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Kontrol Technologies Corp. Management Reports 2026
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Management Reports
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KONTROL
TECHNOLOGIES CORP.
Management Discussion and Analysis
For the Three Months Ended March 31, 2026
May 15, 2026
KONTROL TECHNOLOGIES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
KONTROL TECHNOLOGIES CORP.
Q1 2026 HIGHLIGHTS
- Revenues for the three months ended March 31, 2026 were $1.3 million, compared to $1.5 million for the same quarter in the prior year.
- Gross margin for the three months ended March 31, 2026 was 58%, compared to 54% for the same quarter in the prior year.
- Adjusted EBITDA for the three months ended March 31, 2026 was negative $(133,363) compared to $(228,521) for the same quarter in the prior year.
- Net loss for the three months ended March 31, 2026 was $432,617 compared to net loss of $1.1 million for the same quarter in the prior year. Q1 2026 net loss includes unrealized loss on revaluation of marketable securities.
- Unrealized loss on revaluation of marketable securities for the three months ended was a loss of $132,472. The fair value of a financial instrument will fluctuate because of changes in market prices. The Company invested in marketable securities, including GIC's, term deposit, and shares in public companies. The Company notes that the investments in shares of public companies holding digital assets are expected to be more volatile than the other marketable securities held.
- As at March 31, 2026 the Company's aggregate cash and marketable securities balance was $7.6 million. As at March 31, 2026 the Company had no outstanding interest-bearing bank debt.
KONTROL TECHNOLOGIES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
KONTROL TECHNOLOGIES CORP.
Caution Regarding Forward Looking Statements
Certain information included in this Management Discussion and Analysis, including information relating to future financial or operating performance and other statements that express the expectations of management or estimates of future performance constitute "forward-looking statements". All statements contained herein that are not clearly historical in nature may constitute forward-looking information. In some cases, forward-looking information can be identified by words or phrases such as "may", "will", "expect", "likely", "should", "would", "plan", "anticipate", "intend", "potential", "proposed", "estimate", "believe" or the negative of these terms, or other similar words, expressions and grammatical variations thereof, or statements that certain events or conditions "may" or "will" happen, or by discussions of strategy. Such forward-looking statements include, without limitation, statements regarding possible future acquisitions and/or investments in operating businesses and/or technologies, accelerated organic growth, expansion of smart energy technologies into US markets, strategic partnerships to expand into North American Markets, acceleration of recurring SaaS revenues, the provision of solutions to customers and Greenhouse Gas emissions reductions, proposed financial savings and sustainable energy benefits and energy monitoring.
Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief are based on assumptions made in good faith and believed to have a reasonable basis. Such assumptions include, without limitation, that suitable businesses and technologies for acquisition and/or investment will be available, that such acquisitions and or investment transactions will be concluded, that sufficient capital will be available to the Company, that technology will be as effective as anticipated, that organic growth will occur, and others.
However, forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected, or implied by such forward-looking statements. Such risks include, but are not limited to, lack of acquisition and investment opportunities or that such opportunities may not be concluded on reasonable terms, or at all, that sufficient capital and financing cannot be obtained on reasonable terms, or at all, that technologies will not prove as effective as expected that customers and potential customers will not be as accepting of the Company's product and service offering as expected, and government and regulatory factors impacting the energy conservation industry
Accordingly, undue reliance should not be placed on forward-looking statements and the forward-looking statements contained in this Management Discussion and Analysis are expressly qualified in their entirety by this cautionary statement. The forward-looking statements contained herein are made as at the date hereof and the Company does not undertake any obligation to update publicly or revise any such forward-looking statements or any forward-looking statements contained in any other documents whether as a result of new information, future events or otherwise, except as required under applicable securities law. In this Management Discussion and Analysis ("MD&A"), "Kontrol", "Kontrol Technologies", the "Company", "we", "us" and "our" refer to Kontrol Technologies Corp. and its subsidiaries. All financial information is prepared in Canadian dollars and using International Financial Reporting Standards ("IFRS"). Unless otherwise specified, in this MD&A, all references to "dollars" or to "$" are to Canadian dollars.
Additional information relating to Kontrol Technologies Corp., including our most recent Annual Information Form ("AIF"), is available on SEDAR at www.sedarplus.ca. This MD&A should be read in
KONTROL TECHNOLOGIES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
KONTROL TECHNOLOGIES CORP.
conjunction with the Company's fiscal 2025 audited consolidated financial statements, fiscal 2025 MD&A, and unaudited condensed interim consolidated financial statements as at March 31, 2026.
