DISCIPLINED
EXECUTION
2025 ANNUAL REPORT
TABLE OF CONTENTS
01 AirBoss 2025 at a Glance
03 Key Recent Annual Highlights
04 Message to Shareholders
06 Future Outlook:
AirBoss Rubber Solutions (ARS)
08 Future Outlook:
AirBoss Manufactured Products (AMP)
09 Navigating Economic and
Geopolitical Uncertainty
10 Management’s Discussion and
Analysis of Financial Condition
and Results of Operations
27 Consolidated Financial
Statements
A N N U A L R E P O R T
1
AIRBOSS 2025 AT A GLANCE:
2025 REPRESENTED A
MARKED IMPROVEMENT IN
AIRBOSS’ FINANCIAL
PERFORMANCE,
WITH EXECUTION AGAINST
STRATEGIC PRIORITIES
AND A STRENGTHENED
FINANCIAL POSITION.
AIRBOSS OF AMERICA CORP. (“AIRBOSS” OR THE “COMPANY”) DELIVERED
STRONG PERFORMANCE IN 2025, HIGHLIGHTED BY YEAR-OVER-YEAR GROWTH
IN ADJUSTED EBITDA, IMPROVED FREE CASH FLOW GENERATION AND
CONTINUED BALANCE SHEET DELEVERAGING.
2
PERFORMANCE AT AIRBOSS MANUFACTURED PRODUCTS (“AMP”)
WAS PARTICULARLY STRONG, DRIVEN BY ONGOING DELIVERIES
UNDER PREVIOUSLY AWARDED DEFENSE CONTRACTS AND IMPROVED
RESULTS IN THE RUBBER MOLDED PRODUCTS BUSINESS, WHILE
AIRBOSS RUBBER SOLUTIONS (“ARS”) CONTINUED TO FACE MARKET
SOFTNESS ACROSS MOST SECTORS. WHILE ECONOMIC AND
GEOPOLITICAL HEADWINDS CONTINUED TO IMPACT DEMAND ACROSS
CERTAIN END MARKETS, PARTICULARLY WITHIN ARS, THE COMPANY
DELIVERED IMPROVED PROFITABILITY, STRONG CASH FLOW
GENERATION, AND MATERIALLY REDUCED LEVERAGE.
AS AN ORGANIZATION, AIRBOSS REMAINED FOCUSED ON DISCIPLINED COST
MANAGEMENT, MANUFACTURING FOOTPRINT OPTIMIZATION AND OPERATIONAL
EXECUTION, WHILE CONTINUING TO NAVIGATE ECONOMIC AND GEOPOLITICAL
UNCERTAINTY, INCLUDING TARIFFS, INFLATIONARY PRESSURES AND ONGOING
VOLATILITY ACROSS CERTAIN CUSTOMER SECTORS.
A N N U A L R E P O R T
3
$0
$100
$200
$300
$400
$500
$600
$700
2023
2024
2025
EXTERNAL NET SALES1
($MM)
$410
$34.0
$1.9
$26.8
$21.9
$(8.6)
$(41.7)
$(20.4)
$(6.4)
$(12.5)
$0
$10
$20
$30
$40
-$50
-$40
-$30
-$20
-$10
$50
$60
$70
ADJUSTED PROFIT1
PROFIT (LOSS)
($MM)
$0
$20
$40
$60
$80
$100
$120
ADJUSTED EBITDA1
($MM)
2023
2024
2025
2023
2024
2025
2023
2024
2025
$426
$387
1. Adjusted EBITDA and Adjusted Profit are non-IFRS
financial measures. Please see our financial
disclosures below and on page 12 of this Annual
Report for further information.
MANUFACTURED PRODUCTS:
Net sales of $239M (+35.4% YoY). Gross profit
of $44M (140% YoY).
STRENGTHENED PERFORMANCE:
Adjusted EBITDA of $34.0M (+55% YoY). Net loss
of $8.6M (decreased 57.7% YoY).
CASH FLOW GENERATION:
Cash provided by operating activities increased
to $49.1M (+40.3M YoY).
STRENGTHENED BALANCE SHEET:
Reduced borrowings under revolving credit
facility by $28.4M YoY.
TARIFF RISKS:
Ongoing tariff uncertainty remains a risk; contingency
planning and mitigation strategies have been
activated in an effort to reduce their impact.
WHILE THE EXTERNAL ECONOMIC
ENVIRONMENT REMAINS UNCERTAIN,
AIRBOSS CONTINUES TO PRIORITIZE
OPERATIONAL DISCIPLINE AND THE
SUCCESSFUL CONVERSION OF KEY
OPPORTUNITIES TO SUPPORT
SUSTAINABLE LONG-TERM GROWTH.
KEY RECENT ANNUAL HIGHLIGHTS
4
MESSAGE TO
SHAREHOLDERS
2025 REPRESENTED A MARKED IMPROVEMENT IN AIRBOSS’ FINANCIAL
PERFORMANCE COMPARED TO 2024. DESPITE CONTINUED MACROECONOMIC
UNCERTAINTY, TARIFF-RELATED PRESSURES AND GEOPOLITICAL VOLATILITY, THE
COMPANY DELIVERED HIGHER ADJUSTED EBITDA, IMPROVED MARGINS, STRONGER
CASH GENERATION AND MATERIALLY REDUCED LEVERAGE.
AirBoss Rubber Solutions experienced continued
market softness across most sectors, driven in part
by tariff-related dynamics and customer inventory
management. While volumes declined, management
remained focused on cost controls, productivity
initiatives and investment in specialty compound
capabilities to position ARS for future recovery.
The Company currently anticipates that volume
recovery at ARS may begin midway through 2026,
subject to prevailing market conditions and trade
policy developments.
AirBoss Manufactured Products delivered significant
improvement in 2025. The defense products
business benefited from deliveries under newly
awarded contracts, driving meaningful margin
expansion. The rubber molded products business
also improved year-over-year despite continued
volatility in automotive production schedules. During
the year, the Company substantially completed the
relocation of its Jessup, Maryland operations to
Auburn Hills, Michigan to optimize its manufacturing
footprint and improve long-term operating efficiency.
Consolidated gross profit increased by $17.1M to $71.1
million in 2025, and gross margin expanded to 17.3%
in 2025, up from 14.0% in 2024. Cash provided by
operating activities increased to $49.1M in 2025,
enabling the Company to reduce borrowings under its
revolving credit facility by $28.4 million during the
year. Net Debt decreased to $67.6 million, resulting in
a Net Debt to Adjusted EBITDA ratio of 1.99x compared
to 4.51x at the end of 2024.
While economic and policy-related uncertainty remains
elevated, management continues to prioritize liquidity,
disciplined capital allocation and operational
execution. The Company’s secured credit facilities
remained in compliance with all covenants at the end
of 2025, and available borrowing capacity totaled
$71.5 million at year-end under the asset-based
revolving facility.
AirBoss’ long-term priorities remain focused on
strengthening its core Rubber Solutions platform
through innovation and specialty compound
development and expanding Manufactured Products
through diversification of advanced rubber molded
products and growth opportunities within defense
markets, including NATO and allied partners.
We thank our employees, customers, suppliers and
shareholders for their continued support as we
continue to execute the key tenets of our strategic
plans. We remain committed to disciplined financial
management while driving sustainable long-term
growth in an ever-evolving global marketplace.
Chris Bitsakakis
P.G. Schoch
President and Co-CEO
Chairman and Co-CEO
A N N U A L R E P O R T
5
6
FUTURE OUTLOOK:
AIRBOSS RUBBER
SOLUTIONS
A N N U A L R E P O R T
7
ARS remains committed to executing its strategy
focused on specialized products, expanded production
of a broader array of specialty compounds, and
enhanced flexibility in attracting and fulfilling new
business opportunities.
AIRBOSS RUBBER SOLUTIONS REMAINS FOCUSED
ON RESTORING VOLUME GROWTH WHILE ENHANCING
PRODUCT MIX AND MARGIN QUALITY. MANAGEMENT
CONTINUES TO INVEST IN RESEARCH AND
DEVELOPMENT TO SUPPORT ENHANCED
COLLABORATION WITH CUSTOMERS. WHILE
NEAR-TERM SOFTNESS MAY PERSIST DEPENDING
ON TARIFF DYNAMICS AND INDUSTRIAL DEMAND,
THE SEGMENT IS POSITIONED TO BENEFIT FROM
A NORMALIZATION OF INVENTORY LEVELS AND
BROADER ECONOMIC RECOVERY.
8
The business will continue its focus on cost management,
efficiencies, automation and diversification into adjacent product
sectors, as well as continuing its focus on operational improvements
and working with key customers to leverage opportunities aligned
with its growth initiatives.
MANUFACTURED PRODUCTS ENTERS 2026 WITH CONTINUED
EXECUTION ON RECENTLY-AWARDED CONTRACTS WITHIN
AIRBOSS DEFENSE GROUP AND ENHANCED OPERATING
EFFICIENCY FOLLOWING FOOTPRINT OPTIMIZATION
INITIATIVES. THE SEGMENT WILL CONTINUE TO PURSUE
DIVERSIFICATION OPPORTUNITIES ACROSS ADVANCED RUBBER
MOLDED APPLICATIONS AND GLOBAL DEFENSE PROGRAMS,
WHILE MAINTAINING DISCIPLINED COST MANAGEMENT.
FUTURE OUTLOOK:
AIRBOSS
MANUFACTURED
PRODUCTS
A N N U A L R E P O R T
9
NAVIGATING ECONOMIC AND
GEOPOLITICAL UNCERTAINTY
While economic uncertainties remain, AirBoss has a strong track record of adaptability and financial
discipline. By staying agile, data-driven, and proactive, the Company is positioned to navigate these
headwinds while continuing to drive growth and shareholder value.
AS AIRBOSS LOOKS AHEAD TO 2026, THE COMPANY REMAINS
DILIGENT IN MANAGING THE POTENTIAL IMPACT OF ECONOMIC
VOLATILITY, PARTICULARLY IN RESPONSE TO EXISTING
TARIFFS AND THE POTENTIAL FOR FURTHER ESCALATION OR
RETALIATORY MEASURES.
