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Microbix Biosystems Inc. Audit Report / Information 2025
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Audit Report / Information
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NOTE TO READER
These Audited Financial Statements are being re-filed on SEDAR on this date since the earlier version filed at 07:44 a.m. EST on this date did not include the Independent Auditor’s Report from Ernst & Young LLP.
MICROBIX
INDEPENDENT AUDITOR'S REPORT
To the Shareholders of Microbix Biosystems Inc.
Opinion
We have audited the consolidated financial statements of Microbix Biosystems Inc. and its subsidiaries [the "Group"], which comprise the consolidated statements of financial position as at September 30, 2025 and 2024, and the consolidated statements of income (loss) and comprehensive income (loss), consolidated statements of changes in shareholders' equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at September 30, 2025 and 2024, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards ["IFRS"].
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the consolidated financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as a whole, and in forming the auditor's opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.
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MICROBIX
Key Audit Matters
Inventories Costing – work in process and finished goods
As at September 30, 2025, the inventories balance was $9.2 million, which consists of raw materials, work in process and finished goods. Inventory is recorded at the lower of cost and net realizable value. The cost of work in process and finished goods consists of direct costs incurred in production including raw materials, direct labour, depreciation, amortization and directly attributable overhead costs and indirect overhead costs based on normal operating capacity. The Group uses the weighted average cost method to measure the cost of work in process and finished goods. Note 3 of the consolidated financial statements describes the accounting policy for inventories.
Auditing the Group's inventory costing requires significant audit effort in performing procedures to evaluate management's application of the overhead absorption for work in process and finished goods inventories due to the inputting of various inventory cost elements. As a result, the nature of management's process gives rise to a risk that an error may occur in the costing process for work in process and finished goods inventories.
How our audit addressed the key audit matter
The procedures, amongst others, performed to test the inventory costing process for work in process and finished goods, included:
- We assessed the Group's accounting policy for inventories for compliance with IAS 2;
- For a sample of work in process and finished goods inventories, we recalculated the underlying inventories cost elements; including materials, labour and overheads;
- For a sample of work in process and finished goods inventories, we examined the actual costs of raw materials, direct labour and overhead by comparing the amounts to external and internal data sources such as invoices and payroll records;
- Obtained managements over/under absorption analysis and compared the allocation of labour and overhead cost to products in the weighted average cost calculation used by management to the actual costs incurred; and
- Recalculated the over/under absorption amounts to be capitalized to work in process and finished goods inventories.
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MICROBIX
Other information
Management is responsible for the other information. The other information comprises:
- Management's Discussion and Analysis; and
- The information, other than the consolidated financial statements and our auditor's report thereon, in the Annual Report.
Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management's Discussion and Analysis and Annual Report prior to the date of this auditor's report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
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MICROBIX
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
- Evaluate the overall presentation, structure, and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
- Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the Group as a basis for forming an opinion on the consolidated financial statements. We are responsible for the direction, supervision and review of the work performed for the purposes of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Michael Gouveia.
Toronto, Canada
December 16, 2025
Chartered Professional Accountants
Licensed Public Accountants
MICROBIX
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| As at September 30, 2025 and 2024 | Canadian Funds | |
|---|---|---|
| As at September 30, 2025 | As at September 30, 2024 | |
| ASSETS | ||
| CURRENT ASSETS | ||
| Cash and cash equivalents | $ 12,112,760 | $ 12,963,339 |
| Accounts receivable (Note 21) | 1,610,509 | 4,161,448 |
| Inventories (Note 5) | 9,195,586 | 6,464,407 |
| Prepaid expenses and other assets | 656,036 | 643,469 |
| Investment tax credit receivable | - | 27,299 |
| TOTAL CURRENT ASSETS | 23,574,891 | 24,259,962 |
| LONG-TERM ASSETS | ||
| Property, plant and equipment (Note 6) | $ 10,104,298 | $ 9,617,657 |
| Intangible assets (Note 7) | 3,730,744 | 4,219,148 |
| TOTAL LONG-TERM ASSETS | 13,835,042 | 13,836,805 |
| TOTAL ASSETS | $ 37,409,933 | $ 38,096,767 |
| LIABILITIES | ||
| CURRENT LIABILITIES | ||
| Accounts payable and accrued liabilities | $ 1,977,360 | $ 2,662,417 |
| Current portion of long-term debt (Note 9) | 5,220 | 111,120 |
| Current portion of lease liability (Note 6) | 211,161 | 130,815 |
| Deferred revenue (Notes 9, 23) | 585,212 | 490,470 |
| TOTAL CURRENT LIABILITIES | 2,778,953 | 3,394,822 |
| LONG-TERM LIABILITIES | ||
| Debentures (Note 8) | $ 2,298,793 | $ 2,006,436 |
| Lease liability (Note 6) | 1,295,832 | 568,919 |
| Deferred revenue (Note 23) | 285,269 | 249,588 |
| Long-term debt (Note 9) | 2,963,544 | 3,579,574 |
| TOTAL LONG-TERM LIABILITIES | 6,843,438 | 6,404,517 |
| TOTAL LIABILITIES | $ 9,622,391 | $ 9,799,339 |
| SHAREHOLDERS' EQUITY | ||
| Share capital (Note 11) | $ 50,431,600 | $ 48,682,854 |
| Equity component of convertible debentures (Note 8) | 2,272,566 | 2,272,566 |
| Contributed surplus | 10,720,423 | 10,733,243 |
| Accumulated deficit | (35,637,047) | (33,391,235) |
| TOTAL SHAREHOLDERS' EQUITY | $ 27,787,542 | $ 28,297,428 |
| TOTAL LIABILITIES & SHAREHOLDERS' EQUITY | $ 37,409,933 | $ 38,096,767 |
Commitments and Contingencies (Note 25)
(Signed) "Martin Marino"
MARTIN MARINO
DIRECTOR
(Signed) "Cameron L. Groome"
CAMERON L. GROOME
DIRECTOR
The accompanying notes and summary of significant accounting policies are an integral part of these consolidated financial statements.
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MICROBIX
| CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) | ||
|---|---|---|
| For the years ended September 30, 2025 and 2024 | Canadian Funds | |
| 2025 | 2024 | |
| SALES | ||
| Product sales (Notes 22, 23) | $ 17,712,222 | $20,617,233 |
| Royalties and other sales | 873,144 | 4,776,915 |
| TOTAL SALES | 18,585,366 | 25,394,148 |
| COST OF GOODS SOLD | ||
| Product costs (Notes 5, 15) | 8,651,885 | 9,945,836 |
| Royalties | 79,911 | 56,611 |
| TOTAL COST OF GOODS SOLD | 8,731,796 | 10,002,447 |
| GROSS MARGIN | 9,853,570 | 15,391,701 |
| EXPENSES | ||
| Selling and business development (Note 15) | 1,615,931 | 1,475,561 |
| General and administrative (Note 15) | 7,486,130 | 7,893,983 |
| Research and development (Note 15) | 2,327,663 | 2,125,382 |
| Foreign exchange loss (gain) | 129,490 | (8,237) |
| OPERATING INCOME (LOSS) BEFORE FINANCE EXPENSES | (1,705,644) | 3,905,011 |
| Finance expenses, net (Note 18) | 595,894 | 234,269 |
| INCOME (LOSS) BEFORE INCOME TAXES | (2,301,538) | 3,670,742 |
| INCOME TAXES | ||
| Current income taxes (Note 16) | (55,726) | 150,563 |
| NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FOR THE YEAR | $ (2,245,812) | $ 3,520,179 |
| NET INCOME (LOSS) PER SHARE | ||
| Basic (Note 14) | $ (0.016) | $ 0.026 |
| Diluted (Note 14) | $ (0.016) | $ 0.026 |
The accompanying notes and summary of significant accounting policies are an integral part of these consolidated financial statements.
