3P REALIA PROPERTIES

Consolidated Financial Statements of

REALIA PROPERTIES INC.

Years ended December 31, 2024 and 2023

(Expressed in Canadian Dollars)

DAVIDSON & COMPANY LLP
Chartered Professional Accountants

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of
Realia Properties Inc.

Opinion

We have audited the accompanying consolidated financial statements of Realia Properties Inc. (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2024 and 2023 and the consolidated statements of income (loss) and comprehensive income (loss), changes in shareholders' equity, and cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2024 and 2023, and its financial performance and its cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 2 of the consolidated financial statements, which indicates that the Company incurred a net income of $516,933 during the year ended December 31, 2024 and, as of that date, the Company's total deficit was $9,721,901. As stated in Note 2, these events and conditions indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matter described below to be the key audit matter to be communicated in our auditor's report.

Assessment of the recoverability of bond receivable

As described in Note 6 of the consolidated financial statements, the carrying amount of the bond receivable was $9,885,563 as at December 31, 2024.

The principal considerations for our determination that the recoverability of bond receivable is a key audit matter is the significant judgement and subjectivity required by management relating to expected credit losses and recoverability. This in turn leads to a high degree of auditor judgement, subjectivity and effort in performing procedures to evaluate management's significant assumptions, including future forward-looking assumptions.

A member of Nexia International

1200 - 609 Granville Street, P.O. Box 10372, Pacific Centre, Vancouver, B.C., Canada V7Y 1G6
Telephone (604) 687-0947 Davidson-co.com

Our approach to addressing the key audit matter included the following, among others:

Gained an understanding of management’s processes and controls surrounding the Company’s assessment over the recoverability of the bond receivable, including the adequacy of the associated collateral.
Inspected the executed bond receivable agreement along with subsequent amendments and related agreements.
Obtained a confirmation to confirm the principal balance, interest and terms of the agreement.
Evaluated the Company’s disclosures in the consolidated financial statements related to the bond receivable.

Other Information

Management is responsible for the other information. The other information obtained at the date of this auditor's report includes Management’s Discussion and Analysis.

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

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

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

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

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

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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

Vancouver, Canada

November 28, 2025

Chartered Professional Accountants

REALIA PROPERTIES INC.

Consolidated Statements of Financial Position
(Expressed in Canadian dollars)

December 31, 2024 and 2023

	2024	2023
Assets
Current assets:
Cash	$ 1,799,388	$ 1,753,720
Amounts receivable (note 6)	2,597,523	1,913,050
Prepaid expenses and deposits	138,561	199,573
Bond receivable (note 6)	9,885,563	-
	14,421,035	3,866,343
Investment properties (notes 5 and 7)	37,432,259	35,454,191
Mortgage reserve fund (note 7)	1,755,271	1,449,046
Bond receivable (note 6)	-	9,092,875
	$ 53,608,565	$ 49,862,455
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities (Note 9)	$ 389,028	$ 636,276
Current portion of mortgages payable (Note 7)	508,788	439,156
Derivative liability (note 8)	-	148,516
Convertible debentures (note 8)	1,941,703	-
	2,839,519	1,223,948
Tenants' security deposits	256,191	231,411
Mortgages payable (note 7)	28,027,040	26,233,331
Convertible debentures (note 8 (b))	-	1,718,510
	31,122,750	29,407,200
Shareholders' equity:
Share capital (note 10)	21,800,437	21,800,437
Equity component of convertible debentures (note 8)	149,052	149,052
Contributed surplus	1,313,196	1,313,196
Accumulated other comprehensive income (loss)	1,402,664	(51,161)
Deficit	(9,721,901)	(10,083,779)
Equity attributable to Shareholders' of Realia Properties Inc.	14,943,448	13,127,745
Non-controlling interest	7,542,367	7,327,510
Total Shareholders' Equity	22,485,815	20,455,255
	$ 53,608,565	$ 49,862,455

See accompanying notes to consolidated financial statements.

Approved on behalf of the Board:

"Jean-Daniel Cohen"
Director

"Stephane Amine"
Chair, Audit Committee

REALIA PROPERTIES INC.

