Newtopia Inc.

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Annual Financial Statements

For the Years Ended December 31, 2022 and 2021

(Expressed in Canadian Dollars)

December 31, 2022 and 2021

Table of Contents

	Page
Management's responsibility for financial reporting	1
Independent auditor's report	2
Statements of financial position	6
Statements of loss and comprehensive loss	7
Statements of changes in equity (deficit)	8
Statements of cash flows	9
Notes to the financial statements	10 - 39

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Newtopia Inc. 33 Bloor Street East, 5th Floor Toronto, ON, M4W 3H1 1.888.639.8181 [email protected]

Management’s Responsibility for Financial Reporting

To the Shareholders of Newtopia Inc.

The accompanying financial statements of Newtopia Inc. (“Newtopia” or the “Company”) are the responsibility of management and have been approved by the Board of Directors of the Company.

The financial statements have been prepared by management, in accordance with International Financial Reporting Standards, as disclosed in the notes to the financial statements. Where necessary, management has made informed judgments and estimates in accounting for transactions which were not complete at the financial position date. In the opinion of management, the financial statements have been prepared with acceptable limits of materiality and are in accordance with International Financial Reporting Standards.

Management has established systems of internal control over the financial reporting process, which are designed to provide reasonable assurance that relevant and reliable financial information is produced.

The Board of Directors is responsible for reviewing and approving the financial statements together with other financial information of the Company and for ensuring that management fulfills its financial reporting responsibilities. The finance department assists the Board of Directors in fulfilling its responsibility. The Board of Directors meets with management to review the financial reporting process and the financial statements together with other financial information of the Company for issuance to the shareholders.

Management recognizes its responsibility for conducting the Company’s affairs in compliance with the established financial standards and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.

MNP LLP, the Company's independent auditors have audited the 2022 and 2021 financial statements and their report is presented herein. The auditors have full and unrestricted access to the Board of Directors.

Jeff Ruby Chief Executive Officer

Collin Swenson Chief Financial Officer

Toronto, Ontario April 23, 2023

Page 1

Independent Auditor's Report

To the Shareholders of Newtopia Inc.:

Opinion

We have audited the financial statements of Newtopia Inc. (the "Company"), which comprise the statements of financial position as at December 31, 2022 and December 31, 2021, and the statements of loss and other comprehensive loss, changes in equity (deficit) and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2022 and December 31, 2021, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audits 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 report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audits 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.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 in the financial statements, which indicates that the company incurred a comprehensive loss during the year ended December 31, 2022 and as of that date, the Company had an accumulated deficit. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

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 of the current period. 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 are in the process of finalizing our assessment of the key audit matters, if any, that will be communicated in the auditor's report. At this point, based upon our audit work completed to date, we expect that the only possible key audit matter relates to the estimation of variable consideration and stand-alone selling prices for certain revenue streams. Our final assessment will be communicated to the Audit Committee prior to issuance of our auditor's report.

Revenue Recognition

As described in Notes 2(c) and 13, the Company has revenues totaling $11,166,428 from the sale of welcome kits, participant fees, success fees, and outcome guarantee fees.

The determination of the transaction price for the welcome kit sales requires significant judgment and estimation, especially when considering customer options to purchase additional items at a later date, each of which represent

In accordance with IFRS 15 Revenue from contracts with customers, there is variable consideration for participant fees, success fees, and outcome guarantee fees. The amount of variable consideration is subject to estimation and is highly susceptible to factors outside of the Company's influence, such as, among other factors, the number of participants who join the program. The amount of variable consideration recognized is estimated based upon participant data collected on existing and similar customer contracts, and is subject to predictions with respect to participant weight loss.

Revenue recognition is considered to be a key audit matter as there are significant judgments made by management with respect to the estimates of transaction price and variable consideration. This resulted in significant auditor attention and judgment to evaluate.

Audit Response

We responded to this matter by performing procedures in relation to the IFRS 15 Assessment. Our audit work in relation to this included, but was not restricted to, the following:

For a selection of key customer contracts with multiple performance obligations, we examined the key terms and assessed the reasonableness of the allocation of the total transaction price to each distinct performance obligation.
We tested Information Technology General Controls and other relevant application controls related to the consumer software application employed by management to track various aspects of program participants and related data.
We evaluated the reasonability of management's judgments and estimates with respect to variable consideration with reference to historical program participant data, other available industry data, and by performing lookback procedures comparing estimates from prior years to actual outcomes.
We analyzed participant data through the first quarter of the subsequent year and compared it to management's estimates. We also considered other events in the first quarter subsequent to year end which could be reasonably thought to have an impact on management's estimate.

Other Information

Management is responsible for the other information. The other information comprises Management’s Discussion and Analysis.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audits of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audits or otherwise appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to 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. We have nothing to report in this regard.

800-1600 Carling Avenue, Ottawa, Ontario, K1Z 1G3 T: 613.691.4200 F: 613.726.9009 MNP.ca

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, 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 Company’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 Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’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 these 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 Company’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 Company’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 Company 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.

800-1600 Carling Avenue, Ottawa, Ontario, K1Z 1G3 T: 613.691.4200 F: 613.726.9009 MNP.ca

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits and significant audit findings, including any significant deficiencies in internal control that we identify during our audits.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine 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 report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Marc Normand.

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Ottawa, Ontario April 23, 2023

Chartered Professional Accountants Licensed Public Accountants

800-1600 Carling Avenue, Ottawa, Ontario, K1Z 1G3 T: 613.691.4200 F: 613.726.9009 MNP.ca

NEWTOPIA INC.

Statements of Financial Position As at December 31, 2022 and 2021

(Expressed in Canadian Dollars)

NEWTOPIA INC. Statements of Financial Position As at December 31, 2022 and 2021 (Expressed in Canadian Dollars)
	Note	2022	2021
		$	$
Assets
Current assets
Cash		345,950	811,584
Trade and other receivables	4,18	1,557,640	1,381,977
Contract asset	13	190,000	-
Prepaid expenses and deposits		205,843	330,992
Inventories	5	325,571	131,000
Deferred costs	9	76,269	162,872
		2,701,273	2,818,425
Property and equipment	6	8,052	66,147
Right-of-use asset	7	-	369,538
Intangible asset	8	3,235,363	2,251,852
		5,944,688	5,505,962
Liabilities
Current liabilities
Trade and other payables	21	2,584,039	1,965,420
Credit facility	9	4,823,545	2,331,314
Lease obligations	7	544,700	300,555
Contract liability	13	-	144,034
Deferred revenue		48,185	59,549
Debentures	10	2,409,103	-
		10,409,572	4,800,872
Non-current lease obligations	7	-	367,001
Debentures	10	1,068,772	2,182,403
		11,478,344	7,350,276
Equity/Deficit
Common shares	11(a)	47,978,992	45,177,120
Contributed surplus	12	12,861,449	11,652,200
Deficit		(66,374,097)	(58,673,634)
		(5,533,656)	(1,844,314)
		5,944,688	5,505,962

Nature of business and going concern 1

Signed on behalf of the Board:

"Jeffrey Ruby"

"Karen Basian"

Director Director

The accompanying notes form an integral part of and should be read in conjunction with these financial statements.

Page 6

NEWTOPIA INC.

Statements of Loss and Comprehensive Loss Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

NEWTOPIA INC. Statements of Loss and Comprehensive Loss Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)
	Note	2022	2021
		$	$
Revenue	13	11,166,428	10,455,848
Cost of revenue	5,14	5,140,369	5,384,184
Gross profit		6,026,059	5,071,664
Operating expenses
Technology and development	14	3,923,663	3,126,963
Sales and marketing	14	2,720,728	3,156,822
General and administrative	14	5,111,304	4,679,652
Share-based compensation	15	492,720	1,071,275
Depreciation of property and equipment	6	46,387	66,590
Loss on disposal of property and equipment	6	15,534	-
Depreciation of right-of-use asset	7	169,370	184,767
Lease modification	7	150,907	-
		12,630,613	12,286,069
Other expenses (income)
Interest on lease obligations	7	70,797	113,714
Interest and accretion expense	10	388,448	112,990
Finance charges	9	273,736	67,342
Capitalized borrowing costs	8	(67,000)	(39,200)
Foreign exchange (gain)/loss		(19,053)	34,650
Impairment of right-of-use asset	8	200,168	-
Loss on settlement of debt	7	-	18,964
Amortization of deferred finance charges	9	248,813	174,397
Change in value of derivative liability	11	-	(47,508)
		1,095,909	435,349
Net loss and comprehensive loss		(7,700,463)	(7,649,754)

Loss per share
Basic and diluted loss per share	17	(0.07)	(0.08)

Weighted average number of common shares outstanding
Basic and diluted	17	112,736,347	100,350,455

The accompanying notes form an integral part of and should be read in conjunction with these financial statements.

Page 7

NEWTOPIA INC.

