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Eddy Smart Home Solutions Ltd. — Management Reports 2026
Apr 24, 2026
48019_rns_2026-04-23_881bb78c-5baa-4fad-91bb-5dc9eaeb936f.pdf
Management Reports
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Eddy Smart Home Solutions Ltd.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Years ended December 31, 2025, and 2024
Management's Discussion & Analysis
Eddy Smart Home Solutions Ltd. ("Eddy" or the "Company") is a North American provider and developer of residential and commercial smart water metering products and monitoring services, helping property owners protect, control, and conserve water usage through water metering and sensing devices and behavioural learning software in some products. The Company operates in three segments: Multi-Family Residential ("MFR"), Single-Family Residential ("SFR") and Commercial and Institutional ("C&I").
This Management's Discussion and Analysis ("MD&A") is dated as of April 22, 2026, and should be read in conjunction with the Company's audited consolidated financial statements of the Company and notes thereto as at and for the years ended December 31, 2025, and 2024. Unless otherwise specified, dollar amounts are expressed in Canadian dollars. Additional information in respect of the Company can be found on SEDAR at www.sedar.com.
FORWARD-LOOKING INFORMATION
This MD&A contains certain forward-looking statements within the meaning of applicable Canadian securities laws ("forward-looking statements" or "forward-looking information") that involve various risks and uncertainties and should be read in conjunction with the accompanying audited consolidated financial statements and notes thereto for the years ended December 31, 2025, and 2024.
Statements other than statements of historical fact contained in this MD&A may be forward-looking statements, including, without limitation, management's expectations, intentions and beliefs concerning anticipated future events, results, circumstances, economic performance or expectations with respect to Company, including Company business operations, business strategy and financial condition. When used herein, the words "anticipates", "believes", "budgets", "could", "estimates", "expects", "forecasts", "goal", "intends", "may", "might", "outlook", "plans", "projects", "schedule", "should", "strive", "target", "will", "would," and similar expressions may be used to identify forward-looking information, although not all forward-looking information contains these identifying words. In particular, statements regarding the Company's plans for 2026, the Company's liquidity risks and foreign currency risks, the estimated new MFR sales, and the expected revenue recognition of current devices are forward-looking statements.
These forward-looking statements reflect the internal projections, expectations, future growth, results of operations, performance, business prospects and opportunities of the Company and are based on information currently available to the Company and/or assumptions that the Company believes are reasonable. Many factors may cause actual results to differ materially from the results and developments discussed in the forward-looking information. There can be no assurance that actual results will be consistent with these forward-looking statements.
In developing these forward-looking statements, certain material assumptions were made. These forward-looking statements are also subject to certain risks. These risks include, but are not limited to:
- actual future market conditions being different than anticipated by management;
- general economic and business conditions;
- the risk that the deployment of the monitoring of residential and commercial smart water metering products and related technologies does not meet anticipated results;
- the risks and uncertainties described under the Risks and Uncertainties section in this MD&A.
Such forward looking statements or information are based on a number of assumptions, all or any of which may prove to be incorrect. In addition to any other assumptions identified in this document, assumptions have been made regarding, among other things:
- management's views regarding current and anticipated market conditions;
- industry trends remaining unchanged;
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
Page | 1
Management's Discussion & Analysis
- the Company's financial and operating attributes as at the date hereof and its anticipated future performance;
- assumptions regarding the volume and mix of business activities remaining consistent with current trends;
- the Company's ability to obtain financing on acceptable terms;
- the Company's ability to enter into long-term revenue agreements with established developers and insurance companies;
- the concentration risk of suppliers and their ability to provide timely supplies;
- assumptions regarding foreign exchange rates.
Readers are cautioned that the preceding list of factors or assumptions is not exhaustive. Although forward-looking statements contained in this MD&A are based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Accordingly, readers should not place undue reliance on such forward-looking statements and assumptions as management cannot provide assurance that actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company.
All forward-looking information in this MD&A is made as of the date of this MD&A. These forward-looking statements are subject to change as a result of new information, future events or other circumstances, and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events, or otherwise, unless required by applicable securities law.
See the Risks and Uncertainties section in this MD&A for a discussion in respect of the material risks relating to the business of the Company.
This MD&A includes references to financial measures such as Adjusted EBITDA. The Company feels that these financial measures are important to the understanding of its business activities. These financial measures are not defined by IFRS and are therefore referred to as non-IFRS measures. The non-IFRS measures may not be comparable to similar measures presented by other companies. The Company uses these measures to evaluate its performance. The non-IFRS measures should not be considered an alternative to, or more meaningful than, measures determined in accordance with IFRS, as an indication of the Company's performance. The non-IFRS measures are reconciled to their closest IFRS measures.
RECENT DEVELOPMENTS AND OUTLOOK
Eddy Solutions continues to expand its footprint through strategic partnerships with real estate developers, general contractors, submetering companies, and asset managers. As part of its ongoing evolution, the Company has made a deliberate shift away from the single-family home market to focus on larger-scale, higher-impact deployments in the Multi-Family Residential and Commercial sectors. Areas where its technology delivers the greatest value. The Company's pipeline in Canada remains strong, with consistent demand and a growing volume of active projects, supported by leading insurance providers who continue to endorse and recommend the Eddy system across their customer networks.
Across the industry, the importance of proactive leak mitigation is becoming increasingly evident. What was once considered a "nice-to-have" insurance feature is now viewed as critical infrastructure in modern buildings. Eddy Solutions is at the forefront of this shift, working in close collaboration with major insurers to enable premium discounts and reduced deductibles for customers utilizing its solutions.
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
Page | 2
Management's Discussion & Analysis
The Company has entered a transformative phase with its strategic expansion into the U.S. market. This initiative is supported by the appointment of key leadership, including James Florentino as Director of Sales, Shkya Ghanbarian as Chief Strategy Officer, and, most recently, Sebastian Williams as Director of Partnerships. Together, they bring deep expertise to accelerate the Company's growth in the United States. A cornerstone of this expansion is the establishment of a dedicated U.S. based facility that will serve as a hub for operations, logistics, and customer success. This infrastructure will enable the Company to efficiently meet rising demand and scale delivery across key regions. The U.S. growth strategy targets both new construction and retrofit opportunities in the multi-family and commercial building sectors, positioning the Company to capitalize on a broad range of market opportunities.
With a proven technology platform, deep deployment expertise, and a strong commitment to customer satisfaction, Eddy Solutions is well-positioned to drive sustainable growth and long-term value across North America.
GROWTH IN INSTALLED DEVICES
As of December 31, 2025, the Company's cloud-based leak detection platform supporting the Eddy brand managed 131,838 in-building devices, up from 109,816 as of December 31, 2024. This reflects growth of approximately 20% for 2025. These devices are comprised of Eddy IQs, Eddy H20s and Eddy Links. Installed devices is an important measure of traction that we are gaining in the market with the deployment of our leak protection services.