TO MITIGATE THESE CHALLENGES, AIRBOSS IS ACTIVELY:
EXPLORING PRODUCTION SHIFTS:
Assessing alternative U.S.-based manufacturing
options to reduce tariff exposure while maintaining
efficient operations.
OPTIMIZING SUPPLY CHAIN STRATEGIES:
Strengthening supplier partnerships and
diversifying sourcing to minimize disruptions.
MANAGING COSTS:
Implementing efficiency projects in an effort to
offset potential tariff risks and minimize impact
to all stakeholders.
BALANCING AND FILLING OPEN CAPACITY
IN ALL PLANTS:
Maximizing domestic production to balance
supply and demand.
2025
10
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of AirBoss of America Corp.
(“AirBoss” or the “Company”) has been prepared as of March 20, 2026 and should be read in conjunction with the Consolidated
Financial Statements and Notes for the year ended December 31, 2025 prepared in accordance with IFRS Accounting Standards
as issued by the International Accounting Standards Board. All dollar amounts are shown in thousands of US dollars, except per
share amounts, unless otherwise specified. Additional information regarding the Company, including its Annual Information Form,
can be found on SEDAR+ at www.sedarplus.com and on the Company’s website at www.airboss.com.
FORWARD-LOOKING INFORMATION
Certain statements contained or incorporated by reference herein, including those that express management’s expectations or
estimates of future developments or AirBoss’ future performance, constitute “forward-looking information” or “forward-looking
statements” within the meaning of applicable securities laws, and can generally be identified by words such as “will”, “may”, “could”,
“expects”, “believes”, “anticipates”, “forecasts”, “plans”, “intends”, “should” or similar expressions. These statements are not historical
facts but instead represent management’s expectations, estimates and projections regarding future events and performance.
Statements containing forward-looking information are necessarily based upon a number of opinions, estimates and assumptions
that, while considered reasonable by management at the time the statements are made, are inherently subject to significant
business, economic and competitive risks, uncertainties and contingencies. AirBoss cautions that such forward-looking information
involves known and unknown contingencies, uncertainties and other risks that may cause AirBoss’ actual financial results,
performance or achievements to be materially different from its estimated future results, performance or achievements expressed
or implied by the forward-looking information. Numerous factors could cause actual results to differ materially from those in the
forward-looking information, including without limitation: impact of general economic conditions, notably including its impact on
demand for rubber solutions and products; dependence on key customers; global defense budgets, notably in the Company’s
target markets, and success of the Company in obtaining new or extended defense contracts; contract-related risks; cyclical trends
in the tire and automotive, construction, mining and retail industries; sufficient availability of raw materials at economical costs;
weather conditions affecting raw materials, production and sales; global political uncertainty and policy change; AirBoss’ ability to
maintain existing customers or develop new customers in light of increased competition; AirBoss’ ability to successfully integrate
acquisitions of other businesses and/or companies or to realize on the anticipated benefits thereof; AirBoss’ ability to successfully
develop and execute effective business strategies including, without limitation, the recently announced strategic transition; changes
in accounting policies and methods, including uncertainties associated with critical accounting assumptions and estimates; changes
in the value of the Canadian dollar relative to the US dollar; changes in tax laws; changes in trade policies or the imposition of new
tariffs, duties or other similar restrictions which could influence the cost and flow of goods and services across borders; current and
future litigation; ability to obtain financing on acceptable terms and ability to satisfy the covenants set forth in such financing
arrangements; environmental damage and non-compliance with environmental laws and regulations; impact of global health
situations; IT/cybersecurity risks; potential product liability and warranty claims and equipment malfunction. There is increased
uncertainty associated with future operating assumptions and expectations as compared to prior periods. This list is not exhaustive
of the factors that may affect any of AirBoss’ forward-looking information.
All of the forward-looking information in this Annual Report is expressly qualified by these cautionary statements. Investors are
cautioned not to put undue reliance on forward-looking information. All subsequent written and oral forward-looking information
attributable to AirBoss or persons acting on its behalf are expressly qualified in their entirety by this notice. Forward-looking
information contained herein is made as of the date of this press release and, whether as a result of new information, future events
or otherwise, AirBoss disclaims any intent or obligation to update publicly the forward-looking information except as required by
applicable laws. Risks and uncertainties about AirBoss’ business are more fully discussed under the heading “Risk Factors” in our
most recent Annual Information Form and are otherwise disclosed in our filings with securities regulatory authorities which are
available on SEDAR+ at www.sedarplus.com.
AirBoss of America Corp.
A N N U A L R E P O R T
11
OVERALL PERFORMANCE
Recent Highlights
(In US dollars except as otherwise noted)
• Adjusted EBITDA1 in the fourth quarter of 2025 (“Q4 2025”) increased by $3.3 million to $8.4 million compared to $5.1 million
in the fourth quarter of 2024 (“Q4 2024”) and losses increased by $5.0 million to $7.6 million, with the loss primarily attributable
to restructuring initiatives and non-cash asset impairment charges;
• Adjusted EBITDA1 for the year increased by $12.1 million to $34.0 million compared to $21.9 million for full-year 2024 and
losses decreased by $11.8 million to $8.6 million, with the loss primarily attributable to restructuring initiatives and non-cash
asset impairment charges;
• Cash provided by operating activities increased by $16.7 million to $21.0 million in Q4 2025 compared to $4.3 million in Q4 2024;
• Cash provided by operating activities increased by $40.3 million to $49.1 million for full-year 2025 compared to $8.8 million
for full-year 2024;
• Reduced borrowings under our revolving credit facility by $28.4 million since the beginning of the year for a Net Debt to
Adjusted EBITDA ratio1 of 1.99x (4.51x at December 31, 2024); and
• Declared a quarterly dividend of CAD$0.035 per common share.
Selected Financial Information
Three months ended December 31, Year ended December 31,
2025
2024
2025
2024
2023
In thousands of US dollars, except share data
(unaudited)
(unaudited)
Financial results:
Net sales
106,037
91,963
410,203
387,024
426,025
Loss
(7,572)
(2,616)
(8,617)
(20,390)
(41,749)
Adjusted Profit1
145
(1,613)
1,913
(12,536)
(6,424)
Earnings (loss) per share (US$)
– Basic
(0.28)
(0.10)
(0.32)
(0.75)
(1.54)
– Diluted
(0.28)
(0.10)
(0.32)
(0.75)
(1.54)
Adjusted earnings per share1 (US$)
– Basic
0.01
(0.06)
0.07
(0.46)
(0.24)
– Diluted
0.01
(0.06)
0.07
(0.46)
(0.24)
EBITDA1
664
5,105
23,379
15,063
(11,177)
Adjusted EBITDA1
8,401
5,105
33,988
21,914
26,758
Net cash from operating activities
21,026
4,295
49,108
8,780
40,917
Free cash flow1
16,802
1,175
37,254
(1,826)
32,453
Dividends declared per share (CAD$)
0.035
0.035
0.140
0.175
0.370
Capital expenditures
4,413
3,132
12,043
10,632
8,505
Financial position:
Total assets
276,969
309,528
356,656
Debt2
83,766
117,390
131,092
Net Debt1
67,573
98,888
88,213
Shareholders’ equity
115,735
126,010
148,857
Outstanding shares*
27,149,224
27,130,556
27,130,556
*27,149,224 at March 20, 2026
1See Non-IFRS Financial Measures
2Debt includes $8,200 of lease liabilities (2024: $12,011; 2023: $13,890)
MD&A (cont’d)
2025
12
MD&A (cont’d)
NON-IFRS FINANCIAL MEASURES
This MD&A is based on consolidated financial statements prepared in accordance with IFRS accounting standards and uses
Non-IFRS Financial Measures. Management believes that these measures provide useful information to investors in measuring
the financial performance of the Company. These measures do not have a standardized meaning prescribed by IFRS and
therefore they may not be comparable to similarly titled measures presented by other companies and should not be construed
as an alternative to other financial measures determined in accordance with IFRS. These terms are not a measure of performance
under IFRS and should not be considered in isolation or as a substitute for profit or loss under IFRS.
EBITDA and Adjusted EBITDA are non-IFRS measures used to measure the Company's ability to generate cash from operations
for debt service, to finance working capital and capital expenditures, potential acquisitions and to pay dividends. EBITDA is
defined as earnings before income taxes, finance costs, depreciation and amortization. Adjusted EBITDA is defined as EBITDA
excluding impairment costs, acquisition costs, and non-recurring costs. A reconciliation of profit (loss) to EBITDA and Adjusted
EBITDA is below.
Three months ended December 31, Year ended December 31,
2025
2024
2025
2024
2023
In thousands of US dollars
(unaudited)
(unaudited)
EBITDA:
Loss
(7,572)
(2,616)
(8,617)
(20,390)
(41,749)
Finance costs
155
3,144
8,045
12,763
5,233
Depreciation and amortization
4,680
5,188
19,523
21,012
22,345
Income tax expense (recovery)
3,401
(611)
4,428
1,678
2,994
EBITDA
664
5,105
23,379
15,063
(11,177)
Professional fees related to AEP negotiations
–
–
–
–
152
Write-down of inventory
249
–
249
6,049
8,031
Restructuring costs
466
–
1,627
802
3,104
Impairment of assets
7,022
–
8,733
–
26,648
Adjusted EBITDA
8,401
5,105
33,988
21,914
26,758
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 and
$1,711 of impairment charges against a right of use asset and leasehold improvements. In addition, the Rubber Solutions segment
incurred restructuring costs of $480 related to staff reductions. In 2023 and 2024, the Company completed a series of staff reductions.
At December 31, 2025, the Company recognized an impairment related to the defense operation's assets. The carrying amount
of these assets was determined to be higher than its recoverable amount of nil and an impairment loss of $7,022 was
recognized. In 2023, the Company recognized a goodwill impairment related to the defense operations.
In 2025, 2024 and 2023, the Company recorded write-downs of $249, $6,049 and $8,031, respectively, related to its inventory of
medical gowns and/or nitrile gloves due to downward shifts in pricing.
Adjusted profit is a non-IFRS measure defined as profit (loss) before impairment costs, acquisition costs and non-recurring costs.
This measure and Adjusted earnings per share are used to evaluate operating results of the Company. A reconciliation of Profit
(loss) to Adjusted profit and Adjusted earnings per share is below.
