Newtopia Inc. — Interim / Quarterly Report 2021

Aug 12, 2021

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Condensed Interim Financial Statements of

NEWTOPIA INC.

For the Three and Six Months Ended June 30, 2021 and 2020

(Unaudited)

(Expressed in Canadian Dollars)

NEWTOPIA INC.

Condensed Interim Financial Statements (Unaudited) Three and Six Months Ended June 30, 2021 and 2020

Table of Contents
	Page
Condensed Interim Statements of Financial Position		1
Condensed Interim Statements of Loss and Comprehensive Loss		2
Condensed Interim Statements of Changes in Equity (Deficit)		3
Condensed Interim Statements of Cash Flows		4
Notes to the Condensed Interim Financial Statements	5	- 15

NEWTOPIA INC.

Condensed Interim Statements of Financial Position (Unaudited) As at June 30, 2021 and December 31, 2020

(Expressed in Canadian Dollars)

(Expressed in Canadian Dollars)
		June 30,	December 31,
	Note	2021	2020
		$	$
Assets
Current assets
Cash		637,858	4,673,683
Trade and other receivables	3	1,325,899	1,067,123
Unbilled revenue		77,000	426,000
Prepaid expenses and deposits		366,338	465,285
Inventories		248,519	278,696
Deferred costs	5	**158,043 **	232,089
		2,813,657	7,142,876
Property and equipment		95,138	129,913
Right-of-use asset		461,918	554,305
Intangible asset	4	**981,100 **	68,948
		4,351,813	7,896,042
Liabilities
Current liabilities
Trade and other payables	12	2,003,818	2,765,583
Credit facility	5	1,071,275	-
Lease obligations		235,937	215,532
Derivative liability	8(c)	-	47,508
		3,311,030	3,028,623
Non-currentlease obligations		527,877	667,558
		**3,838,907 **	3,696,181
Equity/Deficit
Common shares	8(b)	45,177,120	44,648,952
Common shares to be issued	8(b)	-	528,168
Contributed surplus	10	11,093,439	10,046,621
Deficit		**(55,757,653) **	(51,023,880)
		**512,906 **	4,199,861
		4,351,813	7,896,042
Nature of business and going concern	1
Events after the period end	13

Signed on behalf of the Board:

"Jeffrey Ruby" Director Director

"Karen Basian"

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

Page 1

NEWTOPIA INC.

Condensed Interim Statements of Loss and Comprehensive Loss (Unaudited) Three and Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars)

(Expressed in Canadian Dollars)
		Three Months Ended		Six Months Ended
		June	30,	June 30,
	Note	2021	2020	2021	2020
		$	$	$	$
Revenue		2,529,021	2,687,055	5,148,192	6,550,041
Cost of revenue		**1,457,764 **	1,276,626	**2,758,631 **	3,485,183
Grossprofit		1,071,257	1,410,429	2,389,561	3,064,858
Operating expenses
Technology and development		982,214	793,322	1,712,221	1,569,988
Sales and marketing		923,051	815,196	1,899,533	1,543,678
General and administrative		1,096,028	893,132	2,311,747	1,827,696
Share-based compensation	11,12	**337,123 **	121,659	886,943	256,091
		**3,338,416 **	2,623,309	6,810,444	5,197,453
Other expenses (income)
Depreciation of property and
equipment		16,803	21,339	34,775	42,893
Depreciation of right-of-use asset		46,192	46,191	92,387	92,386
Interest and accretion expense	6	-	-	-	233,542
Interest on lease obligations		29,046	36,849	60,314	74,698
Finance charges		15,812	-	20,948	-
Amortization of deferred finance
charges	5	46,120	-	85,036	-
Foreign exchange (gain)/loss		39,142	106,620	66,938	(96,491)
Change in value of convertible
debenture derivative liabilities	6	-	177,663	-	448,656
Change in value of derivative
liability	8(c)	(2,989)	(61,504)	(47,508)	(47,876)
Loss on settlement of related party
payable	12	-	-	-	167,716
		**190,126 **	327,158	312,890	915,524
Net loss and comprehensive loss		**(2,457,285) **	(1,540,038)	(4,733,773)	(3,048,119)
Loss per share
Basic and diluted		(0.02)	(0.02)	(0.05)	(0.08)
Weighted average number of common
shares outstanding
Basic and diluted		100,492,786	62,468,935	100,205,764	39,002,427

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

Page 2

NEWTOPIA INC.

