Financial statements
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Interim condensed consolidated financial statements of QUANTUM eMOTION CORP. Three and six month periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars)
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QUANTUM eMOTION CORP. Table of Contents Page Interim Condensed Consolidated Financial Statements Interim Condensed Consolidated Statements of Financial Position 1 Interim Condensed Consolidated Statements of Loss and Comprehensive Loss 2 Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity 3 Interim Condensed Consolidated Statements of Cash Flows 4 Notes to the Interim Condensed Consolidated Financial Statements 5 - 17
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1 QUANTUM eMOTION CORP. Interim Condensed Consolidated Statements of Financial Position (Unaudited, in Canadian dollars) Notes June 30, 2026 December 31, 2025 $ $ Assets Current assets: Cash 315,762 246,653 Accounts and taxes receivable 7 550,444 454,243 Grant receivable 8 64,621 - Prepaid expenses and other 760,161 103,021 Investments 3 33,689,193 36,943,960 35,380,181 37,747,877 Non-current assets: Investments 3 2,863,008 4,749,326 Intangible assets 4 9,876,941 307,084 Property and equipment 4 39,897 28,977 Right-of-use asset 5 154,858 53,583 Total assets 48,314,885 42,886,847 Liabilities and shareholders’ equity Current liabilities: Accounts payable and accrued liabilities 990,416 591,878 Current portion of lease obligation 6 71,004 39 ,018 Total current liabilities 1,061,420 630,896 Non-current liabilities: Contingent liability 9,009,072 - Lease obligation 6 88,864 16,960 Total liabilities 10,159,356 647,856 Shareholders’ equity Share capital 9 9 58,462,148 58,110,456 Warrants 9 2,553,182 2,577,613 Contributed surplus 9 11,846,312 7,932,393 Fair value reserve 12 295,240 295,240 Deficit (35,001,353) (26,676,710) 38,155,529 42,238,991 Total liabilities and shareholders’ equity 48,314,885 42,886,847 See accompanying notes to interim condensed consolidated financial statements. Approved on behalf of the Board: “Francis Bellido” Francis Bellido CEO “Marc Rousseau” Marc Rousseau CFO
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2 QUANTUM eMOTION CORP. Interim Condensed Consolidated Statements of Loss and Comprehensive Loss (Unaudited, in Canadian dollars) Three months ended June 30 Six months ended June 30 Notes 2026 2025 2026 2025 $ $ $ $ Revenues 1,479 - 12,061 - Expenses Research and development 532,177 306,624 931,482 518,502 General and administrative 1,538,866 582,473 2,779,107 1,041,026 Marketing and selling 219,914 154,296 393,202 260,638 Share-based payments 1,924,763 560,272 3,991,153 3,126,263 4,215,720 1,603,665 8,094,944 4,946,431 Other items Amortization and depreciation 4 502,919 6,128 521,485 11,766 Net financial (income) expense 11 19,155 (92,360) (279,724) (89,428) 522,074 (86,232) 241,761 (77,672) Total expenses 4,737,794 1,517,433 8,336,705 4,868,768 Net loss and comprehensive loss (4,736,314) (1,517,433) (8,324,643) (4,868,768) Basic and diluted loss per share 0.022 0.008 0.038 0.027 Weighted average number of common shares outstanding 219,375,425 191,918,134 219,071,183 177,999,588 See accompanying notes to interim condensed consolidated financial statements.