The following table summarizes the installed devices:
| INSTALLED DEVICES - DECEMBER 31, 2025 | ||||
|---|---|---|---|---|
| Q4/2024 | Q1/2025 | Q2/2025 | Q3/2025 | Q4/2025 |
| 109,816 | 117,513 | 120,804 | 125,832 | 131,838 |
| Growth quarter-over-quarter | 7,697 | 3,291 | 5,028 | 6,006 |
| YTD installations | 7,697 | 10,988 | 16,016 | 22,022 |
| Growth % quarter-over-quarter | 7% | 3% | 4% | 5% |
| YTD % increase | 7% | 10% | 15% | 20% |
Beginning in the second half of 2025, the Company's strategic shift toward prioritizing the MFR segment drove growth in installed devices, offsetting declines in the SFR segment resulting from customer attrition and end-of-term non-renewals.
| INSTALLED DEVICES - DECEMBER 31, 2024 | ||||
|---|---|---|---|---|
| Q4/2023 | Q1/2024 | Q2/2024 | Q3/2024 | Q4/2024 |
| 75,229 | 83,416 | 97,277 | 105,432 | 109,816 |
| Growth quarter-over-quarter | 8,187 | 13,861 | 8,155 | 4,384 |
| YTD installations | 8,187 | 22,048 | 30,203 | 34,587 |
| Growth % quarter-over-quarter | 11% | 17% | 8% | 4% |
| YTD % increase | 11% | 29% | 40% | 46% |
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
Page | 3
Management's Discussion & Analysis
BACKLOG OF CONTRACTED SALES
The contracted sales backlog serves as the primary indicator of the market traction we are achieving with our leak-protection services. Given the nature of the new construction development cycle, revenue from contracts secured in a particular quarter generally materializes only once construction commences, typically within several quarters to roughly two years.
A key operating metric reflecting our momentum and the underlying value of our business is our contracted sales backlog. Consistent with our mission to protect property and empower people with data and control, the backlog remained robust at approximately $35.4 million as of December 31, 2025, compared to $38.6 million at December 31, 2024. This represents future contracted revenue to be recognized over the life of the agreements, which have a weighted average remaining term of approximately 8.1 years (2024 – 8.5 years).
During 2025, the backlog of contracted sales reflected new equipment and monitoring contracts signed totaling $10.8 million, billings of $8.6 million (see the Operational Revenue section of this MD&A for further details), contract terminations of $3.5 million for the Eddy brand, $1.4 million for SFR, and $0.5 million for the Reed brand.
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 $1,851,040 (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.
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. See Debt Facility section of this MD&A for further details.
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 market, to ultimately attain and maintain profitable operations. These consolidated financial statements do not give effect to
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
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Management's Discussion & Analysis
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.
OVERVIEW
The Company is a North American provider and developer of commercial and residential smart leak detection 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: MFR, SFR and C&I.
The Company generates revenue through both upfront equipment sales, SaaS model and service/replacement of equipment.
The Company has invested and now has significant resources, knowledge base, and a fully developed product suite to meet the demands of the MFR, SFR, and C&I market at scale through its already established sales team and channel partners including Insurance Companies, Telecommunications Companies, Mechanical and Engineering Groups and Real Estate Developers.
The wholly owned operating subsidiaries of the Company are Eddy Smart Home Solutions Inc., Eddy Solutions USA Corp., and Reed Controls Inc.
The Company's product and service offering consists of a hardware and software component that work together to provide comprehensive leak protection. The primary hardware components include equipment such as water meters that measure the flow of water through pipes (Eddy IQ), wireless sensors that detect the presence of water shutoff valves that can turn off water flow in the building (Eddy H20) and gateways which allow the devices to communicate with each other and with the Company's monitoring center (Eddy IQ). The Company's software component is its monitoring service which is based on its cloud-based platform that tracks and stores data from the subscriber's devices.
SEGMENTS
The Company has three operating and reportable segments: MFR, SFR, and C&I. The MFR segment consists of multi-residential buildings such as condominiums and apartments, with each unit within the multi-residential building constituting one subscriber. The SFR segment consists of single-family homes, with each single-family home constituting one subscriber. The C&I segment consists of buildings used for commercial and industrial activities such as office buildings, warehousing, institutions and health care centers. See the Revenue and the Results by Operating Segments sections of this MD&A.
SALES AND DISTRIBUTION CHANNELS
The Company utilizes a mix of direct and indirect sales and distribution channels. The Company's direct channel customers are generated by its sales outreach, marketing efforts, brands awareness, and subscriber referrals, and are supported by the Company's internal salesforce. Direct channel customers include property owners (developers, asset managers, condominium corporations, plumbing manufacturers, plumbing engineering, and homeowner's associations), insurance carriers, and submetering companies. The Company's indirect channel customers are generated by commission-based agreements with independent third-party companies which include general contractors, developers, insurance carriers and brokers, sub-metering companies, property managers, telecom companies, restoration firms, architectural and engineering firms, and HVAC installers. The primary sales channels are insurance carriers, submetering companies and developers.
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
Page | 5
Management's Discussion & Analysis
SEASONALITY
The Company has exposure to the construction industry, particularly condominium construction, which in Canada is seasonal in nature. As a result, less work is performed in the winter and early spring months than in the summer and fall months. Accordingly, the Company will experience a seasonal pattern in its operating results, with the first half of the year, and particularly the first quarter, typically generating lower revenue and profits than the second half of the year. Therefore, results in any one quarter are not necessarily indicative of results in any other quarter, or for the year as a whole.
NON-IFRS FINANCIAL AND PERFORMANCE MEASURES
The Company's audited consolidated financial statements for the years ended December 31, 2025, and 2024 are prepared in accordance with IFRS Accounting Standard. The Company reports on certain non-IFRS measures that are used by management to evaluate the performance of the Company. Since non-IFRS measures do not have standardized meanings prescribed by IFRS, securities regulations require that non-IFRS measures be clearly defined, qualified, and reconciled with their nearest IFRS measure. These measures do not have standardized meanings or interpretations and may not be comparable to similar terms and measures provided by other issuers.
REPORTED EBITDA AND ADJUSTED EBITDA
Reported EBITDA and Adjusted EBITDA are non-IFRS measures that are used by management to evaluate the performance of the Company.
Reported EBITDA is defined as net loss adjusted for finance costs and depreciation and amortization.
Adjusted EBITDA is defined as Reported EBITDA adjusted for foreign exchange, share-based compensation expense, and non-recurring items.
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |
| $ | $ | $ | $ | |
| Net Loss | (972,104) | (927,413) | (2,813,421) | (3,645,448) |
| (+) Tax Expense / (Recovery) | -- | -- | -- | -- |
| (+) Finance Costs | 30,664 | -- | 71,643 | 392,052 |
| (+) Depreciation, Property and Equipment | 6,321 | 9,176 | 30,285 | 37,180 |
| (+) Amortization, Fulfillment Assets | 111,727 | 80,482 | 360,855 | 344,750 |
| Reported EBITDA | (823,392) | (837,755) | (2,350,638) | (2,871,466) |
| (+) Foreign exchange loss | 16,376 | 62,531 | 33,192 | 84,398 |
| (+) Loss on property and equipment disposal | 1,095 | -- | 13,910 | -- |
| (-) Insurance recovery on property and equipment | -- | -- | (19,488) | -- |
| (-) Reversal of provision due to settlement of claim | -- | -- | (1,041,431) | -- |
| (+/-) Share-based Compensation Expense/(Recovery) | 65,373 | 890 | 312,834 | (6,391) |
| Adjusted EBITDA | (740,548) | (774,334) | (3,051,621) | (2,793,459) |
Reported EBITDA improved slightly to a loss of $823k for the three months ended 2025 (from $838k in 2024), an improvement of $14k. While net loss increased modestly by $45k, this was offset at the EBITDA level by higher non-cash add-backs, particularly increased amortization of fulfillment assets. Finance costs of $31k were also added back in 2025. Depreciation decreased slightly year over year.
