Addendum amounted to $982,545 and recognized as a prepaid customer incentive. The prepaid customer incentive balance is amortized against revenue as units are installed under the terms of the Addendum. Total units installed as at December 31, 2025, amount to 6,946 units (December 31, 2024 - 6,697 units).
During 2025, the Company installed 249 units (2024 - 656 units) and recorded $29,271 (2024 - $26,672), these are recorded as a reduction to revenue and an increase to contributed surplus.
During 2025, amortization of the prepaid expenses amounted to $63,911 (2024 - $58,237), based on the installed units. These are recorded as an amortization of the prepaid item and a reduction to revenue.
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
7. Inventory
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Installation supplies | 134,471 | 115,574 |
| Goods in transit | 82,678 | 15,090 |
| Water monitoring equipment (finished good) | 2,064,955 | 1,908,646 |
| Provision for inventory | (82,266) | (255,723) |
| 2,199,838 | 1,783,587 |
Inventory provision
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Beginning of year balance | (255,723) | (266,467) |
| Inventory write-off | 195,876 | 167,452 |
| Increase in inventory provision | (22,419) | (156,708) |
| End of year balance | (82,266) | (255,723) |
The Company provides for slow-moving inventory, not expected to be consumed or realized in cash in its normal operating cycle. Inventory is also periodically reviewed for potential obsolescence, and the Company writes down inventory based on its assessment of market conditions. During 2025, there were indications that the carrying amount of inventories exceeded the net realizable value and a provision was required $43,393 (December 31, 2024 - $156,708).
As at December 31, 2025, deposits on inventory purchases amounted to $330,935 (December 31, 2024 - $968,113).
8. Costs to obtain and fulfill contracts
Cost to obtain and fulfill a contract consisted of the following:
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Cost | ||
| Opening balance | 7,842,356 | 6,087,932 |
| Additions | 1,787,681 | 1,754,424 |
| Balance, end of year | 9,630,037 | 7,842,356 |
| December 31, 2025 | December 31, 2024 | |
| --- | --- | --- |
| $ | $ | |
| Accumulated depreciation | ||
| Opening balance | (1,939,470) | (1,594,720) |
| Amortization (note 18) | (360,855) | (344,750) |
| Balance, end of year | (2,300,325) | (1,939,470) |
| Net book value, end of year | 7,329,712 | 5,902,886 |
As at December 31, 2025, the cost to obtain and fulfill contacts amounted to $7,329,712 (2024 - $5,902,886) comprised of a current amount of $1,173,624 (2024 - $1,193,195) and a non-current amount of $6,156,088 (2024 - $4,709,691).
The cost to obtain and fulfill contracts consists of hardware and labour cost incurred during commissioning. At December 31, 2025, it was determined that the recoverable amount exceeded the carrying amount, therefore, the Company did not record any impairment.
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
9. Property and equipment
Property and equipment consists of the following:
| December 31, 2025 | |||
|---|---|---|---|
| Computer hardware | Vehicles | Total | |
| $ | $ | $ | |
| Cost | |||
| Balance at December 31, 2024 | 67,004 | 98,554 | 165,558 |
| Disposals | (7,958) | (32,038) | (39,996) |
| Balance at December 31, 2025 | 59,046 | 66,516 | 125,562 |
| Computer hardware | Vehicles | Total | |
| $ | $ | $ | |
| Accumulated depreciation | |||
| Balance at December 31, 2024 | (42,670) | (44,350) | (87,020) |
| Depreciation | (12,176) | (18,109) | (30,285) |
| Disposals | 6,863 | 19,223 | 26,086 |
| Balance at December 31, 2025 | (47,983) | (43,236) | (91,219) |
| Net book value at December 31, 2025 | 11,063 | 23,280 | 34,343 |
During 2025, the Company wrote off a vehicle with an original cost of $32,039 and accumulated depreciation of $19,224 following an accident, resulting in the derecognition of its carrying amount of $12,815 from property and equipment. Additionally, computer equipment with a carrying amount of $1,095 was disposed of during the year, bringing total disposals to $13,910. Insurance proceeds of $19,488 related to the accident were recognized upon confirmation of reimbursement by the insurer, and the proceeds have been received.