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3 QUANTUM eMOTION CORP. Interim Condensed Consolidated Statements of Shareholders’ Equity (Unaudited, in Canadian dollars) Notes Number of shares Number of shares to be issued Share capital Units to be issued Warrants Contributed surplus Deficit Fair value reserve of financial asset at FVOCI Total equity $ $ $ $ $ $ $ Balance as of December 31, 2025 218,588,670 - 58,110,456 - 2,577,613 7,932,393 (26,676,710) 295,240 42,238,991 Share-based payments 9 - - - - - 3,991,153 - - 3,991,153 Exercise of options 9 101,000 - 181,261 - - (77,234) - - 104,027 Exercise of warrants 9 730,000 - 170,431 - (24,431) - - - 146,000 Net loss and comprehensive loss - - - - - - (8,324,643) - (8,324,643) Balance as of June 30, 2026 219,419,670 - 58,462,148 - 2,553,182 11,846,312 (35,001,353) 295,240 38,155,529 Balance as of December 31, 2024 164,652,838 50, 000 15,462,594 8,688 454,877 1,540,107 (16,128,423) - 1,337,843 Units issuance 9 21,333,333 - 11,746,988 - 11,097,103 - - - 22,844,091 Units issuance costs 9 - - (1,668,201) - (844,091) - - - (2,512,292) Share-based payments 9 - - - - 3,126,265 - - 3,126,265 Exercise of warrants 9 13,001,666 (50,000) 3,898,354 (8,688) - - - - 3,889,666 Exercise of options 9 1,312,500 - 405,750 - - (159,000) - - 246,750 Net loss and comprehensive - - - - - - (4,868,768) - (4,868,768) Balance as of June 30, 2025 200,300,337 - 29,845,485 - 10,707,889 4,507,372 (20,997,191) - 24,063,555 See accompanying notes to consolidated financial statements.
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4 QUANTUM eMOTION CORP. Interim condensed consolidated statements of Cash Flows (Unaudited, in Canadian dollars) Three months ended June 30 Six months ended June 30 Notes 2026 2025 2026 2025 $ $ $ $ Operating activities Net loss (4,736,314) (1,517,433) (8,324,643) (4,868,768) Adjustments to net loss for non-cash items Share-based payments 9 1,847,529 560,272 3,913,919 3,126,265 Amortization and depreciation 523,575 6,128 542,141 11,766 Accretion expense (reversal) (792) (2,162) - Fair-value adjustment of contingent liability 423,798 423,798 Net changes in non-cash working capital items - - Taxes receivable (102,326) (8,194) (132,815) (47,807) Accounts receivable 18,337 (26,377) 6,261 (26,377) Tax credit and grant receivable (667) (13,964) Interest receivable (14,464) (40,362) Prepaid expenses and other 55,500 (3,207) (649,258) (22,634) Accounts payable and accrued liabilities 126,311 (148,231) 329,763 (8,301) (1,859,513) (1,139,205) (3,945,160) (1,835,858) Investing activities Additions to property and equipment 4 (24,284) - (16,987) (5,516) Payment of milestone to SKV Technology 4 (1,500,000) - (1,500,000) - Advance to Greybox (24,750) - (474,750) - Purchase of investments (265,737) (17,932,824) (2,433,534) (22,934,632) Proceeds from sale of investments 3,671,672 68,172 8,140,774 87,172 1,856,901 (17,864,653) 3,715,503 (22,852,976) Financing activities Proceeds from issuance of units 9 - 12,380,710 - 22,000,000 Share issuance costs 9 - (856,788) - (1,668,201) Exercise of options 9 88,374 97,062 181,261 246,750 Exercise of warrants 9 - 2,347,166 146,000 3,889,666 Lease payment (15,551) - (28,495) - 72,823 13,968,150 298,766 24,468,215 Increase (decrease) in cash 70,211 (5,407,714) 69,109 (220,619) Cash, beginning of period 245,551 6,546,491 246,653 1,359,406 Cash, end of period 315,762 1,138,777 315,762 1,138,777 See accompanying notes to interim condensed consolidated financial statements.
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QUANTUM eMOTION CORP. Notes to the interim condensed consolidated financial statements Periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars) 5 1. Nature of operations Quantum eMotion Corp. (the “Compan y”) was incorporated under the Business Corporations Act of Ontario on July 19, 2007. The head office, principal address and records office of the Company are located at 2300 Alfred Nobel, Montreal, QC, H4S 2A4. The Company is a de veloper of a new gener ation of quantum-based cryptographic solutions pursuant to the develop ment of intellectual property and subsequent commercialization of cybersecurity solutions. 2. Basis of preparation and material accounting policies These interim condensed consolidated financial statements have been prepared by management in accordance with IAS 34 Interim financial reporting and using the same accounting policies and methods of computation as those used in preparing the audited annual consolidated financial statements for the year ended December 31, 2025. The unaudited interi m condensed consolidated financial statements should be read in conjunction with the Company’s audited annual consolidated financial statements and accompanying notes for the year ended December 31, 2025, which have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The Board of Directors approved and authorized for issue these interim condensed consolidated financial statements on August 14, 2026. Business combinations and asset acquisition The Company determines that it has acquired a business when the acquired set of activities and assets include an input and a substantive process that together significantly contribute to the ability to create outputs. The acquired process is considered substantive if it is critical to the ability to continue producing outputs, and the inputs acquired incl ude an organized workforce with the necessary skills, knowledge, or experience to perform that process or it signifi cantly contributes to the ability to continue producing outputs and is considered unique or scarce or cannot be replaced without significant cost, effort, or delay in the ability to continue producing outputs. Where the acquisition does not constitute a business, the Company uses the optional concentration of fair value test as outlined in IFRS 3. Under this test, if the fair value of the business acquired is concentrated in a single identifiable asset, the Company considers the acquisition to be an asset acquisition and not a business combination and measures the asset at the purchase price. Any contingent consideration to be transferred by t he acquirer will be recognized at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments, is measured at fair value in accordance with IFRS 13 with the changes in fair value recognized in the st atement of profit or loss in accordance with IFRS 9.