Statements of Changes in Equity (Deficit) Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

		Common	Shares To	Contributed
	Note	Shares	Be Issued	Surplus	Deficit	Total
		$	$	$	$	$
Balance, January 1, 2021		44,648,952	528,168	10,046,621	(51,023,880)	4,199,861
Net loss and comprehensive loss		-	-	-	(7,649,754)	(7,649,754)
Share-based compensation		-	-	1,071,275	-	1,071,275
Warrants issued on issuance of 8% Debenture Units	10(a)	-	-	216,588	-	216,588
Issuance of shares	11(a)	528,168	(528,168)	-	-	-
Settlement of related party payable		-	-	317,716	-	317,716
Balance, December 31, 2021		45,177,120	-	11,652,200	(58,673,634)	(1,844,314)
Net loss and comprehensive loss		-	-	-	(7,700,463)	(7,700,463)
Share-based compensation		-	-	492,720	-	492,720
Private Placement Offering of Units, net of issuance costs	11(a)(i)	2,624,495	-	511,839	-	3,136,334
Compensation options issued to brokers		(83,230)	-	83,230	-	-
Adjustment of issuance costs of 8% Debenture Units	10(a)	-	-	4,733	-	4,733
Shares issued on issuance of 13% Debenture Units	10(b)	260,607	-	-	-	260,607
Settlement of related party payable	21	-	-	116,727	-	116,727
Balance, December 31, 2022		47,978,992	-	12,861,449	(66,374,097)	(5,533,656)

The accompanying notes form an integral part of and should be read in conjunction with these financial statements.

Page 8

NEWTOPIA INC.

Statements of Cash Flows

Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

NEWTOPIA INC. Statements of Cash Flows Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)
	Note	2022	2021
		$	$
Cash flows used in operating activities
Net loss and comprehensive loss		(7,700,463)	(7,649,754)
Items not involving cash:
Depreciation of property and equipment		46,387	66,590
Depreciation of right-of-use asset		169,370	184,767
Impairment of right-of-use asset		200,168	-
Lease modification		150,907	-
Amortization of intangible asset		68,838	-
Amortization of deferred finance charges		248,813	174,397
Capitalized borrowing costs		(67,000)	(39,200)
Accretion expense		184,848	62,090
Interest on lease obligations		70,797	113,714
Loss on disposal of property and equipment		15,534	-
Change in value of derivative liability		-	(47,508)
Share-based compensation		492,720	1,071,275
Loss on settlement of debt		-	18,964
		(6,119,081)	(6,044,665)
Change in non-cash working capital
Trade and other receivables		(175,663)	(314,854)
Prepaid expenses and deposits		125,149	134,293
Inventories		(194,571)	147,696
Trade and other payables		794,346	(94,221)
Contract asset/liability		(334,034)	162,844
Deferred revenue		(11,364)	59,549
		(5,915,218)	(5,949,358)
Cash flows used in investing activities
Purchase of property and equipment	6	(3,826)	(2,824)
Intangible asset development costs	8	(985,349)	(2,143,704)
		(989,175)	(2,146,528)
Cash flows from financing activities:
Credit facility withdrawals	9	9,396,285	6,352,152
Credit facility repayments	9	(6,904,054)	(4,020,838)
Credit facility financing costs	9	(162,210)	(105,180)
Proceeds from promissory notes	9	550,000	-
Repayment of promissory notes	9	(550,000)	-
Proceeds from debenture units, net of closing costs	10	1,316,964	2,336,901
Repayment of lease obligation	7	(344,560)	(329,248)
Proceeds from private placement offering, net of share
issuance costs	11(a)(i)	3,136,334	-
		6,438,759	4,233,787
Net change in cash during the year		(465,634)	(3,862,099)
Cash, beginning of year		811,584	4,673,683
Cash, end of year		345,950	811,584
Supplemental cash flow information
Non-cash settlement of related party payable		116,727	317,716
Interest paid		449,073	108,702

The accompanying notes form an integral part of and should be read in conjunction with these financial statements.

Page 9

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

1. Nature of business and going concern

Newtopia Inc. (“Newtopia” or the “Company”) is a technology enabled habit change company that delivers disease prevention solutions by leveraging genetic testing, social and behavioral science to help individuals prevent chronic disease and reduce costs for health insurers. Newtopia was incorporated on May 9, 2008, pursuant to the provisions under the Business Corporations Act of Ontario, Canada. The Company’s corporate headquarters and registered head office are located at 93 Bloor Street East, 5th Floor, Toronto, Ontario, M4W 3H1. The Company trades on the TSX Venture Exchange (the "TSX-V") under the symbol "NEWU".

On March 12, 2020, the World Health Organization declared the global outbreak of the COVID-19 virus as a pandemic. The outbreak has spread throughout Europe, the Middle East, Canada and the United States, causing companies and various international jurisdictions to impose restrictions, such as quarantines, closures, cancellations and travel restrictions. While these effects are expected to be temporary, the duration of the business disruptions internationally and related financial impact cannot be reasonably estimated at this time. Although the Company's operations have not been materially affected at this point, significant uncertainty remains as to the potential impact of the COVID-19 pandemic on its ability to access capital and on its results of operations and financial condition.

The Company’s financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that the Company will continue in operation for the foreseeable future and be able to realize the carrying value of its assets and discharge its liabilities in the normal course of operations. The Company incurred a comprehensive loss of $7,700,463 for the year ended December 31, 2022 and as of that date has an accumulated deficit of $66,374,097. To date, the Company has funded operations through debt financing and private equity offerings. On April 29, 2022, the Company closed a brokered and a concurrent nonbrokered private placement offering of 17,500,000 units of the Company at a price of $0.20 per unit for aggregate gross proceeds of $3,500,000 (See Note 11(a)(i)). Each unit is comprised of one common share in the capital of the Company and one-half of one common share purchase warrant. On December 15, 2022, the Company closed a non-brokered offering of subordinated and postponed 13% secured non-convertible debenture units for gross proceeds of $1,350,000 (See Note 10(b)). Each unit is comprised of $10,000 principal amount of debentures and 66,666 common shares of the Company. The Company’s ability to continue as a going concern is dependent upon its ability to obtain additional financing and/or achieve profitable operations in the future. There is no certainty additional financing will be available to the Company on favourable terms, or at all. These conditions indicate the existence of a material uncertainty that may cast significant doubt regarding the company's ability to continue as a going concern.

The financial statements do not reflect adjustments that would be necessary if the going concern assumption was not appropriate. These adjustments could be material.

2. Significant accounting policies

(a) Statement of compliance

These financial statements have been prepared on a going concern basis in accordance with International Financial Reporting Standards (“IFRS”) and the interpretations of the International Financial Reporting Interpretations Committee as issued by the International Accounting Standards Board (“IASB”).

These financial statements were approved by the Board of Directors and authorized for issuance on April 17, 2023.

(b) Basis of presentation

The financial statements are prepared on a going concern basis using historical cost except as otherwise noted in the accounting policies below. Historical cost is generally based on the fair value of the consideration provided in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for

Page 10

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

2. Significant accounting policies (cont'd)

measurement and/or disclosure purposes in these financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of IFRS 16, and measurements that have some similarities to fair value but are not fair value, such as net realizable value in IAS 2 or value in use in IAS 36.

The financial statements are presented in Canadian dollars, which is also the Company’s functional currency.

The principal accounting policies adopted are set out below:

(c) Revenue recognition

The Company recognizes revenue when it transfers control to a customer.

Revenue is recognized in a manner that depicts the transfer of promised goods or services to a customer and at an amount that reflects the consideration expected to be received in exchange for transferring those goods and services. This is achieved by applying the following five steps:

(i) identify the contract with a customer;
(ii) identify the performance obligations in the contract;
(iii) determine the transaction price;
(iv) allocate the transaction price to the performance obligations in the contract; and
(v) recognize revenue when (or as) the Company satisfies a performance obligation

The Company principally generates revenue from providing services to its customer’s employees (the “participants”). Products and services are not typically sold separately but are bundled in packages. The typical length of a contract for bundled packages is two years or more. The Company bills its customers on a monthly basis. Cash refunds are not offered.

For bundled packages, the Company accounts for individual products and services separately if they are distinct (i.e. if a product or service is separately identifiable from other items bundled in the package and if a customer can benefit from the other items, either on their own or together, with other resources that are readily available to the customer). The consideration is allocated between separate products and services in a bundle based on their stand-alone selling prices. As the Company does not sell products and services separately, the Company estimates the stand-alone selling prices using the adjusted market assessment approach.

Welcome kits

Welcome kits contain measurement and communication tools, such as genetic testing kits, smart scales and starter guides that aid in the delivery of promised services to participants. Revenue is recognized when items in the welcome kit are delivered and control has passed to the participant.

The Company offers no returns or warranties of any kind.

Engaged participant fees

Engaged participant fees are charged to the customers when a participant is deemed to be engaged in the program based on criteria as defined in the contract. This revenue is recognized when the engagement criteria is met by the participant, and as the benefits of the health coaching services are received over a distinct period of time.

Page 11

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

2. Significant accounting policies (cont'd)

(c) Revenue recognition (cont'd)

Success fees

Success fees are one-time fees paid by customers upon the achievement of certain target metrics normally measured after the first year of a participant's active enrolment in the Company's program. The Company includes in revenue success fees based on the most likely amount. The Company estimates success fees based on participant data collected on existing and similar customer contracts, however participant outcomes can vary depending on geographical location and industry. Estimates of success fees are also subject to predictions with respect to participant weight loss. Success fees are recorded when there is a low probability of there being a significant reversal of revenue.

Outcome guarantee fees

Certain customer contracts contain outcome guarantee fees where the Company refunds a portion of previously earned engaged participant fees if certain target metrics are not met. The Company estimates outcome guarantee refunds based on participant data collected on existing and similar customer contracts, however participant outcomes can vary depending on geographical location and industry. Estimates of outcome guarantees are also subject to predictions with respect to participant weight loss.

Customer incentives and discounts

The Company may offer other discount programs and incentives for the purchase of certain products and services by customers. The Company estimates the amount of such discounts and specific terms of each program. Revenue is recorded net of these amounts and the estimated amounts of such discounts and incentives is included in the Company's contract liability.

The Company incurs no contract costs.