| December 31, 2024 | |||
|---|---|---|---|
| Computer hardware | Vehicles | Total | |
| $ | $ | $ | |
| Cost | |||
| Balance at December 31, 2023 | 88,444 | 98,554 | 186,998 |
| Disposals | (21,440) | - | (21,440) |
| Balance at December 31, 2024 | 67,004 | 98,554 | 165,558 |
| Computer hardware | Vehicles | Total | |
| $ | $ | $ | |
| Accumulated depreciation | |||
| Balance at December 31, 2023 | (40,766) | (24,596) | (65,362) |
| Depreciation | (17,426) | (19,754) | (37,180) |
| Disposals | 15,522 | - | 15,522 |
| Balance at December 31, 2024 | (42,670) | (44,350) | (87,020) |
| Net book value at December 31, 2024 | 24,334 | 54,204 | 78,538 |
10. Accounts payable and accrued liabilities
Accounts payable and accrued liabilities consist of the following:
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Accounts payables | 710,298 | 2,578,064 |
| Payroll accrual | 155,240 | 90,490 |
| Developer and customer commission accrual | 409,534 | 208,944 |
| Warranty reserve | 528,390 | 445,410 |
| Accrued liabilities | 1,623,389 | 1,061,086 |
| 3,426,850 | 4,383,994 |
On September 30, 2025, the claim and counterclaim were settled. As a result, a previously recognized provision of $1,041,431 (net of HST), was reversed and accounts payable and accrued liabilities were reduced.
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
11. Debt facilities
The following table reflects the activity in debt related financial instruments for the year.
| Working capital | ||||
|---|---|---|---|---|
| Debt facility | facility | Credit facility | Loan payable | |
| $ | $ | $ | $ | |
| Balance, December 31, 2023 | - | 5,266,472 | 1,095,027 | 40,000 |
| Accrued interest on working capital facility | - | 323,199 | - | - |
| Repayment of loan payable | - | - | - | (40,000) |
| Accrued interest on credit facility | - | - | 68,853 | - |
| Conversion of the Credit Facility to Common Shares (note 12) | - | - | (1,163,880) | - |
| Repayment of working capital facility | - | (5,589,671) | - | - |
| Balance, December 31, 2024 | - | - | - | - |
| Draw on the debt facility | 1,000,000 | - | - | - |
| Accrued interest on debt facility | 71,643 | - | - | - |
| Balance, December 31, 2025 | 1,071,643 | - | - | - |
Debt facility
On January 17, 2025, the Company entered into a revolving loan agreement (the "Facility") with a private lender that is a related party, as the lender is owned by a key management individual who is also a director and shareholder of the Company. The Facility provides for borrowings of up to $1,000,000 and bears interest at a rate of 12% per annum, which management considers to be at market terms. The Facility matures on January 17, 2027; accrued interest is settled at maturity. The borrowing limit may be increased by up to an additional $500,000, to a maximum of $1,500,000, subject to the Company's growth in receivables and inventory and at the lender's discretion. No fees were incurred and no security was pledged in connection with the Facility.
As at December 31, 2025, the draw on the credit facility amounted to $1,000,000.
As at December 31, 2025, the accrued interest amounting to $71,643 and is reflected in the carrying amount of the Debt Facility (note 21).
Working capital facility
On July 15, 2024, the Company repaid in full the amount owed under the Working Capital Facility amounting to $5,589,671 (principal of $4,643,554 of principal and accrued interest of $946,117). See note 21.
Credit facility
On June 28, 2024, the Credit Facility of $1,163,880 (principal of $1,000,000 and accrued interest of $163,880) was fully converted to 775,920 common shares (at $1.50 per post-consolidation share, see note 12). No gain or loss was recognized on the shares-for-debt exchange (see note 21).
Loan payable
The Company fully repaid the $40,000 Canada Emergency Business Account ("CEBA") loan within the stipulated repayment period, thereby preserving its eligibility for the interest-free benefit and maintaining consistency with the benefits previously recognized.
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
12. Share capital
The following Common Shares were issued and outstanding as at December 31, 2025 and 2024.
| Common Shares (1) | ||
|---|---|---|
| Number of Common Shares | Common Shares | |
| $ | ||
| Balance, December 31, 2025 | 6,128,623 | 61,392,599 |
| Balance, December 31, 2024 | 6,128,623 | 61,392,599 |
The Company's authorized share capital included an unlimited number of common shares with no par value.
(1) Prior period share amounts have been retrospectively adjusted to reflect the (100:1) Share Consolidation, which became effective on June 28, 2024.
The TSX-V approved the consolidation of the Company's issued and outstanding common shares on the basis of one (1) post-consolidation common share for every hundred (100) pre-consolidation common shares (the "Share Consolidation"). The Share Consolidation became effective on June 28, 2024, which was approved by the Company's Board of Directors on April 24, 2024, and received Shareholder approval at the annual general and special meeting on June 17, 2024. No fractional common shares were issued in connection with the Share Consolidation. Any fractional common shares arising from the Share Consolidation were deemed to have been tendered by its registered owner to the Company for cancellation for no consideration. In addition, the exercise or conversion price and/or the number of common shares issuable under any of the Company's outstanding convertible securities, were proportionately adjusted in connection with the Share Consolidation.
All issued and outstanding common shares, per share amounts, and outstanding equity instruments and awards exercisable into common shares in the consolidated financial statements of the Company and notes thereto have been retroactively adjusted to reflect the (100:1) Share Consolidation for all prior periods presented.
