Neo Performance Materials Inc. — Audit Report / Information 2022

Mar 29, 2023

NEO PERFORMANCE MATERIALS INC.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2022

KPMG LLP 333 Bay Street, Suite 4600 Toronto, ON M5H 2S5 Tel 416-777-8500 Fax 416-777-8818

www.kpmg.ca

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Neo Performance Materials Inc.

Opinion

We have audited the consolidated financial statements of Neo Performance Materials Inc. (the Entity), which comprise:

• the consolidated statements of financial position as at December 31, 2022 and December 31, 2021
• the consolidated statements of profit or loss for the years then ended
• the consolidated statements of comprehensive income 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 significant accounting policies

(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, 2022 and December 31, 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

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, 2022. 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 matter described below to be the key audit matter to be communicated in our auditor's report.

Evaluation of the recoverable amount of the Magnequench group of cash generating units containing goodwill

Description of the matter

We draw attention to Notes 4.7, 4.18.2 and 10 to the financial statements. Goodwill is assigned to a cash generating unit or group of cash generating units. The Entity performs impairment testing for each group of cash generating units containing goodwill on an annual basis or more frequently if events or changes in circumstances indicate that the carrying value of the group of cash generating units might be impaired. The recoverable amount of a group of cash generating units is the greater of its value in use and its fair value less costs to sell. The estimated recoverable amount was determined based on forecasted cash flows discounted to calculate the present value of the cash flows expected to be derived from each group of cash generating units. This approach involves estimates and assumptions about revenue growth rates, operating profit margins and discount rates.

Why the matter is a key audit matter

We identified the evaluation of the recoverable amount of the Magnequench group of cash generating units containing goodwill as a key audit matter. This matter represented a significant risk of material misstatement as minor changes to certain significant assumptions had a significant effect on the estimated recoverable amount of the Magnequench group of cash generating units. Significant auditor judgment, including specialized skills and knowledge, was required in evaluating the results of audit procedures over the estimates and assumptions used in the Entity's determination of the recoverable amount.

How the matter was addressed in the audit

The primary procedures we performed to address this key audit matter included the following:

We compared the Entity's historical revenue and operating profit margin forecasts for the Magnequench group of cash generating units to actual results to assess the Entity's ability to accurately forecast revenue growth rates and operating profit margin assumptions.

We evaluated the appropriateness of the Entity's annual average revenue growth rates and operating profit margin assumptions by comparing those assumptions to industry data, analysts' expectations and/or internal forecasts.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the appropriateness of the discount rate used by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities.

Other Information

Management is responsible for the other information. Other information comprises the information included in Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions.

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 filed with the relevant Canadian Securities Commissions 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.

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 International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Entity's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Entity to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
• Provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance 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 Bryant William Ramdoo.

Toronto, Canada

March 28, 2023

NEO PERFORMANCE MATERIALS INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(All figures in thousands of United States dollars)

	December 31, 2022	December 31, 2021
ASSETS
Current
Cash and cash equivalents	147,491	89,037
Restricted cash	1,179	1,283
Accounts receivable (Note 6)	81,409	65,209
Inventories (Note 7)	212,702	200,954
Income taxes receivable	355	1,667
Other current assets	23,279	19,211
Total current assets	466,415	377,361
Property, plant and equipment (Note 8)	75,767	73,378
Intangible assets (Note 9)	42,984	49,961
Goodwill (Note 10)	66,042	70,082
Investments (Note 11)	16,363	13,759
Deferred tax assets (Note 19)	6,956	6,638
Other non-current assets	1,933	2,903
Total non-current assets	210,045	216,721
Total assets	$676,460	$594,082
LIABILITIES AND EQUITY
Current
Bank advances and other short-term debt (Note 12)	17,288	6,502
Accounts payable and other accrued charges	69,093	94,201
Income taxes payable	10,033	7,059
Provisions (Note 25)	1,369	5,560
Lease obligations (Note 13)	1,264	1,589
Derivative liability (Note 12)	28,570	14,704
Current portion of long-term debt (Note 12)	747	—
Other current liabilities	278	1,455
Total current liabilities	128,642	131,070
Long-term debt (Note 12)	29,885	—
Employee benefits (Note 24)	489	1,210
Provisions (Note 25)	23,604	15,127
Deferred tax liabilities (Note 19)	13,942	13,366
Lease obligations (Note 13)	813	1,388
Other non-current liabilities	1,442	1,405
Total non-current liabilities	70,175	32,496
Total liabilities	198,817	163,566
Non-controlling interest	3,193	2,891
Equity attributable to equity holders of Neo Performance Materials
Inc.	474,450	427,625
Total equity	477,643	430,516
Total liabilities and equity	$676,460	$594,082

Commitments and contingencies (Note 16) Subsequent events (Note 30)

NEO PERFORMANCE MATERIALS INC. CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

(All figures in thousands of United States dollars, except per share information)

	Year Ended December 31,
	2022	2021
RevenueCosts of sales	640,298	539,251
Costs excluding depreciation and amortization	481,524	380,548
Depreciation and amortization	9,406	8,176
Gross profit	149,368	150,527
Expenses
Selling, general and administrative	58,915	58,445
Share-based compensation (Note 20)	2,483	4,526
Depreciation and amortization	7,313	7,689
Research and development	20,810	19,859
Impairment of assets	1,233	121
	90,754	90,640
Operating income	58,614	59,887
Other expense	(2,228)	(9,750)
Finance cost, net (Note 26)	(15,259)	(3,943)
Foreign exchange gain (loss)	301	(4,388)
Income from operations before income taxes and equity income ofassociates	41,428	41,806
Income tax expense (Note 19).	(17,793)	(9,580)
Income from operations before equity income of associates	23,635	32,226
Equity income of associates (net of income tax) (Note 11)	2,783	3,817
Net incomeAttributable to:	$26,418	$36,043
Equity holders of Neo Performance Materials Inc.	$25,947	$35,177
Non-controlling interest	471	866
	$26,418	$36,043
Earnings per share attributable to equity holders of NeoPerformance Materials Inc.:
Basic (Note 18)	$0.62	$0.92
Diluted (Note 18)	$0.61	$0.91

NEO PERFORMANCE MATERIALS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(All figures in thousands of United States dollars)

	Year Ended December 31,
	2022	2021
Net income for the year	$26,418	$36,043
Other comprehensive (loss) income:
Item that will not be reclassified subsequently to profit or loss:
Defined benefit pension plan actuarial gain (net of income taxexpense: 2022 - $141; 2021 - $231)	445	731
Item that is or may be reclassified subsequently to profit or loss:
Currency translation adjustment	(17,347)	3,550
Other comprehensive (loss) income for the year	(16,902)	4,281
Total comprehensive income for the year	$9,516	$40,324
Attributable to:
Non-controlling interest	302	949
Equity holders of Neo Performance Materials Inc.	9,214	39,375
	$9,516	$40,324

NEO PERFORMANCE MATERIALS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

(All figures in thousands of United States dollars)

	Year Ended December 31,
	2022	2021
Operating activities
Net income for the year	$26,418	$36,043
Add (deduct) items not affecting cash:
Depreciation and amortization	16,720	15,865
Share-based compensation	2,483	4,526
Provisions (Note 25)	8,451	11,138
Change in pension liability	59	80
Finance costs, net (Note 26)	15,259	3,943
Equity income of associates, net of income tax (Note 11).	(2,783)	(3,817)
Loss (gain) on disposal of assets	346	(278)
Income tax expense (Note 19)	17,793	9,580
Foreign exchange (gain) loss	(658)	1,225
Impairment of assets	1,233	121
Other	(67)	120
Net change in non-cash working capital balances related to operations (Note 15)	(67,829)	(70,737)
Cash contributions to defined benefit pension plan (Note 24)	(194)	(266)
Income taxes paid, net of income taxes recovered	(12,352)	(9,365)
Interest paid, net of interest received	(197)	168
Payments made to settle provisions (Note 25)	(986)	(508)
Cash provided by (used in) operating activities	$3,696	$(2,162)
Investing activities
Additions of property, plant and equipment	(17,354)	(9,159)
Additions of intangible assets	(116)	(305)
Proceeds from sale of assets	—	426
Purchases of short-term investments and equity securities (Note 12)	—	(776)
Dividends received from associates	—	103
Decrease in restricted cash	39	2,710
Other investing activities	—	(5)
Cash used in investing activities	$(17,431)	$(7,006)
Financing activities
Increase in bank advances and other short-term debt, net	12,380	4,056
Proceeds from issuance of common shares from treasury	47,744	38,004
Dividends paid to equity holders of Neo Performance Materials Inc.	(13,401)	(12,773)
Share-based compensation paid	(919)	(1,697)
Proceeds from long-term debt	30,911	—
Repayment of long-term debt	(543)	—
Repurchase of common shares	—	(37)
Lease payments	(1,433)	(1,743)
Withholding taxes paid, net of amount received from issuance of commonshares on stock-based awards	54	391
Cash provided by financing activities	74,793	26,201
Effect of exchange rate changes on cash and cash equivalents	(2,604)	(220)
Cash provided during the year	58,454	16,813
Cash and cash equivalents, beginning of year	89,037	72,224
Cash and cash equivalents, end of year	$147,491	$89,037

NEO PERFORMANCE MATERIALS INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(All figures in thousands of United States dollars)

EquityPension PlanAccumulatedAttributableCommon Stock
CurrencyActuarialOtherto EquityRetainedContributedTranslationGains, net ofComprehensiveHolders ofNumberAmountDeficitSurplusAdjustmenttaxIncome (loss)NPM Inc.	NonControllingInterestEquity
Balance - January 1, 202240,668,902$41$ (19,253) $439,795$6,034$1,008$7,042$427,625$	2,891$ 430,516
Net income——25,947————25,947	47126,418
Other comprehensive loss————(17,178)445(16,733)(16,733)	(169)(16,902)
Total comprehensive income——25,947—(17,178)445(16,733)9,214	3029,516
Share-based compensation———3,231———3,231	—3,231
Dividends paid to equity holders of NeoPerformance Materials Inc. (Cdn $0.10 per commonshare)——(13,401)————(13,401)	—(13,401)
Issuance of common shares on stock-based awards21,285——33———33	—33
Issuance of common shares from treasury (net of
transaction costs of $3.1 millions)4,506,7344—47,744———47,748	—47,748
4,528,0194(13,401)51,008———37,611	—37,611
Balance - December 31, 202245,196,921$45$ (6,707) $490,803$(11,144) $1,453$(9,691) $474,450$	3,193$ 477,643
Balance - January 1, 202137,460,390$37$ (41,657) $400,771$2,567$277$2,844$361,995$	1,490$ 363,485
Net income——35,177————35,177	86636,043
Other comprehensive income————3,4677314,1984,198	834,281
Total comprehensive income——35,177—3,4677314,19839,375	94940,324
Purchase of equity from non-controlling interest————————	(5)(5)
Non-controlling interest of the subsidiary sold————————	457457
Share-based compensation———866———866Dividends paid to equity holders of NeoPerformance Materials Inc. (Cdn $0.10 per common	—866
share)——(12,773)————(12,773)	—(12,773)
Shares repurchased and canceled under NormalCourse Issuer Bid (Note 17)(3,400)——(37)———(37)	—(37)
Issuance of common shares on stock-based awards .613,9121—194———195	—195
Issuance of common shares from treasury (net oftransactions costs of $2.2 millions)2,598,0003—38,001———38,004	—38,004
3,208,5124(12,773)39,024———26,255	45226,707
Balance - December 31, 202140,668,902$41$ (19,253) $439,795$6,034$1,008$7,042$427,625$	2,891$ 430,516

NEO PERFORMANCE MATERIALS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular figures in thousands of United States dollars, unless otherwise stated)

NOTE 1 NATURE OF OPERATIONS

Neo Performance Materials Inc. ("Neo", the "Company" or the "Group") is a Canadian public company traded on the Toronto Stock Exchange ("TSX") and was incorporated on September 12, 2017 under the Business Corporations Act (Ontario). Neo's registered and head office is located at 121 King Street West, Suite 1740, Toronto, Ontario, Canada, M5H 3T9.

On February 17, 2021, Neo completed a bought deal secondary offering of common shares of Neo. OPPS NPM S.à.r.l. and OPPS NPM II S.à.r.l, ("the Selling Shareholders"), affiliates of Oaktree Capital L.P. ("Oaktree"), sold an aggregate of 5,175,000 common shares of Neo at Cdn. $15.75 per share for total gross proceeds to the Selling Shareholders of approximately Cdn. $81.5 million. Following the completion of this secondary offering, Oaktree held an aggregate of 17,109,155 common shares of Neo, which represented approximately 45.7% of the issued and outstanding common shares of Neo. This constituted a liquidity event under the Legacy Plan.

On April 27, 2021, Neo completed a bought deal secondary offering of common shares of Neo. OPPS NPM S.à.r.l. (the "Selling Shareholder") sold an aggregate of 4,600,000 common shares of Neo under this secondary offering at Cdn. $19.75 per share for total gross proceeds to the Selling Shareholder of approximately Cdn. $90.9 million.

On November 16, 2021, Neo completed a bought secondary and treasury offering of common shares of Neo. Neo issued and sold from treasury an aggregate of 2,598,000 common shares at a price of Cdn. $19.25 per share for total gross proceeds to Neo of approximately Cdn. $50.0 million. The Selling Shareholder sold an aggregate of 2,631,000 common shares of Neo also at a price of Cdn. $19.25 per share for total gross proceeds to the Selling Shareholder of Cdn. $50.7 million.

On September 16, 2022, Neo completed a bought deal treasury offering of common shares of Neo. Neo issued and sold from treasury an aggregate of 4,506,734 common shares at a price of Cdn. $15.00 per share for total gross proceeds to Neo of approximately Cdn. $67.6 million ("treasury offering").

On October 13, 2022, Hastings Technology Metals Ltd. ("Hastings") completed its binding Share Purchase Agreement with an affiliate of Oaktree to acquire 8,974,127 common shares of Neo at Cdn. $15.00 per share, for an aggregate purchase price of Cdn. $134.6 million.

Following the completion of the transaction and treasury offering, Hastings holds 8,974,127 common shares of Neo representing 19.9% of the issued and outstanding common shares of Neo and Oaktree holds 904,028 common shares of Neo representing 2.0% of the issued and outstanding common shares of Neo.

Neo manufactures the building blocks of many modern technologies that enhance efficiency and sustainability. Neo's advanced industrial materials, magnetic powders and magnets, specialty chemicals, metals, and alloys, are critical to the performance of many everyday products and emerging technologies. Neo's products help to deliver the technologies of tomorrow to consumers today.

Neo has approximately 1,760 employees and has a global platform that includes 9 manufacturing facilities located in China, the United States ("U.S."), Germany, Canada, Estonia, and Thailand, as well as one dedicated research and development ("R&D") centre in Singapore. Since 1994, Neo has leveraged its processing expertise to innovate and grow into a leading manufacturer of advanced industrial materials for specialty end markets. Neo has established itself as a leading commercial partner to some of the world's largest customers in the automotive, manufacturing, semiconductor, advanced electronic and specialty chemical industries. As a result, Neo is well positioned in markets that are forecast to see robust, long-term growth driven by multiple global macro trends, such as vehicle electrification, industrial automation, consumer electronics, energy efficient lighting, air and water pollution control, and superalloys. Neo identifies growth markets driven by global macro trends such as these, and produces highly engineered industrial materials that are critical to the performance of applications in those markets.

Neo is organized along three business segments: Magnequench, Chemicals & Oxides ("C&O") and Rare Metals ("RM"), as well as the Corporate segment.

Magnequench

The Magnequench segment, with more than 30 years of manufacturing experience, is the world leader in the production of permanent magnetic powders used in bonded and hot-deformed, fully dense neodymium-iron-boron ("NdFeB" or "neo") magnets. These powders are formed through Magnequench's market-leading technology related to the development, processing, and manufacturing of neo magnetic powders. Magnequench uses a proprietary process to manufacture Magnequench Powder using a blend of various inputs. Magnequench also manufactures magnets using these bonded magnetic powders. These powders and bonded permanent magnets are used in the following: motors used in various automotive applications for hybrid, electric, and internal combustion engine vehicles; micro motors for household applications like vacuum cleaners, refrigerators, hair dryers, air conditioners and residential heating and cooling circulation pumps; industrial and other sensors; and other applications requiring high levels of magnetic strength, improved performance, and reduced size and weight.

