AirBoss of America : 2025 Annual Financial Statements (AirBoss AR Financials 2025 Final)

About this update from Airboss Of America Corporation

Management's Responsibility for Financial Reporting The accompanying consolidated financial statements of AirBoss of America Corp. and all the information in the annual report are the responsibility of management and have been approved by the Board of Directors. The consolidated financial statements have been prepared by management, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. When alternate accounting methods exist, management has chosen those it deems most appropriate in the circumstances. Financial statements are not precise since they include certain amounts based on estimates and judgments. Management has determined such amounts on a reasonable basis in order to ensure that the financial statements are presented fairly, in all material respects. Management has prepared the financial information presented in this annual report and has ensured that it is consistent with that presented in the consolidated financial statements. AirBoss of America Corp. maintains systems of internal accounting and administrative controls consistent with reasonable cost. Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and the Company's assets are appropriately accounted for and adequately safeguarded. The Board of Directors is responsible for ensuring that management fulfills its responsibilities for reviewing and approving the financial statements. The Board carries out this responsibility principally through its Audit Committee. The Audit Committee is appointed by the Board and all members are outside directors. The Committee meets periodically with management, as well as the external auditors, to discuss internal controls over the financial reporting process, auditing matters and financial reporting issues, to satisfy itself that each party is properly discharging its responsibilities and to review the annual report, the financial statements and the external auditors' report. The Committee reports its findings to the Board for consideration when approving the financial statements for issuance to the shareholders. The Committee also considers the engagement or re-appointment of the external auditors for review by the Board and approval by the shareholders. KPMG LLP, the Company's external auditors, who are appointed by the shareholders, audited the consolidated financial statements as of and for the years ended December 31, 2025 and December 31, 2024 in accordance with Canadian generally accepted auditing standards to enable them to express to the shareholders their opinion on the consolidated financial statements. KPMG LLP has full and free access to the Audit Committee. March 20, 2026 P. Gren Schoch Frank Ientile Chairman and co-Chief Executive Officer Chief Financial Officer Independent Auditor's Report To the Shareholders of AirBoss of America Corp. Opinion We have audited the consolidated financial statements of AirBoss of America Corp. (the Entity), which comprise: the consolidated statements of financial position as at December 31, 2025 and December 31, 2024 the consolidated statements of loss and comprehensive loss for the years then ended the consolidated statements of changes in equity for the years then ended the consolidated statements of cash flows for the years then ended and notes to the consolidated financial statements, including a summary of material accounting policy information (Hereinafter referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as at December 31, 2025 and December 31, 2024, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board. Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the " Auditor's Responsibilities for the Audit of the Financial Statements " section of our auditor's report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2025. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our auditor's report. Evaluation of impairment of goodwill Description of the matter We draw attention to Notes 3(e)(i) and 8 to the financial statements. The goodwill balance included within intangible assets is $24,929 thousand. The Entity performs goodwill impairment testing at least annually and whenever events or changes in circumstances indicate that the carrying amount of the cash-generating unit likely exceeds its recoverable amount. The allocation of goodwill is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segment. The recoverable amount of the cash-generating unit is based on value in use, which is determined by discounting the future cash flows generated from the continuing use of the cash-generating unit or cash-generating unit group. In determining the estimated recoverable amount of the cash-generating unit or group, the Entity's significant assumptions include projected sales and cost of sales, discount rates and the terminal multiple. Why the matter is a key audit matter We identified the evaluation of the impairment of goodwill as a key audit matter. This matter represented significant auditor judgment due to the high degree of estimation uncertainty in determining the recoverable amount. In addition, the involvement of those with specialized skills and knowledge were required in performing and evaluating the results of our audit procedures due to the sensitivity of the recoverable amount to changes in significant assumptions. How the matter was addressed in the audit The primary procedures we performed to address the key audit matter included the following: We assessed the Entity's ability to accurately forecast by comparing the Entity's projected sales and cost of sales used in the prior year impairment test to actual results We compared the Entity's projected sales and cost of sales to actual results. We took into account changes in conditions and events, affecting each cash-generating unit or cash-generating group to assess the adjustments made in arriving at the projected assumptions We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the appropriateness of (1) the discount rates and (2) the terminal multiple. We assessed the appropriateness of the discount rates for the cash-generating units by comparing them against ranges that were independently developed using publicly available market data for comparable entities. We assessed the appropriateness of the terminal multiple assumption by calculating the implied terminal growth rate and comparing it to publicly available market and industry data. Other Information Management is responsible for the other information. Other information comprises: the information included in Management's Discussion and Analysis of Financial Condition and Results of Operations the information, other than the financial statements and the auditor's report thereon, included in a document likely to be entitled "2025 Annual Report". Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated. We obtained the information included in Management's Discussion and Analysis of Financial Condition and Results of Operations as at the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditor's report. We have nothing to report in this regard. The information, other than the financial statements and the auditor's report thereon, included in a document likely to be entitled "2025 Annual Report" is expected to be made available to us after the date of this auditor's report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Entity to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the group as a basis for forming an opinion on the group financial statements. We are responsible for the direction, supervision and review of the audit work performed for the purposes of the group audit. We remain solely responsible for our audit opinion. Determine, from the matters communicated with those charged with governance, those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditor's report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Chartered Professional Accountants, Licensed Public Accountants The engagement partner on the audit resulting in this auditor's report is Phillip M. Collins. Hamilton, Canada March 20, 2026 Consolidated Statements of Financial Position In thousands of US dollars Note December 31, 2025 December 31, 2024 ASSETS Current assets Cash 7,993 6,491 Trade and other receivables, including derivatives 4, 10 62,368 69,508 Prepaid expenses 6,366 6,637 Inventories 5 50,493 57,136 Current income taxes receivable 16 1,912 2,195 Total current assets 129,132 141,967 Non-current assets Property, plant and equipment 6, 7 78,957 83,927 Intangible assets 8 58,704 71,219 Deferred income tax assets 16 7,500 9,702 Other assets 9, 16 2,676 2,713 Total non-current assets 147,837 167,561 Total assets 276,969 309,528 LIABILITIES Current liabilities Trade and other payables, including derivatives 10 70,710 57,534 Current portion of loans and borrowings 7, 11 5,494 5,002 Provisions 13 1,132 198 Current income taxes payable 16 1,484 552 Total current liabilities 78,820 63,286 Non-current liabilities Loans and borrowings 7, 11 78,272 112,388 Employee benefits 19 379 385 Other payables 10 93 118 Provisions 13 1,174 4,264 Deferred income tax liabilities 16 2,496 3,077 Total non-current liabilities 82,414 120,232 Total liabilities 161,234 183,518 EQUITY Share capital 14 88,082 87,992 Contributed surplus 14 7,454 6,469 Retained earnings 20,199 31,549 Total equity 115,735 126,010 Total liabilities and equity 276,969 309,528 The notes on pages 27 to 52 are an integral part of these consolidated financial statements. Commitments and contingencies (note 18) On behalf of the Board P.G. Schoch Director Robert L. McLeish Director Consolidated Statements of Loss and Comprehensive Loss For the year ended December 31 In thousands of US dollars Note 2025 2024 Net Sales Cost of sales 5 410,203 (339,134) 387,024 (333,028) Gross profit 71,069 53,996 General and administrative expenses (46,462) (48,275) Selling and marketing expenses (11,200) (6,312) Research and development expenses 17 (3,161) (3,207) Impairment of assets 6, 8 (8,733) - Restructuring costs (1,627) (802) Other income and expenses 23 3,970 (1,349) Operating expenses (67,213) (59,945) Results from operating activities 3,856 (5,949) Finance costs 11, 12, 19 (8,045) (12,763) Loss before income tax (4,189) (18,712) Income tax expense 16 (4,428) (1,678) Loss and