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MICROBIX
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the years ended September 30, 2025 and 2024 | Canadian Funds | |
|---|---|---|
| 2025 | 2024 | |
| OPERATING ACTIVITIES | ||
| Net Income (Loss) for the Year | $ (2,245,812) | $ 3,520,179 |
| Items not affecting cash | ||
| Amortization and depreciation (Note 22) | 1,779,356 | 1,612,813 |
| Accretion of debentures (Note 8) | 292,357 | 217,042 |
| Share-based compensation (Note 13) | 650,194 | 714,290 |
| Accretion interest expense (Notes 6, 9, 18) | 237,363 | 223,986 |
| Gain on debt modification (Notes 9,18) | - | (166,630) |
| Grant income | (35,170) | - |
| Change in non-cash working capital balances (Note 17) | (758,575) | (1,774,061) |
| CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | (80,287) | 4,347,620 |
| INVESTING ACTIVITIES | ||
| Purchase of property, plant and equipment (Note 6) | (797,297) | (1,636,146) |
| Additions to intangible assets (Note 7) | - | (270,604) |
| CASH USED IN INVESTING ACTIVITIES | (797,297) | (1,906,750) |
| FINANCING ACTIVITIES | ||
| Repayments of long-term debt (Note 9) | (1,207,300) | (340,305) |
| Proceeds from Government Loan and Grants (Note 10) | 359,250 | - |
| Payment of lease liabilities | (210,678) | (182,184) |
| Repurchase of common share units, net of costs (Note 11) | (1,730,586) | (925,279) |
| Proceeds from exercise of warrants and options (Notes 12, 13) | 2,816,318 | 363,750 |
| CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 27,004 | (1,084,018) |
| NET CHANGE IN CASH - DURING THE YEAR | (850,580) | 1,356,852 |
| CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR | 12,963,339 | 11,606,487 |
| CASH AND CASH EQUIVALENTS - END OF YEAR | $12,112,760 | $12,963,339 |
The accompanying notes and summary of significant accounting policies are an integral part of these consolidated financial statements.
MICROBIX
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
| For the years ended September 30, 2025 and 2024 | ||||||
|---|---|---|---|---|---|---|
| SHARE CAPITAL (Note 11) | CONTRIBUTED SURPLUS | DEFICIT | EQUITY COMPONENT OF DEBENTURES | TOTAL SHAREHOLDERS' EQUITY | ||
| NUMBER OF SHARES | STATED CAPITAL | |||||
| BALANCE, SEPTEMBER 30, 2023 | 136,853,373 | $49,044,488 | $10,218,847 | $(36,911,414) | $2,272,566 | $24,624,487 |
| Share-based compensation expense | - | - | 714,290 | - | - | 714,290 |
| Share Issuance pursuant to Exercise of Options | 1,570,000 | 565,070 | (201,321) | - | - | 363,749 |
| Repurchase of Shares | (2,749,237) | (926,704) | 1,426 | - | - | (925,278) |
| Net income and comprehensive income for the year | - | - | - | 3,520,179 | - | 3,520,179 |
| BALANCE, SEPTEMBER 30, 2024(1) | 135,674,136 | $48,682,853 | $10,733,243 | $(33,391,235) | $2,272,566 | $28,297,427 |
| Share-based compensation expense | - | - | 650,194 | - | - | 650,194 |
| Share Issuance pursuant to Exercise of Warrants | 6,703,314 | 3,096,932 | (683,738) | - | - | 2,413,194 |
| Exercise of Options | 1,875,000 | 449,005 | (45,880) | - | - | 403,125 |
| Repurchase of Shares | (4,739,972) | (1,797,190) | 66,604 | - | - | (1,730,586) |
| Net loss and comprehensive loss for the year | - | - | - | (2,245,812) | - | (2,245,812) |
| BALANCE, SEPTEMBER 30, 2025(1) | 139,512,478 | $50,431,600 | $10,720,423 | $(35,637,047) | $2,272,566 | $27,787,542 |
(1) Includes 259,833 (book value $93,926) treasury shares as at September 30, 2025 (September 30, 2024 - 137,074 (book value $49,198)); see Note 11. The accompanying notes and summary of significant accounting policies are an integral part of these consolidated financial statements.
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
1. NATURE OF THE BUSINESS
Microbix Biosystems Inc. and its subsidiary (the "Company" or "Microbix"), incorporated under the laws of the Province of Ontario, develops and commercializes proprietary biological and technology solutions for human health and wellbeing. Microbix manufactures a wide range of critical biological materials and medical devices for the global diagnostics industry, notably test ingredients (Antigen business) used in immunoassays, quality assessment and proficiency testing controls (QAPsTM business), and sample collection devices (DxTMTM business).
The registered office and principal place of business of the Company is located at 265 Watline Avenue, Mississauga, Ontario, L4Z 1P3.
2. BASIS OF PREPARATION
The Company's management prepared these consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"). The Board of Directors approved these consolidated financial statements on December 16, 2025.
Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial assets and financial liabilities to fair value. The consolidated financial statements are presented in Canadian dollars, which is the Company's functional currency.
Basis of consolidation
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Crucible Biotechnologies Limited, over which the Company has control. Control exists when the entity is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The non-controlling interest component, if any, of the Company's subsidiary is included in equity. All significant intercompany transactions have been eliminated upon consolidation.
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of estimates and judgments
The preparation of consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from estimates and such differences could be material.
Key areas of managerial judgments and estimates are as follows:
Financial assets and liabilities
Estimates and judgments are also made in the determination of fair value of financial assets and liabilities and include assumptions and estimates regarding future interest rates, the relative creditworthiness of the Company to its counterparties, the credit risk of the Company's counterparties relative to the Company, the estimated future cash flows and discount rates.
Income taxes
The Company recognizes tax-related items such as deferred tax assets, tax-loss carry-forwards and other deductible temporary differences where it is probable that sufficient future taxable income can be generated in order to fully utilize such losses and deductions. This requires significant estimates and assumptions regarding future earnings, and the ability to implement certain tax planning opportunities in order to assess the likelihood of utilizing such losses and deductions.
Impairments
Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances indicating that the carrying value of the asset may not be recoverable. For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units or "CGUs"). The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. Management evaluates impairment losses for potential reversals when events or circumstances warrant such consideration.
Revenue recognition
Variable consideration included within a revenue arrangement requires significant judgment to determine the amount and timing of revenue recognition due to revenue being constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur.
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MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
Revenues from product sales are recognized when control of the promised good is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods.
Revenues from licensing of the Company's intangible assets are recognized when the service is rendered and control of the service is transferred to the Company's customers. Licensing revenue is comprised of upfront payments and certain milestones, and royalties. Upfront payments and milestones not representing a financing component are recognized to coincide with the timing of when control is transferred, which may either be a point in time or over time. Certain of the Company's licensing agreements include variable consideration due to uncertainty as to the amount of revenue earned. Revenue from variable consideration is recognized only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved (variable consideration constraint).
The Company may invoice certain customers in advance for contracted product sales. Amounts received in advance of control of the product transferring to the customer are deferred and recognized as revenue in the period control is transferred.
The Company may also provide services to customers, such as for development of custom products. Such service revenues are recognized on a percentage of completion basis.
Cash and Cash Equivalents
Cash consists of cash on hand and deposits with banks and investments in highly liquid instruments with original maturities of three months or less.
Financial assets and liabilities
The Company's financial assets and liabilities (financial instruments) include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, long-term debt, bank indebtedness, and convertible debentures. All financial instruments are recorded at fair value at recognition. Financial instruments are measured by grouping them into classes upon initial recognition, based on the purpose of the individual instruments.
Subsequent to initial recognition, the classification and measurement of the Company's financial assets are included in one of the following categories:
- Amortized cost: Financial instruments that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortized cost. Interest income (expense) from these financial instruments is recorded in net income (loss) using the effective interest rate method.
- Fair value through profit or loss ("FVTPL"): Financial instruments that do not meet the criteria for amortized cost or Fair value through other comprehensive income are measured at FVTPL. A gain or loss on a financial instrument that is subsequently measured at FVTPL and is not part of a hedging relationship is recognized in net income (loss) and presented net in comprehensive income (loss) within other gains (losses) in the period in which it arose.
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MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Gross carrying amount of the amortized cost of the financial liability as the present value of the estimated future contractual cash flows that are discounted adjustment is recognized in income.
The following summarizes the Company's classification and measurement of financial assets and liabilities as at September 30:
| Classification and Measurement Method | 2025 | 2024 | |
|---|---|---|---|
| Financial assets: | |||
| Cash and cash equivalents | FVTPL | $ 12,112,760 | $ 12,963,339 |
| Accounts receivable | Amortized cost | 1,610,509 | 4,161,448 |
| Financial liabilities: | |||
| Accounts payable and accrued liabilities | Amortized cost | $ 1,977,360 | $ 2,662,417 |
| Debentures | Amortized cost | 2,298,793 | 2,006,436 |
| Long-term-debt | Amortized cost | 2,968,764 | 3,690,694 |
Inventories
Inventories are comprised of raw materials, work in process, and finished goods. Inventories are carried at the lower of cost and net realizable value. The cost of raw materials is determined on the weighted average cost method. Cost of work in process and finished goods consists of direct costs incurred in production including raw materials, direct labour, depreciation on property, plant and equipment and amortization of intangible assets and directly attributable overhead costs and indirect overhead costs based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Inventories are written down to net realizable value when the cost of inventories is estimated to be unrecoverable due to obsolescence, damage or declining selling prices.