Adjusted EBITDA improved by $34k, mainly reflecting lower foreign exchange losses compared to the prior year and partially offset by higher share-based compensation expense.
For the year ended December 31, 2025, net loss improved to $2.81M from $3.65M in 2024, a reduction of $0.83M. The improvement was primarily driven by a significant decrease in finance costs (see the Debt Facility section of this MD&A), lower depreciation, and a reversal of a provision following the settlement
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
Page | 6
Management's Discussion & Analysis
of a claim. These factors were partially offset by increased G&A expenses and higher amortization of fulfillment assets. As a result, reported EBITDA improved by $0.52M.
Adjusted EBITDA declined to a loss of $3.05M in 2025 from $2.79M in 2024. The year-over-year movement is primarily driven by a $1.04M reversal (see the Contingences section of this MD&A) of a provision following settlement of a claim and an increase in share-based compensation expense (see the Share-Based Compensation section of this MD&A) to $313k (from a small recovery in 2024). These impacts were partially offset by lower foreign exchange losses and an insurance recovery related to property and equipment. A one-off loss on disposal of property and equipment of $14k was also recorded in 2025.
OPERATIONAL WORKING CAPITAL
The non-IFRS measure Operational Working Capital is adjusted for deferred revenue and reflects a metric used by management to evaluate the Company's operating efficiency and liquidity, excluding certain items included in standard IFRS working capital. Deferred Revenue represents upfront prepayments received for certain water leak detection monitoring services or products that have not yet been delivered. While IFRS classifies these amounts as a liability, from an operational cash management perspective, they reflect future revenue and provide insight into cash-tied operational efficiency.
| As at December 31, 2025 | As at December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Current assets | 6,038,277 | 6,029,850 |
| Current liabilities | 7,889,318 | 6,919,863 |
| Working capital | (1,851,040) | (890,013) |
| Current assets (A) | 6,038,277 | 6,029,850 |
| Current liabilities | 7,889,318 | 6,919,863 |
| Adjustment: deferred revenue (current portion) | (4,462,468) | (2,535,869) |
| Adjusted current liabilities (B) | 3,426,850 | 4,383,994 |
| Operational working capital [(A) - (B)] | 2,611,427 | 1,645,856 |
As at December 31, 2025, operational working capital was $2,611,427 (2024 - $1,645,856), approximately $4.4 million higher than reported working capital (2024 - $2.5 million). This reflects the Company's ability to effectively manage its operations and current obligations.
FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE INDICATORS
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |
| $ | $ | $ | $ | |
| Revenue - MFR | 1,078,627 | 963,941 | 3,836,841 | 2,878,274 |
| Revenue - SFR | 132,889 | 115,792 | 403,731 | 492,013 |
| Revenue - C&I | 126,641 | 188,841 | 476,849 | 407,839 |
| Total revenue | 1,338,157 | 1,268,574 | 4,717,421 | 3,778,126 |
| Net loss | (972,104) | (927,413) | (2,813,421) | (3,645,448) |
| Net loss per share - basic and diluted (*) | ($ 0.16) | ($ 0.15) | ($ 0.46) | ($ 1.04) |
| Non-IFRS measures | ||||
| Reported EBITDA (**) | (823,392) | (837,755) | (2,350,638) | (2,871,466) |
| Adjusted EBITDA (**) | (740,548) | (774,334) | (3,051,621) | (2,793,459) |
For the three months ended December 31, 2025, revenue increased by $69,583 (6%), to $1,338,157 from $1,268,574 in the comparable period. For the year ended December 31, 2025, revenue increased by $939,295 (25%), to $4,717,421 from $3,778,126 in 2024.
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
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Management's Discussion & Analysis
(*) On June 28, 2024, the Company completed a non-brokered private placement of 5,333,333 post-consolidation common shares and the prior period share amounts have been retrospectively adjusted to reflect the (100:1) Share Consolidation (see the Share Capital section of this MD&A). As at December 31, 2025, 6,128,623 (December 31, 2024 – 6,128,623) Common Shares were issued and outstanding.
(**) See the Non-IFRS Financial and Performance Measures section of this MD&A.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION HIGHLIGHTS
| As at December 31, 2025 | As at December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Total assets | 13,024,141 | 11,688,531 |
| Total liabilities | 17,749,290 | 13,980,700 |
| Total shareholders (deficiency) | (4,725,149) | (2,292,169) |
As at December 31, 2025, total assets increased by $1,335,610, while total liabilities rose by $3,768,590 (see the Operational Working Capital and Consolidated Financial Position sections of this MD&A), resulting in a $2,432,980 increase in shareholders' deficiency.
CONSOLIDATED RESULTS OF OPERATIONS
For the years ended December 31, 2025, and 2024:
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |
| Revenue | $ 1,338,157 | $ 1,268,574 | $ 4,717,421 | $ 3,778,126 |
| Expenses | ||||
| Cost of Sales | 478,004 | 455,155 | 1,835,014 | 1,755,452 |
| Selling | 269,731 | 332,178 | 1,458,248 | 864,743 |
| General and administrative | 1,520,022 | 1,353,386 | 5,188,719 | 4,347,106 |
| 2,267,757 | 2,140,719 | 8,481,981 | 6,967,301 | |
| Operating loss | (929,600) | (872,145) | (3,764,560) | (3,189,175) |
| Reversal of provision due to settlement of claim | - | - | 1,041,431 | - |
| Loss on property and equipment disposal | (1,095) | - | (13,910) | - |
| Insurance recovery on property and equipment | - | - | 19,488 | - |
| Interest income | 5,630 | 7,263 | 8,964 | 20,177 |
| Loss on foreign exchange | (16,376) | (62,531) | (33,192) | (84,398) |
| Finance costs | (30,664) | - | (71,643) | (392,052) |
| Net loss before income taxes | (972,105) | (927,413) | (2,813,421) | (3,645,448) |
| Income taxes | - | - | - | - |
| Net loss | (972,104) | (927,413) | (2,813,421) | (3,645,448) |
For the three months ended December 31, 2025, revenue increased by $69,583, or 6%, primarily driven by a higher number of deployed MFR projects. Gross margin remained consistent with the prior period at 64%.
For the year ended December 31, 2025, sales increased by $939,295 (25%), while gross margin improved to 61% from 54% in 2024, primarily driven by enhancements in inventory management, monitoring services, and licensing and network fees. Selling expenses increased by $593,505 and general and administrative expenses rose by $841,613, reflecting the Company's strategic investment in expanding sales and operational capacity to support growth. Finance costs decreased by $320,409, mainly due to lower utilization of credit facilities during 2025. In addition, the Company resolved a claim and counterclaim, resulting in the reversal of a previously recognized provision of $1,041,431 (see the Contingencies section of this MD&A).
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
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Management's Discussion & Analysis
REVENUE
The Company accounts for revenue from contracts with customers in accordance with IFRS 15. For the Eddy brand the equipment and monitoring revenue is recognized when commissioned over the contract term on a straight-line basis. And for the installations services that are performed by third party contractors, revenue is recognized when commissioned. For the Reed brand revenue is recognized when the equipment is delivered and installed at a point in time and the monitoring services are recognized over the contract period.
