Financial statements
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SERNOVA BIOTHERAPEUTICS INC. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED JULY 31, 2026 AND 2025 (Unaudited)
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SERNOVA BIOTHERAPEUTICS INC. Interim Condensed Consolidated Statements of Financial Position (In Canadian Dollars) (Unaudited) 1 Note July 31, 2026 October 31, 2025 Assets Current assets Cash $ 63,331 $ 265,004 Amounts receivable 10,887 122,633 Pre paid expenses and other assets 295,363 135,013 Total current assets 369,581 522,650 Non-current assets Deposits – 223,860 Equipment, net 4,431 17,724 Total non-current assets 4,431 241,584 Total assets $ 374,012 $ 764,234 Liabilities and shareholders’ deficit Current liabilities Accounts payable and accrued liabilities 4 $ 9,544,669 $ 8,559,341 Accounts payable to be settled in equity 4 – 12,508,057 Loan payable 5 – 3,730,133 Convertible debentures 6 2,504,481 – Total current liabilities 12,049,150 24,797,531 Non-current liabilities Convertible debentures 6 78,943 1,043,533 Total non-current liabilities 78,943 1,043,533 Total liabilities 12,128,093 25,841,064 Shareholders’ deficit Common shares, no par value; unlimited authorized; 377,642,509 and 332,854,811 shares issued and outstanding as at July 31, 2026 and October 31, 2025, res pectively 7 125,262,171 118,696,619 Preferred shares, no par value; unlimited authorized; 65,831,880 and nil shares issued and outstanding as at Jul y 31, 2026 and October 31, 2025, respectively 7 12,025,024 – Warrants 7 1,743,291 537,142 Contributed surplus 7 23,409,758 21,792,017 Deficit (174,194,325) (166,102,608) Total shareholders’ deficit (11,754,081) (25,076,830) Total liabilities and shareholders’ deficit $ 374,012 $ 764,234 Going concern (Note 2(c)) Commitments and contingencies (Note 10) Events after the reporting period (Note 13) See accompanying notes to the interim condensed consolidated financial statements.
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SERNOVA BIOTHERAPEUTICS INC. Interim Condensed Consolidated Statements of Operations and Comprehensive Loss (In Canadian Dollars) (Unaudited) 2 Three months ended July 31, Nine months ended July 31, Note 2026 2025 2026 2025 Operating expenses Research and development 9 $ 432,624 $ 1,742,268 $ 1,311,644 $ 6,693,435 General and administrative 9 1,685,182 1,757,630 5,217,775 5,933,385 Total operating expenses 2,117,806 3,499,898 6,529,419 12,626,820 Other expense (income) Interest income – (131) (413) (25,607) Finance costs 260,183 541,676 1,658,247 1,015,382 Foreign exchange loss (gain) 196,273 62,179 21,464 (83,771) Gain on disposal of right-of-use asset and lease liabilities – (50,963) – (50,963) Net other expense 456,456 552,761 1,679,298 855,041 Net loss before income taxes $ 2,574,262 $ 4,052,659 $ 8,208,717 $ 13,481,861 Deferred income tax recovery (45,000) – (45,000) – Current income tax expense (recovery) – 21,124 (72,000) 64,402 Net loss and comprehensive loss $ 2,529,262 $ 4,073,783 $ 8,091,717 $ 13,546,263 Basic and diluted net loss per common share 11 $ 0.01 $ 0.01 $ 0.02 $ 0.04 Weighted average number of common shares outstanding – basic and diluted 377,642,509 328,484,786 355,095,081 328,144,401 See accompanying notes to the interim condensed consolidated financial statements.
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SERNOVA BIOTHERAPEUTICS INC. Interim Condensed Consolidated Statements of Changes in Equity (In Canadian Dollars) (Unaudited) 3 Common Shares Preferred Shares Warrants Contributed Surplus Deficit Total (Note 7) (Note 7) (Note 7) (Note 7) Balance, October 31, 2025 332,854,811 $ 118,696,619 – $ – $ 537,142 $ 21,792,017 $(166,102,608) $ (25,076,830) Net loss – – – – – – (8,091,717) (8,091,717) Warrants in conjunction with loan payable – – – – 79,529 – – 79,529 Issuance of warrants in conjunction with convertible debentures – – – – 166,293 – – 166,293 Issuance of units in debt settlements, net of issuance costs 514,622 84,761 65,831,880 12,025,024 883,624 – – 12,993,409 Issuance of units in private placements, net of issuance costs 44,273,076 6,480,791 – – 76,703 – – 6,557,494 Issuance of options as settlement of director fees – – – – – 238,587 – 238,587 Deferred tax asset on convertible debentures – – – – – (45,000) – (45,000) Share-based compensation – – – – – 1,424,154 – 1,424,154 Balance, July 31, 2026 377,642,509 $ 125,262,171 65,831,880 $ 12,025,024 $ 1,743,291 $ 23,409,758 $(174,194,325) $ (11,754,081) Balance, October 31, 2024 325,324,786 $ 116,679,651 – $ – $ 34,421 $ 20,688,462 $ (150,359,142) $ (12,956,608) Net loss – – – – – – (13,546,263) (13,546,263) Issuance of common shares in settlement of deferred share units 3,160,000 1,384,956 – – – (1,384,956) – – Issuance of warrants in conjunction with convertible debentures – – – – 202,444 37,625 – 240,069 Issuance of warrants in conjunction with loan payable – – – – 205,800 – – 205,800 Share-based compensation – – – – – 1,624,555 – 1,624,555 Balance, July 31, 2025 328,484,786 $ 118,064,607 – $ – $ 442,665 $ 20,965,686 $(163,905,405) $ (24,432,447) See accompanying notes to the interim condensed consolidated financial statements.