(d) Cost of revenue

Cost of sales consists of the cost of Welcome Kits sold to new participants, the labour costs associated with the coaching team and amortization of intangibles.

(e) Financial assets and liabilities

Financial assets and financial liabilities are initially measured at fair value. Subsequent measurement of these assets and liabilities is based on their classification.

Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

The Company classifies its financial assets and financial liabilities in the following measurement categories: i) those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss) and ii) those to be measured at amortized cost.

The classification of financial assets depends on the business model for managing the financial assets and the contractual terms of the cash flows. Financial liabilities are classified as those to be measured at amortized cost unless they are designated as those to be measured subsequently at fair value through profit or loss (irrevocable election at the time of recognition). For assets and liabilities measured at fair value, gains and losses are either recorded in profit or loss or other comprehensive income.

The Company reclassifies financial assets when and only when the business model for managing those assets changes. Financial liabilities are not reclassified.

Page 12

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

2. Significant accounting policies (cont'd)

(e) Financial assets and liabilities (cont'd)

The Company has implemented the following classifications:

Financial Instrument	Classification	Measurement
*Financial assets*
Cash	Amortized cost	Amortized cost
Trade and other receivables	Amortized cost	Amortized cost
*Financial liabilities*
Trade and other payables	Amortized cost	Amortized cost
Credit facility	Amortized cost	Amortized cost
Debentures	Amortized cost	Amortized cost
Lease obligations	Amortized cost	Amortized cost

Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments or principal and interest on the principal outstanding are generally measured at amortized cost at the end of the subsequent accounting periods. All other financial assets including equity investments are measured at their fair values at the end of the subsequent accounting periods, with any changes taken through profit and loss or other comprehensive income (irrevocable election at the time of recognition).

The Company assesses at each statement of financial position date whether there is objective evidence that a financial asset or group of financial assets is impaired.

If there is objective evidence that an impairment loss has occurred on an unquoted or not actively traded equity instrument that is not carried at fair value (because its fair value cannot be reliably measured), the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate.

For financial assets carried at amortized cost, the Company recognizes loss allowances for expected credit losses on its financial assets measured at amortized cost. The Company recognizes expected credit losses for trade and other receivables under the simplified approach under IFRS 9. The simplified approach does not require the Company to track changes in credit risk; rather, the Company recognizes a loss allowance based on lifetime expected credit losses. Expected credit losses are probability-weighed estimate of credit losses. Credit losses are measured at the present value of the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive. Expected credit losses are discounted at the effective interest rate of the related financial asset. The Company does not have any financial assets that contain a financing component.

Objective evidence of impairment of financial assets carried at amortized cost exists if the counterparty is experiencing significant financial difficulty, there is a breach of contract, concessions are granted to the counterparty that would not normally be granted, or it is probable the counterparty will enter into bankruptcy or a financial reorganization.

Page 13

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

2. Significant accounting policies (cont'd)

(f) Compound financial instruments

Debentures

The liability and equity components of debentures are presented separately on the statement of financial position. Where there is both liability and equity components, the Company determines the carrying amount of the financial liability by discounting the stream of future payments at the prevailing market rate for a similar liability of comparable credit status and providing substantially the same cash flows. The liability component is then increased by accretion of the discounted amounts to reach the face value of the debentures at maturity which is included in the statements of loss and comprehensive loss as part of interest and accretion expense. The carrying amount of the equity component is calculated by deducting the carrying amount of the financial liability from the amount of the debentures and is presented in Equity as an equity component of the debentures. The equity component is not remeasured subsequent to initial recognition. The transaction costs are distributed between liability and equity, on a pro rata basis according to their carrying amounts.

(g) Impairment of non-financial assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired or whenever events/change in circumstances indicate that the carrying amount of an asset exceeds the recoverable amount. An asset’s recoverable amount is the higher of the asset’s or the cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognized in profit or loss for the period in which they are identified.

(h) Income taxes

Income tax expense consists of current and deferred tax expense. Current and deferred tax are recognized in profit or loss, except when it relates to items recognized directly in equity or other comprehensive income.

Current tax is recognized and measured at the amount expected to be recovered from or payable to the taxation authorities based on the income tax rates enacted at the end of the reporting period and includes any adjustment to taxes payable in respect of previous years.

Deferred tax is recognized on any temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable earnings. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realized and the liability is settled. The effect of a change in the enacted or substantively enacted tax rates is recognized in net loss and comprehensive loss or in equity depending on the item to which the adjustment relates.

Deferred tax assets are recognized to the extent future recovery is probable. At each reporting period end, deferred tax assets are reduced to the extent that it is no longer probable that sufficient taxable earnings will be available to allow all or part of the asset to be recovered.

(i) Property and equipment

Property and equipment is stated at cost less accumulated depreciation and accumulated impairment losses. Items are amortized using the straight-line method over their estimated useful lives as follows:

Office equipment	5 years
Computer hardware	3 to 5 years
Computer software	1 year

Page 14

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

2. Significant accounting policies (cont'd)

(i) Property and equipment (cont'd)

When components of an asset have a different useful life and cost that is significant to the total cost of the asset, depreciation is calculated on each separate component. Estimated useful lives, residual values and methods of deprecation are reviewed annually.

(j) Internally-generated intangible assets

Expenditure on research activities is recognized as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, all of the following conditions have been demonstrated:

the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above.

Where no internally-generated intangible asset can be recognized, development expenditure is recognized in profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses. Amortization commences when the internally-generated intangible asset is ready for use and is recognized on a straight-line basis over the estimated useful life of the intangible asset.

Intangibles consist of the purchase and customization of a new customer relationship management (CRM) platform and the development of integrated web and mobile applications. In November 2022, the new CRM platform was ready for use and the Company commenced amortization of the CRM platform over its estimated useful life of four years.

(k) Inventories

Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less selling costs. The cost of inventories is based on a first-in, first-out principle.

(l) Share capital

Common shares and non-retractable preferred shares are classified as equity. Incremental costs directly attributable to the issuance of shares are recognized as a reduction of share capital. When the Company issues share capital for consideration other than cash, the transaction is recorded at the fair value of the share capital issued. Where shares are issued in connection with warrants, the Company uses the Black-Scholes option pricing model to apportion the fair value of consideration received between share capital and warrants.

(m) Share-based compensation

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The assumptions and models used for estimating fair value for share-based compensation transactions are disclosed in Note 15.

The fair value determined at the grant date of the equity-settled share-based payments is expensed over the

Page 15

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

2. Significant accounting policies (cont'd)

(m) Share-based compensation (cont'd)

vesting period, based on the Company’s estimate of equity instruments that will eventually vest, with a corresponding increase in contributed surplus. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in profit or loss.

Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

(n) Loss per share

Basic earnings and loss per common share are calculated by dividing the earning or loss by the weighted average number of common shares outstanding during the year. Diluted earnings and loss per common share are calculated by dividing the applicable earnings and loss by the sum of the weighted average number of common shares outstanding and adjusting for all additional shares that would have been outstanding if potentially dilutive common securities had been issued during the year.

(o) Provisions

Provisions are recognized when present (legal or constructive) obligations, as a result of a past event, will lead to a probable outflow of economic resources and amounts can be estimated reliably. Provisions are measured at management’s best estimate of 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. The Company performs evaluations to identify onerous contracts and, where applicable, records provisions for such contracts. All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. In those cases where the possible outflow of economic resources as a result of present obligations is considered remote, no liability is recognized.

(p) Foreign currency translation

Foreign currency denominated revenues and expenses are translated using average rates of exchange during the year. Foreign currency denominated monetary assets and liabilities are translated at the rate of exchange in effect at the balance sheet date. The resulting exchange gains and losses are recognized in net income.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

(q) Leases

At inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company recognizes a right-of-use asset and a lease liability at the lease commencement date.

The right-of-use asset is initially measured at cost which comprises of the lease liability, lease payments made at or before the commence date, initial indirect costs and asset retirement obligations, less any lease incentives. The right-of-use asset is subsequently measured at cost less accumulated depreciation and impairment losses. The assets are depreciated to the earlier of the end of the useful life of the right-of-use asset or the lease term using the straight-line method as this most closely reflects the expected pattern of consumption of the future economic benefits for the Company.

The lease liability is initially measured at the present value of the future lease payments discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate.

Page 16

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

2. Significant accounting policies (cont'd)

(q) Leases (cont'd)

The Company has elected to not apply IFRS 16 for short term leases that are 12 months or less and for leases of low value assets. The lease payments associated with these leases is recognized as an expense on a straightline basis over the lease term.

( r ) Borrowing costs

General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.

Other borrowing costs are expensed in the period in which they are incurred.

(s) Future accounting policies

New and Revised IFRS Standards issued but not yet effective

In January 2020, the IASB issued amendments to IAS 1, Presentation of Financial Statements, to clarify the requirements for classifying liabilities as current or non-current. The amendments clarify the classification of liabilities as current or non-current based on rights that are in existence at the end of the reporting period and are unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability. The amendments also clarify the definition of "settlement" of a liability. The amendments are effective January 1, 2024, with early adoption permitted. The amendments are to be applied retrospectively. Management does not expect any material impact to the Corporation’s financial statements upon adoption of these amendments.

In February 2021, the IASB issued amendments to IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, to introduce a definition of "Accounting Estimates". The amendments clarify the distinction between changes in accounting estimates and accounting policies as well as the correction of errors. Additionally, the IASB clarifies how entities use measurement techniques and inputs to develop accounting estimates. The amendments are effective January 1, 2023, with early adoption permitted. Management does not expect any material impact to the Corporation’s financial statements upon adoption of these amendments.