C&O

The C&O segment manufactures and distributes a broad range of advanced industrial materials that have become an indispensable part of modern life. Neo's world-class processing and advanced materials manufacturing capabilities enable Neo to meet increasingly demanding specifications from manufacturers that need custom engineered materials. Applications from these products include automotive catalysts, permanent magnetics, consumer electronics, petroleum refining catalysts, medical devices, and wastewater treatment.

Rare Metals

The RM segment sources, reclaims, produces, refines, and markets high-value specialty metals and their compounds. These products include both high-temperature metals (tantalum, niobium, hafnium and rhenium) and electronic metals (gallium and indium). Applications from products made in this segment primarily include superalloys for jet engines, medical imaging, wireless technologies and LED lighting. Other applications include flat panel displays, solar, steel additives, batteries and electronics applications.

Corporate

Neo's global head office is in Toronto, Ontario, Canada, with additional corporate offices in Greenwood Village, Colorado, U.S.; Singapore; and Beijing, China. The functions of this group include finance, administration, information technology, accounting, and legal.

Future development

1. Hudson Resources Inc.

On August 22, 2022, Neo and Hudson Resources Inc. ("Hudson") entered into a binding agreement ("Agreement") whereby Neo will acquire from Hudson an exploration license ("License") covering the Sarfartoq Carbonatite Complex in southwest Greenland (the "Project"). The Project hosts a mineral deposit that is enriched in neodymium and praseodymium, two essential elements for rare earth permanent magnets used in electric vehicles, wind turbines, and high-efficiency electric motors and pumps that help reduce greenhouse gas emissions. Neo intends to assign its rights under the Agreement to a Special-Purpose Entity ("SPE") controlled by Neo, that would hold the License and continue exploration and ultimately extraction of the rare earth elements on the Project.

Consideration to be paid for the License includes a non-refundable initial cash payment of $0.25 million which was paid by Neo after signing the Agreement, as well as an additional $3.25 million upon closing. Additionally, if within five years from the date of closing of the transaction (1) the SPE transfers the License, or there is a change in control of the SPE pursuant to an acquisition or merger, then Hudson will receive 5% of the total consideration received by the SPE in connection with such transfer, or (2) the SPE conducts an initial public offering on a stock exchange ("IPO"), then Hudson will receive 5% of the fully diluted equity interests in the SPE immediately prior to the IPO.

Completion of the sale of the License is subject to various conditions, including approval from the Government of Greenland for the transfer of the License, and approval of the TSX Venture Exchange (the "TSXV") on the part of Hudson. These conditions have not yet been satisfied such that the sale of the License remains incomplete as at December 31, 2022.

2. Australian Rare Earths Limited ("AR3")

On October 14, 2022, Neo entered into a non-binding memorandum of understanding with Australian Rare Earths Ltd. ("AR3") that provides for the parties to enter into a joint development agreement pursuant to which Neo will provide technical and material testing support to AR3 and collaborate on future rare earth projects, including separation capabilities, in Australia. In return, Neo would receive options on AR3 stock, and rights to purchase 50% of the initial production from AR3's Koppamurra rare earth project in Australia. Neo's participation is in the early phases and no capital has been spent on this project other than the initial investment in AR3 of $0.8 million made on June 30, 2021.

NOTE 2 GENERAL INFORMATION AND STATEMENT OF COMPLIANCE WITH IFRS

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standard ("IFRS"), as issued by the International Accounting Standards Board ("IASB").

The consolidated financial statements were approved and authorized for issuance by Neo's Board of Directors ("Board") on March 28, 2023.

Significant management judgment in applying accounting policies

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results could 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.

NOTE 3 BASIS OF PREPARATION

These consolidated financial statements have been prepared on a going concern basis, under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

The preparation of these consolidated financial statements in accordance with IFRS requires the use of certain accounting estimates. It also requires management to exercise judgment in applying Neo's accounting policies.

Certain prior period amounts have been reclassified to conform to the current period presentation. Such reclassifications did not affect results of operations.

NOTE 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4.1 Overall considerations

These consolidated financial statements have been prepared using accounting policies specified by those IFRS standards as issued by the IASB that are in effect at the end of the reporting period December 31, 2022.

The significant accounting policies that have been applied in the preparation of these consolidated financial statements are summarized below.

4.2 Basis of Consolidation

4.2.1 Business Combinations

Business combinations are accounted for using the acquisition method. The acquisition method involves the recognition of the acquiree's identifiable assets and liabilities, including contingent liabilities, regardless of whether they were recorded in the financial statements prior to acquisition. On initial recognition, the assets and liabilities of the acquired subsidiary are included in the consolidated statements of financial position at their fair values, which are also used as the basis for subsequent measurement in accordance with Neo's accounting policies. Noncontrolling interest is measured at the fair value of the identifiable assets and liabilities acquired. Goodwill represents the excess of the fair value of the consideration transferred over the fair value of the identifiable net assets of the acquiree at the date of acquisition.

Acquisition-related costs paid to third parties are expensed as incurred unless they are costs related to the issuance of debt or equity instruments. Debt issuance costs are accounted for as a deduction in the carrying value of the related debt instrument and amortized as a finance charge over the term of the debt, and equity issuance costs are accounted for as a deduction from share capital.

4.2.2 Subsidiaries and associates

Subsidiaries are entities controlled by Neo. Neo controls an entity when it 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 statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

Non-controlling interests ("NCI") arise from business combinations in which Neo acquires less than 100% interest. NCI is initially measured at proportionate interest in the acquiree's identifiable net assets at the date of acquisition, which means that goodwill, or the gain on a bargain purchase, includes a portion attributable to ordinary NCI.

Changes in Neo's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

An associate is an entity over which Neo has significant influence, but does not have control, or joint control, over the financial and operating policies. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost.

Subsequent to initial recognition, the consolidated financial statements include Neo's share of the profit or loss and other comprehensive income (loss) ("OCI") of associates.

When Neo's share of losses exceeds its interest in an associate, the carrying amount of that interest is reduced to zero and recognition of further losses is discontinued except to the extent that Neo has incurred legal or constructive obligations or made payments on behalf of the associate. Changes resulting from the net income or loss generated by the associates are reported within equity income of associates in the consolidated statement of profit or loss.

Outlined below is information related to the Neo's subsidiaries and associates at December 31, 2022:

	Place ofBusiness	Entity Type	EconomicInterest	Method
Neo Cayman Holdings Ltd.	CaymanIslands	Subsidiary	100%	Consolidation
Neo Performance Materials ULC .	Canada	Subsidiary	100%	Consolidation
Neo Chemicals & Oxides, LLC	United States	Subsidiary	100%	Consolidation
Neo Chemicals & Oxides (Europe)Ltd.	UnitedKingdom	Subsidiary	100%	Consolidation
Neo Rare Metals (Korea) Inc.	South Korea	Subsidiary	80%	Consolidation
Neo International Corp.	Barbados	Subsidiary	100%	Consolidation
Jiangyin Jiahua Advanced MaterialResources Co., Ltd.	China	Subsidiary	95%	Consolidation
Neo Japan, Inc.	Japan	Subsidiary	100%	Consolidation
Neo Performance Materials(Singapore) Pte. Ltd.	Singapore	Subsidiary	100%	Consolidation
Zibo Jiahua Advanced MaterialResources Co., Ltd.	China	Subsidiary	98%	Consolidation
NPM Silmet OÜ	Estonia	Subsidiary	100%	Consolidation
Magnequench Japan, Inc.	Japan	Subsidiary	100%	Consolidation
Magnequench (Korat) Co., Ltd.	Thailand	Subsidiary	100%	Consolidation
Zibo Jia Xin Magnetic MaterialsLtd.	China	Subsidiary	100%	Consolidation
Neo Rare Metals (USA), LLC	United States	Subsidiary	100%	Consolidation
NPM Holdings (US), Inc.	United States	Subsidiary	100%	Consolidation

	Place ofBusiness	Entity Type	EconomicInterest	Method
NMT Holdings GmbH	Germany	Subsidiary	100%	Consolidation
Buss & Buss SpezialmetalleGmbH	Germany	Subsidiary	50%	Consolidation
Neo Rare Metals (Oklahoma), LLC	United States	Subsidiary	80%	Consolidation
Magnequench, LLC	United States	Subsidiary	100%	Consolidation
Magnequench Neo Powders Pte.Ltd.	Singapore	Subsidiary	100%	Consolidation
Magnequench International, LLC .	United States	Subsidiary	100%	Consolidation
Xin Bao Investment Limited	Hong Kong	Subsidiary	100%	Consolidation
Magnequench (Tianjin) CompanyLimited	China	Subsidiary	100%	Consolidation
Magnequench Limited	Barbados	Subsidiary	100%	Consolidation
Neo Performance Materials(Beijing) Co., Ltd.	China	Subsidiary	100%	Consolidation
Magnequench InternationalTrading (Tianjin) Co., Ltd.	China	Subsidiary	100%	Consolidation
Magnequench GmbH	Germany	Subsidiary	100%	Consolidation
Neo Performance Materials KoreaInc.	South Korea	Subsidiary	100%	Consolidation
Neo US Holdings, Inc.	Canada	Subsidiary	100%	Consolidation
Neo Magnequench Distribution,LLC	United States	Subsidiary	100%	Consolidation
Magnequench Magnetics (ChuZhou) Co., Ltd.	China	Subsidiary	100%	Consolidation
Neo Jia Hua Advanced Materials(Zibo) Co., Ltd.	China	Subsidiary	98%	Consolidation
Neo Water Treatment LLC	United States	Subsidiary	100%	Consolidation
Magnet Ventures Pte. Ltd.	Singapore	Subsidiary	100%	Consolidation
Magnet Ventures Europe OÜ	Estonia	Subsidiary	100%	Consolidation
NPM C&O Europe OÜ	Estonia	Subsidiary	100%	Consolidation
Neo North Star Holdings LLC	United States	Subsidiary	100%	Consolidation
Neo North Star Resources Inc.	United States	Subsidiary	66.7%	Consolidation
Zibo Shijia Trading Co., Ltd.	China	Subsidiary	59.6%	Consolidation
Toda Magnequench MagneticMaterial (Tianjin) Co., Ltd.	China	Joint venture	33%	Equity method
Gan Zhou Ke Li Rare Earth NewMaterial	China	Joint venture	25%	Equity method
GQD Special Material (Thailand)Co., Ltd.	Thailand	Joint venture	20%	Equity method

4.2.3 Transactions eliminated on consolidation

Inter-company transactions, balances, and any unrealized income and expenses arising from transactions between subsidiaries are eliminated upon consolidation. Unrealized gains arising from transactions with equity-accounted associates are eliminated against the investment to the extent of Neo's interest in the associates. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

4.3 Functional currency

The consolidated financial statements are presented in United States dollars ("U.S. dollars" or "USD"), which is the functional currency of Neo. The functional currency of the Group's significant subsidiaries are the currencies of the primary economic environment and the business processes of the subsidiaries and include USD, Chinese Renminbi ("RMB") and Japanese Yen. The subsidiaries with functional currencies other than U.S. dollars are: Jiangyin Jiahua Advanced Material Resources Co., Ltd. ("JAMR"); Neo Japan, Inc. ("Neo Japan"); Magnequench International Trading (Tianjin) Co., Ltd; Magnequench (Tianjin) Company Limited ("MQTJ"), Zibo Jiahua Advanced Material Resources Co., Ltd. ("ZAMR"); Magnequench Magnetics (Chu Zhou) Co., Ltd. ("MQCZ") and Zibo Shijia Trading Co., Ltd. ("ZSTC").

4.3.1 Foreign currency transactions

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Nonmonetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognized in profit or loss.

4.3.2 Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into U.S. dollars at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into U.S. dollars at the exchange rates at the dates of the transactions.

Foreign currency differences are recognized in OCI and accumulated in the translation reserve, except to the extent that the translation difference is allocated to NCI.

When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If Neo disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to NCI. When Neo disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

4.4 Segment reporting

Neo's reporting segments are determined based on Neo's product lines, which are the basis upon which Neo's Chief Operating Decision Maker ("CODM") evaluates the performance of the business. Neo is organized along three business segments – Magnequench, C&O and RM. Discrete operating and financial information is available for these principal segments and is used to determine operating performance for each segment and to allocate resources.

Each of the operating segments is managed separately as each of these product lines requires different technologies, resources and marketing approaches. All inter-segment transactions between the segments have been eliminated on consolidation.

4.5 Revenue recognition

Revenue is measured based on the consideration specified in a contract with a customer. Neo recognizes revenue when it transfers control over a good or service to a customer. The principal activity from which Neo generates its revenue is the sale of rare earth, magnetic powders, magnets, and rare metal-based functional materials to third parties. Delivery of the rare earth, magnetic powders, magnets, and rare metal-based functional materials are considered the only performance obligation. Transaction prices are based on the selling prices of the goods agreed with the customers. Control generally transfers when the goods are delivered and have been accepted by customers.

4.6 Operating expenses

Operating expenses are recognized in profit or loss upon utilization of the service or at the date of their origin.

4.7 Goodwill

Under the acquisition method of accounting, the fair value of the consideration paid is allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The excess of the fair value of consideration paid over the fair value of the identifiable net assets acquired is recorded as goodwill. Goodwill is not amortized; instead it is tested for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the cash generating unit ("CGU") might be impaired and is carried at cost less accumulated impairment losses.

At the date of acquisition, goodwill is assigned to a CGU or group of cash generating units ("CGUs") that is expected to benefit from the synergies of the business combination. For the purpose of impairment testing, goodwill is allocated to Neo's operating segments, which are individual divisions and corresponds to the level at which goodwill is internally monitored by the CODM. Goodwill impairment is recognized for any excess of the carrying amount of the CGU (or group of CGUs) over its recoverable amount. The recoverable amount of a CGU or group of CGUs, is the greater of its value in use and its fair value less costs to sell. The recoverable amounts of the groups of CGUs are calculated using future cash flow projections based on financial forecasts approved by management.

Goodwill impairment charges are recognized in profit or loss and cannot be reversed in future periods.

4.8 Property, plant and equipment

Property, plant and equipment are recorded at cost and depreciated over their estimated useful lives on a straight-line basis, ranging from 4 to 40 years for buildings, 2 to 20 years for machinery and equipment, and 2 to 50 years for right-of-use assets. As no finite useful life for land can be determined, related carrying amounts are not depreciated. Consistent with International Accounting Standards ("IAS") 16, "significant components" with different useful lives from the original asset purchased or constructed are identified and depreciated using a representative useful life. Generally, maintenance and repairs are charged to expense as incurred. However, "major overhauls and replacements" are capitalized to the consolidated statements of financial position as a separate component, with the replaced part or previous overhaul derecognized from the statements of financial position and recorded in the statements of profit or loss.

Construction in progress is not depreciated until put into use. Costs are only capitalized if the cost is directly attributable to the construction or development of the assets and may include:

• costs of employee benefits arising from the construction or acquisition of the item of property, plant and equipment;

• costs of site preparation;

• initial delivery and handling costs;

• installation and assembly costs;

• costs of testing whether the asset is functioning properly, after deducting the net proceeds from selling any items produced while bringing the asset to that location and condition (such as samples produced when testing equipment); and

• professional fees.

In accordance with IAS 36 - Impairment of Assets, property, plant and equipment is reviewed each reporting period to determine whether indicators of impairment or reversal of impairment exist. If an indicator of impairment or reversal of impairment exists, the Entity calculates the recoverable amount of the CGUs to determine if any impairment loss or reversal of impairment is required.

The carrying values of property, plant and equipment, if they are determined to exceed their recoverable amounts, are written down to their recoverable amount and an impairment charge is recognized in the consolidated statements of profit or loss (see impairment section below). If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the lesser of the revised estimate of its recoverable amount and the carrying value that would have remained had no impairment loss been recognized previously.

Impairment losses and reversals of previous impairments on property, plant and equipment are recognized in the Consolidated Statement of Profit or Loss as impairment expense (recovery) and are separately disclosed.

Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognized in the consolidated statements of profit or loss within other income or expense.

4.9 Intangible assets

Intangible assets acquired by way of an asset acquisition or business combination are recognized if the asset is separable or arises from contractual or legal rights and the fair value can be measured reliably upon initial recognition. Neo's intangible assets consist primarily of license agreements, customer relationships and trade name. Upon acquisition, customer relationships and license agreements are measured initially at fair value and are amortized on a straight-line basis over the period of the associated agreement or legal title: 5 to 10 years for license agreements and 10 to 15 years for customer relationships. Amortization has been included within depreciation and amortization expense in the consolidated statements of profit or loss. For any trade name with an indefinite life, its initial fair value recorded at acquisition will not be amortized, instead it is tested for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Intangible assets are reviewed each reporting period to determine whether indicators of impairment or reversal of impairment exist. If an indicator of impairment or reversal of impairment exists, the Entity calculates the recoverable amount of the CGUs to determine if any impairment loss or reversal of impairment is required.

