Mr. Peter Shippen reports

PARAGON ADVANCED LABS REPORTS Q2 2026 RESULTS

Paragon Advanced Labs Inc. today released its financial and operating results for the three and six months ended June 30, 2026.

Paragon generated quarterly revenue of $4.1-million during the second quarter of 2026, an increase of approximately 85 per cent from $2.2-million in the first quarter of 2026 and more than five times the revenue of $800,000 in the second quarter of 2025.

Increased laboratory utilization translated into improved gross profitability. The company generated gross profit of $419,175, representing a gross margin of approximately 10.3 per cent, compared with a gross loss of $217,217 in Q1 (first quarter) 2026.

"The second quarter provided clear evidence of the operational leverage in our business. Revenue increased 85 per cent from Q1, we moved into positive gross profit and we still have significant available capacity to support further growth. With recently announced commercial wins, we expect the momentum to continue into the second half of the year," said Peter Shippen, chief executive officer of Paragon.

The company continues to optimize operations to better manage costs, including labour and staffing, the utilization of third party services, and other items such as freight and consumables.

For the six months ended June 30, 2026, revenue totalled $6.3-million, representing an increase of approximately 142 per cent compared with $2.6-million during the corresponding period in 2025. The increase demonstrates continued growth in customer demand, expanded operational capacity and increasing utilization of the company's testing facilities.

Further, for the six months ended June 30, 2026, the company generated a gross profit of $200,000, compared with a gross loss of $100,000 during the same period in 2025, reflecting the company's transition toward positive operating leverage as revenue continue to grow.

The company temporarily outsourced certain sample preparation activities during Q2 as personnel were recruited and trained and internal capacity was expanded. This contributed to increased sample preparation and freight costs during the period. Management expects these costs to moderate as additional internal sample preparation capacity becomes available.

Net loss from operations for the six months ended June 30, 2026, included depreciation on leased and other assets of $2.4-million, finance costs of $2.7-million, and $1.1-million of non-recurring professional fees related to capital markets guidance and advisory fees.

IFRS 16 (international financial reporting standards) lease accounting and cash cost context

Because Paragon leases rather than owns its PhotonAssay machines, standard IFRS accounting treatment creates a presentation that requires context to interpret correctly. Paragon believes it is important that investors understand the accounting treatment associated with its PhotonAssay fleet and other leased assets.

The company recognizes right-of-use assets and corresponding lease liabilities for its leased PhotonAssay units in accordance with IFRS 16. Accordingly, the company's income statement recognizes depreciation of the ROU assets and interest expense on the related lease liabilities. The related lease payments are presented in the statement of cash flows in accordance with the company's accounting policy.

For the second quarter:

• Cost of sales included approximately $789,000 of depreciation.
• Finance expense included approximately $1.28-million of lease interest.
• The company made approximately $1.89-million of actual cash lease payments.

The lease payment amount includes PhotonAssay units, as well as certain facility, equipment and other leases, and therefore should not be viewed as a direct substitute for the depreciation included in cost of sales. Management believes investors should consider both the reported IFRS results and the company's actual lease cash obligations when assessing the operating economics and cash requirements of the laboratory platform.

Operating developments

During Q2, Paragon continued to increase its operational capacity across North America. The company's Thunder Bay sample preparation facility, which commenced operations in April, 2026, continued to ramp up during the quarter. Expansion of the Sparks, Nev., geochemistry laboratory also progressed and is expected, once completed, to more than double the geochemical analytical capacity at that facility.

Subsequent to the quarter-end, Paragon entered into a memorandum of understanding with McEwen Inc., contemplating an advanced laboratory and PhotonAssay facility supporting McEwen's Gold Bar operations in Nevada, with potential future facilities in Timmins, Ont., and Mexico. Under the contemplated Nevada arrangement, McEwen would finance the land and construction of the laboratory buildings, with Paragon responsible for operating the commercial laboratory.

The company also appointed John Pizimolas as chief commercial officer effective Aug. 24, 2026. His prior experience includes senior commercial roles at SGS, ALS, Bureau Veritas, Veracio and Chrysos Corp.

Shares for debt

The company further announces its intention to settle an aggregate of approximately $835,884 of indebtedness through the issuance of common shares of the company at a deemed price of $3.10 per share.

The indebtedness relates to consulting services provided to the company. The company has determined that it is in its best interests to settle the indebtedness through the issuance of shares in order to preserve its cash for working capital and continuing operations.

The proposed debt settlement remains subject to all required regulatory approvals, including the approval of the TSX Venture Exchange.

Any shares issued pursuant to the debt settlement will be subject to a statutory hold period of four months and one day from the date of issuance in accordance with applicable securities laws and the policies of the TSX-V.

As part of its continuing efforts to prudently manage shareholder dilution, the company intends to cancel an aggregate of 253,400 previously granted restricted share units (RSUs), subject to the terms of the company's equity incentive plan and any required regulatory approvals.

We seek Safe Harbor.