comprehensive loss (8,617) (20,390) Loss per share Basic 15 (0.32) (0.75) Diluted 15 (0.32) (0.75) The notes on pages 27 to 52 are an integral part of these consolidated financial statements. Consolidated Statements of Changes in Equity Attributable to equity holders of the Company In thousands of US dollars Share Capital Contributed Surplus Retained Earnings Total Equity Balance at January 1, 2024 87,992 5,480 55,385 148,857 Loss and comprehensive loss for the year - - (20,390) (20,390) Share-based compensation expense - 1,022 - 1,022 Stock options forfeited - (33) - (33) Dividends to equity holders - - (3,446) (3,446) Balance at December 31, 2024 87,992 6,469 31,549 126,010 Attributable to equity holders of the Company In thousands of US dollars Share Capital Contributed Surplus Retained Earnings Total Equity Balance at January 1, 2025 87,992 6,469 31,549 126,010 Loss and comprehensive loss for the year - - (8,617) (8,617) Share-based compensation expense - 1,236 - 1,236 Stock options forfeited - (147) - (147) Settlement of deferred share units 90 (104) - (14) Dividends to equity holders - - (2,733) (2,733) Balance at December 31, 2025 88,082 7,454 20,199 115,735 The notes on pages 27 to 52 are an integral part of these consolidated financial statements. Consolidated Statements of Cash Flows For the year ended December 31 In thousands of US dollars Note 2025 2024 Cash flows from operating activities Loss for the year (8,617) (20,390) Adjustments for: Depreciation 6, 7 12,357 12,812 Amortization of intangible assets 8 7,166 8,200 Impairment of assets 6, 8 8,733 - Write-down of inventory 5 249 6,049 Finance costs 11, 12, 19 8,045 12,763 Unrealized foreign exchange (gains) / losses (138) 98 Share-based payment expense 13, 14 2,048 1,241 Research and development tax credits 17 (446) (429) Income tax expense 16 4,428 1,678 Restructuring and legal provisions 13 2,378 - Loss on disposal 155 7 Other 26 34 36,384 22,063 Change in inventories 6,394 974 Change in trade and other receivables 7,292 3,755 Change in prepaid assets 315 76 Change in trade and other payables 12,424 (10,413) Change in provisions (3,654) (794) Net change in non-cash working capital balances 22,771 (6,402) Interest paid (9,372) (10,289) Income tax paid (675) 3,408 Net cash provided by operating activities 49,108 8,780 Cash flows from investing activities Acquisition of property, plant and equipment 6 (11,144) (9,902) Acquisition of intangible assets 8 (899) (730) Government investment tax credits 17 189 - Proceeds from sale of asset - 26 Net cash used in investing activities (11,854) (10,606) Cash flows from financing activities Repayment of revolving line of credit (28,350) (66,750) Dividends paid (2,707) (4,170) Principal payments for lease liabilities (2,693) (2,541) Repayment of loans and borrowings (2,062) - Proceeds from loans and borrowings - 55,000 Debt refinancing costs (149) (2,338) Settlement of deferred share units (net of withholding taxes) (14) - Interest received on share purchase loans 3 7 Net cash used in financing activities (35,972) (20,792) Net increase / (decrease) in cash 1,282 (22,618) Cash at January 1 6,491 28,989 Effect of exchange rate fluctuations on cash held 220 120 Cash at December 31 7,993 6,491 The notes on pages 27 to 52 are an integral part of these consolidated financial statements. Notes to Consolidated Financial Statements ("CFS") For the years ended December 31, 2025 and 2024 (Amounts in thousands of US dollars, except share and per share amounts, unless otherwise specified) NOTE 1 REPORTING ENTITY AirBoss of America Corp. is a public company listed on the Toronto Stock Exchange and cross-traded on the OTCQX® Best Market in the United States, incorporated and domiciled in Ontario. Its registered office is located at 16441 Yonge Street, Newmarket, Ontario, Canada. AirBoss of America Corp. and its subsidiaries are together referred to, in these consolidated financial statements, as the "Company" or "AirBoss". The Company has operations in Canada, the US and Germany and is involved primarily in the manufacture of high-quality rubber-based products to resource, military, health care, government, automotive and industrial markets (see note 20). Subsidiaries are consolidated based on control which is assessed on whether the Company has power over an investee, exposure or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns. List of Subsidiaries Set out below is a list of operating subsidiaries of the Company. Operating Subsidiaries Jurisdiction Ownership % Ace Elastomer, LLC ("ACE") South Carolina 100% AirBoss Defense Group Ltd. ("ADG Canada") Quebec 100% AirBoss Defense Group, LLC ("ADG USA") Delaware 100% AirBoss Flexible Products, LLC ("AFP") Michigan 100% AirBoss GmbH Germany 100% AirBoss Rubber Compounding (NC), LLC ("ANC") North Carolina 100% AirBoss Silicone, LLC Michigan 100% Blackbox Biometrics, Inc. ("B3") New York 100% Critical Solutions International, LLC ("CSI") Texas 100% The Company's operating segments are organized into the following reportable segments: AirBoss Rubber Solutions ("ARS") - Includes manufacturing and distribution of rubber compounds and distribution of rubber compounding related chemicals. AirBoss Manufactured Products ("AMP") - Includes the manufacture and distribution of anti-noise, vibration and harshness dampening parts, and personal protection and safety products, primarily for CBRN-E threats. Unallocated Corporate Costs - Includes corporate activities and certain unallocated costs. ARS consists of AirBoss' custom rubber compounding operations in Kitchener, Ontario, Rock Hill, South Carolina, Scotland Neck, North Carolina, Auburn Hills, Michigan, and Acton Vale, Quebec. AMP consists of the Company's rubber molded product operations in Auburn Hills, Michigan and defense businesses in Auburn Hills, Michigan, Acton Vale, Quebec, Rochester, New York and Charleston, South Carolina. NOTE 2 BASIS OF PREPARATION Statement of compliance The consolidated financial statements have been prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board. The consolidated financial statements were authorized for issue by the Board of Directors on March 20, 2026. Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position: certain property, plant and equipment was re-measured at fair value on the adoption of IFRS forward contracts are measured at fair value liabilities for cash settled share-based payment arrangements are initially and thereafter measured at fair value equity settled share-based payment arrangements are measured at fair value at the grant date recognition of future income taxes on foreign exchange differences where the currency of the tax basis on non-monetary assets and liabilities differ from the functional currency the employee benefit liability is recognized as the net total of the plan assets, at fair value, less the present value of the defined benefit obligation. Functional and presentation currency These consolidated financial statements are presented in US dollars ("USD"), which is the Company's functional currency. All financial information presented in USD has been rounded to the nearest thousand, except where otherwise indicated. Use of estimates and judgments The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Significant areas requiring the use of estimates include the recoverable amount of cash-generating units ("CGUs") for purposes of goodwill and intangible asset impairment testing and the valuation of deferred tax assets. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in the following notes: Note 8 - recoverable amount of CGUs Note 16 - valuation of deferred tax assets Information about assumptions and estimation uncertainties that have a significant risk resulting in a material adjustment within the next financial year are included in the following notes: Note 8 - recoverable amount of CGUs - significant assumptions used in value-in-use calculations Note 16 - valuation of deferred tax assets - likelihood that deferred income tax assets will be realized based upon the generation of future taxable income during the period in which the temporary differences are deductible NOTE 3 MATERIAL ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. Basis of consolidation Subsidiaries Subsidiaries are entities controlled by the Company. Control exists when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial information of subsidiaries is included in the consolidated financial statements from the date that control commences until the date that control ceases. Transactions eliminated on consolidation Inter-company balances and transactions, and any unrealized income and expenses arising from inter-company transactions, are eliminated in preparing the consolidated financial statements. Foreign currency Functional and presentation currency Items included in the financial statements of each of the Company's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in USD, which is the Company's functional and presentation currency. Foreign currency transactions Transactions in foreign currencies are translated to functional currencies at exchange rates at the dates of the transactions, or valuation where items are re-measured. Monetary assets and liabilities denominated in a currency other than the functional currency are translated to the functional currency at the exchange rate at the reporting date. The foreign currency gain or loss on the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities are recognized in profit or loss on the consolidated income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign exchange gains and losses are presented within other expenses in the consolidated statement of loss. Financial instruments Financial assets and liabilities The Company recognizes financial assets and financial liabilities initially at fair value and subsequently measures these at either fair value or amortized cost based on the following classifications: Fair value through profit or loss ("FVTPL"): Financial assets and financial liabilities purchased or incurred, respectively, with the intention of generating earnings in the near term, and derivatives are classified as FVTPL. This category includes derivative assets and derivative liabilities that do not qualify for hedge accounting. For items classified as FVTPL, the Company initially recognizes such financial assets on the