The carrying values of finite life intangibles, if they are determined to exceed their recoverable amounts, are written down to their recoverable amount and an impairment charge is recognized in the consolidated statements of profit or loss (see impairment section below). If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the lesser of the revised estimate of its recoverable amount and the carrying value that would have remained had no impairment loss been recognized previously.

Impairment losses and reversals of previous impairments on intangible assets are recognized in the Consolidated Statement of Profit or Loss as impairment expense (recovery) and are separately disclosed.

4.10 Leases

At the inception of a contract, Neo assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

To assess whether a contract conveys the right to control the use of an identified asset, Neo assesses whether:

• The contract involves the use of an identified asset this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified;
• Neo has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
• Neo has the right to direct the use of the asset. Neo has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, Neo has the right to direct the use of the asset if either:
  • Neo has the right to operate the asset; or
  • Neo designed the asset in a way that predetermines how and for what purpose it will be used.

Neo 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. Right-of-use assets are depreciated over their lease terms, ranging from 2 to 50 years for land and 2 to 10 years for building, machinery, vehicle, and office equipment.

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, Neo's incremental borrowing rate. Generally, Neo uses its incremental borrowing rate as the discount rate.

The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

Neo has applied judgment to determine the lease term for some lease contracts, in which it is a lessee, that include renewal options. The assessment of whether Neo is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized.

Neo has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets.

4.11 Impairment

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows. As a result, some assets are tested individually for impairment and some are tested at the CGU level.

Goodwill is allocated to a CGU or group of CGUs for impairment testing purposes based on the level at which management monitors it, which is not at a level higher than an operating segment. The allocation is made to those CGUs or group of CGUs that are expected to benefit from synergies of the related business combination in which the goodwill arises.

Corporate head office assets and expenses are proportionately allocated to CGUs or group of CGUs based on management's involvement in the business activities of each CGU or group of CGUs.

A CGU or a group of CGUs, to which goodwill has been allocated, is tested for impairment at least annually and whenever there is an indication that it may be impaired. This testing is done by comparing the carrying amount of a CGU or group of CGUs, including the goodwill, with the recoverable amount of the CGU or group of CGUs. The recoverable amount of an asset, CGU or group of CGUs is the greater of its value in use and its fair value less costs to sell.

To determine the recoverable amount, management estimates expected future cash flows from each CGU or group of CGUs and determines a suitable pre-tax discount rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to Neo's five-year financial plan, adjusted as necessary, where value in use is calculated, to exclude the effects of future reorganizations and asset enhancements. Discount factors are determined individually for each CGU or group of CGUs and reflect their respective risk profiles as assessed by management.

Impairment losses for a CGU or group of CGUs are first allocated to reduce the carrying amount of goodwill allocated to that CGU or group of CGUs and the remainder is allocated to other assets of the CGU or group of CGUs on a pro rata basis. Goodwill impairment losses are not reversed.

Non-financial assets with finite lives are tested for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. In addition, non-financial assets that are not amortized are subject to an annual impairment assessment. Any impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount within earnings of continuing or discontinued operations, as appropriate. The Company evaluates impairment losses for potential reversals, other than goodwill and indefinite life intangible assets impairment, at each reporting period. See Notes 4.8 and 4.9 for further details.

4.12 Financial instruments

Financial assets and financial liabilities are recognized when Neo becomes a party to the contractual provisions of the financial instrument.

4.12.1 Classification

Neo classifies its financial assets in the following measurement categories:

• those to be measured subsequently at fair value, either through other comprehensive income ("OCI") or through profit or loss, and
• those to be measured at amortized cost.

The classification depends on the Neo's business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Neo has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income ("FVOCI").

Neo reclassifies debt investments when and only when its business model for managing those assets changes.

4.12.2 Recognition and derecognition

Regular way purchases and sales of financial assets are recognized on trade date, being the date on which Neo commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership.

4.12.3 Measurement

At initial recognition, the Neo measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss ("FVPL"), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

Debt instruments

Subsequent measurement of debt instruments depends on Neo's business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which Neo classifies its debt instruments:

• Amortized cost: Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortized cost. Interest income from these financial assets is included in interest income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss.
• FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets' cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses, which are recognized in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized in other gains/(losses). Interest income from these financial assets is included in interest income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses), and impairment expenses are presented as separate line item in the statement of profit or loss.
• FVPL: Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognized in profit or loss and presented net within other gains/(losses) in the period in which it arises.

Equity instruments

Neo subsequently measures all equity investments at fair value. Where management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognized in profit or loss as other income when Neo's right to receive payments is established.

Changes in the fair value of financial assets at FVPL are recognized in other gains/(losses) in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.

Financial liabilities

Financial liabilities are initially recognized at fair value, net of transaction costs incurred. They are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the financial liabilities using the effective interest method. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates.

Financial liabilities are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any noncash assets transferred or liabilities assumed, is recognized in profit or loss as other income or finance costs.

4.12.4 Impairment

Neo assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortized cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For trade receivables, Neo applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the receivables.

Neo'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.

4.13 Inventories

Inventories are stated at the lower of weighted-average cost and net realizable value. The cost of inventories is comprised of all purchase, conversion and other costs to bring inventories to their present condition and location. Purchase costs consist of the purchase price, import duties, non-recoverable taxes, transportation, handling and any other costs directly attributable to the purchase of materials. Conversion costs include direct material and labour costs that are directly attributable to the manufacturing process as well as an allocation of fixed and variable overheads based on normal operating capacity, incurred in converting materials into finished goods.

Net realizable value is the estimated selling price in the ordinary course of business less any applicable selling expenses. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the write-down is reversed (i.e. the reversal is limited to the amount of the original write-down) so that the new carrying amount is the lower of the cost and the revised net realizable value.

4.14 Income taxes

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.

4.14.1 Current tax

Current tax for each taxable entity is based on the local taxable income at the local statutory tax rate enacted or substantively enacted at the balance sheet date and includes adjustments to tax payable or recoverable in respect of previous periods. Current tax assets and liabilities are offset only if certain criteria are met.

4.14.2 Deferred tax

Deferred tax is recognized using the balance sheet method in respect of all temporary differences between the tax bases of assets and liabilities, and their carrying amounts for financial reporting purposes, except as indicated below.

• Where the deferred tax liability arises from the initial recognition of goodwill, or the initial recognition of an asset or liability in an acquisition that is not a business combination and, at the time of the acquisition, affects neither the accounting profit nor taxable profit or loss;
• In respect of taxable temporary differences associated with investments in subsidiaries and interests in joint arrangements, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences and the carry forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax assets and unused tax losses can be utilized. Future taxable profits are determined based on business plans for individual subsidiaries in the Group and the reversal of taxable temporary differences. 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; such reductions are reversed when the probability of future taxable profits improves.

Unrecognized deferred tax assets are reassessed at each reporting date and recognized to the extent that it has become probable that future taxable profits will be available against which they can be used.

Deferred tax assets and liabilities are offset only if certain criteria are met.

4.15 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits. Cash equivalents may also include bank notes, as well as short-term money market instruments with terms of maturity less than three months at the date of acquisition, which can be immediately converted into cash upon acquisition.

4.16 Employee future benefits

The Company provides post-employment benefits through defined benefit plans and defined contribution plans.

4.16.1 Defined benefit plan

The defined benefit plans sponsored by Neo defines the amount of pension benefit that an employee will receive on retirement by reference to length of service and final salary.

Pension and other post-retirement benefits earned by employees are actuarially determined on an annual basis by independent actuaries using the projected unit credit method and based on assumptions such as the expected return on plan assets, retirement ages of employees and expected health care trend rate. Fair value is used to value the plan assets for the purpose of calculating the expected return on plan assets. Actual results may differ from results which are estimated based on assumptions. Past service cost arising from plan amendments are recognized immediately in the consolidated statements of profit or loss.

The asset or liability recognized in the consolidated statements of financial position is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or losses. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability.

Actuarial gains and losses are recognized in other comprehensive income in the period incurred.

4.16.2 Defined contribution benefits

A defined contribution plan is a pension plan under which Neo pays fixed contributions into a plan managed by an independent entity. The Company has no legal or constructive obligations to pay further contributions after its payment of the fixed contribution. Payments to defined contribution plans are expensed in the consolidated statements of profit or loss in the period during which services are rendered by employees.

4.17 Share-based compensation

Directors, officers and employees of Neo receive remuneration in the form of share-based payments, whereby these individuals render services as consideration for cash or equity instruments.

4.17.1 Equity-settled share-based plans

The cost of equity-settled share-based compensation is determined by the fair value at the date when the grant is made using an option pricing model. That cost is recognized in share-based compensation expense, together with a corresponding increase in equity (contributed surplus), over the period in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The expense recognized for equity-settled transactions at each reporting date reflects the vesting period, which has expired and Neo's best estimate of the number of equity instruments that will ultimately vest.

Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of Neo's best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. No expense is recognized for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

4.17.2 Cash-settled share-based plans

The cost of cash-settled share-based compensation is recognized in share-based compensation expense as an expense over the period from the issue date to the vesting date. Obligations related to cash-settled share-based plans are recorded as liabilities at fair value in accounts payable and other accrued charges. At each reporting date, obligations related to cash-settled share-based plans are re-measured at fair value with reference to the fair value of Neo's share price and the number of units that have been vested. The corresponding share-based compensation expense or recovery is recognized over the vesting period.

4.17.3 Deferred share units plan

Neo has adopted a non-employee director deferred share units ("DSUs") plan, which is described in Note 20. Obligations related to the DSUs plan are recorded as liabilities at fair value in accounts payable and other accrued charges, and re-measured at each reporting date at fair value with reference to the fair value of Neo's share price and the number of units that have vested. The cost of DSUs is recognized in operating expenses in the period they are awarded.

4.18 Significant management judgment in applying accounting policies

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results could 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 the significant judgments, estimates and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses are discussed below.

4.18.1 Income taxes

In the ordinary course of business, there are many transactions for which the ultimate tax outcome is uncertain, and estimates are required for exposures related to examinations by tax authorities. Management reviews these transactions and exposures and records tax liabilities based on its assessment of many factors, including past experience and interpretations of tax law applied to the facts of each matter. The determination of tax liabilities is subjective and generally involves a significant amount of judgment. The final outcome may differ from estimates, and a change to these estimates could impact the income tax provision.

The assessment of the probability of future taxable income in which deferred tax assets can be utilized is based on Neo's expectation of future profitability by legal entity adjusted for significant non-taxable income and expenses as well as limits to the use of loss carryforwards or other tax credits. If a positive forecast of taxable income indicates the probable future use of a deferred tax asset, it is usually recognized in full. Recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances.

4.18.2 Impairment

An impairment loss is recognized for the amount by which an asset's or CGU's carrying amount exceeds its recoverable amount, which is the higher of fair value less cost to sell and value in use. To determine the recoverable amount, management estimates expected future cash flows from each asset or CGU and determines a suitable discount rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows, management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual results may vary, and may cause significant adjustments to Neo's assets in future periods. In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors. Similarly, when a reversal of an impairment loss previously recorded occurs (for property, plant and equipment and finite life intangible assets), the reversal is recognized with the carrying amount of the asset increased to the lesser of the revised estimate of its recoverable amount and the carrying value that would have remained had no impairment loss been recognized previously. Significant judgment is involved in determining if there is an indication that an asset or a CGU may be impaired or there is an indication that a previously recognized impairment loss for an asset or a CGU has reversed because of a change in the estimates used to determine the impairment loss.

4.18.3 Business combinations

On initial recognition, the identifiable assets and liabilities of the acquired business are included in the consolidated statements of financial position at their fair values*.* In measuring fair value management uses estimates about future cash flows and discount rates. Any measurement changes from initial recognition would affect the measurement of goodwill.

4.18.4 Useful lives of depreciable assets

Management reviews the useful lives, residual values, and method of depreciation of depreciable assets based on the expected utility of the assets annually. Any changes are accounted for prospectively as a change in accounting estimate.

4.18.5 Inventories

Inventories are measured at the lower of cost and net realizable value. In estimating net realizable values, management takes into account the most reliable evidence available at the time the estimates are made. Neo's core business is subject to changes in foreign policies and internationally accepted metal prices which may cause selling prices to change rapidly.

4.18.6 Provisions

A provision is recognized if, as a result of a past event, Neo has a present legal or constructive obligation that can be reliably estimated and it is probable that an outflow of economic benefits will be required to settle the obligation. The timing or amount of the outflow may still be uncertain. Management estimates the expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Provisions are discounted when the time value of money is significant.

4.18.7 Defined benefit pension liability

Management estimates the defined benefit pension liability annually with the assistance of independent actuaries; however, the actual outcome may vary due to estimation uncertainties. The estimate of the defined benefit pension liability is based on estimated retirement ages, medical cost trends and mortality. Discount factors are determined based on matching the plan's projected cash flow with the independent actuaries' discount yield curve. Estimation uncertainties exist particularly with regard to medical cost trends, which may vary significantly in future estimates of Neo's defined benefit pension obligations.

4.18.8 Fair value of financial instruments

Management uses valuation techniques in measuring the fair value of financial instruments, where active market quotes are not available. Details of the assumptions used are given in the notes to these financial statements regarding financial assets and liabilities. In applying the valuation techniques management makes use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

4.18.9 Share-based compensation

Neo measures the cost of cash-settled and equity-settled share-based transactions with employees and directors by reference to the fair value of the equity instruments at the date at which they are granted, and re-measures the obligations related to cash-settled share-based plans with reference to the fair value of Neo's share price and the number of units that have been vested at each reporting date. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining and making assumptions about the most appropriate inputs to the valuation model including the expected life, volatility, dividend yield, forfeiture rate and expectations regarding achievement of market conditions and related timing of such achievement. Such assumptions are inherently uncertain and changes in these assumptions affect the fair value estimates.

4.18.10 Measurement uncertainty

Neo continues to monitor the ongoing situation of the coronavirus ("COVID-19") pandemic and its impacts will depend on future developments such as the duration and severity of the disease, possibility of resurgence, and actions taken by authorities to control the spread of the disease. The extent of the impact the disease may have on Neo's business remains highly uncertain and cannot be predicted with confidence.

Any future developments related to the COVID-19 pandemic could have a material adverse effect on Neo's business and results of operations. In addition, because of the severity and global nature of the COVID-19 pandemic, it is possible that estimates in Neo's consolidated financial statements could change in the near term and the effect of any such changes could be material, which could result in, among other things, an impairment of non-current assets and a change in the expected credit losses on accounts receivable. Neo is regularly evaluating the COVID-19 situation and monitoring any impacts on its business.

4.19 Government grants

Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attached to them and that the grant will be received. Government grants are recognized in profit or loss on a systematic basis over the periods that Neo expenses the related costs for which the grants are intended to compensate.

4.20 Exploration and evaluation costs

Exploration and evaluation costs are capitalized until the commencement of commercial production. If commercially profitable ore reserves are developed, capitalized costs of the related property are classified as mining assets and amortized using the unit of production method. Capitalization is made within property, plant and equipment or intangible assets according to the nature of the expenditure. No depreciation and/or amortization is charged during the exploration and evaluation phase. Exploration and evaluation assets are tested for impairment when reclassified to development tangible or intangible assets, or whenever facts and circumstances indicate impairment. An impairment loss is recognized for the amount by which the exploration and evaluation assets' carrying amount exceeds their recoverable amount. The recoverable amount is the higher of the exploration and evaluation assets' fair value less costs of disposal and their value in use.

Any payments from third parties or tax credits refunded to Neo are credited to the capitalized cost of the mineral property. If payments received exceed the capitalized cost of the mineral property, the excess is recognized in income in the period received.

NOTE 5 RECENT ACCOUNTING PRONOUNCEMENTS

5.1 Neo adopted the following accounting standards and amendments to accounting standards during the year ended December 31, 2022:

5.1.1 Onerous Contracts - Costs of Fulfilling a Contract (Amendments to IAS 37)

On May 14, 2020, the IASB issued amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract to specify that the 'cost of fulfilling' a contract comprise both:

• incremental costs of fulfilling that contract, for example direct labour and materials; and

• an allocation of other costs that relate directly to fulfilling contracts, for example the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract.