IFRS Revenue
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |
| $ | $ | $ | $ | |
| Eddy integrated | 1,338,157 | 989,523 | 4,566,404 | 3,122,898 |
| Eddy third party installations | - | 301,421 | - | 301,421 |
| Reed equipment and installation | - | - | 136,932 | 255,572 |
| Reed monitoring | - | (22,370) | 14,085 | 98,235 |
| Total | 1,338,157 | 1,268,574 | 4,717,421 | 3,778,126 |
| Three months ended | Year ended | |||
| --- | --- | --- | --- | --- |
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |
| $ | % | $ | % | |
| MFR - Revenue | 1,078,627 | 81% | 963,941 | 76% |
| SFR - Revenue | 132,889 | 10% | 115,792 | 9% |
| C&I - Revenue | 126,641 | 9% | 188,841 | 15% |
| 1,338,157 | 100% | 1,268,574 | 100% |
Revenue for the three months ended December 31, 2025, increased by $69,583 compared to Q4 2024. The increase was driven by the MFR segment, which rose by $114,686, and the SFR segment, which increased by $17,096, reflecting a true-up related to terminations initiated earlier in the year. This was partially offset by a decrease of $62,200 in the C&I segment due to the completion of certain projects.
Revenue for the year ended December 31, 2025, increased by $939,295 compared to 2024. The increase was driven by the MFR segment, which grew by $958,567, and the C&I segment, which increased by $69,010, partially offset by a decrease of $88,282 in the SFR segment. This performance is consistent with the Company's strategy to shift away from the single-family residential market and focus on larger-scale deployments in the multi-family residential and commercial sectors.
OPERATIONAL REVENUE
Operational revenue represents total billings under customer contracts, including monthly monitoring subscriptions, equipment rentals and sales, project management services, and installation activities. This non-IFRS measure reflects amounts billed during the three and twelve-month periods ended December 31, 2025. Amounts not yet recognized as revenue are primarily recorded as deferred revenue.
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |
| $ | % | $ | % | |
| MFR | 1,590,562 | 79.5% | 1,626,577 | 92.7% |
| SFR | 3,304 | 0.2% | 72,788 | 4.1% |
| C&I | 407,634 | 20.4% | 54,744 | 3.1% |
| Total | 2,001,500 | 100.0% | 1,754,109 | 100.0% |
For the three months ended December 31, 2025, operational revenue was $2,001,500 (2024 - $1,754,109), exceeding IFRS-recognized revenue by $663,343 (2024 - $485,535), an increase of
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
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Management's Discussion & Analysis
approximately 37% compared to the prior year. For the year ended December 31, 2025, operational revenue was $8,552,556 (2024 – $7,243,175), exceeding IFRS-recognized revenue by $3,835,145 (2024 – $3,465,049), an increase of approximately 11% compared to 2024.
Management considers operational revenue a meaningful performance measure because it reflects the Company's recurring core activities, including equipment sales and contractual revenue from equipment purchase advances. This measure provides a clearer basis for assessing operating results and evaluating future growth potential.
The Company's operational results, based on billings for the period, are as follows:
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |
| $ | $ | $ | $ | |
| Revenue IFRS | 1,338,157 | 1,268,574 | 4,717,421 | 3,778,126 |
| Operational adjustment | 663,343 | 485,535 | 3,835,145 | 3,465,049 |
| Operational Revenue (A) | 2,001,500 | 1,754,109 | 8,552,566 | 7,243,175 |
| Expenses | ||||
| Cost of Sales (B) | 714,957 | 629,361 | 3,326,834 | 3,365,437 |
| Selling | 269,731 | 332,178 | 1,458,248 | 864,743 |
| General and administrative | 1,520,022 | 1,353,386 | 5,188,719 | 4,347,106 |
| 2,504,710 | 2,314,925 | 9,973,801 | 8,577,286 | |
| Operational profit/(loss) | (503,210) | (560,817) | (1,421,235) | (1,334,111) |
| Reversal of provision due to settlement of claim | - | - | 1,041,431 | - |
| Loss on property and equipment disposal | (1,095) | - | (13,910) | - |
| Insurance recovery on property and equipment | - | - | 19,488 | - |
| Interest income | 5,630 | 7,263 | 8,964 | 20,177 |
| Loss on foreign exchange | (16,376) | (62,531) | (33,192) | (84,398) |
| Finance costs | (30,664) | - | (71,643) | (392,052) |
| Net loss before income taxes | (545,715) | (616,085) | (470,097) | (1,790,384) |
| Income taxes | - | - | - | - |
| Net operational profit/(loss) | (545,715) | (616,085) | (470,097) | (1,790,384) |
(A) Operational revenue represents the total billings for the period.
(B) Operational cost of sales and gross margin percentages remain proportionately aligned with IFRS-reported figures.
CONTRACTED MONITORING AND EQUIPMENT RENTALS
Billings for contracted monthly monitoring and equipment represent the average monthly recurring revenue billed to customers ("recurring revenue").
Recurring Revenue
| Three months ended December 31, 2025 | December 31, 2024 | Year ended December 31, 2025 | December 31, 2024 | |||||
|---|---|---|---|---|---|---|---|---|
| $ | % | $ | % | $ | % | $ | % | |
| MFR | 841,344 | 96.7% | 700,516 | 89.0% | 3,206,045 | 94.6% | 2,487,215 | 87.0% |
| SFR | 3,304 | 0.4% | 72,788 | 9.2% | 80,807 | 2.4% | 332,628 | 11.6% |
| C&I | 25,104 | 2.9% | 13,819 | 1.8% | 101,151 | 3.0% | 38,465 | 1.3% |
| Total | 869,751 | 100.0% | 787,122 | 100.0% | 3,388,003 | 100.0% | 2,858,308 | 100.0% |
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
Page | 10
Management's Discussion & Analysis
For the three months ended December 31, 2025, recurring revenue totaled $869,751 (2024 – $787,122), which equates to $289,917 per month (2024 – $262,374). This represents approximately a 10% increase over Q4/2024.
For the year ended December 31, 2025, recurring revenue was $3,388,003 (2024 – $2,858,308), which equates to $282,334 per month (2024 – $238,192). This represents approximately a 19% increase over 2024. The strong performance in the MFR segment aligns with the Company's strategic focus. Most customers are billed monthly, with some billed annually, and this billing mix is reflected in the period-over-period results.
COST OF SALES
Cost of Sales by Segment
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |
| $ | $ | $ | $ | |
| MFR - COS | 384,865 | 345,458 | 1,492,480 | 1,337,349 |
| SFR - COS | 48,284 | 33,672 | 157,046 | 228,607 |
| C&I - COS | 44,855 | 76,025 | 185,488 | 189,497 |
| 478,004 | 455,155 | 1,835,014 | 1,755,452 |
Cost of Sales Detail
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |
| $ | $ | $ | $ | |
| Share-based compensation | 7,918 | 891 | 48,037 | 13,360 |
| Materials and labour | 226,698 | 268,071 | 958,926 | 703,545 |
| Provision for inventory | 22,419 | - | 22,419 | 156,708 |
| Warehouse rent | 18,150 | 18,285 | 72,690 | 71,950 |
| Monitoring service | 65,888 | 73,906 | 277,752 | 314,541 |
| Amortization on costs to obtain and fulfill contracts | 111,727 | 80,482 | 360,855 | 344,750 |
| Licensing and network fees | 25,204 | 13,520 | 94,336 | 150,598 |
| 478,004 | 455,155 | 1,835,014 | 1,755,452 |
For the three months ended December 31, 2025, operational efficiencies were achieved through improved management of materials and labour, as well as enhanced monitoring and service delivery. For the year ended December 31, 2025, similar improvements were realized in inventory management, monitoring services, and licensing and network fees.