On June 28, 2024, the Company completed a non-brokered private placement of 5,333,333 post-consolidation common shares for gross proceeds of $8,000,000 (at $1.50 per post-consolidation share). This included the full conversion of the Credit Facility (principal of $1,000,000 and accrued interest of $163,880) into 775,920 common shares (see note 12), and the issuance of 4,557,413 common shares for cash proceeds of $6,836,120. The fees paid in connection with the private placement amounted to $147,123. No gain or loss was recognized on the shares-for-debt exchange of the credit facility, given that the creditor is also a shareholder and it was determined that the creditor is acting in the capacity of shareholder.
The 5,333,333 post-consolidation shares issued pursuant to the private placement that closed on June 28, 2024, were subject to a four month and one day hold period that expired on October 29, 2024.
21
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
13. Share-based compensation
On June 17, 2024, the shareholders approved the Company's Omnibus Equity Incentive Plan (the "Plan") which came into effect on June 28, 2024. The Plan includes stock options, restricted share units, performance share units and share appreciation rights, and provides that the Board of Directors of the Company may from time to time, in its discretion and in accordance with the TSX Venture Exchange, grant to directors, officers, employees and technical consultants to the Company, non-transferable equity incentive to acquire common shares, provided that the number of common shares reserved for issuance will not exceed 10% of the issued and outstanding common shares of the Company. The term of the equity incentive grants will be determined by the Board of Directors, but not exceeding 10 years.
Stock options
On April 1, 2025 (the "Grant Date"), the Company granted stock options to eligible employees to purchase up to 221,401 Common Shares at an exercise price of $2.50 per share. The options will expire on April 1, 2030, and vest in three equal tranches on the first, second, and third anniversaries of the Grant Date (i.e., 12, 24, and 36 months from April 1, 2025).
The following assumptions were used in arriving at the grant-date fair value associated with the stock options:
| 2025 issuance | |
|---|---|
| Exercise price | $2.50 |
| FV on date of grant | $2.50 |
| Risk-free rate | 2.57% |
| Expected life | 5 years |
| Expected volatility | 125% |
| Forfeitures | 0% to 18% |
| Expected dividends | Nil |
| December 31, 2025 | |
| --- | --- |
| Number of options (1) | |
| Outstanding, beginning of year | 24,642 |
| Options granted | 221,401 |
| Forfeiture | (14,100) |
| Expired | (1,515) |
| Options outstanding, end of year | 230,428 |
| Number of options exercisable | 22,127 |
(1) Prior period options and exercise price amounts have been retrospectively adjusted to reflect the (100:1) Share Consolidation, which became effective on June 28, 2024 (see note 12).
The following stock options were issued and outstanding as at December 31, 2025:
| Expiry date | Number of options outstanding (1) | Number of options exercisable (1) | Exercise price (1) |
|---|---|---|---|
| April 1, 2030 | 207,301 | - | $2.50 |
| January 12, 2033 | 2,000 | 1,000 | $12.00 |
| May 4, 2031 | 5,000 | 5,000 | $60.00 |
| May 26, 2032 | 1,377 | 1,377 | $60.00 |
| February 10, 2032 | 1,262 | 1,262 | $60.00 |
| May 28, 2031 | 3,786 | 3,786 | $65.36 |
| January 4, 2031 | 505 | 505 | $61.40 |
| September 29, 2029 | 2,196 | 2,196 | $1.98 |
| August 4, 2027 | 800 | 800 | $60.00 |
| February 10, 2027 | 800 | 800 | $60.00 |
| January 12, 2027 | 3,400 | 3,400 | $60.00 |
| February 16, 2026 | 2,000 | 2,000 | $50.00 |
| Number of options outstanding and exercisable | 230,428 | 22,127 | $7.31 |
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
Restricted and performance share units
On April 1, 2025 (the "Grant Date"), the Company granted performance share units ("PSUs") and restricted share units ("RSUs") as part of its long-term incentive program.
On April 1, 2025, Performance Share Units (PSUs): A total of 306,431 PSUs were granted to an officer of the Company. The PSUs vest in three equal installments on the first, second, and third anniversaries of the Grant Date (i.e., 12, 24, and 36 months following April 1, 2025). In addition to time-based vesting, the PSUs are subject to performance-based vesting conditions tied to achieving specified recorded sales targets.
The following PSUs were issued and outstanding as at December 31, 2025:
| Expiry date | Number of PSUs outstanding | Number of PSUs exercisable | Exercise price | |
|---|---|---|---|---|
| Outstanding, beginning of year | - | - | - | |
| PSUs granted | April 1, 2028 | 306,431 | - | $2.50 |
| Forfeiture | - | - | - | |
| Expired | - | - | - | |
| PSUs outstanding, end of year | 306,431 | - | $2.50 |
On April 1, 2025, Restricted Share Units (RSUs): A total of 116,400 RSUs were granted to the Company's directors. These RSUs vest in equal one-third installments on the first, second, and third anniversaries of the Grant Date.
