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FOBI AI Inc. Management Reports 2026
47806_rns_2026-03-30_592dd296-16c3-4743-a6f3-eced59b99373.pdf
Management Reports
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FOBI AI INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE PERIOD ENDED SEPTEMBER 30, 2025
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the Period Ended September 30, 2025
INTRODUCTION
The following Management's Discussion and Analysis ("MD&A") of Fobi AI Inc. ("Fobi", "We" or "the Company") is dated March 27, 2026, and has been prepared by Management in accordance with the requirements of National Instrument 51-102 - Continuous Disclosure Obligations ("NI 51-102"). The information contained in this MD&A is not a substitute for detailed investigation or analysis on any particular issue. The information provided in this MD&A is not intended to be a comprehensive review of all matters and developments concerning the Company.
This MD&A should be read in conjunction with the Company's unaudited condensed consolidated interim financial statements for the three months ended September 30, 2025 (the "Interim Financial Statements") and the comparative period ended September 30, 2024, the related notes therein, as well as the Company's audited consolidated financial statements for the fiscal year ended June 30, 2025 (the "Annual Financial Statements"), all of which have been prepared under International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). All references to dollar amounts are in Canadian dollars unless otherwise noted.
The Interim Financial Statements have been prepared without an auditor review. In accordance with NI 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the condensed consolidated interim financial statements, they must be accompanied by a notice indicating that an auditor has not reviewed the financial statements.
FORWARD LOOKING STATEMENTS
This MD&A contains certain forward-looking statements and information relating to the Company that are based on the beliefs of management as well as assumptions made by, and information currently available to, management. When used in this document the words "anticipate", "believe", "estimate", "expect" and similar expressions, as they relate to the Company or management, are intended to identify forward-looking statements. This MD&A contains forward-looking statements relating to, among other matters, regulatory compliance, the sufficiency of current and future working capital and the estimated cost and availability of funding for the continued development of the Company's technological property, as well as its overall business development. Such statements reflect the current views of management with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements, including but not limited to: the Company's ability to raise additional financing, market and competitive conditions, general economic conditions, ability to retain key personnel, and changes in applicable regulations.
COMPANY OVERVIEW
Fobi AI (TSXV: FOBI) is a Company involved in Artificial Intelligence ("AI"), Web3 technology platforms, and digital wallet products and technology. We are a provider of product and capability which can deliver end-to-end execution from strategic advisory through proprietary technology deployment and can do so with live, production-scale systems. With over 100 million wallet passes issued across 150+ countries, the Company operates commercially-licensed AI systems on Canadian-hosted infrastructure. This provides our client and customer enterprises with private AI capabilities where public platforms cannot be used due to data privacy restrictions and concern, as well addressing regulatory requirements. Unlike legacy consulting firms that deliver strategy without implementation capability, Fobi's consultancy-plus-technology model integrates strategic vision with owned technology stack and production-proven systems at scale.
The Company operating portfolio includes Qples, our U.S. retail and CPG coupon subsidiary built on the 8110 industry standard; PulseIR, our investor engagement and digital wallet platform; and Passwords S.A., our European wallet pass subsidiary.
On June 11, 2025, the Company completed the strategic divestiture of Fobi AI Germany GmbH (formerly operating under the Passcreator brand), a European wallet pass subsidiary, to create further focus on scaling Qples, PulseIR, and Passwords, and the core FOBI business assets, across key global markets and target industries. The Company retains a 48-month, non-exclusive worldwide license to continue use of the platform technology. As a result of this divestiture, the results of Fobi AI Germany GmbH are presented as discontinued operations for all periods presented.
Fobi's products and solutions are applied in industries including sports and entertainment, telecommunications, financial services, insurance, hospitality and retail. Fobi's capabilities enable client and partner enterprises to deliver personalized, real-time customer experiences at scale. The Company's strategy is to simplify adoption, embed and deliver its products seamlessly into existing client information technology infrastructure and then ultimately capture, collect, analyze and transform data into enterprise value.
The Company expects to generate revenues across three primary areas: through consulting engagements supporting customers as they deploy and expand technology initiatives aligned with Fobi products and services; through the sale of software as a service offerings and associated analytics; and, through licensing and deployment of our proprietary technology which incorporate artificial intelligence and multi-platform data layering.