Property, plant and equipment
Property, plant and equipment are measured at cost less accumulated depreciation and impairment (if any). Cost includes the cost of material, labour, and other costs directly attributable to bringing the asset to a working condition for its intended use.
Depreciation is calculated at rates that will reduce the original cost to estimated residual value over the estimated useful life of each asset. Depreciation commences once the asset is available for use.
Depreciation is provided for at the following basis and rates:
Research and development equipment
Other equipment and fixtures
Buildings
Declining balance, 10-100%
Declining balance, 10-30%
Straight line, 50 years
Land is not depreciated. Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted prospectively, if appropriate.
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Intangible assets
Intangible assets include technology costs, patents, trademarks, and licenses. Each is recorded at cost and amortized on a straight-line basis over the term of the agreements or useful life of the asset. Amortization commences when the intangible asset is available for use.
Impairment of long-lived assets
An impairment charge is recognized for long-lived assets, including intangible assets with definite lives, when an event or change in circumstances indicates that the assets' carrying value may not be recoverable. The impairment loss is calculated as the difference between the carrying value of the asset and the recoverable amount. The recoverable amount is the higher of the fair value less costs to sell and value in use. A previously recognized impairment loss on long-lived assets is assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there is a subsequent increase in the recoverable amount. An impairment loss is reversed only to the extent that the asset's or CGU's carrying value does not exceed the carrying value that would have been determined, net of amortization expense, had no impairment loss been recognized. Such reversal is recognized in the statement of profit and loss.
Borrowing costs
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which they are incurred.
Share-based compensation
The Company applies the fair value method of accounting for share-based compensation for awards granted to officers, directors and employees of the Company. The fair value of the award at the time of granting is determined using the Black-Scholes option pricing model, and recognized as a compensation expense over the vesting period with an offsetting amount recorded to contributed surplus. Each tranche in an award is considered a separate award with its own vesting period and grant date fair value.
Share options issued to consultants of the Company are based on the fair value of the services provided. The amount of the compensation cost recognized at any date at least equals the value of the portion of the options vested at that date. When stock options are exercised, the consideration paid by employees or directors, together with the related amount in contributed surplus, is credited to share capital. When an employee leaves the Company, vested options must be exercised within 90 days, or the options expire. Any options that are unvested are reversed in the period that the employee leaves.
Foreign currency translation
For each entity, the Company determines the functional currency and items included in the financial statements of each entity are measured using the functional currency, which represents the currency of the primary economic environment in which each entity operates.
Foreign currency denominated revenues and expenses are translated by use of the exchange rate in effect at the end of the month in which the transaction occurs. Foreign currency denominated monetary assets and liabilities are translated at the period-end date. Exchange gains and losses arising on these transactions are included in the consolidated statements of income (loss) and comprehensive income (loss) for the period.
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income (Loss) per common share
The Company calculates basic income (loss) per share amounts for profit or loss attributable to ordinary equity holders. Basic income (loss) per share is calculated using the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is calculated in the same manner as basic income (loss) per share except for adjusting the profit or loss attributable to ordinary equity holders and the weighted average number of shares outstanding for the effects of all dilutive potential ordinary shares.
Deferred taxes
Deferred income tax assets and liabilities are recognized for the estimated income tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective income tax bases. Deferred income tax assets are recognized to the extent that it is probable that future taxable income will be available against which temporary differences can be utilized. Deferred income tax assets and liabilities are measured using tax rates expected to be in effect when the temporary differences are expected to be recovered or settled. The effects of changes in income tax rates are reflected in deferred income tax assets and liabilities in the year that the rate changes are substantively enacted, with a corresponding charge to income. The amount of deferred tax assets recognized is limited to the amount that is more likely than not to be realized.
Research and development expenses
Costs associated with research and development activities are expensed during the year in which they are incurred net of tax credits earned, except where product development costs meet the criteria under IFRS for deferral and amortization.
Investment tax credits
The Company is entitled to Canadian federal and provincial investment tax credits which are earned as a percentage of eligible research and development expenditures incurred in each taxation year. Investment tax credits are accounted for as a reduction of the related expenditure for items of a current nature and a reduction of the related asset cost for items of a long-term nature. These credits are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the credits in the foreseeable future.
Leases
The Company as lessee
The Company determines whether a contract is or contains a lease at inception of the contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
(i) Right-of-use assets
The Company recognizes a right-of-use asset and a lease liability based on the present value of future lease payments when the lessor makes the leased asset available for use by the Company. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. Right-of-use assets are subject to impairment.
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Leases (Continued)
(ii) Lease liabilities
The Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term, discounted using the interest rate implicit in the lease. The lease payments include fixed payments (including in-substance fixed payments), variable payments that depend on an index or a rate, renewal options that are reasonably certain to be exercised less any lease incentives receivable. Variable lease payments that do not depend on an index or rate are recognized as an expense in the period in which the event that triggers the payment occurs. In addition, the carrying amount of lease payments is reassessed if there is a modification, a change in the lease term or a change in the in-substance fixed lease payments. The Company has elected to apply the practical expedient to not separate the lease component and its associated non-lease component.
Management exercises judgment in the process of applying IFRS 16 - Leases and determining the appropriate lease term on a lease by lease basis. Renewal options are only included if Management is reasonably certain that the option will be renewed. As most of the Company's operating lease contracts do not provide the implicit interest rate, nor can the implicit interest rate be readily determined, the Company uses its incremental borrowing rate as the discount rate for determining the present value of lease payments. The Company's incremental borrowing rate for a lease is the rate that the Company would pay to borrow an amount necessary to obtain an asset of a similar value to the right-of-use asset on a collateralized basis over a similar term.
(iii) Short term leases and leases of low-value assets
The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases of property, plant and equipment that have a lease term of 12 months or less and leases of low-value assets, e.g. laptop computers. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
Government Financing and Assistance
Government assistance that requires repayment and that is non-interest bearing is accounted for at its fair value, based on management's best estimate. The difference between the assistance amount and its fair value is accounted for as a government grant and recognized in income (loss) over the period in which the related costs they are intended to compensate are recognized.
Changes in Accounting Policies
IAS 1 – Presentation of Financial Statements (“IAS 1”)
In January 2020, the IASB issued amendments to IAS 1, which affects the presentation of liabilities in the statement of financial position and not the amount or timing of their recognition. The amendments clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period and align the wording in all affected paragraphs to refer to the right to defer settlement by at least 12 months. That classification is unaffected by the likelihood that an entity will exercise its deferral right. The amendments are effective for annual periods beginning on or after January 1, 2024 and are to be applied retrospectively. The Company has concluded that there is no impact of adopting these amendments on its consolidated financial statements on October 1, 2024.
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
4. IMPACT OF NEW ACCOUNTING STANDARDS AND AMENDMENTS ISSUED BUT NOT YET ADOPTED
IFRS 18 – Presentation and Disclosure in Financial Statements (“IFRS 18”)
In April 2024, the IASB issued an amendment to IFRS 18, which will replace IAS 1. The issuance introduces new categories and subtotals in the statements of comprehensive income (loss), requires disclosure of management-defined performance measures, and includes new requirements for the location, aggregation and disaggregation of financial information. IFRS 18 will be effective for annual periods beginning on or after January 1, 2027 and is to be applied retrospectively. Early adoption is permitted and must be disclosed. The Company is still assessing the impact of adopting this amendment on its consolidated financial statements.
5. INVENTORIES
Inventories consist of the following:
| September 30, 2025 | September 30, 2024 | |
|---|---|---|
| Raw materials | $ 1,713,896 | $ 1,759,743 |
| Work in process | 2,738,867 | 2,154,703 |
| Finished goods | 4,742,825 | 2,549,961 |
| $ 9,195,586 | $ 6,464,407 |
During the year ended September 30, 2025, inventories in the amount of $8,651,885 (September 30, 2024-$9,945,836) were recognized as an expense through cost of goods sold. The allowance for potentially impaired or stale-dated inventories as at September 30, 2025 was $529,715, which is recognized as an expense in cost of goods sold (September 30, 2024 - $718,726).