The following RSUs were issued and outstanding as at December 31, 2025:
| Expiry date | Expiry date | Number of RSUs outstanding | Number of RSUs exercisable | Exercise price |
|---|---|---|---|---|
| Outstanding, beginning of year | - | - | - | |
| RSUs granted | April 1, 2028 | 116,400 | - | $2.50 |
| Forfeiture | - | - | - | |
| Expired | - | - | - | |
| RSUs outstanding, end of year | 116,400 | - | $2.50 |
Share-based compensation expense
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Stock options | 179,359 | (6,391) |
| Performance share units | - | - |
| Restricted share units | 133,475 | - |
| 312,834 | (6,391) |
During 2025, the Company reassessed the probability of meeting the RSU performance condition at each reporting date.
During 2025, the share-based compensation recoveries resulted from staff departures and are reflected in stock-based compensation forfeitures and expiries.
The share-based compensation expense was allocated as follows
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| General and administrative expense | 228,676 | (20,130) |
| Cost of sales | 48,037 | 13,360 |
| Selling expense | 36,121 | 379 |
| 312,834 | (6,391) |
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
Warrants
The following warrants were issued and outstanding as at December 31, 2025:
| December 31, 2025 | December 31, 2024 | |||
|---|---|---|---|---|
| Number of warrants | Weighted average exercise price | Number of warrants | Weighted average exercise price | |
| Outstanding, beginning of year | 14,243 | $58.25 | 33,243 | $59.82 |
| Warrants expired | (13,243) | $60.00 | (19,000) | $61.00 |
| Outstanding, end of year | 1,000 | $50.00 | 14,243 | $58.25 |
| Number of warrants exercisable | 1,000 | $50.00 | 14,243 | $58.25 |
| Expiry date | Number of warrants outstanding | Number of warrants exercisable | Exercise price | |
| February 17, 2026 | 1,000 | 1,000 | $50.00 | |
| Number of warrants outstanding and exercisable | 1,000 | 1,000 | $50.00 |
On January 12, 2025, 13,243 outstanding and exercisable warrants with an exercise price of $60 expired.
On December 15, 2024, 19,000 outstanding and exercisable warrants with an exercise price of $61 expired.
24
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
14. Related party transactions and balances
During 2025, the Company incurred expenses amounting to $11,062 (2024 - $13,030), for installation and plumbing work from a company related to a key management personnel and shareholder of the Company. Included in accounts payable as at December 31, 2025 is an amount owing of $nil (2024 - $220).
During 2025, the Company incurred expenses amounting to $69,324 (2024 - $234,605), for professional services to a firm of which a director of the Company is a partner. Included in accounts payable as at December 31, 2025 is an amount owing of $nil (2024 - $nil).
During 2025, the Company incurred expenses amounting to $100,000 (2024 - $nil), for consulting services from a company related to a key management person and shareholder of the Company. Included in accounts payable as at December 31, 2025 is an amount owing of $nil (2024 - $nil).
The Company entered into a loan agreement with a related party lender, as the lender is owned by a key management individual who is also a director and shareholder of the Company. As at December 31, 2025, $1,000,000 had been drawn on the revolving debt facility, and accrued interest of $71,643 was included in the carrying amount of the facility.
Key management personnel compensation
The compensation awarded to key management personnel is as follows:
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Salaries, fees and other short-term benefits | 595,857 | 775,205 |
| Share-based compensation (note 13) | 166,521 | 22,708 |
| 762,378 | 797,913 |
Key management personnel include those persons having authority and responsibility for planning, directing, and controlling the activities of the Company as a whole. The Company defines key management personnel as being the directors and key employees.
15. Contingencies
The Company, from time to time, may be subject to various legal proceedings and complaints arising in the normal course of business. These proceedings primarily include matters related to employment laws, various provincial regulations governing debt collection and contractual obligations. The Company has liability insurance coverage in excess of certain limits from various insurance carriers, which cover in part many of these matters. It is the Company's policy to accrue for amounts related to these legal matters when it is probable a liability has been incurred and an amount is reasonably estimable.
On March 3, 2022, a claim was filed in the amount of $175,000 against the Company, relating to an employee breaching post-employment obligation and fiduciary obligations. The Company believes that there is no merit to this claim.
On September 30, 2025, a claim and counterclaim were settled, with the Company agreeing to pay a total of $350,000 (including HST). Under the terms of the settlement, $150,000 was payable upon signing, with the remaining $200,000 to be paid in eight quarterly installments of $25,000 each, commencing on January 1, 2026, and concluding on October 1, 2027. As a result, a previously recognized provision of $1,041,431 (net of HST) was reversed and accounts payable and accrued liabilities were reduced (see note 10).
On June 14, 2023, a claim was filed against the Company in the amount of $750,000 relating to an employment matter. The Company believes that there is no merit to this claim and will defend its position and has not included an accrual in its provision for this claim.