FOBI AI BRANDS AND ASSETS
(Listed chronologically by year of original development or acquisition)
2021 - PulseIR - Investor relations and digital wallet platform delivering real-time two-way communication and lock-screen notifications to shareholders, with segmentation and analytics tools. This business line is currently paused pending future growth capital.
2021 - Qples - U.S.-based coupon management subsidiary for consumer-packaged goods brands enabling the creation, distribution, and tracking of print-at-home and digital coupons integrated with the 8110 industry standard. The Company intends to continue maintaining and updating Qples in line with evolving industry standards including fraud detection and validation processes.
2021 - PassWallet - An intellectual property acquisition of a proprietary mobile wallet application enabling users to store, organize, update, and use digital passes, currencies, and identifications such as boarding passes, loyalty cards, tickets, vouchers, and coupons delivered via email, SMS, barcode, or QR code.
2022 - Passwords S.A. - European wallet pass subsidiary enabling brands to issue mobile coupons, loyalty cards, and event tickets directly to Apple Wallet and Google Pay, with a focus on retail and ticketing.
2025 - Fobi AI Germany GmbH (Divestiture) - Former German wallet pass subsidiary, divested on June 11, 2025. Fobi retains a 48-month, non-exclusive worldwide license to continue use of the platform technology.
ALIGNMENT WITH ARTIFICIAL INTELLIGENCE AND WEB3
Fobi has been developing AI automation and Blockchain infrastructure for its entire existence, positioning the Company at the convergence of three technology trends before they became mainstream enterprise priorities. The Company operates proprietary AI systems built on commercially-licensed models, and deployed on Canadian-hosted infrastructure, providing enterprises with private AI capabilities where public platforms cannot be used due to data privacy and regulatory requirements. This production-grade AI architecture has been validated through live deployments and can process and manage thousands of automated operations across the Company's digital wallet infrastructure.
Fobi's digital wallet platform has over 100 million passes issued and exists in 150+ countries. The platform was built natively for Web3 integration rather than retrofitted from legacy systems. The architecture supports tokenization, credentials verification, and customer-owned data models, and positions the platform as infrastructure for the ownership economy.
A Chief Technology Officer with relevant AI and Web3 expertise was appointed in July 2025 to oversee a continuation and enhancement of the technology platform development, expansion and migration to next-generation architecture. This positions Fobi to capture market share as client and customer enterprises shift from strategy consultation to execution-focused deployment. The Company is focused toward an estimated $500 billion addressable market at the convergence of AI automation, mobile engagement, and Web3 infrastructure.
CAPITAL MARKETS EQUITY STATUS - AUDIT / FINANCIAL STATEMENTS
Due to certain audit and financial statement filing matters and delays, the Company's common stock was temporarily suspended from public trading during the fiscal year end 2025 by the relevant Canadian oversight exchange regulators. The Company has now filed updated Audits and Financial Statements for the Fiscal year end 2024 and Fiscal year end 2025.
On December 12, 2025, given the Company's compliance, a Partial Revocation Order was issued by the British Columbia Securities Commission ("BCSC"), permitting the Company to conduct a private placement offering. Management continues to work toward full revocation of the cease trade order and the resumption of normal public trading of the Company's common shares.
OVERALL PERFORMANCE
Announcements and Highlights during the three months ended September 30, 2025:
During Q1 FY2026, the Company continued to focus on its core operations in North America and Europe through Qples and Passwords S.A., following the completion of the Fobi AI Germany GmbH divestiture in June 2025.
Revenue from continuing operations for the three months ended September 30, 2025 was $172,677, representing a 23% increase from $140,430 during the comparative period ended September 30, 2024. This reflects improved commercial momentum following the organizational streamlining from the Fobi AI Germany GmbH divestiture.
Total operating expenses from continuing operations decreased significantly to $997,540 for Q1 FY2026 compared to $1,833,817 in Q1 FY2025, a reduction of 46%, primarily reflecting the elimination of amortization and depreciation charges and lower technology costs associated with the divested subsidiary.
Net loss from continuing operations was $834,600 for the three months ended September 30, 2025, compared to $1,681,230 for the same period of the prior year, a reduction of approximately 50%.
The Company had a cash balance of $7,758 at September 30, 2025 (June 30, 2025 - $1,344,431). Subsequent to the quarter end, the Company completed two tranches of a non-brokered private placement, raising an aggregate of $1,004,200 in gross proceeds to support ongoing operational requirements and regulatory compliance activities.