consolidated statement of financial position at fair value and recognizes subsequent changes in the consolidated statement of loss. Transaction costs incurred are expensed in the consolidated statement of loss. Amortized cost: The Company classifies financial assets held to collect contractual cash flows at amortized cost, including cash, trade and other receivables, income taxes receivable and share purchase loans. The Company initially recognizes the carrying amount of such assets on the consolidated statement of financial position at fair value plus directly attributable transaction costs, and subsequently measures these at amortized cost using the effective interest rate method, less any impairment losses. Financial liabilities that are not classified as FVTPL include trade and other payables and loans and borrowings. These financial liabilities are recorded at amortized cost on the consolidated statement of financial position. Impairment of financial assets The Company uses the forward-looking "expected credit loss" model to determine the allowance for impairment as it relates to trade and other receivables. The Company's allowance is determined by historical experiences, and considers factors including the aging of the balances, the customer's credit worthiness, and updates based on the current economic conditions, expectation of bankruptcies, and the political and economic volatility in the markets/location of customers. Derecognition The Company derecognizes a financial asset when the contractual rights to the cash flows and benefits from the asset expire or are settled. The difference between the carrying amount of the financial asset and the sum of consideration received and receivable is recognized in the consolidated statement of loss. Financial liabilities are derecognized when obligations under the contract expire, are discharged or cancelled. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in the consolidated statement of loss. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. Derivative financial instruments The Company holds stand-alone derivative financial instruments to reduce its foreign currency risk exposures. Such derivatives are recognized initially at fair value; attributable transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes therein are recognized immediately in the consolidated statement of loss. Property, plant and equipment Recognition and measurement Land and buildings comprise mainly manufacturing facilities and offices. Items of property, plant and equipment are measured at historical cost (net of government grants) less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and borrowing costs. Cost also includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognized net within other expenses in the consolidated statement of loss. Subsequent costs The cost of replacing a part of an item of property, plant and equipment is recognized in the carrying amount of the item or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred. Depreciation Land is not depreciated. For other property, plant and equipment, depreciation is calculated over the depreciable amount, which is the cost of an asset, revalued amount or other amount substituted for cost, less its residual value. Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of property, plant and equipment, with certain manufacturing equipment being depreciated on a units of production basis since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current and comparative periods are as follows: buildings 15-40 years plant and manufacturing equipment 5-15 years vehicles 3-5 years furniture, office, lab and computer equipment 3-5 years Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate. Intangible assets Goodwill Goodwill that arises upon the acquisition of a business is included in intangible assets. At initial recognition, goodwill is measured as the excess of purchase price over the fair value of identifiable net assets. In respect of acquisitions prior to January 1, 2010, goodwill is included on the basis of its deemed cost, the amount recorded prior to the transition to IFRS. Subsequent measurement Goodwill is measured at cost less accumulated impairment losses. Goodwill is tested at least annually for impairment and whenever events or changes in circumstances indicate that the carrying amount of the cash-generating unit likely exceeds its recoverable amount. Impairment losses on goodwill are not reversed. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segment. Customer Relationships Customer Relationships that arise upon the acquisition of a business are included in intangible assets. At initial recognition, customer relationships are measured at fair value based on total sales to customers, estimating an annual attrition rate and future growth based on current market conditions and historical data. Other intangible assets Other intangible assets that are acquired or developed by the Company and have finite useful lives are measured at cost less accumulated amortization and accumulated impairment losses. Costs associated with annual licenses and maintaining computer software programs are recognized as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Company are recognized as intangible assets when there is an ability to use the software product and it can be demonstrated how the software product will generate probable future economic benefits. Directly attributable costs that are capitalized as part of the software product include the incremental software development or contracted employee costs. Other development expenditures that do not meet these criteria are recognized as an expense as incurred. Subsequent expenditures Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditures on internally generated goodwill and intellectual property, are recognized in profit or loss as incurred. Amortization Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Amortization is calculated over the cost of the asset, or other amount substituted for cost, less its residual value. The estimated useful lives for the current and comparative periods are as follows: software 5 years capitalized development costs 3-5 years customer relationships 10-17 years brands, patents and trademarks 8-20 years Inventories Inventories are measured at the lower of cost and net realizable value. The cost of manufactured inventories is based on the weighted average cost method and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing inventories to their existing locations and conditions. Inventory that is not interchangeable is determined on an individual item basis and includes expenditures incurred in acquiring the inventories, shipping and logistics costs. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs to sell. Impairment charges are recorded against cost of sales, when it is determined the net realizable value is less than cost. Employee benefits: Defined Benefit plan The Company provides certain employees with post-retirement life insurance benefits that are unfunded. The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans. These obligations are valued annually by independent qualified actuaries. The Company's net obligation in respect of longterm employee benefits, other than pension plans, is the amount of future benefits that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The discount rate is the yield at the reporting date on high quality corporate bonds that have maturity dates approximating the terms of the Company's obligations. Any actuarial gains and losses are recognized in other comprehensive income and retained earnings in the period in which they arise. Multi-Employer Pension Plan The Company contributes to the Steel Workers Pension Trust, a defined benefit multi-employer pension plan (MEPP) under the terms of collective-bargaining agreements that cover its union-represented employees in the State of Michigan. Defined benefit MEPPs are accounted for as defined contribution plans as adequate information to account for the Company's participation in the plan is not available due to the size and number of contributing employees in the plan. The risks of participating in a MEPP are different from participation in a single-employer plan in the following aspects: Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. If the Company chooses to stop participating in the multi-employer plan, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. Provisions Provisions for environmental restoration and legal claims are recognized when: the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost. Net Sales: Goods Sold Net sales from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Net sales for production of finished goods is recognized at the point in time control of the goods is transferred to the customer. Control of finished goods production transfers upon shipment to, or receipt by, customers depending on the terms of the contract. Generally, the buyer has no right of return except if the product did not comply with the agreed upon specifications . Services Net sales for tolling services is recognized over time as value is added to the raw materials which are controlled and provided by the customer. Net sales for other services are recognized upon acceptance by the customer. Government assistance Government assistance is recognized as a reduction of the related expense or cost of the asset acquired in the period the expenditure is recognized, unless the conditions for receiving the assistance are met after the related expenditure has been recognized. In this case, the assistance is recognized when it becomes receivable. Lease payments The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses, and adjusted for certain remeasurements of the lease liability. When a right-of-use asset meets the definition of investment property, it is presented in investment property. The right-of-use asset is initially measured at cost, and subsequently measured at fair value, in accordance with the Company's accounting policies. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate. The Company applied judgment to determine the lease term for a lease contract running month-to-month, which significantly affects the amount of lease liability and right-of-use asset recognized. Finance income and finance costs Finance income comprises interest income on funds invested and changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognized, as it accrues in profit or loss, using the effective interest method. Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognized on financial assets and the financing component of employee benefits. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profit or loss using the effective interest method. Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. Current tax also includes any tax arising from dividends. Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis, or their tax assets and liabilities will be realized simultaneously. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Company to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made. Segment reporting Segment results that are reported to the Company's Chairman & co-CEO, and President & co-CEO (the chief operating decision makers) include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Operating segments are aggregated if they are similar and demonstrate similar economic characteristics. Unallocated items comprise mainly corporate assets (primarily the Company's headquarters), and head office expenses. Share-based payments In 2015, the shareholders approved the Company's 2015 Omnibus Incentive Plan ("Omnibus Plan"). The Omnibus Plan is a share-based compensation plan under which the entity receives services from directors, employees and certain advisors as consideration for equity instruments of the Company. The fair value of the services received in exchange for the grant of the equity awards is recognized as an expense. The total amount to be expensed is determined by reference to the fair value of the awards granted. Under the Omnibus Plan, the Company can issue restricted stock units, performance share units, deferred share units and stock options pursuant to the terms and conditions of the Omnibus Plan and the related award agreements entered into thereunder. Non-market vesting conditions are included in assumptions about the number of equity awards that are expected to vest. The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of equity awards that are expected to vest based on the non-market vesting conditions. It recognizes the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. Unless net settled, when options are exercised the Company issues new shares. The proceeds received, together with the amount recorded in contributed surplus, are credited to share capital when the options are exercised. The beneficiary can elect to convert the fair value of the vested options to the market value of shares on a cashless basis on the exercise date. Liabilities related to performance share units are settled through cash payment. The dilutive effect of outstanding equity awards is reflected as additional share dilution in the computation of diluted earnings per share. New Standards adopted IFRS 18 Presentation and Disclosure in Financial Statements IFRS 18 will replace IAS 1 and applies for annual reporting periods beginning on or after January 1, 2027 and is to be applied retrospectively. The new standard will change how the Company presents and discloses its financial statements and accompanying notes by requiring defined subtotals in the statement of profit or loss, requiring disclosure about management-defined performance measures and adding new principles for aggregation and disaggregation of information. The Company is currently evaluating the standard and developing an implementation plan. NOTE 4 TRADE AND OTHER RECEIVABLES December 31 2025 2024 Trade receivables Less: expected credit loss 62,469 (1,355) 68,035 (187) Other receivables 61,114 1,254 67,848 1,660 62,368 69,508 Impairment losses The aging of trade receivables at the reporting date was: December 31 2025 Gross Impairment 2024 Gross Impairment Within terms 50,014 - 50,170 - Past due 0-30 days 7,212 - 12,011 - Past due 31-120 days 5,243 (1,355) 5,854 (187) 62,469 (1,355) 68,035 (187) The continuity of the allowance for impairment was: For the year ended December 31 2025 2024 Balance at January 1 (187) (669) Impairment loss recognized (1,270) (120) Collected 8 94 Written-off 94 508 Balance at December 31 (1,355) (187) NOTE 5 INVENTORIES December 31 2025 2024 Raw materials and consumables 30,738 38,028 Work in progress 8,373 7,271 Finished goods 22,371 25,110 61,482 70,409 Provisions (10,989) (13,273) 50,493 57,136 Inventories expensed in cost of sales were $330,323 (2024: $321,231). The inventory provision relates primarily to net realizable value adjustments based on management's estimates of future selling prices and demand. The Company recorded a $249 write-down of medical gowns to net realizable value (2024: $6,049 from gowns and nitrile gloves) and an increase in the provisions of $528 (2024: $132), which have been recognized in cost of sales, offset by the reversal of $3,061 (2024: $9,898) related to sale of inventory previously provided for. Additions - 329 109 11,229 11,667 Tax credits - - - (464) (464) Disposals (6,753) (1,699) (74) (154) (8,680) Impairment - - - (1,032) (1,032) Transfers 1,852 8,206 80 (10,138) - Balance at December 31, 2025 51,317 141,924 3,418 8,591 205,250 NOTE 6 PROPERTY, PLANT AND EQUIPMENT Land and buildings 1 Plant and equipment 1 Furniture and equipment 1 Under construction Total Cost Balance at January 1, 2024 55,039 124,405 3,133 9,686 192,263 Additions - 2,315 116 9,769 12,200 Disposals - (703) (1) - (704) Transfers 1,179 9,071 55 (10,305) - Balance at December 31, 2024 56,218 135,088 3,303 9,150 203,759 Depreciation for the period Impairment Disposals 3,747 1,711 (5,847) 8,317 - (1,686) 293 - (74) - - - 12,357 1,711 (7,607) Balance at December 31, 2025 28,359 94,956 2,978 - 126,293 Accumulated Depreciation Balance at January 1, 2024 25,027 80,228 2,435 - 107,690 Depreciation for the period 3,721 8,767 324 - 12,812 Disposals - (670) - - (670) Balance at December 31, 2024 28,748 88,325 2,759 - 119,832 (1) includes right of use assets. See note 7 for additional details. Carrying amounts Land and buildings Plant and equipment Furniture and equipment Under construction Total Balance at December 31, 2024 27,470 46,763 544 9,150 83,927 Balance at December 31, 2025 22,958 46,968 440 8,591 78,957 Depreciation expense of $11,592 (2024: $12,158) was charged to cost of sales, $655 (2024: $638) was charged to general and administrative expense and $110 (2024: $16) was charged to research and development expenses. In the third quarter of 2025, the Manufactured Products segment began relocating its Jessup, Maryland operations to Auburn Hills, Michigan, and re-launched its operations in the fourth quarter of 2025. The Company agreed to pay $750 to terminate the lease of the Jessup property. The Company recorded $1,711 of impairment charges against a right of use asset and leasehold improvements of $640 and $1,071, respectively. At December 31, 2025, the Company recognized an impairment charge against assets related to a CGU within AMP's defense operations. The carrying amount of these assets was determined to be higher than their recoverable amount of nil and an impairment loss of $1,032 was recognized. NOTE 7 LEASES The Company leases some of its plants, offices, and equipment. The majority of the Company's leases are for buildings, which have remaining terms between 1 and 4 years. Right-of-Use Assets Land and buildings Equipment Total Cost Balance at January 1, 2024 19,064 2,484 21,548 Lease additions - 718 718 Disposals - (183) (183) Balance at December 31, 2024 19,064 3,019 22,083 Lease additions Disposals - (4,517) 523 (640) 523 (5,157) Balance at December 31, 2025 14,547 2,902 17,449 Accumulated depreciation Balance at January 1, 2024 7,749 1,489 9,238 Depreciation 2,021 575 2,596 Disposals - (183) (183) Balance at December 31, 2024 9,770 1,881 11,651 Depreciation 2,022 590 2,612 Impairment (note 6) 640 - 640 Disposals (3,603) (640) (4,243) Transfers - - - Balance at December 31, 2025 8,829 1,831 10,660 Carrying amounts Balance at December 31, 2024 9,294 1,138 10,432 Balance at December 31, 2025 5,718 1,071 6,789 Lease Liabilities Interest expense on lease liabilities of $538 (2024: $633) is included in Finance Costs. Lease liabilities of $8,200 (2024: $12,011) are included in Loans and Borrowings (see note 11) Cash outflow related to leases was $3,231 (2024: $3,174). The future undiscounted contractual lease payments are as follows: Total 2026 2027 2028 2029 2030 Thereafter Lease payments 9,097 2,354 2,290 2,280 1,869 181 123 NOTE 8 INTANGIBLE ASSETS Goodwill Customer Relationships Brands, Patents and Trademarks Software and Development costs Total Cost Balance at January 1, 2024 24,929 63,210 31,224 10,769 130,132 Additions - - - 730 730 Balance at December 31, 2024 24,929 63,210 31,224 11,499 130,862 Additions Tax credits Transfers - - - - - - - - - 899 (258) - 899 (258) - Balance at December 31, 2025 24,929 63,210 31,224 12,140 131,503 Accumulated Amortization Balance at January 1, 2024 - 35,914 8,799 6,730 51,443 Amortization for the year - 4,018 2,913 1,269 8,200 Balance at December 31, 2024 - 39,932 11,712 7,999 59,643 Amortization for the year Impairment - - 3,406 - 2,638 5,990 1,122 - 7,166 5,990 Balance at December 31, 2025 - 43,338 20,340 9,121 72,799 Carrying amounts Balance at December 31, 2024 24,929 23,278 19,512 3,500 71,219 Balance at December 31, 2025 24,929 19,872 10,884 3,019 58,704 Amortization expense of $7,166 (2024: $8,200) was charged to general and administrative expense. Remaining amortization for customer relationships acquired is 4 to 13 years and patents and trademarks is 4 to 16 years. Goodwill is allocated to CGUs or CGU groups as follows: Goodwill December 31 2025 2024 AirBoss Rubber Solutions CGU group AirBoss Manufactured Products - rubber molded products CGU group 14,864 10,065 14,864 10,065 24,929 24,929 Goodwill is allocated to the CGU or CGU group that are expected to benefit from synergies of the related business combination and represent the lowest level within the Company at which management monitors goodwill. As at December 31, 2025, there was no goodwill impairment. AMP's defense CGU goodwill balance was fully impaired during the year ended December 31, 2023, with an accumulated impairment loss of $26,648. At December 31, 2025, the Company recognized an impairment charge against assets related to a CGU within