Condensed Interim Statements of Changes in Equity (Deficit) (Unaudited) Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars)

Note Common Shares Shares To Be Issued Preferred Shares Special Warrants Contributed Surplus	Deficit **Total **
$ $ $ $ $ Balance, December 31, 2020 44,648,952 528,168 - - 10,046,621 Net loss and comprehensive loss - - - - - Share-based compensation - - - - 886,943 Issuance of shares 8(b),12 528,168 (528,168) - - - Settlement of related party payable 12 - - - - 159,875	$ $ (51,023,880) 4,199,861 (4,733,773) (4,733,773) - 886,943 - - - 159,875
Balance, June 30, 2021 45,177,120 - - - 11,093,439	(55,757,653) 512,906
Balance, December 31, 2019 4,643,945 - 13,011,033 9,164,731 5,172,192 Net loss and comprehensive loss - - - - - Share-based compensation - - - - 256,091 Conversion of Convertible Debentures 6 6,039,000 - - - 589,594 Modification of warrants 6 - - - - 42,787 Conversion of retractable preferred shares 7 7,420,265 - - - - Conversion of preferred shares 8(b) 13,011,033 - (13,011,033) - - Conversion of Special warrants 9 6,812,648 - - (9,164,731) 2,352,083 Settlement of debt 8(b),12 - 528,168 - - 39,548 Exercise of warrants 8(d) - 99,999 - - -	(43,204,384) (11,212,483) (3,048,119) (3,048,119) - 256,091 - 6,628,594 (42,787) - - 7,420,265 - - - - - 567,716 - 99,999
Balance, June 30, 2020 37,926,891 628,167 - - 8,452,295	(46,295,290) 712,063

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

Page 3

NEWTOPIA INC.

Condensed Interim Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2021 and 2020

(Expressed in Canadian Dollars)

Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars)
		Six Months	Ended June 30,
		2021	2020
		$	$
Cash flows used in operating activities:
Net loss and comprehensive loss		(4,733,773)	(3,048,119)
Items not involving cash:
Depreciation of property and equipment		34,775	42,893
Depreciation of right-of-use asset		92,387	92,386
Amortization of deferred finance charges		85,036	-
Share-based compensation		886,943	256,091
Interest and accretion expense		-	233,542
Interest on lease obligations		60,314	74,698
Loss on settlement of related party payable		-	167,716
Change in value of convertible debenture derivative
liabilities		-	448,656
Change in value of derivative liability		**(47,508) **	(47,876)
		(3,621,826)	(1,780,013)
Net change in non-cash working capital
Trade and other receivables		(258,776)	246,175
Unbilled revenue		349,000	-
Inventories		30,177	321,840
Prepaid expenses and deposits		98,947	196,817
Trade and otherpayables		**(601,890) **	(148,341)
		**(4,004,368) **	(1,163,522)
Cash flows used in investing activities
Purchase of property and equipment		-	(11,843)
Intangible asset development costs		**(912,152) **	-
		**(912,152) **	(11,843)
Cash flows from (used in) financing activities:
Repayment of lease obligations		(179,590)	(128,428)
Credit facility withdrawals	5	1,071,275	-
Credit facility financing costs	5	(10,990)	-
Proceeds from exercise of non-broker warrants		-	99,999
		**880,695 **	(28,429)
Decrease in cash		(4,035,825)	(1,203,794)
Cash, beginning ofperiod		**4,673,683 **	2,386,341
Cash, end ofperiod		637,858	1,182,547
Supplemental disclosure of cash flow information
Non-cash settlement of relatedparty payable		159,875	400,000

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

Page 4

NEWTOPIA INC. Notes to the Condensed Interim Financial Statements (Unaudited) Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars)

1. Nature of business and going concern

Newtopia Inc. (“Newtopia” or the “Company”) is a health technology company that delivers disease prevention solutions by leveraging technology, behavioral science and genetics to help individuals prevent chronic disease and reduce costs for employers and 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 4101 Yonge Street, Suite 706, Toronto, Ontario, M2P 1N6.