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

	2024	2023
Revenue:
Rental income	$ 3,973,271	$ 3,718,127
Recoveries of operating expenses income	1,619,868	1,453,929
Other income	4,075	19,000
	5,597,214	5,191,056
Property operating expenses
Operating and leasing expenses	(2,709,345)	(2,430,933)
Earnings from property operations	2,887,869	2,760,123
Other revenues (expenses):
General and administrative (note 12)	(570,774)	(495,459)
Depreciation (note 5)	(1,301,556)	(1,346,765)
Net finance costs (note 13)	(959,009)	(1,191,408)
Change in fair value of embedded derivative liability (note 8 (b)	148,516	(48,950)
Miscellaneous income	384,177	377,047
Foreign exchange gain (loss)	(72,290)	(171,643)
	(2,370,936)	(2,877,178)
Net income (loss) for the year	$ 516,933	$ (117,055)
Other comprehensive income (loss):
Items that may be reclassified subsequently to profit or loss
Foreign currency translation on US operations	1,513,627	(32,403)
Comprehensive income (loss)	$ 2,030,560	$ (149,458)
Net income (loss) for the year attributed to:
Non-controlling interest	$ 155,055	$ (291,431)
Shareholders of Realia Properties Inc.	361,878	174,376
	$ 516,933	$ (117,055)
Comprehensive income (loss) attributed to:
Non-controlling interest	$ 214,857	$ (306,526)
Shareholders of Realia Properties Inc.	1,815,703	157,068
	$ 2,030,560	$ (149,458)
Weighted average number of units	255,221,137	255,221,137
Basic and diluted income (loss) per common share	$ 0.00	$ (0.00)

REALIA PROPERTIES INC.

Consolidated Statements of Changes in Shareholders' Equity

(Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

	Number of shares	Share capital	Equity component of convertible debentures	Contributed surplus	Accumulated other comprehensive income (loss)	Deficit	Total attributable to owners of the parent	Non-controlling interest	Total shareholders' equity
Balance, December 31, 2022	255,221,137	21,800,437	475,792	1,313,196	(33,853)	(18,364,403)	5,191,169	-	5,191,169
Non-controlling's share of acquisition of assets	-	-	(326,740)	-	-	8,106,248	7,779,508	7,634,036	15,413,544
Net income (loss) for the year	-	-	-	-	-	174,376	174,376	(291,431)	(117,055)
Other comprehensive income (loss)	-	-	-	-	(17,308)	-	(17,308)	(15,095)	(32,403)
Balance, December 31, 2023	255,221,137	21,800,437	149,052	1,313,196	(51,161)	(10,083,779)	13,127,745	7,327,510	20,455,255
Net income (loss) for the year	-	-	-	-	-	361,878	361,878	155,055	516,933
Other comprehensive income (loss)	-	-	-	-	1,453,825	-	1,453,825	59,802	1,513,627
Balance, December 31, 2024	255,221,137	21,800,437	149,052	1,313,196	1,402,664	(9,721,901)	14,943,448	7,542,367	22,485,815

See accompanying notes to consolidated financial statements.

REALIA PROPERTIES INC.

Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

	2024	2023
Cash provided by (used in):
Cash flows from operating activities:
Net income (loss) for the year	$ 516,933	$ (117,055)
Adjustments to reconcile net (income) loss for the year to net cash provided by operating activities:
Depreciation	1,301,556	1,346,765
Amortization of transaction costs	15,988	15,988
Accretion	207,205	262,496
Change in fair value of derivative liability	(148,516)	48,950
Foreign exchange	72,290	225,500
Interest expense	1,471,705	1,634,736
Interest income	(795,509)	(721,825)
Change in operating assets and liabilities (note 18)	44,033	(847,739)
	2,685,655	1,847,816
Cash flows from investing activities:
Additions to investment properties	(28,528)	(257,908)
Security deposits received (paid)	4,606	24,999
	(23,922)	(232,909)
Cash flows from financing activities:
Repayment of mortgage payable and interest	(1,773,802)	(1,791,323)
Interest paid on convertible debt	(140,234)	(653,297)
Proceeds from convertible debt	-	-
Contributions to mortgage reserve funds	(306,225)	(65,920)
	(2,220,261)	(2,510,540)
Effect of exchange rate changes on cash	(395,804)	(111,041)
Increase (decrease) in cash	45,668	(1,006,674)
Cash, beginning of year	1,753,720	2,760,394
Cash, end of year	$ 1,799,388	$ 1,753,720