Non-IFRS Measures
Adjusted EBITDA is a non-International Financial Reporting Standards ("IFRS") measure used by management that is not defined by IFRS. Adjusted EBITDA does not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Management believes that Adjusted EBITDA provides meaningful and useful financial information as these measures demonstrate the operating performance of the business excluding non-cash charges.
"Adjusted EBITDA" is calculated as net income or loss before interest, income taxes, amortization, and depreciation, share based compensation, acquisition related expenses, listing expense, gain or loss on sale of assets, revaluation and impairment of assets. Readers are cautioned that Adjusted EBITDA should not be construed as an alternative to net income as determined under IFRS; nor as an indicator of financial performance as determined by IFRS; nor a calculation of cash flow from operating activities as determined under IFRS; nor as a measure of liquidity and cash flow under IFRS. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, accordingly, the Company's Adjusted EBITDA may not be comparable to similar measures used by any other company.
Management reports its financial statements as one operating segment for reporting purposes. The Company's operating businesses are carried on or owned by its wholly-owned subsidiaries. With respect to energy management, Efficiency Engineering and Kontrol Buildings provide turn-key solutions to building owners and asset managers in the commercial, industrial and multi-residential sector. These include software to analyze the management of HVAC systems, design and engineering of improvements and/or retrofits and ongoing mission critical services.
ABOUT
The Company is a provider of energy management to commercial and industrial consumers. Management considers its products and services to comprise one operating segment - energy management and consulting services. The Company delivers building intelligence through the Internet of Things (IoT), software and cloud technology, design and engineering improvements, energy retrofits, and installation of HVAC systems. Kontrol works to provide products and services that are intended to benefit customers from reduced energy costs, lower emissions, improved operating performance real-time data and analytics, smart-learning, and increased sustainability.
PRODUCTS AND SERVICES
Smart Buildings and Facilities
Kontrol's Smart Technology is deployed to customers through a cloud-based interface accessible on desktops and mobile devices. The Company collects real-time and historical data through the use of IoT
KONTROL TECHNOLOGIES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
KONTROL TECHNOLOGIES CORP.
sensors and direct connection to industrial control systems, bringing various sources of asset performance data in the cloud where smart-learning software is applied to optimize performance.
Energy management
The Company provides building HVAC integration, automation, and retrofits to improve the energy efficiency of buildings and facilities. These are typically one-time projects with annual recurring service revenue generated to manage and maintain the energy and building assets following their installation. Kontrol provides end-to-end HVAC services, including custom system design, installation, and maintenance, supported by advanced building assessments to optimize performance and longevity.
Kontrol and its subsidiaries provide technical services to help building owners and managers improve their facilities, save money, and conserve valuable energy resources. These services are intended to uncover, design, and manage facility systems solutions, with an emphasis on economic feasibility and energy savings. Kontrol will navigate provincial and federal incentive programs on behalf of building owners and property managers. The Company collaborates with clients to provide thorough and cost-effective energy auditing, monitoring and verification, energy project assessment, mechanical, electrical, and renewable design, and LEED facilitation.
BUSINESS ACQUISITIONS/DIVESTURES AND PURCHASE/SALE OF ASSETS
June 24, 2024 – SALE OF ASSETS - CEM SPECIALTIES INC.
December 29, 2023 – SALE OF ASSETS - ORTECH CONSULTING INC.
February 14, 2023 – BANKRUPTCY ASSIGNMENT OF GLOBAL HVAC & AUTOMATION INC.
July 30, 2021 – ACQUISITION OF GLOBAL HVAC & AUTOMATION INC.
August 1, 2020 - ACQUISITION OF NEW FOUND AIR HVAC SERVICES INC.
January 14, 2019 - PURCHASE OF ASSETS FROM DIMAX CONTROLS CANADA INC.
September 20, 2018 - ACQUISITION OF CEM SPECIALITIES INC.
April 30, 2018 - ACQUISITION OF ASSETS FROM MCW DIMAX LTD.
August 4, 2017 - ACQUISITION OF EFFICIENCY ENGINEERING INC.
February 10, 2017 - ACQUISITION OF ORTECH CONSULTING INC.
December 1, 2016 - ACQUISITION OF PATENTS AND INTELLECTUAL PROPERTY LOG-ONE LTD.
June 30, 2016 - ACQUISITION OF KONTROL TECHNOLOGIES INC.
