Newtopia Inc. — Interim / Quarterly Report 2021

Nov 10, 2021

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Condensed Interim Financial Statements of

NEWTOPIA INC.

For the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)

(Expressed in Canadian Dollars)

NEWTOPIA INC.

Condensed Interim Financial Statements (Unaudited) Three and Nine Months Ended September 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 - 18

NEWTOPIA INC.

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

(Expressed in Canadian Dollars)

(Expressed in Canadian Dollars)
		September 30,	December 31,
	Note	2021	2020
		$	$
Assets
Current assets
Cash		467,932	4,673,683
Trade and other receivables	3	1,792,836	1,067,123
Unbilled revenue		134,000	426,000
Prepaid expenses and deposits		349,133	465,285
Inventories		155,593	278,696
Deferred costs		**184,203 **	232,089
		3,083,697	7,142,876
Property and equipment		82,000	129,913
Right-of-use asset	4	415,726	554,305
Intangible asset	5	**1,726,296 **	68,948
		5,307,719	7,896,042
Liabilities
Current liabilities
Trade and other payables		1,786,719	2,765,583
Credit facility	6	666,800	-
Lease obligations	4	285,436	215,532
Deferred revenue		66,682	-
Contract liability		160,000	-
Derivativeliability	10(c)	-	47,508
		2,965,637	3,028,623
Non-current lease obligations	4	446,391	667,558
Debentures	7	**2,135,965 **	-
		5,547,993	3,696,181
Equity/Deficit
Common shares	10(b)	45,177,120	44,648,952
Common shares to be issued	14	-	528,168
Contributed surplus	12	11,460,863	10,046,621
Deficit		**(56,878,257) **	(51,023,880)
		**(240,274) **	4,199,861
		5,307,719	7,896,042
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 unaudited condensed interim financial statements.

Page 1

NEWTOPIA INC.

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

(Expressed in Canadian Dollars)
		Three Months Ended		Nine Months	Ended
		September 30,		September 30,
	Note	2021	2020	2021	2020
		$	$	$	$
Revenue		2,904,863	2,389,374	8,053,055	8,939,415
Cost of revenue		**1,460,870 **	1,213,393	**4,219,501 **	4,698,576
Grossprofit		1,443,993	1,175,981	3,833,554	4,240,839
Operating expenses
Technology and development		715,966	812,228	2,428,187	2,382,216
Sales and marketing		644,184	781,307	2,543,717	2,324,985
General and administrative		1,036,275	946,108	3,348,022	2,773,804
Share-based compensation	13,14	45,122	120,528	932,065	376,619
		2,441,547	2,660,171	**9,251,991 **	7,857,624
Other expenses (income)
Depreciation of property and
equipment		16,163	19,012	50,938	61,905
Depreciation of right-of-use asset	4	46,192	46,192	138,579	138,578
Interest on lease obligations	4	27,875	35,269	88,189	109,967
Interest on promissory note		-	8,219	-	8,219
Finance charges		39,454	10,995	60,402	244,537
Amortization of deferred finance
charges	6	27,890	-	112,926	-
Foreign exchange (gain)/loss		(34,524)	39,778	32,414	(56,713)
Change in value of convertible
debenture derivative liabilities	8	-	-	-	448,656
Change in value of derivative
liability	10(c)	-	111,680	(47,508)	63,804
Loss on settlement of related party
payable	14	-	-	-	167,716
		**123,050 **	271,145	435,940	1,186,669
Net loss and comprehensive loss		**(1,120,604) **	(1,755,335)	(5,854,377)	(4,803,454)
Loss per share
Basic and diluted		(0.01)	(0.02)	(0.06)	(0.09)
Weighted average number of common shares		outstanding
Basic and diluted		100,492,786	91,010,143	100,302,490	56,464,872

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) Nine Months Ended September 30, 2021 and 2020 (Expressed in Canadian Dollars)