Three months ended December 31, Year ended December 31,
2025
2024
2025
2024
2023
In thousands of US dollars
(unaudited)
(unaudited)
Adjusted profit:
Loss
(7,572)
(2,616)
(8,617)
(20,390)
(41,749)
Write-off of deferred finance costs (after tax)
–
1,003
–
1,003
–
Professional fees related to AEP negotiations (after tax)
–
–
–
–
116
Write-down of inventory (after tax)
249
–
249
6,049
6,264
Restructuring costs (after tax)
446
–
1,548
802
2,297
Impairment of assets (after tax)
7,022
–
8,733
–
26,648
Adjusted profit
145
(1,613)
1,913
(12,536)
(6,424)
Basic weighted average number of shares outstanding
27,149
27,131
27,144
27,131
27,118
Diluted weighted average number of shares outstanding
27,639
27,131
27,533
27,131
27,118
Adjusted earnings per share (in US dollars):
Basic
0.01
(0.06)
0.07
(0.46)
(0.24)
Diluted
0.01
(0.06)
0.07
(0.46)
(0.24)
Net Debt measures the financial indebtedness of the Company assuming that all cash on hand is used to repay a portion of the
outstanding debt. A reconciliation of loans and borrowings to Net Debt is below.
In thousands of US dollars
2025
2024
2023
Net debt:
Loans and borrowings - current
5,494
5,002
2,437
Loans and borrowings - non-current
78,272
112,388
128,655
Leases included in loans and borrowings
(8,200)
(12,011)
(13,890)
Cash
(7,993)
(6,491)
(28,989)
Net debt
67,573
98,888
88,213
The Company has a Net Debt to trailing twelve-month Adjusted EBITDA ratio of 1.99x (2024: 4.51x, 2023: 3.30x)
AirBoss of America Corp.
A N N U A L R E P O R T
13
MD&A (cont’d)
Free cash flow is a non-IFRS measure used to evaluate cash flow after investing in the maintenance or expansion of the Company's
business. It is defined as cash provided by operating activities, less cash expenditures on long-term assets. A reconciliation of net
cash from (used in) operating activities to free cash flow is below.
Three months ended December 31, Year ended December 31,
2025
2024
2025
2024
2023
In thousands of US dollars
(unaudited)
(unaudited)
Free cash flow:
Net cash from operating activities
21,026
4,295
49,108
8,780
40,917
Acquisition of property, plant and equipment
(4,233)
(3,077)
(11,144)
(9,902)
(7,256)
Acquisition of intangible assets
(180)
(55)
(899)
(730)
(1,249)
Proceeds from disposition
–
12
–
26
41
Proceeds from government grant
189
–
189
–
–
Free cash flow
16,802
1,175
37,254
(1,826)
32,453
Basic weighted average number of shares outstanding
27,149
27,131
27,144
27,131
27,118
Diluted weighted average number of shares outstanding
27,639
27,331
27,533
27,131
27,439
Free cash flow per share (in US dollars):
Basic
0.62
0.04
1.37
(0.07)
1.20
Diluted
0.61
0.04
1.35
(0.07)
1.18
OVERVIEW
Overall, 2025 represented a marked improvement for AirBoss compared to 2024, despite pronounced economic and geopolitical
headwinds that affected each segment to varying degrees. AirBoss Rubber Solutions (“ARS”), in particular, experienced
significant market softness, partially offset by strong performance at AirBoss Manufactured Products (“AMP”) across both its
defense and rubber-molded products businesses, supported by deliveries under previously announced contracts and footprint
optimization initiatives. Management continued implementing risk-mitigation strategies in response to these challenges, including
cost controls and continuous improvement initiatives.
The Company navigated ongoing uncertainty related to economic conditions, geopolitical developments, tariffs, inflationary
pressures, and supply-chain disruption, while maintaining focus on executing its long-term strategic plan. Given the cross-border
nature of its operations, a significant portion of products manufactured in Canada are sold into the United States and may be
subject to existing or future tariffs. While most products qualify under USMCA/CUSMA, the Company continues to evaluate and
implement contingency plans to mitigate potential impacts, particularly in advance of any future trade negotiations or agreement
renegotiations. Despite this environment of continued economic uncertainty, management remains focused on converting key
opportunities to support sustainable long-term growth. The Company currently expects volume recovery at ARS to commence
midway through 2026, although the timing and magnitude of recovery could be affected by additional tariffs, duties, or evolving
trade restrictions as well as general market conditions and continued geopolitical uncertainties.
ARS experienced continued and pronounced softness in Q4 2025 compared to Q4 2024, with revenue contraction and reduced
margins driven by overall softness in most customer sectors. This was primarily attributable to tariff-related market conditions,
as customers continued to manage potential exposure through the sale of pre-existing inventories. As a segment, ARS continued
to invest in research and development to support enhanced collaboration with customers and remains committed to executing
its strategy focused on specialized products, expanded production of a broader array of specialty compounds, and enhanced
flexibility in attracting and fulfilling new business opportunities.
AMP experienced overall volume improvement in Q4 2025 compared to Q4 2024, primarily driven by its defense products
business and improvements in the rubber molded products business. The defense business had improvements in both revenue
and gross profit, mainly driven by deliveries under recently announced awards. The rubber molded products had improved
volumes in both auto and non-auto sectors, despite continued volatility related to the original equipment manufacturers (OEMs)
periodically shuttering production to rebalance vehicle inventory levels throughout 2025. During the quarter, the Company
substantially completed the relocation of its operations in Jessup, Maryland to Auburn Hills, Michigan in an effort to optimize its
manufacturing footprint. The business continued its focus on cost management, operational efficiencies, automation and
diversification into adjacent product sectors. Management also continued its focus on operational improvements and working with
key customers to leverage opportunities aligned with its growth initiatives.
The Company’s long-term priorities consist of the following:
1. Growing the core Rubber Solutions segment by emphasizing rubber compounding as the core driver for sustainable growth
and productivity, focusing on innovation in custom rubber compounding while aiming to expand market share through organic
and inorganic means, while striving to achieve enhanced diversification by a broadening of product breadth through
technological advancements and investments in specialty compound niches; and
2. Manufactured Products' growth strategy is focused on diversifying and expanding its range of advanced rubber-molded
products while positioning current and future core defense products to take advantage of new growth opportunities within
NATO and other partner customers around the world.
AirBoss continues to focus on these long-term priorities while investing in core areas of the business to expand a solid foundation
that will support long-term growth.
2025
MD&A (cont’d)
RESULTS OF OPERATIONS – For year ended December 31, 2025 compared to 2024
NET SALES
Consolidated net sales for the year ended December 31, 2025 increased by 6.0% to $410,203, compared with 2024 primarily due
to significant increased sales at Manufactured Products’ defense products business and increases in the rubber molded products
business partially offset by decreased sales at Rubber Solutions across most sectors.
Rubber
Manufactured
Inter-segment
In thousands of US dollars
Solutions
Products
net sales
Total
Net Sales
2025
205,247
239,203
(34,247)
410,203
2024
226,351
176,696
(16,023)
387,024
Increase (decrease) $
(21,104)
62,507
(18,224)
23,179
Increase (decrease) %
(9.3)
35.4
113.7
6.0
Rubber Solutions
Net sales in the Rubber Solutions segment decreased by 9.3%, to $205,247 compared with 2024. This was due to softness across
most sectors driven by pronounced and continued economic headwinds. Volume was down 13.0% with decreases across the
majority of sectors.
Tolling volumes for the year ended December 31, 2025 decreased by 59.7% compared with 2024. Non-tolling volumes for the year
ended December 31, 2025 decreased by 11.3% compared with 2024. The overall decrease in volume was across most sectors.
Manufactured Products
Net sales in the Manufactured Products segment increased by 35.4%, to $239,203 compared with 2024. This is primarily due to
higher sales in the defense products business driven by deliveries under new contract awards, and improved sales in the molded
rubber products business.
GROSS PROFIT
For the year ended December 31, 2025, consolidated gross profit increased by 31.6% to $71,069 compared with 2024. Gross
profit as a percentage of net sales increased to 17.3% from 14.0% in 2024. The increase in margin percentage was driven
primarily by margin improvements resulting from the new business awards at AMP's defense products business, by margin
improvement at AMP's rubber molded products business, and a $6,049 inventory write-down in 2024 compared to a $249
write-down in 2025, partially offset by margin contraction in the Rubber Solutions segment due to unfavorable mix and lower
volume across most customer sectors driven by market softness and economic uncertainty partially offset by managing
controllable overhead costs and continuous improvement initiatives.
Rubber
Manufactured
In thousands of US dollars
Solutions
Products
Total
Gross Profit
2025
26,625
44,444
71,069
2024
35,500
18,496
53,996
Increase (decrease) $
(8,875)
25,948
17,073
% of net sales
2025
13.0
18.6
17.3
2024
15.7
10.5
14.0
Rubber Solutions
For the year ended December 31, 2025, gross profit for Rubber Solutions of $26,625 (13.0% of net sales), decreased by $8,875
compared to $35,500 (15.7% of net sales) in 2024. The decrease was primarily a result of unfavorable mix and margin pressure in
addition to decreased tolling and non-tolling volumes compared to the same period in 2024.
Manufactured Products
Gross profit for the year ended December 31, 2025 in the Manufactured Products segment of $44,444 (18.6% of net sales), increased
by $25,948 compared to $18,496 (10.5% of net sales) in 2024. The increase was primarily a result of significant volume and mix
improvements in the defense products business driven by the ongoing delivery of new business awards in addition to improvements
in the rubber molded products business and a $6,049 inventory write-down in 2024 compared to a $249 write-down in 2025.
OPERATING EXPENSES
Consolidated operating expenses for the year ended December 31, 2025 increased by $7,268 to $67,213 compared with 2024.
The increase was primarily due to $8,733 of impairment charges, $825 higher restructuring costs, higher selling costs and bad
debt expense, partially offset by a $3,700 legal settlement, lower legal and administrative expenses, and foreign exchange gain
compared to a loss in the prior year. As a percentage of net sales, operating expenses for the year ended December 31, 2025
increased to 16.4% from 15.5% in 2024.