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SERNOVA BIOTHERAPEUTICS INC. Interim Condensed Consolidated Statements of Cash Flows (In Canadian Dollars) (Unaudited) 4 Note Nine months ended July 31, 2026 Nine months ended July 31, 2025 Cash flows from operating activities Net loss $ (8,091,717) $ (13,546,263) Adjustments for items not affecting cash: Amortization and depreciation 13,293 280,376 Share-based compensation 7 1,424,154 1,624,555 Director fees settled in equity 238,587 – Research collaboration advances recognized as cost recoveries – (35,153) Interest on lease liabilities – 44,454 Accretion and accrued interest expense 5,6 570,264 192,297 Gain on disposal of right-of-use asset and lease liabilities – (50,963) Loss on debt settlements 7 456,607 – Deferred tax asset on convertible debentures (45,000) – Changes in non-cash working capital balances: Amounts receivable 111,746 32,056 Prepaid expenses and other assets (160,350) 9,084 Accounts payable and accrued liabilities and deposits 4 1,237,933 712,716 Net cash used in operating activities (4,244,483) (10,736,841) Cash flows from investing activities Disposal of equipment – 4,784 Net cash provided by investing activities – 4,784 Cash flows from financing activities Loan repayment 5 (4,000,000) – Proceeds from private placements of units, net of issuance costs 7 6,557,494 – Proceeds from loan, net of issue costs – 3,703,323 Proceeds from convertible debentures, net of issuance costs 6 1,485,316 1,141,254 Research collaboration advances – 64,825 Lease liabilities payments – (106,002) Net cash provided by financing activities 4,042,810 4,803,400 Net decrease in cash (201,673) (5,928,657) Cash, beginning of period 265,004 6,012,274 Cash, end of period $ 63,331 $ 83,617 Supplemental cash flow disclosures: Income taxes paid $ – $ 9,403 Interest received $ 413 $ 26,650 Interest paid $ 354,726 $ 220,216 Right-of-use asset additions $ – $ 108,715 See accompanying notes to the interim condensed consolidated financial statements.
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SERNOVA BIOTHERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2026 and 2025 (In Canadian Dollars) (Unaudited) 5 1. Nature of operations Sernova Biotherapeutics Inc. (the “Company”) is a publicly listed, clinical-stage biotechnology company focused on providing a functional cure for the treatment of type 1 diabetes. The Company’s primary asset is its proprietary Cell Pouch, a bio-hybrid organ system which is designed to enhance the delivery of cell therapy to better replicate natural body functions. The Cell Pouch creates a vascularized, organ-like environment that promotes the longevity and functionality of therapeutic cells and ensures containment for retrievability. Effective February 4, 2025, the corporate name changed from Sernova Corp. to Sernova Biotherapeutics Inc. Sernova Biotherapeutics Inc. is governed under the Business Corporations Act (British Columbia). The Company has operations in the United States and Canada and its common shares are listed on the Toronto Stock Exchange (the “Exchange”), the OTCQB Venture Market and on Xetra. 2. Basis of presentation (a) Statement of compliance These interim condensed consolidated financial statements have been prepared in accordance with IFRS® Accounting Standards and are in compliance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”). Accordingly, these interim condensed consolidated financial statements do not include all disclosures required for annual financial statements and should be read in conjunction with the Company’s annual consolidated financial statements for the year ended October 31, 2025. These interim condensed consolidated financial statements were approved and authorized for issue by the Company’s Audit Committee of the Board of Directors on September 10, 2026. Certain comparative figures in the interim condensed consolidated statements of cash flows have been reclassified to conform to the current period’s presentation. This reclassification had no impact on the cash provided by (used in) operating, investing or financing activities. (b) Basis of measurement These interim condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Sernova (US) Corp. The financial statements of the subsidiary are prepared for the same reporting period as the Company using consistent accounting policies. Intercompany transactions, balances and gains and losses on transactions between the Company and its subsidiary are eliminated upon consolidation. These interim condensed consolidated fina ncial statements have been prepared on a historical cost basis, except for financial instruments classified as fair value through profit or loss, which are stated at their fair value, or at amortized cost. These interim condensed consolidated financial statements are presented in Canadian dollars, which is the functional currency of the Company. (c) Going concern These consolidated financial statements have been prep ared assuming that the Company will continue as a going concern. The Company has incurred losses and generated negative cash flows since inception. A net loss and comprehensive loss of $8,091,717 was incurred during the nine months ended July 31, 2026 (2025 – $13,546,263). As at July 31, 2026, the Company had an accumulated deficit of $174,194,325 and a working capital deficit (current liabilities in excess of current assets) of $11,679,569. For the nine months ended July 31, 2026, the Company generated negative cash flows from operations of $4,244,483 (2025 – $10,736,841).