		Common	Shares To	Preferred	Special	Contributed
	Note	Shares	Be Issued	Shares	Warrants	Surplus	Deficit	**Total **
		$	$	$	$	$	$	$
Balance, December 31, 2020		44,648,952	528,168	-	-	10,046,621	(51,023,880)	4,199,861
Net loss and comprehensive loss		-	-	-	-	-	(5,854,377)	(5,854,377)
Share-based compensation		-	-	-	-	932,065	-	932,065
Warrants issued on issuance of	7	-	-	-	-	216,588	-	216,588
Debentures
Issuance of shares	10(b),14	528,168	(528,168)	-	-	-	-	-
Settlement of related party payable	14	-	-	-	-	265,589	-	265,589
Balance, September 30, 2021		45,177,120	-	-	-	11,460,863	(56,878,257)	(240,274)
Balance, December 31, 2019		4,643,945	-	13,011,033	9,164,731	5,172,192	(43,204,384)	(11,212,483)
Net loss and comprehensive loss		-	-	-	-	-	(4,803,454)	(4,803,454)
Share-based compensation		-	-	-	-	376,619	-	376,619
Conversion of Convertible	8	6,039,000	-	-	-	589,594	-	6,628,594
Debenture
Modification of warrants	10(d)	-	-	-	-	87,650	(87,650)	-
Conversion of retractable preferred	9(b)	7,420,265	-	-	-	-	-	7,420,265
shares
Conversion of preferred shares	9(b),10(c)	13,011,033	-	(13,011,033)	-	-	-	-
Conversion of Special warrants	9(b),11	6,812,648	-	-	(9,164,731)	2,352,083	-	-
Settlement of related party payable	9(b),10(c),14	-	528,168	-	-	39,548	-	567,716
Exercise of warrants	9(b),10(d)	877,775	-	-	-	(248,275)	-	629,500
Balance, September 30, 2020		38,804,666	528,168	-	-	8,369,411	(48,095,488)	(393,243)

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) Nine Months Ended September 30, 2021 and 2020

(Expressed in Canadian Dollars)

		Nine Months Ended September 30,	Nine Months Ended September 30,
		2021	2020
		$	$
Cash flows used in operating activities:
Net loss and comprehensive loss		(5,854,377)	(4,803,454)
Items not involving cash:
Depreciation of property and equipment		50,938	61,905
Depreciation of right-of-use asset		138,579	138,578
Amortization of deferred finance charges		112,926	-
Share-based compensation		932,065	376,619
Interest and accretion expense		15,652	233,542
Interest on lease obligations		88,189	109,967
Interest on promissory note		-	8,219
Loss on settlement of related party payable		-	167,716
Change in value of convertible debenture derivative
liabilities		-	448,656
Changein value ofderivativeliability		**(47,508) **	63,804
		(4,563,536)	(3,194,448)
Net change in non-cash working capital
Trade and other receivables		(725,713)	408,998
Inventories		123,103	381,258
Unbilled revenue		292,000	-
Prepaid expenses and deposits		116,152	(47,144)
Trade and other payables		(713,275)	(173,889)
Deferred revenue		66,682	-
Contractliability		**160,000 **	-
		**(5,244,587) **	(2,625,225)
Cash flows used in investing activities
Purchase of property and equipment		(3,025)	(15,725)
Intangible asset development costs		**(1,657,348) **	-
		**(1,660,373) **	(15,725)
Cash flows from (used in) financing activities:
Repayment of lease obligations		(239,452)	(214,046)
Credit facility withdrawals		3,829,254	-
Credit facility repayments		(3,162,454)	-
Financing costs		(65,040)	-
Proceeds from promissory note		-	500,000
Proceeds from issuance of debentures, net of issuance
costs	7	2,336,901	-
Proceedsfromexercise of non-broker warrants		-	629,500
		**2,699,209 **	915,454
Decrease in cash		(4,205,751)	(1,725,496)
Cash, beginning ofperiod		**4,673,683 **	2,386,341
Cash, end ofperiod		467,932	660,845
Supplemental disclosure of cash flow information
Non-cash settlement of relatedparty payable		265,589	-

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) Nine Months Ended September 30, 2021 and 2020 (Expressed in Canadian Dollars)

1. Nature of operations 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 $5,854,377 for the nine months ended September 30, 2021 and as of that date has an accumulated deficit of $56,878,257. On September 15, 2021, the Company issued $2,545,000 debenture units with attached warrants (See Note 7) and on September 20, 2021, the bank agreed to increase the Company's credit facility from $5,000,000 to $7,500,000 (See Note 6). 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.

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 November 8, 2021.

Page 5

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

3. Trade and other receivables

	September 30,	December 31,
	2021	2020
	$	$
Trade receivables	1,768,205	955,705
Indirect taxes receivable	24,631	111,418
	1,792,836	1,067,123

The Company has estimated and set its expected credit losses at nil based on the Company’s historical collection and loss experience and incorporates forward-looking factors, where appropriate.