CORPORATE UPDATE
The Company is focused on providing sustainable building services and solutions to a wide range of real estate owners, property managers and institutions. The Company's customer footprint includes commercial, multi-residential and industrial customers who face similar challenges, including managing energy consumption and decarbonization.
As at March 31, 2026 the Company had no outstanding interest-bearing bank debt. We are well positioned with the necessary resources to accelerate organic growth plans and to evaluate potential acquisitions. While the Company has not closed any new acquisitions in recent quarters, we have identified targets and continue the process of performing detailed due diligence reviews, which require a substantial amount of
KONTROL TECHNOLOGIES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
KONTROL TECHNOLOGIES CORP
time to complete. The Company's business model involves growing our core sustainable buildings platform which is critical to Kontrol's strategic direction. We continue to experience some softness in the market with customers slowing their spending on capex projects, primarily related to economic uncertainty, however, maintenance and service solution margins have remained stable. We continue to service approximately 400 commercial buildings. Over the medium term we will seek to deploy cash resources through expansion of core operations in managing the decrease in revenue and earnings resulting from 2023 and 2024 asset sales.
Revenue
Revenues for the three months ended March 31, 2026 were $1.3 million, compared to $1.5 million for the same quarter in the prior year. The decrease is attributable to softness in the market with customers slowing their spending on capex projects
The Company's presence in buildings allows for revenue generation from multiple sources including project integration, energy retrofit and service, recurring revenues through energy software monitoring, maintenance, energy management, and engineering/design. Our building technology and cloud-based platform are addressing sustainability, energy conservation and greenhouse gas emission reduction. Further, we continue to focus on our net zero emission business in the private and public sectors.
The Kontrol Buildings brand is a commercial and industrial HVAC contractor that mainly services the province of Ontario. The group has demonstrated excellence in both customer and technical services; providing complete turnkey solutions which includes repair, installation, maintenance, retrofit, and system design services for HVAC systems.
Adjusted EBITDA
Adjusted EBITDA for the three months ended March 31, 2026 was negative $(133,363) compared to negative $(228,521) for the same quarter in the prior year.
Activity from energy audit, system design, energy consulting, and HVAC operations was down in Q1 2026 compared to Q1 2025 due to lower customer order intake. Kontrol's audit and systems design team are leading experts in net zero emission engineering and have been putting decarbonization and mitigating environmental impacts at the forefront as we address a renewed focus on helping our customers achieve their sustainability objectives. This team experienced lower audit and design activity as this work can fluctuate based on the number of requests for proposals available for bidding from municipalities and the private sector at any point in time. Revenue from HVAC operations was slightly down but this team has consistently contributed steady revenue and earnings through a combination of project work and service maintenance under contract.
Gross profit and expenses
Gross profit for Q1 2026 was down $57,848 compared to Q1 2025. Gross margin for the three months ended was 58%, compared to 54% for the same quarter in the prior year. The overall gross margin has remained in a favourable range due to the Company's strategic focus on higher gross margin service and
KONTROL TECHNOLOGIES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
KONTROL TECHNOLOGIES CORP.
technology solutions, and efforts to actively manage pricing in navigating a higher cost environment over prior periods.
Advertising and promotion for the three months ended March 31, 2026, was $3,636 slightly up from $3,583 for the comparative quarter in the prior year. Advertising is primarily related to social media campaigns, marketing, trade shows and product awareness campaigns. Management will utilize these campaigns on a strategic basis as required to communicate Company news, technology deployments, customer outreach and overall corporate updates. As these expenses are often discretionary in nature, management has focussed on essential programs.
Business fees and licenses for the three months ended March 31, 2026, was $80,951 down from $91,652 for the comparative quarter in the prior year. This expense account includes all fees associated with Kontrol's public listing, administrative and fees for business licenses, software licenses and cloud computing fees. Management's ongoing efforts to reduce scope of service cloud computing/storage, web services and computing processing capacity has resulted in greater stability and consistency of the overhead.
Consulting for the three months ended March 31, 2026, was $67,560 down from $72,473 for the comparative quarter in the prior year. Consulting will vary based on the mix of staff under consulting arrangement versus employment salary contracts. Kontrol will periodically engage investor relations firms and strategic communication professionals on a case-by-case basis depending on company awareness needs.
Employee salaries and benefits for the three months ended March 31, 2026, was $519,805 down from $556,011 for the comparative quarter in the prior year. Employee salaries and benefits in part decreased due to change in mix of staffing experience levels. The Company has been leveraging existing in-house expertise in our sustainable buildings platform and we are experiencing benefits.