GROSS MARGIN
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |
| $ | $ | $ | $ | |
| MFR - GM | 693,762 | 618,483 | 2,344,361 | 1,540,925 |
| SFR - GM | 84,605 | 82,120 | 246,685 | 263,406 |
| C&I - GM | 81,786 | 112,816 | 291,361 | 218,342 |
| 860,153 | 813,419 | 2,882,407 | 2,022,674 |
Gross margin for the three months ended December 31, 2025, increased by $46,734 compared to Q4 2024, primarily driven by higher margins in the MFR segment ($75,279) and SFR segment ($2,485), partially offset by a decrease in the C&I segment ($31,030). Gross margin as a percentage of revenue was in line with the comparable period at 64%.
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
Page | 11
Management's Discussion & Analysis
For the year ended December 31, 2025, gross margin increased by $859,733 compared to 2024, driven by improvements in the MFR segment ($803,436) and the C&I segment ($73,019), partially offset by a decrease in the SFR segment ($16,721). This reflects the Company's strategic focus on expanding higher-margin, more scalable MFR and C&I operations. Gross margin as a percentage of revenue improved to approximately 61%, compared to 54% in 2024.
Excluding non-cash items (share-based compensation, inventory provisions, and amortization of costs to obtain and fulfill a contract), operational gross margin for the three months ended December 31, 2025, was approximately 75%, compared with 71% in the prior year period. For the year ended December 31, 2025, operational gross margin was approximately 70%, compared with 67% in the prior year period, reflecting improvements in deployment management.
GENERAL & ADMINISTRATIVE EXPENSES
General & administrative expense primarily includes wages and benefits for office staff, consulting expense, professional fees, IT maintenance, dues and subscriptions, provision for expected credit losses, share-based compensation for administrative staff, depreciation on property and equipment, amortization of right-of-use, intangible assets and administrative spend.
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |
| $ | $ | $ | $ | |
| Wages and benefits | 854,793 | 833,935 | 2,988,246 | 2,847,382 |
| Consulting expense | 218,139 | 120,528 | 625,285 | 398,829 |
| Professional fees | 222,574 | 67,182 | 521,800 | 111,745 |
| IT maintenance | 29,400 | 13,729 | 77,773 | 65,619 |
| Dues and subscriptions | 80,692 | 64,851 | 262,718 | 237,092 |
| Provision for expected credit losses | (84,320) | 56,552 | (35,103) | 82,972 |
| Share-based compensation | 67,028 | - | 228,676 | (20,130) |
| Depreciation on property and equipment | 6,321 | 9,176 | 30,285 | 37,180 |
| Inventory write-down | 13,041 | 44,606 | (11,265) | 49,455 |
| Consumables and supplies | 33,184 | 27,149 | 87,507 | 115,364 |
| Insurance | 21,008 | 20,176 | 106,560 | 108,503 |
| Regulatory compliance | 1,563 | 2,322 | 18,736 | 76,817 |
| Administrative | 56,599 | 93,179 | 287,501 | 236,278 |
| 1,520,022 | 1,353,386 | 5,188,719 | 4,347,106 |
For the three months ended December 31, 2025, general and administrative expenses increased by $166,636 to $1,520,022 compared to $1,353,386 in Q4 2024. The increase was primarily driven by higher consulting expenses ($97,611) and professional fees ($155,392). In addition, share-based compensation of $67,028 was recognized in the current period, and wages and benefits increased by $20,858, alongside modest increases in IT maintenance and dues and subscriptions.
These increases were partially offset by a favourable change in the provision for expected credit losses of $140,872, lower administrative expenses ($36,580), and a reduction in inventory write-downs ($31,565) compared to the prior year period. Depreciation and regulatory compliance costs also decreased slightly year over year.
For the year ended December 31, 2025, general and administrative expenses increased by $841,613 to $5,188,719 compared to $4,347,106 in 2024. The increase was primarily driven by higher consulting expenses ($226,456) and professional fees ($410,055). Wages and benefits also increased by $140,864, consistent with the Company's ramp up reflecting higher staffing levels and related compensation costs. In addition, share-based compensation of $228,676 was recognized in 2025 compared to a recovery of $20,130 in 2024.
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
Page | 12
Management's Discussion & Analysis
These increases were partially offset by a favourable change in the provision for expected credit losses, which decreased by $118,075 year over year, as well as lower inventory write-downs ($60,720), reduced consumables and supplies ($27,857), and lower regulatory compliance costs ($58,081). Depreciation and insurance expenses also declined modestly compared to the prior year.
SELLING EXPENSES
Selling expense primarily includes salaries, marketing promotions, share-based compensation for sales staff, commission expense to developer and customer, warranty reserve and general.
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |
| $ | $ | $ | $ | |
| Salaries | 234,470 | 79,672 | 804,076 | 321,840 |
| Marketing promotions | 23,636 | 5,273 | 53,759 | 23,038 |
| Share-based compensation | (9,573) | - | 36,121 | 379 |
| Commission expense to developer and customer | 71,848 | 66,149 | 200,590 | 154,978 |
| Sales commission | (106,412) | 12,960 | 107,279 | 58,681 |
| Warranty reserve | 23,977 | 159,823 | 146,378 | 290,819 |
| General | 31,784 | 8,301 | 110,045 | 15,008 |
| 269,731 | 332,178 | 1,458,248 | 864,743 |
Selling expenses fell by $62,447 (19%) in Q4 2025 versus Q4 2024, largely due to $188,964 in capitalized sales commissions and reduced warranty reserves due to the completion of higher-margin projects. These savings were partially offset by increases in salaries, marketing initiatives, and general operating expenses.
Selling expenses increased by $593,505 (69%) in the year ended December 31, 2025, compared to 2024, primarily driven by higher salaries, increased commission-related costs, and higher general selling expenses, partially offset by a decrease in warranty reserve expense. The most significant driver of the increase was salaries and benefits, which rose by $482,236, reflecting the hiring of additional sales professionals to support the Company's strategic growth and expansion in the U.S. market as operations scaled. Increases in marketing, promotional, and general selling expenses were driven by higher marketing spend and increased sales and travel activity, consistent with the Company's continued investment in expanding its U.S. sales presence. Share-based compensation increased by $35,742, reflecting new equity-based awards granted during 2025.
SHARE-BASED COMPENSATION
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).
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.
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.
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
Management's Discussion & Analysis
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 likelihood of achieving the RSU performance conditions at each reporting date. Recoveries of share-based compensation arose primarily from employee departures and are reflected as forfeitures and expiries within stock-based compensation.
Share-Based Compensation Expense Allocation
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Stock options | 179,359 | (6,391) |
| Performance share units | - | - |
| Restricted share units | 133,475 | - |
| 312,834 | (6,391) |
See Note 13 of the accompanying audited consolidated financial statements presents additional details related to the Company's share-based compensation as at December 31, 2025, and 2024.
PROVISION FOR CREDIT LOSSES ON ACCOUNTS RECEIVABLE
See Note 16 of the Company's audited consolidated financial statements for the years ended December 31, 2025, and 2024 for additional details of the provision for credit losses on accounts receivable by the Company's operating segments (MFR, SFR and C&I).
DEPRECIATION ON PROPERTY AND EQUIPMENT
Depreciation on property and equipment primarily consists of computer hardware and vehicles.
For the three and twelve months ended December 31, 2025, depreciation on property and equipment was $6,321 (2024 – $9,176) and $30,285 (2024 – $37,180), respectively.