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SERNOVA BIOTHERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2026 and 2025 (In Canadian Dollars) (Unaudited) 6 2. Basis of presentation (cont’d…) (c) Going concern (cont’d…) Until the Company’s products are approved and available for sale and profitable operations are developed, the Company’s liquidity requirements will be dependent on its ability to continue to secure additional funding to meet its financial obligations and to fund research and development expenditures. Failure to do so could have a material adverse effect on the Company’s financial condition. As a result, material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern and realize its assets and discharge its liabilities in the normal course of business. The Company expects to incur further losses in the development and commercialization of its proprietary Cell Pouch platform for the foreseeable future an d forecasts that it will need to succes sfully complete additional financing initiatives in the near term to continue as a going concern and cover its planned research and development expenditures and financial obligations. The planned financing initiatives include equity financings, loans or strategic alliances. While the Company has been successful in securing financing in the pa st, there can be no assurance that it w ill be able to secure financing in the future or that financing can be obtained on favourable terms. Failure to successfully raise additional funding or settle amounts payable would have a significant impact on the Company’s ability to continue its operations. Until sufficient financing is obtained, the Company has deferred and reduced planned expenditures. If the going concern assumption was not appropriate for these interim condense d consolidated financial statements, then adjustments would be necessary to the carrying values of assets and liabilities, the reported expenses and the classifications used in the interim condensed consolidated statements of financial position, which could be material. The interim condensed consolidated financial statements do not include adjustments that would be necessary if the going concern assumption was not appropriate. After the reporting period, the Company entered into a definitive merger agreement and development and commercialization agreement with Seraxis Holdings, Inc. (“Seraxis”). See Note 13 – Events after the reporting period for details on the agreements and related financing activities. (d) Use of significant estimates and judgments In preparing these interim condensed consolidated fi nancial statements, the significant judgements made by management in applying the Company’s accounting policies and key sources of estimation uncertainty were the same as those applied to the audited consolidated financial statements for the year ended October 31, 2025. 3. Material accounting policies The Company’s material accounting policies are outlined in the Company’s audited consolidated financial statements for the year ended October 31, 2025, and have been applied consistently in these interim condensed consolidated financial statements. (a) New accounting standards and interpretations issued but not yet effective IFRS 18, Presentation and Disclosure in Financial Statements In April 2024, the IASB issued IRFS 18, Presentation and Disclosure in Financial Statements which replaces IAS 1 Presentation of Financial Statements. IFRS 18 introduces new requirements on presentation within the statement of profit or loss, including specified totals and subtotals. It also requires disclosure of management-defined performance measures and includes new requirements for aggregation and disaggregation of financial information based on the identified roles of the primary financial statements and the notes. IFRS 18 and the amendments to the other standards are effective for annual periods beginning on or after Janu ary 1, 2027, with early application permitted. IFRS 18 applies retrospectively to both annual and interim financial statements. The Company is assessing the impact of adopting this standard on the consolidated financial statements.