3. Critical judgments and key sources of estimation uncertainty

The preparation of these financial statements requires management to make estimates based on events and circumstances that existed at the statement of financial position date. Accordingly, actual results may differ from these estimates. Significant estimates and judgements made by management with a significant risk of material adjustment in the current year are discussed below:

the amount of deferred tax assets recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits to be recovered;
the analysis of historical bad debts and the judgement used to predict future economic conditions when estimating expected credit losses;
the inputs and assumptions used in the allocation of the purchase price for bundled products and services;
the assessment of the nature, amount of costs capitalized and useful life of the internally generated intangible asset;
the assessment of Company’s ability to continue as going concern
the inputs and assumptions used with respect to determining success fees;
the inputs and assumptions used with respect to determining outcome guarantee fees;
the inputs and assumptions used in the valuation and recognition of share-based payments;
the inputs and assumptions used in the valuation and recognition of other discounts and incentives;

Page 17

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

4. Trade and other receivables

Trade and other receivables as at December 31, 2022 and 2021 are comprised of the following:

	2022	2021
	$	$
Trade receivables	1,491,664	1,334,741
Indirect taxes receivable	65,976	47,236
	1,557,640	1,381,977

Trade receivables include amounts that are past due at the end of the reporting period (see the table below for aged analysis). The Company applies the simplified approach to providing for expected credit losses as prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. The Company has estimated and set its expected credit losses for the years ended December 31, 2022 and 2021 at nil based on the Company’s historical collection and loss experience and incorporates forward-looking factors, where appropriate. The Company reviews its trade receivables regularly and reduces amounts to their expected realizable values by providing for expected credit losses as soon as the trade receivables are determined not to be fully collectible.

	2022	2021
	$	$
Trade receivables
Current	1,466,250	1,315,210
31-60 days	19,409	14,908
61-90 days	6,005	4,623
	1,491,664	1,334,741

5. Inventories

Inventories recognized as cost of sales for the year ended December 31, 2022 amounted to $781,113 ($815,487 for the year ended December 31, 2021).

All of the Company’s inventories during the years ended December 31, 2022 and 2021 consist of finished goods. The Company recognized an inventory obsolescence provision of $NIL as at December 31, 2022 (December 31, 2021 - $10,497).

Page 18

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

6. Property and equipment

	Office	Computer
	Equipment	Hardware	Total
	$	$	$
Cost
Balance, January 1, 2021	82,607	341,663	424,270
Additions	-	3,025	3,025
Disposals	(280)	-	(280)
Balance, December 31, 2021	82,327	344,688	427,015
Additions	-	3,826	3,826
Disposals	(82,327)	-	(82,327)
Balance, December 31, 2022	-	348,514	348,514
Accumulated depreciation
Balance, January 1, 2021	45,691	248,666	294,357
Depreciation	11,368	55,222	66,590
Disposals	(79)	-	(79)
Balance, December 31, 2021	56,980	303,888	360,868
Depreciation	9,813	36,574	46,387
Disposals	(66,793)	-	(66,793)
Balance, December 31, 2022	-	340,462	340,462
Carrying amounts
At December 31, 2021	25,347	40,800	66,147
At December 31, 2022	-	8,052	8,052

7. Right-of-use asset and lease liability

The following table represents the right-of-use asset:

	Office
	$
Balance, January 1, 2021	554,305
Depreciation	(184,767)
Balance, December 31, 2021	369,538
Depreciation	(169,370)
Impairment of right-of-use asset	(200,168)
Balance, December 31, 2022	-

The right-of-use asset was being amortized over the life of the lease, which was 6 years.

Page 19

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

7. Right-of-use asset and lease liability (cont'd)

The following is a schedule of future minimum lease payments for right-of-use assets under the finance lease together with the balance of the obligations:

	$
Balance, January 1, 2021	883,090
Interest expense	113,714
Payments	(329,248)
Balance, December 31, 2021	667,556
Interest expense	70,797
Payments	(344,560)
Lease modification	150,907
Balance, December 31, 2022	544,700

	December 31,	December 31,
	2022	2021
	$	$
Amounts shown in:
Current liabilities	544,700	300,555
Non-current liabilities	-	367,001
	544,700	667,556

The undiscounted lease payments remaining are as follows:

	December 31,	December 31,
	2022	2021
	$	$
No later than 1 year	392,591	375,885
Later than 1 year, but no later than 5 years	-	392,591
	392,591	768,476

Total cash outflow for leases, including principal and interest, during the year ended December 31, 2022 was $344,560 (December 31, 2021 - $329,248).

During the year, the Company adopted a remote office model and initiated negotiations with the lessor to terminate the lease prior to the end of the lease term. The lease was terminated in November 2022 and in January 2023, the Company reached an agreement with the lessor to pay $381,636 in monthly instalments in 2023. At the date of termination, the Company recognized an impairment to the right-of-use asset at its net book value of $200,168 and remeasured the lease obligation by $150,907 to $544,700.

Page 20

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

8. Intangible asset

Intangibles consist of the purchase and customization of a new customer relationship management (CRM) platform and the development of integrated web and mobile applications.

	$
Cost
Balance, January 1, 2021	68,948
Additions	2,143,704
Capitalized borrowingcosts	39,200
Balance, December 31, 2021	2,251,852
Additions	985,349
Capitalized borrowingcosts	67,000
Balance, December 31, 2022	3,304,201
Accumulated amortization
Balance, December 31, 2021	-
Amortization	68,838
Balance, December 31, 2022	68,838
Carrying amounts
At December 31, 2021	2,251,852
At December 31, 2022	3,235,363

During the year ended December 31, 2022, the Company capitalized general and specific borrowing costs directly attributable to the development of the above CRM platform in the amount of $67,000 (December 31, 2021 - $39,200). The capitalization rate used to determine the amount of borrowing costs to be capitalized was the weighted average interest rate applicable to the Company’s general borrowings during the year, in this case 6.33% (December 31, 2021 - 5.74%).

9. Credit facility

On December 4, 2020, the Company closed an Operating Credit Line Agreement (the “Facility”) in the amount of $5,000,000 with a Schedule I bank (the “Bank”). The Company may avail itself of the operating credit under the Facility by way of either Canadian dollars at prime lending rate plus 2.25% or United States dollars at the U.S. base lending rate plus 2.25%. The Facility is secured by all Newtopia property and is subject to certain covenants where the Company is required to meet minimum cash runway ratios. The Company intends to use the operating line facility to fund working capital requirements as needed.

In connection with the Facility, the Company was required to obtain a guarantee from Export Development Canada (the "EDC") of 50% of the available Facility plus accrued and unpaid interest up to a maximum of 120 days (the "Guaranteed Amount"). The Company agreed to pay a guarantee fee of 2.35% of the Guaranteed Amount and guaranteed interest on outstanding amounts at the Lender’s Prime Rate minus 0.05%. The initial guarantee covers the period from October 14, 2020 to September 30, 2021 (the "Guarantee Period"). In October 2021 the guarantee was extended until September 30, 2022. In October 2022, the guarantee was further extended until October 2024.

In accordance with the terms of the Facility, the Lender received 210,526 Warrants (the "Warrants") on December 4, 2020, with each Warrant entitling the Lender to acquire one common share at a price of $0.95 at

Page 21

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

9. Credit facility (cont'd)

any time within the earlier of the December 4, 2022 and December 4, 2025. The fair value of the Warrants was determined at $84,314 using the Black Scholes valuation model with the following assumptions: risk free interest rate of 0.27%, expected life of 5 years and expected volatility of 73.75%. The Company has classified the Warrants within equity with the value of the Warrants being treated as a transaction cost and deferred and amortized over the term of the Facility. The Warrants expired unexercised on December 4, 2022.

The Company has also incurred cash transaction costs of $141,955 in connection to the Facility. As the Facility can be drawn upon and then repaid by the Company repeatedly throughout the term, the transaction costs are in the nature of a facility fee and not specific to an amount borrowed. On this basis, the Company has deferred and amortized the transaction costs over the term of the Facility regardless of whether there have been any drawdowns by the Company. The guarantee fees paid to date in the amount of $157,410 were treated similarly but amortized over the Guarantee Period.

During the year ended December 31, 2022, the Company recorded amortization of the deferred transaction costs of $196,788 in the Statements of Loss and Comprehensive Loss (December 31, 2021 - $159,551).

The Company was not in compliance with the Facility's minimum cash runway ratio covenant during certain months of 2021. In July 2021, the bank agreed to not accelerate repayment of the Facility on the condition that the Company enter into a term sheet for a minimum $2,000,000 capital injection by August 15, 2021 with the funds received no later than August 31, 2021. Any injection in the form of debt financing would be fully subordinated to the bank's Facility. Pursuant to a term sheet dated August 10, 2021, the Company closed a private placement of $2,545,000 debenture units on September 15, 2021 (see Note 10).

On September 20, 2021, the bank agreed to increase the Facility from $5,000,000 to $7,500,000, waive the Company's breach of its minimum cash runway ratio covenants for the selected months and reduce the threshold for the cash runway ratio covenant for the months from September to December 2021. On October 1, 2021, the EDC increased the Guaranteed Amount to 50% of the $7,500,000 Facility. Subsequent to year-end, the Company entered into an amendment with the Bank to keep the reduced cash runway ratio covenant in place until May 31, 2022.

. On June 29, 2022, the Company entered into a second amendment of the Facility with the Bank to replace the cash runway ratio covenant with a covenant to maintain minimum total liquidity thresholds for the months from May to September 2022 and to reduce the cash runway ratio covenant for the month of October 2022.

