Highmark Interactive Inc. — Interim / Quarterly Report 2022

Nov 29, 2022

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Condensed Interim Consolidated Financial Statements of

HIGHMARK INTERACTIVE INC.

(formerly Stormcrow Holdings Corp.)

(Unaudited)

For the three and nine months ended September 30, 2022

Management’s Comments on Unaudited Condensed Interim Consolidated Financial Statements

The accompanying unaudited condensed interim consolidated financial statements of Highmark Interactive Inc. for the three and nine months ended September 30, 2022 have been prepared by management, reviewed by the Audit Committee and approved by the Board of Directors of the Company.

In accordance with National Instrument 51-102, Continuous Disclosure Obligations of the Canadian Securities Administrators, the Company herewith discloses that the accompanying unaudited condensed interim consolidated financial statements have not been reviewed by an auditor.

HIGHMARK INTERACTIVE INC.

Condensed Interim Consolidated Statements of Financial Position (Unaudited - Expressed in Canadian dollars)

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HIGHMARK INTERACTIVE INC.

Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Unaudited - Expressed in Canadian dollars)

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HIGHMARK INTERACTIVE INC.

Condensed Interim Consolidated Statements of Changes in Equity (Unaudited - Expressed in Canadian dollars)

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HIGHMARK INTERACTIVE INC.

Condensed Interim Consolidated Statements of Cash Flows

(Unaudited - Expressed in Canadian dollars)

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HIGHMARK INTERACTIVE INC. Notes to the Condensed Interim Consolidated Financial Statements (Expressed in Canadian dollars) For the three and nine months ended September 30, 2022

1. Nature of operations and going concern

Highmark Interactive Inc. (formerly Stormcrow Holdings Corp.) (the “Company”) was incorporated November 6, 2019 pursuant to the provisions of the Business Corporations Act (Ontario).

The Company was previously carrying on business as a Capital Pool Corporation (“CPC”), as such term is defined in TSX Venture Exchange Inc. (the “Exchange”) Policy 2.4 – Capital Pool Companies (“CPC Policy 2.4”). The Company’s principal purpose was the identification, evaluation and acquisition of assets, properties or businesses or participation therein subject, in certain cases, to shareholder approval and acceptance by the Exchange.

On November 11, 2021, the Company incorporated a wholly owned subsidiary under the Business Corporations Act (Ontario), 2845009 Ontario Inc. (“Subco”), for the sole purpose of completing the proposed Qualifying Transaction. The Qualifying Transaction was completed on November 11, 2021 by way of a three-cornered amalgamation, pursuant to which Subco amalgamated with Highmark Innovation Inc (“Highmark”) and the Company, which now holds the assets of Highmark Innovations as a wholly-owned subsidiary, changed its name to Highmark Interactive Inc. Immediately prior to the close of the Qualifying Transaction, the Company consolidated its common shares on a 6 to 1 basis (the “Share Consolidation”). The Share Consolidation has been applied retrospectively in the consolidated financial statements, including a share exchange in connection with the Qualifying transaction of 1.40235 post-consolidation shares of the Company for every one share of Highmark, and as a result, the common shares (the “Common Shares”), broker warrants and option amounts of the Company presented herein are stated in an adjusted post-share consolidation basis. Upon the close of the Qualifying Transaction, the Company successfully became listed on Tier 1 of the TSX Venture Exchange under the symbol “HMRK”.

The Company delivers best-in-class digital health tools and hybrid clinical care solutions focused on human neurological and psychological function. The corporate office address is 323 Kerr Street, Suite 209, Oakville Ontario L6K 3B6.