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QUANTUM eMOTION CORP. Notes to the interim condensed consolidated financial statements Periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars) 6 3. Investments June 30, December 31, 2026 2025 $ $ Current investments, at amortized cost Guaranteed investment certificates having a principal of $21,665,000 and accrued interest of $170,935, non-redeemable, bearing interest between 3.05% and 3.30% per annum, maturing at various dates between June 2, 2026, and June 3, 2027 22,145,556 19,806,662 Investment account, including accrued interest of $70,956, (2025 - $229,695), redeemable, bearing interest at 2.75% per annum 9,614,560 15,754,152 Commercial deposit, having a principal of US$1,008,261, bearing interest at 2.81% per annum, maturing on December 3, 2026 1,454,325 1,383,146 Short-term advance, interest bearing at 12% and due on demand 474,750 - Balance, end of period 33,689,193 36,943,960 June 30, December 31, 2026 2025 $ $ Non-current investments, at amortized cost Guaranteed investment certificates having a principal of $2,000,000 and accrued interest of $329, non-redeemable, bearing interest at 3.00% and maturing on January 30, 2027 - 2,000,329 Non-current investments, at FVOCI Investment in equity instruments of Greybox Solutions Inc. 645,240 645,240 Investment in equity instruments of Krown Technologies Inc. 567,900 547,675 Secured convertible promissory notes of US$1,100,000 with Vertical Growth Equity Inc. (“VGE”), bearing interest at 12% per annum, maturing in May 2026 and automatically convertible into a 9.99% participation upon the occurrence of certain milestones. Accrued interest amounted to $93,786. The convertible promissory note is secured by all the assets of VGE. As of June 30, 2026, the Company has yet to receive payment, and as a result, has sent a notice of default to the holder and extended the maturit y date to August 2026. 1,649,868 1,556,082 Balance, end of period, FVOCI 2,863,008 2,748,997 Balance, end of period 2,863,008 4,749,326
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QUANTUM eMOTION CORP. Notes to the interim condensed consolidated financial statements Periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars) 7 4. Intangible assets and property and equipment Equipment Licenses Intellectual property Total $ $ $ $ Cost December 31, 2025 31,928 446,112 - 478,040 Additions 16,987 - 10,085,274 10,102,261 June 30, 2026 48,915 446,112 10,085,274 10,580,301 Accumulated amortization and impairment December 31, 2025 2,951 139,028 - 141,979 Amortization 6,067 11,153 504,264 521,485 June 30, 2026 9,018 150,181 504,264 663,463 Net book value December 31, 2025 28,977 307,084 - 336,061 June 30, 2026 39,897 295,931 9,581,010 9,916,838 Acquisition of SKV Technology Inc. On April 2, 2026, the Corporation acquired 100% of the issued and outstanding shares of SKV, a California- based entity which holds legal title to the SecureKey™ technology, a cryptographic software solution (the “SKV Acquisition”). Consideration Amount and Range of Outcomes No cash, Common Shares, or other consideration wa s paid at closing. The consideration for the SKV Acquisition consists entirely of contingent payments structured as follows: up to C$7,000,000 in milestones- based earn-out payments and up to C$15,000,000 in royalty payments. 3. Investments (Cont’d) The Company designated the investments shown above as equity securities at FVOCI because these equity securities represent investments that the Company intends to hold for the long-term for strategic purposes. No strategic investments were disposed of during the period and there were no transfers of any cumulative gain or loss within equity relating to these investments.