AMP's defense operations. The carrying amount of these assets was determined to be higher than their recoverable amount of nil and an impairment loss of $5,990 was recognized. Recoverable amount Recoverable amounts for testing impairment of goodwill and a CGU within AMP's defense operations was based on value-in-use. Value-in-use was determined by discounting the future cash flows generated from the continuing use of the CGU or CGU group. Significant assumptions used in value-in-use calculations AirBoss Rubber Solutions The calculation of value-in-use is most sensitive to the following assumptions: Discount rate of 12.3% (13.5% pre-tax discount rate) (2024: 11.6%) determined using risk-adjusted returns from comparable companies adjusted for the Company's capital structure Terminal multiple of 5.9 based on analyst estimates Projected sales based on annual growth rates ranging from 9-10% over the forecast period Projected cost of sales based on annual growth in cost of sales ranging from 8-9% over the forecast period Growth rates used represent a return to normal operating levels and margins, consistent with historical performance as well as realization of strategic initiatives. AirBoss Manufactured Products - rubber molded products The calculation of value-in-use is most sensitive to the following assumptions: Discount rate of 12.7% (14.0% pre-tax discount rate) (2024: 11.5% ) determined using risk-adjusted returns from comparable companies adjusted for the Company's capital structure Terminal multiple of 5.9 based on analyst estimates Projected sales based on annual growth rates ranging from 8-13% over the forecast period Projected cost of sales based on annual growth rates ranging from 7-12% over the forecast period Growth rates used represent a return to normal operating levels and margins, consistent with historical performance as well as realization of strategic initiatives. Cash flows were projected based on past experience, actual operating results and the business plan for a one-year period. Cash flows for a further four-year period were extrapolated using projected sales and a growth rate for costs based on past experiences and future growth trends. Projected sales and cost of sales in the business plan were budgeted based on discussions with customers, contracts on-hand and industry information, past experience and trends, as well as continuous improvement initiatives. The anticipated annual sales are based on expected growth levels (net of the inflationary effect of rising raw material prices). The values assigned to the significant assumptions represent management's assessment of future trends in the rubber, defense and engineered products industries, which are based on both external sources and internal sources (historical data). NOTE 9 OTHER ASSETS Share purchase loans 1 Other Total Balance at January 1, 2024 395 446 841 Tax credits - 1,955 1,955 Accrued interest 7 - 7 Interest paid (7) - (7) Loan forgiven (55) - (55) Effect of movements in exchange rates (28) - (28) Balance at December 31, 2024 312 2,401 2,713 Tax credits - - - - Accrued interest 5 - - 5 Interest paid (3) - - (3) Loan forgiven (51) - - (51) Effect of movements in exchange rates 12 - - 12 Balance at December 31, 2025 275 2,401 2,676 (1) see note 21 for additional details. NOTE 10 DERIVATIVES NOT DESIGNATED IN A FORMAL HEDGING RELATIONSHIP Foreign exchange hedge At December 31, 2025, the Company had contracts to sell $7,934 from January 2026 to June 2026 for Canadian dollars ("CAD") $11,000. The fair value of these contracts, representing an unrealized gain of $92, are included in trade and other receivables, including derivatives on the consolidated statement of financial position. The unrealized changes in fair value, representing a gain of $92 (2024: loss of $586), are recorded on the statement of loss as other expenses. At December 31, 2024, the Company had contracts to sell $14,486 from January 2025 to September 2025 for CAD $20,000. The fair value of these contracts, representing an unrealized loss of $586, are included in trade and other payables, including derivatives on the consolidated statement of financial position. Interest rate swap The Company's interest rate swap agreement for a notional amount of $20,000, matured in May 2025. Swap interest was calculated and settled on a monthly basis based on the difference between the floating rate of Secured Overnight Financing Rate ("SOFR") and a fixed rate of 3.84%. Interest recovery on the swap agreement was $42 (2024: $517) and is included in finance costs on the consolidated statement of loss. At December 31, 2024, the fair value of this agreement, representing a gain of $38 was included in loans and borrowings on the consolidated statement of financial position. The change in the fair value, representing a loss of $38 (2024: loss of $213), is included in finance costs on the consolidated statement of loss. Share price hedge At December 31, 2025, the Company had contracts to reduce its exposure to the change in its share price from 228,000 shares on its share-based compensation costs (see note 13). The contracts mature between March and April 2026 and in February 2026 were subsequently extended to April 2027. The fair value of these agreements, representing a loss of $422 (2024: loss of $535) is included in trade and other payables, including derivatives on the consolidated statement of financial position. The change in the fair value, representing a gain of $143 (2024: loss of $166), is recorded on the consolidated statement of loss as other expenses. The realized loss from the swap agreements was $43 (2024: loss of $61). Life Insurance In September 2024, the Company took out a life insurance policy requiring an annual premium of $103. At December 31, 2025, the net fair values of the financial instruments, representing a loss of $93 (2024: loss of $118) are included in Other payables on the consolidated statement of financial position. The change in the fair value, representing a gain of $25 (2024: loss of $118) are recorded in Other expenses on the consolidated statement of loss. NOTE 11 LOANS AND BORROWINGS December 31 2025 2024 Non-current Revolving line of credit 24,000 52,350 Term debt 48,698 52,594 Interest rate swap - - Lease liabilities 6,230 9,377 Less: deferred financing (656) (1,933) 78,272 112,388 Current Term debt 4,240 2,406 Interest rate swap - (38) Lease liabilities 1,970 2,634 Less: deferred financing (716) - 5,494 5,002 December 31 2025 2024 Revolving line of credit 24,000 52,350 Term debt 52,938 55,000 Interest rate swap - (38) Lease liabilities 8,200 12,011 Subtotal 85,138 119,323 Less principal due within one year (5,494) (5,002) 79,644 114,321 Less deferred financing (1,372) (1,933) 78,272 112,388 In November 2024, the Company entered into two secured credit facilities: an asset-based revolving line of credit; and a term loan. Proceeds from the two secured credit facilities were used to repay the Company's previous revolving credit facility. The two facilities are secured against substantially all of the Company's assets and contain cross-default provisions along with customary financial and nonfinancial covenants, including minimum earnings and liquidity (assessed monthly), and limitations on capital expenditures, dividend payments and additional indebtedness. At December 31, 2025, the revolving line of credit provides for maximum borrowings of up to $125,000 (with an accordion of $25,000 upon the satisfaction of customary conditions). In January 2025, the facility was modified from a maximum borrowing of $100,000 with a $50,000 accordion, with all other terms unchanged. In June 2025, the facility was modified to exclude insured letters of credit from the calculation of excess availability. In July 2025, the revolving credit facility and term loan were amended to extend the deadline to add back certain costs for earnings covenants. The revolving line of credit is subject to a borrowing base calculation that is based on cash on hand, and a percentage of eligible accounts receivable and inventory (as defined in the credit agreement). As of December 31, 2025, the total available borrowing capacity under this facility was $71,532 with $24,315 drawn under the facility (2024: $79,428 available and $52,665 drawn). The borrowing base is recalculated monthly and may fluctuate based on changes in cash, accounts receivable and inventory levels. The revolving line of credit bears interest at SOFR plus applicable margins from 175 to 225 basis points, depending on unused borrowing capacity, and matures on November 29, 2027. The previous revolving facility provided up to $150,000, bore interest at SOFR plus applicable margins from 145 to 450 basis points, depending on covenants, and was scheduled to mature on September 23, 2026. The term loan was for an original amount of $55,000 and matures on November 29, 2027. As of December 31, 2025, the outstanding principal balance was $52,938. The term loan bears interest at SOFR plus applicable margins from 425 to 450 basis points, depending on earnings. Interest and principal are paid on a monthly basis, with additional principal payments required if the balance outstanding exceeds a borrowing base calculation that is based on appraised collateral. Deferred financing fees less accumulated amortization are deducted against borrowings for presentation purposes. The Company is amortizing $2,137 of financing fees over the term of the new credit facilities. $1,355 of unamortized deferred financing fees related to the previous credit facility were written-off in 2024 and are included in finance costs. Principal repayments on the loans and borrowings are as follows: Total 2026 2027 2028 2029 2030 Thereafter Revolving line of credit 24,000 - 24,000 - - - - Term debt 52,938 4,240 48,698 - - - - Lease liabilities 8,200 1,970 2,012 2,113 1,810 173 122 85,138 6,210 74,710 2,113 1,810 173 122 At December 31, 2025 the Company is not in default, nor has it breached any terms of the revolving credit facility or term loan. The carrying amount and fair value of the borrowings are as follows: Carrying amount Fair value 2025 2024 2025 2024 Revolving line of credit 23,153 51,182 24,000 52,350 Term debt 52,413 54,235 52,938 55,000 Interest rate swap - (38) - (38) Lease liabilities 8,200 12,011 7,955 11,464 The fair value of the revolving credit facility