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. Although effective vaccines are currently being distributed worldwide, the emergence of new and more infectious variants of the virus could slow the relaxing of restrictions and the recovery of the global economy. While these effects are expected to be temporary, significant uncertainty still remains as to the potential impact on the Company's ability to access capital and on its results of operations and financial condition. To date, the Company's operations have remained stable as the pandemic continues to progress and evolve.

The Company’s unaudited condensed interim 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 $4,733,773 for the six months ended June 30, 2021 and as of that date has an accumulated deficit of $55,757,653. As of June 30, 2021, the Company's working capital deficit was $497,373. As at June 30, 2021, the Company was in breach of certain bank facility covenants (See note 5). The bank has agreed to not accelerate repayment of the facility on the condition that the Company receives 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 facility. 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. 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.

Subsequent to June 30, 2021 on August 10, 2021, the Company finalized a term sheet from a lender for a $2,000,000 subordinated debenture with attached warrants (See Note 13).

The unaudited condensed interim financial statements do not reflect adjustments that would be necessary if the going concern assumption was not appropriate.

2. Basis of presentation

Statement of compliance

These unaudited condensed interim financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”), using International Accounting Standard (“IAS 34”), Interim Financial Reporting.

These unaudited condensed interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2020 and accompanying notes. The Company has followed the same basis of presentation, accounting policies and method of computation for these unaudited condensed interim financial statements as were disclosed in the audited financial statements for the year ended December 31, 2020.

The unaudited condensed interim financial statements were approved for issuance by the Board of Directors on August 10, 2021.

Page 5

NEWTOPIA INC. Notes to the Condensed Interim Financial Statements (Unaudited) Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars)

3. Trade and other receivables

	June 30,	December 31,
	2021	2020
	$	$
Trade receivables	1,284,345	955,705
Indirect taxesreceivable	**41,554 **	111,418
	1,325,899	1,067,123

4. Intangible asset

Intangibles consist of the purchase and customization of a new customer relationship management platform and the development of integrated web and mobile applications. At June 30, 2021, the intangibles are not yet ready for use and amortization has not commenced.

5. Credit facility

On December 4, 2020, the Company closed an Operating Credit Line Agreement (the “Facility”) in the amount of $5,000,000. 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 matures on December 4, 2022 (the “Maturity Date”), 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 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 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 any time within the earlier of the Maturity Date 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 Company has also incurred cash transaction costs of $138,805 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 draw-downs by the Company. Guarantee fees paid to June 30, 2021 in the amount of $32,960 are treated similarly but amortized over the Guarantee Period. Amortization of the deferred transaction costs recorded in the statement of loss and comprehensive loss during the three months and six ended June 30, 2021 was $46,120 and $85,036, respectively (three and six months ended June 30, 2020 - $NIL, respectively). As at June 30, 2021, the balance of unamortized deferred transaction costs was $158,043.

As of June 30, 2021, $1,071,275 was drawn on the Facility. Interest expense for the three and six months ended June 30, 2021 was $2,730 (three and six months ended June 30, 2020 - $NIL).

At June 30, 2021, the Company was not in compliance with the Facility's minimum cash runway ratio covenant. The bank has agreed to not accelerate repayment of the Facility on the condition that the Company receives 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. Subsequent to June 30, 2021 on August 10, 2021, the Company finalized a term sheet from a lender for a

Page 6

NEWTOPIA INC. Notes to the Condensed Interim Financial Statements (Unaudited) Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars)

5. Credit facility (cont'd)

$2,000,000 subordinated debenture with attached warrants (See Note 13).