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QUANTUM eMOTION CORP. Notes to the interim condensed consolidated financial statements Periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars) 8 4. Intangible assets and property and equipment (cont’d) The contractual range of undiscounted contingent consideration payments is from $Nil to a maximum of C$22,000,000, consisting of up to C$7,000,000 in milestone payments and up to C$15,000,000 in royalties. As at June 30, 2026, the first two milestones have been achieved resulting in a payment of C$1,500,000. The milestone payments are tied to specific technical and commercial achievements. The royalty payments are based on cumulative sales of products incorporating the SecureKey technology over a five-year period. Achieving the maximum royalty amount of C$15,000,000 would require cumulative sales of approximately C$195,000,000 over the five-year royalty period. Basis for Determining Consideration Amount The consideration was negotiated at arm's length and reflects the Corporation’s assessment of the potential strategic value and expected synergies from integr ating the SecureKey intellectual property with the Corporation’s existing assets and platforms. The assessment considered, among other factors: (i) the nature and scope of the intellectual property rights acquired; (ii) the existence of technical documentation supporting the technology and its readiness for integration, incl uding documentation relevant to certification and validation efforts; (iii) the alignment of the SecureKey technology with the Corporation’s strategic initiatives; and (iv) current and expected market demand for cryptographic protection. The Corporation’s evaluation indicated that developi ng equivalent technology internally would require significant development time, resource commitment, and would carry material technological and financial risks. The contingent consideration struct ure was established to mitigate the risk of overpayment by linking payments to the achievement of specified technical and commercial outcomes. The Corporation will pay the maximum royalty amount only if aggregate sales over the five-year royalty period reach substantial levels. Relationships Between the Corporation and Sellers The transaction was conducted at arm’s length. No directors, officers, or insiders of the Corporation were involved as sellers or otherwise had an interest in the transaction. The Corporation engaged Jason Thomas, one of the sellers and founder of SKV, as an employee of the Corporat ion concurrently with the closing of the SKV Acquisition. Stage of Development of Acquired Technology The SecureKey technology is a cryptographic software so lution designed to provide securitization of latent data. The technology includes associated certificati on-related work product completed prior to the SKV Acquisition and documentation prepared to support validation under the NIST FIPS framework applicable to cryptographic technology. The technology has been functionally tested and validated by the developers. Technical documentation and source code were transferred to the Corporation, enabling the Corporation to commence integration work immediately following closing. The technology has been integrated into the Corporation's product offerings.
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QUANTUM eMOTION CORP. Notes to the interim condensed consolidated financial statements Periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars) 9 4. Intangible assets and property and equipment (cont’d) Accounting Treatment The transaction has been accounted for as an asset acqu isition under IFRS 3. At the acquisition date, the Corporation recognized an intangible asset representing the acquired intellectual property and a corresponding contingent consideration liability of $10, 085,274 representing the fair value of the potential future milestone and royalty payments. The intangible asset will be amortized over five years on a straight- line basis. The fair value was determined using an income approach (a discounted present value technique based on probability-weighted expected future payment s), reflecting market participant assumptions regarding the probability of achieving the commercializ ation milestones and projected future sales, as well as the expected timing of payments over several years using a discount rate of 30%. As stated above, the Company recognized an initial value for the contingent liability to be $10,085,274. The first two milestones, with a combined earn-out valu e of $1.5 million, were paid and recorded against contingent liability in the second quarter. In addition, the Company performed a fair value assessment of this liability as of June 30, 2026, and calculated a fair-val ue adjustment using the discounted cash flow method with a 30% discount factor of $423,798 which was expensed in the second quarter. The