The subsidiaries of the Company include:

Entity	% of ownership
Highmark Innovations Inc.	100%
Highmark Interactive (US) Inc.1	100%
BrainFx Inc.	100%
BrainFx USA Inc.1	100%
Highmark Health Corporation	100%
Highmark Health Mississauga	100%
Complex InjuryRehab Inc.	100%

1 Entity has been dormant throughout the entire reporting period.

The condensed interim consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realise its assets and discharge its liabilities in the normal course of business. However, during the three and nine months ended September 30, 2022 and 2021, the Company experienced significant operating losses, and had a substantial deficit and negative cash flows from operating activities. Management has concluded that the events and conditions surrounding the Company, result in uncertainties that may cast significant doubt upon the Company’s ability to continue as a going concern. The Company’s ability to fund operating expenses and debt service requirements will depend on, among other things, future operating performance and the Company’s ability to raise additional funding through equity and debt financing.

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Notes to Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian dollars) For the three and nine months ended September 30, 2022

HIGHMARK INTERACTIVE INC.

2. Statement of compliance

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards 34, “Interim Financial Reporting” (“IAS 34”), using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board ("IASB") and interpretations of the International Financial Reporting Interpretations Committee ("IFRIC").

These condensed interim consolidated financial statements are intended to provide an update on the Company’s audited consolidated annual financial statements for the year ended December 31, 2021. Accordingly, they do not include all the information required for annual financial statements and should be read in conjunction with the Company’s audited consolidated annual financial statements for the year ended December 31, 2021, which have been prepared in accordance with IFRS. In the opinion of the Company’s management, the accompanying unaudited condensed interim consolidated financial statements contain only normal recurring adjustments that are necessary for a fair presentation of its financial position, financial performance, changes in equity and cash flows for the interim period.

These condensed interim consolidated financial statements are presented in Canadian dollars (“CAD” or “$”), which is the Company’s functional currency.

These condensed interim consolidated financial statements were authorized for issue by the Board of Directors on November 29, 2022.

3. Accounting policies

The accounting policies applied by the Company in these condensed interim consolidated financial statements are the same as those applied in the Company’s annual consolidated financial statements for the year ended December 31, 2021.

In the period ended September 30, 2022, the Company has not early adopted any standard, interpretation, or amendment.

4. Accounts receivable

The Company evaluates credit losses on a regular basis based on the aging and collectability of its receivables. As at September 30, 2022 and December 31, 2021, bad debt expense of $8,713 and $90,712 was recorded, respectively.

5. Prepayments and other current assets

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HIGHMARK INTERACTIVE INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian dollars) For the three and nine months ended September 30, 2022

6. Intangible assets

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7. Right of Use Assets and Lease Liabilities

The Company capitalizes leases greater than one year. On January 1, 2022, the Company entered into a new sixyear lease agreement for office and clinic space. The Company, therefore, recognized the right-of-use asset and capital lease liability on its Statement of Financial Position.

The following reconciles the right-of-use assets:

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HIGHMARK INTERACTIVE INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian dollars) For the three and nine months ended September 30, 2022

The following reconciles the lease liabilities:

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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 incremental borrowing rate of 12.00% (December 31, 2021: 6.38%). The lease liability is subsequently measured using the amortized cost method.

The following table presents the contractual cash flows for lease obligations as at the following periods ended:

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8. Accounts payable and accrued liabilities

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9. Deferred revenue

Cash payments received from customers in advance of the Company providing customers a right to access its software platform are included in "Deferred revenue" in the Company's consolidated statements of financial position. These amounts are comprised of the Company's deferred revenue for its subscription fees. The Company

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Notes to Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian dollars) For the three and nine months ended September 30, 2022

HIGHMARK INTERACTIVE INC.

expects to deliver its service of providing a right to access to customers within one year from the receipt of the funds.

The following table summarizes the activity of deferred revenue for the following periods ended:

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10. Loans

Bridge Loan

On May 11, 2021, the Company obtained a $2,300,000 secured 9% bridge loan (the “Bridge Loan”) from certain shareholders for the purpose of funding the cash portion of the purchase price of BrainFx Inc. and the provision of additional working capital. The Bridge Loan will mature on the earlier of the date that is two years from the date of advance or such other date as the parties may mutually agree. The Bridge loan is secured by all the existing and future acquired assets of the Company. On September 1, 2021, the terms of the Bridge loan were amended to extend the maturity date of the loan to May 11, 2023.