38
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
6. PROPERTY, PLANT, EQUIPMENT AND LEASES
The freehold land and buildings have been pledged as security for bank loans under a mortgage (see Note 9). Property, plant and equipment consists of:
| Building and Leasehold Improvements | Research and Development Equipment | Other Equipment and Fixtures | Right of Use Assets | Land | Total | |
|---|---|---|---|---|---|---|
| COST | ||||||
| Balance, as at September 30, 2023 | $ 6,265,678 | $ 723,546 | $ 7,898,200 | $ 1,705,810 | $ 800,000 | $ 17,393,234 |
| Additions | 352,949 | - | 1,475,047 | - | - | 1,827,996 |
| Balance, as at September 30, 2024 | $ 6,618,627 | $ 723,546 | $ 9,373,246 | $ 1,705,810 | $ 800,000 | $ 19,221,230 |
| Additions | 132,123 | 34,256 | 630,917 | 980,298 | - | 1,777,595 |
| Balance, as at September 30, 2025 | $ 6,750,751 | $ 757,803 | $10,004,164 | $ 2,686,108 | $ 800,000 | $20,998,825 |
| ACCUMULATED DEPRECIATION | ||||||
| Balance, as at September 30, 2023 | $ 2,620,774 | $ 493,088 | $ 4,655,948 | $ 695,824 | - | $ 8,465,634 |
| Depreciation | 396,640 | 23,986 | 541,283 | 176,030 | - | 1,137,939 |
| Balance, as at September 30, 2024 | $ 3,017,414 | $ 517,074 | $ 5,197,231 | $ 871,854 | - | $ 9,603,573 |
| Depreciation | 447,571 | 23,107 | 616,691 | 203,584 | - | 1,290,953 |
| Balance, as at September 30, 2025 | $ 3,464,985 | $ 540,181 | $ 5,813,922 | $ 1,075,438 | - | $10,894,526 |
| NET BOOK VALUE | ||||||
| Balance, September 30, 2024 | $ 3,601,213 | $ 206,473 | $ 4,176,015 | $ 833,956 | $ 800,000 | $ 9,617,656 |
| Balance, as at September 30, 2025 | $ 3,285,766 | $ 217,622 | $ 4,190,241 | $ 1,610,669 | $ 800,000 | $10,104,298 |
Activity within right-of-use assets and lease liabilities during the year was as follows:
| Right-of-Use Assets | Lease Liabilities | ||
|---|---|---|---|
| Property | Equipment | ||
| Balance, September 30, 2023 | $ 798,567 | $ 211,419 | $ 854,034 |
| Additions | - | - | - |
| Depreciation Expense | (153,831) | (22,199) | - |
| Interest Accretion | - | - | 27,884 |
| Payments | - | - | (182,184) |
| Balance, September 30, 2024 | $ 644,736 | $ 189,220 | $ 699,734 |
| Additions | 973,279 | 7,019 | 980,298 |
| Depreciation Expense | (183,324) | (20,261) | - |
| Interest Accretion | - | - | 37,639 |
| Payments | - | - | (210,678) |
| Balance, September 30, 2025 | $ 1,434,691 | $ 175,978 | $ 1,506,993 |
| Current portion | $ 211,161 | ||
| Non-current portion | 1,295,832 |
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
6. PROPERTY, PLANT, AND EQUIPMENT AND LEASES (Continued)
Lease liabilities for leases that were entered during the year ended September 30, 2025 were discounted using an incremental borrowing rate of 4.7% (September 30, 2024 – 3.5%). During Q3, the Company's lease at 235 Watline Avenue was extended for an additional three years with an option for an additional three years.
Lease obligations as at September 30, 2025 are:
| Amount | |
|---|---|
| 2026 | $ 271,262 |
| 2027 | 273,554 |
| 2028 | 281,943 |
| 2029 | 292,017 |
| 2030 | 296,512 |
| 2031 and thereafter | 300,670 |
| Total | $ 1,715,958 |
7. INTANGIBLE ASSETS
Intangible assets consist of:
| Capitalized Development Costs Bioreactor (a) | Patents and Trademarks QAPs (b) | Kinlytic® License (c) | Rights and Knowhow (d) | Total | |
|---|---|---|---|---|---|
| COST | |||||
| Balance, as at September 30, 2023 | $ 2,088,575 | $ 142,470 | $ 3,078,585 | - | $ 5,309,630 |
| Additions | - | - | - | 270,604 | 270,604 |
| Balance, as at September 30, 2024 | $ 2,088,575 | $ 142,470 | $ 3,078,585 | $ 270,604 | $ 5,580,235 |
| Additions | - | - | - | - | - |
| Balance, as at September 30, 2025 | $ 2,088,575 | $ 142,470 | $ 3,078,585 | $ 270,604 | $ 5,580,235 |
| ACCUMULATED AMORTIZATION | |||||
| Balance, as at September 30, 2023 | $ 847,033 | $ 39,179 | - | - | $ 886,212 |
| Amortization expense | 139,238 | 14,247 | 307,859 | 13,530 | 474,874 |
| Balance, as at September 30, 2024 | $ 986,272 | $ 53,426 | $ 307,859 | $ 13,530 | $ 1,361,087 |
| Amortization expense | 139,238 | 14,247 | 307,859 | 27,060 | 488,404 |
| Balance, as at September 30, 2025 | $ 1,125,510 | $ 67,673 | $ 615,718 | $ 40,590 | $ 1,849,491 |
| NET BOOK VALUE | |||||
| Balance, as at September 30, 2024 | $ 1,102,304 | $ 89,044 | $ 2,770,727 | $ 257,074 | $ 4,219,148 |
| Balance, as at September 30, 2025 | $ 963,065 | $ 74,797 | $ 2,462,868 | $ 230,013 | $ 3,730,744 |
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
7. INTANGIBLE ASSETS (Continued)
The Bioreactor intangible asset is amortized on a straight-line basis at a rate of 7%. At each reporting date, the Company is required to assess its long-lived assets for potential indicators of impairment. If any such indication exists, the Company estimates the recoverable amount of the asset or CGU and compares it to the carrying value.
(a) Bioreactor
The Company has internally developed an improved bioreactor production process ("Bioreactor") to increase the efficiency and output of manufacturing certain Antigen products. This process has been successfully employed for ongoing production of key Antigen products.
(b) Patents and Trademarks - Quality Assessment Products ("QAPs")
To enhance its QAPs business of providing patient-sample mimetics for use in quality checks across various laboratory test applications, Microbix has been developing intellectual property. Accordingly, it has capitalized and continues to capitalize various patent application costs. The Company is amortizing these patent costs, in accordance with IFRS.
(c) Kinlytic®
The Company acquired the assets and rights pertaining to the development, production, and licensing of Kinlytic® from ImaRX Therapeutics, Inc. in 2008. The asset is being amortized over an estimated period of 10 years, from the year of the agreement.
(d) Rights and Know-how
On March 4, 2024, the Company acquired QAPs-related rights and know-how from a supplier. These rights and know-how include the following: (i) viable cell-lines that can be propagated by Microbix, (ii) disclosure of supplier methods under which such propagation can be performed, and (iii) any licenses to the Intellectual Property of the supplier that are reasonably required by Microbix. The purchase price was US$200,000 (C$270,604). The asset is being amortized over an estimated period of 20 years from the year of purchase.
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
8. DEBENTURES
The Company has convertible debentures issued and outstanding as at September 30, 2025. The carrying values of the debt component of these debentures are as follows:
| Convertible debentures | Total convertible debentures | ||
|---|---|---|---|
| (a) | (b) | ||
| Date of issue | Oct, 2016 | Oct, 2016 | |
| Face value | $ 1,500,000 | $ 2,500,000 | $ 4,000,000 |
| Liability component at the date of issue | 461,550 | 780,750 | 1,242,300 |
| Balance, September 30, 2023 | 652,631 | 1,136,763 | 1,789,394 |
| Accretion | 76,106 | 140,937 | 217,042 |
| Balance, September 30, 2024 | 728,737 | 1,277,700 | 2,006,436 |
| Accretion | 102,653 | 189,703 | 292,357 |
| Balance, September 30, 2025 | $ 831,390 | $ 1,467,403 | $ 2,298,793 |
| Equity component as at September 30, 2025 | $ 574,435 | $ 1,698,131 | $ 2,272,566 |
| Conversion price per common share | $ 0.23 | $ 0.23 | |
| Effective interest rate charged | 31.07% | 30.85% | |
| Payment frequency | Quarterly | Quarterly | |
| Maturity of financial instrument | Jan, 2029 | Sep, 2028 | |
| Stated interest rate | 9% | 9% | |
| Terms of repayment | Interest only | Interest only | |
| Blended quarterly repayment | N/A | N/A |
The debentures denoted as (a) and (b) above are secured against the real property and the personal property of the Company including, without limiting the foregoing, a registered second mortgage on the property at 265 Watline Avenue, Mississauga, Ontario, in favour of the holder, its successors and assigns subordinate only to indebtedness to a Canadian chartered bank or similar financial institution on normal commercial terms up to their maximum principal.
