Financial statements
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Interim Condensed Consolidated Financial Statements of (Expressed in Canadian dollars, unless otherwise noted) ALUULA COMPOSITES INC. For the three and nine months ended July 31, 2025 and 2024 (Unaudited) Notice of No Auditor Review of the Interim Financial Statements The accompanying interim condensed consolidated financial statements of the Company have been prepared by and are the responsibility of the Company’s management. The Company’s independent auditor has not performed a review of these financial statements in accordance with standards established by the CPA Canada for a review of interim financial statements by an entity’s auditor.
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2 Approved on behalf of the Board: “Peter Gustavson” Director “Jeremy South” Director ALUULA COMPOSITES INC. Interim Condensed Consolidated Statements of Financial Position (Expressed in Canadian dollars, unless otherwise noted) (Unaudited) Note July 31 2025 October 31 2024 Assets Current assets: Cash and cash equivalents 1,223,301$ 857,011$ Trade and other receivables 4 1,354,152 1,032,754 Inventory 5 1,681,022 1,098,320 Prepaid expenses and other current assets 312,061 71,109 Assets related to discontinued operations 18 189,480 672,808 4,760,016 3,732,002 Property and equipment 6 554,016 697,291 Intangible assets 7 3,429,025 3,618,375 Other long-term assets 22,694 22,693 Investments - 187,500 Goodwill 4,037,139 4,037,139 12,802,890$ 12,295,000$ Liabilities and Shareholders' Equity Current liabilities: Trade and other payables 8 635,059$ 981,067$ Customer deposits 84,503 44,251 Current portion of loan from related party 10 800,000 200,000 Current portion of long-term debt 9 118,010 114,522 Current portion of lease obligations 143,127 139,346 Deferred tax liability 911,515 964,442 Liabilities related to discontinued operations 18 6,001 420,826 2,698,215 2,864,454 Long-term debt 9 353,109 442,153 Long-term loan from related party 10 - 800,000 Lease obligations 24,355 132,177 3,075,679 4,238,784 Shareholders' equity: Share capital 14 18,677,303 16,466,950 Contributed surplus 2,808,723 1,788,547 Deficit (11,758,815) (10,199,281) 9,727,211 8,056,216 Subsequent events 19 12,802,890$ 12,295,000$ The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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3 ALUULA COMPOSITES INC. Interim Condensed Consolidated Statements of Loss and Comprehensive Loss (Expressed in Canadian dollars, unless otherwise noted) (Unaudited) Note July 31 2025 July 31 2024 July 31 2025 July 31 2024 Sales 2,121,588$ 1,291,938$ 4,956,794$ 4,692,368$ Cost of sales 1,248,885 804,148 2,855,911 2,741,400 Gross profit 872,703 487,790 2,100,883 1,950,968 Operating expenses: Salaries and benefits 495,505 514,008 1,584,517 1,864,625 General and administrative 379,970 903,391 762,573 1,544,267 Marketing 36,575 39,960 73,552 183,660 Research and development 51,852 59,962 164,194 135,397 Share-based compensation 15 586,431 57,922 666,870 86,819 1,550,333 1,575,243 3,251,706 3,814,768 Loss before interest, tax and amortization (677,630) (1,087,453) (1,150,823) (1,863,800) Other income 11 33,386 3,636 56,698 763,812 Interest expense (33,137) (41,413) (103,882) (104,254) Depreciation of property and equipment 6 (37,240) (40,930) (114,153) (135,086) Amortization of intangible assets 7 (66,545) (66,621) (199,350) (199,316) Loss from continued operations before tax (781,166) (1,232,781) (1,511,510) (1,538,644) Deferred tax recovery 17,642 17,642 52,927 71,410 (763,524) (1,215,139) (1,458,583) (1,467,234) 18 (34,620) 91,930 (100,951) (649,307) Net loss and comprehensive loss (798,144)$ (1,123,209)$ (1,559,534)$ (2,116,541)$ Loss per share: Basic and diluted loss per share - continued operations (0.03)$ (0.10)$ (0.07)$ (0.12)$ Basic and diluted loss per share - discontinued operations (0.00)$ 0.01$ (0.00)$ (0.05)$ Weighted average shares outstanding, basic and diluted 25,063,787 12,530,781 21,330,714 12,529,270 The accompanying notes are an integral part of these interim condensed consolidated financial statements. For the nine month period endedFor the three month period ended Net loss and comprehensive loss from continued operations Net income (loss) and comprehensive income (loss) from discontinued operations
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4 ALUULA COMPOSITES INC. Interim Condensed Consolidated Statements of Changes in Equity (Expressed in Canadian dollars, unless otherwise noted) (Unaudited) Shares outstanding Share capital Contributed Surplus Deficit Total shareholders' equity Balance, October 31, 2023 12,528,281 16,460,950$ 1,674,620$ (6,263,086)$ 11,872,484$ - - 86,819 - 86,819 Option exercise (Note 14) 2,500 6,000 - - 6,000 Net loss - - - (2,116,541) (2,116,541) Balance, July 31, 2024 12,530,781 16,466,950$ 1,761,439$ (8,379,627)$ 9,848,762$ Balance, October 31, 2024 12,530,781 16,466,950$ 1,788,547$ (10,199,281)$ 8,056,216$ - - 666,871 - 666,871 12,530,781 1,840,540 537,064 - 2,377,604 Warrant exercise (Note 14) 229,698 369,813 (183,759) - 186,054 Net loss - - - (1,559,534) (1,559,534) Balance, July 31, 2025 25,291,260 18,677,303$ 2,808,723$ (11,758,815)$ 9,727,211$ The accompanying notes are an integral part of these interim condensed consolidated financial statements. As a result of the March 12, 2025 share consolidation described in Note 14, all shares and options issued and outstanding have been updated to reflect the 20:1 consolidation. Exercise prices have also been adjusted to reflect this consolidation. Share-based compensation (Note 15) Share-based compensation (Note 15) Rights offering (Note 14)
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5 ALUULA COMPOSITES INC. Interim Condensed Consolidated Statements of Cash Flows (Expressed in Canadian dollars, unless otherwise noted) (Unaudited) For the nine month period ended Note July 31 2025 July 31 2024 Cash flows from (used in) operating activities: Net and comprehensive loss - continued operations (1,458,583)$ (1,467,234) Items not involving cash: Depreciation of property and equipment 6 114,153 135,086 Depreciation of property and equipment included in inventory 6 90,031 60,874 Amortization of intangible assets 7 199,350 199,316 Share-based compensation 15 666,870 86,819 Fair value adjustments 11 - (374,391) Accretion of and accrued interest on loans and leases 29,532 39,069 Loss on disposal of property and equipment 6 - 6,059 Loss on disposal of intangible assets 7 5,562 47,902 Inventory write-downs 5 23,523 77,839 Warrant proceeds receivable 14 157,706 - Changes in non-cash working capital items: Trade and other receivables 4 (321,398) 545,283 Inventory 5 (606,225) (347,954) Deferred tax liability (52,927) (71,411) Prepaid expenses and other current assets (240,952) (6,451) Other assets - 8,102 Trade and other payables 8 (346,008) 541,164 Customer deposits 40,252 27,234 Cash flows used in operating activities - continued operations (1,699,114) (492,693) Cash flows from operating activities - discontinued operations 40,071 174,876 Total cash flows used in operating activities (1,659,043) (317,817) Cash flows from (used in) investing activities: Acquisition of property and equipment 6 (60,909) (54,727) Proceeds from sale of property and equipment 6 - 27,365 Proceeds from sale of investments 187,500 - Acquisition of intangible assets 7 (15,562) (20,798) Cash flows from (used in) investing activities - continued operations 111,029 (48,160) Cash flows from investing activities - discontinued operations - 27,863 Total cash flows from (used in) investing activities 111,029 (20,297) Cash flows from (used in) financing activities: Issuance of share capital 14 2,534,505 6,000 Transaction costs from share issuance 14 (128,553) - Repayment of loan from related party 10 (200,000) - Repayment of long-term debt 9 (109,368) (88,608) Payments for principal portion of lease obligations (109,761) (110,235) Proceeds of loan from related party 10 - 1,000,000 Cash flows from financing activities - continued operations 1,986,823 807,157 Cash flows used in financing activities - discontinued operations (72,519) (87,476) Total cash flows from financing activities 1,914,304 719,681 Increase in cash and cash equivalents 366,290 381,567 Cash and cash equivalents, beginning of period 857,011 773,368 Cash and cash equivalents, end of period 1,223,301$ 1,154,935 The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 6 1. Nature of operations: Aluula Composites Inc. (“Aluula” or the “Company”) is domiciled in Victoria, BC Canada, with a registered office at 300-4240 Glanford Avenue. The Company’s subsidiary Aluula Composites Canada Inc. (“ACI”) has developed and patented an innovative process for manufacturing ultra -strong, lightweight and recyclable composite materials for use across various industries. ACI’s subsidiary, Ocean Rodeo Sports Inc. (“Ocean Rodeo”), purchases finished products containing these ALUULA composite materials from its manufacturer and sells them within the windsport sector. On April 29, 2024, the Company’s Board of Directors approved a mandate to sell specific assets used in Ocean Rodeo’s business and discontinue its operations. Accordingly, Ocean Rodeo meets the criteria of a discontinued operation under IFRS 5 – Non current assets held for sale and discontinued operations. In order to simplify its organizational structure, o n August 1, 2024, Aluula was amalgamated with its wholly owned subsidiary ACI. The newly amalgamated entity will carry on business under the legal name Aluula Composites Inc. 2. Basis of preparation: (a) Statement of compliance: These interim condensed consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”). These interim condensed consolidated financial statements were approved by the Board of Directors for issue on September 23, 2025. (b) Basis of measurement: These interim condensed consolidated financial statements have been prepared on a going concern basis, under the historical cost basis except for certain financial instruments that are measured at fair value as detailed in the Company’s material accounting policy information. (c) Basis of consolidation: These interim condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary Ocean Rodeo. A subsidiary is an entity over which the Company has control. The Company controls an entity when the Company is exposed to or has the rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company and deconsolidated from the date that control ceases. All significant intercompany transactions are eliminated on consolidation. (d) Functional and presentation currency: These interim condensed consolidated financial statements are presented in Canadian Dollars, which is the Company and its subsidiary’s functional currency. Each entity in the Company maintains its accounting records in its functional currency. An entity’s functional currency is the currency of the principal economic environment in which it operates.
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 7 2. Basis of preparation (continued): (d) Functional and presentation currency (continued): Transactions in currencies other than the functional currency are recorded at the rates of exchange at the date of the transaction. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at the period end date. Non- monetary items that are measured in terms of historica l cost are translated using historical rates. All gains and losses on translation of those foreign currency transactions are recorded in the consolidated statement of comprehensive income (loss). (e) Discontinued operations: Discontinued operations are reported when a component of the Company, representing a separate major line of business or area of operations with clearly distinguishable cash flows, has been disposed of or is held for sale. Classification as a discontinued o peration occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. Discontinued operations are reported as a separate element of net income or loss on the consolidated statements of income (loss) for both the current and comparative periods. When a disposal group is classified as held for sale, assets and liabilities are aggregated and presented as separate line items, respectively, on the consolidated statement of financial position.. Assets held for sale are not depreciated and are measured at the lower of carrying value and fair value less costs to sell. (f) Estimates and judgements: The preparation of these interim condensed consolidated financial statements in conformity with IFRS requires management to make certain estimates, judgements and assumptions that affect the application of accounting methods and the amounts recognized in the interim condensed consolidated financial statements. These estimates and the underlying assumptions are established and reviewed continuously on the basis of past experience and other factors considered reasonable in the circumstances. Actual results may differ from the estimates. Significant judgements and estimates relate to: (i) Allowance for credit losses: Credit losses are measured using the Expected Credit Loss (“ECL”) methodology which requires the recognition of credit losses based on up to 12 months of expected losses for financial assets and the recognition of lifetime losses for those financial assets that have experienced a significant increase in credit risk since origination. The determination of a significant increase in credit risk takes into account many different factors including relative changes in probability of default since origination. In determining whether there has been a significant increase in credit risk and in calculating the amount of ECL, the Company must rely on estimates and exercise judgement regarding matters for which the ultimate outcome is unknown. These judgements include changes in circumstances that may cause future assessments of credit risk to be materially different from current assessments, which could require an increase or decrease in the allowance for credit losses. To calculate ECL, the Company analyzes receivable balances by age, geography and customer-type and applies a historical default percentage. Amounts that are known to be uncollectible are written off when identified.