Rubber
Manufactured
In thousands of US dollars
Solutions
Products
Corporate
Total
Operating Expenses
2025
15,545
39,479
12,189
67,213
2024
16,001
31,216
12,728
59,945
Increase (decrease) $
(456)
8,263
(539)
7,268
% of net sales
2025
7.6
16.5
N/A
16.4
2024
7.1
17.7
N/A
15.5
14
AirBoss of America Corp.
A N N U A L R E P O R T
MD&A (cont’d)
Rubber Solutions
Rubber Solutions' operating expenses for the year ended December 31, 2025 decreased by 2.8%, to $15,545, compared with
$16,001 in 2024. The decrease was primarily due to lower administrative costs, partially offset by restructuring costs of $480 and
a higher bad debt expense.
Manufactured Products
Manufactured Products' operating expenses for the year ended December 31, 2025 increased by 26.5% to $39,479. The increase
was due to $8,733 of impairment charges, higher selling costs related to defense products, $345 higher restructuring costs and a
higher bad debt expense, partially offset by a $3,700 legal settlement, a larger foreign exchange gain compared to a loss in the prior
year, and lower amortization expense.
Unallocated Corporate Costs
Unallocated corporate costs for the year ended December 31, 2025 decreased by $539 from 2024. The decrease was primarily
due to a smaller foreign exchange loss compared to a gain in the prior year, partially offset by higher administrative costs.
FINANCE COST
Finance costs in 2025 were $8,045 (2024: $12,763). The decrease was primarily due to lower overall borrowings, lower interest
rates under the new revolving credit facility, a cost recovery related to an earn-out liability payable to former owners of an
acquired business, and the write-off of deferred finance costs in the prior year.
INCOME TAX EXPENSE
For the year ended December 31, 2025, the Company recorded an income tax expense of $4,428 (2024: expense of $1,678)
for an effective income tax rate of (105.7)% (2024: (9.0)%). The effective tax rates are negative due to the derecognition of
deferred tax assets in 2025 and not recognizing deferred tax assets in 2025 and 2024.
Tax expense/(recovery) Rate
In thousands of US dollars
2025
2024
2025
2024
Expected statutory rate
(1,110)
(4,959)
26.50%
26.50%
Foreign rate differential
462
999
(11.03%)
(5.34%)
Effect of permanent differences
(164)
273
3.92%
(1.46%)
Change in tax rates and new legislation
–
405 –
(2.16%)
Filing differences
(11)
5
0.26%
(0.03%)
Deductible temporary differences not recognized
4,945
4,916
(118.05%)
(26.27%)
Other
306
39
(7.31%)
(0.21%)
Effective tax rate
4,428
1,678
(105.71%)
(8.97%)
LOSS AND LOSS PER SHARE
Net loss in 2025 amounted to $8,617, compared with a loss of $20,390 in 2024. The basic and fully diluted net loss per share was
$0.32 (2024: loss of $0.75). The decreased loss was primarily due to a higher gross profit at AMP's defense products business,
lower finance costs, and a legal settlement in the Company's favour, partially offset by lower profitability at ARS, an impairment
charge, higher restructuring costs, and higher tax expense.
QUA RTERLY INFORMATION
In thousands of US dollars
Earnings (loss) per share
Quarter Ended
Net Sales
Profit (loss)
Basic
Diluted
2025
December 31, 2025
106,037
(7,572)
(0.28)
(0.28)
September 30, 2025
100,420
(2,902)
(0.11)
(0.11)
June 30, 2025
98,637
2,265
0.08
0.08
March 31, 2025
105,109
(408)
(0.02)
(0.02)
2024
December 31, 2024
91,963
(2,616)
(0.10)
(0.10)
September 30, 2024
96,204
(3,279)
(0.12)
(0.12)
June 30, 2024
95,367
(9,568)
(0.35)
(0.35)
March 31, 2024
103,490
(4,927)
(0.18)
(0.18)
15
Fourth Quarter 2025 Results
NET SALES
Consolidated net sales for Q4 2025 increased by 15.3% to $106,037, from $91,963 in Q4 2024, with increases at Manufactured
Products partially offset by Rubber Solutions.
Rubber Solutions
Net sales for Q4 2025 in the Rubber Solutions segment decreased by 3.3% to $45,767, from $47,349 in Q4 2024. The
decrease in net sales for Q4 2025 was primarily due to softness across most sectors. Volume was down 3.5% with
decreases across the majority of sectors. Tolling volume was down 65.0%, while non-tolling volume was down 1.2% driven
by decreases in most sectors. In tolling applications, the Company only realizes net sales on the provision of compounding
services for customer-supplied material, versus non-tolling where AirBoss also supplies the raw material inputs that are
reflected in net sales.
Manufactured Products
Manufactured Products net sales for Q4 2025 increased by 50.4% to $72,451 compared with Q4 2024. The increase was
a result of higher volumes in the defense product business and increases across the rubber molded product lines, despite
continued volume softness and volatility related to OEMs shuttering production to rebalance vehicle inventory levels.
GROSS PROFIT
Consolidated gross profit for Q4 2025 increased to $19,941 (18.8% of net sales) from $15,297 (16.6% of net sales) in Q4
2024, primarily as a result of increased sales at AMP.
Rubber Solutions
Gross profit at Rubber Solutions for Q4 2025 was $5,256 (11.5% of net sales), compared with $5,938 (12.5% of net sales) in
Q4 2024. The decrease in gross profit was principally due to lower volumes across most customer sectors and product mix
partially offset by managing controllable overhead costs and continuous improvement initiatives.
Manufactured Products
Gross profit at Manufactured Products for Q4 2025 increased by $5,326 to $14,685 compared with $9,359 in Q4 2024. The
increase was primarily a result of new business awards at AMP's defense products business, margin improvement at AMP's
rubber molded products business further supported by operational cost improvements in the segment, managing controllable
overhead costs and continuous improvement initiatives.
OPERATING EXPENSES
Consolidated operating expenses for Q4 2025 increased by $8,577 to $23,957, compared with $15,380 in Q4 2024. The
increase was primarily due to the $7,022 impairment charge and $466 of restructuring costs noted above, higher administrative
costs and bad debt expense, partially offset by a foreign exchange gain compared to a loss in the prior year.
INCOME TAX EXPENSE
The Company recorded an income tax expense of $3,401 for Q4 2025 compared with a tax recovery of $611 for Q4 2024. The
change was due to the derecognition of tax deferred assets in 2025.
2025
MD&A (cont’d)
16
AirBoss of America Corp.
A N N U A L R E P O R T
MD&A (cont’d)
LIQUIDITY AND CAPITAL RESOURCES
Overview
The Company expects to fund its 2026 operating cash requirements, including required working capital investments, capital
expenditures and scheduled debt repayments from cash on hand, cash flow from operations and committed borrowing
capacity. The Company’s asset-based revolving line of credit provides financing up to $125,000 (with an accordion of $25,000
upon the satisfaction of customary conditions), 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. As at December 31, 2025, $24,315 was drawn against
the revolving credit facility, from outstanding borrowings of $24,000 plus $315 drawn as a letter of credit.
For the year ended December 31, 2025, $49,108 of cash was provided by operations (2024: $8,780 provided), $11,854 was
used by investing activities (2024: $10,606) and $35,972 was used by financing activities (2024: $20,792). Cash increased
by $1,502 from $6,491 to $7,993, adjusted for the effect of exchange rate fluctuations on cash held.
Operating activities
For the year ended December 31, 2025, cash provided by operating activities increased by $40,328 compared to 2024. The increase
was primarily due to $29,173 more cash from working capital and a reduced loss partially offset by a $4,083 increase in income
tax payments.
Cash provided by working capital for the year ended December 31, 2025 was $22,771 (2024: $6,402 cash used) as a result of the
following factors:
• Cash provided by trade and other receivables was $7,292 due to lower sales at the Rubber Solutions segment, partially offset
by increased receivables related to new defense contracts and automotive business;
• Cash provided by inventories was $6,394, primarily related to lower sales at the Rubber Solutions segment and contract
deliveries for defense contracts in late 2025;
• Cash provided by prepaid expenses was $315 primarily due to lower insurance premiums;
• Cash provided by trade and other payables was $12,424 primarily to support new defense contracts and increased
automotive volumes;
• Cash used for provisions of $3,654 related to the payouts for a legal settlement, restructuring costs and settlement of
performance share units.
Investing Activities
Property, Plant and Equipment
For the year ended December 31, 2025, the following investments were made in each segment:
Rubber Solutions invested $4,528. $288 was invested in growth initiatives, and the balance was invested on cost savings initiatives
and to replace or upgrade existing property, plant and equipment.
Manufactured Products invested $6,616. $1,721 was invested in growth initiatives, $389 on cost savings initiatives and the balance
was invested to replace or upgrade existing property, plant and equipment.
Intangible assets
The Company invested $899 on productivity software and rolling out company-wide enterprise software.
17
2025
MD&A (cont’d)
Financing activities
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 non-financial covenants, including minimum earnings and liquidity, and limitations on capital expenditures, dividend payments
and additional indebtedness.
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 Secured Overnight Financing Rate
(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. In 2024, the Company wrote-off $1,355 of
unamortized deferred financing fees related to the previous credit facility. This write-off was included in finance costs.
Commitments and contractual obligations
The Company’s contractual obligations as at December 31, 2025 are summarized below:
Payments Due In
2026
2027
2028
2029
2030 Thereafter
Total
Revolving line of credit
–
24,000
–
–
–
–
24,000
Term debt
4,240
48,698
–
–
–
–
52,938
Lease liabilities
1,970
2,012
2,113
1,810
173
122
8,200
Purchase obligations
24,822
–
–
–
–
–
24,822
Total
31,032
74,710
2,113
1,810
173
122
109,960
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.
Dividends
A quarterly dividend of $0.035 CAD per share was declared on November 5, 2025 and paid on January 15, 2026. Total dividends
declared during the year were $0.14 CAD per common share compared to $0.175 per common share in 2024.
Outstanding shares
As at December 31, 2025 the Company had 27,149,224 common shares outstanding.
18
AirBoss of America Corp.
A N N U A L R E P O R T
MD&A (cont’d)
TRANSACTIONS WITH RELATED PARTIES
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
5,037
3,218
Share-based payment expense
1,080
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.