6. Convertible debentures

On November 6, 2018, the Company closed a private placement offering (the "Offering") of 4,000 7% unsecured convertible debenture units (the "Debenture Units") at a price of $1,000 per unit for aggregate gross proceeds of $4,000,000. Each Debenture Unit consisted of one $1,000 principal amount of subordinated unsecured convertible debentures (the "Convertible Debentures") and such number of warrants (the "Unit Warrants") equal to 33% of the principal amount divided by the Unit Warrant exercise price. Each Unit Warrant entitles the holder to purchase one common share (the "Common Share") in the capital stock of the Company at the Unit Warrant exercise price for a period of 36 months to November 7, 2021. The Unit Warrant exercise price shall be determined upon a liquidity event ("Liquidity Event") involving the Company at the fair market value (the "Fair Market Value") of one Common Share on the date of such Liquidity Event. The Unit Warrants cannot be exercised prior to a Liquidity Event. The Liquidity Event is stated to mean the listing of the Company's Common Shares on a recognized exchange, the sale of all its outstanding shares or assets, or a merger involving the Company. The Convertible Debentures were to mature and be repaid on November 6, 2019 together with an additional fee equal to 3% of the principal amount. The conversion price (the "Conversion Price"), subject to adjustment in certain circumstances, shall be set upon a Liquidity Event at 70% of the deemed market price per share upon a Liquidity Event, after taking into account customary adjustments. All issued and outstanding Convertible Debentures including interest shall automatically be converted into fully paid Common Shares at the Conversion Price upon a Liquidity Event.

In October 2019, holders of $3,850,000 of the $4,000,000 Debenture Units consented to the extension of the maturity dates of their Debenture Units from November 6, 2019 to March 31, 2020 and as such the debentures were payable on this date. The extension of the maturity date of the Debenture Units resulted in the derecognition of the host debt at its amortized cost of $4,137,878 and the recognition at its fair value of $3,729,100.

On March 30, 2020, the Company obtained both the final receipt from the OSC for its Final Prospectus and the conditional approval to list from the TSX-V. The Common Shares from the automatic conversion of the Convertible Debentures were issued when the Company's shares commenced trading on May 4, 2020.

The following table is a summary of the accretion to amortized cost and conversion of the host contract:

	$
Residual value of liability component at issuance	1,951,530
Less: issuance costs	200,967
	1,750,563
Interest and accretion expense for the year ended December 31, 2018	399,230
Balance, December 31, 2018	2,149,793
Interest and accretion up to October 23, 2019	2,148,584
Repayment	(160,500)
Debt extinguishment	(4,137,878)
Recognition of new debt	3,729,100
Interest and accretion	264,659
Balance, December 31, 2019	3,993,758
Interest and accretion	233,542
Converted to Common Shares and Unit Warrants	(4,227,300)
Balance, December 31, 2020 and June 30, 2021	-

Page 7

NEWTOPIA INC. Notes to the Condensed Interim Financial Statements (Unaudited) Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars)

7. Retractable preferred shares

The Company is authorized to issue an unlimited number of retractable preferred shares. Retractable preferred shares were issued during the period from 2008 to 2014 and are comprised of Series 1 class A preferred shares, voting and participating by series, issuable in series with rights, privileges, restrictions and conditions as determined by the directors and officers of Newtopia at the time of issuance. In April 2019, holders of Series 1 class A preferred shares consented to the conversion of Series 1 class A preferred shares into common shares on a one for one basis. The conversion of 27,344,395 preferred shares to common shares occurred on May 4, 2020.

There were no retractable preferred shares issued during the six months ended June 30, 2021 and 2020.

8. Equity

• (a) Authorized

Unlimited

Series 2, class A preferred shares, voting and participating by series, issuable in series with rights, privileges, restrictions and conditions as determined by the directors and officers of Newtopia at the time of issuance. Series 2, class A preferred shares are convertible to common shares at a stated conversion ratio on the earlier of: (i) qualifying initial public offering; (ii) qualified merger or acquisition; and (iii) at majority consent of the Series 2, class A preferred shareholders. On liquidation, Series 2, class A preferred shareholders are entitled to receive whether in cash, securities or other property payment of the greater of the threshold price per share and the pro rata share of the proceeds to which each holder would be entitled to if they had converted to common shares, in preference to the common shareholders. In April 2019, holders of the Series 2 class A preferred shares approved the conversion of Series 2 class A preferred shares into common shares on a one for one basis. The conversion of the 4,430,285 preferred shares to common shares occurred on May 4, 2020.