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 8 2. Basis of preparation (continued): (f) Estimates and judgements (continued): (ii) Valuation of inventory: Valuing inventory requires the Company to estimate future retail sales prices and reductions, future customer product demand, inventory losses or shrinkage, vendor rebates based on volume purchases and the probability that funds will be collected from vendors. If actual losses on inventory differ from those estimated, inventory and consolidated comprehensive income (loss) will be affected in future periods. (iii) Internally generated assets: The Company undertakes many research and development projects as part of its regular operations. Significant judgement is required to distinguish between the research and development phases of these projects. Development costs are only recognized as an asset when the relevant capitalization criteria under IAS 16 or IAS 38 are met. (iv) Long-lived assets valuation: Aluula determines the estimated useful lives and residual values of long -lived assets to calculate amortization and depreciation. This estimate is determined by considering a typical life cycle for the asset, expected usage levels, and expected maintenance levels. Useful lives and residual values are reviewed annually, and future depreciation charges are adjusted where management believes the outcomes differ from previous estimates. Goodwill and indefinite life intangible assets are tested for impairment annually. Goodwill, indefinite life intangibles, property and equipment, and definite life intangibles are also tested for impairment when circumstances indicate that impairment may exist . Management judgement is involved in determining if there are circumstances indicating that testing for impairment is required, and in identifying Cash Generating Units (“CGUs”) for the purpose of impairment testing. The Company assesses impairment by comparing the recoverable amount of a long -lived asset, CGU, or CGU group to its carrying value. The recoverable amount is defined as the higher of: (i) value in use; or (ii) fair value less selling costs. Determination of the recoverable amount involves significant assumptions, including those with respect to future cash inflows and outflows, discount rates, terminal growth rates, royalty rates, and useful lives of assets. These assumptions could affect the Company’s future results if the current estimates of future performance and fair values change. These determinations will affect the amount of amortization expense on definite life assets recognized in future periods.
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 9 2. Basis of preparation (continued): (f) Estimates and judgements (continued): (v) Provision for warranty returns: Aluula provides customers with a general warranty that composite materials shipped will materially conform to product specifications, as agreed to in advance with the customer. This general warranty does not apply to samples or development material which are provided on an “as is” basis without warranty. Non-conformance with product specifications must be identified prior to the composite materials being cut or incorporated into the customer’s product. The Company, at its sole discretion, will accept the return of non-conforming materials and replace with conforming materials or provide a refund (or credit) to the customer for the price paid for the non -conforming materials. Aluula has made certain assumptions to estimate future expected warranty claims. The Company’s historical experience with warranties across product lines as well as industry averages have been used to estimate the warranty provision. Ocean Rodeo provides its customers with a limited warranty of up to twenty-four months depending on the consumers’ geographic location . Inventory sold since operations were discontinued do not carry a warranty as sales are on an “as is” basis. The Company has made certain assumptions to estimate the warranty provision. (vi) Share-based compensation: Share-based compensation is measured at fair value using the Black -Scholes option pricing model. Aluula uses judgement when determining inputs for the model, including expected lives, underlying share price volatility and forfeiture rates. Changes to the assumptions used in determining inputs will impact the calculation of fair value and the amount of compensation expense recognized in earnings. Any impact due to a change in estimate is recognized in earnings in the year that it occurs. (vii) Leases: The Company applies judgement in assessing whether a contract is or contains a lease. Such judgements include the determination of whether an asset is specifically or implicitly identified in the contract , whether the Company has the right to obtain substantially all the economic benefits from use of the asset and whether the Company has the right to direct the use of the asset. These judgements are made at the inception of a contract and may change if there are material changes to the agreement. Estimates are used to determine the incremental borrowing rate of a lease when the interest rate implicit to the lease is not readily available. The Company’s incremental borrowing rate is determined using a model which incorporates the Company’s creditworthiness, the nature and quality of the underlying asset, and the duration of the lease. The inputs used in determining the incremental borrowing rate are reviewed and updated periodically. Changes to these estimates may affect the value of assets, liabilities and net earnings in the future. The Company also applies judgement in determining whether it is reasonably certain to exercise lease extensions options or purchase options in a contract by considering all relevant factors and circumstances that may create an economic incentive for the Company to exercise the option considering such factors as past experience, contract terms and conditions and the importance of the underlying assets to the Company’s operations.
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 10 2. Basis of preparation (continued): (f) Estimates and judgements (continued): (viii) Deferred income tax assets and liabilities: Deferred income tax assets and liabilities result from timing differences between the financial reporting and tax bases of assets and liabilities. Loss carryforwards also comprise a portion of the temporary differences and result in a deferred income tax a sset. Deferred income tax assets are only recognized to the extent that management considers it probable that a deferred income tax asset will be realized. The assessment for the recognition of a deferred tax asset requires significant judgement. The factors used to assess the likelihood of realization are the Company’s forecasts of future taxable income and available tax planning strategies that could be implemented to realize the deferred tax assets. Unknown future events and circumstances, such as changes in tax rates and laws, may materially affect the assumptions and estimate s made from one period to the next. (ix) Measurement of fair values: A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non -financial assets and liabilities. The Company uses observable market data to the extent possible. Where fair values cannot be determined based on quoted prices in active markets, fair value is measured using valuation techniques and models. The inputs to these models are taken from observable markets where possible, but where this is not feasible , estimates are required to establish fair values. Changes in assumptions about the inputs of these models could affect the reported fair value of the Company’s financial and non-financial assets and liabilities. Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities is disclosed in the associated notes to the interim condensed consolidated financial statements. (x) Revenue recognition: Revenue is recognized when the criteria in IFRS 15 are met, the timing of which requires judgement by management. This judgement includes whether collection of receivables is reasonably assured, and whether control has passed from the Company to the customer. The timing of change of control is estimated based on historical results using assumptions for the time of delivery based on shipping terms, date, and destination. Actual timing of the change of control could vary from the estimates made. (xi) Valuation of assets and liabilities acquired in a business combination: In a business combination, the Company may acquire the assets and assume certain liabilities of an acquired entity. Estimates of fair values of these assets and liabilities involves judgement and a variety of assumptions to be made, including analysis of relevant market expectations, estimates surrounding the costs to acquire or create a similar asset, expected net future cash flows, and appropriate discount rates. I ntangible assets acquired in a business combination are measured using a discounted cash flow approach . The discounted cash flow ap proach is a valuation technique that calculates the fair value of an intangible asset based on the present value of future cash flows that the asset can be expected to generate in the future .