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SERNOVA BIOTHERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2026 and 2025 (In Canadian Dollars) (Unaudited) 7 4. Accounts payable and accrued liabilities July 31, 2026 October 31, 2025 Trade and other payables $ 5,105,174 $ 5,160,303 Accrued liabilities 983,379 1,881,537 Due to related parties (Note 8) 3,456,116 1,517,501 $ 9,544,669 $ 8,559,341 During the nine months ended July 31, 2026, the Company settled $12,605,835 of accounts payable in equity (2025 – $nil). See Note 7 – Share capital. 5. Loan payable On April 16, 2025, the Company entered into a term loan w ith Navigate Private Yield Fund LP III, a fund managed by Fraser Mackenzie Private Credit Inc. The loan was issued for a principal amount of $4,000,000 and was due on the maturity date of April 16, 2026. The loan had a minimum fixed interest payable of $400,000 for the first six months and bore interest at 15.25% per annum. The loan was secured against the assets of the Company and Company’s US subsidiary as well as against the assets of a member of the Company’s Board of Directors. In consideration for the guarantee and assumption of lia bility, the Company granted a member of the Board of Directors 9,000,000 common share purchase warrants, see Note 8 – Related party transactions . Each warrant is exercisable, once vested, at a price of $0.20 per share for a term of 36 months. On the closing of the loan, 4,000,000 warrants vested and the remaining 5,000,000 vested in monthly increments of 833,333 beginning after six months. The value of the guarantee was determined to be $340,200 using a Black-Scholes pricing model, of which $151,200 was recognized as a transaction cost and recorded against the debt and $189,000 was recognized over the term of the loan within finance costs in the consolidated statements of operations and comprehensive loss. During the nine months ended July 31, 2026, $79,529 of guarantee warrants vested and were recognized in the interim condensed consolidated statements of operations and comprehensive loss (2025 – $54,600). During the nine months ended July 31, 2026, the loan payable was fully repaid on the maturity date, and the related guarantees and asset securities were removed. For the nine months ended July 31, 2026, the Company recognized interest and accretion expense of $549,801 (2025 – $315,688). 6. Convertible debentures Balance outstanding, October 31, 2025 $ 1,043,533 Face value of convertible debentures issued 1,500,000 Less: value allocation to warrants (167,937) Less: issue costs allocation (13,040) Convertible debenture liability component 2,362,556 Accretion expense 220,868 Balance outstanding, July 31, 2026 $ 2,583,424
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SERNOVA BIOTHERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2026 and 2025 (In Canadian Dollars) (Unaudited) 8 6. Convertible debentures (cont’d…) As at July 31, 2026, the Company has the following unsecured convertible debentures outstanding with a Director of the Company, see Note 8 – Related party transactions: i) $1,000,000, bearing interest at a rate of 15% per annum payable annually in arrears, in cash or common shares at the option of the Company. The debenture is repayable in 24 months on March 4, 2027, and has a conversion price of $0.20 per share. A total of 5,000,000 non-transferable common share purchase warrants were issued as part of the offering with each warran t being exercisable into a common share at a price of $0.20 per share for 36 months. As at July 31, 2026, the carrying value of the debenture was $922,841. During the nine months ended July 31, 2026, the holder elected to defer receipt of $150,000 of interest which became payable as of March 4, 2026; ii) $100,000, bearing interest at a rate of 12% per annum payable annually in arrears, in cash or common shares at the option of the Company. The debenture is repayable in 24 months on July 7, 2027, and has a conversion price of $0.15 per share. A total of 666,667 non-tran sferable common share purchase warrants were issued as part of the offering with each warrant being exercisable into a common share at a price of $0.25 per share for 36 months. As at July 31, 2026, the carrying value of the debenture was $80,853. During the nine months ended July 31, 2026, the holder elected to defer receipt of $12,000 of interest which became payable as of July 7, 2026; iii) $100,000, bearing interest at a rate of 12% per annum payable annually in arrears, in cash or common shares at the option of the Company. The debenture is repayable in 24 months on July 21, 2027, and has a conversion price of $0.15 per share. A total of 666,667 non-tran sferable common share purchase warrants were issued as part of the offering with each warrant being exercisable into a common share at a price of $0.25 per share for 36 months. As at July 31, 2026, the carrying value of the debenture was $80,303. During the nine months ended July 31, 2026, the holder elected to defer receipt of $12,000 of interest which became payable as of July 21, 2026; iv) $100,000, bearing interest at a rate of 10% per annum payable annually in arrears, in cash or common shares at the option of the Company. The debenture is repayable in 24 months on September 2, 2027, and has a conversion price of $0.15 per share. A total of 666,667 non-transferable common share purchase warrants were issued as part of the offering with each warran t being exercisable into a common share at a price of $0.25 per share for 36 months. As at July 31, 2026, the carrying value of the debenture was $78,943; and v) $1,500,000, bearing interest at a rate of 10% per annum payable monthly in arrears, in cash or common shares at the option of the Company. The debenture is repayable in six months on October 14, 2026, and has a conversion price of $0.15 per share. A total of 10,000,000 non-transferable common share purchase warrants were issued as part of the offering with each warran t being exercisable into a common share at a price of $0.25 per share for 36 months. As at July 31, 2026, the carrying value of the debenture was $1,420,484. The Company has the option to redeem and repay the convertible debt at any time after 12 months following the issue date at a redemption premium of 2% of the principal amount called for redemption except for the $1,500,000 debenture payable on October 14, 2026 which the Company has the option to redeem and repay at any time without a redemption premium. No finder’s fees or finder’s warrants were paid or issued, respectively, in connection with these offerings. The convertible debentures and warrants , and any securities into which they may be exchanged or converted, are subject to a four-month hold period in accordance with applicable securities regulations. The liability component of each convertible debenture was initially recognized at the fair value of a comparable liability without an equity conversion option and related warrant issuance (before issue cost allocation) based on future cash flows discounted at the estimated ma rket interest rate of 30%. The residual values of the gross proceeds were allocated to the conversion options based on the differe nce between the fair value of the compound financial instrument as a whole and the fair value of the liability co mponent and to the warrants based on their relative fair value. Accretion of interest on the liability components and accrued interest expense on the convertible debentures are included in finance costs in the interim condensed consolidated statements of operations and comprehensive loss.