As part of the Bridge loan the Company issued 1,060,987 purchase warrants with a strike price of $0.54 per common share. On May 4, 2022, the Company amended the term to expiry of warrants issued from one year to two years. The Company determined that the Bridge loan is a compound instrument and has therefore separated the liability and equity portion. The fair value of the liability was determined first using a market interest of 18.9% to represent the fair value of similar stand-alone debt instrument. The residual amount has been recognized as the fair value of the warrants. The Company estimated the fair value of the Bridge loan and warrants at $2,002,925 and $297,075, respectively. The warrant meets the condition of fixed-for-fixed and therefore are classified as equity on the consolidated financial statements.

During the three and nine months ended September 30, 2022, the Company repaid $690,000 in principal and $203,000 in interest.

Unsecured convertible debentures

On May 11, 2021, the Company issued $2,500,000 in unsecured three-year convertible debentures. The debentures are convertible into common shares of the Company, at the option of the holder, at $0.68 per share. The convertible debentures bear interest at a rate of 7.5% per annum, from the date of issue, payable semi-annually in arrears in cash on May 11 and November 11 each year. The first interest payment was due on November 11, 2021, for the period from the closing date to November 11, 2021. At any time after one year following the closing date, the Company may force the conversion of the principal amount of the outstanding convertible debentures at

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HIGHMARK INTERACTIVE INC. Notes to Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian dollars) For the three and nine months ended September 30, 2022

the conversion price if the daily volume weighted average trading price of the common shares is greater than $1.90 for any 20 consecutive trading days. During the three and nine months ended September 30, 2022, the Company paid $93,750 in interest (December 31, 2021 - $93,750).

Loan from shareholder - secured promissory note

On October 22, 2019, the Company entered into a secured promissory note amounting to $150,000 with shareholders. The secured promissory note has maturity of three (3) years from the date of issuance and bears interest at a rate of 12% per annum. As at September 30, 2022, the outstanding balance on this promissory note is $212,375 (December 31, 2021: $174,152). Subsequent to September 30, 2022, the secured promissory note was due on October 22, 2022. The secured promissory note is currently outstanding and the Company is actively negotiating an extension that should be completed prior to year-end.

CEBA

In 2020, the Company received a loan of $40,000 under the Canada Emergency Business Account (CEBA) funded by the government of Canada. The loan is a zero-interest, partially forgivable loan. As the Company is reasonably certain that it will repay the balance of the loan before the previous maturity date of December 31, 2022, it recognized the non-forgivable portion of $30,000 as long-term debt at inception of the loan.

During the year ended December 31, 2021, the Company assumed a total of $70,000 of CEBA loans from the acquisition of BrainFx Inc. and Complex Injury Rehab Inc.

In January 2022, the maturity date of the loans granted under CEBA was extended to December 31, 2023.

Line of Credit

As part of the acquisition of BrainFx Inc. and Complex Injury Rehab Inc. the Company assumed their operating line of credit of $100,000 and $125,000 respectively with Royal Bank of Canada. The line of credit bears an interest rate at the lender’s prime rate plus 4% per annum. As at September 30, 2022 the Company had drawn $32,500 on the credit facilities (December 31, 2021: $198,476). The lines of credit are secured against the assets of the Company. Subsequent to September 30, 2022, the BrainFX Inc. line of credit was cancelled.

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HIGHMARK INTERACTIVE INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian dollars) For the three and nine months ended September 30, 2022

The carrying amount of loan balances for the following periods ended were:

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11. Share Capital

The Company's authorized share capital consists of an unlimited number of Common Shares with no par value. As at September 30, 2022, the Company had 40,032,810 common shares issued and outstanding. There were no share issuances during the nine months ended September 30, 2022.

12. Stock Options

The Company has a share option plan (the "Plan") for directors, officers and employees of the Company and consultants providing similar services to the Company.