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 11 2. Basis of preparation (continued): (f) Estimates and judgements (continued): (xii) Assets held for sale: The determination as to whether a disposal group meets the requirements to be classified as held for sale, and the assets and liabilities to be included within that disposal group, requires management to exercise judgment. Aluula must also exercise judgement when determining at what date all of the criteria are satisfied for assets to be classified as held for sale. The Company must also use estimates when determining the fair value less costs to sell of the disposal group to assess if the carrying value of the disposal group is greater than its recoverable amount. 3. Summary of material accounting policy information: The significant accounting policies applied in the preparation of these interim condensed consolidated financial statements are consistent with the accounting policies disclosed in Note 3 to the audited consolidated financial statements for the years ended October 31, 2024 and 2023. 4. Trade and other receivables: Trade and other receivables are comprised of the following: Trade receivables net of expected credit losses outstanding at July 31, 2025 and Octob er 31, 2024 were aged as follows: July 31 2025 October 31 2024 Trade receivables 1,302,393$ 927,492$ Government receivables 181,354 93,815 Other receivables 170,685 63,983 Expected credit losses (70,511) (26,450) Sales return allowances (229,769) (26,086) 1,354,152$ 1,032,754$ July 31 2025 October 31 2024 Current 767,024$ 811,469$ 30 - 60 days 146,755 25,844 60 - 90 days 1,673 47,043 Over 90 days 316,430 16,686 1,231,882$ 901,042$
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 12 4. Trade and other receivables (continued): The following table summarizes the change in sales return allowances for the period: The following table summarizes the change in expected credit losses for the period: Amounts used during the fiscal 2024 period relate to one customer receivable aged past 90 days that was deemed uncollectible as a result of the decision to discontinue Ocean Rodeo’s operations. 5. Inventory: Inventory is comprised of the following: During the three and nine months ended July 31, 2025, inventories totalling $1,132,335 and $2,529,589 respectively (three and nine months ended July 31, 2024 - $752,497 and $2,451,843) and inventory write-downs of $23,523 and $ 23,523 (three and nine months ended July 31, 2024 - $71,885 and $77,839) were expensed in cost of sales . There were no reversals of write -downs from previous periods. July 31 2025 October 31 2024 Opening balance 26,086$ -$ Additional provisions during the period 229,769 62,092 Amounts used during the period (26,086) - Reversal of previous allowance - (36,006) 229,769$ 26,086$ July 31 2025 October 31 2024 Opening balance 26,450$ 3,478$ Additional provisions during the period 59,301 641,737 Amounts used during the period (15,240) (615,245) Unused amounts reversed - (3,520) 70,511$ 26,450$ July 31 2025 October 31 2024 Raw materials 1,156,113$ 844,736$ Finished goods 524,909 253,584 Balance, July 31, 2024 1,681,022$ 1,098,320$
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 13 6. Property and equipment: During the three and nine months ended July 31, 2025 $30,863 and $90,031 respectively (three and nine months ended July 31, 2024 – $25,394 and $60,874) of depreciation was included in the cost of finished goods inventory. Furniture and equipment Computer equipment Leasehold improvements Machinery and equipment Right-of-use buildings Total Cost Balance, October 31, 2023 18,669$ 20,338$ 7,304$ 682,693$ 646,453$ 1,375,457$ Additions 21,960 12,987 - 67,610 - 102,557 Disposals - - - (42,521) - (42,521) Balance, October 31, 2024 40,629 33,325 7,304 707,782 646,453 1,435,493 Additions - 19,932 - 40,977 - 60,909 Balance, July 31, 2025 40,629$ 53,257$ 7,304$ 748,759$ 646,453$ 1,496,402$ Accumulated depreciation Balance, October 31, 2023 3,044$ 10,948$ 2,131$ 193,519$ 275,538$ 485,180$ Depreciation 1,909 8,282 1,458 123,301 127,169 262,119 Disposals - - - (9,097) - (9,097) Balance, October 31, 2024 4,953 19,230 3,589 307,723 402,707 738,202 Depreciation 3,804 7,680 1,096 96,226 95,378 204,184 Balance, July 31, 2025 8,757$ 26,910$ 4,685$ 403,949$ 498,085$ 942,386$ Carrying amounts: Balance, October 31, 2024 35,676$ 14,095$ 3,715$ 400,059$ 243,746$ 697,291$ Balance, July 31, 2025 31,872$ 26,347$ 2,619$ 344,810$ 148,368$ 554,016$
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 14 7. Intangible assets: As at July 31, 2025, intangible assets with a cost of $11,368 (October 31, 2024 - $9,973) were recorded for patents, licenses or trademarks management expects to be granted but were still pending approval. 8. Trade and other payables: Trade and other payables are comprised of the following: Patents and Licenses Trademarks Total Cost Balance, October 31, 2023 4,174,340$ 15,851$ 4,190,191$ Additions 17,796 3,002 20,798 Disposals (61,625) (3,287) (64,912) Balance, October 31, 2024 4,130,511 15,566 4,146,077 Additions 15,562 - 15,562 Disposals (6,259) - (6,259) Balance, July 31, 2025 4,139,814$ 15,566$ 4,155,380$ Accumulated amortization Balance, October 31, 2023 264,453$ 149$ 264,602$ Amortization 265,978 38 266,016 Disposals (2,916) - (2,916) Balance, October 31, 2024 527,515 187 527,702 Amortization 199,322 28 199,350 Disposals (697) - (697) Balance, July 31, 2025 726,139$ 215$ 726,355$ Carrying amounts: Balance, October 31, 2024 3,602,996$ 15,379$ 3,618,375$ Balance, July 31, 2025 3,413,674$ 15,351$ 3,429,025$ July 31 2025 October 31 2024 Accrued liabilities 271,439$ 579,158$ Trade payables 197,413 175,296 Royalties payable 72,885 59,319 Warranty provision 58,863 142,240 Payroll liabilities 34,459 24,787 Government payables - 267 635,059$ 981,067$
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 15 8. Trade and other payables (continued): The following table summarizes the change in warranty provisions for the period: 9. Long-term debt: (a) Western Economic Diversification Canada: On March 23, 2022, the Company signed an agreement to receive funding up to $737,500 through the Western Economic Diversification Canada (“WD Canada”) Business Scale-up and Productivity program to offset costs of business expansion as prescribed in the funding agreement. This funding is in the form of an interest free loan, repayable in monthly instalments of $12,459 . Monthly installments commenced April 1, 2024 and will continue until the loan is repaid on March 1, 2029. As of July 31, 2025, $729,114 (October 31, 2024 - $729,114) of the available funding had been received, and the loan had a discounted balance of $499,816 (October 31, 2024 - $556,676). (b) Western Economic Diversification Canada: On August 24, 2020, Ocean Rodeo signed an agreement to receive up to $190,000 through WD Canada’s Regional Relief and Recovery Fund (“RRRF”) to offset costs of business expansion as prescribed in the funding agreement. This funding is in the form of an interest free loan, repayable in monthly instalments of $5,275 beginning January 31, 2023. On December 6, 2024, the Company repaid the remaining $68,675 balance of this loan ; therefore, as at July 31, 2025, the discounted balance was $nil (October 31, 2024 - $72,307). The following table summarizes the changes in financing activities due to long -term debt: July 31 2025 October 31 2024 Opening balance 142,240$ 210,557$ Additional provisions during the period 109,768 143,084 Amounts used during the period (39,082) (138,477) Unused amounts reversed (154,063) (72,924) 58,863$ 142,240$ July 31 2025 October 31 2024 556,675$ 646,497$ Cash movement: Debt repayments (109,368) (125,064) Non-cash movement: Amortization of non-cash interest 23,812 35,242 Ending balance 471,119 556,675 Less: current portion 118,010 114,522 Long-term portion 353,109$ 442,153$ Opening balance