FUTURE ACCOUNTING STANDARDS
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.
19
MD&A (cont’d)
2025
20
CRITICAL ACCOUNTING ESTIMATES
The Company’s preparation of consolidated financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, net sales and expenses. The Company’s estimates are based upon historical
experience and on various other assumptions that are believed to be reasonable under the circumstances. The results of the
Company’s ongoing evaluation of these estimates form the basis for making judgments about the carrying value of assets and
liabilities and the reported amounts for net sales and expenses. Actual results may differ from these estimates under different
assumptions. These estimates and assumptions are affected by management’s application of accounting policies.
The Company’s critical accounting policies are those that affect our consolidated financial statements materially and involve a
significant level of judgment by the Company. A summary of the significant accounting policies, including critical accounting
policies, is set forth in note 3 to the consolidated financial statements. The Company’s critical accounting estimates include
valuation of intangible assets and income taxes.
Valuation of Goodwill
The Company reviews and evaluates goodwill for impairment when an indicator of impairment exists in the associated cash-
generating units ("CGUs") or CGU groups, but at least on an annual basis. In determining whether impairment has occurred in
one of the CGUs, management compares the CGU’s carrying value to its recoverable amount based on value in use. Value in
use was determined by the future cash flows generated from the continuing use of the CGU. The calculations are most sensitive
to the discount rate and growth rate. Determination of growth rate is based on a number of assumptions arising from the most
current financial performance of each cash generating unit, the upcoming annual budget for each reporting unit and the historical
variability of earnings. Other factors, such as any foreign exchange volatility and volatility in world markets for raw materials can
also materially alter our expectations. Accordingly, management’s judgment is required to determine whether these factors at any
one point in time and in light of business initiatives, suggest a major change, positive or negative, to the prospects of the business
and, therefore, to the valuation of goodwill. As at December 31, 2025 and 2024, there was no goodwill impairment.
The calculation of value-in-use is most sensitive to the following assumptions:
• Discount rate of 12.3% to 12.7% 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 growth of 8% to 13% and cost of sales growth of 7% to 12% over the forecast period
A one percent change in the discount rate or a 1.0 change in the terminal multiple would not result in an impairment.
Other Long-lived Assets
The Company reviews and evaluates long-lived assets for impairment when events or changes in economic and other
circumstances indicate that the carrying value of such assets may not be fully recoverable. The net recoverable value of an
asset, or cash-generating unit, is calculated as the higher of an asset’s or cash-generating unit’s fair value less costs to sell
and its value in use. Future net cash flows are developed using assumptions that reflect the planned course of action for an
asset given management’s best estimate of the most probable set of economic conditions. Inherent in these assumptions are
significant risks and uncertainties.
At December 31, 2025, the Company recognized an impairment related to the defense operation's intangible assets. The
carrying amount of these assets was determined to be higher than its recoverable amount of nil and an impairment loss of
$7,022 was recognized.
Accounting for Income Taxes
The provision for income taxes is calculated based on the expected tax treatment of transactions recorded in the consolidated
financial statements. The objectives of accounting for income taxes are to recognize the amounts of taxes payable or refundable for
the current year and future tax liabilities and assets for the future tax consequences of events that have been recognized in the
consolidated financial statements or tax returns. In determining both the current and deferred components of income taxes, the
Company interprets tax legislation in a variety of jurisdictions, as well as makes assumptions about the expected timing of the reversal
of deferred tax assets and liabilities and recognition of deferred tax assets is based on a probable criteria. If its interpretations differ
from those of tax authorities or if the timing of reversals is not as anticipated, the provision or relief for income taxes could increase
or decrease in future periods. Additional information regarding our accounting for income taxes is contained in note 16 to the
consolidated financial statements. Deferred tax assets have been recorded relating to loss carry-forward amounts when management
believes it is more likely than not that these will be used before expiration.
AirBoss of America Corp.
A N N U A L R E P O R T
21
MD&A (cont’d)
FINANCIAL INSTRUMENTS
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.
Share price hedge
At December 31, 2025, the Company had contracts to reduce its exposure to the change in its share price on its share-based
compensation costs. 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).
RISK FACTORS
Impact of Economic Cycle
Demand for the Company’s products is highly sensitive to general economic cycles and the economic conditions of the industry
sectors it serves. In addition, a number of our customers' industry sectors are cyclical in nature. The Company is particularly
sensitive to trends in the defense, automotive, tire, energy generation, construction, mining and transportation industries because
these industries are significant markets for the Company’s business and are highly cyclical. In a severe economic slowdown,
prices for coal, copper and other mined materials may fall, affecting demand for conveyor belting, off-road retread tires and other
rubber products manufactured by our customers from rubber compounds manufactured by the Rubber Solutions segment. A
general economic slowdown or deteriorating economic conditions in our customers' specific industry sectors could have a
material adverse effect on our profitability, financial condition and long-term growth prospects.
At Manufactured Products, the timing and size of orders from government defense departments worldwide is highly dependent
on the political climate in the applicable jurisdiction, the broader geopolitical climate and their impact on defense budgeting and
spending; a significant decline in defense budget and spending from current levels could have a material adverse effect on the
profitability, financial condition and long-term growth prospects of Manufactured Products. In particular, the global automotive
industry is also cyclical, with the potential for regional differences in timing of expansion and contraction. A significant decline in
automobile production volumes for the North American market from current levels could have a material adverse effect on the
profitability, financial condition and long-term growth prospects of our Manufactured Products segment.
Political Uncertainty and Policy Change
Certain of the business sectors in which we and our customers operate, both in the Manufactured Products' and Rubber Solutions’
segments, are either highly-globalized industries or industries which rely on the movement of goods between Canada and the
United States. The election of protectionist governments or implementation of protectionist trade policies could negatively impact
the movement of goods, services and people across borders, including within North America. In particular, the recently-enacted
tariffs and the potential for further escalating cross-border tariffs between the U.S. and Canada, as well as other countries, introduces
heightened uncertainty that could materially adversely impact our supply chains, increase production costs, and erode our
competitive positioning.
The recently-introduced tariffs and the potential for further increased tariffs on goods exported from Canada to the U.S. could
significantly raise our production costs and reduce profit margins. Retaliatory tariffs could further disrupt supply chains and restrict
our market access.
"Buy America" policies could limit the Company's ability to secure U.S. government contracts, necessitating changes in supply
chain strategies to comply with local content requirements.
Uncertainty created by rapidly changing political and trade environments may impact our ability to plan effectively for our businesses
over the short- and medium-terms, until such time as policy changes or new laws, if any, are implemented and particularly as tariff
negotiations, retaliatory measures, and evolving regulatory frameworks remain fluid. Such uncertainty may affect plans relating to
establishing operations in new locations (directly or through joint ventures) or potential acquisitions. A material variation between
our planning assumptions and actual outcomes could have a material adverse effect on our profitability, financial condition and long-
term growth prospects.
In addition, certain of the Company’s defense and survivability products may be subject to export control laws and regulations in
the United States, Canada and other jurisdictions, including restrictions administered under applicable export control and sanctions
regimes. These laws and regulations may limit the countries, end-users or end-uses to which products may be sold and may require
the Company to obtain export licenses or other governmental approvals. Changes in export control laws, sanctions programs or
their interpretation, or a failure to comply with applicable requirements, could result in the imposition of fines, penalties, restrictions
on the Company’s ability to export products, suspension or debarment from government contracting, reputational harm or other
material adverse effects on the Company’s business, financial condition and results of operations.
2025
MD&A (cont’d)
22
Raw Materials and Inventory
The Company depends on various outside sources of supply for raw materials used in the production of its products, the price
and availability of which are subject to market conditions. As a result, any shortage of such raw materials could potentially
delay delivery of our products or supplies, increase our costs and decrease our profitability. The Company maintains multiple
supply sources in different areas of the world to mitigate the risk of shortages or price increases experienced in certain, but not
all, markets. However, there can be no assurance that such multiple supply sources can be maintained in the future and multiple
sources cannot overcome a global shortage in a particular raw material, should one occur.
Historically, raw material markets have been extremely volatile with key materials doubling or halving in price within a relatively
short period, and the Company does not expect such volatility to cease. Excess inventory or shortages of raw material could
prove costly to the Company in these markets.
The Company does not have long-term supply contracts with the majority of its suppliers and purchases most raw materials
on a purchase order basis. The price of many raw materials, such as carbon black, synthetic and natural rubber, chemicals for
rubber mixing, steel and silicone is directly or indirectly affected by factors such as exchange rates and the price of oil and, in
the case of natural rubber, weather conditions that impact harvest seasons. Although the Company attempts to pass price
changes in raw materials on to its customers, it may not always be able to adjust its prices, especially in the short term, to
recover the costs of increased raw material prices. Conversely, if raw material prices decrease significantly and rapidly, the
Company may be at risk to recover the cost of any inventory purchased based on demand at higher prices.
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)
Competition and Price Pressure
The Company competes directly against major North American and international companies. Some of these companies have
strong established competitive positions in these markets, including having a direct local presence in international markets
where the Company does not, and may be sheltered by domestic tariffs. In the case of rubber compounding, the industry leader
may have greater resources, both financial and technical, than the Company and has long-standing relationships with some
of the Company’s prospective customers using well-established marketing and distribution networks. Furthermore, the
customers of several industry sectors are price sensitive and thus, certain of the more commodity-like products in our
businesses can be affected by severe price pressure, which in turn could adversely impact our profitability in those areas.
Litigation
In December 2022, a statement of claim was filed in the Ontario Superior Court of Justice against AirBoss and several named
officers. The applicants under the proceeding sought an order for leave to proceed under the Securities Act (Ontario), certifying
the proceeding as a class proceeding and appointing them as representative plaintiffs. The applicants sought, among other
relief, a declaration that the Company made misrepresentations contrary to the Securities Act (Ontario) during a period
extending from November 9, 2021 to September 6, 2022, as well as unspecified damages. In May 2024, the Company
announced that the matter was settled within insurance limits, that none of the defendants admitted any liability, wrongdoing,
or fault as part of the settlement and that it did not result in any direct financial impact to the Company.