and term loan approximate the gross carrying amount. The fair values of lease liabilities are based on cash-flows discounted using a borrowing rate of 5.6% (2024: 6.5%). NOTE 12 FINANCE COSTS For the year ended December 31 Note 2025 2024 Interest on revolving line of credit 11 3,333 10,277 Interest on term debt 11 4,890 467 Interest on lease liabilities 7 538 633 Write-off of deferred finance fees 11 - 1,355 Amortization of deferred finance fees 11 710 696 Change in fair value of interest rate hedges 10 38 213 Cash settlement of interest rate hedges 10 (42) (517) Change in fair value of contingent consideration 13 (1,865) (96) Other 443 (265) Net finance costs 8,045 12,763 NOTE 13 PROVISIONS Contingent liability from acquisition of AMP Legal and defense other Restructuring PSUs entity Total Balance at January 1, 2024 1,729 351 413 2,651 5,144 Change in fair value of contingent liability - - - (96) (96) Provisions accrued - - 252 - 252 Payments - (351) (137) (306) (794) Forfeitures - - - - 0 Foreign Exchange - - (44) - (44) Balance at December 31, 2024 1,729 - 484 2,249 4,462 Less: amount due within one year - - (123) (75) (198) 1,729 - 361 2,174 4,264 Change in fair value of contingent liability - - - (1,865) (1,865) Provisions accrued 751 1,627 959 - 3,337 Payments (2,400) (1,048) (129) (77) (3,654) Foreign Exchange - - 26 - 26 Balance at December 31, 2025 80 579 1,340 307 2,306 Less: amount due within one year - (579) (468) (85) (1,132) 80 - 872 222 1,174 In 2023, the Company was named a defendant in legal proceedings related to a settlement agreement associated with shipping and demurrage costs owed to a vendor by a former subcontractor of the Company. In 2025, the Company paid $2,400 to settle these legal proceedings. The Company is occasionally named as a party in various claims and legal proceedings, which arise during the normal course of its business. The Company reviews each of these claims, including the nature of the claim, the amount in dispute or claimed and the availability of insurance coverage. Although there can be no assurance that any particular claim will be resolved in the Company's favour, management does not believe that the outcome of any claim or potential claims of which it is currently aware will have a material adverse effect on the Company. In 2025, the Manufactured Products segment substantially completed the relocation of its operations in Jessup, Maryland to Auburn Hills, Michigan. In connection with this move, the Company recorded restructuring costs of $1,147 related to staff reductions. In addition, the Rubber Solutions segment incurred restructuring costs of $480 related to staff reductions. Performance Share Units ("PSUs") The Company has issued 692,933 PSUs to certain executives pursuant to the terms and conditions of the Omnibus Plan. Each PSU entitles the holder to receive on vesting a cash payment equal to the product of (a) the fair market value of a common share as of the vesting date and (b) a performance factor between 0.5 and 1.5, based on the level of achievement of predetermined performance objectives over the vesting period generally. The PSUs vest three years following the grant date. Performance stock units 2025 2024 January 1 315,447 233,460 New issuances 520,908 128,969 Forfeitures (82,787) (6,648) Settlements (60,635) (40,334) December 31 692,933 315,447 The Company recognized costs of $959 (2024: $252) related to PSUs in general and administrative expenses in the consolidated statement of loss. The Company uses Share Price hedges (see note 10) to offset PSU costs related to the change in share price. Contingent liability from acquisition of AMP defense entity The contingent liability is determined by discounting estimated future payments. The large reduction in the fair value of the liability during the year corresponds with the factors leading to the impairment charge disclosed in notes 6 and 8 regarding assets in a CGU within AMP's defense operations. NOTE 14 CAPITAL AND OTHER COMPONENTS OF EQUITY Share Capital and Contributed Surplus Share Capital: Authorized Unlimited number of Class A shares designated as common shares Unlimited number of Class B preference shares The directors may fix, from time to time before such issue, the number of shares that is to comprise each series and the designations, rights, privileges, restrictions and conditions attaching to each series. Under the Omnibus plan, a maximum of 10% of the Company's issued and outstanding shares are available for issuance under any type of share-based compensation plan. As at December 31, 2025, 212,458 shares are available (2024: 383,639). Issued common shares were as follows: 2025 2024 January 1 27,130,556 27,130,556 Settlement of deferred share units 18,668 - December 31 27,149,224 27,130,556 During 2025 and 2024, no options were exercised. 18,668 shares were issued to settle 23,600 DSUs. Capital and other components of equity Contributed surplus Contributed surplus is comprised of the difference between the book value per share and the purchase price paid for shares acquired for cancellation by the Company and stock-based compensation of employees and non-employees. Stock Options The term of an option shall not exceed 10 years from the date of grant. Options granted to directors and officers of the Company, which were outstanding at December 31, 2025, are as follows: Exercise price ($CAD) Options outstanding quantity Weighted average contract life Options exercisable quantity 3.84 1,407,473 4.24 - 5.91 246,188 3.39 - 7.65 315,138 2.22 78,785 32.45 162,884 1.21 81,442 36.01 86,113 0.22 64,585 2,217,796 224,812 Options granted and outstanding: A summary of the status of the Company's stock option plan as of December 31, 2025 and 2024 and changes during the years then ended, is presented below: 2025 2024 Quantity Weighted average exercise price ($CAD) Quantity Weighted average exercise price ($CAD) Outstanding beginning of year 2,111,424 9.45 1,956,515 10.13 Granted 1,494,327 3.84 323,036 5.91 Expired (1,146,477) 5.38 (138,644) 9.49 Forfeited (241,478) 9.07 (29,483) 13.79 Outstanding end of year 2,217,796 7.96 2,111,424 9.45 Inputs for measurement of grant date fair values The grant date fair value of all options were measured based on the Black-Scholes model. Expected volatility is estimated by considering historic average share price volatility. The inputs used in the measurement of the fair values at grant date of the share-based payment plans are the following: Fair value of share options and assumptions In Canadian dollars March 2025 May 2024 Fair value at grant date Share price at grant date Exercise price Expected volatility (weighted average volatility) Option life (expected weighted average life) Expected annual dividend rate Risk-free interest rate (based on government bonds) $1.34 $3.79 $3.84 52.5% 5 years 3.7% 2.7% $2.36 $5.79 $5.91 53.2% 5 years 2.4% 3.7% The stock options issued vest as follows: Quantity Vested at December 31, 2025 224,812 2026 554,449 2027 532,921 2028 492,200 2029 413,414 2,217,796 The Company recognized employee costs of $815 (2024: $742) relating to option grants in general and administrative expenses in the consolidated statement of loss. Deferred Stock Units ("DSUs") The Company has issued DSUs to non-executive directors pursuant to the terms and conditions of the Omnibus Plan. Each vested DSU entitles the holder to receive, on redemption, either: (a) one common share; (b) a cash payment equal to the fair market value of a common share as of the redemption date; or (c) a combination of both cash and common shares, at the sole discretion of the Company. The redemption of a DSU occurs only following the termination of a holder's service as director and will occur on either: (a) a date selected by a recipient following the termination of their services as a director (which can be no earlier than 10 days, and no later than one year, after the service termination date); or (b) a date selected by the Company following the death of the recipient while still serving as director (which can be no later than 90 days following the death of the recipient). Under the terms of compensation for independent directors of the Company approved by the Compensation Committee and Board in 2016, commencing with the second quarter of 2016 and for each subsequent quarter while he or she remains a director, each independent director is to be granted a number of DSUs having a fair market value equal to CAD $6.25. The fair market value of each DSU is equal to the volume-weighted average trading price of a Common Share on the TSX for the 5 trading days preceding the relevant grant date. In addition to this fixed amount of DSUs, independent directors are able to elect to be paid all or a portion of all other director's fees in DSUs in lieu of cash, using the same calculation of fair market value as for the fixed amount of DSUs, to be granted on a quarterly basis. All DSUs issued to independent directors vest three months following the relevant grant date. The compensation expense is accrued over the vesting period with a corresponding increase in liabilities in the amount which represents the fair value of the amount payable to the independent director in respect of the DSUs. Deferred stock units 2025 2024 January 1 217,993 153,239 New issuances 90,275 64,754 Settlements (23,600) - December 31 284,668 217,993 The Company recognized costs of $274 (2024: $247) related to DSUs in general and administrative expenses in the consolidated statement of loss. Dividends Dividends on common shares were paid to shareholders of record quarterly in 2025 and in 2024 as follows: 2025 2024 Shareholder of record at: $CAD/share Date Paid $CAD/share Date Paid March 31 0.035 April 15, 2025 0.070 April 15, 2024 June 30 0.035 July 15, 2025 0.035 July 15, 2024 September 30 0.035 October 15, 2025 0.035 October 15, 2024 December 31 0.035 January 15, 2026 0.035 January 15, 2025 0.140 0.175 The dividend payable at December 31, 2025 was $693 (2024: $660). NOTE 15 EARNINGS PER SHARE The following table sets forth the calculation of basic and diluted earnings per share: For the year ended December 31 In thousands of US dollars except per share amounts 2025 2024 Numerator for basic and diluted earnings per share: Net income (loss) Denominator for basic and diluted earnings per share: Basic weighted average number of shares