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 16 10. Related parties: (a) Director related transactions: The Company has a royalty agreement with Epic Ventures Inc . (“Epic”), which is controlled by a director of the Company, pursuant to which royalties are paid on each square meter of certain patented materials, in exchange for Epic’s assignment of the applicable patents to the Company. The Company has recorded royalties of $72,885 and $160,405 for the three and nine months ended July 31, 2025 (three and nine months ended July 31, 2024 - $45,414 and $168,304). (b) Loan from related parties: On December 29, 2023, the Company entered into a $1,000,000 loan agreement (the “Loan Agreement”) with 0876991 B.C. Ltd., a related party. The loan is guaranteed by the Company and secured against all present and after-acquired personal property pursuant to a general security agreement. The loan bears interest at a rate of 12% per annum . Total interest paid for the three and nine months ended July 31 , 2025 was $24,197 and $75,814 respectively (three and nine months ended July 31, 2024 - $30,247 and $69,699) and is recorded in interest expense on the consolidated statement of loss and comprehensive loss. In June 2024, the parties agreed to amend the Loan Agreement and extend the repayment date from July 1, 2024 to January 1, 2025. On October 16, 2024, the parties entered into a second amendment to the Loan Agreement pursuant to which: (i) $200,000 of the loan remains payable on January 1, 2025 and the due date for repayment of the balance of $800,000 of the loan was extended to January 1, 2026; and (ii) the Company was affirmed as the debtor due to the corporate amalgamation with its wh olly-owned subsidiary on August 1 , 2024. All other terms of the Loan Agreement remain unchanged. In accordance with the terms of the second amended Loan Agreement, the Company repaid $200,000 on January 1, 2025 resulting in a balance owing of $800,000 on July 31, 2025. (c) Key management compensation: The Company’s key management personnel include the Executive Leadership Team, which is comprised of the Chief Executive Officer, Chief Financial Officer, Chief Scientific Officer, and Chief Commercial Officer . The Executive Leadership Team has the authority and responsibility for overseeing, planning, directing and controlling the Company’s activities. Total compensation expense relating to the Executive Leadership Team for the three and nine months ended July 31, 2025 was $754,652 and $1,168,991 respectively (three and nine months ended July 31, 2024 - $209,834 and $667,173), which includes $524,633 and $596,886 (July 31, 2024 - $40,287 and $74,443) in share-based compensation. Agreements with the members of the Executive Leadership Team provide for severance payments under specific circumstances if the executive is terminated without cause totaling $399,600 (July 31, 2024 - $nil). At July 31, 2025, the remaining balance of accrued restructuring liabilities recorded during the fiscal 2024 year was $nil (October 31, 2024 - $189,318).
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 17 11. Other income: Other income is comprised of the following: 12. Financial instruments: (a) Fair value: The following fair value measurement hierarchy is used for financial instruments that are measured in the consolidated statement of financial position at fair value using: Level 1: quoted prices in active markets for identical assets or liabilities; Level 2: techniques (other than quoted prices included in Level 1) that are observable for the asset or liability either directly (as prices) or indirectly (as derived from prices); and Level 3: techniques which use inputs that are both significant to the overall fair value measurement of the asset or liability and are not based on observable market data (unobservable inputs). The carrying value of cash and cash equivalents, trade and other receivables, trade and other payables approximate their fair value due to the relatively short -term maturity of these financial instruments. The carrying value of long -term debt, related party debt, and lease obligations are initially recognized at fair value and subsequently measured at amortized cost, which approximate fair value, using the effective interest rate method. There were no transfers between levels of the fair value hierarchy during the nine months ended July 31, 2025 or the year ended October 31, 2024. The following table summarizes the fair value hierarchy of assets and liabilities recorded at FVTPL: July 31 2025 July 31 2024 July 31 2025 July 31 2024 Interest and other 33,386$ 7,605$ 56,698$ 13,742$ Fair value adjustment on investment - (374,696) - 374,695 Licenses - - - 4,648 Realized gain on investment - 374,696 - 374,696 Loss on disposal of property and equipment - (3,969) - (3,969) 33,386$ 3,636$ 56,698$ 763,812$ For the nine month period endedFor the three month period ended Level 2 Level 3 Level 2 Level 3 Investments -$ -$ -$ 187,500$ July 31, 2025 October 31, 2024
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 18 13. Financial risk and capital management: The Company’s activities expose it to a variety of financial risks, including credit risk, liquidity risk, interest rate risk, foreign exchange risk. (a) Credit risk: Credit risk is the risk that a counterparty will not meet its obligations under a customer contract or financial instrument, leading to a financial loss. The Company transacts only with recognized, creditworthy third parties and requires payment for goods upon invoice unless the customer has been granted credit terms. It is the Company’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. The Company’s top two customers account for 41.3% (October 31, 2024 – 69.0%) of trade receivables at July 31, 2025, with the largest customer accounting for 26.1% (October 31, 2024 – 55.8%). (b) Liquidity risk: Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company manages liquidity risk by monitoring forecasted and actual cash flows, minimizing reliance on any single source of credit, managing the maturity profiles of financial assets and liabilities, negotiating credit terms with vendor s. To the extent the Company does not believe it has sufficient liquidity to meet its obligations, it will consider securing additional equity or debt funding. The table below details the maturities of the contractual undiscounted cash flows of the Company’s financial liabilities and as such these balances may not agree with the amounts disclosed on the consolidated financial statements. As at July 31, 2025 and October 31, 2024, the contractual maturities of financial liabilities were as follows: Contractual cash flow Up to 1 year Greater than 1 year Financial liabilities Loan from related party 800,000$ 800,000$ -$ Trade and other payables 635,060 635,060 - Long-term debt 534,684 145,824 388,860 Lease obligations 170,739 146,348 24,391 Total financial liabilities 2,140,483$ 1,727,232$ 413,251$ Contractual cash flow Up to 1 year Greater than 1 year Financial liabilities Long-term loan from related party $ 1,000,000 200,000$ 800,000$ Trade and other payables 981,067 981,067 - Long-term debt 718,002 219,774 498,228 Lease obligations 280,500 146,348 134,152 Total financial liabilities 2,979,569$ 1,547,189$ 1,432,380$ July 31, 2025 October 31, 2024