In addition to ongoing litigation, the Company may become party to litigation from time to time in the ordinary course of business
which could adversely affect our business. Should any litigation in which the Company becomes involved be determined against
the Company, such a decision could adversely affect the Company’s ability to continue operating and the market price for our
shares, and could require the use of significant resources. Even if the Company is involved in litigation and wins, litigation can
redirect significant Company resources.
AirBoss of America Corp.
A N N U A L R E P O R T
MD&A (cont’d)
23
Contract-related Risks
Contracts from many of our customers, in both operating segments, consist of individual purchase orders or blanket orders under
umbrella supply agreements. In these cases, there is no obligation on any customer to continue to issue individual purchase orders
and most umbrella supply agreements do not impose minimum purchase requirements and also permit the customer to terminate
blanket orders at any time. Customers may also cancel contracts for convenience or due to changes in political or economic
conditions, including geopolitical instability, government budget constraints or shifting procurement priorities. The termination of
blanket orders or other contracts could result in the Company incurring various pre-production, engineering and other costs that we
may not recover from our customers and which could have a material adverse impact on our financial condition and profitability.
In addition, it is difficult to accurately predict when opportunities to win contract awards for defense products and personal protective
equipment from the United States, Canadian or other foreign governments or agencies will arise and how long the contract tender
to award and subsequent commencement of production process will take. A prolonged tender process without a corresponding
award could also result in the Company incurring various pre-production, engineering and other costs that we may not recover and
which could have a material adverse impact on our financial condition and profitability. Obtaining new contract awards from U.S.
government agencies may be adversely impacted by changes in procurement policy including "Buy American" policies.
Customers may also cancel contracts for convenience or due to changes in political or economic conditions, including geopolitical
instability, government budget constraints or shifting procurement priorities. Failing to win new contract awards or losing existing
contracts could have a material adverse impact on our financial condition or profitability.
The Company’s government contracts are subject to applicable procurement laws and regulations, audit rights and compliance
requirements, and any failure to comply with such requirements could result in penalties, contract termination, suspension or debarment.
Financing-Related Risks
The Company’s ability to secure necessary financing on acceptable terms is crucial for day-to-day operations, capital improvements,
strategic initiatives and growth. Failure to obtain, maintain or renew such financing could have a material adverse effect on the
Company’s liquidity, financial position and operations.
The Company's credit facilities require that the Company does not exceed certain ratios, including covenants related to minimum
adjusted EBITDA and liquidity requirements. The Company uses forecasts to project its future compliance with these financial
covenants and has in the past negotiated amendments to these covenants when there was a risk of default. Compliance with these
covenants is dependent on the Company's financial performance, which could be adversely affected by various factors, such as
changes in geopolitical or economic conditions, including tariffs and trade restrictions, operational results and customer contracts.
Should results for any fiscal period not meet the Company’s expectations it may request amendments of these covenants in order
to remain in compliance, though there is no guarantee such a request will be granted by the Company's lenders. Failure to obtain
such amendments could result in the Company’s lenders taking certain actions including acceleration of debt repayment, imposition
of additional restrictive covenants, increased borrowing costs or cross-default risks, which could have a material adverse effect on
the Company’s liquidity, financial position and operations.
In addition, credit availability under the Company's credit facilities is subject to asset-values, cash on hand, accounts receivable and
inventory levels, which could also be impacted by various factors, such as geopolitical or economic conditions, including tariffs and
trade restrictions, operational results and customer contracts. A decrease in credit availability could have a material adverse effect
on the Company's liquidity, financial position and operations.
Currency Exposure
The Company has net sales and expenses denominated in both CAD and USD dollars. In addition, the cost to the Company
of certain key raw materials and other expense items and the competitiveness of prices charged by the Company for its products
will be indirectly affected by currency fluctuations. Changes in the value of the Canadian dollar relative to the US dollar could
have a material positive or adverse effect on the Company’s results of operations.
The Company reviews its currency exposure positions from time to time and reacts accordingly by increasing or decreasing
the proportion of borrowings denominated in CAD funds as a natural balance sheet hedge or establishing forward contracts to
purchase CAD funds to manage its foreign exchange risk related to cash flows. However, there is no assurance that such
strategies will be successful or cost effective and the profitability of the Company’s business could be adversely affected by
currency fluctuations.
The following table approximates the impact on the Company of a 10.0% decrease in the value of one CAD dollar in the
Company’s USD functional currency:
Earnings before tax
In millions of dollars
2025
2024
Sales (1)
(2.1)
(1.7)
Purchases (2)
4.8
5.4
(1) Based upon Canadian dollar-denominated sales
(2) Based upon Canadian dollar-denominated debt repayments, purchases and 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).
24
2025
MD&A (cont’d)
Health, Safety and the Environmental
The Company’s operations are subject to extensive health, safety and environmental (HSE) regulations by federal, provincial,
state and local authorities. The Company employs individuals who undertake manufacturing activity and handle various
substances in its manufacturing process, the nature of which may expose the Company to risks of causing or being deemed liable
for injury or environmental or other damages. The Company regularly assesses its policies and procedures relating to workplace
safety in its production facilities. While its use of potentially hazardous materials is limited, the Company ensures that its
operations are conducted in a manner that minimizes such risks and maintains insurance coverage considered reasonable by
management. To date, no regulatory authority has required the Company to pay any material fines or remediation expenses in
connection with any alleged violation of HSE regulations. However, there can be no assurance that future personal injury or
environmental damage will not occur or that personal injury or environmental damage due to prior or present practices will not
result in future liabilities. While management believes that the Company is in substantial compliance with all material HSE
government requirements relating to its operations, changes in government laws and regulations are ongoing and may make
HSE compliance increasingly expensive. It is not possible to predict future costs, which may be incurred to meet such obligations.
Impacts of Global Health Situations
Global health situations can have an impact on the Company’s operations. The duration and scope of future outbreaks is not
known with any certainty and the Company is unable to accurately project the ultimate impact on the business. However, if
outbreaks continue for an extended period of time, AirBoss may continue to experience supply chain and logistics challenges, in
particular given production delays throughout the world, a decline in sales activities, and reductions in operations and workforce.
Dependence on Key Customers and Contracts
From time to time, a significant portion of the Company’s sales for a given period may be represented by a relatively small number
of customers. Net sales from five customers represented 31% of consolidated net sales in 2025 (2024: 30%). While the Company
continues to work on diversification of its customer base in all segments, there is no assurance of continued success and shifts in
market share away from these top customers could adversely impact our profitability.
Product Liability and Warranty Claims
As a manufacturer of rubber-based and other products, products which are used in vehicles and products which are worn by
individuals in the defense and first responder communities, the Company faces a risk of product liability and warranty claims from
its direct customers and, in some cases, from end-users of its products. Although the Company carries commercial general liability
insurance of the types, and in the amounts it believes to be reasonable by industry standards, any claim which is successful and
is not covered by insurance or which exceeds the policy limit could have a material adverse effect on the Company and its results.
Capacity and Equipment
Our rubber compounding facilities have an annual capacity to process over 500 million turn pounds.
The Company remains committed to continuous maintenance and upgrading of its equipment. Critical equipment remains not only
in a high state of repair, but is also technologically up to date so that the Company is able to ensure the reliability of supply to its
customers at competitive prices and at a high quality standard.
The Company has made regular investments in capacity and efficiency across its operations and should additional equipment be
required to fulfill any substantial increases in sales, the Company expects that it can be readily sourced in the market; however, any
material failure of our equipment or inability to purchase additional required equipment could have a material adverse effect on the
Company.
Production Disruptions
Our production facilities, and those of our subcontractors and suppliers, are subject to risk of shut-down caused by fire, natural
disaster or other catastrophic event, pandemic, labour conflicts or other forces or events beyond our control, or could result from a
disruption of supply of source materials from suppliers and sub-suppliers. Any prolonged shut-down of one or more of our production
facilities or that of our subcontractors could result in a materially negative impact on our profitability.
Intellectual Property
The Company relies on patents, trade secrets, confidentiality agreements and other contractual protections to safeguard its
proprietary technologies, formulations, product designs and manufacturing processes. These measures may not prevent
unauthorized use or disclosure of proprietary information. In addition, the Company may be subject to claims alleging infringement
of third-party intellectual property rights. Any failure to adequately protect its intellectual property or any adverse determination in
such claims could have a material adverse effect on the Company’s business, financial condition and results of operations.
A N N U A L R E P O R T
25
MD&A (cont’d)
AirBoss of America Corp.
Climate Change Risks
Extreme weather events and natural disasters
Extreme weather events such as floods and windstorms and other natural disasters caused by climate change could cause
catastrophic destruction to some of our or our suppliers’ facilities, interrupt the Company’s and its suppliers’ and customers’
operations and activities and interrupt the ability of raw materials and finished products to be received from suppliers and delivered
to customers (physical risks), which could in turn disrupt our production and/or prevent us from supplying products to our
customers. Climate change may also have indirect effects on the Company’s business by increasing the cost of (or making
unavailable) property insurance on terms the Company finds acceptable, as well as increasing the costs of maintenance, capital
replacement and expansion, energy, water and other services at the Company’s facilities. In addition to physical risks associated
with climate change, the potential future requirements that could be imposed by external stakeholders in the transition to a net-
zero economy (transition risk) may also impact the Company’s business operations. While we conduct risk assessments of our
facilities and have implemented mitigation strategies to address, such as insurance policies which protect against property damage
and business continuity risk, where practical, physical risks related to extreme weather events or natural disasters and the
frequency and severity of any such event can vary by region and cannot be predicted. A catastrophic destruction of our facilities
or those of our suppliers could have a material adverse effect on our operations and profitability.
Reputational risks
As public awareness and concern about climate change increases, consumer preferences are rapidly evolving towards
environmentally friendly and sustainable products. There is a risk that we may face reputational challenges if our products or
processes are perceived as harmful to the environment or lagging behind our peers in sustainability practices. In addition, there
is a growing emphasis on sustainable and responsible investment criteria by institutional and retail investors that could impact our
Company's attractiveness to investors. Failure to meet these evolving criteria may result in a revaluation of our Company by the
market, potentially affecting our stock price and access to capital.