Unlimited

Series 3, class A preferred shares, voting and participating by series, issuable in series with rights, privileges, restrictions and conditions as determined by the directors and officers of Newtopia at the time of issuance. Series 3, class A preferred shares are convertible to common shares at a stated conversion ratio on the earlier of: (i) qualifying initial public offering; (ii) qualified merger or acquisition; and (iii) at majority consent of the Series 3, class A preferred shareholders. On liquidation, Series 3, class A preferred shareholders are entitled to receive whether in cash, securities or other property payment of the greater of the threshold price per share and the pro rata share of the proceeds to which each holder would be entitled to if they had converted to common shares, in preference to the common shareholders. In April 2019, holders of the Series 3 class A preferred shares consented to the conversion of Series 3 class A preferred shares into common shares on a one for one basis. The conversion of 10,294,118 preferred shares to common shares occurred on May 4, 2020.

Unlimited Series 4, class A preferred shares, voting and participating by series, issuable in series with rights, privileges, restrictions and conditions as determined by the directors and officers of Newtopia at the time of issuance. Series 4, class A preferred shares are convertible to common shares at a stated conversion ratio on the earlier of: (i) qualifying initial public offering; (ii) qualified merger or acquisition; and (iii) at majority consent of the Series 4, class A preferred shareholders. On liquidation, Series 4, class A preferred shareholders are entitled to receive whether in cash, securities or other property payment of 80% of the threshold price per share and the pro rata share of the proceeds to which each holder would be entitled to if they had converted to common shares, in preference to the common shareholders. In April 2019, holders of the Series 4 class A preferred shares consented to the conversion of Series 4 class A preferred shares into common shares on a one for one basis. The conversion of 9,191,175 preferred shares to common shares occurred on May 4, 2020.

Unlimited

Common shares.

Page 8

NEWTOPIA INC. Notes to the Condensed Interim Financial Statements (Unaudited) Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars)

8. Equity (cont'd)

(b) Common shares, issued and outstanding

(b) Common shares, issued and outstanding
Number of shares	Amount
Balance, December 31, 2020 99,626,937 Shares issued on settlement of related party payable_(Note 12)_ 865,849	$ 44,648,952 528,168
Balance, June 30, 2021 100,492,786	45,177,120
Balance, December 31, 2019 15,535,919 Shares issued on exercise of stock options 7,500 Shares issued on conversion of Convertible Debentures (Note 6) 8,625,037 Shares issued on conversion of retractable preferred shares (Note 7) 27,344,395 Shares issued on conversion of preferred shares_(Note 8(a)) 23,915,578 Shares issued on exercise of Special Warrants (_Note 9) 14,422,822	4,643,945 - 6,039,000 7,420,265 13,011,033 6,812,648
Balance, June 30, 2020 89,851,251	37,926,891

(c) Preference shares, issued and outstanding

During the year ended December 31, 2020, 14,705 of the Series 2 warrants were exercised and 588,234 had expired. At December 31, 2020, the derivative liability related to the remaining 282,003 outstanding Series 2 warrants was revalued at $47,508 using the Black-Scholes valuation model with the following inputs and assumptions: expected volatility – 53.70%, risk-free interest rate – 0.24%, expected dividend yield – 0%, and expected life – 0.4 years (See note 8(d)). During the three and six months ended June 30, 2021, the 282,003 outstanding Series 2 warrants expired, therefore the corresponding derivative liability was $NIL.

(d) Warrants

As at June 30, 2021 and 2020, the Company has the following warrants outstanding with the corresponding average exercise prices:

		Weighted
		Average
	Number of	Exercise
	Warrants	Price
		$
Balance, December 31, 2020	17,401,772	0.89
Warrants expired	(282,003)	0.68
Balance, June 30, 2021	17,119,769	0.89

Page 9

NEWTOPIA INC. Notes to the Condensed Interim Financial Statements (Unaudited) Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars)

8. Equity (cont'd)

(d) Warrants (cont'd)

		Weighted
		Average
	Number of	Exercise
	Warrants	Price
		$
Balance, December 31, 2019	3,840,093	0.57
Bonus Warrants issued in lieu of Bonus Shares_(i)_	2,000,000	0.0001
Unit Warrants issued on conversion of Convertible Debentures_(Note 6)_	1,885,707	0.70
Broker warrants issued on Convertible Debt offering_(Note 6)_	334,286	0.70
Warrants issued on automatic exercise of Special Warrants_(Note 9)_	7,211,411	1.00
Warrants exercised	(238,662)	0.42
Warrants expired	(119,331)	0.42
Balance, June 30, 2020	14,913,504	0.38