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 19 13. Financial risk and capital management (continued): (c) Interest rate risk: Interest rate risk is the risk the fair value of future cash flows of a financial instrument will fluctuate because of changes in market rates. The Company monitors interest rates and economic conditions. At July 31, 2025, the Company did not have any variable interest bearing credit facilities outstanding (July 31, 2024 - $nil). As the Company’s loans are either at fixed or no interest rate, a 1% change in the interest rate would not have an impact on the consolidated statement of loss and comprehensive loss. (d) Foreign exchange risk: Foreign exchange risk is the risk that the value of financial instruments or cash flows will fluctuate due to changes in foreign exchange rates. While the Company has a significant amount of foreign currency revenues and associated receivables, natural hed ges are in place through the purchase of input materials in foreign currencies. A 1% change in foreign exchange rates would have impacted the consolidated statement of loss and comprehensive loss by approximately $21,000 (July 31, 2024 - $19,510). (e) Capital management: The Company’s objective when managing its capital structure is to support its financial obligations and execute its operating and strategic plans. The Company’s capital is defined as the aggregate of its share capital, short and long-term debt. July 31 2025 October 31 2024 Share capital 18,677,303$ 16,466,950$ Debt 1,271,119 1,556,675 19,948,422$ 18,023,625$
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 20 14. Share capital: (a) Common shares: On February 18, 2025, the TSX Venture Exchange (the “TSXV”) approved the consolidation of the Company’s voting common shares (the “Shares”) on the basis of one (1) post-consolidation Share outstanding for every twenty (20) pre -consolidation Share s (the “Consolidation”). O n March 12, 2025, the Company’s Shares began trading on the TSXV on a consolidated basis. All issued shares and options presented in these interim condensed consolidated financial statements have been adjusted to reflect the Consolidation. The number of warrants outstanding was not subject to Consolidation however their conversion entitlement into Shares was amended such that warrant holders would receive one post -Consolidation Share for every twenty warrants following the payment of the applicable adjusted exercise price. On April 14, 2024, an employee exercised stock options issued under the Company’s stock option plan with an exercise price of $ 2.40 per share. The Company issued 2,500 common shares in exchange for $6,000 consideration. On January 21, 2025, the Company completed an offering of rights (the “Rights Offering”) which resulted in the issuance of 12,530,781 Share at a price of $0. 20 per share for gross proceeds of $2,506,156. In connection with the Rights Offering, the Company has entered into a $1,500,000 standby purchase agreement with certain directors and officers of the Company (the "Standby Purchasers"), who agreed to: (i) fully exercise their Basic Subscription Privilege to purchase 2,912,800 Shares; and (ii) to purchase up to an additional 7,500,000 Shares not otherwise subscribed for under the Rights Offering (the "Standby Commitment") . As consideration for the Standby Commitment, the Company issued 26,250,000 bonus warrants to the Standby Purchasers. Each 20 bonus warrants is exercisable into one Share at a price of $ 2.00 per Share for a period of five years. Because the Company raised the maximum amount permitted under the July 31 2025 October 31 2024 Authorized: Unlimited voting common shares Unlimited preferred shares Issued: 25,061,562 voting common shares (October 31, 2024 - 12,530,781) 18,677,303$ 16,466,950$ Common shares Number Amount Opening balance, October 31, 2023 12,528,281 16,460,950$ Option exercise 2,500 6,000 Total share capital at October 31, 2024 12,530,781 16,466,950$ Rights offering 12,530,781 1,840,540 Warrant exercise 229,698 369,813 Total share capital at July 31, 2025 25,291,260 18,677,303$
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 21 14. Share capital (continued): (a) Common shares (continued): Rights Offering, the Standby Purchasers were not required to purchase additional Shares under the terms of the Standby Commitment. Share issuance costs for the Rights Offering were $665,617 including $ 537,064 representing the estimated fair value of the warrants. Net proceeds of $2,337,588 were apportioned between sha re capital ($1,840,540) and contributed surplus ($537,064) based on the relative fair value of the shares and warrants issued in the Rights Offering. (b) Warrants: Warrants outstanding as of October 31, 2023 are comprised of warrants issued in conjunction with the Company’s July 12, 2023 private placement offering (the “July 2023 Private Placement”) which was led by Haywood Securities Inc. (“Haywood”). Under the terms of the July 2023 Private Placement, the Company issued 1,224,497 Units (the “Units”) at a price of $3.00 for gross proceeds of $3,673,493. Each Unit comprised one Share of the Company and 20 share purchase warrants, which entitles the holder to purchase one Share of the Company at a price of $5.00 per share until expiry on July 1 2, 2025. In addition to cash commission paid to Haywood, the Company issued 45,919 Units as partial consideration for their corporate finance fees and issued 1,469,400 broker warrants (the “Broker Warrants”) with an exercise price of $3.00. On January 24, 2025, the Company issued 26,250,000 warrants to Standby Purchasers as compensation for entering into the Standby Commitment as outlined in Note 14 (a) . The warrants have an exercise price of $2.00 and an expiry date of January 24, 2030. On July 9 , 2025 the Company amend ed the expiry date and exercise price of 24,489,953 outstanding share purchase warrants (the “ Repriced Warrants”) that were issued pursuant to the July 2023 Private Placement. Prior to amendment, each 20 Warrants entitled the holder to acquire one Share of the Company at a price of $5.00 per share until expiry on July 12, 2025. Pursuant to the July 9, 2025 Warrant amendment, warrants were repriced such that each 20 Warrants entitle the holder to acquire one Share at a price of $0.81 per share until an extended expiry date of July 12, 2026. As required by TSX V policies, an acceleration provision was added to the Warrants, which provides that if for any 10 consecutive trading days the closing price of the Company’s listed shares exceeds $0.97, the term of the Warrants will be accelerated to a 30-day exercise period. The terms of 2,387,772 warrants issued in the July 2023 Private Placement as consideration for both corporate finance fees and as Broker Warrants were not amended and expired unexercised on July 12, 2025. During the three months ended July 31, 2025, 4,593,960 Repriced Warrants were exercised in exchange for the issuance of 229,698 Shares and resulted in gross proceeds of $186,055. The weighted average remaining life of the warrants outstanding is 2.59 years.