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SERNOVA BIOTHERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2026 and 2025 (In Canadian Dollars) (Unaudited) 9 7. Share capital (a) Authorized Unlimited number of common shares and preferred shares, without par value. (b) Share capital changes During the nine months ended July 31, 2026, the Company: i) issued 3,843,750 units at $0.16 per unit for gross proceeds of $615,000, before deducting cash offering costs of $22,628 in a non- brokered private placement. Each unit comprises one common share of the Company and one common share purchase warrant with each common share purchase warrant exercisable for one common share at a price of $0.40 per common share for 36 months. The common share purchase warrants have a fair value of $76,875 as determined using the residual fair value method. Non-cash offering costs include the issuance of 105,000 compensation warrants with a fair value of $105. The fair value of compensation warrants was determined using the Black-Scholes pricing model based on an exercise price of $0.40 per common share, expected life of three years, volatility of 30% and a risk-free rate of 2.5%; ii) issued 13,762,659 units at $0.15 per unit for gross proceeds of $2,064,399, before deducting cash offering costs of $54,729 in a non-broker ed private placement. Each unit co mprises one common share of the Company and one common share purchase warrant. Each common share purchase warrant will be exercisable for one common share at a price of $0.25 per common share for 36 months and is subject to acceleration of the exercise period in the event that the five-day volume weighted average price of the Company’s common shares exceeds $0.50. No fair value has been assigned to the common share purchase warrants under the residual fair value method. Non-cash offering costs include the issuance of 192,880 compensation warrants with a fair value of $2,565. The fair value of compensation warrants was determined using the Black-Scholes pricing model based on an exercise price of $0.25 per common share, expected life of three years, volatility of 30% and a weighted average risk-free rate of 2.7%; iii) issued 514,622 units at $0.19 per unit to settle salaries payable to key management personnel of $97,778. Each unit was comprised of one common share, one-half common share wa rrant with an exercise price of $0.25 exercisable for 24 months and one-half common share warrant with an exercise price of $0.30 exercisable for 36 months. Cash offering costs of $8,456 were incurred and allocated to common shares and common share purchase warrants based on their relative fair value. The exercise periods of the $0.25 warrants and the $0.30 warrants are subject to acceleration on 30 days notice to warrant holders in the event that the five-day volume weighted average price of the Company’s common shares exceeds $0.40 and $0.50 per share, respectively. The settlement of the debt resulted in a loss of $1,747 included in finance costs on the interim condensed consolidated statements of operations and comprehensive loss; iv) issued 65,831,880 units at $0.19 per unit to settle accounts payable of $12,508,057. Each unit was comprised of one preferred share, one-half preferred share warran t with an exercise price of $0.25 exercisable for 24 months and one-half preferred share warrant with an exercise price of $0.30 exercisable for 36 months. Cash offering costs of $66,211 were incurred and allocated to preferred shares and preferred share purchase warrants based on their relative fair value. The exercise periods of the $0.25 warrants and the $0.30 warrants are subject to acceleration on 30 days notice to warrant holders in the event that the five-day volume weighted average price of the Company’s co mmon shares exceeds $0.40 and $0. 50 per share, respectively. The settlement of the debt resulted in a loss of $460,494 included in finance costs on the interim condensed consolidated statements of operations and comprehensive loss; and
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SERNOVA BIOTHERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2026 and 2025 (In Canadian Dollars) (Unaudited) 10 7. Share capital (cont’d…) (b) Share capital changes (cont’d…) v) issued 26,666,667 units at $0.15 per unit for gross proceeds of $4,000,000 to a member of the Board of Directors, before deducting cash offering costs of $44,548 in a non-brokered private placement. See Note 8 – Related party transactions. Each unit comprises of one common share of the Company and one common share purchase warrant. Each common share purchase warrant will be exercisable for one common share at a price of $0.20 per common share for 36 months and is subject to acceleration of the exercise period in the event that the five-day volume weighted average price of the Company’s common shares exceeds $0.50. No fair value has been assigned to the common share purchase warrants under the residual fair value method. During the nine months ended July 31, 2025, the Company issued 3,160,000 common shares upon the equity settlement of deferred share units (“DSUs”). (c) Warrants Warrant activity during the nine months ended July 31 was as follows: 2026 2025 Number of warrants Weighted average exercise price Number of warrants Weighted average exercise price Balance outstanding, beginning of period 41,421,231 $ 0.27 21,257,050 $ 0.30 Issued in a private placement 44,273,076 0.23 – – Compensation warrants issued in a private placement 297,880 0.30 – – Issued in conjunction with debt settlements 66,346,502 0.27 – – Issued with convertible debentures 10,000,000 0.25 6,333,334 0.21 Issued in conjunction with loan payable – – 9,000,000 0.20 Expired (1,280,000) (0.30) – – Balance outstanding, end of period 161,058,689 $ 0.25 36,590,384 $ 0.26 The outstanding warrants balance of 161,058,689 includes 65,831,880 preferred share warrants which are exercisable into preferred shares and 95,226,809 common share warrants which are exercisable into common shares. During the nine months ended July 31, 2026, the Company amended the terms of outstanding warrants as follows: i) 19,997,050 warrants that were issu ed pursuant to a private placement unit offering on September 3, 2024 which were set to expire on March 3, 2026 were amended to extend the expiry date by one year to March 3, 2027; and ii) 5,571,250 warrants that were issued pursuant to a private placement unit offering in October and November 2025 with an exercise price of $0.40 and a term of 36 months were amended to reduce the exercise price to $0.25 and include a provision to a llow the Company to accel erate the expiry date if the five-day volume weighted average trading price exceeds $0.50.