The following table reflects the actual warrants issued and outstanding as of June 30, 2021:

	Exercise	Number of
Expiry date	Price	Warrants
	$
August 2021	0.68	514,705
September 2021	0.68	1,112
November 2021	0.70	334,286
May 2022	0.70	633,450
September 2022	1.00	7,211,411
October 2022	0.95	763,526
October 2022	1.30	3,950,000
May 2023	0.70	1,711,279
February2025_(i)_	0.0001	2,000,000
		17,119,769

Page 10

NEWTOPIA INC. Notes to the Condensed Interim Financial Statements (Unaudited) Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars)

8. Equity (cont'd)

The following table reflects the actual warrants issued and outstanding as of June 30, 2020:

	Exercise	Number of
Expiry date	Price	Warrants
	$
August 2020	0.42	357,993
October 2020_(ii)_	0.42	167,064
December 2020_(iii)_	0.42	787,589
December 2020	0.68	602,939
April 2021	0.68	176,011
May 2021	0.68	7,300
June 2021	0.68	98,692
August 2021	0.68	514,705
September 2021	0.68	1,112
November 2021	0.70	405,000
May 2022	0.70	768,695
May 2022	1.00	7,211,411
May 2023	0.70	1,814,993
February2025	0.0001	2,000,000
		14,913,504

(i) During the year ended December 31, 2018, the Company issued a series of 13% secured debentures (the "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 Debentures were fully settled by December 31, 2019.

On February 20, 2020, the lender of the 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.

• (ii) In October 2019, the Company granted an extension of the expiry date from December 2019 to March 2020. In March 2020, the expiry date was further extended to October 2020.

(iii) In October 2019, the Company granted an extension of the expiry date from October 2019 to December 2020.

9. Special warrants

Pursuant to an agency agreement entered by the Company on May 3, 2019, the company agreed to create, offer, issue and sell up to 14,285,715 special warrants (the “Special Warrants”) at a price of $0.70 per Special Warrant (the “Issue Price”), for gross proceeds of up to $10,000,000.50 (the “Offering”). The agents of the agreement (the “Agents”) agreed to find purchasers of the Special Warrants on a commercially reasonable “best efforts” private placement basis.

Each Special Warrant shall be voluntarily exercisable, for no additional consideration, into one Unit (each, a “Unit”), subject to adjustment described below. Each Unit consists of one common share (a “Common Share”) and one half (½) of one common share purchase warrant (a “Warrant”). Each whole Warrant entitles the holder to purchase one Common Share at $1.00 per Common Share, subject to adjustment as detailed below, for 3 years

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NEWTOPIA INC. Notes to the Condensed Interim Financial Statements (Unaudited) Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars)

9. Special warrants (cont'd)

following the Closing Date.

All unexercised Special Warrants will be deemed to be exercised on the date that is two business days following the earlier of: (i) that date which is 12 months following the date of the first closing of the Offering, and (ii) the later of: (A) the date on which the Company obtains a receipt for a Final Prospectus; and (B) the date the Common Shares are conditionally approved for listing on the TSX Venture Exchange or, subject to the consent of the Agents, another recognized exchange.

In the event that the Company has not filed the Preliminary Prospectus by that date which is 60 days following the date the Company receives, in the aggregate, $8,000,000 in gross proceeds from the Offering, each unexercised Special Warrant will thereafter entitle the holder thereof to receive upon the exercise or deemed exercise thereof, for no additional consideration, 1.20 Units in lieu of one Unit (the “Penalty Provision”).

In consideration of the services rendered by the Agents in connection with the Offering, the Company agreed to pay a cash commission of 7% the gross proceeds raised and special broker warrants (the “Special Broker Warrants”) to purchase that number of Common Shares equal to 7% of the number of Special Warrants sold in the Offering. Each Special Broker Warrant will entitle the holder to purchase one Common Share at a price of $0.70 per Common Share at any time during the three (3) year period following the date of the first closing of the Offering.