On October 26, 2023, a customer filed a claim against the Company in the amount of $200,000 relating to alleged damage to a wine collection. Management believes the claim is without merit and intends to vigorously defend its position, as no water damage occurred and the product was not used for its intended purpose.
On October 8, 2025, a former customer filed a claim against the Company in the amount of $50,000 seeking damages. The Company believes the claim is without merit, as the alleged damages occurred during a period when the customer was not under contract and was not paying for monitoring services. The Company intends to vigorously defend the claim and has not recorded a provision in respect of this matter.
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
16. Risk management
The Company is exposed to the symptoms and effects of global economic conditions and other factors that could adversely affect its business, financial condition, and operating results. Many of the risk factors are beyond the Company's direct control. The Company's management and Board of Directors plan an active role in monitoring the Company's key risks and in determining the policies that are best suited to manage these risks.
Capital
For capital management purposes, the Company defines capital as share capital and debt facilities.
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Share capital (note 12) | 61,392,599 | 61,392,599 |
| Debt facilities (note 11) | - | - |
| Total capital | 61,392,599 | 61,392,599 |
Risk management
The Company's objective and policies for managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Company manages its capital structure and makes changes based on economic conditions, risks that impact the consolidated operations and future significant capital investment opportunities. In order to maintain or adjust its capital structure, the Company may issue new equity instruments or considers other financing opportunities. (See notes 12).
The Company is exposed to a variety of financial risks by virtue of its activities: market risk, credit risk, interest rate risk, liquidity risk and foreign currency risk. The Board of Directors has overall responsibility for the determination of the Company's capital and risk management objectives and policies while retaining ultimate responsibility for them. The Company's overall capital and risk management program has not changed throughout the year. It focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial performance. Risk management is carried out by the finance department under policies approved by the Board of Directors. The finance department identifies and evaluates financial risks in close cooperation with management.
Credit risk
Credit risk is the risk one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company's main credit risks relate to its trade accounts receivable and contract assets. The Company installs residential and commercial water leak mitigation technology at its customers locations in the normal course of its operations.
Management of the Company monitors the creditworthiness of its customers by performing background checks on all new customers focusing on publicity, reputation in the market, and relationships with customers and other vendors. Further, management monitors the frequency of payments from ongoing customers and performs frequent reviews of outstanding balances.
Provisions for outstanding balances are established based on forward-looking information and revised when there are changes in circumstances that would create doubt over the receipt of funds. Such reviews are conducted on a continued basis through the monitoring of outstanding balances as well as the frequency of payments received. Accounts receivables and contract assets are completely written off once management determines the probability of collection to be remote. Such reviews are conducted on a forward-looking basis and reviewed when changes in client or economic circumstances exist that would create doubt over the receipt of funds within the next twelve months. For the year ended December 31, 2025, $17,770 in accounts receivables and contract assets were written off (2024 - $34,816 in receivables were written off). The amounts that were written off are still subject to collection enforcement activity. Payment terms are usually 30 days after the invoice is issued.
26
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
The following tables present the provision for credit losses in the accounts receivable and contract assets based on the Company's operating sectors: MFR, SFR and C&I.
The provision for credit losses on accounts receivable and contract assets as at December 31, 2025:
| Accounts receivable and contract assets | Current | 60 - 120 days | Over 120 days | Total |
|---|---|---|---|---|
| $ | $ | $ | $ | |
| MFR | 726,226 | 367,921 | 263,092 | 1,357,239 |
| SFR | 3,877 | 2,194 | 4,049 | 10,120 |
| C&I | 241,649 | 116,164 | - | 357,813 |
| 971,752 | 486,279 | 267,141 | 1,725,172 | |
| Provision for credit losses | Current | 60 - 120 days | Over 120 days | Total |
| --- | --- | --- | --- | --- |
| $ | $ | $ | $ | |
| MFR | 65,465 | 55,189 | 75,530 | 196,184 |
| SFR | 388 | 493 | 3,036 | 3,917 |
| C&I | 12,082 | 11,616 | - | 23,698 |
| 77,935 | 67,298 | 78,566 | 223,799 | |
| Accounts receivable and contract assets, net | 1,501,373 |
The provision for credit losses on accounts receivable and contract assets as at December 31, 2024:
| Accounts receivable and contract assets | Current | 60 - 120 days | Over 120 days | Total |
|---|---|---|---|---|
| $ | $ | $ | $ | |
| MFR | 1,332,400 | 334,110 | 143,698 | 1,810,208 |
| SFR | 1,990 | 6,233 | 20,031 | 28,254 |
| C&I | 16,225 | 17,712 | - | 33,937 |
| 1,350,615 | 358,055 | 163,729 | 1,872,399 | |
| Provision for credit losses | Current | 60 - 120 days | Over 120 days | Total |
| --- | --- | --- | --- | --- |
| $ | $ | $ | $ | |
| MFR | 129,673 | 50,116 | 70,171 | 249,960 |
| SFR | 637 | 3,116 | 15,024 | 18,777 |
| C&I | 811 | 1,771 | - | 2,582 |
| Expected credit losses | 131,121 | 55,003 | 85,195 | 271,319 |
| Accounts receivable and contract assets, net | 1,601,080 |
Changes in the provision for expected credit losses result from the following:
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Beginning of year balance | 271,319 | 201,074 |
| Net allowance recognized as (recovery)/expense | (29,750) | 105,061 |
| Receivable written off | (17,770) | (34,816) |
| End of year balance | 223,799 | 271,319 |
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
Currency risk
The Company generates sales of product in Canadian and U.S. dollars and incurs its expenses in both U.S. and Canadian dollars and is therefore exposed to risk from changes in foreign currency rates. In addition, the Company holds financial assets and liabilities in U.S. dollars that expose the Company to foreign exchange risks. The Company does not utilize any financial instruments or cash management policies to mitigate the risks arising from changes in foreign currency rates.