4. Right-of-use asset and lease liability

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

	$
Balance, December 31, 2019	739,072
Depreciation	(184,767)
Balance, December 31, 2020	554,305
Depreciation	(138,579)
Balance, September 30, 2021	415,726

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

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, December 31, 2019	1,039,430
Interest expense	143,325
Payments	(299,665)
Balance, December 31, 2020	883,090
Interest expense	88,189
Payments	(239,452)
Balance, September 30, 2021	731,827
Amounts shown in:
Current liabilities	285,436
Non-currentliabilities	**446,391 **
	731,827

Page 6

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

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

The undiscounted lease payments remaining are as follows:

	September 30,
	2021
	$
No later than 1 year	371,708
Laterthan 1year, butnolaterthan5 years	**486,562 **
	858,270

Total cash outflow for leases, including principal and interest, during the nine months ended September 30, 2021 was $239,452 (September 30, 2020 - $214,046).

5. 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 September 30, 2021, the intangibles are not yet ready for use and amortization has not commenced.

6. 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 (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 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 for the three and nine months ended September 30, 2021 were nil and $32,960 respectively, and 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 nine ended September 30, 2021 was $27,890 and $112,296, respectively (three and nine months ended September 30, 2020 - $NIL, respectively). As at September 30, 2021, the balance of unamortized deferred transaction costs related to the Facility was $133,303.

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

Page 7

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

7. Credit facility (cont'd)

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 7).

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.

As of September 30, 2021, $666,800 was outstanding on the Facility. Interest expense for the three and nine months ended September 30, 2021 was $18,372 (three and nine months ended September 30, 2020 - $NIL). The Company was in compliance with all covenants on September 30, 2021.

7. Debentures

On September 15, 2021 (the “Closing Date”), the Company closed a non-brokered private placement of subordinated and postponed 8.0% secured non-convertible debenture units (the “Units”) for gross proceeds of $2.545,000 (the “Offering”).

Each Unit is comprised of: (i) $10,000 principal amount of subordinated and postponed secured non-convertible debentures of the Company (the “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 of the Offering (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 are subject to a four month hold period that expires on January 16, 2022. An aggregate of 438,777 Warrants were issued in connection with the closing of the Offering.

The Debentures will mature on September 15, 2023 (the “Maturity Date”) 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 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 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 Closing Date but prior to 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 Maturity Date.

Finders acting in connection with this 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 "Maintenance Fee"). The Company will defer and amortize the Maintenance Fee over the date the fee is due to the Maturity Date. As at September 30, 2021, the balance of unamortized deferred transaction costs related to the Maintenance Fee due on the first anniversary of the private placement was $50,900.

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

Page 9

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

7. Credit facility (cont'd)

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 debentures with similar terms would bear. The equity component of the Debentures comprises the value of the Warrants to the Lenders, being the difference between the face value of the 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 being closely related and its value was determined to be not material.

The host debt was subsequently carried at amortized cost at an effective interest rate of 17.96%. Accretion charges attributable to the Debentures for the three and nine-months period ended September 30, 2021 were $15,652. 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.

8. 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:

Page 9

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

8. Convertible debentures (cont'd)

onvertible debentures (cont'd)
	$
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 September 30, 2021	-

9. 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 nine months ended September 30, 2021 and 2020.

Page 10

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

10. 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 11

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

10. Equity (cont'd)

• (b) Common shares, issued and outstanding

	Number of
	shares	Amount
		$
Balance, December 31, 2020	99,626,937	44,648,952
Shares issued on settlement of related party payable_(Note 14)_	865,849	528,168
Balance, September 30, 2021	100,492,786	45,177,120
Balance, December 31, 2019	15,535,919	4,643,945
Shares issued on exercise of stock options	7,500	-
Shares issued on conversion of Convertible Debentures (Note 8)	8,625,037	6,039,000
Shares issued on conversion of retractable preferred shares (Note 9)	27,344,395	7,420,265
Shares issued on conversion of preferred shares_(Note 10(c)_)	23,915,578	13,011,033
Shares issued on exercise of Special Warrants (Note 11)	14,422,822	6,812,648
Shares issued on exercise of share purchase warrants_(Note 14)_	1,454,958	877,775
Balance, September 30, 2020	91,306,209	38,804,666

(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 10(d)). During the nine months ended September 30, 2021, the 282,003 outstanding Series 2 warrants expired, therefore the corresponding derivative liability was $NIL.