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SERNOVA BIOTHERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2026 and 2025 (In Canadian Dollars) (Unaudited) 11 7. Share capital (cont’d…) (d) Incentive plan The Company has an incentive plan (the “Incentive Plan”) that was last appr oved by shareholders on January 10, 2025. Under the Incentive Plan, the Board of Directors may grant stock options to directors, officers, employees or consultants of the Company and DSUs to directors and officers of the Company. The total number of common shares authorized for issuance under the Incen tive Plan is 51,285,001. The remaining balance available for grant under the Incentive Plan as at July 31, 2026 is 1,668,357, which is reserved for the issuance of stock options. Options granted under the Incentive Plan have a term of up to ten years from the date of grant. The vesting schedule of all granted options is determined at the discretion of the Board of Dire ctors, and the options typically vest quarterly or annually over periods of up to four years. During the year ended October 31, 2024, 3,036,126 performance-based stock options were granted that are estimated to vest by the second qu arter of 2027 and only upon achievement of predetermined performance criteria. The exercise price of any stock options granted is no less than the price pursuant to the policies of the Exchange. Stock option activity during the nine months ended July 31 was as follows: 2026 2025 Number of options Weighted average exercise price Number of options Weighted average exercise price Balance outstanding, beginning of period 32,609,840 $ 0.29 43,080,158 $ 0.53 Granted 14,417,618 0.16 2,995,000 0.25 Forfeited – – (719,035) (0.68) Cancelled (163,485) (0.15) – – Expired (774,595) (0.53) (16,264,486) (0.84) Balance outstanding, end of period 46,089,378 $ 0.25 29,091,637 $ 0.33 Options exercisable, end of period 21,611,224 $ 0.27 5,141,270 $ 0.64 Stock options outstanding by range of exercise prices as at July 31, 2026 are set forth below: Range of exercise prices Number outstanding Weighted average remaining contractual life (years) Weighted average exercise price Number exercisable Weighted average exercise price $ 0.15 to $ 0.20 12,974,133 9.6 $ 0.15 4,455,463 $ 0.15 $ 0.21 to $ 0.25 7,898,612 8.0 0.25 5,068,197 0.25 $ 0.26 to $ 0.31 24,441,633 7.7 0.27 11,312,564 0.27 $ 0.87 to $ 1.32 775,000 4.5 1.18 775,000 1.18 $ 0.15 to $ 1.32 46,089,378 8.2 $ 0.25 21,611,224 $ 0.27 The Black-Scholes pricing model was used to estimate fair value for the purpose of recording share-based compensation expense. Historical data was used to estimate the expected dividend yield and volatility of the Company’s common shares in determining the fair value of the stock options. The risk-free interest rate was based on the Government of Canada benchmark bond yield rates in effect at the time of grant and the expected life of the options represents the estimated length of time the options are expected to remain outstanding.