Currency risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. A portion of the Company's income is generated in US dollars and is subject to currency fluctuations. The performance of the Canadian dollar relative to the US dollar could positively or negatively affect the Company's income. Thus, the Company may from time to time, experience losses resulting from fluctuations in the value of its foreign currency translations, which could adversely affect its operating results. Currency risk is not hedged.
Regarding currency exposure, if the Canadian dollar had been 5% stronger/weaker versus the US dollar for the year ended December 31, 2025, with all other variables held constant, income for the period would have been $1,665 higher/lower (2024 – $1,929).
For the year ended December 31, 2025, approximately 7% (2024 – 6%) of the Company's total sales were in US dollars. Consequently, some assets are exposed to foreign exchange fluctuations.
US dollar denominated balances include operating cash and accounts receivable and contracted assets. As at December 31, 2025, operating cash was $159,279 (US $116,211) and accounts receivable and contract assets of $97,958 (US $71,471). As at December 31, 2024, operating cash was $57,685 (US $40,089) and accounts receivable and contract assets of $25,207 (US $17,518).
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is subject to interest rate risk with respect to its cash, however, the risk is minimal because of their short-term maturity. All of the Company's interest-bearing debt instruments have fixed interest rates and are not subject to interest rate cash flow risk.
Liquidity risk
Liquidity risk is the risk the Company will encounter difficulty in meeting the obligations associated with its financial liabilities. The Company is exposed to this risk mainly in respect of its accounts payable, due to related parties and accruals. The Company prepares cash flow forecasts to monitor its cash flow needs in order to manage its liquidity risk. The Company manages liquidity risk through managing contractual maturities based on cash flow forecasts. The Company mitigates this risk through credit facilities and loan agreements.
Contractual obligations are due as follows:
| December 31, 2025 | Less than 12 | |||
|---|---|---|---|---|
| Total | months | 1 - 3 years | 4 - 5 years | |
| $ | $ | $ | $ | |
| Accounts payable and accrued liabilities (note 10) | 3,426,850 | 3,426,850 | - | - |
| Debt facilities (note 11) | 1,071,643 | - | 1,071,643 | - |
| 4,498,493 | 3,426,850 | 1,071,643 | - | |
| December 31, 2024 | Less than 12 | |||
| Total | months | 1 - 3 years | 4 - 5 years | |
| $ | $ | $ | $ | |
| Accounts payable and accrued liabilities (note 10) | 4,383,994 | 4,383,994 | - | - |
| 4,383,994 | 4,383,994 | - | - |
Accounts payable and accrued liabilities includes a warranty provision of $528,390 (December 31, 2024 - $445,410), related to water monitoring equipment.
Fair value of financial instruments
The fair value of cash, restricted cash, accounts receivable and contract assets, accounts payable and accrued liabilities, and debt facilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
During the year ended December 31, 2025 and 2024, there were no transfers between Level 1, Level 2 or Level 3 fair value measurements.
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
17. Revenue
The Company accounts for revenue from contracts with customers in accordance with IFRS 15: (1) identify the contract with customers (2) identify the performance obligations in the contract (3) determine the transaction price (4) allocate the transaction price to each performance obligation on the basis of the relative stand-alone selling prices ("SSP") of each distinct good or service promised in the contract (5) recognize revenue when the relevant criteria are met for each performance obligation.
| Performance obligations from contracts with customers | Timing of the satisfaction of the performance obligation |
|---|---|
| Integrated | Equipment and monitoring revenue recognized when commissioned, over the contract term on a straight-line basis |
| Third party installations | Installations services that can be performed by third parties, are recognized when commissioned |
| Equipment and installations | When the equipment is delivered and installed, at a point in time |
| Monitoring | As the service is provided over the period |
| Software as a service | As the service is provided (usually monthly) |
| December 31, 2025 | |
| --- | --- |
| $ | |
| Eddy integrated | 4,566,404 |
| Eddy third party installations | - |
| Reed equipment and installation | 136,932 |
| Reed monitoring | 14,085 |
| 4,717,421 |
Deferred revenue
Deferred revenue is comprised of upfront prepayments received for certain water leak detection monitoring services, which are recognized over the contract term (which averages 60 - 84 months).