remaining balance of contingent liability as at June 30, 2026, is $9,009,072. Milestone payments are contingent upon the achievement of specified technical and commercial milestones, the timing of which is uncertain and dependent on t he Corporation’s development progress and market conditions. Royalty payments are expected to occur over a five-year period following the date of the first sale, contingent upon sales of products incorporating the SecureKey technology. Significant uncertainties The fair value measurement reflected the expected ti ming of payments over several years. Uncertainties exist regarding both the amount and timing of future outflows, including: Whether the technical milestones will be achieved; Whether the Corporation will secure government or defense c ontracts meeting the specified thresholds; Whether the Corporation will ac hieve cloud marketplace listings; The level of commercial sales of products incorporating the SecureKey™ technology; The timing of milestone achievements and sales; Market conditions and competitive dynamics affecting commercialization;
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QUANTUM eMOTION CORP. Notes to the interim condensed consolidated financial statements Periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars) 10 4. Intangible assets and property and equipment (cont’d) The fair value measurement of the contingent consideration was based on the following major assumptions: Market participant assumptions regarding the probability of achieving each commercialization milestone; Projected future sales volumes and pricing for products incorporating the SecureKey technology; Expected timing of milestone ac hievements and royalty payments; A discount rate reflecting the Corporation's cost of equity and risks specific to the contingent payments; The Corporation's ability to integrate the tech nology with its existing products and achieve anticipated synergies. 5. Right-of-use asset June 30, 2026 December 31, 2025 $ $ Balance at the beginning of the period 53,583 - Additions 129,770 77,684 Amortization (28,495) (24,101) Balance at the end of the period 154,858 53,583 6. Lease liability June 30, 2026 December 31, 2025 $ $ Balance at the beginning of the period 55,978 - Additions 129,770 77,684 Payments (28,495) (24,101) Interest accretion 2,615 2,396 Balance at the end of the period 159,868 55,978 Current 71,004 39,018 Non-current 88,864 16,960 The Company signed a three-year lease for its location at Temecula, California on May 1, 2026. The lease ends on April 30, 2029.
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QUANTUM eMOTION CORP. Notes to the interim condensed consolidated financial statements Periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars) 11 7. Tax credits receivable June 30, 2026 December 31, 2025 $ $ Balance at the beginning of the period 353,035 - Additions 51,034 353,035 Payments received (101,691) - Balance at the end of the period 302,378 353,035 As at June 30, 2026, the Company had accounts receivable of $4,954, interest receivable of $20,260 and sales taxes receivable of $222,852 bringing the total of accounts and taxes receivable to $550,444. 8. Grants receivable The Company received confirmation from the National Sciences and Engineering Research Council of Canada (NSERC) that the Company was awarded funding of up to $600,000 in support of a research and development project focused on quantum-secure semiconductor technology in collaboration with JMEM Tek. The Company received payment of $101,084 for claims made in the first quarter of 2026 and claimed $64,621 in the second quarter of 2026. 9. Share capital a) Authorized The Company is authorized to issue an unlimited number of: • voting Class A preferred shares • voting Class B preferred shares • voting Class C preferred shares • voting Class D preferred shares • special shares (non-voting) • common shares (voting) without nominal or par value. Class A preferred shares are ranked senior to Cl ass B preferred shares, Cl ass B preferred shares are ranked senior to Class C preferred shares, Class C preferred shares are ranked senior to Class D preferred shares, Class D preferred shares are ranked senior to special shares, and special shares are ranked senior to common shares in priority of receiving dividends declared by the Company. Holders of special shares and common shares shall be entitled to receive pro-rata for the remaining property of the Company after distribution to the holders of Class A, Class B, Class C and Class D preferred shares, on a pro-rata basis. Dividends for Class A, Class B, Class C and Class D preferred shares are preferential and non-cumulative and are declared in accordance with their respective priority. Dividend rate per share for Class B, Class C and Class D preferred shares is 7% per annum. Dividends are declared at the discretion of the Company’s Board of Directors.