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SERNOVA BIOTHERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2026 and 2025 (In Canadian Dollars) (Unaudited) 12 7. Share capital (cont’d…) (d) Incentive plan (cont’d…) For the stock options granted during the nine months ended July 31, share-based compensation expense was determined based on the fair value of the stock options on the grant date using the Black-Scholes pricing model using the following weighted average assumptions: 2026 2025 Dividend yield 0% 0% Expected volatility 77.7% 80.6% Risk-free interest rate 2.8% 2.8% Expected life of options 5.0 years 5.4 years For the nine months ended July 31, 2026 and 2025, the Company issued stock options with weighted average grant date fair values of $0.09 and $0.12 per stock option, respectively. The Incentive Plan allows for the issuan ce of DSUs to directors and officers of the Company and settlement in the form of a cash payment or issuance of shares after the DSU holder leaves the Company. Since the method of settlement of the DSUs is at the discretion of the Company, it has been accounted for as an equity-settled plan. During the nine months ended July 31, 2026, no DSUs were equity-settle d (2025 – 3,160,000). There were no DSUs granted or cancelled during the nine months ended July 31, 2026 and 2025. As at July 31, 2026, 1,285,001 DSUs were outstanding (October 31, 2025 – 1,285,001), of which 1,285,001 had vested (October 31, 2025 – 1,285,001). 8. Related party transactions The key management personnel of the Company are the Directors, Executive Officers and Vice Presidents. Generally, amounts due to related parties, including amounts due to key management personnel, are unsecured and interest free, and settlement generally occurs in cash. The Company has the following debt and repayment arrangements with key management personnel beyond ordinary-course operations: i) convertible debentures with a Director, and the same Director was the guarantor of the Company’s loan payable. See Note 5 – Loan payable and Note 6 – Convertible debentures; ii) issued units in a non-brokered private placement to a Director for gross proceeds of $4,000,000. See Note 7 – Share capital.; and iii) $1,981,999 of salaries and fees payable to Executive Officers bearing interest at a rate of 12% per annum payable upon settlement which takes place upon the occurrence of specified financial milestones. As at July 31, 2026, amounts due to key management pe rsonnel included in accounts payable and accrued liabilities were $3,456,116 (October 31, 2025 – $1,517,501). Compensation to key management personnel for the reporting period: Three months ended Jul y 31, Nine months ended July 31, 2026 2025 2026 2025 Personnel costs $ 894,468 $ 799,925 $ 2,482,659 $ 2,575,569 Director fees 81,250 67,371 217,625 204,267 Share-based compensation 323,464 341,009 1,142,666 1,578,507 $ 1,299,182 $ 1,208,305 $ 3,842,950 $ 4,358,343
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SERNOVA BIOTHERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2026 and 2025 (In Canadian Dollars) (Unaudited) 13 9. Nature of expenses Research and development expenses Three months ended Jul y 31, Nine months ended July 31, 2026 2025 2026 2025 Personnel costs $ 127,908 $ 519,512 $ 439,542 $ 1,687,406 Research and clinical development 115,158 1,036,820 377,062 4,096,580 Manufacturing costs – – – 234,698 Patent fees and other costs 117,402 184,423 246,763 566,294 Amortization and depreciation 4,431 181,936 13,293 262,802 Share-based compensation – options 67,725 (150,423) 231,965 (20,721) 432,624 1,772,268 1,308,625 6,827,059 Grants, contributions and taxes – (30,000) 3,019 (133,624) Total research and development expenses $ 432,624 $ 1,742,268 $ 1,311,644 $ 6,693,435 General and administrative expenses Three months ended Jul y 31, Nine months ended July 31, 2026 2025 2026 2025 Personnel costs $ 752,514 $ 587,534 $ 2,162,938 $ 1,911,070 Consulting and professional fees 272,589 260,821 700,521 853,392 Director fees and expenses 81,250 67,371 217,625 204,708 Investor relations and corporate communications 149,864 216,042 536,546 751,855 Public company expenses 15,662 5,309 144,882 141,903 Insurance and other costs 80,085 110,853 263,074 407,607 Depreciation – 3,116 – 17,574 Share-based compensation – DSUs – – – 2,853 Share-based compensation – options 333,218 506,584 1,192,189 1,642,423 Total general and administrative expenses $ 1,685,182 $ 1,757,630 $ 5,217,775 $ 5,933,385 10. Commitments and contingencies The Company was previously awarded a US$2.45 milli on ($3.44 million) grant under an agreement with Breakthrough T1D (formerly JDRF) that supports its Phase 1/2 clinical trial of Sernova’s Cell Pouch for treatment of patients with type 1 diabetes. Pursuant to the agreement, the Company has committed to perform certain clinical trial activities and to use commercially reasonable efforts to introduce a diabetes product into the US market. All milestone achievements under this agreement have been reached and the full amount of the grant has been earned. The Company is required to pay royalties to Breakthrough T1D as a percen tage of any future net sales received from such diabetes product or in certain future license or disposition transac tions up to a maximum of fo ur times the aggregate amount of Breakthrough T1D grant funding received. A bonus amount equal to the total amount of grant funding received is also payable to Breakthrough T1D on two aggregate net sales thresholds if they are achieved. Given the early and inconclusive stage of development of the diabetes product, the royalty is not probable at this time and therefore no liability has been recorded.