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 22 14. Share capital (continued): (b) Warrants (continued): The fair value of warrants has been measured using the Black -Scholes model using the following inputs: No warrants were issued during the fiscal year ended October 31, 2024. The number and weighted average exercise price of warrants issued are as follows: Each 20 warrants entitles the holder to acquire one Share of the Company. 15. Share-based compensation: (a) Stock options: During the Company’s July 9, 2025 annual general meeting, shareholders approved the Company’s plan 10% rolling stock option plan . The Company’s stock option plan must be approved by the shareholders annually. The fair value of employee share options has been measured using the Black-Scholes model using the following inputs: Expected volatility was based on the Company’s actual historical volatility. 2025 Risk free interest rate 2.91% Stock price volatility 83.6% Expected life of warrants 4 years Number Weighted average exercise price Balance, October 31, 2023 27,104,795 5.00$ Balance, July 31, 2024 27,104,795 5.00$ Balance, October 31, 2024 26,877,725 5.00$ Granted during the period 26,250,000 2.00 Expired during the period (2,387,772) 3.77 Exercised during the period (4,593,960) 0.81 Balance, July 31, 2025 46,145,993 1.49$ Exercisable, July 31, 2025 46,145,993 1.49$ 2025 2024 Risk free interest rate 2.64% - 2.84% 0.95% - 3.34% Expected dividend yield 0.00% 0.00% Forfeiture rate 6.0% - 26.0% 0.0% - 30.0% Stock price volatility 81.9% - 82.6% 81.1% Expected life of option 3.5 - 4 years 3 - 5 years
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 23 15. Share-based compensation (continued): (a) Stock options (continued): During the three months ended July 2025, the Company made various changes to stock options to support retention of its valued team members by better aligning the exercise price with the current market price, which experienced a decline following the completion of the Company’s Rights Offering. On May 13, 2025, the Company amended the exercise price of 188,601 outstanding stock options held by non-insiders of the Company, with previous exercise prices ranging from $2.00 to $3.00, to $0.61 per Share. In accordance with IFRS 2 – Share-based payment (“IFRS 2” ), the Company performed a fair value analysis of the repriced stock options compared to the original stock options. As a result of this analysis, an incremental fair value of $22,604 and $22,604 was recognized in share-based compensation expense in the three and nine months ended July 31, 2025 respectively. During the three months ended July 31, 2025, the Company cancelled 807,244 options issued to directors and officers. In accordance with IFRS 2, the Company was required to account for the cancellation as an acceleration of vesting and recognise immediately on cancellation the share- based compensation expense that otherwise would have been recognized for services received over the remainder of the cancelled options’ vesting period. Share-based compensation expense recorded in the three and nine months ended July 31, 2025 associated with these cancellations were $432,943 and $432,943 respectively. During the three months ended July 31, 2025, the Company granted 2,058,560 options to directors, officers, employees and consultants. Under IFRS 2, the Company was required to account for 807,244 of these newly granted options as modifications of options that were cancelled as outlined above. In accordance with IFRS 2, the Company recognized the effects of this deemed modification by recording the incremental fair value of the original equity instrument granted compared to the modified equity instrument on the date of modification , resulting in a share-based compensation expense of $100,667 and $100,667 for the three and nine months ended July 31, 2025 respectively. The number and weighted average exercise price of s tock options issued are as follows: Number Weighted average exercise price Balance, October 31, 2023 648,345 2.40$ Exercised during the year (2,500) 2.40 Granted during the year 623,750 2.80 Forfeited during the year (170,703) 2.40 Balance, July 31, 2024 1,098,892 2.60$ Balance, October 31, 2024 1,041,158 2.60$ Granted during the year 2,058,560 0.62 Forfeited during the year (45,313) 2.77 Cancelled during the year (807,244) 2.56 Balance, July 31, 2025 2,247,161 0.62$ Exercisable, July 31, 2025 886,301 0.65$
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 24 15. Share-based compensation (continued): (a) Stock options (continued): For the three and nine months ended July 31 , 2025, stock-based compensation expense was $586,431 and $666,870 respectively (three and nine months ended July 31, 2024 - $57,922 and $86,819). The weighted average remaining life of the options outstanding is 4.61 years. 16. Segment information: (a) Reportable segments: The Company has aggregated certain operating segments on the basis product s sold. The Company has the following reportable segments: • The Aluula segment relates to the assembly and sale of composite materials for use in various applications and industries. Aluula sells its materials to manufacturers and brand partners. • The Ocean Rodeo segment relates to the purchase and resale of inventory in the windsport market. Ocean Rodeo sells its products to dealers, distributors, and end users. On April 29, 2024 the Company’s Board of Directors approved a mandate to sell specific assets used in the Ocean Rodeo business and discontinue its operations. As a result, Ocean Rodeo segment has been reclassified as Discontinued Operations. Note 18 includes additional information on assets held for sale and discontinued operations. Management evaluates the performance of each segment based on its individual profitability. All expenditures are allocated to segments. Total assets and liabilities for each segment are as follows: The interim condensed consolidated statements of loss and comprehensive loss for the three and nine months ended July 31 , 2025 and 2024 exclude Ocean Rodeo’s results, which have been reported in these periods as discontinued operations in Note 18. July 31, 2025 Aluula Discontinued Operations Total Total assets 12,613,410$ 189,480$ 12,802,890$ Total liabilities 3,069,679 6,001 3,075,680 October 31, 2024 Aluula Discontinued Operations Total Total assets 11,622,192$ 672,808$ 12,295,000$ Total liabilities 3,817,958 420,826 4,238,784