SUBSEQUENT EVENTS
On December 12, 2025, Fobi AI Inc. received partial revocation of its cease trade order from the British Columbia Securities Commission to conduct a private placement offering of up to 30 million units at $0.05 per unit, aiming to raise up to $1.5 million. Each unit will consist of one common share and one warrant exercisable at $0.10 for 36 months. The proceeds are planned to be used primarily to cover accounting, audit, and legal fees needed to file outstanding disclosure documents and obtain full revocation of the cease trade order.
Subsequent to period end, the Company completed two tranches of the above non-brokered private placement of units at a price of $0.05 per unit. On January 23, 2026, the Company closed the first tranche and issued 10,084,000 units for gross proceeds of $504,200. In connection with the first tranche, the Company would pay finder's fees consisting of $3,500 in cash and issued 70,000 finder's warrants.
On February 3, 2026, the Company closed the second tranche and issued 10,000,000 units for gross proceeds of $500,000. No finder's fees were disclosed in connection with the second tranche. The total issuance across both tranches amounted to 20,084,000 units for aggregate gross proceeds of $1,004,200.
Between November 2024 and early 2025, the Company received complaints from certain former employees alleging non-payment of wages and related employee entitlements under the British Columbia Employment Standards Act. The British Columbia Employment Standards Branch conducted an investigation and, based on findings, a demand notice in the amount of $465,838.07 was issued. On August 18, 2025, the Employment Standards Branch issued a formal notice cancelling the demand notice upon the Company's payment of the owed wages. As at the date of authorization of the Interim Financial Statements, the investigation has concluded and there is no outstanding enforcement order related to this matter.
RESULTS OF OPERATIONS
As at September 30, 2025, the Company had a working capital deficiency of $4,017,538 (June 30, 2025 - deficiency of $3,050,852). The increase in working capital deficiency is primarily a result of the significant decrease in the cash position during Q1 FY2026, as cash was utilized to fund ongoing operating activities.
Comparison of the Three Months Ended September 30, 2025, and September 30, 2024
Revenue
Revenue from continuing operations for the three months ended September 30, 2025 was $172,677, an increase of $32,247, or approximately 23%, compared to $140,430 for the three months ended September 30, 2024. Revenue is primarily earned from selling platform-as-a-service, reselling, referring and hosting the Company's technology to users, as well as from consulting services and development services. The increase in revenue reflects improved commercial activity through the Passwords and Qples business lines during the quarter, as the Company continues to build its client base following the restructuring of the prior fiscal year.
Net Loss
Net loss from continuing operations was $834,600 for the three months ended September 30, 2025, compared to $1,681,230 for the three months ended September 30, 2024, representing a decrease in net loss of $846,630, or approximately 47%. This improvement is primarily attributable to the significant reduction in operating expenses in the current period, particularly the elimination of amortization and depreciation charges following the Fobi AI Germany GmbH
divestiture and the full amortization of prior intangible assets, as well as lower technology costs and the absence of research and development costs. There were no discontinued operations for the three months ended September 30, 2025 (September 30, 2024 - net loss of $2,947).
Operating Expenses
Advertising and Marketing
Advertising and marketing expenses from continuing operations decreased by $119,180, from $119,351 for the three months ended September 30, 2024, to $171 for the three months ended September 30, 2025. The significant decrease reflects the Company's continued strategy of developing in-house sales and marketing capabilities rather than engaging external marketing services.
Amortization and Depreciation
Amortization and depreciation from continuing operations was $nil for the three months ended September 30, 2025, compared to $394,786 for the three months ended September 30, 2024. The reduction to nil reflects that all depreciable intangible assets and equipment from continuing operations were either fully amortized or written down as at June 30, 2025. No new additions to capital assets were made during the quarter.
Consulting Fees
Consulting fees from continuing operations decreased by $28,168, or 27%, from $103,526 for the three months ended September 30, 2024, to $75,358 for the three months ended September 30, 2025. This reduction reflects the Company's continued strategy of leveraging internal capabilities and reducing reliance on external consultants.
Office and General
Office and general expenses from continuing operations increased by $1,950, from $14,839 for the three months ended September 30, 2024, to $16,742 for the three months ended September 30, 2025. The increase is primarily attributable to a slight increase in administrative costs associated with the Company's regulatory compliance activities.