See accompanying notes to consolidated financial statements.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

Organization:

Realia Properties Inc. ("Realia" and collectively with its subsidiaries, the "Company") was incorporated under the Canada Business Corporations Act on June 3, 2008 and is a real estate holding company trading on the TSX Venture Exchange (common shares "TSXV: RLP", convertible debentures "TSXV: RLP.DB"). The Company issued share capital and commenced operations on June 30, 2008. The registered office of the Company is 151 Yonge Street, 11th Floor, Toronto, Ontario M5C 2W7.

The sole business of the Company is the ownership of real property interests, consistent with a well-established investment policy. The Company seeks to create a portfolio of stabilized income producing real estate assets within the United States with value to be maximized through the acquisition of well-positioned quality assets. The focus is on necessity-based, retail/commercial properties and community centers.

These consolidated financial statements have been approved and authorized for issue by the Board of Directors on November 28, 2025.

Basis of presentation and statement of compliance:

a) Statement of compliance:

The accompanying consolidated financial statements are prepared in accordance with IFRS Accounting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

b) Basis of presentation:

i) The consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern. For the year ended December 31, 2024, the Company reported a net income of $516,933 (2023 – loss of $117,055), the Company has a deficit of $9,721,901 (2023 – deficit of $10,083,779) and working capital of $11,581,516 (2023 – working capital of $2,642,395).

The ability of the Company to continue as a going concern and realize its assets and discharge its liabilities in the normal course of business is dependent on the Company's ability to raise additional financings, the continued support from the third-party convertible debenture holders and related parties, and on its ability to achieve profitable operations in the future.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

2. Basis of presentation and statement of compliance (continued):

b) Basis of presentation (continued):

i) (continued):

Management is of the opinion that sufficient working capital will be obtained from the cash flows from its investment properties and from proceeds received from the sale of a portion of interest in its properties to meet the Company's debt obligations and commitments as they become due, and that the Company's current credit facilities and shareholder arrangements are sufficient to support future operations. In addition to ongoing working capital requirements, the Company may be required to secure sufficient funding for general and administration costs and interest charges. Although management may have been successful in the past in undertaking financings and borrowings, there can be no reassurance that management will be able to do so in the future on terms acceptable to the Company.

The application of the going concern basis of presentation assumes that the Company will continue in operation for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of business. There is, primarily as a result of the conditions described above, material uncertainties that may cast significant doubt as to the appropriateness of the use of the going concern assumption. These consolidated financial statements have been prepared on a going concern basis notwithstanding these conditions. If the going concern basis was not appropriate for these consolidated financial statements, then adjustments would be necessary to the carrying values of assets and liabilities, the reported revenues and expenses, and consolidated statement of financial position classifications used. These adjustments could be material.

ii) The consolidated financial statements have been prepared on a historical basis except for certain financial instruments at fair value. In addition, the consolidated financial statements have been prepared on an accrual basis, except for cash flow information.

iii) The preparation of these consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Company's accounting policies. Areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 4.

c) Functional and presentation currencies:

These consolidated financial statements are presented in Canadian dollars, which is the functional currency of Realia, the parent Company, and its Canadian subsidiary. The functional currency of the Company's US subsidiaries is the US dollar.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

3. Material accounting policy information:

The material accounting policies applied in the preparation of these consolidated financial statements are set out below. The accounting policies have been applied consistently by the group entities unless otherwise stated.

a) Basis of consolidation:

The consolidated financial statements include the assets and liabilities and results of operations of Realia and its subsidiaries. The assets and liabilities and results of operations include the consolidation of its wholly owned 100% US subsidiaries: Realia Properties US, and its wholly owned Canadian subsidiary, Realia Hospitality Inc. It also includes the consolidation of its 25.01% ownership of RLP US Sub LLC, TSP Metro Gateway LLC, TSP 116 Street LLC, and Martin Downs NSC LLC, and its wholly owned Canadian subsidiary, Realia Hospitality Inc.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are prepared for the same reporting period as the Company using consistent accounting policies.

All material intercompany balances and transactions are eliminated upon consolidation.