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SERNOVA BIOTHERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2026 and 2025 (In Canadian Dollars) (Unaudited) 14 10. Commitments and contingencies (cont’d…) The Company enters into contracts in the normal course of business, including for research and development activities, consulting and other services. Generally, these contracts are cancellable by the Company with notice. As at July 31, 2026, the Company has commitments totalling approximately $330,000, which are expected to be paid over the next 12 months. The Company has entered into research collaboration agreemen ts with strategic partners in the ordinary course of operations that may include contractual milestone payments related to the achievement of pre-specified research, development, regulatory and commercialization events and indemnification provisions, which are common in such agreements. Pursuant to the agreements, the Company is obligated to make research and development and regulatory milestone payments upon the occurrence of certain events and royalty payments based on net sales. The maximum amount of potential future indemnification could be un limited; however, the Company currently holds commercial and product liability insurance that limits the Company’s liability and may enable it to recover a portion of any future amounts paid. Historically, the Company has not made any indemnification payments under such agreements and believes that the fair value of these indemnification ob ligations is minimal. Accordingly, the Company has not recognized any liabilities relating to indemnification obligations. 11. Net loss per share Basic net loss per share is calculated by dividing the net loss by the weighted average number of shares outstanding during the reporting period. The effect of any potential conversion of preferred shares, exercise of stock options, common share purchase warrants and preferred share purchase wa rrants, and settlement of DSUs and convertible debentures has been excluded from the calculation of diluted loss per share as they would be anti-dilutive. 12. Financial instruments Financial risk factors The Company’s risk exposures and impact on the Company’s financial instruments are summarized below: (a) Credit risk Credit risk is the risk of loss to the Company if a counterpar ty to a financial instrument fails to meet its contractual obligations. The Company’s credit risk is primarily attributable to cash, in excess of insured amounts, held or invested at financial institutions including Canadian chartered banks and financial service firms. Management actively reviews the risk of the financial institutions and or the counterparty to the underlying financial instruments held failing to meet their obligations and adjusts expected credit losses if and when any undue risk is identified. Amounts receivable as at July 31, 2026 are primarily composed of amounts due from Canadian federal government agencies and full collection is expected for all amounts. (b) Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company is a development-stage company and is reliant on external fundraising to support its operations. Once funds have been raised, the Company manages its liquidity risk by investing its cash resources in high-interest savings accounts or marketable securities to provide regular cash flow for its operations and monitoring actual and projected cash flows. As at July 31, 2026, the Company had a worki ng capital deficit of $11,679,569. Additional financing is required for the Company to meet its short-term financial obligations, see Note 2(c) – Going concern.
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SERNOVA BIOTHERAPEUTICS INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2026 and 2025 (In Canadian Dollars) (Unaudited) 15 12. Financial instruments (cont’d…) (c) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company holds its cas h in bank accounts and manages its interest rate risk by holding cash in high-yield savings accounts or highly liquid short-term investments. Interest income is not significant to the Company’s projected operational budget and rate fluctuations are not significant to the Company’s risk assessment. The convertible debentures and loan payable have fixed rates of interest. (d) Foreign currency risk Foreign currency risk is the risk that future cash flows of a financial instrume nt will fluctuate because of changes in foreign exchange rates. The Company is exposed to foreign currency risk on fluctuations in foreign exchange rates for any cash, amou nts receivable, accounts payable and accrued li abilities, and grant contributions that are denominated in foreign currencies. The Company’s forei gn currency risk is primarily related to US dollar- denominated expenses and accounts payable and accrued liabilities. Fluctuations in the US dollar exchange rate could have a significant impact on the Company’s results. Assuming all other variables remain constant, a 10% depreciation or appreciation of the Canadian dollar against the US do llar would result in an increase or decrease in loss and comprehensive loss for the nine months ended July 31, 2026 of $700,393 (2025 – $1,893,353). Balances in US dollars are as follows: As at Jul y 31, 2026 As at Octobe r 31, 2025 Cash $ 3,626 $ 117 Accounts payable and accrued liabilities (4,996,093) (4,587,524) $ (4,992,467) $ (4,587,407) 13. Events after th e reporting period In September 2026, the Company entered into a definitive merger agreement (the “Arrangement Agreement”) with Seraxis to combine our technologies and businesses to create a clinical stage company focused on advancing a differentiated approach to type 1 di abetes islet replacement (the “Merger”). The resulting entity will be named BetaNova Biotherapeutics, Inc. (“BetaNova”). The Merger will be completed by way of a statutory plan of arrangement under the Business Corporations Act (British Columbia) (the “Arrangement”). Upon completion of the Merger, existing shareholders of the Company are expected to collectively hold approximately 50% of the issued and outstanding shares of BetaNova on a non-diluted basis. The completion of the Merger is subject to a number of conditions, including among other things, receipt of the requisite shareholder approvals of both the Company and Seraxis, final approval of the Exchange, court approval and standard conditions, including receipt of all re quired consents and waiv ers from material third pa rties. The Arrangement Agreement includes a termination fee in the amount of US$5 million, payable by either the Company or Seraxis under certain circumstances. Until the Merger is completed, the Company and Seraxis have also entered into a development and commercialization agreement pursuant to which the parties will jointly develop and commercialize its products and have the ability to transfer required capital between th e companies. Commitments for a US$10 million non-brokered convertible note financing have been secured from existing insider shareholders of both the Company and Seraxis in connection with the Merger. The convertible note will be issued by Seraxis and funds will be transferred to the Company, as required, under the development and commercialization agreement. The financing is expected to provide sufficient capital to both companies to complete the Merger and advance certain milestones for BetaNova. The Company has also provided notice of termination in respect of its iPSC developm ent program with Evotec International GmbH, with such termination to become effective three months after the notice date.