The table below summarizes the deferred revenue balances.
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Opening balance | 9,596,706 | 6,515,037 |
| Additions | 8,043,126 | 6,346,237 |
| Recognitions | (4,389,035) | (3,264,568) |
| Balance end of year | 13,250,797 | 9,596,706 |
As at December 31, 2025, the deferred revenue amount of $13,250,797 (2024 - $9,596,706) comprised of a current amount of $4,462,468 (2024 - $2,535,869) and a non-current amount of $8,788,329 (2024 - $7,060,837).
29
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
- Cost of sales
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Share-based compensation (note 13) | 48,037 | 13,360 |
| Materials and labour | 958,926 | 703,545 |
| Provision for inventory (note 7) | 22,419 | 156,708 |
| Warehouse rent | 72,690 | 71,950 |
| Monitoring service | 277,752 | 314,541 |
| Amortization on costs to obtain and fulfill a contract (note 8) | 360,855 | 344,750 |
| Licensing and network fees | 94,336 | 150,598 |
| 1,835,014 | 1,755,452 |
- Selling
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Salaries | 804,076 | 321,840 |
| Marketing promotions | 53,759 | 23,038 |
| Share-based compensation (note 13) | 36,121 | 379 |
| Commission to developer and customer | 200,590 | 154,978 |
| Sales commission | 107,279 | 58,681 |
| Warranty | 146,378 | 290,819 |
| General | 110,045 | 15,008 |
| 1,458,248 | 864,743 |
- General and administrative
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Wages and benefits | 2,988,246 | 2,847,382 |
| Consulting expense | 625,285 | 398,829 |
| Professional fees | 521,800 | 111,745 |
| IT maintenance | 77,773 | 65,619 |
| Dues and subscriptions | 262,718 | 237,092 |
| Provision for expected credit losses (note 16) | (35,103) | 82,972 |
| Share-based compensation (note 13) | 228,676 | (20,130) |
| Depreciation on property and equipment (note 9) | 30,285 | 37,180 |
| Inventory write-down | (11,265) | 49,455 |
| Consumables and supplies | 87,507 | 115,364 |
| Insurance | 106,560 | 108,503 |
| Regulatory compliance | 18,736 | 76,817 |
| Administrative | 287,501 | 236,278 |
| 5,188,719 | 4,347,106 |
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
21. Finance costs
| Reference | December 31, 2025 | December 31, 2024 | |
|---|---|---|---|
| $ | $ | ||
| Interest on working capital facility | Note 11 | - | 323,199 |
| Interest on credit facility | Note 11 | - | 68,853 |
| Interest on debt facility | Note 11 | 71,643 | - |
| 71,643 | 392,052 |
22. Income taxes
Provision for income taxes
The combined tax rate is determined using the substantively enacted tax rates as at December 31, 2025 and 2024. A reconciliation to the provision for income tax reported in the consolidated statement of loss and comprehensive loss is summarized as follows:
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Rate reconciliation | ||
| Loss before income taxes | (2,813,421) | (3,645,448) |
| Canadian and Ontario statutory income tax rate | 26.5% | 26.5% |
| Income tax recovery computed at the statutory rates | (745,556) | (966,044) |
| Permanent differences | (6,547) | 10,940 |
| Stock option expense | 82,901 | (6,391) |
| Other | 51,477 | (5,206) |
| Change in unrecognized deductible temporary differences | 617,726 | 1,005,689 |
| Share issue cost in equity | - | (38,988) |
| Deferred income tax recovery | - | - |
| December 31, 2025 | December 31, 2024 | |
| --- | --- | --- |
| $ | $ | |
| Unrecognized deferred tax assets | ||
| Operating losses carried forward | 67,992,509 | 65,015,516 |
| Depreciable capital assets | 158,169 | 78,538 |
| Share issuance costs | 369,767 | 699,562 |
| Financial statement reserves and tax reserves | 2,219,035 | 2,350,785 |
| Costs to obtain and fulfill a contract | (6,809,737) | (5,465,000) |
| Total unrecognized temporary differences | 63,929,743 | 62,679,401 |
The Company has incurred losses for income tax purposes in the amount of approximately $60,894,936 in Canada that expire between 2035 and 2045, and approximately $272,548 losses in the U.S. that can be carried forward indefinitely. The non-capital losses are available to reduce future years' income for tax purposes. The potential tax benefit of these loses has not been recognized.