Where the Company's interest in a subsidiary is less than 100%, the Company recognizes non-controlling interest. Non-controlling interests in the net assets are identified separately from the Company's deficiency. The non-controlling interest consists of the non-controlling interest as at the date of the original acquisition plus the non-controlling interest's share of changes in equity or deficiency since the date of acquisition.

b) Investment properties:

Investment properties are comprised of properties held to earn rental revenue or for capital appreciation or both. Investment properties are measured initially at cost including transaction costs. Transaction costs include transfer taxes, professional fees for legal services and initial leasing commissions to bring the property to the condition necessary for it to be capable of operating.

Investment properties include land and buildings and lease related intangible assets which include below and above market rents, value of in-place leases and prepaid lease origination costs. Investment properties are measured at cost less accumulated depreciation and accumulated impairment losses.

Depreciation of buildings is calculated using the straight-line method with reference to each property's cost, estimated useful life, components, and residual value.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

3. Material accounting policy information (continued):

b) Investment properties (continued):

The basis of depreciation and estimated useful lives of buildings, major components and lease related intangibles are as follows:

Asset	Basis	Rate
Buildings	Straight-line	35 - 45 years
Major components	Straight-line	5 - 15 years
Lease related intangibles	Straight-line	Weighted average term of the lease

Depreciation methods, useful lives and residual values are reviewed annually and adjusted as required.

Note 5 discloses the fair value of the investment properties. The following approaches either individually, or in combination, are used by management in their determination of the fair value of investment properties:

The Income Approach derives market value by estimating the future cash flows that will be generated by the property and then applying an appropriate capitalization rate or discount rate to those cash flows. This approach can utilize the direct capitalization method and/or the discounted cash flow analysis.
The Direct Comparison Approach involves comparing or contrasting the recent sale, listing or optioned prices of properties comparable to the subject and adjusting for any significant differences between them.

Management reviews independent appraisals when obtained for properties, to ensure the assumptions used by the appraisers are reasonable. The fair value amount determined by management and disclosed in note 5 reflects those assumptions used in the approaches above.

An investment property is derecognized when it has been disposed of or permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognized in the consolidated statement of income (loss) and comprehensive income (loss) in the period of retirement or disposal.

c) Cash and cash equivalents:

Cash and cash equivalents consist of cash on hand and in the bank and highly-liquid investments having terms of three months or less from the date of acquisition and that are readily convertible to known amounts of cash. Cash and cash equivalents exclude cash subject to restrictions. As at December 31, 2024 and December 31, 2023, there were no cash equivalents.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

3. Material accounting policy information (continued):

d) Revenue recognition:

The Company accounts for its leases as operating leases given that it has retained substantially all of the risk and benefits of ownership.

The Company earns revenue from tenants from various sources consisting of rent earned under lease agreements, property tax and operating cost recoveries. Revenue from lease components is recognized on a straight-line basis over the lease term and includes the recoveries of specified operating expenses. Revenue recognition commences when a tenant has the right to use the premises and is recognized pursuant to the terms of the lease agreement.

Revenue includes recoveries of specified operating expenses, in accordance with the terms of the lease agreements. The recoveries of operating expenses relate to services provided to customers and are recognized as revenue when the services are transferred to the customer at the transaction price.

e) Finance income (expenses):

Finance income consists of interest income on the bond receivable. Finance expense include interest on long-term debt, financing fees, amortization of deferred financing costs and accretion of convertible debentures.

Finance income is recognized in the period in which it is earned, while finance expenses are recognized in the period in which they are incurred.

f) Provisions:

Provisions are recognized in other liabilities when the Company has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are measured at management's best estimate of the expenditure required to settle the obligation at the end of the reporting period, and are discounted to present value where the effect is material, such as closure costs.

g) Convertible debentures:

Convertible debentures are separated into debt and equity components based on the residual method. The value of the debt component is calculated at the estimated fair value of the future interest and principal payments due under the terms of the convertible debentures, with the residual value assigned to the equity component.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

3. Material accounting policy information (continued):

g) Convertible debentures (continued):

Transaction costs directly related to the debt component reduce the carrying value of the convertible debentures and are amortized over the lives of the convertible debentures using the effective interest rate method. Transaction costs related to the equity component of convertible debentures are recognized in the value of the equity component, net of deferred income tax.