Professional Fees
Professional fees from continuing operations decreased by $6,357, or 2%, from $280,117 for the three months ended September 30, 2024, to $273,760 for the three months ended September 30, 2025. Professional fees remain a significant expense category and are largely attributable to legal, audit, and accounting fees associated with the Company's regulatory compliance obligations.
Technology Costs
Technology costs from continuing operations decreased by $69,964, from $74,818 for the three months ended September 30, 2024, to $4,854 for the three months ended September 30, 2025. The decrease reflects the elimination of technology costs associated with the divested Fobi AI Germany GmbH subsidiary, as well as reduced hosting and infrastructure costs during the period.
Wages and Benefits
Wages and benefits from continuing operations decreased by $65,345, or 10%, from $661,061 for the three months ended September 30, 2024, to $595,716 for the three months ended September 30, 2025. Wages and benefits continue to represent the largest single operating expense for the Company. The decrease is attributable to a reduction in headcount as part of ongoing cost management measures undertaken during and subsequent to the fiscal year ended June 30, 2025.
SUMMARY OF QUARTERLY RESULTS
The following is selected financial information as prepared in Canadian dollars under International Financial Reporting Standards derived from the Company's most recently completed eight fiscal quarters. Revenue and net income (loss) figures reflect the reclassification of Fobi AI Germany GmbH results as discontinued operations for all comparative periods.
| | Sep 30, 2025
$ | Jun 30, 2025
$ | Mar 31, 2025
$ | Dec 31, 2024
$ |
| --- | --- | --- | --- | --- |
| Total Assets | 263,369 | 1,568,973 | 815,695 | 907,028 |
| Working Capital (Deficiency) | (4,087,193) | (3,050,852) | (4,893,719) | (4,499,661) |
| Revenue | 172,677 | 507,625 | 632,045 | 767,099 |
| Net Income (Loss) | (904,315) | 1,733,086 | (377,222) | (783,939) |
| Loss per Share | (0.00) | (0.01) | (0.00) | (0.00) |
| | Sep 30, 2024
$ | Jun 30, 2024
$ | Mar 31, 2024
$ | Dec 31, 2023
$ |
| --- | --- | --- | --- | --- |
| Total Assets | 879,314 | 1,574,233 | 5,231,939 | 4,560,585 |
| Working Capital (Deficiency) | (3,796,196) | (2,515,035) | (7,152) | (1,563,711) |
| Revenue | 140,430 | 718,994 | 688,093 | 780,313 |
| Net Income (Loss) | (1,681,230) | (6,083,298) | (1,427,656) | (1,273,183) |
| Loss per Share | (0.01) | (0.03) | (0.01) | (0.01) |
Please note that the June 30, 2025 revenue shown is annual total from continuing operations. The Jun 30, 2025 net income reflects the gain on divestiture of Fobi AI Germany GmbH.
LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN
Since our inception, we have incurred operating losses. We will need capital to fund our operations, which we may obtain from additional financings, debt and operations revenue or other sources. To date, we have financed our operations primarily through the issuance of our common shares.
As at September 30, 2025, the Company had total assets of $263,369 (June 30, 2025 - $1,568,973). The Company had a cash balance of $7,708 and a working capital deficiency of $4,087,193 at September 30, 2025, as compared with a cash balance of $1,344,431 and a working capital deficiency of $3,050,852 at June 30, 2025. The significant decrease in cash during the quarter reflects the utilization of available cash resources to fund ongoing operating activities, including wages and professional fees.
The consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. As at September 30, 2025, the Company had not yet generated significant revenue or positive cash flow from operations and had an accumulated deficit of $84,094,808. These factors, among others, create significant doubt as to the ability of the Company to continue as a going concern. Management believes that the proceeds from the private placement financings completed subsequent to the period end (raising aggregate gross proceeds of $1,004,200), combined with revenue that the Company expects to generate, will provide the Company with sufficient working capital to satisfy its liabilities and commitments as they become due for the foreseeable future. There can be no assurances that sufficient equity can be raised on acceptable terms on a timely basis. The Company's strategy is to mitigate risks and uncertainties and to execute a business plan aimed at revenue growth and managing operating expenses and working capital requirements. Failure to implement this plan could have a material adverse effect on the Company's financial condition and results of operations.