Other income for the three months ended March 31, 2026 was $24,000 down from $28,503 for the comparative quarter in the prior year. Other income is comprised of certain income and exchange generated from the marketable securities, and other miscellaneous income and expenses.
Professional fees for the three months ended March 31, 2026 was $110,396 down from $180,913 for the comparative quarter in the prior year. Professional fees include audit, legal, recruiter, investment banking, dispute settlement, and professional fees relating to asset sales and discontinued operations, and other miscellaneous. The decrease is attributable to an overall drop in legal fees associated with the business and dispute settlement.
Travel for the three months ended March 31, 2026, was $29,357 down from $38,545 for the comparative quarter in the prior year. The Ontario based energy service teams will incur typical expenses such as fuel, and road tolls.
KONTROL TECHNOLOGIES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
KONTROL TECHNOLOGIES CORP
Net finance income for the three months ended March 31, 2026, was $23,776 compared to $30,208 for the same quarter in the prior year. The Company is recording interest income earned on the marketable securities. The Company incurs interest expense in connection with leases. As at March 31, 2026 the marketable securities balance was $7.0 million.
Share-based compensation for the three months ended March 31, 2026, was $0 compared to $48,473 for the same quarter in the prior year. Share-based compensation relates to expensing of employee and board options and share awards; timing of compensation will impact expense recognition.
Unrealized loss on revaluation of marketable securities for the three months and year ended March 31, 2026 was loss of $132,472. The marketable securities are measured at fair value through profit and loss. The fair value of a financial instrument will fluctuate because of changes in market prices. The Company is exposed to market price risk arising from its marketable securities.
Selected Financial Information and Discussion of Operations
| Financial Results
(Unaudited) | Three months ended | |
| --- | --- | --- |
| | March 31, 2026 | March 31, 2025 |
| Revenue | $1,296,862 | $1,493,383 |
| Gross profit | $749,956 | $807,804 |
| Net loss | $(432,617) | $(1,145,833) |
| Basic and diluted EPS | $(0.01) | $(0.02) |
| Add/Deduct for Adjusted EBITDA reconciliation: | | |
| Amortization and depreciation | $190,558 | $156,052 |
| Net finance income | $(23,776) | $(30,208) |
| Revaluation of marketable securities | $132,472 | $742,995 |
| Share based compensation | - | $48,473 |
| Adjusted EBITDA | $(133,363) | $(228,521) |
| Financial Position | At March 31, 2026 | At December 31, 2025 |
| --- | --- | --- |
| Assets | $12,840,045 | $13,527,646 |
| Non-current liabilities | $223,472 | $147,102 |
| Cash dividends | $0 | $0 |
Total assets and liabilities
As at March 31, 2026, the Company had total assets of $12.8 million. Cash, marketable securities, accounts receivable, goodwill, and intangible assets were the most significant dollar asset account balances. Non-
KONTROL TECHNOLOGIES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
KONTROL TECHNOLOGIES CORP
current liabilities are the lease liabilities. Investments in marketable securities were made through cash available.
Annual impairment testing involves determining the recoverable amount of the cash-generating unit (CGU) group to which goodwill is allocated and comparing this to the carrying value of the CGU groups. The fair value less costs of disposal was determined to be in greater than the CGUs value in use. As at December 31, 2025 Goodwill relating to the SmartSite brand and Efficiency Engineering Inc. were deemed impaired in 2025. The impairment amounts equal the goodwill carrying amounts of $398,000 and $830,363 for SmartSite and Efficiency Engineering respectively.
Disclosure of Outstanding Share Data
As at December 31, 2025, 53,759,169 common shares, 3,360,000 options, and 8,907,340 warrants were outstanding. The options and warrants are exercisable on a one-for-one basis for common shares of the Company.