The amendments were effective for annual periods beginning on or after January 1, 2022 and apply to contracts existing at the date when the amendments are first applied. The amendment was adopted by Neo on January 1, 2022. The amendment did not have a material impact on the consolidated financial statements.

5.1.2 Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)

On January 23, 2020, the IASB issued amendments to IAS 1 Presentation of Financial Statements to clarify the requirements for classifying liabilities as current or non-current. More specifically:

• the amendments specify that the conditions which exist at the end of the reporting period are those which will be used to determine if a right to defer settlement of a liability exists;
• the amendments clarify that classification is unaffected by expectations, or to any periods retrospectively, about whether an entity will exercise its right to defer settlement of a liability; and
• the amendments clarify the situations that are considered settlement of a liability.

This amendment to IAS 1 is effective for annual periods starting on or after January 1, 2023, earlier application is permitted. The amendment was adopted by Neo on January 1, 2022. The amendment did not have a material impact on the consolidated financial statements.

In October 2022, the IASB issued Non-current Liabilities with Covenants (Amendments to IAS 1) to clarify how covenant with which an entity must comply within twelve months after the reporting period affect the classification of a liability.

The amendments are effective for annual periods beginning on or after January 1, 2024. Early adoption is permitted.

Neo does not anticipate that these amendments to IAS 1 will have a material impact on its consolidated financial statements.

5.2 The following are new accounting pronouncements or amendments that have been issued by the IASB but have not yet been adopted by Neo:

5.2.1 Definition of Accounting Estimates (Amendments to IAS 8)

On February 12, 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS 8) to introduce a new definition for accounting estimates, clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy.

The new guidance will be effective for annual periods starting on or after January 1, 2023 and will be applied prospectively, with earlier application permitted.

5.2.2 Disclosure Initiative - Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

On February 12, 2021, the IASB issued Disclosure Initiative - Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) to help companies provide useful accounting policy disclosures. The key amendments include:

• requiring companies to disclose their material accounting policies rather than their significant accounting policies;

• • clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and as such need not be disclosed; and
• clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material to a company's financial statements.

The amendments are effective for annual periods beginning on or after January 1, 2023 and will be applied prospectively, with early adoption permitted.

5.2.3 Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

In May 2021, the IASB issued amendments to IAS 12 Income Taxes to clarify how entities should account for deferred tax on certain transactions such as leases and decommissioning provisions. The amendments narrow the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences.

The amendments are effective for annual periods beginning on or after January 1, 2023. Early adoption is permitted.

5.2.4 Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)

In September 2022, the IASB issued Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) with amendments that clarify how a seller-lessee subsequently measures sale and leaseback transactions that satisfy the requirements in IFRS 15 to be accounted for as a sale.

The amendments are effective for annual periods beginning on or after January 1, 2024. Early adoption is permitted.

NOTE 6 ACCOUNTS RECEIVABLE

Neo uses the simplified provision matrix for calculating expected credit losses. Allowance is determined by historical experiences, and considers factors including, the aging of the balances, customer's credit worthiness, and updates based on the current economic conditions, expectation of bankruptcies, and the political and economic volatility in the markets and location of customers. Payments are typically due 30 to 90 days upon completion of the performance obligations for each contract, generally upon delivery.

Neo reviews all amounts periodically for indicators of impairment and where applicable the amounts impaired have been provided for in the loss allowance. The life-time expected credit loss for the year ended December 31, 2022 was $0.5 million (2021: nominal).

Neo's exposure to credit risks and impairment losses related to accounts receivable is disclosed in Note 27.

NOTE 7 INVENTORIES

Inventories, stated at the lower of weighted-average cost or net realizable value, consist of the following:

	December 31, 2022	December 31, 2021
Raw materials	$58,426	$73,023
Work-in-progress	55,618	42,019
Finished goods	91,621	78,412
Supplies	7,037	7,500
Total	$212,702	$200,954

The cost of finished goods manufactured includes appropriate materials, labour and production overhead expenditure.

For the year ended December 31, 2022, a total of $476.9 million of inventories was included in cost of sales compared to $376.9 million for the year ended December 31, 2021. These included $3.5 million of provisions, net of reversals, for inventories in the year ended December 31, 2022 and $4.6 million, net of reversals, in the year ended December 31, 2021.

	Land	Building &improvements	Machinery&Equipment	Rightof-useAssets		Officeequipment	Constructionin Progress(net oftransfer)		Total
At January 1, 2022
Cost	$2,550	$36,059	$78,262	$	6,755	$8,023	$	4,929	$ 136,578
Accumulated depreciation	—	(14,101)	(41,630)		(3,586)	(3,883)		—	(63,200)
Opening net book valueat January 1, 2022	$2,550	$21,958	$36,632	$	3,169	$4,140	$	4,929	$ 73,378
Additions (1).	—	24	940		5,065	479		11,549	18,057
Write-offs, net of cost andaccumulated depreciation	—	—	(242)		(39)	(79)		—	(360)
Transfers	—	665	3,817		—	743		(5,225)	—
Currency translationadjustments	—	(912)	(1,423)		(116)	(203)		(151)	(2,805)
Impairments	—	—	(295)		—	—		—	(295)
Depreciation expense	—	(2,463)	(6,863)		(1,637)	(1,245)		—	(12,208)
Closing net book valueat December 31, 2022	$2,550	$19,272	$32,566	$	6,442	$3,835	$	11,102	$ 75,767
Comprised of:
Cost	$2,550	$35,091	$78,490		$ 11,414	$8,055	$	11,102	$ 146,702
Accumulated depreciation	—	(15,819)	(45,924)		(4,972)	(4,220)		—	(70,935)

NOTE 8 PROPERTY, PLANT AND EQUIPMENT

Notes:

1. Additions of right-of-use assets in the amount of $0.7 million were excluded from "Additions of property, plant, and equipment" in the Statement of Cash Flows as these have not yet been paid.

		Land						Building &improvements	MachineryRight&of-useEquipmentAssets		Officeequipment		Constructionin Progress(net oftransfer)		Total
At January 1, 2021
Cost	$	2,550	$	34,519	$71,647		6,142	$	7,105	$	4,194	$ 126,157
Accumulated depreciation		—		(12,057)	(34,210)		(2,382)		(3,186)		—	(51,835)
Opening net book valueat January 1, 2021	$	2,550	$	22,462	$37,437	$	3,760	$	3,919	$	4,194	$ 74,322
Additions (1).		—		61	1,215		1,202		184		7,699	10,361
Write-offs, net of cost andaccumulated depreciation		—		—	(136)		(125)		(146)		(103)	(510)
Transfers		—		1,033	4,658		—		1,181		(6,872)	—
Currency translationadjustments		—		250	164		29		58		11	512
Impairment		—		—	(121)		—		—		—	(121)
Depreciation expense		—		(1,848)	(6,585)		(1,697)		(1,056)		—	(11,186)
Closing net book valueat December 31, 2021	$	2,550	$	21,958	$36,632	$	3,169	$	4,140	$	4,929	$ 73,378
Comprised of:
Cost	$	2,550	$	36,059	$78,262	$	6,755	$	8,023	$	4,929	$ 136,578
Accumulated depreciation		—		(14,101)	(41,630)		(3,586)		(3,883)		—	(63,200)

Notes:

1. Additions of right-of-use assets in the amount of $1.2 million were excluded from "Additions of property, plant, and equipment" in the Statement of Cash Flows as these have not yet been paid.

NOTE 9 INTANGIBLE ASSETS

Neo's intangible assets consist primarily of customer relationships, license agreements, patents and tradename. The following table illustrates the net book value of Neo's intangible assets:

	CustomerRelationships		LicenseAgreementsand Patents		Tradename	Total
At January 1, 2022
Cost	$62,620	$	4,790	$	6,000	$73,410
Accumulated amortization	(22,072)		(1,377)		—	(23,449)
Opening net book value at January 1, 2022	$40,548	$	3,413	$	6,000	$49,961
Additions	—		116		—	116
Disposals	—		(24)		—	(24)
Currency translation adjustments	(2,393)		(165)		—	(2,558)
Amortization expense	(4,060)		(451)		—	(4,511)
Closing net book value at December 31, 2022	$34,095	$	2,889	$	6,000	$42,984
Comprised of:
Cost	$58,776	$	4,659	$	6,000	$69,435
Accumulated amortization	(24,681)		(1,770)		—	(26,451)

At January 1, 2021		CustomerRelationships	LicenseAgreementsand Patents	Tradename		Total
Cost	$	61,692	$4,430	$	6,000	$	72,122
Accumulated amortization		(17,590)	(879)		—		(18,469)
Opening net book value at January 1, 2021	$	44,102	$3,551	$	6,000	$	53,653
Additions		—	305		—		305
Currency translation adjustments		633	49		—		682
Amortization expense		(4,187)	(492)		—		(4,679)
Closing net book value at December 31, 2021	$	40,548	$3,413	$	6,000	$	49,961
Comprised of:
Cost	$	62,620	$4,790	$	6,000	$	73,410
Accumulated amortization		(22,072)	(1,377)		—		(23,449)

NOTE 10 GOODWILL

	December 31, 2022	December 31, 2021
Opening balance as at January 1	$70,082	$68,967
Currency translation adjustments	(4,040)	1,115
Ending balance	$66,042	$70,082

On December 31, 2022, Neo performed a goodwill impairment test for its Magnequench segment in accordance with its policy and based on conditions at that date. The recoverable amount for the Magnequench group of CGUs was determined based on fair value less cost to sell. The calculations used a detailed five-year cash flow projection based on financial forecasts prepared by management. Cash flows beyond the five-year period were extrapolated using the estimated annual average growth rates stated below. The forecasted cash flows were then discounted to calculate the present value of the cash flows expected to be derived from the Magnequench group of CGUs. This approach involves estimates and assumptions including the revenue growth rate, operating profit margins and the discount rate. The fair value measurement was categorized as a Level 3 fair value measurement based on significant unobservable inputs in the valuation technique used.

• 1. Annual average revenue growth rate is determined based on management's past experience in the industry and cash flow forecasts averaged 13% (2021: 5.0%) based on Magnequench's five-year financial plan. The cash flow forecasts at the end of the planning period were extrapolated using an estimated long-term growth rate of 5.0% (2021: 4.0%).
• 1. Pre-tax discount rate is determined in order to calculate the present value of the projected cash flows of the Magnequench group of CGUs. The pre-tax discount rate was 16.6% for Magnequench at December 31, 2022 and 16.4% at December 31, 2021.

The following table shows the amount of goodwill allocated to the Magnequench segment:

	December 31, 2022	December 31, 2021
Goodwill	$66,042	$	70,082

The following table shows the intangible assets with an indefinite useful life allocated to the Magnequench segment:

		December 31, 2022		December 31, 2021
Tradename	.	$	6,000	$	6,000

As a result of the annual goodwill and indefinite life intangible asset impairment test performed at December 31, 2022, it was determined that the recoverable amount exceeded the carrying amount of the Magnequench group of CGUs and therefore no impairment existed in the Magnequench group of CGUs at December 31, 2022.

NOTE 11 INVESTMENTS

Neo holds a 25% ownership interest in Ganzhou Keli Rare Earth New Material Co., Ltd. ("Keli"), a company which converts rare earth oxides into metals for use in Magnequench Powders.

Neo holds a 33% investment in Toda Magnequench Magnetic Materials Co. Ltd. ("TMT"), which produces rare earth magnetic compounds with Magnequench Powders supplied by MQTJ in its normal course of business.

Neo also holds a 20% ownership interest in GQD Special Materials (Thailand) Co., Ltd. ("GQD"), a company which converts rare earth oxides into metals for use in Magnequench Powders.

	Country ofIncorporationorRegistration	PercentageShareHoldings
Keli	China	25%
TMT	China	33%
GQD	Thailand	20%

Aggregate financial information of these equity accounted associates as at and for the year ended December 31, 2022 and December 31, 2021 is provided below.

For the year ended December 31, 2022:

	TMT	Keli	GQD	Total
Total revenue	$12,516	$745,711	$84,029	$842,256
Share of revenue in associates	4,130	186,428	16,806	207,364
Net income	778	9,812	2,757	13,347
Share of income in associates	250	2,000	533	2,783

For the year ended December 31, 2021:

	TMT	Keli	GQD	Total
Total revenue	$11,969	$536,772	$74,231	$622,972
Share of revenue in associates	3,950	134,193	14,846	152,989
Net income	1,331	10,346	3,955	15,632
Share of income in associates	439	2,587	791	3,817

As at December 31, 2022:

	TMT	Keli	GQD	Total
Current assets	$11,101	$150,122	$21,248	$182,471
Non-current assets	$1,120	$5,443	$1,343	$7,906
Total assets of associates	$12,221	$155,565	$22,591	$190,377
Current liabilities	$2,187	$105,431	$12,012	$119,630
Non-current liabilities	$2,701	$—	$—	$2,701
Total liabilities of associates	$4,888	$105,431	$12,012	$122,331

As at December 31, 2021:

	TMT	Keli	GQD	Total
Current assets	$7,330	$180,118	$17,048	$204,496
Non-current assets	$1,339	$6,366	$1,401	$9,106
Total assets of associates	$8,669	$186,484	$18,449	$213,602
Current liabilities	$1,492	$141,377	$10,398	$153,267
Total liabilities of associates	$1,492	$141,377	$10,398	$153,267

Investments accounted for using the equity method are as follows:

	TMT	Keli	GQD	Total
Carrying value at January 1, 2022 .	$2,302	$9,760	$1,697	$13,759
Share of results in associates	250	2,000	533	2,783
Unrealized profit from sales toassociates	(179)	—	—	(179)
Carrying value at December 31,2022	$2,373	$11,760	$2,230	$16,363
Carrying value at January 1, 2021 .	$1,966	$7,173	$906	$10,045
Share of results in associates	439	2,587	791	3,817
Dividends received from associates	(103)	—	—	(103)
Carrying value at December 31,2021	$2,302	$9,760	$1,697	$13,759

NOTE 12 CATEGORIES OF FINANCIAL INSTRUMENTS

The carrying amounts presented in the condensed consolidated statements of financial position relate to the following categories of financial assets and liabilities:

Financial Assets	December 31, 2022			December 31, 2021
Fair value through profit or loss (1)
Equity securities	$	902	$	2,056
Measured at amortized cost (2)
Cash and cash equivalents:
Cash		139,962		89,037
Short-term deposits (3).		7,529		—
Total cash and cash equivalents		147,491		89,037
Restricted cash		1,179		1,283
Accounts receivable		81,409		65,209
	$	230,079	$	155,529
Total financial assets	$	230,981	$	157,585

Financial Liabilities	December 31, 2022	December 31, 2021
Fair value through profit or loss
Put option issued to non-controlling interest of Buss & Buss(derivative liability)	$28,570	$	14,704
Measured at amortized cost (2)
Current:
Bank advances and other short-term debt	17,288		6,502
Accounts payable and other accrued charges	69,093		94,201
Current portion of long-term debt (4).	747		—
	$87,128	$	100,703
Non-current:
Long-term debt (4).	$29,885	$	—
Total financial liabilities	$145,583	$	115,407
Notes:

(1) On June 30, 2021, Neo purchased equity securities in the amount of $0.8 million. The equity securities are re-measured at each reporting period with the change in fair value recorded in finance cost or income. For the year ended December 31, 2022, the fair value of these equity securities decreased by $1.2 million ($1.1 million decrease in fair value in addition to foreign exchange loss of $0.1 million). The fair value of these equity securities in the period ended December 31, 2021 increased by $1.3 million ($1.4 million increase in fair value net of foreign exchange loss of $0.1 million).

(2) Carrying value of financial instruments measured at amortized cost is a reasonable approximation of their fair value.

(3) Short-term deposits have a maturity of 3 months or less.

(4) Estonia debt facility (see Note 12.3.3) and the first tranche of the Export Development Canada credit facility term loan in the amount of $25.0 million (see Note 12.3.4).

12.1 Derivative liability

As at December 31, 2022, Neo's derivative liability is comprised of a put option issued to the non-controlling interest of a consolidated subsidiary Buss & Buss Spezialmetalle GmbH ("Buss & Buss"). The Buss & Buss put option is related to a share purchase agreement ("SPA") between NMT Holdings GmbH, a German subsidiary of Neo, and the shareholders of Buss & Buss entered into on May 27, 2010. The SPA includes a call and a put option on shares of the remaining shareholder or his legal successors. If the call option is exercised by Neo, a premium is added to the consideration to purchase the underlying shares in Buss & Buss. If the put option is exercised by the non-controlling interest, a discount will reduce the cost basis of the securities sold to Neo. Although the final amount of the put option is not known, the initial fair value of this obligation was determined by a third-party valuator based on information available at that time. The put option liability is subsequently re-measured at each reporting period based on 90% of the fair value and the change in the put option liability is recorded in the consolidated statements of profit or loss.