On May 3, 2019, the Company closed the first tranche of the Offering, issuing 6,792,944 Special Warrants for gross proceeds of $4,755,061. The Company paid a 7% cash commission to the agents of $332,854 and incurred $132,791 in issuance costs for net proceeds of $4,289,416. In addition, the Company issued 475,506 Special Broker Warrants to the Agents, each exercisable at a price of $0.70 per common share at any time up to May 3, 2022. The Special Broker Warrants were valued using the Black Scholes option pricing model with the following assumptions: risk free interest rate of 1.42%, expected life of 3.0 years, stock price of $0.61 and expected volatility of 63.12% at $112,457.

On July 26, 2019, the Company closed the second tranche of the Offering for aggregate gross proceeds of $3,761,755, issuing 4,373,221 Special Warrants on a brokered private placement basis and 1,000,714 Special Warrants in a concurrent non-brokered private placement basis for gross proceeds of $3,061,255 and $700,500, respectively. Included in the brokered private placement proceeds, the lender of the Debentures agreed to settle $460,000 of the $1,000,000 Debentures issued in March 2018 and all outstanding interest as at July 26, 2019 of $290,000, for a total subscription of $750,000 in 1,071,429 Special Warrants. In consideration for their services on the brokered portion of the Offering, the Agents received 293,189 Special Broker Warrants and were entitled to receive a cash commission of $205,233 of which $129,358 was settled by the Agents for 184,793 of Special Warrants. Including the Agents’ Commission of $129,358 converted to Special Warrants and after paying the Agents their remaining cash commission of $75,875 and out-of-pocket costs of $34,548, the Company received net proceeds of $3,521,974. The Company incurred closing costs of $39,879 for a total net proceeds from the second tranche of $2,732,095. The 293,189 Special Broker Warrants, each exercisable at a price of $0.70 per common share at any time up to May 3, 2022, were valued at $68,894 based on the Black Scholes option pricing model with the following assumptions: risk free interest rate of 1.55%, expected life of 2.8 years, stock price of $0.61 and expected volatility of 65.08%.

The total number of Special Warrants issued under the first and second tranches of the Offering was 12,166,879 for a combined gross proceeds of $8,516,816.

On December 31, 2019, the lender of the Debentures agreed to settle the remaining principal balance of $1,440,000, accrued interest to date of $82,160 plus the outstanding retirement fee of $57,000 for a total subscription of $1,579,160 in 2,255,943 Special Warrants. Accordingly, the total number of Special Warrants was 14,422,822. The Company incurred legal costs of $4,589 in connection with the debt settlement.

Upon the commencement of trading of the Company's common shares on May 4, 2020, the Special Warrants were automatically converted to 14,422,822 Common Shares and 7,211,411 whole Warrants. The total net proceeds raised on the Offering, including the settlement of the Secured Debentures, of $9,164,731 was allocated to the Common Shares and Warrants based on their relative fair values. The fair value of the Warrants was determined using the Black Scholes option pricing model with the following assumptions: risk free interest rate of 1.67%, share price of $0.70 expected life of 2.0 years and expected volatility of 81.47%. $2,352,083 was

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NEWTOPIA INC. Notes to the Condensed Interim Financial Statements (Unaudited) Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars)

9. Special warrants (cont'd)

attributed to the Warrants and included in Contributed Surplus.

10. Contributed surplus

	June 30,	December 31,
	2021	2020
	$	$
Stock options	6,380,300	5,333,482
Warrants	**4,713,139 **	4,713,139
	11,093,439	10,046,621

11. 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 plan cannot exceed 18,114,870. 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 were as follows:

		Weighted
		Average
	Number of	Exercise
	Options	Price
		$
Outstanding, as at December 31, 2020	15,610,020	0.58
Granted	1,567,200	0.47
Expired	(500,000)	0.68
Forfeited	(342,928)	0.81
Options outstanding, June 30, 2021	16,334,292	0.56
Outstanding, as at December 31, 2019	10,838,421	0.45
Granted to settle related party payable_(Note 12)_	188,571	0.70
Exercised	(230,000)	0.42
Forfeited	(20,000)	0.68
Options outstanding, June 30, 2020	10,776,992	0.46

The Company recognized share-based compensation expense of $337,123 and $886,943 for the three and six months ended June 30, 2021, respectively, with a corresponding amount recognized to Contributed Surplus (three and six months ended June 30, 2020 - $121,659 and $256,091, respectively).