Market Risks
Climate change poses risks to the stability and cost-efficiency of our global supply chain. Extreme weather events, such as floods,
hurricanes, and droughts, can disrupt production and logistics, leading to increased costs and delays. These disruptions could
impact our ability to meet customer demand and maintain competitive pricing. In addition, regulatory and societal shifts towards
a low-carbon economy could significantly alter demand for certain materials and products. Our Company may face risks associated
with shifts in demand for our products, particularly if we are unable to adapt our offerings to align with market transitions towards
sustainable alternatives.
Policy Risks
The introduction of new regulations aimed at reducing carbon emissions and greenhouse gas emissions, such as carbon pricing
mechanisms, emissions trading schemes, and stricter environmental standards, could result in significant compliance costs.
Management believes that the Company is in substantial compliance with all material environmental regulations relating to its
operations however changes to these regulations are ongoing and accordingly may make compliance increasingly expensive.
These costs may impact our profitability and require substantial capital investments to adapt our operations and products. In
addition, the Company faces the risk that certain chemicals and raw materials which are used in the manufacturing of rubber
compounds could be restricted or prohibited from use, which the Company would have to mitigate by finding alternatives, which
could in turn increase the costs of its products and make them less attractive to customers. Further, the global transition to a low-
carbon economy could impose additional regulatory compliance costs if our business model, operations, or products do not align
with emerging regulatory requirements or incentives for low-emission technologies, which could affect our competitive positioning
and necessitate significant strategic adjustments.
Catastrophic Events
AirBoss has operations and facilities which manufacture products in Canada and the United States. Natural events (such as a
hurricane or major earthquake), terrorist attack, pandemics, epidemics, outbreaks of an infectious disease or similar events or other
catastrophic events, including adverse weather events associated with global climate change which have increased in severity
and frequency in recent years, could cause delays in developing, manufacturing or selling products. Although AirBoss conducts
risk assessments and implements mitigation, such as property and business continuity insurance, and third-party supplier
monitoring, such events that occur in major markets where AirBoss sells products could reduce the demand for our products in
those areas and, as a result, impact our sales into those markets. In either case, any such disruption could have a material adverse
effect on the Company’s business, financial condition and results of operations.
2025
MD&A (cont’d)
26
IT/Cybersecurity Risks
Although we have established and continue to enhance security controls intended to protect our IT systems and infrastructure,
there is no guarantee that such security measures will be effective in preventing unauthorized physical access or cyber-attacks.
A significant breach of our IT systems could: result in theft of funds; cause disruptions in our manufacturing operations; lead to
the loss, destruction or inappropriate use of sensitive data; or result in theft of our, our customers’ or our suppliers’ intellectual
property or confidential information. The occurrence of any of the foregoing could adversely affect our operations and/or reputation,
and could lead to claims against us that could have a material adverse effect on our profitability.
Acquisitions and Integration
As part of our growth strategy, we will continue to pursue acquisitions in areas we have identified as consistent with such strategy.
However, there can be no assurance that we will identify suitable targets for acquisition or be able to acquire suitable targets
successfully. In addition, there is also a risk that the Company may not be able to successfully integrate any acquisition or achieve
all or any of the anticipated synergies of such acquisitions or to do so within the anticipated timelines, any of which could adversely
impact our profitability and financial condition.
Key Personnel
The Company’s future success largely depends on its ability to recruit, retain and develop qualified managers and other key
personnel. If key persons leave the Company and successors cannot be recruited or if the Company is unable to attract qualified
personnel, this could have a negative impact on our profitability and financial condition.
DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the fiscal year of the Company, an evaluation was carried out under the supervision of and with the participation
of the Company’s management, including our Chairman & co-CEO, President and co-CEO, and CFO, of the effectiveness of our
disclosure controls and procedures. Based on that evaluation, our Chairman & co-CEO, President and co-CEO, and CFO concluded
that the design and operation of our disclosure controls and procedures were effective as of December 31, 2025, the end of the
period covered by management’s discussion and analysis, to ensure that material information relating to the Company and its
consolidated subsidiaries would be made known to them by officers within those entities.
The Company’s Chairman & co-CEO, President and co-CEO, and CFO are responsible for establishing and maintaining the
Company’s disclosure controls and procedures. The Disclosure Committee, composed of senior managers of the Company, assists
the Chairman & co-CEO, President and co-CEO, and CFO in evaluating the information and appropriateness of material subject
to public disclosure.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
During the most recent period, there have been no changes in the Company’s existing policies and procedures and other
processes that comprise its internal control over financial reporting, that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial reporting.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
Management has designed internal controls over financial reporting to provide reasonable assurance regarding the reliability
of the Company’s financial reporting and its compliance with IFRS in its consolidated financial statements. The Chairman & co-
CEO, President and co-CEO, and CFO have supervised management in the evaluation of the design and effectiveness of the
Company’s internal controls over financial reporting as at December 31, 2025 and believe the design and effectiveness of the
internal controls to be effective.
AirBoss of America Corp.
A N N U A L R E P O R T
27
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
2025
28
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.
AirBoss of America Corp.
A N N U A L R E P O R T
29
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.
2025
30
Auditors’ 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
AirBoss of America Corp.
A N N U A L R E P O R T
31
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 35 to 59 are an integral part of these consolidated financial statements.
Commitments and contingencies (note 18).
On behalf of the Board
P.G. Schoch
Robert L. McLeish
Director
Director
2025
Consolidated Statements of Loss and Comprehensive loss
32
For the year ended December 31
In thousands of US dollars
Note
2025
2024
Net Sales
410,203
387,024
Cost of sales
5
(339,134)
(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 35 to 59 are an integral part of these consolidated financial statements.
AirBoss of America Corp.
A N N U A L R E P O R T
Consolidated Statements of Changes in Equity
33
Attributable to equity holders of the Company
Share
Contributed
Retained
Total
In thousands of US dollars
Capital
Surplus
Earnings
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
Share
Contributed
Retained
Total
In thousands of US dollars
Capital
Surplus
Earnings
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 35 to 59 are an integral part of these consolidated financial statements.
2025
Consolidated Statements of Cash Flows
34
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 35 to 59 are an integral part of these consolidated financial statements.
AirBoss of America Corp.
A N N U A L R E P O R T
35
Notes to Consolidated Financial Statements ("CFS")
For the years ended December 31, 2025 and 2024
(Amounts in thousands of US dollars, except 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
(a) 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.
(b) 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.
(c) 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.
Notes to CFS (cont’d)
2025
36
(d) 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.
(a) Basis of consolidation
(i) 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.
(ii) 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.
(b) Foreign currency
(i) 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.
(ii) 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.
(c) Financial instruments
(i) 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.
AirBoss of America Corp.
A N N U A L R E P O R T
Notes to CFS (cont’d)
37
(ii) 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.
(iii) 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.
(iv) 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.
(d) Property, plant and equipment
(i) 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.
(ii) 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.
(iii) 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.
(e) Intangible assets
(i) 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.
2025
Notes to CFS (cont’d)
(ii) 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.
(iii) 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.
(iv) 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.
(v) 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
(f) 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.
(g) Employee benefits:
(i) 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 long-term 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.
(ii) 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:
(a) Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of
other participating employers.
(b) If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the
remaining participating employers.
(c) 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.
38
AirBoss of America Corp.
A N N U A L R E P O R T
Notes to CFS (cont’d)
(h) 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.
(i) Net Sales:
(i) 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.
(ii) 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.
(j) 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.
(k) 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.
(l) 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.
(m)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.
(n) 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.
39
40
2025
Notes to CFS (cont’d)
(o) 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.
(p) 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.
A N N U A L R E P O R T
41
Notes to CFS (cont’d)
AirBoss of America Corp.
NOTE 4 TRADE AND OTHER RECEIVABLES
December 31
2025
2024
Trade receivables
62,469
68,035
Less: expected credit loss
(1,355)
(187)
61,114
67,848
Other receivables
1,254
1,660
62,368
69,508
Impairment losses
The aging of trade receivables at the reporting date was:
2025 2024
December 31
Gross
Impairment
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.
2025
42
Notes to CFS (cont’d)
NOTE 6 PROPERTY, PLANT AND EQUIPMENT
Land and
Plant and
Furniture
Under
buildings1
equipment1
and equipment1
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
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
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
Depreciation for the period
3,747
8,317
293
–
12,357
Impairment
1,711
–
–
–
1,711
Disposals
(5,847)
(1,686)
(74)
–
(7,607)
Balance at December 31, 2025
28,359
94,956
2,978
–
126,293
(1) includes right of use assets. See note 7 for additional details.
Land and
Plant and
Furniture
Under
Carrying amounts
buildings
equipment
and equipment
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.
AirBoss of America Corp.
A N N U A L R E P O R T
43
Notes to CFS (cont’d)
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
–
523
523
Disposals
(4,517)
(640)
(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
2025
44
Notes to CFS (cont’d)
NOTE 8 INTANGIBLE ASSETS
Brands,
Software and
Customer
Patents and
Development
Goodwill
Relationships
Trademarks
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
–
–
–
899
899
Tax credits
–
–
–
(258)
(258)
Transfers
–
–
–
–
–
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
–
3,406
2,638
1,122
7,166
Impairment
–
–
5,990
–
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
14,864
14,864
AirBoss Manufactured Products - rubber molded products CGU group
10,065
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.
AirBoss of America Corp.
A N N U A L R E P O R T
45
Notes to CFS (cont’d)
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 loans1
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.
2025
46
Notes to CFS (cont’d)
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
AirBoss of America Corp.
A N N U A L R E P O R T
Notes to CFS (cont’d)
47
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 non-financial 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
2025
48
Notes to CFS (cont’d)
NOTE 13 PROVISIONS
Contingent liability
from acquisition
Legal and
of AMP
other
Restructuring
PSUs
defense 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
–
–
–
–
–
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 share 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.
AirBoss of America Corp.
A N N U A L R E P O R T
49
Notes to CFS (cont’d)
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:
Options
Weighted
Options
outstanding
average
exercisable
Exercise price ($CAD)
Quantity
contract life
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
Weighted average
Weighted average
exercise price
exercise price
Quantity
($CAD)
Quantity
($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
2025
50
Notes to CFS (cont’d)
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
$1.34
$2.36
Share price at grant date
$3.79
$5.79
Exercise price
$3.84
$5.91
Expected volatility (weighted average volatility)
52.5%
53.2%
Option life (expected weighted average life)
5 years
5 years
Expected annual dividend rate
3.7%
2.4%
Risk-free interest rate (based on government bonds)
2.7%
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).