For the year ended December 31, 2022 and 2021, the change in the fair value of the derivative liability was an increase of $13.9 million and $5.3 million, respectively. The fair value of the derivative liability is based on the best market information available to management, including assumptions regarding the forecasted pricing of the advanced industrial materials Buss & Buss produces. The main driver of the change year-over-year, was due to changes in these assumptions, and the discount rate. This fair value measurement was categorized as a Level 3 fair value measurement based on significant unobservable inputs in the valuation technique used.

12.2 Financial assets and liabilities measured at fair value

The following table presents financial assets and liabilities measured at fair value in the consolidated statements of financial position in accordance with the fair value hierarchy. It does not include financial assets and liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. This hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level in which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement. The financial assets and liabilities measured at fair value in the consolidated statement of financial position as at December 31, 2022, are grouped into the fair value hierarchy as follows:

	Level 1		Level 2		Level 3
Financial Assets:Equity securities	$	902	$	—	$—
Financial Liabilities:
Put option issued to non-controlling interest of Buss &Buss	$	—	$	—	$28,570

Neo's equity securities, classified in Level 1, is measured at FVTPL based on the stock price of the securities that is publicly available. The following table shows the change in the fair value of the equity securities for the year ended December 31, 2022 and December 31, 2021:

	December 31, 2022	December 31, 2021
Opening balance - January 1, 2022 and 2021, respectively	$2,056	$—
Acquisition of equity securities	—	776
(Decrease) increase in share price - recorded as finance (expense)income	(1,075)	1,363
Foreign exchange loss	(79)	(83)
Ending balance	$902	$2,056

Neo's derivative liability, classified in Level 3, uses the discounted cash flow method to determine the fair value based on significant inputs that are not based on observable market data.

Changing inputs to the Level 3 valuations to reasonably possible alternative assumptions may significantly change amounts recognized in net income, total assets, total liabilities or total equity. The following is a sensitively analysis of the inputs to the valuation model of the Buss & Buss derivative liability as at December 31, 2022:

	Effect of 1% increase (1)	Effect of 1% decrease (1)
Terminal growth rate	1,241	(1,090)
Overall discount rate	(1,859)	2,124

Notes:

(1) Assuming all other inputs are unchanged

There have been no transfers between levels for the period ended December 31, 2022.

12.3 Bank advances, short-term debt and long-term debt

12.3.1 Chinese debt facility

In the third quarter of 2021, Magnequench (Tianjin) Co. Ltd., Magnequench International Trading (Tianjin) Co. Ltd., Jiangyin Jia Hua Advanced Material Resources Co. Ltd., Zibo Jiahua Advanced Material Resources Co. Ltd., Magnequench Magnetics (Chu Zhou) Co. Ltd., and Neo Jia Hua Advanced Materials (Zibo) Co. Ltd. ("NAMCO"), each referred to as a ("Borrower") or collectively as ("Chinese Subsidiaries"), entered into a $10.0 million Overdraft Facility ("Tranche I") and a $20.0 million Import Facilities or a Multiple Currency Revolving Loan Facility ("Tranche II") with HSBC Bank (China) ("Lender"). Tranche I and Tranche II (collectively, the "Facilities") may be drawn down in accordance with the provisions of the Facilities to finance the working capital requirement of the Chinese Subsidiaries.

Tranche I can be drawn in Chinese Renminbi ("RMB") only. Interest is accrued on the daily overdraft balance at a rate equal to the China Loan Prime Rate ("LPR") plus 0.5% per annum and shall be payable monthly in arrears.

The Import Facilities under Tranche II can be drawn in either RMB or USD. If drawn in RMB, interest is accrued at a rate equal to the LPR plus 0.3% per annum. If drawn in USD, interest is accrued at a rate to be agreed upon by the Lender and Borrower. The term of a loan shall not exceed 150 days in any case.

The Multiple Currency Revolving Loan Facility under Tranche II can be drawn in RMB, USD or Euro provided that the USD equivalent of the aggregate outstanding amount shall in no time exceed the amount of this facility. If drawn in RMB, interest is accrued at a rate equal to the LPR plus 0.4% per annum. If drawn in USD or Euro, interest is accrued at a rate to be agreed by the Lender and the Borrower. The term of each loan will be 1, 3, or 6 months or such other periods as determined by the Lender and shall not exceed 12 months in any case.

The Facilities are cross-guaranteed by the Chinese Subsidiaries and by Neo and contain a number of financial covenants (which include a debt to equity ratio and that minimum equity and earnings before interest, income taxes, depreciation and amortization ("EBITDA") levels be maintained – as such terms are defined in the Facilities agreement) and commercial covenants, including specific terms relating to the timing, interest payable and maturity terms of each draw on these Facilities.

The balance drawn on the Facilities under Tranche II as at December 31, 2022 and December 31, 2021, net of changes in foreign exchange, is $9.2 million (RMB 64.2 million) and $6.3 million (RMB 40.0 million), respectively. Neo and the relevant borrowing parties are in compliance with all covenants in the Facilities agreement as at December 31, 2022.

12.3.2 German debt facility

On December 13, 2022, Buss & Buss obtained an additional $7.4 million (€7.0 million) revolving line of credit to fund its working capital requirement which brings its total revolving line of credit to $13.3 million (€12.5 million) as at December 31, 2022. The revolving line of credit can be drawn either in Euros or USD. The bank is entitled to revise the interest rate if the three-month Euro Interbank Offered Rate ("Euribor") average rate changes by more than 0.25%, up to a maximum of 0.1% plus the actual change in average rate.

The security for the revolving line of credit includes a directly enforceable guarantee of the non-controlling shareholder of Buss & Buss amounting to $0.3 million (€0.3 million) as well as a lien amounting to $0.5 million (€0.5 million) on certain property, plant and equipment. The remainder of the revolving line of credit is secured by certain working capital of Buss & Buss.

As at December 31, 2022 and December 31, 2021, $8.1 million (€7.6 million) and $0.2 million (€0.2 million), respectively, was drawn from the revolving line of credit.

There are no financial covenants which need to be met.

12.3.3 Estonia debt facility

On December 23, 2021, Silmet entered into a $7.5 million (€7.0 million) credit facility with OP Corporate Bank plc Eesti filiaal ("OP Bank") to finance working capital and other investments at Silmet. On December 29, 2021, part of the credit facility was assigned to a bank guarantee related to the disposal of naturally occurring radioactive materials ("NORM") residue, thus temporarily reducing the credit facility by $2.5 million (€2.3 million) to a net $5.0 million (€4.7 million) credit facility which can be drawn in Euros and accrues interest at a rate equal to the 6 month Euribor plus 1.95% per annum. On August 2, 2022, the OP Bank released the $2.5 million (€2.3 million) from the bank guarantee.

As part of the facility agreement, Silmet has pledged certain security as collateral in favour of OP Bank, including a combined mortgage over certain real estate properties for $9.6 million (€9.0 million), and certain other fixed assets for $5.3 million (€5.0 million).

The facility contains a number of financial covenants, which include a debt service coverage ratio, an equity ratio, and that a maximum net debt to EBITDA ratio not be exceeded – as such terms are defined in the facility agreement. The financial covenants are tested semi-annually as of June 30 and December 31 each year.

During the year ended December 31, 2022, Silmet repaid $0.6 million (€0.5 million) such that as at December 31, 2022, $6.9 million (€6.5 million) remains drawn. As of December 31, 2022, Silmet is in compliance with all covenants in the facility agreement. The current portion of this term debt facility as at December 31, 2022 was $0.7 million (€0.7 million), while $6.2 million (€5.8 million) was classified as long-term. Please see Note 27.5 for the scheduled repayment of this borrowing.

12.3.4 Export Development Canada credit facility

On August 16, 2022, Neo entered into a loan agreement (the "Loan Agreement") with Export Development Canada ("EDC") for a term loan of up to $75.0 million (the "Credit Facility"), to be advanced in three tranches of $25.0 million, to finance the relocation, expansion, and sustainability upgrades to its environmental emissions catalyst manufacturing facility (the "NAMCO Project").

The Credit Facility matures five years from the date of the loan agreement, on August 16, 2027, with principal repayment beginning on August 16, 2024. Neo will repay to EDC the full principal amount of each outstanding loan as follows, each year on the anniversary of the date of the agreement:

• Payment 1 (2023) No principal repayment;
• Payment 2 (2024) 10% of the Borrowed Loan;
• Payment 3 (2025) 10% of the Borrowed Loan;
• Payment 4 (2026) 10% of the Borrowed Loan;
• Payment 5 (Maturity Date) all remaining amount necessary to repay the loan in full, including all payable principal, interests, fees and expenses.

The outstanding principal amount carries an interest rate equal to the secured overnight financing rate ("SOFR"), as administered by the Federal Reserve Bank of New York, plus an applicable margin. The interest is payable every three months, commencing on the borrowing date of the loan agreement.

Prior to drawing each of the three tranches, the Loan Agreement requires certain conditions to be fulfilled including detail engineering for the NAMCO Project, including all specifications, plans, documents and drawings that are issued for construction, erection and installation purposes in respect of the NAMCO Project as required by EDC, maintenance of cost performance relative to budget, disclosures related to environmental and social law compliance, and other certifications from management and third-party environmental monitoring consultants.

The Credit Facility is guaranteed by a number of Neo's Subsidiaries and contain a number of covenants (which include a maximum leverage ratio and debt service coverage ratio levels that should be maintained – as such terms are defined in the executed agreement), including specific terms relating to the timing and basis of interest payable, compliance with laws and regulations, financial statements, acquisitions, dividend payments or distributions to shareholders.

On December 14, 2022, the first tranche of $25.0 million was advanced to Neo. As at December 31, 2022, the carrying amount of the loan, measured at amortized cost, was $23.7 million ($25.0 million net of transaction costs of $1.3 million). Total interest expense amounted to $0.1 million.

There were no defaults of principal or interest payments and no breaches of the loan agreement during the year ended December 31, 2022. As at December 31, 2022, Neo is in compliance with all covenants in the Credit Facility agreement.

NOTE 13 LEASES

13.1 Right-of-use assets

Neo leases vehicles, machinery, land and buildings for its office and research and development facilities. The leases of vehicles, machinery and office spaces typically run for a period of 2 to 5 years. The leases of land could range for a period of 1 to 50 years. Some leases include an option to renew for an additional period of the same duration after the end of the contract term.

Neo also leases office equipment with contract terms of 1 to 2 years. These leases are short-term and/or leases of low-value items. Neo has elected not to recognize right-of-use assets and leases liabilities for these leases.

In June 2021, one of Neo's subsidiaries in China, NAMCO, entered into a 50 year land lease agreement with the Chinese government in the amount of $4.4 million. In March 2022, NAMCO received the land certificate from the Chinese government which gives permission to NAMCO to begin using the land as stated in the lease agreement.

Information about Neo's right-of-use assets is presented in Note 8.

13.2 Lease liabilities

The following table shows the contractual undiscounted cash flows of the leases based on their maturity date:

	December 31, 2022		December 31, 2021
Less than one year		1,320	1,680
One to five years		822	1,365
More than five years		34	47
Total undiscounted lease liability	$	2,176	$3,092

13.3 Amounts recognized in profit or loss

The following table shows the amount of lease related expenses recognized in the statement of profit or loss for the year ended December 31, 2022:

	Year Ended December 31,
	2022	2021
Interest on lease liabilities	121	166
Expenses relating to short-term leases	22	20
Expenses relating to leases of low-value assets, excluding shortterm leases of low-value assets	5	5

NOTE 14 OPERATING SEGMENTS

The primary metric used to measure the financial performance of each operating segment is EBITDA before equity income (loss) in associates, other income (expense), foreign exchange (gain) loss, share and value-based compensation, impairment of assets, and other costs (recoveries) ("Adjusted EBITDA"), which management believes provides a better indication of the base-line performance of Neo's core business operations.

A comparative breakdown of business segment information is as follows:

For the year ended December 31, 2022:

	Magnequench	Chemicals& Oxides	RareMetals	Corporate	Total forreportablesegments	Eliminations	Total
External revenue	$277,412	$232,500	$ 130,386	$—	$640,298	$—	$ 640,298
Inter-segment revenue	—	15,511	—	—	15,511	(15,511)	—
Total revenue	$277,412	$248,011	$ 130,386	$—	$655,809	$(15,511)	$ 640,298
Net Income (loss)	$25,148	$19,127	$(858)	$(19,652)	$23,765	$2,653	$ 26,418
Finance (income) cost, net	(135)	665	14,161	568	15,259	—	15,259
Income tax expense	8,123	2,968	6,629	73	17,793	—	17,793
Depreciation andamortization included incosts of sales	3,472	4,055	1,879	—	9,406	—	9,406
Depreciation andamortization included inoperating expenses	5,570	1,137	308	298	7,313	—	7,313
EBITDA	$42,178	$27,952	$ 22,119	$(18,713)	$73,536	$2,653	$ 76,189
Reconciliation to Adjusted EBITDA:
EBITDA	$42,178	$27,952	$ 22,119	$(18,713)	$73,536	$2,653	$ 76,189
Other (income) expense	(258)	1,416	1,070	—	2,228	—	2,228
Foreign exchange loss(gain)Equity income of	440	(2,000)	(23)	1,282	(301)	—	(301)
associates	(2,783)	—	—	—	(2,783)	—	(2,783)
Share-based compensation(1).	595	669	195	1,024	2,483	—	2,483
Impairment of assets (2).	—	287	946	—	1,233	—	1,233
Other recoveries (3).	—	—	—	(22)	(22)	—	(22)
Adjusted EBITDA (4).	$40,172	$28,324	$ 24,307	$(16,429)	$76,374	$2,653	$ 79,027
Capital expenditures	$3,238	$11,812	$2,420	$—	$17,470	$—	$ 17,470

Notes:

(1) Represents share-based compensation expense in respect of the Plan (Note 20) and the LTIP.

(2) Represents impairment in property, plant and equipment, long-term asset and prepayment.

(3) Represents primarily legal, professional advisory fees and other transaction costs incurred with respect to non-operating capital structure related transactions. Neo has removed these recoveries to provide comparability with historic periods.

(4) Certain items are excluded from net income (loss) to determine Adjusted EBITDA. Adjusted EBITDA is used internally by management when analyzing segment underlying performance.

For the year ended December 31, 2021:

	Magnequench	Chemicals& Oxides		RareMetals		Corporate		Total forreportablesegments	Eliminations			Total
External revenue	$263,753	$	191,894		$ 83,604	$	—	$539,251	$	—		$ 539,251
Inter-segment revenue	—		20,817		—		—	20,817		(20,817)		—
Total revenue	$263,753	$	212,711		$ 83,604	$	—	$560,068	$	(20,817)		$ 539,251
Net Income (loss)	$32,460	$	27,865	$	(1,800)	$	(20,098)	$38,427	$	(2,384)		$ 36,043
Finance cost (income), net	(223)		(43)		5,534		(1,325)	3,943		—		3,943
Income tax expense	8,147		(1,821)		3,218		36	9,580		—		9,580
Depreciation andamortization included in costsof sales	3,373		2,602		2,201		—	8,176		—		8,176
Depreciation andamortization included inoperating expenses	5,946		1,144		262		337	7,689		—		7,689
EBITDA	$49,703	$	29,747	$	9,415	$	(21,050)	$67,815	$	(2,384)		$ 65,431
Reconciliation to Adjusted EBITDA:
EBITDA	$49,703	$	29,747	$	9,415	$	(21,050)	$67,815	$	(2,384)		$ 65,431
Other (income) expense (1)	(371)		9,767		354		—	9,750		—		9,750
Foreign exchange loss(gain)	2,217		1,623		(728)		1,276	4,388		—		4,388
Equity income of associates	(3,817)		—		—		—	(3,817)		—		(3,817)
Share and value-basedcompensation (2).	277		254		113		3,882	4,526		—		4,526
Impairment of assets (3).	—		121		—		—	121		—		121
Other costs (4).	—		—		—		1,516	1,516		—		1,516
Adjusted EBITDA (5).	$48,009	$	41,512	$	9,154	$	(14,376)	$84,299	$	(2,384)		$ 81,915
Capital expenditures	$4,784	$	3,297	$	1,383	$	—	$9,464	$	—	$	9,464

Notes:

(1) Represents other expenses resulting from non-operational related activities, including provisions for damages for outstanding legal claims related to historic volumes. These costs and recoveries are not indicative of Neo's ongoing activities.