The Company was not in compliance with all covenants for the months from September 30, 2022 to the date of the these financial statements. On November 1, 2022, the bank agreed to not accelerate repayment of the Facility on the conditions that the Company receives minimum capital injections of $700,000 by November 11, 2022 and $2,500,000 by December 15, 2022. Until the conditions are met, the maximum credit on the Facility will be capped at $4,880,760. Any injection in the form of debt financing would be fully subordinated to the bank's Facility. On October 26, 2022 and November 9, 2022, the Company issued $300,000 and $250,000 in subordinated 12% promissory notes, respectively, for an aggregate issuance of $550,000, including $50,000 by a director of the Company. On December 15, 2022, the Company repaid the promissory notes and issued subordinated 13% secured non-convertible debenture units for gross proceeds of CAD$1,350,000 (see Note 10(b)) which includes $400,000 from the holders of the promissory notes. The Bank is continuing credit on a day-to-day basis subject to no further defaults and deterioration of its position and as of the date of these financial statements have not accelerated repayment of the Facility.

As of December 31, 2022, $4,823,545 was outstanding on the Facility. Interest expense for the year ended December 31, 2022 was $237,944 (December 31, 2021 - $67,342).

Page 22

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

10. Debentures

The following table is a summary of the accretion to amortized cost of the Debentures:

	8%	13%
	Debentures	Debentures		Total
	$	$		$
Value of liability component, net of issuance costs	2,120,313		-	2,120,313
Interest and accretion	112,990		-	112,990
Repayment	(50,900)		-	(50,900)
Balance, December 31, 2021	2,182,403		-	2,182,403
Value of liability component, net of issuance costs	-	1,056,357		1,056,357
Interest and accretion	376,033	12,415		388,448
Repayment	(203,600)		-	(203,600)
Adjustment to issuance costs	54,267		-	54,267
Balance, December 31, 2022	2,409,103	1,068,772		3,477,875

The debentures repayable in excess of one year is presented as long-term liabilities:

	8%	13%
	Debentures	Debentures	Total
	$	$	$
Current portion - payable no later than one year	2,409,103	-	2,409,103
Non-currentportion	-	1,068,772	1,068,772
	2,409,103	1,068,772	3,477,875

(a) 8% secured non-convertible debentures

On September 15, 2021, the Company closed a non-brokered private placement of subordinated and postponed 8.0% secured non-convertible debenture units (the "8% Debenture Units") for gross proceeds of $2,545,000.

Each unit is comprised of: (i) $10,000 principal amount of subordinated and postponed secured non-convertible debentures of the Company (the “8% Debentures”); and (ii) 1,724 common share purchase warrants of the Company (each whole warrant, a “Warrant”, and collectively, the “Warrants”). Each Warrant is exercisable for one common share of the Company (a “Common Share”) until September 15, 2023 (the “Expiry Date”). The exercise price of Warrants shall be $0.58 per share during the first year following the closing date and $0.75 per share following the one-year anniversary of the Closing Date until the Expiry Date. The securities issued pursuant to the Offering were subject to a four month hold period that expired on January 16, 2022. An aggregate of 438,777 Warrants were issued in connection with the closing of the private placement.

The 8% Debentures will mature on September 15, 2023 and are secured by the property, assets and rights of the Company subordinated to the Credit Facility and bear interest at a rate of 8.0% per annum payable quarterly in arrears in cash.

The 8% Debentures cannot be redeemed for four months from closing of the offering; however can thereafter be repaid in part or in full at any time subject to an early repayment fee equal to: (i) 6% of the principal amount of the 8% Debenture if repayment occurs prior to the date that is six months following the closing date; (ii) 4% of such principal amount if repayment occurs following the date that is six months following the date of closing but prior to

Page 23

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

10. Debentures (cont'd)

(a) 8% secured non-convertible debentures (cont'd)

the first anniversary of the closing date; (iii) 3% of such principal amount if repayment occurs following the first anniversary of the closing date but prior to the date that is six months following such first anniversary; or (iv) 2% of such principal amount if repayment occurs following the date is six months following the first anniversary of the closing date but prior to the date of maturity.

Finders acting in connection with the offering received a cash fee in the aggregate total amount of $108,500 and an aggregate 187,067 finder’s warrants (Compensation Options) exercisable for Common Shares until September 15, 2022 at an exercise price of $0.58 per share. The Compensation Options were valued at $31,666 using the Black Scholes option pricing model with the following assumptions: risk free interest rate of 0.25%, expected life of 1.0 year, stock price of $0.58 and expected volatility of 74.63%. The Company incurred legal costs of $99,599 in connection with the offering.

The Company agrees to pay an annual work and credit maintenance fee of 2% of the principal amount in cash, due and payable annually in advance. The Company will defer and amortize the maintenance fee over the date the fee is due to the maturity date. As at December 31, 2022, the balance of unamortized deferred transaction costs related to the maintenance fee due on the second anniversary of the private placement was $36,054.

As per IAS 32, the Debentures are accounted for as a compound financial instrument with a liability component, being the host debt contract, a separate equity component, being the Warrants to the Lenders, and an embedded derivative, being the prepayment option.

At inception, the Company used the residual value method to allocate the principal amount of the Debentures between the liability and equity components. The Company valued the debt component of the debentures by calculating the present value of the principal and interest payments, discounted at a rate of 12.60%, being management's best estimate of the rate that a non-convertible debenture with similar terms would bear. The equity component of the 8% Debentures comprises the value of the Warrants to the Lenders, being the difference between the face value of the 8% Debentures and the liability element calculated above. Total transaction costs of $239,766 were proportionally allocated between the host debt and the equity component based on their relative fair values. Based on this calculation, the net liability component is $2,120,313 and the residual equity component is $184,921. The prepayment option was determined to be closely related and its value was determined to be not material. During the year ended December 31, 2022, the Company reduced accrued transaction costs by $59,000. The reduction resulted in increases to the liability and equity components of $54,267 and $4,733, respectively.

The host debt was subsequently carried at amortized cost at an effective interest rate of 17.96%. Accretion charges attributable to the 8% Debentures for the year ended December 31, 2022 were $376,033. This amount is added to the liability component on the statements of financial position and is included in accretion expense on the statements of loss and comprehensive loss. $67,000 of the interest charge was capitalized to the intangible asset (See Note 8).

(b) 13% secured non-convertible debentures

On December 15, 2022, the Company closed a non-brokered offering of subordinated and postponed 13% secured non-convertible debenture units (the "13% Debenture Units") for gross proceeds of CAD$1,350,000 million.

Each unit is comprised of: (i) $10,000 principal amount of subordinated and postponed secured non-convertible debentures of the Company (the "13% Debentures"); and (ii) for no additional consideration, 66,666 common shares of the Company (each whole common share, a "Bonus Share", and collectively, the "Bonus Shares"). The Bonus Shares are calculated based on 20% of the principal amount of the 13% Debentures purchased divided by $0.03, being the closing price on the trading day prior to the day on which the offering was initially announced on November 30, 2022. An aggregate of 8,999,990 Bonus Shares were issued. The securities issued are subject to a four month hold period that expires on April 16, 2023.

The 13% Debentures will mature on December 15, 2024 and are secured by the assets of the Company and rights of the Company subordinated to the Credit Facility and bear interest at a rate of 13.0% per annum payable

Page 24

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

10. Debentures (cont'd)

(b) 13% secured non-convertible debentures (cont'd)

quarterly in arrears in cash.

The 13% Debentures cannot be redeemed for four months from closing of the offering; however can thereafter be repaid in part or in full at any time subject to an early repayment fee equal to: (i) 6% of the principal amount of the 13% Debentures if repayment occurs prior to the date that is six months following the closing date; (ii) 4% of such principal amount if repayment occurs following the date that is six months following the date of closing but prior to the first anniversary; (iii) 3% of such principal amount if repayment occurs following the first anniversary but prior to the date that is six months following such first anniversary; or (iv) 2% of such principal amount if repayment occurs following the date is six months following the first anniversary of the closing date but prior to the date of maturity.

Finders acting in connection with the offering received a finder's fee in the aggregate total amount of $5,500.

The Company will pay to the holders of the 13% Debentures an annual work and credit maintenance fee of 2% of the principal amount in cash. The annual maintenance fee will be paid in advance for each year, with the first payment due and payable on the date that is three months following the closing date and the final maintenance fee payment due and payable on the one-year anniversary of the closing date.

At inception, the Company used the residual value method to allocate the principal amount of the 13% Debentures between the liability and equity components. The Company valued the debt component of the debentures by calculating the present value of the principal and interest payments, discounted at a rate of 26%, being management's best estimate of the rate that a non-convertible debenture with similar terms would bear. The equity component of the 13% Debentures comprises the value of the Bonus Shares, being the difference between the face value of the 13% Debentures and the liability element calculated above. Total transaction costs of $33,056 were proportionally allocated between the host debt and the equity component based on their relative fair values. Based on this calculation, the net liability component is $1,056,357 and the residual equity component is $260,607. The prepayment option was determined being closely related and its value was determined to be not material.

Accretion charges attributable to the 13% Debentures for the year ended December 31, 2022 were $12,415. This amount is added to the liability component on the statements of financial position and is included in accretion expense on the statements of loss and comprehensive loss.