SUMMARY OF QUARTERLY RESULTS
The following summary information is taken from the Company's quarterly and annual financial reports.
| | Q1
March 31, 2026 | Q4
Dec 31, 2025 | Q3
Sept 30, 2025 | Q2
June 30, 2025 | Q1
March 31, 2025 | Q4
Dec 31, 2024 | Q3
Sept 30, 2024 | Q2
June 30, 2024 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Revenue | $1,296,862 | $1,585,347 | $1,339,508 | $1,257,424 | $1,493,383 | $1,749,808 | $1,737,947 | $3,654,825 |
| Gross Profit | $749,956 | $747,036 | $774,627 | $739,623 | $807,804 | $858,702 | $924,580 | $2,020,525 |
| Net loss | $(432,617) | $(6,049,014) | $706,378 | $230,592 | $(1,145,833) | $148,582 | $(931,032) | $12,321,014 |
| Basic and Diluted EPS | $(0.01) | $(0.11) | $0.01 | $0.00 | $(0.02) | $0.00 | $(0.01) | $0.21 |
Revenue was down in Q1 2026 compared to previous quarter. Revenue was stable over the four quarters in fiscal year 2025. While the Company has experienced some softness in the market due to customer postponement of larger scale projects, gross margin percentage was fairly consistent throughout 2025 and into 2026. Due to the sale of air monitoring and compliance related assets in Q2 2024, as expected, the revenue and gross profit trend line has been on a downward decline since the sale of those assets. Management is pleased with the gains generated from asset sales; Q2 2024 net income includes a significant gain on the sale of air monitoring and compliance assets, which reflects a substantial premium to book value. While the Company's operational footprint has become smaller, we seek to deploy our cash holdings to accelerate the pursuit of growth opportunities in our sustainable buildings' platform. Starting in Q3 2024 net income (loss) includes the revaluation of marketable securities.
KONTROL TECHNOLOGIES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
KONTROL TECHNOLOGIES CORP.
LIQUIDITY AND CAPITAL RESOURCES
The aggregate cash and marketable securities balance as at March 31, 2026 was $7.6 million. As at March 31, 2026, the Company had current assets and current liabilities of $9.5 million and $4.7 million, respectively. The Vendor Take Back associated with the Global discontinued operation is classified as current based on the contractual terms of the purchase agreement. However, the Company is pursuing legal action against the vendor, as the full amount is under legal dispute.
Cash flows used in operating activities were $100,387 for the three months ended March 31, 2026, compared to $585,953 for the same quarter in the prior year. The unrealized loss on revaluation of marketable securities was greater in Q1 2025 compared to Q1 2026, which impacted the change in cash flows used in operating activities.
Cash flows used in investing activities were $18,369 for the three months ended March 31, 2026, compared to $127,738 for the same quarter in the prior year. During the three months ended March 31, 2026, Company purchases of marketable securities were $46,390 compared to $120,238 for the same quarter in the prior year. Proceeds from interest income derived from marketable securities were $33,045. Other investing activities in Q1 2026 were net additions to product development and leases which in aggregate totalled $5,024.
Cash flows used in financing activities were $34,945 for the three months ended March 31, 2026, compared to $170,079 for the same quarter in the prior year. Lease principal payments of $25,676 were made during the three months ended March 31, 2026 compared to $25,974 for the same quarter in the prior year. The Company repurchased $130,000 of common shares during the three months ended March 31, 2025 while in Q1 2026 there were no such purchases made. Interest payments were $9,269 for the three months ended March 31, 2026. The Company is in a net interest positive position due to interest income derived from its holdings of marketable securities.
Investments in marketable securities
As at March 31, 2026 the Company's holdings in marketable securities included GIC's, term deposit, and shares in public companies holding digital assets. Certain securities may be held to collect principal and interest or for cash flows. As at March 31, 2026, total marketable securities were $7.0 million. All investments in marketable securities are passive investments. These investments were made until a point in which the cash liquidity can be deployed into the active operations of the business, through organic growth or acquisitions. The Company's passive investments include marketable securities that are directly correlated or correlated with the price of the digital assets.
SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES
The preparation of the consolidated financial statements requires management to make judgments and estimates and form assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Such estimates primarily relate to unsettled transactions and events as at the date of the consolidated financial statements. On an ongoing basis, management evaluates its judgments and
KONTROL TECHNOLOGIES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
KONTROL TECHNOLOGIES CORP
estimates in relation to assets, liabilities, revenue, and expenses. Management uses various factors it believes to be reasonable under the given circumstances as the basis for its judgments and estimates. Actual outcomes differ from these estimates under different assumptions and conditions.
RELATED PARTY TRANSACTIONS
| Three months ended March 31, 2026 | Three months ended March 31, 2025 | |
|---|---|---|
| Salaries, benefits, and consulting | 38,100 | 104,800 |
| Share based compensation | 50,700 | 35,702 |
| $88,800 | $140,502 |
The Company's key management personnel have the authority and responsibility for planning, directing, and controlling the activities of the Company and consists of the Company's executive management team and management directors. The above table is a summary of the related party transactions, including key management compensation for the three months ended March 31, 2026, and 2025. Director loans are repayable within one year, interest bearing at annual rates ranging from 4% to 6%, and unsecured.