(2) Represents share-based compensation expense in respect of the Plan (Note 20) and the LTIP.

(3) Represents impairment in property, plant and equipment.

(4) Represents primarily legal, professional advisory fees and other transaction costs incurred with respect to non-operating capital structure related transactions. Neo has removed these charges to provide comparability with historic periods.

(5) Certain items are excluded from net income (loss) to determine Adjusted EBITDA. Adjusted EBITDA is used internally by management when analyzing segment underlying performance.

As at December 31, 2022:

	Magnequench	Chemicals& Oxides	RareMetals	Corporate	Total forreportablesegments	Eliminations	Total
Total assetsInvestment in equity method	$285,745	$229,823	$ 110,693	$50,265	$ 676,526	$(66)	$ 676,460
associates	16,363	—	—	—	16,363	—	16,363
Total liabilities	(44,078)	(56,834)	(56,548)	(41,357)	(198,817)	—	(198,817)

As at December 31, 2021:

		Chemicals	Rare		Total forreportable
	Magnequench	& Oxides	Metals	Corporate	segments	Eliminations	Total
Total assets	$308,306	$ 166,265	$ 79,621	$42,610	$ 596,802	$(2,720)	$ 594,082
Investment in equity methodassociates	13,759	—	—	—	13,759	—	13,759
Total liabilities	(65,659)	(50,941)	(30,104)	(16,862)	(163,566)	—	(163,566)

The geographic distribution of Neo's revenue based on the location of its customers for the year ended December 31, 2022 and 2021 are summarized as follows:

Revenue	Year Ended December 31,
		2022	2021
Asia:
China	$	205,675	$	198,379
Japan		101,910		116,180
Thailand		27,442		28,794
South Korea		14,494		4,698
North America		127,442		69,250
Europe		143,829		109,264
Other		19,506		12,686
Total	$	640,298	$	539,251

Revenue from one significant customer accounted for $77.5 million and $90.3 million of Neo's total revenue for the year ended December 31, 2022 and December 31, 2021, respectively. Neo defines significant customers as those that generates 10% or more of consolidated revenue.

The geographic distribution of Neo's non-current assets (excluding deferred tax assets, goodwill and intangible assets) based on the location of the assets is summarized as follows:

	December 31,2022	December 31,2021
Asia:
China	$47,292	$45,817
Singapore	1,386	2,174
Thailand	5,625	5,971
North America	17,505	16,123
Europe	17,354	15,364
Other	4,902	4,592
Total	$94,064	$90,041

NOTE 15 SUPPLEMENTAL CASH FLOW INFORMATION

Net change in non-cash working capital balances related to operations consists of the following:

	Year Ended December 31,
	2022		2021
Increase in assets:
Accounts receivable	$(19,238)	$	(13,328)
Inventories	(18,872)		(69,408)
Other assets	(5,415)		(5,237)
Decrease in liabilities:
Accounts payable and other accrued charges	(23,305)		16,772
Other liabilities	(999)		464
Total net change	$(67,829)	$	(70,737)

NOTE 16 COMMITMENTS AND CONTINGENCIES

16.1 Commitments

In the normal course of business, Neo and its subsidiaries enter into sales commitments with customers, and purchase commitments with suppliers. These commitments are for varying terms and can provide for fixed or variables prices. Neo believes that these contracts serve to reduce risk and does not anticipate that losses will be incurred on these contracts.

16.2 Legal contingencies

Neo operates in a high technology and advanced engineering product environment in which many patents have been issued over time. The subsidiaries of Neo are currently, and may in the future become, involved in legal proceedings alleging patent infringement. At present, Neo is defending against patent infringement legal proceedings filed in Germany, the United Kingdom, the People's Republic of China, and Estonia. Additionally, Neo has initiated proceedings to invalidate certain patents of Neo's competitors issued in these same jurisdictions.

There are many factors that make it difficult to estimate the impact of a particular lawsuit on Neo, including the following, among others: being in the early stage of a proceeding when the claimant is not required to specifically identify the manner in which the patent has allegedly been infringed; damages sought that are unspecified, unsupportable, unexplained or uncertain; discovery not having been started or still incomplete; the complexity of the facts that are in dispute (e.g., the analysis of the patent and a comparison to the activities of Neo is a labor-intensive and highly technical process); the difficulty of assessing novel claims or legal arguments, and; the parties not having engaged in any meaningful settlement discussions. Management is required to apply judgment with respect to estimating the potential impact of the ongoing patent litigation on Neo. Potential impacts to Neo include, but are not limited to the following: the possibility of an injunction prohibiting Neo from manufacturing, distributing, marketing or selling products that are found to infringe on an unexpired patent; potential damages, attorney's fees and costs that Neo could be ordered to pay if it is found to have infringed on a patent, and; damage to Neo's reputation with key customers, or prospective customers, from a finding of patent infringement.

Of the various lawsuits initiated and underway, the German Courts have ruled that certain of Neo Chemicals & Oxides (Europe) Ltd.'s ("Neo C&O (Europe)") products infringed five expired patents of Rhodia Chimie ("Rhodia"): European patent #0735984 B1 ("984"), European patent #0863846 B1("846"), European patent #0605274 ("274"), European patent #0955267 B1 ("267"), and European patent #1435338 B1 ("338"). Neo C&O (Europe) filed an appeal in the 846 infringement action, which is still pending. Neo C&O (Europe) filed an appeal in the 338 infringement action but the Higher Regional Court of Karlsruhe affirmed the judgment of infringement. Neo C&O (Europe) subsequently filed for leave to appeal the 338 judgment of infringement to the German Federal Supreme Court and that application is still pending. The judgments of infringement with respect to 984, 274 and 267, are final. Neo C&O (Europe) was ordered to provide information related to the calculation of damages, but as of yet, there has been no determination of damages in any of the German infringement lawsuits.

Neo C&O (Europe) challenged the validity of patents 984, 846, 274, 267 and 338 before the German Federal Patent Court. Following litigation before the German Federal Patent Court, and subsequent appeals to the German Supreme Court, patents 984, 846, 274, 267 and 338 were upheld subject to restrictions in scope. Neo C&O (Europe) also filed actions in the German Federal Patent Court challenging the validity of European patent #1527018 ("018") and European patent #2007682 ("682"). The German Federal Patent Court upheld the validity of 018 in restricted form. Both Rhodia and Neo have appealed this ruling and the appeals are still pending. Neo's lawsuit challenging the validity of 682 is pending in the German Federal Patent Court.

Rhodia has filed actions in Germany alleging that Neo C&O (Europe) has infringed four unexpired patents: 018, 682, European Patent #3009403 B1 ("403") and European patent #2523907 ("907"). In September 2020, Neo C&O (Europe) was found to infringe 018 in Germany by the Düsseldorf Regional Court. Neo and Rhodia have both appealed this ruling, and the appeals are still pending. The Düsseldorf Regional Court stayed Rhodia's case alleging infringement of 682, pending the outcome of Neo's action before the German Federal Patent Court to invalidate 682. In September of 2021 the Court of Appeal remanded the case back to the Düsseldorf Regional Court to reconsider its order staying the 682 infringement proceeding. The Düsseldorf Regional Court has not yet ruled on Neo's motion for stay following the remand. The 403 infringement action is pending before the Düsseldorf Regional Court and a trial date has not yet been set. The 907 action was initiated at the beginning of July 2020, but Rhodia dismissed the 907 action in March 2021.

In April 2018, the United Kingdom ("UK") High Court of Justice determined that certain of Neo C&O (Europe)'s products infringed the equivalent UK patent 338. Neo C&O (Europe) appealed the trial court judgment of infringement but in October of 2019 the judgment of infringement was affirmed. In 2020 Neo C&O (Europe) reached a confidential settlement with the plaintiffs, Rhodia Operations S.A.S. and Anan Kasai Co. Ltd., for some of the damage claims. A trial on the plaintiffs' remaining claims for damages took place in January and February 2022. On March 29, 2022, the Court ruled that the plaintiffs were not entitled to any damages for the remaining claims. The plaintiffs' appeal of the trial court judgment was dismissed in January 2023. The plaintiffs have applied for permission to appeal to the Supreme Court and the application is still pending.

On April 18, 2018, the Patent Reexamination Board of the State Intellectual Property Office of China ("PRB") ruled in favor of ZAMR, a Chinese subsidiary of Neo, by invalidating all claims associated with Chinese patent ZL 03817110.4, held by Rhodia Operations S.A.S., an affiliate of Brussels-based Solvay ("Rhodia Operations"). On May 23, 2018, the Intermediate People's Court of Zibo, China, dismissed the pending lawsuit by Rhodia Operations alleging infringement of Chinese patent ZL 03817110.4. Rhodia Operations appealed the decisions of the PRB and the Intermediate People's Court of Zibo concerning Patent ZL 03817110.4. In December 2020, the Beijing IP Court upheld the ruling of the PRB invalidating all claims associated with patent ZL 03817110.4. Rhodia Operations appealed the decision of the Beijing IP Court. On April 1, 2022, the Supreme People's Court upheld the ruling of the Beijing IP Court and the judgment invalidating patent ZL 03817110.4 is now final.

On September 26, 2018, the PRB again ruled in favor of ZAMR by invalidating all product claims associated with patent ZL 200710146613.6, held by Daiichi Kigenso Kagaku Kogyo Co. ("DKKK"). The PRB upheld the validity of Claim 4, which is a method claim. In May of 2021, DKKK and Rhodia Operations withdrew their suit alleging infringement of Claim 4. In December 2020, the Beijing IP Court upheld the ruling of the PRB invalidating claims 1 through 3 of patent ZL 200710146613.6. In September 2022, the Supreme People's Court upheld the ruling of the PRB.

In January 2019, the PRB ruled in favor of ZAMR by invalidating all patent claims associated with patent ZL 97195463.1. On February 28, 2019, the Intermediate People's Court of Zibo, China, dismissed the pending lawsuit by Rhodia Operations and DKKK alleging infringement of patent ZL 97195463.1. In April 2020, the Beijing IP Court upheld the PRB's ruling that invalidated all patent claims. Rhodia Operations appealed this judgment to the Supreme People's Court of China and in November 2020, the Supreme People's Court of China affirmed the judgment of the Beijing IP Court, invalidating all claims associated with patent ZL 97195463.1. This final judgment precludes further litigation for alleged infringement of ZL 97195463.1.

On March 4, 2019, the PRB ruled in favor of ZAMR by invalidating all patent claims associated with patent ZL 02822106.0, which is equivalent to European Patent 338. Solvay Japan appealed this decision. In July 2021, the Beijing IP Court dismissed Solvay Japan's appeal and upheld the PRB's ruling that invalidated all patent claims associated with patent ZL 02822106.0. In January of 2022, Solvay Japan withdrew its appeal to the Supreme People's Court of China and the judgment of the Beijing IP Court invalidating all patent claims became final.

In October 2020, Rhodia Operations refiled a lawsuit, in the Ji'nan Intermediate Court, alleging ZAMR had infringed Chinese patent ZL 96196505.3. In 2015 Rhodia Operations had filed a similar lawsuit against ZAMR alleging infringement of the same patent before the Zibo Intermediate People's Court, but in December 2019 Rhodia Operations withdrew that lawsuit during the middle of trial. In August of 2021, the Ji'nan Intermediate Court ruled that ZAMR did not infringe ZL 96196505.3. Rhodia Operations has appealed the judgment of non-infringement, and the appeal is still pending.

In November of 2020 Rhodia Operations filed a lawsuit in Estonia against NPM Silmet OÜ alleging infringement of 403. This case has not yet been set for trial. Neo C&O (Europe) has filed an action before the European Patent Office seeking to revoke 403.

The following infringement proceedings are ongoing. These proceedings are at various stages of court proceeding including being at pre-trial stage, within infringement proceedings, as well as invalidity proceedings.

Patent Reference	Jurisdiction of Claim		Specified Damages byClaimant
European patent 0863846 B1	Germany
European patent 0735984 B1	Germany	}	$8.7 million
European patent 0605274 B1	Germany
Chinese patent ZL 96196505.3	China		$6.5 million
European Patent EP 3009403	Germany		Not specified
European Patent EP 3009403	Estonia		$0.1 million
European & UK patents 1435338 B1	Germany		$40.5 million (€38.0 million)
European & UK patents 1435338 B1	UK		Not specified
European patent 0955267	Germany		$0.3 million (€0.3 million)
European patent 1527018	Germany		$0.7 million
European patent 2007682	Germany		Not specified

Management has made an assessment, based on its interpretation of the claims as to the quantum of the appropriate provision for certain claims, in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Such a provision is based on management's best estimate, as damages are uncertain and are subject to judicial determination. Management's assessment, based on its interpretation of the claims, the limited facts available at this time and independent legal advice, is that for all other claims it is not probable that an outflow of resources will be required in settling these claims and no provision has been made. Future developments in these cases could cause management to change its assessment.

Management does not have sufficient information to comment on the quantum or methodology of the damages sought by the claimants including with respect to potential duplicity of the parts affected. Management's view on specified damages could be materially different than those proposed by the claimant in each case.

Neo intends to defend itself vigorously in all cases. In light of the inherent uncertainties in litigation there can be no assurance that the ultimate resolution of these matters will not significantly exceed the amounts currently accrued for those cases for which an estimate can be made. Losses in connection with any litigation for which management is not presently able to reasonably estimate any potential loss, or range of loss, could be material to Neo's results of operations and financial condition.

NOTE 17 SHARE CAPITAL

	December 31, 2022	December 31, 2021
Number of common shares authorized for issue:	Unlimited	Unlimited
Number of preference shares authorized for issue:	Unlimited	Unlimited
Total common shares issued and fully paid	45,196,921	40,668,902
Total treasury shares	—	—

17.1 Common Shares

Neo's authorized capital consists of an unlimited number of Common Shares without par value. The holders of the Common Shares are entitled to receive notice of and to attend and vote at all meetings of the shareholders of Neo and each Common Share confers the right to one vote in person or by proxy at all meetings of the shareholders of Neo. The holders of the Common Shares, subject to the prior rights, if any, of any other class of shares of Neo, are entitled to receive such dividends in any financial year as the Board may by resolution determine. In the event of the liquidation, dissolution or winding-up of Neo, whether voluntary or involuntary, the holders of the Common Shares are entitled to receive, subject to the prior rights, if any, of the holders of any other class of shares of Neo, the remaining property and assets of Neo.

On September 16, 2022, Neo completed a bought deal treasury offering during which Neo issued and sold from treasury an aggregate of 4,506,734 common shares, for net proceeds of approximately $47.7 million (Gross proceeds of $50.8 million, net of transaction costs of $3.1 million).

None of Neo's shares are held by any subsidiary or associate.

17.2 Preferred Shares

The Board has the authority, without action by Neo's shareholders, to designate and issue an unlimited number of Preferred Shares in one or more series and to designate the rights, preferences and privileges of each series. The Preferred Shares of each series will rank on par with the Preferred Shares of every other series and, if so designated by the Board, will be entitled to preference over the Common Shares with respect to payment of dividends and distribution of any assets in the event of Neo's liquidation, dissolution or winding-up. Where Neo does not pay cumulative dividends in full with respect to a series of its Preferred Shares, the shares of all series of the Preferred Shares will participate rateably with respect to the accumulated dividends in accordance with the amounts that would be payable on those shares if all the accumulated dividends were paid in full.

The issuance of Preferred Shares and the terms selected by the Board could decrease the amount of earnings and assets available for distribution to holders of the Common Shares and/or adversely affect the rights and powers, including the voting rights, of the holders of the Common Shares without any further vote or action by the shareholders. Any series of Preferred Shares issued by the Board will have priority over the Common Shares in terms of dividend or liquidation rights or both. The issuance of Preferred Shares, or the issuance of rights to purchase Preferred Shares, could make it more difficult for a third party to acquire a majority of Neo's outstanding voting shares and thereby have the effect of delaying, deferring or preventing a change of control of Neo or an unsolicited acquisition proposal, and could make the removal of management more difficult. Additionally, the issuance of Preferred Shares may have the effect of decreasing the market price of the Common Shares.

Neo has no current intention to issue any Preferred Shares.