11. Equity

(a) Common shares, issued and outstanding

	Number of
	Shares	Amount
		$
Balance, January 1, 2021	99,626,937	44,648,952
Shares issued on settlement of related party payable (Note 21)	865,849	528,168
Balance, December 31, 2021	100,492,786	45,177,120
Shares issued in private placement offering_(i)_	17,500,000	2,624,495
Compensation options issued to brokers_(i)_	-	(83,230)
Shares issued on issuance of 13% Debenture Units_(Note 10(b))_	8,999,990	260,607
Balance, December 31, 2022	126,992,776	47,978,992

Page 25

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

11. Equity (cont'd)

(a) Common shares (cont'd)

(i) Private placement offering

On April 29, 2022, the Company closed a brokered private placement offering of 16,950,000 units of the Company (the “Units”) at a price of $0.20 per Unit (the “Offering Price”) for aggregate gross proceeds of $3,390,000 (the “Brokered Offering”). Each Unit is comprised of one common share in the capital of the Company (each a “Common Share”) and one-half of one Common Share purchase warrant (each whole warrant, a “Warrant”). Each Warrant is exercisable to acquire one Common Share at an exercise price of $0.30 per Common Share, subject to adjustments in certain events, for a period of 24 months following the closing of the Brokered Offering.

In consideration for the services provided by the agent in connection with the Brokered Offering (the "Agent"), the Agent received: (i) a cash fee equal to 7.0% of the gross proceeds of the Brokered Offering, subject to a reduced cash fee of a maximum of 2% of the aggregate gross proceeds realized from the Units sold by the Agent to management, board members and other insiders of the Company identified by the Company to the Agent (the “President’s List Purchasers”); and (ii) 904,050 non-transferable broker warrants (the “Broker Warrants”), which represents 7.0% of the total number of Units sold under the Brokered Offering to purchasers who were not President’s List Purchasers. Each Broker Warrant is exercisable into one Common Share at the Offering Price, subject to adjustments in certain events, until April 29, 2024.

The Company received net proceeds of $3,026,334 after deducting agent commissions paid in cash of $189,810 and cash closing costs of $173,856. The net proceeds and the deduction of the Broker Warrants are allocated to Common Shares and Warrants on a pro-rata basis relative to their fair values. Each Warrant and Broker Warrant was estimated at the closing date using the Black-Scholes option pricing model with the following assumptions: stock price of $0.22, risk-free interest rate of 2.63%, expected volatility of 86.74% and expected life of 2 years. The net proceeds are allocated between Common Shares and Warrants at $2,530,572 and $495,762, respectively. The fair value of the Broker Warrants of $99,536 is allocated to Common Shares and Warrants at $83,230 and $16,306, respectively.

The Company also concurrently completed a non-brokered private placement of 550,000 Units, at the Offering Price with certain insiders of the Company for aggregate proceeds of $110,000 (the “NonBrokered Offering”, and together with the Brokered Offering, collectively, the “Offerings”) on the same terms as the Brokered Offering. No fees or commissions are payable to the Agent in connection with the Non-Brokered Offering. The Non-Brokered Offering closed on May 11, 2022. The proceeds are allocated to Common Shares and Warrants on a pro-rata basis relative to their fair values. Each Warrant was estimated at the closing date using the Black-Scholes option pricing model with the following assumptions: stock price of $0.17, risk-free interest rate of 2.73%, expected volatility of 89.75% and expected life of 2 years. The proceeds are allocated between Common Shares and Warrants at $93,923 and $16,077, respectively.

Page 26

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

11. Equity (cont'd)

(b) Warrants

The following table is a summary of the activities of the Company’s warrants:

		Weighted
		Average
	Number of	Exercise
	Warrants	Price
		$
Balance, January 1, 2021	17,401,772	0.89
Warrants issued on issuance of Debentures (Note 10)	625,844	0.58
Warrants expired	(1,132,106)	0.69
Balance, December 31, 2021	16,895,510	0.89
Unit Warrants issued on private placement_(Note 11(a)(i)_)	8,750,000	0.30
Broker warrants issued on private placement_(Note 11(a)(i)_)	904,050	0.20
Warrants expired	(12,745,454)	1.07
Balance, December 31, 2022	13,804,106	0.31

The following table is a summary of the warrants outstanding as at December 31, 2022:

	Exercise	Number of
Expiry date	Price	Warrants
	$
May 2023	0.70	1,711,279
September 2023_(Note 10(a))_	0.75	438,777
April 2024_(Note 11(a)(i))_	0.30	8,750,000
April 2024_(Note 11(a)(i)_)	0.20	904,050
February 2025_(i)_	0.0001	2,000,000
		13,804,106

Page 27

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

11. Equity (cont'd)

(b) Warrants (cont'd)

The following table is a summary of the warrants outstanding as at December 31, 2021 :

	Exercise	Number of
Expiry date	Price	Warrants
	$
May 2022	0.70	633,450
September 2022 (Note 10(a))	0.58	187,067
September 2022	1.00	7,211,411
October 2022	1.30	3,950,000
October 2022	0.95	763,526
May 2023	0.70	1,711,279
September 2023_(Note 10(a))_	0.58	438,777
February 2025_(i)_	0.0001	2,000,000
		16,895,510

(i) During the year ended December 31, 2018, the Company issued a series of 13% secured debentures (the "Secured Debentures") for an aggregate amount of $2,600,000, to be drawn in tranches as determined between the Company and the lenders. On the Repayment Date, the lender is entitled to one common share in the capital of the company for each $1 advanced, to a maximum issuance of 2 million common shares (the "Bonus Shares"). The Secured Debentures were fully settled by December 31, 2019.

On February 20, 2020, the lender of the Secured Debentures agreed to accept 2 million warrants of the Company (the "Bonus Warrants") in lieu of the 2 million Bonus Shares. The Bonus Warrants are exercisable into common shares at an exercise price of $0.0001 per common share until February 20, 2025, provided that the holder of the Bonus Warrants, together with its affiliates, are prohibited from exercising Bonus Warrants in common shares, if, as a result of the conversion, the holder, together with its affiliates, would own more than 9.99% of the total number of common shares issued and outstanding immediately after giving effect to the exercise.

12. Contributed surplus

	2022	2021
	$	$
Stock options	7,331,920	6,722,473
Warrants	5,529,529	4,929,727
	12,861,449	11,652,200

Page 28

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

13. Revenue

The Company has recognized the following amounts relating to revenue in the Statements of Loss and Comprehensive Loss

	2022	2021
	$	$
Engaged participant and variable consideration	9,846,357	8,997,232
Welcome kits	1,320,071	1,458,616
	11,166,428	10,455,848

The Company recognizes contract assets or contract liabilities with respect to its success fees, guarantee fees and other allocations relating to sale of its bundled products. The Company accounts for contract assets and liabilities on a contract-by-contract basis with each contract presented as a net contract asset or a net contract liability accordingly.

Contract assets relate to success fees for which the Company believes a significant reversal of revenue will not occur, but the right to related consideration is conditional on achievement of certain metrics.

Contract liabilities relate to the Company’s estimate of the amount of consideration it expects to refund to its customers, material future rights expected to be exercised by customers and discounts provided to customers (due to the allocation of the transaction price to the performance obligations).

Below is a summary of contract assets and contract liabilities from contracts with customers and the significant changes in those balances during the year ended December 31, 2021:

	$
Contract asset (liability)
Balance, January 1, 2021	18,810
Estimated variable consideration	151,590
Settlement of variable consideration	(314,434)
Balance, December 31, 2021	(144,034)
Estimated variable consideration	241,634
Settlement of variable consideration	92,400
Balance, December 31, 2022	190,000

Page 29

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

14. Expenses by nature

	2022	2021
	$	$
Cost of sales
Employee costs	3,834,639	4,086,807
Welcome kits	1,236,892	1,297,377
Amortization of intangibles_(Note 8)_	68,838	-
	5,140,369	5,384,184
Technology and development
Employee costs	1,484,833	1,799,685
Information technology	1,086,404	899,167
Research and development	1,352,426	428,111
	3,923,663	3,126,963
Sales and marketing
Employee costs	1,571,594	2,030,076
Advertising and promotion	1,149,134	1,126,746
	2,720,728	3,156,822
General and administrative
Employee costs	2,772,384	2,203,422
Corporate expenses	1,632,727	1,769,770
Professional fees	706,193	706,460
	5,111,304	4,679,652

Page 30

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

15. Share-based payment arrangements

The Company has established a stock option plan for the benefit of its employees, directors, officers and consultants. The maximum number of options that may be granted under the original plan was 18,114,870. On September 14, 2022, the Shareholders approved an increase to the maximum number of options to 23,598,557. The options are exercisable for a period of up to 5 years.

The Board of Directors determines the vesting schedule, exercise price per common share and the number of common shares which may be allocated to each director, officer, employee and consultant and all other terms and conditions of the option. Vesting is contingent upon continuous service and or employment through the specific vesting date and have an exercise price as set forth in the option certificate issued in respect of such option and in any event shall not be less than market price of the common shares as of the award date.