Deferred income tax
The tax effects of temporary differences that give rise to deferred tax assets ("DTA") and deferred tax liabilities ("DTL"):
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| DTA - non-capital loses | 1,804,580 | 1,432,158 |
| DTL - costs to obtain and fulfill contracts | (1,804,580) | 1,432,158 |
32
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
- Net loss per share
| 2025 | 2024 | |
|---|---|---|
| Net loss for the year | $ (2,813,421) | $ (3,645,448) |
| Weighted average number of common shares outstanding (1) | 6,128,623 | 3,503,673 |
| Basic and diluted loss per share | ($0.46) | ($1.04) |
As at December 31, 2025, 6,128,623 (December 31, 2024 - 6,128,623)¹ Common Shares were issued and outstanding (see note 12).
(1) Prior period share amounts have been retrospectively adjusted to reflect the (100:1) Share Consolidation, which became effective on June 28, 2024 (see note 12).
Diluted
Diluted income per share is calculated by adjusting the weighted average number of Common Shares outstanding to assume the conversion of all dilutive potential Common Shares. For the years ended December 31, 2025 and 2024, potential dilutive Common Shares consisted of share-based compensation awards and warrants (see note 13).
For the year ended December 31, 2025, no adjustment to the weighted average number of Common Shares outstanding was required, as there were no in-the-money stock options or warrants outstanding, RSUs had not vested, and the performance conditions related to PSUs had not been satisfied. Accordingly, diluted earnings per share is equal to basic earnings per share for the years ended December 31, 2025 and 2024.
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
24. Segment reporting
Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. For the purpose of segment reporting, the Company's Chief Executive Officer (CEO) is the Chief Operating Decision Maker (CODM).
The Company operates in three operating segments, which are based on the Company's organizational structure and how the information is reported internally on a regular basis. These operating segments are managed separately because they require different sales and marketing strategies. The Company's revenue is generated from its customers in the following market sectors: MFR, SFR and C&I. The Company's revenue is generated from customers in Canada and the USA.
Information related to each reportable segment is set out below. Segment profit and loss information is used to measure performance because management believes that this information is the most relevant in evaluating the results of the respective segments relative to other entities that operate in the same industries.
The Company's results by operating segments are as follows:
| Year ended December 31, 2025 | MFR | SFR | C&I | Corporate | Total |
|---|---|---|---|---|---|
| $ | $ | $ | $ | $ | |
| Revenue | 3,836,841 | 403,731 | 476,849 | - | 4,717,421 |
| Cost of sales (note 18) | 1,492,480 | 157,046 | 185,488 | - | 1,835,014 |
| Selling (note 19) | 1,186,043 | 124,801 | 147,403 | - | 1,458,248 |
| General and administrative (note 20) | - | - | - | 5,188,719 | 5,188,719 |
| Reversal of provision due to settlement of claim (notes 10, 15) | - | - | - | (1,041,431) | (1,041,431) |
| Loss on property and equipment disposal (note 9) | - | - | - | 13,910 | 13,910 |
| Insurance recovery on property and equipment (note 9) | - | - | - | (19,488) | (19,488) |
| Interest income | - | - | - | (8,965) | (8,965) |
| Loss on foreign exchange | - | - | - | 33,192 | 33,192 |
| Finance costs (note 21) | - | - | - | 71,643 | 71,643 |
| Income taxes (note 22) | - | - | - | - | - |
| 1,158,318 | 121,884 | 143,958 | (4,237,580) | (2,813,421) | |
| Year ended December 31, 2024 | MFR | SFR | C&I | Corporate | Total |
| $ | $ | $ | $ | $ | |
| Revenue | 2,878,274 | 492,013 | 407,839 | - | 3,778,126 |
| Cost of sales (note 18) | 1,337,349 | 228,607 | 189,497 | - | 1,755,452 |
| Selling (note 19) | 658,784 | 112,613 | 93,347 | - | 864,743 |
| General and administrative (note 20) | - | - | - | 4,347,106 | 4,347,106 |
| Interest income | - | - | - | (20,177) | (20,177) |
| Loss on foreign exchange | - | - | - | 84,398 | 84,398 |
| Finance costs (note 21) | - | - | - | 392,052 | 392,052 |
| Income taxes (note 22) | - | - | - | - | - |
| 882,142 | 150,794 | 124,996 | (4,803,379) | (3,645,448) |
Eddy Smart Home Solutions Ltd.
Notes to Consolidated Financial Statements
Years ended December 31, 2025 and 2024
(in Canadian dollars)
The Company's revenue by geography are as follows:
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| Canada | 4,398,751 | 3,574,669 |
| USA | 318,670 | 203,457 |
| Total | 4,717,421 | 3,778,126 |
The Company's long-lived assets by geography are as follows
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| Canada | 6,078,726 | 4,710,580 |
| USA | 111,705 | 77,649 |
| Total | 6,190,431 | 4,788,229 |
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