17.3 Normal Course Issuer Bid

On June 1, 2021, Neo announced that the TSX had accepted a notice filed by Neo of its intention to make a Normal Course Issuer Bid (the "Bid") for up to 2,111,758 of its issued and outstanding common shares. In connection with the Bid, Neo entered into an automatic share purchase plan with its designated broker to allow for purchases of its shares (the "Share Purchase Plan"). The Share Purchase Plan was considered an "automatic plan" for purposes of applicable Canadian securities laws. Under the Share Purchase Plan, Neo's broker could purchase shares on any trading day during the Bid, including during self-imposed trading blackout periods. The price that Neo would pay for any shares purchased under the Bid would be the prevailing market price at the time of purchase. Any shares purchased by Neo would be canceled. The Share Purchase Plan terminated on June 3, 2022.

For the year ended December 31, 2022, Neo did not repurchase or cancel any shares. For the year ended December 31, 2021, Neo repurchased and canceled 3,400 shares for a nominal amount.

NOTE 18 EARNINGS PER SHARE

18.1 Weighted-average number of common shares - basic

The weighted average number of shares outstanding is calculated as follows:

	Year Ended December 31,
	2022	2021
Common shares issued at beginning of period	40,668,902	37,460,390
Weighted average impact of:
Issuance of common shares	1,324,036	683,058
Repurchase and cancellation of common shares underNormal Course Issuer Bid	—	(3,338)
Weighted average number of common shares for the year -basic	41,992,938	38,140,110

18.2 Weighted average number of common shares - diluted

The weighted average number of common shares outstanding after adjustment for the effects of all dilutive potential common shares is calculated as follows:

	Year Ended December 31,
	2022	2021
Weighted average number of common shares - basic	41,992,938	38,140,110
Dilutive effect of Stock Units	334,610	403,238
Weighted average number of common shares - diluted	42,327,548	38,543,348

18.3 Earnings per share

The calculation of basic and diluted earnings per share was based on net income attributable to equity holders of Neo for the year ended December 31, 2022, and December 31, 2021.

	Year Ended December 31,
		2022		2021
Net income attributable to equity holders of Neo PerformanceMaterials Inc. - basic and diluted	$	25,947	$	35,177

	Year Ended December 31,
		2022		2021
Earnings per share - basic	$	0.62	$	0.92
Earnings per share - diluted	$	0.61	$	0.91

For the year ended December 31, 2022, 399,709 (2021: 186,550) stock options, were excluded from the dilutive weighted-average number of ordinary shares calculation because their effect would have been anti-dilutive.

For the year ended December 31, 2022, nil (2021: 47,270) equity-settled RSUs, were excluded from the dilutive weighted-average number of ordinary shares calculation because their effect would have been anti-dilutive.

For the year ended December 31, 2022, 97,000 (2021: 35,447) equity-settled PSUs, were excluded from the dilutive weighted-average number of ordinary shares calculation because their effect would have been anti-dilutive.

NOTE 19 INCOME TAXES

19.1 Income Tax Expense

	Year Ended December 31,
		2022		2021
Current tax expense (benefit)
Current year	$	16,947	$	14,220
Adjustments in respect of prior years		(163)		(117)
Total current tax expense		16,784		14,103
Deferred tax expense (benefit)
Origination and reversal of temporary differences		1,490		261
Amount of benefit arising from previously unrecognized tax loss, used toreduce current tax expense		(340)		(3,071)
Amount of benefit arising from previously unrecognized deductibletemporary differences		(141)		(1,713)
		1,009		(4,523)
Total income tax expense	$	17,793	$	9,580

19.2 Reconciliation of effective tax rate

	Year Ended December 31,
		2022		2021
Income from operations before taxes and equity income of associates		41,428		41,806
Income tax expense (benefit) at Neo's statutory income tax rate of 26.5%
(2020 - 26.5%)		10,978		11,079
Impact of countries with different tax rates		(4,164)		(4,283)
Losses and deductible temporary differences for which no deferred tax
asset has been recognized		2,914		(1,380)
Current tax benefit with respect to prior years		(163)		(117)
Foreign withholding taxes		2,675		2,197
Deferred tax expense (benefit) on foreign exchange translation of non
monetary items		(161)		841
Expenses not deductible for tax purposes		5,019		1,404
Other		695		(161)
Total income tax expense	$	17,793	$	9,580

19.3 Unrecognized deferred tax assets

Deferred tax assets have not been recognized in respect of the following items because it is not probable that future taxable profits will be available against which the benefit can be used:

	Year Ended December 31,
		2022		2021
Deductible temporary differences	$	30,924	$	30,051
Tax losses		102,398		125,417
	$	133,322	$	155,468

Tax losses for which no deferred tax asset was recognized that will not expire totaled $5.8 million while $18.8 million expire between 2023 and 2027 and $77.7 million expire between 2027 and 2042.

19.4 Unrecognized deferred tax liabilities

At December 31, 2022 taxable temporary differences of $70.8 million related to the investment in subsidiaries were not recognized because Neo controls the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

19.5 Recognized deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

	Year Ended December 31,
		2022		2021
Deferred Tax Assets
Inventory	$	3,351	$	3,670
Property, plant and equipment and intangible assets		1,568		1,120
Accrued charges		923		988
Deferred compensation and retirement benefits		224		195
Net operating losses		5		38
Provisions		1,593		3,598
Other		4,228		880
Deferred Tax Liabilities
Inventory		(306)		—
Property, plant and equipment and intangible assets		(9,835)		(10,109)
Foreign subsidiary earnings and withholding tax		(8,088)		(6,470)
Other		(649)		(638)
Deferred tax liabilities - net	$	(6,986)	$	(6,728)

For balance sheet disclosure purposes, deferred tax assets and liabilities have been offset where they relate to income taxes levied by the same taxation authority and Neo has the legal right and intent to offset, resulting in the following presentation:

	Year Ended December 31,
		2022		2021
Deferred tax assets	$	6,956	$	6,638
Deferred tax liabilities		(13,942)		(13,366)
Deferred tax liabilities - net	$	(6,986)	$	(6,728)

Movement in net deferred tax liabilities:

	Year Ended December 31,
		2022		2021
Balance at the beginning of the period	$	(6,728)	$	(10,930)
Recognized in profit or loss		(1,010)		4,523
Other		752		(321)
Balance at the end of the period		(6,986)		(6,728)

NOTE 20 SHARE-BASED COMPENSATION

On September 12, 2017 OCM Neo Holdings (Cayman), L.P. ("OCM") formed Neo, a company incorporated in the province of Ontario, for the purpose of completing a Cayman Islands scheme of arrangement (the "Arrangement") with Neo Cayman Holdings Ltd. ("Neo Cayman") and a subsequent public offering of common shares of Neo. Neo Cayman's management incentive plan was assigned to Neo upon the completion of the Arrangement. This plan ("Legacy Plan") was comprised of Stock Options, Restricted Share Units ("RSUs"), Performance Stock Units ("PSUs") and Special Performance Stock Units ("Special PSUs") (collectively referred to as "Stock Units"). These Stock Units were granted under the Legacy Plan to directors, officers, and employees, and provide the right for these individuals to receive common shares of Neo or, in the case of the options, to purchase common shares of Neo.

In connection with the Arrangement, Neo has undertaken to issue common shares of Neo underlying the Stock Units, applying the exchange ratio applied in connection with the Arrangement. On October 13, 2017, Neo adopted a Stock Option Plan, in conjunction with the Initial Public Offering. On May 9, 2018, Neo adopted a long-term incentive plan (the "LTIP"). Neo granted Options under the Stock Option Plan, Deferred Share Units ("DSUs") under the Directors Share Unit Plan, and RSUs, PSUs and Additional PSUs under the LTIP.

The Special PSUs under the Legacy Plan and Additional PSUs under the LTIP, had all been canceled as at December 31, 2018 as the liquidity event condition was not met. In 2021, Neo issued shares with respect to all outstanding RSUs and PSUs of the Legacy Pan (that had vested).

On May 28, 2021, an omnibus long-term incentive plan (the "Plan") was established. The Plan was formally approved at the Annual General and Special Meeting of Neo on June 29, 2021 and initial awards were granted in September 2021.

On March 28, 2022, Neo granted 153,155 Options, 38,820 equity-settled RSUs, 97,000 equity-settled PSUs, 57,110 cash-settled RSUs, and 57,110 cash-settled PSUs under the Plan. On June 30, 2022, Neo granted 33,483 DSUs to its directors under the Plan.

During the year ended December 31, 2022, 13,000 stock options have been exercised under the terms of the Legacy Plan and 15,758 RSUs have been exercised under the Plan. As of December 31, 2022, there are 697,354 stock options under the Legacy Plan and 100,781 stock options under the 2017 Stock Option Plan, that have vested but have not yet been exercised.

Equity-settled share-based compensation	Options	Options	RSUs	PSUs
Outstanding, January 1, 2022	1,018,073	$10.60	47,270	118,155
Granted	153,155	$13.22	38,820	97,000
Exercised	(13,000) $	9.37	(15,758)	—
Expired	—	$—	—	—
Outstanding, December 31, 2022	1,158,228	$10.96	70,332	215,155
Exercisable, December 31, 2022	860,318	$10.01	—	—
Weighted average exercise price, exercised during theyear	$10.01
Weighted average remaining contractual life, December31, 2022	4.33 years		1.80 years	1.45 years
Cash-settled share-based compensation		RSUs	PSUs	DSUs
Outstanding, January 1, 2022		172,775	168,442	128,208
Granted		57,110	57,110	33,483
Exercised		(62,673)	(2,667)	—
Expired/Forfeited		(12,096)	(46,770)	—
Outstanding, December 31, 2022		155,116	176,115	161,691
Weighted average remaining contractual life, December 31, 2022		1.37 years	1.16 years	—

The following table summarizes the inputs used in the calculation of the grant date fair values for each of the stock units issued under the Plan during 2022 and the LTIP during 2021:

	Options		RSUs		PSUs		DSUs
Key assumptions used for 2022 grants:
Weighted average grant date fair value (per unit)	$	4.56	$ 12.62		$ 12.62	$	9.71
Dividend yield		2.5 %	— %		— %		— %
Expected volatility		43.0 %	— %		— %		— %
Risk-free interest rate		2.5 %	— %		— %		— %
Exercise price.		$ 13.22	$—	$	—	$	—
Forfeiture rate		— %	— %		— %		— %
Fair value of share-based compensation at grant date	$	698	$ 1,211		$ 1,945	$	325
	Options
			RSUs		PSUs		DSUs
Key assumptions used for 2021 grants:
Weighted average grant date fair value (per unit)	$	5.66	$ 14.96		$ 14.96		$ 15.34
Dividend yield		2.1 %	— %		— %		— %
Expected volatility		45.0 %	— %		— %		— %
Risk-free interest rate		1.1 %	— %		— %		— %
Exercise price		$ 15.34	$—	$	—	$	—
Forfeiture rate		— %	— %		— %		— %

The following table shows the share-based compensation obligations recorded in the consolidated statement of financial position:

	December 31, 2022	December 31, 2021
Accounts payable and other accrued charges	$2,486	$	4,018
Contributed surplus	13,533		10,302
Total	$16,019	$	14,320

The following table shows the share-based compensation expense recorded in the consolidated statements of profit or loss during the year ended December 31, 2022 and December 31, 2021:

	Year Ended December 31,
		2022		2021
Options	$	940	$	317
RSUs		882		1,600
PSUs		1,551		1,729
DSUs		(890)		880
Total	$	2,483	$	4,526

NOTE 21 RELATED PARTY TRANSACTIONS

Neo's related parties are its joint venture partners, associates, directors and executive officers.

Neo's related party transactions were made on terms equivalent to those that prevail in arm's length transactions. Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. Outstanding balances are usually settled in cash.

21.1 Transactions with associates

On occasion, MQTJ will supply Magnequench Powders to TMT to produce rare earth magnetic compounds. MQTJ will then purchase these compounds back from TMT in its normal course of business. Keli and GQD process rare earth oxides into metals for inclusion in Magnequench Powders.

Transactions between Neo and its associates are summarized in the table below:

	Year Ended December 31,
		2022		2021
Purchase of goods and services from associates:
TMT	$	4,798	$	2,931
Keli		87,528		87,994
GQD		18,700		21,137
Sales of goods and services to associates:
TMT		9,888		9,189
Keli		1,374		7,007

21.2 Transactions with joint venture partners

Neo also has occasionally purchased and sold products from and to Ganzhou Qian Dong Rare Earth Group Co. Ltd. ("Qian Dong") and Toda Kogyo Corp. ("Toda").

Transactions between Neo and its joint venture partners are summarized in the table below:

	Year Ended December 31,
		2022		2021
Sale of goods to Toda	$	1,634	$	1,182
Purchase of goods from Qian Dong		1,658		2,478

21.3 Transactions with other related parties

Neo, through one of its subsidiaries in China, MQCZ, has occasionally sold products to Atatsu Co., Ltd. ("Atatsu") for resale to third party customers. Atatsu is controlled by members of MQCZ's key management personnel. For the year ended December 31, 2022, sales to Atatsu were $1.3 million. For the year ended December 31, 2021, sales to Atatsu were $0.7 million.

Transactions between Neo and its related parties are summarized in the table below:

	Year Ended December 31,
		2022	2021
Sale of goods and services to related parties	$	17,023	$	20,467
Purchase of goods and services from related parties		112,684		114,540

	December 31, 2022	December 31, 2021
Trade balances:
from related parties	$2,374	$	2,070
due to related parties	(9,295)		(25,925)
Total	$(6,921)	$	(23,855)

NOTE 22 DIRECTORS AND KEY MANAGEMENT COMPENSATION

Neo's key management personnel consist of those persons having authority and responsibility for planning, directing and controlling the activities of Neo, directly or indirectly. Key management personnel include Neo's executive officers, vice-presidents and members of its board of directors. Neo's key management compensation expenses include short-term compensation and share-based compensation expenses.

Neo's short-term compensation for key management personnel during the years ended December 31, 2022 and 2021, was as follows:

	Year Ended December 31,
	2022			2021
Directors		496		348
Key Executive Management		5,204		4,050
Total	$	5,700	$	4,398

Neo's share-based compensation expense for key management personnel during the years ended December 31, 2022 and 2021, was as follows:

	Year Ended December 31,
		2022		2021
Directors		(890)		881
Key Executive Management		2,783		2,777
Total	$	1,893	$	3,658

NOTE 23 SALARIES EXPENSE

The employee salaries included in cost of sales, selling, general and administrative, and research and development expenses are $58.5 million and $58.4 million for the year ended December 31, 2022 and December 31, 2021, respectively.

NOTE 24 EMPLOYEE BENEFITS

24.1 Defined benefit pension plan and other post-retirement benefits

Neo has a defined benefit pension plan which covered all hourly employees employed as at September 30, 1995 and all hourly employees subsequently hired by Neo up to March 1, 2002, at Neo's former manufacturing facility in Anderson, Indiana. There are no active participants in the plan. A December 31 measurement date is used for the plan. The most recent actuarial valuation of the pension plans for funding purposes was as of January 1, 2022 and the next funding valuation will be as of January 1, 2023.

It is Neo's policy to make contributions to this plan that meets the funding requirements of applicable laws and regulations. Neo contributed $0.2 million during the year ended December 31, 2022, and $0.3 million during the year ended December 31, 2021. Investment policies for the plan are consistent with Neo's investment philosophy to reduce exposure to equity market risks. A pension asset investment committee meets periodically to review asset allocation percentages and investment goals. At December 31, 2022 and December 31, 2021, the U.S. plan's assets consist of the following:

	December 31,2022	December 31,2021
Interest-bearing cash	6.2 %	2.2 %
Fixed income securities	36.9 %	35.4 %
Equities	49.2 %	54.2 %
Investment funds	7.4 %	8.0 %
Others	0.3 %	0.2 %

Neo also provides postretirement health benefits to certain of its former employees from the Anderson, Indiana manufacturing facility, which closed in 2002. The measurement date used for postretirement benefit plans is December 31. Measurement of the defined benefit obligation ("DBO") at December 31, 2022 and December 31, 2021 was based on a weighted-average discount rate of 5.10% and 2.35%, respectively.