The number and weighted-average exercise price of options under the stock option program are as follows:

		Weighted
		average
	Number of	exercise
	options	price
		$
Options outstanding, January 1, 2021	15,610,020	0.58
Granted during the year	2,175,771	0.48
Expired during the year	(688,571)	0.69
Forfeited during the year	(2,379,605)	0.81
Options outstanding, December 31, 2021	14,717,615	0.52
Granted during the year	2,446,125	0.22
Expired during the year	(3,700,000)	0.43
Forfeited during the year	(560,191)	0.63
Options outstanding, December 31, 2022	12,903,549	0.49

A summary of the stock options outstanding as at December 31, 2022 is as follows:

Exercise Price Range	Options Outstanding Options Exercisable Number Outstanding Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price
$ 0.18 - 0.20 0.21 - 0.40 0.41 - 0.60 0.61 - 0.80 0.81-1.00	# # $ # $ 601,140 4.60 0.20 136,529 0.20 3,024,439 3.42 0.26 1,568,178 0.27 6,601,403 1.72 0.48 6,233,891 0.48 248,571 0.30 0.70 248,571 0.70 2,427,996 2.88 0.85 1,766,116 0.85
Balance, December 31, 2022	12,903,549 2.44 0.49 9,953,285 0.51

Page 31

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

15. Share-based payment arrangements (cont'd)

A summary of the Company’s stock options outstanding as at December 31, 2021 is as follows:

		Options Outstanding	Options Outstanding		Options Exercisable	Options Exercisable
		Weighted
		average	Weighted			Weighted
		remaining	average			average
	Number	contractual	exercise		Number	exercise
Exercise price range	outstanding	life (years)	price		exercisable	price
$	#	#		$	#	$
0.21 - 0.40	1,301,715	3.2		0.29	1,071,289	0.27
0.41 - 0.60	10,224,739	1.9		0.46	8,274,521	0.45
0.61 - 0.80	493,571	1.0		0.68	478,571	0.69
0.81-1.00	2,697,590	3.9		0.85	1,214,094	0.85
Balance, December 31, 2022	14,717,615	2.4		0.52	11,038,475	0.48

The Company recognized share-based compensation expense of $492,720 for the year ended December 31, 2022 with a corresponding amount recognized to contributed surplus (December 31, 2021 - $771,662).

The stock options granted during the years ended December 31, 2022 and 2021 were determined using the Black-Scholes pricing model at the weighted average assumptions as follows:

	2022	2021
Share price	$0.09 - $0.17	$0.19 - $0.33
Expected volatility	70.05% - 97.18%	60.50% - 70.80%
Expected life	5 years	5 years
Expected dividends	-%	-%
Risk-free interest rate	1.93% - 3.53%	0.75% - 1.40%
Forfeiture rate	6.71% - 6.82%	4.52% - 6.34%

Expected volatility has been based on comparable companies listed on various exchanges.

16. Income taxes

The reconciliation of the combined Canadian federal and provincial statutory income tax rate of 26.5% (2021 - 26.5%) to the effective tax rate is as follows:

	2022	2021
	$	$
Net loss before recoveryof income taxes	(7,700,463)	(7,649,754)
Expected income tax recovery	(2,040,620)	(2,027,180)
Non-deductible expenses	12,380	67,890
Share-based compensation	130,570	283,890
Share issuance costs booked through equity	(53,690)	(5,100)
Change in tax benefits not recognized	1,951,360	1,680,500
Income tax expense	-	-

Page 32

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

16. Income taxes (cont'd)

Deferred tax

The following table summarizes the components of deferred tax:

	2022	2021
	$	$
Deferred tax assets
Property and equipment	1,430	-
Intangible assets	490	-
Operating tax losses carried forward	-	128,970
Lease obligations	108,620	97,930
	110,540	226,900
Deferred tax liabilities
Property and equipment	-	(32,880)
Intangible assets	-	-
Right-of-use asset	-	(97,930)
Debentures	(110,540)	(96,090)
	(110,540)	(226,900)
Net deferred tax asset (liability)	-	-

Deferred tax assets and liabilities have been offset where they relate to income taxes levied by the same taxation authority and the Company has the legal right and intent to offset.

Unrecognized deferred tax assets

The Company has the following deductible temporary differences for which no deferred tax asset has been recognized:

	2022	2021
	$	$
Lease obligations	134,790	298,020
Share issuance and financing costs	1,445,980	1,480,480
Trade and other payables	76,200	271,170
Operating tax losses carried forward	54,912,220	47,507,600
SR&ED Pool	440,530	440,530
Charitable donations carryforward	3,890	2,570

Page 33

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

16. Income taxes (cont'd)

The Canadian operating loss carry forwards expire as noted in the table below. Share issue and financing costs will be fully amortized in 2026. The remaining deductible temporary differences may be carried forward indefinitely. Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilize the benefits therefrom.

The Company's Canadian operating income tax losses expire as follows:

Year of expiry	Amount
	$
2029	428,280
2030	670,630
2031	1,159,040
2032	1,010,140
2033	1,101,030
2034	1,518,460
2035	3,246,420
2036	5,377,420
2037	7,291,880
2038	5,712,300
2039	6,282,670
2040	6,448,190
2041	7,261,140
2042	7,404,620
	54,912,220

17. Loss per share

As a result of losses reported during the years ended December 31, 2022 and 2021, the outstanding stock options and warrants have an anti-dilutive effect and are not included in the computation of diluted loss per share. Consequently, basic and diluted loss per share are the same.

18. Financial instruments and risk management

Financial risk management objectives and policies

The Company's activities expose it to a variety of financial risks including foreign currency risk, credit risk and liquidity risk. These financial risks are actively managed by the Company under the policies approved by the Board of Directors. The principal financial risks are managed by the Company’s finance department, within Board approved policies and guidelines. On an ongoing basis, the finance department actively manages market conditions with a view to minimizing the exposure of the Company to changing market factors, while at the same time limiting the funding costs to the Company.

Fair value

The fair value of cash, trade and other receivables, trade and other payables, credit facility and debentures approximate their carrying values due to their short-term nature.

Page 34

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

18. Financial instruments and risk management (cont'd)

	December	31, 2022	December	31, 2021
	Carrying	Fair	Carrying	Fair
	Value	Value	Value	Value
	$	$	$	$
Financial assets
Cash	345,950	345,950	811,584	811,584
Trade and other receivables	1,557,640	1,557,640	1,381,977	1,381,977
Financial liabilities
Trade and other payables	2,584,039	2,584,039	1,965,420	1,965,420
Credit facility	4,823,545	4,823,545	2,331,314	2,331,314
Debentures	3,477,875	3,277,803	2,182,403	2,182,403

Basis of fair values

(a) Fair value hierarchy

For financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

Level 3 inputs are unobservable inputs for the asset or liability.

The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. There have been no transfers between levels during the period.

As at December 31, 2022, there are no financial instruments carried at fair value.

Credit risk

Credit risk is the risk of financial loss to the Company that arises from the possibility that the Company’s customers may experience financial difficulty and be unable to fulfil their contract commitments. The Company mitigates the risk of credit loss by entering into contracts with large and established customers and by placing its cash with major financial institutions.

The carrying value of cash and trade and other receivables represents the Company's maximum credit exposure. Expected credit losses on trade and other receivables in profit or loss were nil (December 31, 2021: $Nil).

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry and country in which its customers operate (see segment details in Note 22). A customer is considered to be at default when they are unable to fulfil their contractual commitments and make the required payments on their debt obligations. Given the customer base is comprised of large established corporations, customer balances are also considered to be in default when they are more

Page 35

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

18. Financial instruments and risk management (cont'd)

than 90 days past due. Details of concentration of revenue are included in Note 20. The gross carrying amount of a trade receivable is written off when the Company has no reasonable expectations of recovering the balance in its entirety or a portion thereof. The Company makes an assessment on a customer by customer basis with respect to the timing and amount of write-off based on the specific circumstances of the customer and determines the amount to write-off based on whether there is reasonable expectation of recovery.

Management has established a credit policy under which each new customer is analyzed individually for creditworthiness. The majority of the Company’s current customers are large established corporations with high credit quality consisting primarily of U.S. healthcare insurance payors or self-insured employers. The Company limits its exposure to credit risk from trade receivables by establishing a maximum payment period of 1-2 months. When determining whether there is an increase in credit risk of any of its trade receivables, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes quantitative and qualitative information that includes forward-looking information. At December 31, 2022 and 2021, none of these customer’s balances have been written off or are credit impaired at the reporting date. There has been no change to the Company's policies and processes with respect to the way it manages credit risk.

The Company does not require collateral in respect of trade and other receivables. The Company does not have trade receivable and contract assets for which no loss allowance is recognized because of collateral.

At December 31, 2022 and 2021, the exposure to credit risk for trade receivables was limited to the United States (see segment information in Note 22). At December 31, 2022, two customers whose trade receivables exceeded 10% of the total trade and other receivables balance represented 89% (December 31, 2021 – 90%) of the Company’s trade and other receivables.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate based on the changes in foreign exchange rates. The Company enters into transactions to purchase and sell goods denominated in foreign currencies, which relate to revenues, cost of revenue, expenses, cash, accounts receivable and accounts payable balances. Balances are subject to rate fluctuations.

As at December 31, 2022 and 2021, the following items were denominated in foreign currency:

	2022 2021
	$ $ Balances (U.S. Dollars) Cash 255,426 640,096 Trade and other receivables 1,008,451 1,051,904 Trade and otherpayables 590,667 445,808

The following table demonstrates the sensitivity to a reasonably possible change in the U.S. dollar exchange rate, with all other variables held constant, on the translation of the Company’s foreign currency denominated monetary assets and liabilities as at December 31, 2022 and 2021.

Page 36

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

18. Financial instruments and risk management (cont'd)

Foreign currency risk (cont'd)

	Change in	Effect on loss
	U.S. rate	before tax
	$	$
2022	10%	91,180
	-10%	(91,180)
2021	10%	158,000
	-10%	(158,000)

Liquidity risk

The Company’s objective is to have sufficient liquidity to meet its liabilities when due. The Company monitors its cash balances and cash flows generated from operations to meet its requirements. There has been no change to the Company’s policies and processes with respect to the way it manages liquidity risk.