The convertible debentures are convertible at the option of the holder, at any time, into fully paid and non-assessable common shares of the Company at the conversion price then in effect.
All of the debentures were issued to shareholders of the Company. Over the term of the convertible debentures, the debt components are being accreted to the face value of the debentures by the recording of additional interest expense using the effective interest rate, as detailed above.
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
9. LONG-TERM DEBT, BANK INDEBTEDNESS AND OTHER DEBT
a) The Company has an outstanding loan with the Business Development Bank of Canada ("BDC"). The following summarizes the outstanding balance as at September 30, 2025:
| Term Loan with BDC | |
|---|---|
| Effective date of loan | Jun, 2008 |
| Initial Loan Amount | $ 3,000,000 |
| Balance, September 30, 2023 | 1,601,980 |
| Loan repayments during the year | (340,305) |
| Balance, September 30, 2024 | $ 1,261,675 |
| Loan repayments during the year | (1,207,300) |
| Balance, September 30, 2025 | $ 54,375 |
| Current Portion | $ 5,220 |
| Non-current portion | 49,155 |
| Payment frequency | Monthly |
| Maturity of loan | Feb, 2036 |
| Terms of repayment | Principal and interest |
| Notes: Loan for the purchase of manufacturing facility and building improvements. |
The remaining BDC loan has a floating interest rate based on BDC's floating base rate less 1.0%. As at September 30, 2025, the rate was 5.80% (September 30, 2024 – 7.55%). The loan is secured with the building and equipment. On May 21, 2024, the Company prepaid $229,185, 15\%$ of the outstanding balance, without indemnity. On March 24, 2025 the Company made a further principle prepayment of $1,150,000, along with an indemnity equal to three months further interest on the principal prepaid of $17,537.
43
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
9. LONG-TERM DEBT, BANK INDEBTEDNESS AND OTHER DEBT (Continued)
As at September 30, 2025, the commitments for the next five fiscal years and thereafter for the BDC loan are as follows:
| Amount | |
|---|---|
| 2026 | $ 5,220 |
| 2027 | 5,220 |
| 2028 | 5,220 |
| 2029 | 5,220 |
| 2030 | 5,220 |
| 2031 and thereafter | $ 28,275 |
b) On March 26, 2025, the Company announced that it had expanded its bank line of credit ("LoC") to a maximum of C$4.0 million, from its prior maximum of C$ 2.0 million. The LoC is entirely undrawn at September 30, 2025 and is being made available at a premium of 1.4% over the bank's prime rate (4.45% at September 30, 2025). The availability of the expanded demand LoC is driven by a borrowing-base formula that is predominantly driven by accounts receivable and inventory balances. The Company's availability and usage of this facility varies across its manufacturing, sales and accounts receivable collection cycles.
c) On July 29, 2019, the Company signed an agreement with the Federal Economic Development Agency for Southern Ontario ("FedDev") to provide a repayable government contribution of 30% of the Business Scale-up and Productivity Project expenditures made by the Company, up to $2,752,500 over the following four years. The Company is required to submit eligible expenses on a quarterly basis to receive the interest-free contributions. On February 14, 2023, the Company agreed to an amendment to the original agreement providing an additional $840,000 of repayable contributions, increasing the total funding up to $3,592,500. Repayment of all contributions was to begin April 15, 2025. On March 8, 2024, the agreement was further amended to extend the project completion date to September 30, 2024 and the repayment of all contributions was to begin on October 15, 2025. Subsequently, on May 27, 2024, the Company signed an amendment to the agreement extending the project completion date to December 31, 2024 and the repayment of all contributions will now begin on January 15, 2026. As a result of this extension to the timing of repayment, a gain on debt modification of $166,630 was recognized in Q3 2024.
d) As at September 30, 2025, the Company has received contributions totalling $3,592,500 (September 30, 2024 - $3,233,250). The Company determined that the "Loan" consists of two components: an obligation to repay and a government grant in the form of exemption from interest. The Company fair valued the obligation to repay at $2,422,736 (September 30, 2024 - $2,117,358), based on a discount rate of 8%, which represents management's best estimate of fair value. The residual amount of $1,169,764 (September 30, 2024 - $1,115,892) is allocated to the associated government grant and recognized as income over the period in which the related costs they are intended to compensate are recognized. During the year ended September 30, 2025, $36,849 has been recognized as grant income within general and administrative expenses (September 30, 2024 - $95,677). As at September 30, 2025, the carrying value of the Loan is $2,914,388 (September 30, 2024 - $2,429,019) and $352,533 is recognized as a deferred grant within deferred revenue on the consolidated statements of financial position (September 30, 2024 - $315,777).
The Company is in compliance with the covenants associated with this Loan as at September 30, 2025.
The estimated repayments on the existing term facilities in future fiscal years are as follows:
| Fiscal Years | Amount |
|---|---|
| 2026 | $ 538,875 |
| 2027 | 718,500 |
| 2028 | 718,500 |
| 2029 | 718,500 |
| 2030 | 718,500 |
| 2031 | 179,625 |
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
10. GOVERNMENT GRANT
On March 20, 2023, the Company announced a second grant agreement with the Ontario Together Fund ("OTF") of the Ministry of Economic Development, Job Creation and Trade (the "Grant"). This Grant of $840,000 was to cover 30% of the cost to further expand the Company's capabilities and capacity for manufacturing specialized products relating to diagnostic testing for infectious diseases. The Government of Ontario supported the expansions at Microbix's three adjacent sites in Mississauga. An initial Grant disbursement, upon execution of the Grant agreement, in the amount of $504,000 was received on March 13, 2023. During fiscal 2025, $218 of Grant-related income was recognized (2024 - $402,162). In addition, $369,719 was recognized as a reduction to property, plant and equipment. At September 30, 2025, other receivables did not include any grants receivable (September 30, 2024- $336,000). The remaining $336,000 of the Grant was paid on August 25, 2025, following completion of the project.
11. SHARE CAPITAL
The Company is authorized to issue an unlimited number of common shares with no par value and an unlimited number of preference shares with no par value.
On October 3, 2022, the Company initiated a Normal Course Issuer Bid ("NCIB") program for the repurchase and cancellation of outstanding common shares. In accordance with the rules of the Toronto Stock Exchange and as detailed in the Company's news release of September 28, 2022, the NCIB enables the Company to repurchase up to 5% of its common shares over a 12-month period. During fiscal 2023, the Company repurchased 2,892,000 shares at a cost of $1,114,156 and cancelled 2,589,000 shares. 303,000 shares representing shares repurchased ($108,347 book value) but not yet cancelled were considered as treasury shares as at September 30, 2023.
On December 8, 2023, the Company initiated a second NCIB program for the repurchase and cancellation of outstanding common shares. In accordance with the rules of the Toronto Stock Exchange and as detailed in the Company's news release of December 6, 2023, the NCIB enabled the Company to repurchase up to 5% of its common shares over a 12-month period. During fiscal 2024, the Company repurchased 2,583,311 shares at a cost of $925,279 and cancelled 2,749,237 shares. 137,034 shares representing shares repurchased ($49,198 book value) but not yet cancelled were considered as treasury shares as at September 30, 2024.
On December 9, 2024, the Company initiated a third NCIB program for the repurchase and cancellation of outstanding common shares. In accordance with the rules of the Toronto Stock Exchange and as detailed in the Company's news release of December 5, 2024, the NCIB enabled the Company to repurchase up to 5% of its common shares over a 12-month period.
During the year ended September 30, 2025, 4,862,731 shares were repurchased at a cost of $1,730,586 and 4,739,972 shares were cancelled. As at September 30, 2025, 259,833 shares were in treasury, awaiting cancellation.