outstanding Diluted weighted average number of shares outstanding (8,617) 27,144 27,144 (20,390) 27,131 27,131 Loss per share: Basic (0.32) (0.75) Diluted (0.32) (0.75) As of December 31, 2025, 2,217,796 options (2024: 2,111,424 options) were excluded from the diluted weighted average number of common shares calculation as their effect would have been anti-dilutive. The average market value of the Company's shares for the purpose of calculating the dilutive effect of share options was based on quoted market prices for the period during which the options were outstanding. NOTE 16 INCOME TAXES The provision for income taxes differs from the amount computed by applying the Canadian statutory income tax rate to income before income taxes for the following reasons: For the year ended December 31 2025 2024 Combined federal and provincial statutory income tax Foreign tax differential Effect of permanent differences Change in tax rates and new legislation Difference arising on filing and assessments Deductible temporary differences not recognized Other (1,110) 462 (164) - (11) 4,945 306 (4,959) 999 273 405 5 4,916 39 Total expense 4,428 1,678 The components of the provision for income taxes are as follows: Current Deferred 2,807 1,621 1,661 17 Total expense 4,428 1,678 The income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and liabilities are as follows: December 31 2025 2024 Deferred income tax assets: Non-capital income tax loss carry-forwards Equity compensation Capital assets Reserve Other 3,939 683 1,580 7,856 219 8,219 435 1,895 5,578 177 Deferred income tax liabilities: Reserve Capital assets Other 14,277 (16) (9,037) (220) 16,304 (87) (9,421) (171) (9,273) (9,679) Net deferred income tax liabilities 5,004 6,625 Recorded on the consolidated statement of financial position: Deferred income tax assets Deferred income tax liabilities 7,500 (2,496) 9,702 (3,077) Net 5,004 6,625 In assessing the recognition of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the period in which the temporary differences are deductible. Management considers the scheduled reversals of deferred income tax liabilities, the character of the income tax asset and the tax planning strategies in making this assessment. Management would not recognize deferred income tax assets if the more likely than not realization criterion is not met. The Company has $123,915 of unused tax losses (2024: $120,271) available to offset future income taxes in the US. $42,092 of these losses were incurred prior to 2018 and are set to expire starting 2037. Losses incurred after 2017 can be carried forward indefinitely. At December 31, 2025, taxable temporary differences related to investments in subsidiaries were not recognized because the Company controls the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets have not been recognized in respect of the following items because it is not probable that future taxable profit will be available against which the Company can use the benefits therefrom. December 31 2025 Gross amount Tax effect 2024 Gross amount Tax effect Capital losses 575 72 575 72 Operating losses 109,144 24,258 88,869 19,643 Deductible temporary differences 9,067 2,032 6,394 1,427 118,786 26,362 95,838 21,142 In addition, the Company has unrecognized US R&D tax credits in the amount of $852 (2024: $352). NOTE 17 GOVERNMENT ASSISTANCE The Company recognized $722 from government investment tax credits to support the acquisition of capital assets that were reduced accordingly, of which $189 has been collected. Scientific research and investment tax credits of $446 were recognized in 2025 (2024: $429); research and development expenses were reduced accordingly. NOTE 18 COMMITMENTS AND CONTINGENCIES Commitments The Company has purchase commitments of $24,822 (2024: $37,328) for raw materials. Delivery on these commitments is expected in 2026. Litigation No legal provisions are recognized as of December 31, 2025. The Company is occasionally named as a party in various claims and legal proceedings, which arise during the normal course of its business. The Company reviews each of these claims, including the nature of the claim, the amount in dispute or claimed and the availability of insurance coverage. Although there can be no assurance that any particular claim will be resolved in the Company's favour, management does not believe that the outcome of any claim or potential claims of which it is currently aware will have a material adverse effect on the Company. NOTE 19 POST-RETIREMENT BENEFITS The Company provides post-retirement life insurance benefits to eligible retirees (the "Benefit Plan"). The post-retirement life insurance benefits under the other benefit plan are for non-unionized and unionized employees of ADG Canada, which are unfunded defined benefit plans covering life insurance. The methods of accounting, assumptions and frequency of valuations for the Benefit Plan are similar to those used for defined benefit pension schemes. This plan is funded through proceeds from an insurance policy. Total estimated contribution to this plan for the next fiscal year is $18. This plan is unfunded, as such there is no plan asset to be disclosed. At December 31, 2025, the weighted average duration of the defined benefit obligation was 10 years (2024: 10 years). The Benefit Plan exposes the Company to actuarial risks, such as interest rate risk and longevity risk. December 31 2025 2024 Present value of unfunded obligation and liability in the Consolidated Statement of Financial Position 379 385 Movement in the defined benefit obligation is as follows: At January 1 Current service cost Interest cost Benefit payment Actuarial gain Foreign currency translation 385 1 18 (38) (6) 19 441 1 19 (43) 2 (35) 379 385 At December 31 Amounts recognized in the Consolidated Statement of Loss: Post-retirement benefits expense Interest cost Foreign currency translation (4) 18 19 3 19 (35) Recovery 33 (13) The current service charge was included in general and administrative expense and the interest cost is included in finance costs in the consolidated statement of loss. December 31 2025 2024 The principal actuarial valuation assumptions used were as follows: Discount rate 4.75% 4.60% Mortality CPM mortality table projected with scale MI-2017 for the private sector CPM mortality table projected with scale MI-2017 for the private sector The sensitivity of the Benefit Plan to changes in assumptions is set out below. The sensitivity analysis was performed by changing each assumption individually. If actual changes occur, some of these assumptions are likely to be correlated and result in a combined impact. Fiscal Year ending December 31 2025 2024 Effect of an increase of 1% Post-employment benefit obligation Effect of a decrease in 1% Post-employment benefit obligation (33) 41 (34) 42 Mortality Sensitivity Analysis Effect of an increase of 10% on mortality rates Post-employment benefit obligation Effect of a decrease of 10% on mortality rates Post-employment benefit obligation (3) 3 (5) 6 Defined Contribution Plan AirBoss of America Corp. maintains a registered retirement savings defined contribution plan for all of their employees. Total contribution and expense to this plan for 2025 were $644 (2024: $593). ANC maintains a 401(k) plan for its employees. Total contributions and expense to this plan during 2025 were $117 (2024: $102). ACE maintains a 401(k) plan for its employees. Total contributions and expense to this plan during 2025 were $50 (2024: $57). AFP maintains a 401(k) defined contribution plan for its employees. Total contributions and expense to this plan during 2025 were $431 (2024: $440). ADG USA maintains a 401(k) defined contribution plan for its employees. Total contributions and expense to this plan during 2025 were $80 (2024: $224). ADG Canada employees are covered under various registered and unregistered defined contribution plans. Total contribution and expense to these plans for 2025 were $270 (2024: $266). CSI maintains a 401(k) defined contribution plan for its employees. Total contribution and expense to these plans for 2025 were $29 (2024: $46). B3 maintains a 401(k) defined contribution plan for its employees. Total contribution and expense to these plans for 2025 were $48 (2024: $49). Multi-Employer Pension Plan During 2025, the Company made contributions of $267 (2024: $263) to a multi-employer pension plan. The collective bargaining agreement requires that the Company contributes 50 cents for each hour worked by eligible employees during the preceding wage month. NOTE 20 SEGMENTED INFORMATION The Company's operating segments are organized into the following reportable segments: ARS - Includes manufacturing and distribution of rubber compounds and distribution of rubber compounding related chemicals. AMP - Includes the manufacture and distribution of anti-noise, vibration and harshness dampening parts, and personal protection and safety products, primarily for CBRN-E threats. Unallocated Corporate Costs - Includes corporate activities and certain unallocated costs. ARS consists of AirBoss' custom rubber compounding operations in Kitchener, Ontario, Rock Hill, South Carolina, Scotland Neck, North Carolina, Auburn Hills, Michigan, and Acton Vale, Quebec. AMP consists of the Company's rubber molded product operations in Auburn Hills, Michigan and the Company's defense businesses in Auburn Hills, Michigan, Acton Vale, Quebec, Rochester, New York and Charleston, South Carolina. Performance of each reportable segment is measured based on profit before finance costs and income tax, as included in the internal management reports that are reviewed by the Company's Chief Operating Decision Makers: the Chairman & co-CEO, and President & co-CEO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Transfer pricing is based on third-party rates. Information regarding the results of each reportable segment is included below. Inter-company amounts, which represent items purchased and sold between different segments, have been presented within the segment disclosure and are eliminated to arrive at the consolidated amounts. For the year ended December 31 Rubber Solutions Manufactured Products Unallocated Corporate Costs Total 2025 2024 2025 2024 2025 2024 2025 2024 Segment net sales Inter-segment net sales 205,247 (20,473) 226,351 (15,423) 239,203 (13,774) 176,696 (600) - - - - 444,450 (34,247) 403,047 (16,023) External net sales 184,774 210,928 225,429 176,096 - - 410,203 387,024 Depreciation and amortization 8,449 8,383 10,918 12,400 156 229 19,523 21,012 Impairment of assets - - 8,733 - - - 8,733 - Restructuring costs 480 - 1,147 802 - - 1,627 802 Segment measure of profit (loss) 11,080 19,499 4,965 (12,720) (12,189) (12,728) 3,856 (5,949) Finance costs 8,045 12,763 Income tax expense 4,428 1,678 Loss (8,617) (20,390) Segment assets 140,378 164,659 128,858 142,781 7,733 2,088 276,969 309,528 Segment liabilities 50,487 41,985 49,347 67,527 61,400 74,006 161,234 183,518 Capital expenditures 4,528 4,364 6,616 5,538 899 730 12,043 10,632 Geographical segments The Company operates manufacturing facilities and sales offices in the US and Canada, selling primarily in North American markets. In presenting information on the basis of geographical segments, segment net sales is based on the geographical location of customers. Segment assets are based on the geographical location of the assets. Non-current assets include property, plant and equipment, software, goodwill, future income taxes and other assets. For the year ended December 31 Net sales 2025 Non-current assets Net sales 2024 Non-current assets Canada 66,290 39,283 70,866 46,653 United States 285,505 108,554 280,489 120,908 Other countries 58,408 - 35,669 - 410,203 147,837 387,024 167,561 Major customers Five customers represented 31% of consolidated net sales in 2025 (2024: 30%). Major products 2025 2024 Rubber Solutions Tolling 1,338 2,814 Industrial 25,862 30,077 Mixing 157,574 178,037 184,774 210,928 Manufactured Products Anti-vibration 109,733 118,737 Defense 115,696 57,359 225,429 176,096 410,203 387,024 NOTE 21 RELATED PARTIES Transactions with key management personnel During the year, the Company paid $167 (2024: $173) to companies controlled by the Chairman & co-CEO of the Company for use of office facilities. Key management includes directors, Chairman & co-CEO, President & co-CEO, CFO, and senior management. The compensation expense to key management for employee services is shown below: December 31 2025 2024 Salaries and other short-term benefits Share-based payment expense 5,037 1,080 3,218 851 6,117 4,069 The amounts disclosed in this table are the amounts recognized as operating expenses for accounting purposes during the period and do not necessarily represent amounts receivable or received in cash. Key management own 20.4% of the outstanding common shares as at December 31, 2025 (2024: 20.1%). In July 2023, the Company agreed to forgive CAD $591 of loans due from the President & co-Chief Executive Officer by 12.5% annually. The loans bear interest at 2% and 51,178 shares of the Company having a fair value of CAD $237 are pledged as collateral on these loans. At December 31, 2025, CAD $369 remains outstanding under the loans. Principal and accrued interest totaling $274 is included in Other Assets on the consolidated statement of financial position ($312 at December 31, 2024). The loans are due upon the earlier of the disposition date of all or proportionate to any part of the pledged securities, termination of employment, and maturity. The loans are full recourse and interest is due and payable semi-annually. During the year, interest payments of $3 (2024: $7) was received. NOTE 22 FINANCIAL INSTRUMENTS Financial risk management The Company's activities result in exposure to a variety of financial risks, including risks related to commodity prices, currency fluctuation, interest rates, credit and liquidity. Market Risk Commodity prices and supplies The Company's financial performance depends on certain outside sources for raw materials, including carbon black, synthetic and natural rubber, chemicals for rubber mixing, and metals (such as steel and aluminum) used in the production of its products. The price and availability of these raw materials are subject to fluctuations from such factors as weather, exchange rates, the price of oil, changes in industry production capacity, changes in world inventory levels and other factors beyond the Company's control. The Company manages its commodity price and supply risk by matching purchase commitments to its customers' requirements during term of the price quote, generally ranging from 1 to 3 months and maintains supply sources in different areas of the world. The Company does not enter into commodity contracts other than to meet the Company's expected usage and sale requirements; such contracts are not settled net. The following table approximates the financial impact (assuming changes are not passed along to its customers) on the Company of a 10% increase in the cost of its most critical raw materials based upon purchases made in the respective years: Earnings before tax in millions of dollars 2025 2024 Natural and synthetic rubber (5.56) (6.15) Chemicals (Rubber mixing) (3.76) (4.98) Carbon black (2.24) (2.61) Metal (1.74) (2.04) (13.30) (15.78) Foreign Exchange Risk A portion of the Company's products are sold at prices denominated in CAD or based on prevailing CAD; most of the raw material purchases are denominated in USD and a significant portion of its operational costs and expenses are incurred in CAD. Therefore, an increase in the value of the USD to CAD decreases the net sales in USD terms realized by the Company from sales made in CAD, partially offset by lower CAD operational costs/expenses, which decreases operating margin and the cash flow available to fund operations. The net CAD monetary assets of its Canadian operations represent a currency risk as the balances are re-measured at the month end spot rate creating an unrealized exchange gain or loss. The Company manages its currency risk relating to monetary assets and liabilities denominated in CAD by increasing or decreasing the proportion of borrowings denominated in CAD or forward currency contracts. The Rubber Solution segment's profit and loss is somewhat naturally hedged in that sales denominated in USD offset USD expenses and debt service costs. The following table approximates the following impact on the Company of a 10.0% decrease in the value of one Canadian dollar in US currency: in millions of dollars 2025 Sales (1) (2.1) (1.7) Purchases (2) 4.8 5.4 Earnings before tax 2024 Based upon Canadian dollar-denominated sales Based upon Canadian dollar-denominated expenses The Company's term loan (denominated in USD) is secured against certain real estate (valued in CAD) and capital equipment. An increase in the value of the USD to CAD decreases the value of the collateral in USD. If the value of collateral is insufficient, the Company is required to make a principal repayment to cover the shortfall. At December 31, 2025, a $0.10 decrease in the value of one Canadian dollar in US currency would not require a principal repayment (2024: $1,797). Interest Rate Risk The Company's interest rate risk mainly arises from the interest rate impact on cash and floating rate debt. CAD and USD borrowings are on a variable rate basis. The Company has no formal policy to manage a certain proportion of borrowings on a fixed rate basis. The Company's interest rate swap agreement for a notional amount of $20,000, matured in May 2025. Interest recovery on the swap agreements was $42 (2024: $517). At December 31, 2024, the fair value of this agreement, representing a gain of $38 was included in loans and borrowings on the consolidated statement of financial position. The change in the fair value, representing a loss of $38 (2024: loss of $213), is recorded on the consolidated statement of loss as finance costs. The Company entered into the interest rate swap agreements to fix the interest rate on a portion of its borrowings and does not hold them for trading or speculative purposes. At the reporting date, the interest profile of the Company's interest-bearing financial instruments was: December 31 2025 2024 Fixed rate instruments Financial assets Financial liabilities Variable rate instruments Financial liabilities 275 (8,200) (75,566) 312 (11,973) (105,417) Total (83,491) (117,078) Fair value sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates for the year would have increased or decreased earnings before tax: 100bp increase 100bp decrease 2025 Variable rate instruments (906) 906 2024 Variable rate instruments (943) 943 This analysis assumes that all other variables, in particular foreign exchange rates, remain constant. Credit Risk The Company held cash of $7,993 at December 31, 2025 (2024: $6,491), which represents its maximum credit exposure on these assets. The cash is held with bank and financial institution counterparties, which are rated A- to AA-, based on Standard and Poor's ratings. The Company sells its products to a variety of customers under various payment terms in the normal course of its operations and therefore is exposed to credit risks. The Company's exposure to credit risk is influenced by general economic conditions, the default risk of the industry and the relative concentration of business. A majority of the Company's trade receivables are derived from sales to distributors and manufacturers who have been transacting with the Company for over five years. In monitoring credit risk, the Company considers industry, volume and aging trends (see note 4), maturity and other relevant factors. The Company performs ongoing credit evaluations of its customers' financial condition and limits the amount of credit extended when deemed necessary. Purchase limits established for certain accounts represent the maximum open balance permitted without approval from the co-CEO. The Company maintains reserves for potential credit losses relating to specific exposures, and any such losses to date have been within management's expectations. Net sales from five customers represented 31% of consolidated net sales in 2025 (2024: 30%). The loss of any such customers or the delay or cancellation of any orders under certain high-volume contracts could have a significant impact on the Company. The Company believes that its five significant customers are creditworthy and insures the majority of its trade receivables. 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's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under normal and stressed conditions. Th...

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