During 2025, the Company wrote off a vehicle following an accident. The vehicle had an original cost of $32,039 and accumulated depreciation of $19,224, resulting in the derecognition of its carrying amount of $12,815 from property and equipment. In addition, 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 once reimbursement was confirmed by the insurer and have since been received.
AMORTIZATION ON 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 installation labour 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.
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
Page | 14
Management's Discussion & Analysis
For the three months ended December 31, 2025, amortization on cost to obtain and fulfill contracts was $111,727 (2024 – $80,482). For the year ended December 31, 2025, amortization on cost to obtain and fulfill contracts was $360,855 (2024 – $344,750).
As at December 31, 2025, the carrying amount of costs to obtain and fulfill contracts was $7,329,712 (December 31, 2024 – $5,902,886), comprising a current portion of $1,173,624 (2024 – $1,193,195) and a non-current portion of $6,156,088 (2024 – $4,709,691). The increase is primarily attributable to projects completed during the year.
DEBT FACILITY
See Note 11 of the Company's audited consolidated financial statements for the years ended December 31, 2025, and 2024 for details related to activity in debt related financial instruments during 2025 and 2024.
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 12% per annum, which management considers to be consistent with market terms. The Facility matures on January 17, 2027, with accrued interest payable at maturity. The borrowing limit may be increased by up to an additional $500,000, to a maximum of $1,500,000, subject to growth in the Company's 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 facility amounted to $1,000,000 (and the accrued interest was $71,643 reflected in the carrying amount).
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 the SHARE CAPITAL section of this MD&A.
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 and accrued interest of $946,117).
Finance Costs
| December 31, 2025 | December 31, 2024 | |
|---|---|---|
| $ | $ | |
| Interest on working capital facility | - | 323,199 |
| Interest on credit facility | - | 68,853 |
| Interest on debt facility | 71,643 | - |
| 71,643 | 392,052 |
INCOME TAXES
Note 22 of the Company's audited consolidated financial statements for the years ended December 31, 2025, and 2024 presents the reconciliation of income tax, deferred tax and operating losses carried forward.
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 losses has not been recognized.
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
Page | 15
Management's Discussion & Analysis
BASIC AND DILUTED 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) |
(1) Prior period share amounts have been retrospectively adjusted to reflect the (100:1) Share Consolidation, which became effective on June 28, 2024. As at December 31, 2025, 6,128,623 (December 31, 2024 – 6,128,623) Common Shares were issued and outstanding. See the Share Capital section of this MD&A.
Diluted income per share is calculated by adjusting the weighted average number of Common Shares outstanding to reflect the assumed conversion of all dilutive potential Common Shares. For the years ended December 31, 2025, and 2024, such potential dilutive Common Shares consisted of share-based compensation awards and warrants.
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, RSUs had not vested, and the performance conditions for PSUs had not been met. Accordingly, diluted earnings per share equals basic earnings per share for the years ended December 31, 2025, and 2024.
CONSOLIDATED FINANCIAL POSITION
Total Assets
As of December 31, 2025, total assets increased by $1,335,610 to $13,024,141, up from $11,688,531 at December 31, 2024. This increase was primarily driven by higher balances in cash ($306,597), prepaid expenses ($40,604), inventory ($416,251), and costs to obtain and fulfill contracts ($1,426,826), reflecting increased deployment of water monitoring equipment during the year.
These increases were partially offset by declines in deposits on inventory purchases ($637,178), prepaid customer incentives ($75,019), property and equipment ($44,195), and accounts receivable and contract assets ($99,707).
Total Liabilities
As of December 31, 2025, total liabilities increased by $3,768,590 to $17,749,290, up from $13,980,700 at December 31, 2024. The increase was primarily driven by a $1,000,000 draw on the Company's debt facilities and $71,643 in accrued interest (see the Debt Facility section of this MD&A). Deferred revenue also increased by $3,654,091 (see the Revenue, Billings and Operational Revenue, and Operational Working Capital sections of this MD&A).
These increases were partially offset by a decrease of $957,144 in accounts payable and accrued liabilities (see the Contingencies section of this MD&A).
Total Shareholders' (Deficiency)
As of December 31, 2025, total shareholders' deficiency increased by $2,432,980 to ($4,725,149), compared to ($2,292,169) at December 31, 2024. The increase was primarily driven by a higher net deficit of $2,813,421, partially offset by a $347,193 increase in contributed surplus (see the Share-Based Compensation section of this MD&A) and $33,248 in accumulated other comprehensive income.
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
Page | 16
Management's Discussion & Analysis
SHARE CAPITAL
The Company's authorized share capital included an unlimited number of common shares with no par value. The following Common Shares were issued and outstanding as at December 31, 2025:
| 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 |
(1) Prior period share amounts have been retrospectively adjusted to reflect the (100:1) Share Consolidation, which became effective on June 28, 2024.
The Company's authorized share capital included an unlimited number of common shares with no par value. As at December 31, 2025, 6,128,623 (December 31, 2024 – 6,128,623) Common Shares were issued and outstanding.
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 became effective on June 28, 2024.
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, 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 (see the Debt Facility section of this MD&A).
RESULTS BY OPERATING SEGMENTS
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.
Segment Revenue as a Percentage of Total Revenue
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |
| MFR | 81% | 76% | 81% | 76% |
| SFR | 10% | 9% | 9% | 13% |
| C&I | 9% | 15% | 10% | 11% |
Revenue from the single-family residential (SFR) segment declined due to customer attrition and non-renewals at the end of term, which is consistent with the Company's strategic shift toward prioritizing the MFR segment.
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
Management's Discussion & Analysis
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 | 1,492,480 | 157,046 | 185,488 | - | 1,835,014 |
| Selling | 1,186,043 | 124,801 | 147,403 | - | 1,458,248 |
| General and administrative | - | - | - | 5,188,719 | 5,188,719 |
| Reversal of provision due to settlement of claim | - | - | - | (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 | 1,337,349 | 228,607 | 189,497 | - | 1,755,452 |
| Selling | 658,784 | 112,613 | 93,347 | - | 864,743 |
| General and administrative | - | - | - | 4,347,106 | 4,347,106 |
| Interest income | - | - | - | (20,177) | (20,177) |
| Loss on foreign exchange | - | - | - | 84,398 | 84,398 |
| Finance costs | - | - | - | 392,052 | 392,052 |
| Income taxes | - | - | - | - | - |
| 882,142 | 150,794 | 124,996 | (4,803,379) | (3,645,448) |
The growth of the MFR and C&I segments and the strategic expansion into the U.S. market align with the Company's objective of diversifying revenue streams beyond the SFR segment.
See the Revenue, Cost of Sales, General & Administrative Expense and Selling Expenses sections of this MD&A.