Cash Flows
The following table summarizes the results of our cash flows for the three months ended September 30, 2025 and 2024:
| Three Months Ended September 30, 2025 $ | Three Months Ended September 30, 2024 $ | |
|---|---|---|
| Opening balance | 170,139 | 222,700 |
| Net cash outflow from operating activities | (207,454) | (45,063) |
| Net cash outflow from investing activities | (9,594) | - |
| Net cash outflow from financing activities | (5,029) | (8,187) |
| Effect of exchange rate changes on cash | 59,696 | 689 |
| Change in cash | (162,381) | (52,561) |
| Closing balance | 7,758 | 170,139 |
Operating Activities
Net cash outflow from operating activities was $207,454 for the three months ended September 30, 2025, compared to $45,063 for the three months ended September 30, 2024. The increase in operating cash outflows during the current period reflects the utilization of cash to fund ongoing operating activities including wages and professional fees. Non-cash items included in operating activities for the current period comprise: impairment of intangible assets of $73,324; impairment of equipment of $2,074; and interest and accretion of $7,298.
Investing Activities
Net cash used in investing activities was $9,594 for the three months ended September 30, 2025 (September 30, 2024 - $nil). Investing cash outflows in the current quarter relate to the purchase of an investment of $28,751.
Financing Activities
Net cash used in financing activities was $5,029 for the three months ended September 30, 2025, compared to $8,187 for the three months ended September 30, 2024. In both periods, financing cash outflows relate entirely to the repayment of the principal portion of the lease liability. No shares were issued and no options or warrants were exercised during either period.
CAPITAL MANAGEMENT
The Company considers cash and share capital to be the elements of shareholders' equity. The Company's primary objectives in capital management are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and to maintain sufficient funds to finance the sale and distribution of its technology products. The Company manages its capital structure to maximize its financial flexibility making adjustments to it in response to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. The Company does not presently utilize any quantitative measures to monitor its capital and is not subject to externally imposed capital requirements. There were no changes in the Company's approach to capital management during the three months ended September 30, 2025.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table summarizes our contractual commitments and obligations as of September 30, 2025:
| Payments Due by Period | |||||
|---|---|---|---|---|---|
| Total $ | Less Than 1 Year $ | Between 1 and 3 Years $ | Between 3 and 5 Years $ | More Than 5 Years $ | |
| Lease liabilities | 29,112 | 15,379 | 13,733 | - | - |
| Total contractual obligations | 29,112 | 15,379 | 13,733 | - | - |
The Company has also entered into employment agreements with its COO and CEO wherein, should employment be terminated for any reason other than for-cause termination or resignation, these individuals will be eligible for compensation equivalent to an aggregate of one year's salary and any performance bonus equivalent to one-half of the average of the two highest performance bonuses paid in the previous five fiscal years.
CONTINGENCIES
As at September 30, 2025, the Employment Standards Branch demand notice previously in the amount of $465,838.07 was cancelled on August 18, 2025, upon the Company's payment of the owed wages. There are no other material contingent liabilities outstanding as at September 30, 2025.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
TRANSACTIONS WITH RELATED PARTIES
The Company has identified its directors and senior officers as its key management personnel. No post-employment benefits, other long-term benefits and termination benefits were made during the three months ended September 30, 2025, beyond what is disclosed herein. Short-term key management compensation consists of the following:
| September 30, 2025 $ | September 30, 2024 $ | |
|---|---|---|
| Salaries, wages and professional fees | 84,214 | 209,095 |
| Share-based payments | - | 7,210 |
| Total | 84,214 | 216,305 |
As at September 30, 2025, the Company has amounts payable to its directors and officers totalling $162,485 (September 30, 2024 - $136,403 payable) which is included in accounts payable and accrued liabilities. The amounts payable to related parties are unsecured, non-interest bearing and due on demand.
SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with IFRS requires management to make judgements, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
The Company's significant accounting policies are consistent with those applied in the Annual Financial Statements for the year ended June 30, 2025. No new or amended accounting standards that would have a material impact on the Interim Financial Statements became effective during the three months ended September 30, 2025.
Critical accounting estimates
We make estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.
Assumptions used in the calculation of the fair value assigned to share-based payments
The grant date fair value of share-based payment awards granted to employees is recognized as a stock-based compensation expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. No stock options were granted during the three months ended September 30, 2025. During the current period, 7,476,500 stock options expired or were cancelled. The fair value of stock options is measured using the Black-Scholes model. No share-based compensation expense was recognized during the three months ended September 30, 2025 (September 30, 2024 - $11,028).