(d) Warrants

As at September 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 issued_(Note 7)_	625,844	0.58
Warrants expired	(797,820)	0.68
Balance, September 30, 2021	17,229,796	0.89

Page 12

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

10. 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 8)_	1,885,707	0.70
Broker warrants issued on Convertible Debt offering_(Note 8)_	334,286	0.70
Warrants issued on automatic exercise of Special Warrants_(Note 11)_	7,211,411	1.00
Warrants exercised	(1,454,958)	0.43
Warrants expired	(119,331)	0.42
Balance, September 30, 2020	13,697,208	0.75

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

	Exercise	Number of
Expiry date	Price	Warrants
	$
November 2021	0.70	334,286
May 2022	0.70	633,450
September 2022_(Note 7)_	0.58	187,067
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
September 2023_(Note 7) (i)_	0.58	438,777
February2025_(ii)_	0.0001	2,000,000
		17,229,796

Page 13

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

10. Equity (cont'd)

(d) Warrants (cont'd)

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

	Exercise	Number of
Expiry date	Price	Warrants
	$
October 2020_(iii)_	0.42	167,064
December 2020_(iv)_	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	334,286
May 2022	0.70	768,695
September 2022_(v)_	1.00	7,211,411
May 2023 (Note 8)	0.70	1,814,993
February2025_(ii)_	0.0001	2,000,000
		13,697,208

• (i) Exercise price of $0.58 per share until September 2022 and $0.75 per share thereafter until September 30, 2023 (See Note 7).

(ii) 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.

• (iii) 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.

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

• (v) In July 2020, the Company granted an extension of the expiry date from May 2022 to September 2022, resulting in a modification adjustment of $44,863 recorded in Deficit to reflect the increase in the value of the warrants.

Page 14

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

11. 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 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 combined gross proceeds of $8,516,816.

Page 15

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

11. Special warrants (cont'd)

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 attributed to the Warrants and included in Contributed Surplus.

12. Contributed surplus

	September 30,	December 31,
	2021	2020
	$	$
Stock options	6,531,136	5,333,482
Warrants	4,929,727	4,713,139
	11,460,863	10,046,621

13. 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	1,757,200	0.45
Expired	(500,000)	0.68
Forfeited	(1,677,103)	0.81
Options outstanding, September 30, 2021	15,190,117	0.54

Page 16

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

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

		Weighted
		Average
	Number of	Exercise
	Options	Price
		$
Outstanding, as at December 31, 2019	10,838,421	0.45
Granted to settle debt_(Note 14)_	188,571	0.70
Expired	(230,000)	0.42
Forfeited	(20,000)	0.68
Options outstanding, September 30, 2020	10,776,992	0.46

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

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 0.81 - 1.00	# # $ 1,300,882 3.43 0.29 10,035,572 2.06 0.46 528,571 0.69 0.68 3,325,092 4.13 0.85	# $ 1,049,631 0.27 7,219,860 0.44 483,571 0.69 1,192,942 0.85
Balance, September 30, 2021	15,190,117 2.58 0.54	9,946,004 0.49

The following table is a summary of the Company’s stock options outstanding as at September 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 4.08 0.27 8,707,539 2.64 0.45 1,028,571 0.98 0.68	# $ 1,040,882 0.27 5,281,449 0.43 898,571 0.68
Balance, September 30, 2020	10,776,992 2.62 0.46	7,220,902 0.44

The Company recognized share-based compensation expense of $45,122 and $932,065 for the three and nine months ended September 30, 2021, respectively, with a corresponding amount recognized to Contributed Surplus (three and nine months ended September 30, 2020 - $120,528 and $376,619, respectively).

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

Page 17

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

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

	2021	2020
Share price	$0.33 - $0.58	$0.61
Expected volatility	69.09% - 70.44%	75.43%
Expected life	5 years	1.7 years
Expected dividends	-%	-%
Risk-free interest rate	0.75% - 0.98%	1.75%

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

14. Related party transactions

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 nine months ended September 30, 2021 and 2020 consisted of the following:

	Three Months	Ended	Nine Months	Ended
	September	30,	September 30,
	2021	2020	2021	2020
	$	$	$	$
Salaries, fees and short-term benefits	565,719	520,006	1,745,383	1,346,291
Share-based benefits	**(38,531) **	104,057	556,179	325,955
	527,188	624,063	2,301,562	1,672,246

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 nine months ended September 30, 2020. As at September 30, 2021, there was a remaining $425,000 of unpaid bonuses related to prior years due to the CEO in accounts payable and accrued liabilities (September 30, 2020 - $600,000). 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 nine months ended September 30, 2021, the 2020 directors' fees liability was fully settled.

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 September 30, 2021, $171,250 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 nine months ended September 30, 2021 in the amount of $138,283 was applied against directors fees owing for the three month period ended September 30, 2021.

Page 18