Percentage of Revenue by Geography
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |
| Canada | 92% | 96% | 93% | 95% |
| USA | 8% | 4% | 7% | 5% |
QUARTERLY FINANCIAL INFORMATION
| December 31, 2025 | September 30, 2025 | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | March 31, 2024 | |
|---|---|---|---|---|---|---|---|---|
| $ | $ | $ | $ | $ | $ | $ | $ | |
| Revenue | 1,338,157 | 1,244,076 | 1,068,185 | 1,067,003 | 1,268,574 | 720,694 | 747,548 | 1,041,310 |
| Expenses | ||||||||
| Cost of sales | 478,004 | 517,770 | 433,381 | 405,859 | 455,155 | 460,602 | 380,845 | 458,850 |
| Selling | 269,731 | 480,980 | 367,030 | 340,507 | 332,178 | 211,767 | 181,988 | 138,810 |
| General and administrative | 1,520,022 | 1,338,417 | 1,277,638 | 1,052,642 | 1,353,386 | 1,001,367 | 1,291,504 | 700,849 |
| 2,267,757 | 2,337,167 | 2,078,049 | 1,799,008 | 2,140,719 | 1,673,736 | 1,854,337 | 1,298,509 | |
| Operating loss | (929,600) | (1,093,091) | (1,009,864) | (732,005) | (872,145) | (953,042) | (1,106,789) | (257,199) |
| Reversal of provision due to settlement of claim | - | 1,041,431 | - | - | - | - | - | - |
| Loss on property and equipment disposal | (1,095) | (12,815) | - | - | - | - | - | - |
| Insurance recovery on property and equipment | - | 19,488 | - | - | - | - | - | - |
| Interest income | 5,630 | 1,364 | 1,189 | 781 | 7,263 | 12,648 | - | 266 |
| Loss on foreign exchange | (16,376) | (9,325) | 7,242 | (14,732) | (62,531) | 8,391 | (8,969) | (21,289) |
| Finance costs | (30,664) | (23,226) | (11,753) | (6,000) | - | - | (197,456) | (194,596) |
| Income taxes | - | - | - | - | - | - | - | - |
| Net loss | (972,104) | (76,175) | (1,013,186) | (751,956) | (927,413) | (932,003) | - | (472,818) |
| Loss per share - basic and diluted(1) | ($0.16) | ($0.01) | ($0.17) | ($0.12) | ($0.15) | ($0.15) | ($1.44) | ($0.59) |
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
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Management's Discussion & Analysis
(1) Effective June 28, 2024, the Company completed a 100-for-1 Share Consolidation. All prior-period amounts have been retrospectively adjusted to reflect this change (see the Share Capital section of this MD&A).
OFF-BALANCE SHEET ITEMS
The Company has no material off-balance sheet arrangements in place.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Note 16 of the accompanying audited consolidated financial statements present the fair value hierarchy of the Company's financial instruments as at December 31, 2025, and 2024.
During the year ended December 31, 2025, there were no transfers between Level 1, Level 2 or Level 3 fair value measurements.
RELATED PARTY TRANSACTIONS
See note 14 of the accompanying audited consolidated financial statements regarding related party transactions and balances as at December 31, 2025, and 2024.
KEY MANAGEMENT PERSONNEL COMPENSATION
For the years ended December 31, 2025, and 2024, 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 comprise individuals with the authority and responsibility for planning, directing, and controlling the Company's activities as a whole. The Company defines key management personnel as its directors and key employees.
CONTINGENCIES
See note 15 of the accompanying audited consolidated financial statements regarding contingencies as at December 31, 2025, and 2024.
On September 30, 2025, the Company settled a claim and counterclaim, agreeing to pay a total of $350,000 (inclusive of HST). Of this amount, $150,000 was paid upon execution of the settlement agreement, with the remaining $200,000 payable in eight equal quarterly installments of $25,000, commencing January 1, 2026, and ending 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.
CONTRACTUAL OBLIGATIONS
Contractual obligations as at December 31, 2025, and 2024:
| December 31, 2025 | Total | Less than 12 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 | - |
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
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Management's Discussion & Analysis
| December 31, 2024 | Less than 12 | |||
|---|---|---|---|---|
| Total | months | 1 - 3 years | 4 - 5 years | |
| $ | $ | $ | $ | |
| Accounts payable and accrued liabilities | 4,383,994 | 4,383,994 | - | - |
| 4,383,994 | 4,383,994 | - | - |
Accounts payable and accrued liabilities include a warranty provision of $526,625 (December 31, 2024 - $445,410), related to water monitoring equipment.
LIQUIDITY AND CAPITAL RESOURCES
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 consider other financing opportunities.
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 period. 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.
The Company's cash flows provided by operating activities include cash received from monthly recurring revenue and upfront fees received from customers, less cash costs to provide services to customers, including general and administrative costs, and certain costs associated with acquiring new customers.
The water monitoring equipment is purchased by the Company at the start of a contract. The Company recoups the cost for the Eddy brand through payment for upfront equipment sales and monthly payments from customers over the life of the term.
The Company is developing a pipeline of long-term revenue agreements with established developers and insurance companies. To date, the Company has generated losses from operations, and we anticipate that the Company may continue to generate losses as the Company continues to focus on building the pipeline of future business and deploying equipment on the contracts that come due. The Company may require additional working capital to fund growth.
CASH FLOW
Quarterly Summary Statements of Cash Flow:
| December 31, 2025 | September 30, 2025 | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | March 31, 2024 | |
|---|---|---|---|---|---|---|---|---|
| $ | $ | $ | $ | $ | $ | $ | $ | |
| Net cash flow (used in)/from operating activities | 157,135 | (366,496) | (98,079) | (438,699) | (366,547) | (643,572) | (80,883) | (802,080) |
| Net cash flow (used in)/from investing activities | - | 19,488 | - | - | - | (6,208) | (104) | - |
| Net cash flow from/(used in) financing activities | 250,000 | - | 500,000 | 250,000 | - | (5,589,671) | 6,688,997 | (40,000) |
| Foreign exchange | 10,995 | 2,120 | 21,172 | (1,039) | 35,511 | (9,550) | 7,249 | 5,365 |
| Increase/(decrease) in cash during the period | 418,130 | (344,888) | 423,093 | (189,738) | (331,036) | (6,249,001) | 6,615,259 | (836,715) |
| Cash, beginning of period | 228,642 | 573,530 | 150,437 | 340,175 | 671,211 | 6,920,213 | 304,953 | 1,141,669 |
| Cash, end of period | 646,772 | 228,642 | 573,530 | 150,437 | 340,175 | 671,211 | 6,920,213 | 304,954 |
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
Management's Discussion & Analysis
Quarterly Comparable Statements of Cash Flow:
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, 2025 | December 31, 2024 | December 31, 2025 | December 31, 2024 | |
| $ | $ | $ | $ | |
| Net cash flow from/( used in) operating activities | 157,135 | (366,547) | (746,139) | (1,892,200) |
| Net cash flow (used in)/from investing activities | - | - | 19,488 | (7,195) |
| Net cash flow from financing activities | 250,000 | - | 1,000,000 | 1,059,326 |
| Foreign exchange | 10,995 | 35,511 | 33,248 | 38,575 |
| Change in cash during the period | 418,130 | (331,036) | 306,597 | (801,494) |
| Cash, beginning of period | 228,642 | 671,211 | 340,175 | 1,141,669 |
| Cash, end of period | 646,772 | 340,175 | 646,772 | 340,175 |
Cash flow from/(used in) operating activities:
Operating cash inflows totaled $157,135 for the three months ended December 31, 2025, compared to an outflow of $366,547 in the fourth quarter of 2024, representing an improvement of $523,682.
Cash used in operating activities for the year ended December 31, 2025, decreased by $1,146,061 to $746,139, compared to $1,892,200 in the prior period. This improvement was primarily driven by a lower net loss and improved management of non-cash working capital.
Net cash flow from/(used in) financing activities:
Cash flows from financing activities for the three months ended December 31, 2025, reflect a $250,000 draw on the Company's credit facility, compared to no financing activities in the comparable period.