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QUANTUM eMOTION CORP. Notes to the interim condensed consolidated financial statements Periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars) 12 9. Share capital (cont’d) (b) Issued and outstanding On June 2, 2025, the Company completed a broker ed LIFE financing, issuing a total of 8,000,000 units at a price of $1.50 per unit for gross proceed s of $12,000,000. Each unit is comprised of one common share and one warrant of the Company. Each warrant entitles its holder to acquire one common share of the Company at a price of $1.82 for a period of 3 years following the closing of the date of issuance. There is no hold period for trading the warrants. Unit issuance costs of $857,178, which include a broker fee of 6.0% as well as legal and listing costs, were recorded in the second quarter of 2025. In addition, the Company issued 320,000 warrants representing 4% of the units issued to the Agent that brokered the private placement. Each warrant entitles its holder to acquire one common share of th e Company at a price of $1.66 for a period of 2.5 years following the closing of the date of issuance. There is no hold period for trading the warrants. On February 24, 2025, the Company completed a brokered LIFE financing, issuing a total of 13,333,333 units at a price of $0.75 per unit for gross proceeds of $10,000,000. Each unit is comprised of one common share and one warrant of the Company. Each warrant entitles its holder to acquire one common share of the Company at a price of $1.10 for a period of 3 years following the closing of the date of issuance. There is no hold period for trading the warrants. Unit issuance costs of $811,413, which include a broker fee of 6.5% as well as legal and listing costs, were recorded in the first quarter of 2025. In addition, the Company issued 666,666 warrants representing 5% of the issued units to the Agent that brokered the private placement. Each warrant entitles its holder to acquire one common share of th e Company at a price of $0.88 for a period of 2.5 years following the closing of the date of issuance. There is no hold period for trading the warrants. Common shares and warrants were valued based on their relative fair values. The fair value of the common shares was determined by the closing price on the date of the transaction. The fair value of the warrants was determined using the Black- Scholes pricing model and based on the following assumptions: June 2, 2025 February 24, 2025 Share price $1.50 $0.75 Expected volatility 160.46% 156.08% Risk-free interest rate 2.62% 2.62% Expected average life 3.00 3.00 Exercise price $1.82 $1.10 As at June 30, 2026, no dividends were declared or unpaid (December 31, 2025 – $Nil).
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QUANTUM eMOTION CORP. Notes to the interim condensed consolidated financial statements Periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars) 13 9. Share capital (cont’d) (c) Stock options The Company's share options are as follows for the reporting periods presented: June 30, 2026 December 31, 2025 Number of options Weighted average exercise price Number of options Weighted average exercise price $ $ Balance outstanding, Beginning of period 17,184,737 0.97 10,452,237 0.14 Granted 2,980,618 4.23 10,245,000 1.57 Exercised (101,000) 1.05 (2,162,500) 0.25 Cancelled / expired (300,000) 0.08 (1,300,000) 0.17 Forfeited - - (50,000) 1.78 Balance outstanding, end of period 19,764,355 1.48 17,184,737 0.97 Balance exercisable, end of period 11,552,487 0.49 11,017,237 0.45 Shareholders approved an amendment to convert the Company’s stock option plan pool to a rolling plan reserving a number of common shares equal to up to 10% of the Corporation’s issued and outstanding common shares as of the grant date of each option and to add a cashless exercise feature at the Company’s Annual General Meetin g held on June 18, 2026. These changes were approved by the TSX Venture Exchange. The weighted average share price at date of exercise for options exercised during the 3-month and 6-month periods respectively was $4.51 (June 30, 2025, and $4.61 and June 30, 2025 - $0.76). The weighted average remaining contractual life fo r options outstanding on June 30, 2026, is 7.43 years (June 30, 2025 – 6.44 years). Non-cash share-based compensation recognized under the plan amounted to $1,924,763 and $3,991,153 for the three-month and six-month periods ending June 30, 2026 (2025 – $560,272 and $3,126,265). Share-based compensation is provid ed to officers, employees and consultants and related to general and administrative expenses.