The fair value of stock options granted during the six months ended June 30, 2021 and 2020 was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

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NEWTOPIA INC. Notes to the Condensed Interim Financial Statements (Unaudited) Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars)

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

	2021	2020
Share price	$0.38 - $0.58	$0.61
Expected volatility	69.09% - 69.80%	75.43%
Expected life	5 years	1.7 years
Expected dividends	-%	-%
Risk-free interest rate	0.81% - 0.98%	1.75%

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

The following table is a summary of the Company’s stock options outstanding as at June 30, 2021:

Exercise Price Range	Options Outstanding Number Outstanding Weighted Average Remaining Contractual Life(Years) Weighted Average Exercise Price	Options Exercisable
		Number Exercisable Weighted Average Exercise Price
$ 0.21 - 0.40 0.41 - 0.60 0.61 - 0.80 0.81 - 1.00	# # $ 1,205,882 3.56 0.29 10,069,739 2.31 0.46 528,571 0.92 0.68 4,530,100 4.38 0.85	# $ 1,040,882 0.27 6,756,812 0.44 483,571 0.69 912,644 0.85
Balance, June 30, 2021	16,334,292 2.93 0.56	9,193,909 0.48

The following table is a summary of the Company’s stock options outstanding as at June 30, 2020:

ExercisePriceRange	Options Outstanding Number Outstanding Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price	Options Exercisable
		Number Exercisable Weighted Average Exercise Price
$ 0.21 - 0.40 0.41 - 0.60 0.61 -0.80	# # $ 1,040,882 4.33 0.27 8,707,539 2.89 0.45 1,048,571 1.23 0.68	# $ 1,040,882 0.27 5,031,449 0.43 898,571 0.68
Balance, June 30, 2020	10,796,992 2.87 0.46	6,970,902 0.44

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NEWTOPIA INC. Notes to the Condensed Interim Financial Statements (Unaudited) Six Months Ended June 30, 2021 and 2020 (Expressed in Canadian Dollars)

12. 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 three and six months ended June 30, 2021 and 2020 consisted of the following:

	Three Months Ended	Three Months Ended	Six Months	Ended	Ended
	June 30,		June	30,
	2021	2020	2021		2020
	$	$	$		$
Salaries, fees and short-term benefits	556,403	428,204	1,169,115		826,285
Share-based benefits	246,473	122,582	594,710		221,898
	802,876	550,786	1,763,825	1,048,183

On March 2, 2020, the Company and the CEO of the Company agreed to settle $400,000 of unpaid bonuses related to 2019 and prior years 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 aggregate fair value of the common shares and stock options at the date of the settlement was determined to be $567,716. The difference from the bonus payable of $400,000, being $167,716 was recognized as a loss on settlement of related party payable during the six months ended June 30, 2020. As at June 30, 2021, there was a remaining $500,000 of unpaid bonuses related to prior years due to the CEO in accounts payable and accrued liabilities (June 30, 2020 - $500,000). 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.

On November 16, 2020, the Company issued 348,028 stock options to the directors of the Company as settlement of unpaid 2020 directors fees of $160,000. Each option vests quarterly over one year and is exercisable at a price of $0.85 per common share at any time up to November 16, 2025. The fair value of the stock options of $178,956 was determined using the Black-Scholes option pricing model with the following assumptions: risk free interest rate 1.29%, expected life of 5 years and expected volatility of 73.99%. The unpaid fees are being reduced by the amortization of the fair value of the stock options over the vesting period. During the six months ended June 30, 2021, the 2020 directors' fees liability was reduced by $108,325. At June 30, 2021, the remaining balance owing was $5,777.

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. As of June 30, 2021, only $105,000 has been accrued for in General and Administrative expenses. 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%. Amortization of the fair value of the stock options during each of the three months and six months ended June 30, 2021 in the amount of $51,550 was applied against directors fees owing for the three month period ended June 30, 2021.

13. Events after the period end

Subsequent to the end of the period on August 10, 2021, the Company finalized a term sheet from a lender for a $2,000,000 subordinated debenture with attached warrants, satisfying one of the conditions required by the bank for not accelerating repayment of the Company's Facility due to a breach of the Facility's minimum cash runway covenant at June 30, 2021 (See note 5).

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