The number of issued and outstanding common shares and the stated capital of the Company are presented below:
| Number of Shares | Stated Capital | |
|---|---|---|
| Balance, as at September 30, 2023 | 136,853,373 | $ 49,044,488 |
| Exercise of stock options | 1,570,000 | 565,070 |
| Stock repurchase and cancellation | (2,749,237) | (926,704) |
| Balance, as at September 30, 2024 | 135,674,136 | $ 48,682,853 |
| Exercise of stock options | 1,875,000 | 449,005 |
| Exercise of warrants | 6,703,314 | 3,096,932 |
| Stock repurchase and cancellation | (4,739,972) | (1,797,190) |
| Balance, as at September 30, 2025 | 139,512,478 | $ 50,431,600 |
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
12. COMMON SHARE PURCHASE WARRANTS
A continuity of the Company's warrants outstanding as at September 30, 2025 is presented in the following table:
| Units | Weighted average exercise price | |
|---|---|---|
| Balance, September 30, 2023 | 14,631,564 | $ 0.53 |
| Exercised | (5,750,000) | 0.80 |
| Expired | 8,881,564 | 0.36 |
| Balance, September 30, 2024 | (6,703,314) | $ 0.36 |
| Expired | (2,178,250) | 0.36 |
| Balance, September 30, 2025 | - | - |
A summary of the Company's warrants outstanding as at September 30 is presented in the following table:
| September 30, 2025 | September 30, 2024 | |||||
|---|---|---|---|---|---|---|
| Number outstanding | Weighted average exercise price | Weighted average remaining contractual life years | Number outstanding | Weighted average exercise price | Weighted average remaining contractual life years | |
| Range of exercise prices: $0.60 to $0.80 | - | - | - | - | - | - |
| $0.36 | - | - | - | 8,881,564 | 0.36 | 0.34 |
| - | - | - | 8,881,564 | $ 0.36 | 0.34 |
During Q2 2025 6,703,314 warrants issued on January 31, 2020 were exercised at $0.36 per warrant and an equivalent number of shares were issued. In addition, 2,178,250 warrants issued on January 31, 2020 expired on January 31, 2025. As at September 30, 2025, there are no warrants outstanding.
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
13. STOCK OPTION PLAN
Under the Company's stock option plan, the Company may grant options to purchase common shares up to a maximum of 10% of the Company's issued and outstanding common shares. Under the plan, as at September 30, 2025, the Company has a total of 13,519,000 options (September 30, 2024 – 12,884,000) issued and is eligible to issue up to a total of 13,951,248 options.
The exercise price of each option equals no less than the market price at the date immediately preceding the date of the grant. The options granted during any given year and future option grants will generally be vested in a single step on the third anniversary date following their issue. Management does not expect any remaining unvested stock options at the year-end to be forfeited before they vest.
The activity under the Company's stock option plan for year ended September 30, 2025 is as follows:
| Units | Weighted average exercise price | |
|---|---|---|
| Balance, September 30, 2023 | 11,959,000 | $ 0.43 |
| Stock options exercised | (1,570,000) | $ 0.23 |
| Stock options issued | 2,795,000 | $ 0.40 |
| Stock options forfeited/expired | (300,000) | $ 0.42 |
| Balance, September 30, 2024 | 12,884,000 | $ 0.45 |
| Stock options exercised | (1,875,000) | $ 0.22 |
| Stock options issued | 2,895,000 | $ 0.48 |
| Stock options forfeited/expired | (385,000) | $ 0.20 |
| Balance, September 30, 2025 | 13,519,000 | $ 0.49 |
| Exercisable, September 30, 2025 | 5,149,000 | $ 0.60 |
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
13. STOCK OPTION PLAN (Continued)
The exercise price of each option equals the closing market price of the Company's capital stock on the day preceding the grant date. The following table reflects the number of options, their weighted average price and the weighted average remaining contract life for the options grouped by price range as at September 30, 2025 and September 30, 2024:
| September 30, 2025 | September 30, 2024 | |||||
|---|---|---|---|---|---|---|
| Number outstanding | Weighted average exercise price | Weighted average remaining contractual life years | Number outstanding | Weighted average exercise price | Weighted average remaining contractual life years | |
| Range of exercise prices: | ||||||
| $0.46 to $0.62 | 8,044,000 | $ 0.56 | 2.17 | 5,169,000 | $ 0.60 | 1.93 |
| $0.215 to $0.40 | 5,475,000 | $ 0.39 | 2.91 | 7,715,000 | $ 0.34 | 2.93 |
| 13,519,000 | $ 0.49 | 2.47 | 12,884,000 | $ 0.45 | 2.52 |
The fair value of options granted during fiscal 2025 was estimated at the grant date using the Black-Scholes options pricing model, resulting in the following weighted-average assumptions:
| Option Grant Dates | Feb 2025 | Feb 2024 |
|---|---|---|
| Share price on issue date | $ 0.48 | $ 0.40 |
| Dividend yield | 0% | 0% |
| Volatility | 59% | 63% |
| Risk-free interest rate | 2.8% | 3.6% |
| Expected option life (years) | 5 | 5 |
| Weighted average fair value of each option ($ / option) | $ 0.25 | $ 0.22 |
Stock options are assumed to be exercised at the end of the option's life, as management believes the probability of an early exercise is remote. During the year, the fair value of the options vested in the year were expensed and credited to contributed surplus. During the year, the Company recorded share-based compensation expense of $650,194 (2024 - $714,290).
Option issuances in February for the past five years have been on the order of 2% of shares outstanding and are as follows:
| Fiscal Year | Option Quantity | Option Strike Price |
|---|---|---|
| 2021 | 2,239,000 | $0.62 |
| 2022 | 2,805,000 | $0.60 |
| 2023 | 2,815,000 | $0.37 |
| 2024 | 2,795,000 | $0.40 |
| 2025 | 2,895,000 | $0.48 |
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
14. INCOME (LOSS) PER SHARE
Basic income (loss) per share is calculated using the weighted average number of shares outstanding. Diluted income (loss) per share reflects the dilutive effect of the exercise of stock options, warrants and convertible debt. The following table reconciles the net income(loss) and the number of shares for the basic and diluted income (loss) per share computations:
| for the year ended September 30 | 2025 | 2024 |
|---|---|---|
| Numerator for basic and diluted income (loss) per share: | ||
| Net income (loss) available to common shareholders | $ (2,245,812) | $ 3,520,179 |
| Net income (loss) for dilutive earnings per share | $ (2,245,812) | $ 3,520,179 |
| Denominator for basic and diluted income (loss) per share: | ||
| Weighted average common shares outstanding | 139,153,666 | 137,697,660 |
| Dilutive Effect | - | 793,188 |
| Dilutive weighted average common shares outstanding | 139,153,666 | 138,490,848 |
| Net income (loss) per share: | ||
| Basic | $ (0.016) | $ 0.026 |
| Diluted | $ (0.016) | $ 0.026 |
The following represents the warrants, stock options, and convertible debentures not included in the calculation of diluted earnings per share due to their anti-dilutive impact:
| for the year ended September 30 | 2025 | 2024 |
|---|---|---|
| Pursuant to warrants | - | 8,881,564 |
| Under stock options | 13,519,000 | 10,704,000 |
| Pursuant to convertible debentures | 17,391,304 | 17,391,304 |
| 30,910,304 | 36,976,868 |
MICROBIX
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As at and for the years ended September 30, 2025 and 2024 | Canadian Funds |
|---|---|
15. EXPENSES BY NATURE
The Company has chosen to present its consolidated statements of income (loss) and comprehensive income (loss) based on the functions of the entity and include the following expenses by nature for the years ended September 30:
| 2025 | 2024 | |
|---|---|---|
| Short-term wages, bonuses and benefits | $ 12,606,468 | $ 11,679,461 |
| Share based payments | 449,106 | 478,340 |
| Total employee costs | $ 13,055,574 | $ 12,157,801 |
| Included in: | ||
| Cost of goods sold | $ 6,918,081 | $ 5,836,379 |
| Research and development | 1,736,425 | 1,805,184 |
| General and administrative expenses | 3,122,924 | 3,287,355 |
| Selling and business development | 1,278,144 | 1,228,883 |
| Total employee costs | $ 13,055,574 | $ 12,157,801 |
16. INCOME TAXES AND INVESTMENT TAX CREDITS
Income taxes consist of the following, for the years ended September 30:
| 2025 | 2024 | |
|---|---|---|
| Provision based on combined federal and provincial statutory rate of 25.50 % (2024 – 25.43%) | $ (596,397) | $ 941,687 |
| Increase (decrease) resulting from: | ||
| Non deductible expenses | 5,467 | - |
| Stock-based compensation | 165,791 | 181,644 |
| Change in deferred tax assets not recognized | 138,948 | (993,967) |
| Effect of change in tax rate | (15,002) | - |
| Adjustment in respect of income taxes of prior year and other | 245,466 | 21,199 |
| Income tax expense / (Recovery) | $ (55,726) | $ 150,563 |
The Company has unclaimed research and development expenses, research and development investment tax credits, and accumulated losses for income tax purposes. The associated tax benefits have not been recognized in the consolidated financial statements. In addition, an income tax recovery of $55,726 was booked in Q4 2025 as a result of differences in the 2024 tax provision and the 2024 tax return filed and assessed. The are no income taxes payable as at September 30, 2025.