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QUANTUM eMOTION CORP. Notes to the interim condensed consolidated financial statements Periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars) 14 9. Share capital (cont’d) (d) Share purchase warrants The Company’s warrant movement for the six-month period ended June 30, 2026, (June 30, 2025, 25,618,322 at an average weighted price of $1.14) is as follows: Number of warrants Weighted average exercise price $ Balance outstanding, beginning of period 7,980,000 1.22 Warrants issued - - Warrants exercised (730,000) 0.20 Balance outstanding, end of period 7,250,000 1.42 10. Related party transactions The Company’s related parties include companies owned by key management. The Company paid management fees to key management through their management companies as follows up to June 30, 2026: LVR Capital Management, a company owned by Marc Rousseau, the Chief Financial Officer of the Company, was paid compensation of $36,000. As at June 30, 2026, $6,898 (December 2025 – $6,898) was due to that company. Francis Bellido, the CEO of the Company was paid a salary of $247,500. As at June 30, 2026, $99,139.89 (December 2025 – $120,000) was due to Mr. Bellido. Baystream Corporation, a company owned by Larry Moore, was paid $15,000 in director’s fees. As at June 30, 2026, $2,875 (December 2025 – $2,875) was due to that company. Baystream Corporation which provides information Technology services to the Company, is owned by Larry Moore. Fees of $75,723 were paid to that company. As at June 30, 2026, $14,468 (December 2025 – $9,765) was due to that company. Red River Solutions, which is a company owned by Wayne Teeple who is a director of the Company. That company was paid $15,000 in director’s fees. As at June 30, 2026, $8,475 was due to that company (December 2025 - $8,475). Red River Solutions provides business development services to the company. That company was paid $83,000 for consulting services. As at June 30, 2026, that Company was owed $19,350 (December 2025 $5,700). SLT Solutions, a company owned by Tullio Panarello, was paid $15,000 in director’s fees. As at June 30, 2026, $8,475 (2025 – $8,475) was due to that company. CyberDef LLC, a company owned by John Young wh o is a director of the company was paid $10,436 (US$7,500) in director’s fees. As at June 30, 2026, that company was owed $10,680 (December 2025 $5,700). CyberDef LLC was paid compensation of $101, 228 (US$72,000) for serving as the Chief Operating Officer of Quantum eMotion America. As at June 30, 2026, $Nil (2025 – US$14,210) was due to that company.
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QUANTUM eMOTION CORP. Notes to the interim condensed consolidated financial statements Periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars) 15 10. Related party transactions (cont’d) Catherine Loubier, who is a director, was paid $7,143 (USD $5,000) in director’s fees. As at June 30, 2026 $7,143 was due to Catherine Loubier (December 2025 - $Nil) Fileglobal, a company owned by Larry Moore, a director of the Company, was paid $482,392 for providing research and development work to the Company. As at June 30, 2026, $37,390 (2025 – $35,353) was due to that company. Larry Moore did not seek re-election as director of the Company at the latest AGM on June 18, 2026. Transactions with key management The key management of the Company are the members of senior management and the Board. The remuneration and other expenses for the period of key management (including the amounts above) is as follows: Three months ended June 30 Six months ended June 30 2026 2025 2026 2025 $ $ $ $ Research and development 243,463 168,019 482,392 281,081 Management salaries 241,636 142,733 384,728 235,733 Director’s fees 39,852 32,709 72,788 65,924 Other fees 86,861 16,613 158,723 36,023 Share based payments 198,002 29,134 303,226 2,485,538 809,814 389,208 1,401,857 3,104,299
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QUANTUM eMOTION CORP. Notes to the interim condensed consolidated financial statements Periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars) 16 11. Net financial (income) expense Three months ended June 30 Six months ended June 30 2026 2025 2026 2025 $ $ $ $ Financial income (373,686) (110,348) (642,562) (112,156) Financial expense 430,825 13,351 430,835 16,875 Foreign currency gain (37,984) 4,637 (67,997) 5,853 19,155 (92,360) (279,724) (89,428) The Company included the cost of the fair-value adjustment relating to the contingent liability as a financial expense in the second quarter. 12. Financial instruments and risk management (a) Management of capital The capital structure of the Company consists of equity attributable to shareholders, comprising issued share capital, contributed surplus and deficit. The Company’s objectives when managing capital are to: (i) preserve capital; (ii) obtain the best available net return; and (iii) maintain liquidity. The Company manages the capital structure and make s adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares. There were no changes to the Company’s approach to capital management during the period ended June 30, 2026. (b) Fair value of financial instruments The classification of financial instruments as well as their carrying amounts are presented in the table below: June 30, 2026 Amortized cost FVOCI Total $ $ $ Financial assets Cash 315,762 - 315,762 Investments 33,689,193 2,863,008 36,552,201 Financial assets1 34,004,955 2,863,008 36,867,963 Non-current — 2,769,222 2,769,222 Financial liabilities Accounts payable and accrued liabilities 990,416 - 990,416 Total 990,416 - 990,416