AirBoss of America Corp.
A N N U A L R E P O R T
51
Notes to CFS (cont’d)
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)
(8,617)
(20,390)
Denominator for basic and diluted earnings per share:
Basic weighted average number of shares outstanding
27,144
27,131
Diluted weighted average number of shares outstanding
27,144
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
(1,110)
(4,959)
Foreign tax differential
462
999
Effect of permanent differences
(164)
273
Change in tax rates and new legislation
–
405
Difference arising on filing and assessments
(11)
5
Deductible temporary differences not recognized
4,945
4,916
Other
306
39
Total expense
4,428
1,678
The components of the provision for income taxes are as follows:
Current
2,807
1,661
Deferred
1,621
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
3,939
8,219
Equity compensation
683
435
Capital assets
1,580
1,895
Reserve
7,856
5,578
Other
219
177
14,277
16,304
Deferred income tax liabilities:
Reserve
(16)
(87)
Capital assets
(9,037)
(9,421)
Other
(220)
(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
7,500
9,702
Deferred income tax liabilities
(2,496)
(3,077)
Net
5,004
6,625
2025
52
Notes to CFS (cont’d)
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
2024
Gross amount
Tax effect
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.
AirBoss of America Corp.
A N N U A L R E P O R T
53
Notes to CFS (cont’d)
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
385
441
Current service cost
1
1
Interest cost
18
19
Benefit payment
(38)
(43)
Actuarial gain
(6)
2
Foreign currency translation
19
(35)
379
385
At December 31
Amounts recognized in the Consolidated Statement of Loss:
Post-retirement benefits expense
(4)
3
Interest cost
18
19
Foreign currency translation
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
CPM
mortality table
mortality table
projected
projected
with scale MI-
with scale MI-
2017 for the
2017 for the
private sector
private sector
2025
54
Notes to CFS (cont’d)
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
(33)
(34)
Effect of a decrease in 1%
Post-employment benefit obligation
41
42
Mortality Sensitivity Analysis
Effect of an increase of 10% on mortality rates
Post-employment benefit obligation
(3)
(5)
Effect of a decrease of 10% on mortality rates
Post-employment benefit obligation
3
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.
AirBoss of America Corp.
A N N U A L R E P O R T
55
Notes to CFS (cont’d)
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.
Rubber
Manufactured
Unallocated
For the year ended December 31
Solutions
Products
Corporate costs
Total
2025
2024
2025
2024
2025
2024
2025
2024
Segment net sales
205,247
226,351
239,203
176,696
–
–
444,450
403,047
Inter-segment net sales
(20,473)
(15,423)
(13,774)
(600)
–
–
(34,247)
(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.
2025
2024
For the year ended December 31
Net sales
Non-current assets
Net sales
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
2025
56
Notes to CFS (cont’d)
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
5,037
3,218
Share-based payment expense
1,080
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)
AirBoss of America Corp.
A N N U A L R E P O R T
57
Notes to CFS (cont’d)
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:
Earnings before tax
in millions of dollars
2025 2024
Sales (1)
(2.1)
(1.7)
Purchases (2)
4.8
5.4
(1) Based upon Canadian dollar-denominated sales
(2) 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
275
312
Financial liabilities
(8,200)
(11,973)
Variable rate instruments
Financial liabilities
(75,566)
(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.
2025
58
Notes to CFS (cont’d)
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.
The Company manages liquidity by maintaining adequate cash balances, having appropriate lines of credit available and
monitoring cash requirements to meet expected operational expenses, including debt service and capital requirements. In
addition, the Company maintains a facility permitting the Company an accordion feature of up to an additional $25,000
availability, upon the satisfaction of customary conditions for such features. At year end, the Company had cash of $7,993 and
had drawn $24,315 against its $125,000 revolving credit facilities (2024: cash of $6,491 and drawn $52,665 drawn against its
$100,000 revolving credit facilities).
Fair value of financial instruments
The Company’s financial instruments consist of cash, trade and other receivables, share purchase loans, trade and other payables,
interest rate swap, revolving line of credit, other debt, and foreign exchange hedges. The fair values of cash, trade and other
receivables, share purchase loans, trade and other payables, contingent consideration, interest rate swap and foreign exchange
hedges, as recorded in the consolidated statement of financial position approximate their carrying amounts due to the short-term
maturities of these instruments. The fair value of the revolving line of credit and leases have been discounted using current market
interest rates.
The carrying value and fair value are as follows:
Fair value
Total
Amortized
through profit
carrying
Total fair
December 31, 2025
cost
and loss
amount
value
Cash
7,993
–
7,993
7,993
Trade and other accounts receivable
62,276
–
62,276
62,276
Foreign exchange hedge
–
92
92
92
Share purchase loans
275
–
275
275
Total financial assets
70,544
92
70,636
70,636
Trade and other payables
70,288
–
70,288
70,288
Share price hedge
–
422
422
422
Loans and borrowings
83,766
–
83,766
84,893
Contingent consideration
–
307
307
307
Total financial liabilities
154,054
729
154,783
155,910
AirBoss of America Corp.
A N N U A L R E P O R T
59
Notes to CFS (cont’d)
Fair value
Total
Amortized
through profit
carrying
Total fair
December 31, 2024
cost
and loss
amount
value
Cash
6,491
–
6,491
6,491
Trade and other accounts receivable
69,470
–
69,470
69,470
Interest rate swap
–
38
38
38
Share purchase loans
312
–
312
312
Total financial assets
76,273
38
76,311
76,311
Trade and other payables
56,413
–
56,413
56,413
Foreign exchange hedge
–
586
586
586
Share price hedge
–
535
535
535
Loans and borrowings
117,428
–
117,428
118,776
Contingent consideration
–
2,249
2,249
2,249
Total financial liabilities
173,841
3,370
177,211
178,559
The fair values of the share purchase loans and revolving line of credit have been based on market interest rate (level 2) in 2025
and 2024. The Company has not disclosed the fair values for financial instruments (trade and other receivables and other liabilities)
as their carrying amounts approximate their fair values (level 1). There were no reclassifications between classes of financial assets
and financial liabilities in 2025 and 2024. There were no transfers between levels of the fair value hierarchy in 2025 and 2024.
Capital Management
The Company has defined its capital as follows:
December 31
2025
2024
Loans and borrowings
83,766
117,390
less: leases included in loans and borrowings
(8,200)
(12,011)
less: cash
(7,993)
(6,491)
Net debt
67,573
98,888
Shareholders’ equity
115,735
126,010
183,308
224,898
Net Debt measures the financial indebtedness of the Company assuming that all cash on hand is used to repay a portion of the
outstanding debt.
The Company's business is cyclical and it experiences significant changes in cash flow over the business cycle. In addition, the
Company's financial performance can be materially influenced by changes in the relative value of the CAD and USD.
The Company's fundamental objective in managing capital is to ensure adequate liquidity and financial flexibility at all times, but
particularly at the bottom of the business cycle and in a strong Canadian dollar environment. The Company constantly monitors
and assesses its financial performance in order to ensure that its net debt levels are prudent, taking into account the anticipated
direction of the business cycle. When reviewing financing decisions, the Company considers the impact of debt and equity
financing on its existing and future shareholders.
The Company has a revolving line of credit facility that provides liquidity and flexibility when capital markets are restricted. The
facility provides for maximum borrowings of up to $125,000 (increased from $100,000 in January 2025). As of December 31,
2025, the total available borrowing capacity under this facility was $71,532, with $24,315 drawn.
Key management own 20.4% of the outstanding shares of the Company. Each Director is required to hold common shares
and/or DSUs valued, at the time(s) of purchase or issuance, as applicable, at three times the annual base cash retainer
entitlement. Directors have a period of five years from the date of their election to the Board to achieve the minimum shareholding
requirement. There is no plan to extend availability of options beyond key management and senior employees. The Company
has a dividend policy to provide an additional return to shareholders; the decision to pay dividends is reviewed quarterly.
The Company’s term loan requires the Company to have cash plus undrawn revolving line of credit of at least $10,000, tested monthly.
NOTE 23 OTHER INCOME AND EXPENSES
In 2024, a court ruled in the Company’s favor and awarded approximately $3,500 in damages plus interest. The Company settled
the matter in 2025 for $3,700. The Company incurred $676 in legal fees pursuing this legal action over the course of several years.
During 2025, the Company had foreign exchange gains of $418 (2024: $767 loss).
Board of Directors
P. Grenville Schoch
Chairman and Co-Chief Executive Officer,
AirBoss of America Corp.
Aurora, Ontario
Stephen Ryan (2) (3)
Washington, D.C.
David Camilleri (1)
Waterloo, Ontario
Anita Antenucci
Upperville, Virginia
Robert L. McLeish (1) (2) (3)
Port Carling, Ontario
Maxime Robillard (1)
Saint-Basile-le-Grand, Quebec
Alan J. D. Watson (1) (2) (3)
Sydney, Australia
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of Corporate Governance Committee
2025
Corporate Information
60
AirBoss of America Corp.
A N N U A L R E P O R T
Corporate Information
Solicitors
Davies Ward Phillips & Vineberg LLP
Toronto, Ontario
Auditors
KPMG LLP
Hamilton, Ontario
Transfer Agent And Registrar
Computershare Investor Services, Inc.
Toronto, Ontario
Stock Symbol - Toronto Stock Exchange: BOS
Stock Symbol - OTCQX: ABSSF
Website Address: www.airboss.com
Email Address: info@airboss.com
Our Annual Meeting is Thursday, May 7, 2026
at 11:00am at Westmount Golf & Country Club,
50 Inverness Dr., Kitchener, Ontario
CORPORATE OFFICE
AirBoss of America Corp.
16441 Yonge Street
Newmarket, Ontario, Canada L3X 2G8
Telephone: 905-751-1188
Facsimile: 905-751-1101
Chairman and Co-Chief Executive Officer:
P. G. (Gren) Schoch
President and Co-Chief Executive Officer:
Chris Bitsakakis
Chief Financial Officer:
Frank Ientile
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