MICROBIX
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As at and for the years ended September 30, 2025 and 2024 | Canadian Funds |
|---|---|
16. INCOME TAXES AND INVESTMENT TAX CREDITS (Continued)
The significant components of deferred income tax assets are summarized as follows:
| 2025 | 2024 | |
|---|---|---|
| Deferred income tax assets: | ||
| Non-capital loss carry-forwards | $ 23,168 | $ - |
| Difference in net book value compared to undepreciated capital cost | 2,226,466 | 1,973,535 |
| Deferred financing fees and other reserves | 143,995 | 224,039 |
| Unclaimed research and development expenses | 4,027,584 | 4,016,725 |
| Lease liabilities | 384,264 | 177,943 |
| Deferred income tax liabilities related to debentures | (433,786) | (506,963) |
| Difference between government assistance amount and fair market value | (83,019) | (123,960) |
| Right of use assets | (410,701) | (212,075) |
| Other | 104 | - |
| Tax assets not recognized | (5,878,076) | (5,549,244) |
| Deferred tax assets recognized | - | - |
The unrecognized balance of federal research and development investment tax credits carried forward is $2,455,104 reduced by a deferred tax liability of $626,021. The credits expire between 2026 and 2044.
17. CHANGES IN NON-CASH WORKING CAPITAL
| 2025 | 2024 | |
|---|---|---|
| Accounts receivable | $ 2,550,939 | $ (41,677) |
| Inventories | (2,731,179) | (712,376) |
| Prepaid expenses and other assets | (12,568) | 123,981 |
| Investment tax credits receivable | 27,299 | 28,967 |
| Deferred revenue | 91,991 | (1,562,871) |
| Accounts payable and accrued liabilities | (685,057) | 389,915 |
| $ (758,575) | $ (1,774,061) |
MICROBIX
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As at and for the years ended September 30, 2025 and 2024 | Canadian Funds | |
|---|---|---|
| 18. FINANCIAL EXPENSES, NET | ||
| 2025 | 2024 | |
| Cash interest: | ||
| Interest on long-term debt | $ 60,692 | $ 120,747 |
| Interest on debentures | 360,000 | 360,000 |
| Interest other | - | (158,062) |
| Interest income | (354,518) | (529,444) |
| Non-cash interest: | ||
| Accretion on debentures (Note 8) | 292,357 | 217,042 |
| Accretion interest expense (Note 6, 9) | 237,363 | 223,986 |
| Financial expenses, net | $ 595,894 | $ 234,269 |
On May 27, 2024, the Company signed an amendment to the FedDev agreement (see note 9) extending the project completion date to December 31, 2024, and the repayment of all contributions will now begin on January 15, 2026.
19. CAPITAL MANAGEMENT
The Company's capital management objective is to safeguard its ability to function as a going concern while also maintaining and growing its operations and funding its development activities. Microbix defines its capital to include any drawn portion of the revolving line of credit, shareholders' equity, long-term debt, and debentures. The capital as at September 30, 2025 was $33,055,099 (September 30, 2024 - $33,994,557).
To date, the Company has used cash provided by operating activities, common equity issues, debentures, bank mortgage and other financing to fund its activities. Equity is provided through public offerings or private placements, the debentures are all controlled by private individuals known to the Company and the mortgage and other financing are with BDC, FedDev, and TD Bank. If possible, the Company tries to optimize its liquidity needs by non-dilutive sources, including cash provided by operating activities, investment tax credits, grants and interest income. The Company has a revolving line of credit of $4,000,000 with its Canadian chartered bank (see note 9).
The Company's general policy is to not pay dividends and retain cash to keep funds available to finance the Company's growth. Similarly, the Board of Directors may, from time to time, choose to declare a dividend in assets if warranted by circumstances. Also, the Board of Directors may, from time to time, choose to initiate a buy-back of issued common shares. There was no change during the year in how the Company defines its capital or how it manages its capital.
20. FINANCIAL INSTRUMENTS
The Company categorizes its financial assets and liabilities measured at fair value into one of three different levels depending on the observation of the inputs used in the measurement.
For the years ended September 30, 2025 and September 30, 2024, the Company has carried at fair value financial instruments in Level 1. As at September 30, 2025, the Company's only financial instrument measured at fair value is cash and cash equivalents, which is considered to be a Level 1 instrument. There were no transfers between levels during the year.
The three levels are defined as follows:
a) Level 1: Fair value is based on unadjusted quoted prices for identical assets or liabilities in active markets
b) Level 2: Fair value is based on inputs other than quoted prices included within Level 1 that are not observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
c) Level 3: Fair value is based on valuation techniques that require one or more significant unobservable inputs.
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
20. FINANCIAL INSTRUMENTS (Continued)
The following table provides the fair value measurement hierarchy of the Company's assets and liabilities.
| Date of valuation | Quoted prices in active markets (Level 1) | Significant observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |
|---|---|---|---|---|
| Assets measured at fair value: | ||||
| Cash and Cash Equivalents | 30-Sep-25 | $ 12,112,760 | - | - |
| Liabilities for which fair values are disclosed: | ||||
| Debentures | 30-Sep-25 | - | $ 2,298,793 | - |
| Long-term-debt and other debt | 30-Sep-25 | - | $ 2,968,764 | - |
| Date of valuation | Quoted prices in active markets (Level 1) | Significant observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |
| Assets measured at fair value: | ||||
| Cash and Cash Equivalents | 30-Sep-24 | $ 12,963,339 | - | - |
| Liabilities for which fair values are disclosed: | ||||
| Debentures | 30-Sep-24 | - | $ 2,298,793 | - |
| Long-term-debt and other debt | 30-Sep-24 | - | $ 3,690,694 | - |
The fair value of a financial instrument is approximated by the consideration that would be agreed to in an arm's length transaction between willing parties and through appropriate valuation methods, but considerable judgment is required for the Company to determine the value. The actual amount that could be realized in a current market exchange could be different than the estimated value. The fair values of financial instruments included in current assets and current liabilities approximate their carrying values due to their short-term nature.
The fair value of the long-term debt is based on rates currently available for items with similar terms and maturities and is repriced to floating market interest rates and as such, the carrying value of the long-term debt and other debt approximates fair value. The convertible debenture fair values are estimated based on rates for items with similar terms and maturity. The fair values of financial instruments in other long-term liabilities approximate their carrying values as they are recorded at the net present values of their future cash flows using an appropriate discount rate.
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
21. FINANCIAL RISK MANAGEMENT
The primary risks that affect the Company are set out below and the risks have not changed materially during the reporting periods. The list does not cover all risks to the Company, nor is there an assurance that the strategy of management to mitigate the risks is sufficient to eliminate the risk.
Risks arising from financial instruments and risk management
The Company's activities expose it to a variety of financial risks: credit risk, market risk (including foreign exchange risk), and liquidity risk. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial performance.
Risk management is the responsibility of the corporate finance function. Material risks are monitored and are regularly discussed with the Audit Committee of the Board of Directors.
Credit risk
The Company's cash is held in accounts at one of the major Canadian chartered banks or in short-term interest bearing securities. Management perceives the credit risk to be low. Typically the outstanding accounts receivable balance is relatively concentrated with a few large customers representing the majority of the value. As at September 30, 2025, five customers accounted for 64% (September 30, 2024 - five customers accounted for 79%) of the outstanding accounts receivable balance. In addition, for the year ended September 30, 2025, five customers accounted for 74% (September 30, 2024 - five customers accounted for 75%) of sales. The Company has had minimal bad debts over the past several years and accordingly management has recorded an allowance of $35,000 (September 30, 2024 - $35,000).
Trade accounts receivable are aged as follows:
| September 30, 2025 | September 30, 2024 | |
|---|---|---|
| Current | $ 534,694 | $ 3,103,217 |
| 0 - 30 days past due | 543,347 | 261,529 |
| 31 - 60 days past due | 1,578 | 9,424 |
| 61 days and over past due | 132,758 | 108,845 |
| $ 1,212,377 | $ 3,483,015 |
In addition to trade receivables, the Company had other receivables relating primarily to accrued royalties receivable, and HST receivable of $351,198 (September 30, 2024 - $678,433).
54
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
21. FINANCIAL RISK MANAGEMENT (Continued)
Market risk and foreign currency risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, will affect the Company's income or the value of its financial instruments. The Company's activities that result in exposure to fluctuations in foreign currency exchange rates consist of the sale of products and services to customers invoiced in foreign currencies and the purchase of services invoiced in foreign currencies. The Company does not use financial instruments to hedge these risks.