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QUANTUM eMOTION CORP. Notes to the interim condensed consolidated financial statements Periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars) 17 12. Financial instruments and risk management (cont’d) 1 Excludes taxes receivable, as these amounts do no t represent a contractual right to receive cash or another financial asset. Financial assets at FVOCI are presented in accordance with the fair value hierarchy. This hierarchy groups financial assets and liabilities into thr ee levels based on the significance of inputs used in measuring the fair value of the financial assets an d liabilities as defined in note 3. The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement. The fair value of the investments classified as FVOCI (note 3), is measured under level 3 of the fair value hierarchy. There have been no transfers between levels in the reporting periods. The fair value of investments not quoted in an active market may be determined by the Company using reputable pricing sources or indicative prices from bond/debt market makers. The Company would exercise judgment and estimates on the quantity and quality of pricing sources used. Where no market data is available, the Company might value positions using its own models, which are usually based on valuation methods and techniques generally recognized as standard within the industry. The inputs into these models are primarily adjusted market data and discounted cash flows. The models used to determine fair values are validated and periodically reviewed by experienced personnel at the Company, independent of the party that created them. The models used for private equity securities are based mainly on observable transaction data or discounted future cash flows, adjusted for lack of marketability and control premiums. The models used for debt securities are based on the net present value of estimated future cash flows, adjusted as appropriate for liquidity, and credit and market risk factors. Models use observable data, to the extent practicable. However, areas such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors coul d affect the reported fair value of financial instruments. The sensitivity to unobservable inputs is based on ma nagement’s expectation of reasonably possible shifts in these inputs, taking into consideration hi storical volatility and estimations of future market movements. The determination of what constitutes ‘observable’ requires significant judgment by the Company. The Company considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. December 31, 2025 Amortized cost FVOCI Total $ $ $ Financial assets Cash 246,653 - 246,653 Investments 38,944,289 2,748,997 41,693,286 Financial assets1 39,190,942 2,748,997 41,939,939 Non-current 2,000,329 2,748,997 4,749,326 Financial liabilities Accounts payable and accrued liabilities 591,878 - 591,878 Total 591,878 - 591,878
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QUANTUM eMOTION CORP. Notes to the interim condensed consolidated financial statements Periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars) 18 12. Financial instruments and risk management (cont’d) The following table provides information on the valuation techniques and the inputs used. Valuation technique Ke y inputs Relationship and sensitivity of unobservable inputs to fair value 1) Vertical Growth Equity Inc. Discounted cash flow method The Company uses future cash flows estimated using the interest rate on the instrument, discounted at a discount rate based on the investee company’s risk premiums. A change in this discount rate applied would not have a significant impact on the value of the investment since the remaining maturity as at quarter-end is approximately 2 months. 2) Greybox Solutions Inc. 1 Adjusted market method In this approach, the Company used the fair value of the most recent financing round which was conducted at arm’s length. Management used this price to determine the value of the investee Company (inclusive of all classes of shares) and, based on a pro-rata share, calculated the price of the Company’s investment. Management then, based on judgment, applied a discount using judgment due to the non-voting characteristic of the investment. Significant judgment was involved in determining the pro-rata value of the class of shares acquired. Additionally, had management applied a higher/lower discount of 10% the investment value would have decreased/increased by $70,000. 3) Krown Technologies, Inc. Adjusted income approach In this approach, the Company used the investee value determined using projected cash flows and applied a 35% discount based on judgment. The discount was set as such considering recent financial performance and the absence of recent rounds of financing. A higher/lower discount of 15% would have resulted in a decrease/increase in fair value by approximately $90,000.
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QUANTUM eMOTION CORP. Notes to the interim condensed consolidated financial statements Periods ended June 30, 2026, and 2025 (Unaudited, in Canadian dollars) 19 12. Financial instruments and risk management (cont’d) 4) SKV Technology inc. Adjusted income approach In this approach, the Company used the investee value determined using projected cash flows and applied a 30% discount based on judgment. The discount was set as such considering recent financial performance and the absence of recent rounds of financing. A higher/lower discount of 10% would have resulted in a decrease/increase in fair value by approximately $1.5 million. 1 Based on the terms of the investments, management assessed the initial fair value of the securities at $700,000 based on previous financing rounds conducted at arm’s length. However, since fair value is based on unobservable entity-specific inputs, the initial valuation was restricted to the transaction price determined to be $350,000, resulting in a deferred amount of $350,000, of which $59,760 is still deferred as of June 30, 2026. Management policy is to recognize in profit or loss the difference between the fair value at initial recognition and the transaction price based on subsequent financing rounds.