Impairment of non-financial assets
The carrying amounts of our non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If indicators exist, then the asset's recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 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. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit, or "CGU").
Our corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs.
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.
In respect of assets other than goodwill that have indefinite useful lives, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
Going concern
The assumption that the Company will be able to continue as a going concern is subject to critical judgments by management with respect to assumptions surrounding the short and long-term operating budget, expected profitability, investing and financing activities and management's strategic planning. Should those judgments prove to be inaccurate, management's continued use of the going concern assumption could be inappropriate.
RISK FACTORS
The Company has diversified technologies and is focused on many verticals and distribution strategies. The Company continues to focus on multiple verticals to generate future sales in the Company's main products but there is no assurance of success.
The Company has incurred a net loss of $834,600 for the three months ended September 30, 2025, and has a deficit of $84,025,093. Management is continuing efforts to attract additional equity and capital investors and implement cost control measures to maintain adequate levels of working capital. Nevertheless, there can be no assurance provided with respect to the successful outcome of these ongoing actions. If the Company is unable to obtain additional financing on reasonable terms, the Company may be required to amend its business plan to create a successful strategy.
Additional key risk factors include: regulatory and capital markets risk arising from the ongoing cease trade order; financing risk given the Company's reliance on equity markets; revenue and commercial risk given the limited scale of current revenues; technology and market competition risk in the rapidly evolving AI and Web3 markets; and key personnel risk arising from dependence on a small management team.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT FINANCIAL RISK
Cash and cash equivalents are carried at fair value using a level 1 fair value measurement. The carrying value of amounts receivable, accounts payable, lease liabilities, and other financial instruments approximate their fair value because of the short-term nature of these instruments.
The Company's risk exposures and the impact on the Company's financial instruments are summarized below:
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. As at September 30, 2025, the Company had a cash balance of $7,708, which is materially insufficient to settle current liabilities of $4,324,302. These events and conditions indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Subsequent to period end, the Company completed two tranches of a private placement raising $1,004,200, providing additional liquidity. Management is actively pursuing further financing activities.
Credit risk
Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company's credit risk is primarily attributable to its liquid financial assets including cash. The Company limits exposure to credit risk on liquid financial assets through maintaining its cash with high-credit quality financial institutions. Receivables consist of accounts receivable from customers and GST receivable from the Government of Canada. The Company recorded an allowance on bad debts of $nil for the three months ended September 30, 2025 (September 30, 2024 - $nil).
Market risk
Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices. The Company does not have a practice of trading derivatives.
a) Interest rate risk
The Company's financial assets exposed to interest rate risk consist of cash. The Company does not hold variable interest-bearing securities and is not materially subject to interest rate risk. As at September 30, 2025, the Company had $nil in investment-grade short-term deposit certificates.
b) Foreign currency risk
Foreign currency risk refers to the risk that the value of a financial commitment or recognized asset or liability will fluctuate due to changes in foreign currency rates. As at September 30, 2025, the Company's net US dollar exposure was approximately ($169,722) (CAD equivalent: ($602,577)) and its net Euro exposure was $63,648 (CAD equivalent: $164,182). A 10% change in the foreign exchange rate of Euros or US dollars is not expected to have a material impact on the Company's consolidated financial statements.
c) Price risk
The Company holds an investment of $28,751 as at September 30, 2025 (June 30, 2025 - $nil), representing common shares held in a publicly traded company. The market value of this investment is subject to fluctuations in equity prices.
OUTSTANDING SHARE DATA
Common shares
As of the date of this MD&A (March 27, 2026), the Company has 244,681,977 issued and outstanding common shares, which includes 20,084,000 shares issued subsequent to September 30, 2025 in connection with the two tranches of the non-brokered private placement. As at September 30, 2025, the Company had 224,597,977 common shares issued and outstanding.
Stock options
As of the date of this MD&A, the Company has 14,872,994 stock options outstanding at a weighted average exercise price of $0.44 per share, all of which are exercisable. During the three months ended September 30, 2025, nil options expired and nil options were cancelled.
Share purchase warrants
As of the date of this MD&A, the Company has 48,439,632 share purchase warrants outstanding at a weighted average exercise price of $0.15 per share, with a weighted average remaining contracted life of 1.62 years. During the three months ended September 30, 2025, nil warrants expired.
OTHER MD&A REQUIREMENTS
Additional information relating to the Company is on SEDAR+ at www.sedarplus.ca.