Cash flows from financing activities for the year ended December 31, 2025, decreased by $59,326 to $1,000,000, compared to $1,059,326 in 2024. The 2025 cash inflow reflects a $1,000,000 draw on the Company's credit facility. In comparison, 2024 included net proceeds of $6,836,120 from a private placement (net of $147,123 in issuance costs), partially offset by repayments of $5,589,671 on the working capital credit facility and $40,000 on the CEBA loan (see the Debt Financing and Share Capital sections of this MD&A).
CREDIT RISK
Note 16 of the accompanying audited consolidated financial statements present the provision for credit losses on accounts receivable as at December 31, 2025, and 2024.
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.
CURRENCY RISK
Note 16 to the accompanying audited consolidated financial statements outline the Company's currency risk as at December 31, 2025, and 2024.
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 – 5%) 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
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
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Management's Discussion & Analysis
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).
RISKS AND UNCERTAINTIES
The Company is faced with a number of risks, among others, including the risk factors set out below.
Attrition and Competition
The Company operates in a competitive environment and hence its financial condition and result of operations, growth, sustainability and defensive tactics may be negatively impacted by loss of market share to its competitors or due to changes in subscriber behaviors, which could result in a loss of customers and attrition to the number of customers.
Concentration of Suppliers
The Company relies principally on a few suppliers for its supply of equipment. Should any of these suppliers fail to deliver in a timely manner, there could be delays or disruptions in the supply and installation of equipment.
Credit Risk
The Company has financial instruments that are subject to risk of a counterparty failing to meet its contractual obligations. The Company has accounts receivables due from customers that it may fail to collect. The non-performance of these customers can be directly impacted by a decline in economic conditions, which could impair the customers' ability to satisfy their obligations to the Company.
Cybersecurity
The Company collects, processes, transmits and retains confidential, sensitive and personal information including personal financial information ("Confidential Information") regarding its customers, employees, and contractors. Some of this Confidential Information is held and managed by third party service providers. The Company has implemented processes, procedures, and controls to prevent unauthorized access to Confidential Information and to build and sustain a reliable information technology infrastructure. Despite these measures, all of the Company's information systems and any third-party service provider systems that it employs are vulnerable to damage, interruption, disability or failures due to a variety of reasons. The Company or its third-party service providers may be unable to anticipate, timely identify or appropriately respond to one or more of the rapidly evolving and increasingly sophisticated means by which computer hackers, cyber terrorists and others may attempt to breach the Company's or its third-party service providers' security measures. Any system vulnerability or failure of security measures of the Company or its third-party service providers could result in, among others, operational interruption, harm to the Company's reputation or competitive position, the loss of or unauthorized access to Confidential Information or other assets, remediation costs, litigation, regulatory enforcement proceedings, violation of privacy or other laws and damage to the Company's customer relationships.
Geographic Concentration and New Building Construction
The income generated by the Company is sensitive to changes in economic conditions in Ontario and California. Adverse changes in Ontario and California economic conditions may have a material adverse effect on the Company's business, cash flows, financial condition and results of operations. Furthermore, most of the growth in the number of installed equipment in recent years has been principally as a result of new building construction, both residential and commercial. A slowdown in such new building construction may lead to an adverse effect on demand for the Company's products and services.
Labour Relations
The Company's success will depend in part upon the continued services of talented personnel, including, the management team, sales representatives, installation and service technicians and call center talent.
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
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Management's Discussion & Analysis
The Company's ability to recruit and retain key personnel could be adversely impacted by a competitive labour market. The loss, incapacity, or unavailability for any reason of key members of the Company's management team, higher than expected payroll and other costs associated with the hiring and retention of key personnel and the inability or delay in hiring new key employees could materially adversely affect the Company's ability to manage its business and its future operational and financial results.
Leverage Risk and Restrictive Covenants
The Company has debt service obligations. The degree to which the Company is leveraged could have material adverse consequences for the Company, including but not limited to: (i) having to dedicate a portion of its cash flows from operations to the payment of interest on its indebtedness and not having such cash flows available for other purposes, including operations, capital expenditures and future business opportunities; and (ii) restricting its flexibility and discretion to operate its business.
Litigation Risk
In the normal course of the Company's operations, it may, directly or indirectly, become involved in, named as a party, or become the subject of various legal proceedings, including regulatory proceedings, tax proceedings and legal actions relating to, among others, personal injuries, property damage, and contract disputes. The outcome with respect to outstanding, pending, or future proceedings cannot be predicted and may have a material adverse effect on the Company's financial condition and results of operations and on its ability to satisfy its debt service obligations. Even if the Company prevails in any such legal proceedings, the proceedings could be costly and time consuming and may divert the attention of management and key personnel away from operations.
Regulatory Matters
The Company is subject to consumer protection laws (including the Consumer Protection Act, 2002 (Ontario)). Although the Company believes that it is in compliance with such consumer protection laws in all material respects, given the likelihood that regulatory determinations are likely to favour consumers in the event of any ambiguity in such laws, no assurance can be given that the Company will be able to comply with such laws. Furthermore, there can be no assurance that the Company will be able to comply with any future laws, regulations and policies or, if it does so comply, what the impact may be on its costs or ability to originate or retain customers. Failure by the Company to so comply may subject it to civil or regulatory proceedings, including fines, injunctions, recalls or seizures, which may have a material adverse effect on the Company's financial condition and results of operations and on its ability to satisfy its debt service obligations.
Reliance on Third Party Contractors
The Company at certain times utilizes third-party service providers for the installation of equipment at the customers' premises. As a result, the Company is reliant on the personnel, good faith, expertise, technical resources and information systems, and judgment of those service providers in providing such services. Accordingly, the Company may be exposed to adverse developments in the business and affairs of such service providers.
Uninsured or Underinsured Risks
The Company's current insurance coverage in respect of potential liabilities and the accidental loss of value of the assets of the Company from risks is in the form of comprehensive property and casualty insurance in respect of claims for bodily injury or property damage arising out of assets or operations (subject to deductible amounts). However, not all risks are covered by insurance and insurance may not be consistently available on an economically feasible basis or at all. The amounts of insurance may not at all times be sufficient to cover all losses and/or claims.
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
Page | 23
Management's Discussion & Analysis
Useful Life of Equipment
Experience indicates that the average useful life of the batteries within the wireless sensors is approximately 5.5 years. However, there can be no assurance that the batteries within the wireless sensors will continue to have an average useful life of that length. For SFR customers the Company will be responsible for the capital cost and installation fees related to replacing the wireless sensors during the contract term. In the event that the Company does not have sufficient cash flow or financing capabilities to fund the purchase and installation of replacement wireless sensors, the Company may not have the ability to maintain the SFR leak detection portfolio, which could have a material adverse effect on its financial condition and results of operations.
Tariffs
The global economy and financial markets have experienced significant volatility and disruption, including fluctuating inflation and interest rates, foreign currency exchange rate fluctuations, declining consumer confidence, and slower economic growth. These conditions have impacted, and may continue to impact, the overall operating environment and management is closely monitors these macroeconomic developments.
RESPONSIBILITY OF MANAGEMENT AND THE BOARD OF DIRECTORS
Management is responsible for the information disclosed of this MD&A, and has in place the appropriate information systems, procedures, and controls to ensure that the information used internally by management and disclosed externally is complete, reliable, and timely. In addition, the Company's Board of Directors provide an oversight role with respect to all public financial disclosures by the Company and have reviewed and approved this MD&A as well as the audited consolidated financial statements for the years ended December 31, 2025, and 2024.
Eddy Smart Home Solutions Ltd. • 2025 • Fourth Quarter
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