The following are the contractual maturities of the financial liabilities as at December 31, 2022:

		Less than			After
	Total	1 year	1-3 years	4-5 years	5 years
	$	$	$	$	$
Trade and other payables	2,584,039	2,584,039	-	-	-
Credit facility	4,823,545	4,823,545	-	-	-
Lease obligations	544,700	544,700		-	-
			-
Debentures	3,895,000	2,545,000	1,350,000	-	-
	11,847,284	10,497,284	1,350,000	-	-

The following are the contractual maturities of the financial liabilities as at December 31, 2021:

		Less than			After
	Total	1 year	1-3 years	4-5 years	5 years
	$	$	$	$	$
Trade and other payables	1,965,420	1,965,420	-	-	-
Credit facility	2,331,314	2,331,314	-	-	-
Lease obligations	667,556	300,555	367,001	-	-
Debentures	2,545,000	-	2,545,000	-	-
	7,509,290	4,597,289	2,912,001	-	-

19. Capital management

Newtopia defines capital as its equity/deficit and debentures. The Company's capital as at December 31, 2022 is a net deficit of $2,055,781 (December 31, 2021 - net surplus of $338,089). The Company’s objective when managing its capital is (i) to safeguard the ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits to other stakeholders; and (ii) to provide adequate return to shareholders by obtaining an appropriate amount of financing with the level of risk, to reduce after-tax cost of capital.

The Company sets the amount of its capital in proportion to its risk. Newtopia manages its capital structure and

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NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

19. Capital management (cont'd)

makes adjustments in light of changes in economic conditions and the characteristics of risk of underlying assets. In order to maintain or adjust capital structure, the Company may attempt to issue new shares or sell assets to reduce its obligations. The Company’s objective is met by retaining adequate liquidity to provide for the possibility that cash flows from assets will not be sufficient to meet future cash flow requirements. There have been no changes to the Company’s capital management policies during the years ended December 31, 2022 and 2021.

The Company is subject to certain financial covenants on its loan facility (Note 9). There has been no change to the Company’s policies and processes with respect to the way it manages capital.

20. Economic dependence

During the year ended December 31, 2022, two customers whose services and product revenues exceeded 10% of the total revenue balance represented 84% of the Company's revenue (December 31, 2021 - 84%).

21. Related party transactions and balances

The Company’s key management personnel are comprised of the Board of Directors and current and former members of the executive team of the Company. Key management personnel compensation for the year consisted of the following:

	2022	2021
	$	$
Salaries, fees and short-term benefits	3,338,994	2,996,308
Share-based benefits	526,019	952,279
	3,865,013	3,948,587

In November 2022, a director of the Company loaned the Company $50,000 in subordinated 12% promissory notes (see Note 9) which was repaid and used to acquire $50,000 in the 13% Debentures on December 15, 2022 (See Note 9).

On August 9, 2022, the Company issued 516,140 stock options to the directors of the Company for fees related to the three months period ended June 30, 2022 of $66,250. Each option vests quarterly over one year and is exercisable at a price of $0.20 per common share at any time up to August 9, 2027. The fair value of the stock options was determined at $54,388 using the Black Scholes option pricing model with the following assumptions: share price of $0.15, risk free interest rate of 2.89%, expected life of 5 years and expected volatility of 97.18%. On April 4, 2022, the Company issued 355,785 stock options to the directors of the Company for fees related to the three months ended March 31, 2022 of $57,500. Each option vests quarterly over one year and is exercisable at a price of $0.26 per common share at any time up to April 4, 2027. The fair value of the stock options was determined at $55,148 using the Black-Scholes option pricing model with the following assumptions: share price of $0.28, risk free interest rate of 2.43%, expected life of 5 years and expected volatility of 70.08%. Amortization of the fair value of the above stock options during the year ended December 31, 2022 of $91,377 was applied against directors fees owing for year ended December 31, 2022 with a remaining balance owing of $32,373.

On May 19, 2021, the Company issued 797,200 stock options to the directors of the Company for fees related to the year ended December 31, 2021 of $210,000. Each option vests quarterly over one year and is exercisable at a price of $0.47 per common share at any time up to May 19, 2026. The fair value of the stock options was determined at $215,536 using the Black-Scholes option pricing model with the following assumptions: risk free interest rate 0.96%, expected life of 5 years and expected volatility of 69.80%. The unpaid fees are reduced by the amortization of the fair value of the stock options over the vesting period. Amortization during the year ended December 31, 2022 of $30,866 was applied against the 2021 directors fees liability (December 31, 2021 - $184,650) and as at December 31, 2022 the liability was fully settled.

Page 38

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

21. Related party transactions and balances (cont'd)

On March 2, 2020, the Company and the CEO of the Company agreed to settle $400,000 of unpaid bonuses related to years prior to 2019 with 865,849 common shares and 188,571 stock options. The stock options are exercisable at $0.70 per common share until November 6, 2021. The fair value of the common shares and stock options at the date of the settlement was determined to be $528,168 and $39,548, respectively. The fair value of the stock options was determined using the Black-Scholes pricing model with the following assumptions: share price of $0.21, risk free interest rate of 1.75%, expected life of 1.7 years and expected volatility of 75.43%. The shares were issued to the CEO in March 2021 and $528,168 was allocated from shares to be issued to Common Shares in the statement of equity.

As at December 31, 2022, aggregate bonuses payable to members of the Company's executive team was $196,100 (December 31, 2021 - $552,678).

22. Segment information

In measuring performance, the Company does not distinguish or group its operations on a geographical or any other basis and accordingly has a single operating segment. Management has applied judgment by aggregating its operating segments into one single reportable segment for disclosure purposes. Such judgment considers the nature of the operations, the customer mix and an expectation that the operating segments within a reportable segment have similar long-term economic characteristics. Substantially all of the Company's long-lived assets are located in Canada and its revenue earned primarily in the US.

23. Events after year end

On March 7, 2023, the Company closed a private placement offering of units at a price of $0.07 per unit for gross proceeds of $1,534,960. Each unit is comprised of: (i) one Common Share in the capital of the Company; (ii) a first one-half of one Common Share purchase warrant (each whole first warrant, an "A Warrant"); and (iii) a second one-half of one Common Share purchase warrant (each whole second warrant, a "B Warrant"). Each A Warrant entitling the holder thereof to acquire one Common Share at an exercise price of $0.10 per A Warrant Share for a period of six months from the closing date of the offering. Each B Warrant entitling the holder thereof to acquire one Common Share at an exercise price of $0.15 per B Warrant Share for a period of 24 months from the closing date of the Offering. As consideration for certain services provided to the Company in connection with the offering, the Company paid an aggregate of $42,151 and issued 595,021 compensation options exercisable to acquire one Common Share at a price of $0.07 per Common Share for a period of 24 months following the closing date of the offering, as finders' fees to certain persons.

On March 10, 2023, the Company granted incentive stock options to directors, officers and employees of the Company exercisable for 10,600,000 common shares of the Company at $0.105 per share for five years.

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AI assistant

Newtopia Inc. — Annual Report 2023

47712_rns_2023-04-24_1db952fa-8a02-42c9-b217-0da4b2786545.pdf

Annual Financial Statements

NEWTOPIA INC.

Management’s Responsibility for Financial Reporting

Opinion

Basis for Opinion

Material Uncertainty Related to Going Concern

Key Audit Matters

Revenue Recognition

Audit Response

Other Information

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Auditor's Responsibilities for the Audit of the Financial Statements

NEWTOPIA INC.

NEWTOPIA INC.

Statements of Loss and Comprehensive Loss Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

NEWTOPIA INC.

Statements of Changes in Equity (Deficit) Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

NEWTOPIA INC.

Statements of Cash Flows

1. Nature of business and going concern

2. Significant accounting policies

(a) Statement of compliance

(b) Basis of presentation

2. Significant accounting policies (cont'd)

(c) Revenue recognition

Welcome kits

Engaged participant fees

2. Significant accounting policies (cont'd)

Success fees

Outcome guarantee fees

Customer incentives and discounts

(d) Cost of revenue

(e) Financial assets and liabilities

2. Significant accounting policies (cont'd)

2. Significant accounting policies (cont'd)

Debentures

(g) Impairment of non-financial assets

(h) Income taxes

(i) Property and equipment

2. Significant accounting policies (cont'd)

(i) Property and equipment (cont'd)

(j) Internally-generated intangible assets

(k) Inventories

(l) Share capital

(m) Share-based compensation

2. Significant accounting policies (cont'd)

(m) Share-based compensation (cont'd)

(n) Loss per share

(o) Provisions

(p) Foreign currency translation

(q) Leases

2. Significant accounting policies (cont'd)

(q) Leases (cont'd)

( r ) Borrowing costs

(s) Future accounting policies

New and Revised IFRS Standards issued but not yet effective

3. Critical judgments and key sources of estimation uncertainty

4. Trade and other receivables

5. Inventories

NEWTOPIA INC. Notes to the Financial Statements Years Ended December 31, 2022 and 2021 (Expressed in Canadian Dollars)

6. Property and equipment

7. Right-of-use asset and lease liability

7. Right-of-use asset and lease liability (cont'd)

8. Intangible asset

9. Credit facility

9. Credit facility (cont'd)

10. Debentures

10. Debentures (cont'd)

(a) 8% secured non-convertible debentures (cont'd)

(b) 13% secured non-convertible debentures

10. Debentures (cont'd)

11. Equity

11. Equity (cont'd)

(a) Common shares (cont'd)

(i) Private placement offering

11. Equity (cont'd)

11. Equity (cont'd)

Newtopia Inc. Annual Report 2023