As at September 30, the significant balances, quoted in Canadian dollars, held in foreign currencies are:
| U.S. dollars | Euros | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Cash and cash equivalents | $ 779,777 | $ 1,477,218 | $ 325,248 | $ 37,815 |
| Accounts receivable | 1,124,530 | 2,429,236 | 60,938 | 1,020,804 |
| Accounts payable and accrued liabilities | 55,475 | 164,692 | - | - |
The Company's revenue and expenses by foreign currency for the years ended September 30, 2025 and 2024 are as follows:
| 2025 | 2024 | |
|---|---|---|
| Revenue | ||
| Euros | 29% | 15% |
| U.S. dollars | 67% | 83% |
| Expenses | ||
| U.S. dollars | 7% | 8% |
Based upon 2025 results, the impact of a 5% increase in the U.S. dollar against the Canadian dollar would result in an increase in annual U.S. dollar based revenue of approximately C$622,400. The impact of a 5% increase in the Euro against the Canadian dollar would result in an increase in annual Euro based revenue of approximately C$272,500. Correspondingly, the impact of a 5% decrease in the U.S. dollar against the Canadian dollar would result in a loss in annual U.S. dollar based revenue of approximately C$622,400. The impact of a 5% decrease in the Euro against the Canadian dollar would result in a loss in annual Euro-based revenue of approximately C$272,500.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties in meeting its financial liability obligations as they become due. The Company has a planning and budgeting process in place to help determine the funds required to support the normal operating requirements on an ongoing basis. The Company has financed its cash requirements primarily through issuance of securities, short-term borrowings, long-term debt and debentures. The Company controls liquidity risk through management of working capital, cash flows, and the availability and sourcing of financing. Based on current funds available and expected cash flows from operating activities, management believes that the Company has sufficient funds available to meet its liquidity requirements for the foreseeable future. However, if cash from operating activities is significantly lower than expected, if the Company incurs major unanticipated expenses or the Company's borrowings are called, it may be required to seek additional capital in the form of debt or equity or a combination of both. Management's current expectations with respect to future events are based on currently available information and the actual outcomes may differ materially from those current expectations.
55
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
21. FINANCIAL RISK MANAGEMENT (Continued)
Interest rate risk
Financial instruments that potentially subject the Company to cash flow interest rate risk are those assets and liabilities with a variable interest rate. Interest rate risk exposure is primarily on the BDC debt that has a variable rate that is pegged to the bank rate. The rate can be fixed at the Company's option, if the outlook for interest rates should move higher. The only other variable debt the Company has is the $4,000,000 line of credit that bears interest at the bank's prime lending rate plus 1.4%. A 1% increase in the bank rate would cost the Company approximately $540 per year for BDC and about $40,000 on the line of credit usage if it were fully used throughout the fiscal year. However, this would be somewhat offset by increased interest income on the Company's short-term investments.
22. SEGMENTED INFORMATION
The Company operates in two ways: (i) the development, manufacturing, and sale of products relating to the medical diagnostics industry, namely antigens as test ingredients, quality assessment products to help ensure the accuracy of test workflows and viral transport medium to enable collection of patient test samples, and (ii) the development and commercialization of novel and proprietary products or technologies such as Kinlytic. The following is an analysis of the Company's revenues and income (loss) from continuing operations for the years ended September 30, segmented between categories (i) and (ii) (including Kinlytic):
| Segment revenue | Segment Income (loss) | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Antigens, QAPs and DxTM | $ 18,585,366 | $ 21,307,488 | $ (1,937,328) | $ 427,578 |
| Other (Includes Kinlytic®) | - | 4,086,660 | (308,484) | 3,092,601 |
| Total for continuing operations | $ 18,585,366 | $ 25,394,148 | $ (2,245,812) | $ 3,520,179 |
Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales in the current year (September 30, 2024 - $nil).
Segment income (loss) represents the profit (loss) before tax earned by each segment without allocation of central administration costs, directors' fees, and finance costs. These general costs are reflected in Category (i) segment. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.
Segmented assets and liabilities are as follows:
| Segment assets | Segment liabilities | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Antigens, QAPs and DxTM | $ 34,947,065 | $ 35,326,040 | $ 9,622,391 | $ 9,799,339 |
| Other (Includes Kinlytic®) | 2,462,868 | 2,770,727 | - | - |
| Total for continuing operations | $ 37,409,933 | $ 38,096,767 | $ 9,622,391 | $ 9,799,339 |
All assets are allocated to reportable segments and current and deferred tax assets. Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments. All liabilities are allocated to reportable segments other than borrowings and current and deferred tax liabilities. Liabilities for which reportable segments are jointly liable are allocated in proportion to segment assets.
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
22. SEGMENTED INFORMATION (Continued)
Segmented depreciation and amortization, impairment of long-lived assets or reversal of impairment of long-lived assets, and additions to non-current assets as at September 30 are as follows:
| Depreciation and amortization | Additions to non-current assets | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Antigens, QAPs and DxTM | $ 1,471,497 | $ 1,304,954 | $ 797,297 | $ 1,905,750 |
| Other (Includes Kinlytic®) | 307,859 | 307,859 | - | - |
| $ 1,779,356 | $ 1,612,813 | $ 797,297 | $ 1,905,750 |
23. REVENUES AND GEOGRAPHIC INFORMATION
The Company operates in three principal geographical areas – North America (where it is domiciled), Europe, and in other foreign countries. The Company's revenue from external customers is tracked based on the bill-to location. Information about its non-current assets by location of assets are also detailed below. It should be noted that our distribution partner for Asia is based in the United States, so most sales destined to Asia are reflected in the North American total. Additionally, due to its distributor for Asia being domiciled in North America, Microbix believes it is not subject to the receivables collection risks sometimes associated with sales to Asia.
| For the year ended September 30, | Revenue from external customers | Non-current assets | ||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| North America | $ 11,569,547 | $ 19,047,364 | $ 13,835,042 | $ 13,836,805 |
| Europe | 6,735,893 | 6,014,175 | - | - |
| Other foreign countries (directly) | 279,926 | 332,609 | - | - |
| Total for continuing operations | $ 18,585,366 | $ 25,394,148 | $ 13,835,042 | $ 13,836,805 |
The following table reflects the movement in the Company's deferred revenue:
| For the years ended September 30, | 2025 | 2024 |
|---|---|---|
| Balance, beginning of the year | $ 740,059 | $ 2,302,928 |
| Cash payments or advance payments on performance obligations | 2,443,726 | 1,797,626 |
| Revenue recognized during the year | (2,350,059) | (2,788,081) |
| Deferred government grants (Note 10) | 36,756 | (572,415) |
| Balance, end of year | $ 870,482 | $ 740,059 |
As at September 30, 2025, $285,269 of deferred revenue is reported in long-term liabilities (September 30, 2024 - $249,588).
The Company recognizes revenue from the sale of products at a point in time, when control of the promised good is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods.
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As at and for the years ended September 30, 2025 and 2024
Canadian Funds
23. REVENUES AND GEOGRAPHIC INFORMATION (Continued)
Revenue from licensing of the Company's intangible assets is recognized when the service is rendered and control of the service is transferred to the Company's customers. The Company has determined that royalty milestone payments received under the Agreement represent one performance obligation and are recognized at a point in time. The royalty milestones in the Agreement are considered variable consideration and are estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with the variable consideration is subsequently resolved. In 2024, the uncertainty of the consideration originally deferred was recognized as sales. In November 2023, Microbix received confirmation of full project funding from Sequel, recognized the second half of its initial payment from Sequel (i.e., US$ 1.0 million) and received the next milestone payment of US$ 2.0 million which was entirely recognized as revenue in 2024.
24. RELATED PARTY TRANSACTIONS
Key Management Compensation
Key management personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of the Company. Key management includes six independent directors and four key management executive officers. Compensation for the Company's key management personnel was as follows:
| For the year ended September 30, | 2025 | 2024 |
|---|---|---|
| Short-term wages, bonuses and benefits | $ 1,446,502 | $ 1,579,874 |
| Share based payments | 400,975 | 447,491 |
| Total key management compensation | $ 1,847,477 | $ 2,027,365 |
25. COMMITMENTS AND CONTINGENCIES
Commitments
Payments on convertible debentures (Note 8)
| Amount | |
|---|---|
| 2026 | $ 360,000 |
| 2027 | 360,000 |
| 2028 | 2,860,000 |
| 2029 | 1,539,497 |
| 2030 and thereafter | - |
| $ 5,119,497 |
Contingencies
The Company is not party to any legal proceedings arising out of the normal course of business.
MICROBIX
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Canadian Funds
As at and for the years ended September 30, 2025 and 2024
26. SUBSEQUENT EVENTS
On December 9, 2025 the Company initiated Normal Course Issuer Bid ("NCIB") program for the repurchase and cancellation of outstanding common shares. In accordance with the rules of the Toronto Stock Exchange and as detailed in the Company's news release of December 4, 2025, the NCIB enables the Company to repurchase up to 5% of its common shares over a 12-month period.
59