FINANCIAL INSTRUMENTS
The Company's financial instruments are exposed to certain financial risks, including credit risk, liquidity risk, and market risk.
(a) Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company's credit risk is primarily attributable to the liquidity of its cash, accounts receivable and certain marketable securities. The Company limits exposure to credit risk by maintaining its cash with large Canadian financial institutions. To mitigate credit risk with respect to accounts receivable the Company subjects all major customer accounts to its credit evaluation process. The Company's maximum exposure to credit risk as at March 31, 2026 is the carrying value of cash held with financial institutions, marketable securities and accounts receivable.
(b) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company ensures there is sufficient capital to meet short-term business requirements after taking into account cash flows from operations, the Company's holdings of cash, available credit facilities, and by initiating new debt or equity financings. The Company manages liquidity risk through the management of its capital structure.
The Company's contractual liabilities and obligations are as follows:
KONTROL TECHNOLOGIES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
| Less than 1 year | Between 1 year and 5 years | More than 5 years | Total | |
|---|---|---|---|---|
| Accounts payable | 547,798 | - | - | 547,798 |
| Holdback and VTB | 4,082,500 | - | - | 4,082,500 |
| Lease liabilities | 122,856 | 221,089 | - | 343,945 |
| Total | $4,753,154 | $221,089 | $0 | $4,974,243 |
The Global VTB is classified as current based on the contractual terms of the purchase agreement. However, the Company is pursuing legal action against the vendor, as the full amount is under legal dispute.
(c) Fair Value
IFRS 7 establishes a fair value hierarchy that prioritizes the input to valuation techniques used to measure fair value as follows:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities:
Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
As at March 31, 2026 and December 31, 2025, both the carrying and fair value amounts of all the Company's financial instruments was approximately equivalent. The Company's marketable securities are measured at fair value and are classified as level 1 within the fair value hierarchy.
(d) Foreign currency risk
Foreign currency risk arises because of fluctuations in exchange rates. Management of foreign exchange currency exposure is governed by the Company's foreign exchange policy. The objective of the policy is to minimize the earnings impact of foreign currency gains and losses associated with foreign exchange rate fluctuations.
The financial assets and liabilities that are denominated in foreign currencies will be affected by changes in the exchange rate between the Canadian dollar and the U.S. dollar. This primarily includes cash, accounts receivable, marketable securities, accounts payables and accrued liabilities which are denominated in foreign currencies.
(e) Market price risk
Market price risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or foreign currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors
KONTROL TECHNOLOGIES CORP.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2026
KONTROL TECHNOLOGIES CORP
affecting similar financial instruments traded in the market. The Company is exposed to market price risk arising from its marketable securities. The Company manages market price risk in accordance with the Company’s investment objective and policies. The Company notes that the investments in shares of public companies holding digital assets are expected to be more volatile than the other marketable securities held.
Disclosure Controls and Procedures and Internal Control over Financial Reporting
In accordance with National Instrument 52-109 "Certification of Disclosure in Issuers' Annual and Interim Filings", our certifying officers have evaluated the design effectiveness of Disclosure Controls and Procedures, and our Company's Internal Control over Financial Reporting.
Management has evaluated the Company's DCP as of March 31, 2026 and has concluded that such procedures are adequately designed and effective for providing reasonable assurance that: (a) material information relating to the Company is communicated to Management on a timely basis to ensure adequate disclosure; and (b) information required to be disclosed by the Company in its annual filings or other reports filed and submitted under applicable securities legislation is recorded, processed, summarized and reported within the prescribed time period.
Management has also evaluated the Company's ICFR as of March 31, 2026 and has concluded that the Company's ICFR is adequately designed and effective for providing reasonable assurance that the reliability of financial reporting and the preparation of financial statements for external purposes are in accordance with IFRS.
Due to the inherent limitations in all control systems, Management does not provide absolute assurance that the Corporation’s disclosure controls or internal controls over financial reporting will prevent or detect all misstatements and all instances of fraud. A control system is subject to inherent limitations and, no matter how well designed and can provide only reasonable, not absolute, assurance that the control system objectives will be met.
There were no changes in the Company's Internal Control over Financial Reporting during the three months ended March 31, 2026, that have materially affected, or are reasonably likely to materially affect, the Company's Internal Control over Financial Reporting.
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