The following table sets forth details of Neo's components of defined benefit cost related to its U.S. pension and postretirement benefit plans for the year ended December 31, 2022, and December 31, 2021:

		PensionPostretirement				Total
Included in net loss	202220212022			2021		2022			2021
Net interest cost	$	27	$	48	$	2	$	2	$	29	$	50
Service costs		—		—		—		—		—		—
Administrative expenses		30		30		—		—		30		30
Defined benefit cost included in profit or loss .	$	57	$	78	$	2	$	2	$	59	$	80
Remeasurement (gain) loss included in other	Pension						Postretirement				Total
comprehensive income		2022		2021		2022		2021		2022		2021
Actuarial loss (gain) arising from:
Demographic assumptions	$	—	$	32	$	—	$	—	$	—	$	32
Financial assumptions		(1,657)		(423)		(14)		(4)		(1,671)		(427)
Experience adjustments		33		(138)		4		5		37		(133)
Return on plan assets (excluding interestincome)		1,048		(434)		—		—		1,048		(434)
Total remeasurement (gain) loss recognized inother comprehensive income		$ (576)		$ (963)	$	(10)	$	1		$ (586)		$ (962)

The following table sets forth details of Neo's changes in the defined benefit obligation, plan assets and accrued pension and postretirement benefits as at December 31, 2022 and December 31, 2021:

Present value of defined benefit obligation	Pension		Postretirement		Total
	2022	2021	2022		2021	2022	2021
Benefit obligation at the beginning of the period .	$ 7,641	$ 8,452	$	101	$110	$ 7,742	$ 8,562
Service cost	—	—		—	—	—	—
Interest expense	200	185		2	2	202	187
Actuarial (gain) loss recognized in equity	(1,624)	(529)		(10)	1	(1,634)	(528)
Benefits paid	(456)	(467)		(11)	(12)	(467)	(479)
Benefit obligation at end of year	$ 5,761	$ 7,641	$	82	$101	$ 5,843	$ 7,742
Unfunded	$—	$—	$	82	$101	$82	$101
Partly or wholly funded	$ 5,761	$ 7,641	$	—	$—	$ 5,761	$ 7,641

Fair value of plan assets	Pension			Postretirement			Total
	2022	2021		2022	2021		2022	2021
Fair value of plan assets at the beginning of theperiod	$ 6,532	$ 6,204	$	—	$	—	$ 6,532	$ 6,204
Return on plan assets (excluding interest income)	(1,048)	434		—		—	(1,048)	434
Employer contribution	183	254		11		12	194	266
Interest income	173	137		—		—	173	137
Administrative expenses	(30)	(30)		—		—	(30)	(30)
Benefits paid	(456)	(467)		(11)		(12)	(467)	(479)
Fair value of plan assets at end of year	$ 5,354	$ 6,532	$	—	$	—	$ 5,354	$ 6,532
Net defined benefit obligation	$407	$ 1,109	$	82	$	101	$489	$ 1,210

The following table sets forth significant actuarial assumptions used in measuring Neo's pension and other benefit obligations and expense as at December 31, 2022 and December 31, 2021:

	Pension benefit plans		Other benefit plans
	2022	2021	2022	2021
Actuarial assumptions
Discount rate	5.20 %	2.70 %	5.10 %	2.35 %
Health care cost trend rate	N/A	N/A	N/A	N/A

Assumptions regarding future mortality have been based on published statistics and mortality tables. The current longevity underlying the values of the defined benefit obligation at the reporting date were as follows:

	Pension benefit plans		Other benefit plans
Assumed life expectations on retirement at age 65	2022	2021	2022	2021
Retiring today (member age 65)
Males	19.7	19.7	19.7	19.7
Females	21.8	21.7	21.8	21.7
Retiring in 25 years (member age 40 today)
Males	21.7	21.6	21.7	21.6
Females	23.7	23.6	23.7	23.6

At December 31, 2022 and December 31, 2021, the weighted-average duration of the defined benefit obligation was 9.3 and 11.7 years, respectively.

	Pension benefit plans			Other benefit plans
	2022				2022
		Increase		Decrease		Increase		Decrease
Sensitivity analysis
Discount rate (1% movement)	$	(494)	$	587	$	(4)	$	5
			Pension benefit plans		Other benefit plans
		2021			2021
		Increase	Decrease		Increase		Decrease
Sensitivity analysis
Discount rate (1% movement)	$	(811)	$	996	$	(6)	$	7

The expected rate of return on plan assets is based on the discount rate at the measurement date.

24.2 Defined contribution retirement benefits

Neo sponsors a defined contribution 401(k) retirement plan available to substantially all U.S. salaried employees and contributes up to 9% of salaried employees' compensation to the plan. Neo's contributions to the plan during the year ended December 31, 2022 and the year ended December 31, 2021 were consistent at approximately $0.2 million. Neo has a similar defined contribution plan available to all Canadian salaried employees and contributes up to 5% of salaried employees' compensation to the plan. Neo's contribution to the plan during the year ended December 31, 2022 and December 31, 2021 were consistent at approximately $0.2 million.

NOTE 25 PROVISIONS

The provisions for the disposal of NORM and estimated potential damages for historical volumes related to ongoing patent litigation for the year ended December 31, 2022 and December 31, 2021 are summarized as below:

	December 31, 2022	December 31, 2021
Balance as at January 1, 2022 and 2021, respectively	20,687	6,829
Reclassified (to) from accounts payable and other accrued charges (1)	(2,391)	3,179
Provisions made, in the period	8,451	11,138
Payments made, in the period	(986)	(508)
Currency translation adjustment	(788)	49
Balance, at the end of year	$24,973	$20,687
Current portion	$1,369	$5,560
Non-current portion	$23,604	$15,127

Notes:

(1) In the second quarter of 2022, Silmet's NORM provision was reclassified to "Accounts payable and other accrued charges" on the Statement of Financial Position as the timing to dispose of the NORM at Silmet's facility in Estonia and settlement of the liability became certain. In August 2022, the NORM at Silmet's facility was removed and the liability was fully settled.

NOTE 26 FINANCE COSTS

Neo's net finance costs generally consist of interest earned on bank deposits, interest paid on bank advances and on long-term debt, interest paid on leases, dividends paid to non-controlling interest, and changes in the fair value of its financial assets and liabilities. The following table shows the breakdown of net finance costs as presented in the statement of profit or loss:

	Year Ended December 31,
		2022		2021
Change in fair value of equity securities (Note 12)	$	1,075	$	(1,363)
Change in fair value of derivative liabilities (Note 12)		13,866		5,276
Accretion expense on lease liabilities		121		166
Interest earned on bank deposits net of interest paid on bank
advances		(586)		(293)
Interest on EDC Credit Facility		108		—
Interest on Estonia Debt Facility		111		—
Interest on China Debt Facility		469		32
Interest on German Debt Facility		95		125
Total	$	15,259	$	3,943

NOTE 27 FINANCIAL RISK MANAGEMENT

In the normal course of operations, Neo is exposed to a number of different financial risks. These risk factors include market risks such as foreign exchange risk, interest rate risk, other price risk, as well as credit risk and liquidity risk.

27.1 Market risk

Market risk is the risk that changes in market price, such as foreign exchange rates, equity prices and interest rates will affect Neo's net earnings or the value of financial instruments. The objective of market risk management is to mitigate exposures within acceptable limits, while maximizing returns.

27.2 Foreign currency exchange risk

Foreign currency exchange risk refers to the fluctuation of financial commitments, assets, liabilities, income or cash flow due to changes in foreign exchange ("FX") rates. Neo conducts business transactions and owns assets in multiple countries; as a result, Neo is subject to fluctuations in respect of the currencies in which it operates. Neo's income is exposed to FX risk largely in the following ways:

• Translation of foreign currency denominated revenue and expenses into U.S. dollars, the currency in which Neo reports in – When the foreign currency changes in relation to the U.S. dollar, income reported in U.S. dollars will change. The impact of weakening foreign currency in relation to the U.S. dollar for foreign currency denominated revenue and expenses will result in higher net income because Neo has more foreign currency-based expenses than revenue.

• Translation of foreign currency denominated debt and other monetary items – A weakening foreign currency in respect of Neo's foreign currency denominated debt will decrease the debt in U.S. dollar terms and generate a FX gain on bank advances and other short-term debt, which is recorded in income. Neo calculates FX on the short-term debt using the difference in FX rates at the beginning and at the end of each reporting period. Other foreign currency denominated monetary items will also be impacted by changes in FX rates.

The following table summarizes (in U.S. dollar equivalents) Neo's major currency exposures as of December 31, 2022:

	ChineseRenminbi		Euro	USD	ThaiBaht	CanadianDollar	BritishPound
Cash and cash equivalents	$	34,571	$ 3,405	$ 5,646	$ 5,345	$32,463	$	297
Accounts receivable		2,036	2,110	7,167	2,067	—		—
Income taxes receivable		—	—	—	—	—		—
Other receivable		401	1,859	—	563	105		—
Bank advances and other short-term debt		(3,475)	(8,068)	—	—	—		—
Current portion of long-term debt		—	(747)	—	—	—		—
Long-term debt		—	(6,159)	—	—	—		—
Accounts payable and accrued liabilities .		(1,459)	(11,878)	(167)	(2,663)	(2,110)		(217)
Lease obligations		(152)	(33)	—	(38)	(201)		—
Income taxes payable		(935)	(4,744)	—	—	(575)		—
Net financial assets (liabilities)	$	30,987	$ (24,255) $ 12,646		$ 5,274	$29,682	$	80

The following table shows the impact of a one-percentage point strengthening or weakening of foreign currencies against the U.S. dollar as of December 31, 2022 for Neo's financial instruments denominated in non-functional currencies:

	ChineseRenminbi		Euro		ThaiBaht		CanadianDollar		BritishPound
1% Strengthening
Net earnings before tax	$	310	$	(243)	$	53	$	297	$	1
1% Weakening
Net earnings before tax		(310)		243		(53)		(297)		(1)

The effect on profit or loss of a one-percentage point strengthening or weakening of U.S. dollar financial assets and liabilities held in non-U.S. dollar functional currency subsidiaries is a $0.4 million gain or loss, respectively.

27.3 Interest rate risk

This refers to the risk that future cash flows will fluctuate as a result of changes in market interest rates.

As at December 31, 2022, Neo had outstanding bank loan with OP Bank of $6.9 million which bears interest at a rate equal to Euribor plus 1.95% per annum as well as with EDC of $25.0 million which bears interest at a rate equal to 6-month SOFR of 4.74% plus 3.43%. In addition, Neo had outstanding Import Facilities with HSBC China which bears interest at a rate equal to the China Loan Prime Rate (LPR) plus 0.3% per annum and Multiple Currency Revolving Loan Facility which accrues interest at a rate equal to the LPR plus 0.4% per annum. Together, these 2 facilities had an outstanding balance of $9.2 million. However, there is no significant interest rate risk associated with the bank loan with OP Bank as the accrued interest is settled and paid on the last business day of each calendar month and on the final maturity date of the loan.

A reasonably possible change of 100 basis points ("bp") in interest rates at the reporting date would have increased (decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant.

	100 bp increase	100 bp decrease
EDC Credit Facility	$(12)	$12
Estonia Debt Facility	—	—
Chinese Debt Facility	(92)	92
German Debt Facility	(81)	81
Total	$(185)	$185

In addition, Neo had approximately $17.3 million in bank advances and other short-term loans with short-term maturities at December 31, 2022. However, these are not to be subject to significant interest rate risk due to the nature of their maturities.

27.4 Credit risk

Credit risk refers to the possibility that a customer or counterparty will fail to fulfill its obligations under a contract and as a result, create a financial loss for Neo. Neo has a credit policy that defines standard credit practice. This policy dictates that all new customer accounts are reviewed prior to approval and establishes the maximum amount of credit exposure per customer. Credit worthiness and financial well-being of the customer is monitored on an ongoing basis.

Under IFRS 9, Neo calculates a loss allowance using the ECL impairment model and the gross carrying amount of accounts receivable generally represents the maximum credit exposure. As at December 31, 2022, the loss allowance was approximately $0.5 million. The estimated credit losses are included in selling, general and administrative expenses in the consolidated statements of profit or loss and is net of any recoveries that were provided for in prior periods.

Counterparties to financial instruments may expose Neo to credit losses in the event of non-performance. Counterparties for derivative and cash transactions are limited to high credit quality financial institutions, which are monitored on an ongoing basis. Counterparty credit assessments are based on the financial health of the institutions and their credit ratings from external agencies. As at December 31, 2022, Neo does not anticipate non-performance that would materially impact Neo's consolidated financial statements.

27.5 Liquidity risk

Liquidity risk is the risk that Neo will not be able to meet its financial obligations as they fall due. Neo manages liquidity risk through the management of its capital structure, as outlined in Note 28. It also manages liquidity risk by continuously monitoring actual and projected cash flows, taking into account Neo's sales and receipts and matching the maturity profile of financial assets and liabilities. The Board of Directors reviews and approves Neo's annual operating and capital budgets, as well as any material transactions out of the ordinary course of business, including proposals on acquisitions and other major investments.

Financial liabilities	1 year		2-3 years		4-5 years		Beyond 5years		Total
Bank advances and other short-term debts	$	17,288	$	—	$	—	$	—	$	17,288
Accounts payable and other accrued charges		69,093		—		—		—		69,093
Derivative liability(1).		28,570		—		—		—		28,570
Estonia debt (2).		747		1,680		4,480		—		6,907
EDC debt (3).		—		5,000		20,000		—		25,000
Provisions		1,369		23,604		—		—		24,973
Lease obligations		1,264		731		52		30		2,077
Other liabilities		278		1,133		76		233		1,720
Total		$ 118,609	$	32,148	$	24,608	$	263		$ 175,628

The following table reflects the contractual maturity of Neo's financial liabilities as at December 31, 2022:

Notes:

(1) The fair value of the put option on shares of the remaining shareholder of Buss & Buss (see Note 12.2)

(2) Estonia debt facility (see Note 12.3.3).

(3) First tranche of the Export Development Canada credit facility term loan in the amount of $25.0 million (see Note 12.3.4).

NOTE 28 GOVERNMENT GRANTS

28.1 Grant from the Government of Estonia

On November 9, 2022, Neo announced it had been awarded a grant of up to $19.9 million (€18.7 million) from the Government of Estonia under Europe's Just Transition Fund ("JTF") for eligible project costs of up to $104.5 million (€98.0 million). The terms of the award are governed under the Government of Estonia's regulations on general conditions for granting and using funds from the operational program of the European Union ("EU") cohesion and internal security policy funds for the period 2021-2027 and related regulations, and includes factors such as total eligible costs incurred, and employment created.

IAS 20 requires that Government grants can only be recognized when there is reasonable assurance that:

• the entity will comply with the conditions attaching to them; and
• the grants will be received.

As of December 31, 2022, the grant has not been recognized in the consolidated financial statements, as the conditions for doing so in accordance with IAS 20 have not yet been met.

28.2 COVID-19 related Government Grants

Starting in March 2020, governments around the world introduced various programs and incentives including wage subsidy programs and incentives on property tax and utilities for companies who were negatively impacted by the COVID-19 global pandemic. Neo's subsidiaries in China, Singapore, Canada, Germany and Estonia benefited from these programs. Neo's application for these various programs were approved for wage subsidies and incentives on property tax and utilities. Government grants are presented in the statement of profit or loss as follows:

	Year Ended December 31,
		2022	2021
Costs excluding depreciation and amortization.	$	13	$	715
Selling, general and administrative		—		198
Research and development		—		—
Total	$	13	$	913

NOTE 29 CAPITAL DISCLOSURES

Neo's objectives when managing its capital are:

• to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future growth of the business, both internally and by acquisition, and
• to provide an adequate return to its shareholders;

Neo defines its capital as follows:

• shareholders' equity;
• non-controlling interests;
• bank advances and other short-term debt; and
• long-term debt

Neo manages its capital structure and makes adjustments to it in accordance with the aforementioned objectives, as well as in light of changes in economic conditions and the risk characteristics of the underlying assets. As well, Neo may issue new shares and/or new debt to replace existing debt. There are no assurances that these initiatives will be carried out.

In the management of capital, Neo has established quantitative return on capital criteria, and year-over-year sustainable earnings growth targets for Neo's divisions. These targets are monitored and reviewed on a quarterly basis by using a number of key financial metrics, including:

• return on capital employed ("ROCE"): adjusted operating income divided by average adjusted capital employed – ROCE is a key measurement of financial performance, focusing on cash and the efficient use of capital;
• net debt to capitalization: net debt (the sum of long-term debt including the current portion and bank advances, less cash), divided by the sum of net debt, shareholders' equity and non-controlling interests.

Both of these metrics have no standardized meanings prescribed by IFRS and, therefore, are unlikely to be comparable to similar measures of other companies.

NOTE 30 SUBSEQUENT EVENTS

Dividends payable to equity holders of Neo

On March 3, 2023, the Board of Directors declared a quarterly dividend of Cdn $0.10 per common share payable in cash on March 29, 2023, to common shareholders of record at the close of business on March 20, 2023.