The following reconciles the options outstanding at the beginning and end of the period that were granted to employees pursuant to the Plan:

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HIGHMARK INTERACTIVE INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian dollars) For the three and nine months ended September 30, 2022

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During the three and nine months ending September 30, 2022, the Company recognized share-based compensation expense of $53,091 and $293,222 (September 30, 2021 - $149,997 and $282,326) in share-based payments, mainly due to the vesting of stock options, respectively. As at September 30, 2022, an additional $190,735 remains to be recognized up until June 2025. Options outstanding as at September 30, 2022 expire between September 2025 and June 2032.

The grant-date fair values of share-based compensation were measured based on the Black-Scholes option pricing model. The inputs used in the measurement of the fair values at grant dates during the nine months ended September 30, 2022 were as follows:

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Notes to Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian dollars) For the three and nine months ended September 30, 2022

HIGHMARK INTERACTIVE INC.

13. Warrants

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14. Government subsidies

During the three and nine months ended September 30, 2022, the Company received $nil and $8,580 in Canadian Emergency Wage Subsidies (“CEWS”) (September 30, 2021 - $67,063 and $83,998), respectively. During the three and nine months ended September 30, 2022, the Company received $nil and $484 in Canadian Emergency Rent Subsidies (“CERS”) (September 30, 2021 - $4,609 and $6,181).

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Notes to Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian dollars) For the three and nine months ended September 30, 2022

HIGHMARK INTERACTIVE INC.

15. Financial instruments

The Company’s financial instruments are all classified at amortized cost, in which the carrying value is approximate to its fair value, due to their short-term nature. The Company’s financial assets include: cash and cash equivalents, accounts receivable, and prepayments and other current assets. The Company’s financial liabilities include: accounts payable and accrued liabilities, debt, due to related parties, and due to shareholders.

16. Segment and geographical information

The Company’s senior management team has been identified as the chief operating decision maker. They evaluate the performance of the Company and allocate resources based on the information provided by the Company’s internal management system at a separate company level. As such, the Company has determined that it has three operating and reportable segments, being the “Subscription, Support and Other” segment, “Clinical Services” segment and the “Corporate” segment.

Information related to the respective reportable segment is set out below. Segment profit (loss) before tax is used to measure performance because management believes that this information is the most relevant in benchmarking results of the respective segments relative to other Companies that operate in the same industries.

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HIGHMARK INTERACTIVE INC.

Notes to Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian dollars) For the three and nine months ended September 30, 2022

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17. Related party transactions

The Company may enter into transactions with related parties that occur in the normal course of business. The Company’s policy is to conduct all transactions and settle all balances with related parties on market terms and conditions. Loans from shareholders totalled $212,375 and are secured. The loans from shareholders have a maturity date of three (3) years from the date of issuance and bear interest rates of 12% per annum payable upon maturity of the promissory note.

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The amount due to related parties relates to a hold back amount from the acquisition of BrainFx Inc., Complex Injury Rehab Inc. and Highmark Health Corporation. This amount is due within twelve months from the date of acquisition. The Company is in discussions with the respective parties in resolving the outstanding items prior to year-end.

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Notes to Condensed Interim Consolidated Financial Statements (Unaudited - Expressed in Canadian dollars) For the three and nine months ended September 30, 2022

HIGHMARK INTERACTIVE INC.

Compensation of key management personnel

Key management includes the Board of Directors and officers of the Company. The compensation paid or payable to key management is shown in the following table.

The remuneration of key management personnel during the period, was as follows:

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18. Litigation and claims

From time to time, during the ordinary course of business, the Company may be threatened with, or may be named as, a defendant in various legal proceedings including lawsuits. Such proceedings may include, but are not limited to product liability, personal injury, breach of contract, and lost profits or other consequential damage claims. Management has made an assessment of all outstanding proceedings and believes there is a low probability of losses and any resulting damages would be immaterial.

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