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 25 16. Segment information (continued): (b) Geographic information: For geographic reporting, sales are attributed to the geographic location in which the customer is located. The following table summarizes sales from continued operations by region. All of the Company’s non-current assets are located in Canada. The following table summarizes sales from discontinued operations by region. 17. Government Grants: On January 29, 2025, the Company signed a Contribution Agreement with the National Research Council of Canada (“NRC”), as representatives of the Industrial Research Assistance Program (“IRAP”). Under the terms of the Contribution Agreement, the NRC has agr eed to reimburse the Company up to $75,000 against specific costs incurred in relation to a project aimed at utilizing artificial intelligence to improve the efficiency of the Company’s quality assurance and quality control processes (the “Project”). The P roject term is from February 1, 2025 to October 31, 2025. The Company must comply with the terms of the Contribution Agreement in order to qualify for cost reimbursement. Reimbursements recorded for the three and nine months ended July 31 , 2025 were $ 20,118 and $42,364 respectively (three and nine months ended July 31 , 2024 - $nil and $nil). These reimbursements have been recorded as a reduction of salaries and benefits on the consolidated statements of loss and comprehensive loss. July 31 2025 July 31 2024 July 31 2025 July 31 2024 Sri Lanka 1,139,987$ 537,007$ 2,614,349$ 2,475,013$ Vietnam 658,342 233,679 1,077,796 457,997 Europe 245,793 34,771 401,291 85,615 Rest of World 95,051 346 127,711 17,747 United States 27,056 13,532 43,860 28,797 Canada 972 401,754 2,141 565,565 Hong Kong (45,614) 70,849 689,645 1,061,634 Sales 2,121,588$ 1,291,938$ 4,956,794$ 4,692,368$ For the three month period ended For the nine month period ended For the three month period ended For the nine month period ended July 31 2025 July 31 2024 July 31 2025 July 31 2024 Europe 2,386$ 24,849$ 16,439$ 116,331$ Canada - 143,824 136,486 286,979 United States - 54,425 107,349 306,942 Rest of World - 587 60,606 113,708 Sales 2,386$ 223,685$ 320,880$ 823,960$
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 26 18. Assets held for sale and discontinued operations: On April 29, 2024, the Company’s Board of Directors approved a mandate to sell specific assets used in the Ocean Rodeo business and discontinue its operations. Accordingly, Ocean Rodeo meets the criteria of a discontinued operation under IFRS 5 – Non current assets held for sale and discontinued operations. This reporting segment was not previously classified as held -for-sale or as a discontinued operation. The comparative consolidated statement of loss and comprehensive loss has been restated to show the discontinued operations separately from continuing operations. On October 3, 2024, the Company entered into a definitive purchase and sale agreement (the “Agreement”) to sell certain operating assets of Ocean Rodeo (the “Business Assets”), to Bainbridge International Ltd (“Bainbridge”). Under the terms of the Agreement, Bainbridge acquired the following Business Assets: Ocean Rodeo brand and trade name, marketing collateral, website, design files for Ocean Rodeo products, and specific intellectual property. Consideration paid for the Busi ness Assets consists of an upfront cash payment due upon closing and a three-year revenue sharing arrangement with fixed minimum monthly payments commencing March 1, 2025. Under the terms of the Agreement, Ocean Rodeo agreed to cease selling inventory on March 31, 2025. Ocean Rodeo and Bainbridge had an agreement in principle for Ocean Rodeo to sell Bainbridge its remaining inventory , which fell through resulting in the write off of $24,949 remaining inventory during the three months ended July 31, 2025 . Based on the terms of the Agreement, Ocean Rodeo recognized a net gain of $173,108 on disposal of the Business Assets which is included in Other income from discontinued operations for the year ended October 31, 2024. Additionally, in accordance with IFRS 15, Ocean Rodeo has a long-term asset with a balance of $96,337 at July 31 , 2025 (October 31, 2024 - $136,732) related to the deferred consideration receivable outlined in the terms of the Agreement. The following assets and liabilities were excluded from the sale of Business Assets to Bainbridge and represent the “ assets and liabilities related to discontinued operations ” as reported on the interim condensed consolidated statement of financial position at July 31, 2025: July 31 2025 October 31 2024 Assets related to discontinued operations Trade and other receivables 19,115$ 121,135$ Inventory - 330,043 Prepaid expenses and other current assets 59,932 65,297 Intangible assets - 5,505 Other long-term assets 96,337 136,732 Investments 14,096 14,096 Total assets related to discontinued operations 189,480$ 672,808$ Liabilities related to discontinued operations Trade and other payables 6,001$ 286,124$ Customer deposits - 62,395 Short-term debt - 72,307 Total liabilities related to discontinued operations 6,001$ 420,826$ Net assets related to discontinued operations 183,479$ 251,982$
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ALUULA COMPOSITES INC. Notes to the Interim Condensed Consolidated Financial Statements For the three and nine months ended July 31, 2025 and 2024 (Unaudited) 27 18. Assets held for sale and discontinued operations (continued): Net loss and comprehensive loss from discontinued operations for the three and nine months ended July 31, 2025 and 2024 are as follows: 19. Subsequent events: (a) Warrant acceleration period triggered: As described in Note 14 (b) to these interim condensed consolidated financial statements, the Company’s Repriced Warrants are subject to an accelerated expiry clause, in accordance with TSXV policies. Under the acceleration provisions, if the closing price of the Com pany’s Shares is $0.97 or higher for 10 consecutive trading days, the exercise period of the Reprice d Warrants is reduced to 30 calendar days. On August 1, 2025, the accelerated expiry clause was triggered, resulting in an accelerated expiry date of September 4, 2025. During the 30 calendar day acceleration period, 19,785,600 Repriced Warrants were exercised in exchange for 989,280 Aluula common shares, and resulted in the receipt of gross proceeds of $801,317. When combination with the Repriced Warrants exercised during the three months ended July 31, 2025, a total of 24,379,560 or 99.6% of the Repriced Warrants were exercised in exchange for 1,218,978 Aluula common shares and resulted in the receipt of gross proceeds of $987,372. July 31 2025 July 31 2024 July 31 2025 July 31 2024 Sales 2,386$ 223,685$ 320,880$ 823,960$ Cost of sales 24,949 149,921 335,748 639,251 Gross profit (22,563) 73,764 (14,868) 184,709 Operating expenses: Salaries and benefits - 31,337 438 278,644 General and administrative 16,791 (85,549) 112,054 642,016 Marketing - 10,650 (18,861) 204,791 Research and development - 24,759 1,486 56,796 16,791 (18,803) 95,117 1,182,247 (39,354) 92,567 (109,985) (997,538) Other income 4,734 240 9,246 369,558 Interest expense - (877) (212) (2,975) Depreciation of property and equipment - - - (23,019) Amortization of intangible assets - - - (7,567) Loss before tax (34,620) 91,930 (100,951) (661,541) Income tax recovery - - - 12,234 Net loss and comprehensive loss (34,620)$ 91,930$ (100,951)$ (649,307)$ Loss before interest, tax and amortization For the nine month period endedFor the three month period ended