Subsequent to initial recognition, the liability component of convertible debentures is measured at amortized cost using the effective interest rate method and is accreted up to its face value. The equity component is not re-measured subsequent to initial recognition.

Modification is deemed to be substantial if the net present value of the cash flows under the modified terms, including any fees paid or recovered, is at least 10 percent different from the net present value of the remaining cash flows of the liability prior to the modification, both discounted at the original effective interest rate of the liability prior to the modification. A substantial modification of the terms of an existing financial liability is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.

The consideration paid, represented by the fair value of the modified convertible debentures, is allocated to the liability and equity components of the original convertible debentures at the date of extinguishment. The method used in allocating the consideration paid and the transaction costs to the separate components of the original debentures is consistent with that used in the original allocation to the separate components of the original convertible debentures of the proceeds received by the Company when the original convertible debentures were issued.

Once the allocation of the consideration is made, any resulting gain or loss is treated as follows:

The amount of gain or loss relating to the original liability component is recognized in the consolidated statements of income (loss) and comprehensive income (loss); and
The amount of consideration relating to the original equity component is recognized in equity. It comprises the amount transferred from convertible debentures equity reserve attributable to the extinguished convertible debentures, net of the amount of consideration relating to the equity component of convertible debentures upon their early extinguishment.

h) Share options and warrants:

The Company has a share option plan available for officers, employees, and consultants. The fair-value based method of accounting is applied to all share-based compensation. Compensation expense is recognized when share options are granted over the vesting periods. Awards of share options and warrants related to private placements or public offerings of shares are treated as share issue costs.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

3. Material accounting policy information (continued):

h) Share options and warrants (continued):

When share options and warrants are granted to employees, the fair value is estimated on the date of grant using the Black-Scholes option pricing model and is recorded as an expense over the applicable vesting period based on the number of awards expected to vest. Each tranche of an award is considered a separate award within its own vesting period and grant date fair value. On the exercise of share options, the consideration received and the grant date fair value of the option is credited to share capital.

When share options and warrants are granted to non-employees, the fair value of the goods or services received is recorded as an expense. When the value of goods or services received in exchange cannot be reliably estimated, the fair value is measured by use of a valuation model or the fair value of the shares granted.

i) Share capital:

For equity-settled share-based payment transactions, the entity shall measure the goods or services received, and the corresponding increase in equity, directly, at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If the entity cannot estimate reliably the fair value of the goods or services received, the entity shall measure their value, and the corresponding increase in equity, indirectly, by reference to the fair value of the equity instruments granted.

Transaction costs related to the issuance of the shares are recognized directly in shareholders' equity as a reduction of the proceeds received.

j) Income or loss per share:

Basic income or loss per share is calculated by dividing the income or loss by the weighted average number of common shares outstanding during the period. The Company computes dilutive effects of options, warrants and similar instruments. The dilutive effect on income per share is recognized by the use of proceeds that could be obtained upon exercise of options, warrants and similar instruments. It is assumed that the proceeds would be used to purchase common shares at the average market price during the period.

k) Foreign currency translation:

Foreign operations

The functional currency of the Company's subsidiaries is the United States dollar as it is the currency of the primary economic environment in which the subsidiaries operate. In determining the functional currency, consideration is given to the denomination of major cash flows of the entity. The functional currency of entities within the group has remained unchanged during the reporting period.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

3. Material accounting policy information (continued):

k) Foreign currency translation (continued):

Upon consolidation, assets and liabilities of the US subsidiaries are translated to Canadian dollars, the presentation currency of the Company, at the period end rate of exchange and the results of their operations translated at average rates of exchange for the period. The resulting translation adjustments are included in accumulated other comprehensive income in equity. Translation adjustments from monetary receivables and payables within the Company's subsidiaries for which settlement is neither planned nor likely to occur in the foreseeable future are included in the accumulated other comprehensive income in equity.

Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency of the respective group entity, using the exchange rates prevailing at the dates of the transactions (spot exchange rate).

Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at year-end exchange rates are recognized in profit or loss.

Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.

l) Income taxes:

Current income tax for each entity is based on the local taxable income at the local statutory tax rate enacted or substantively enacted at the consolidated statement of financial position date and includes adjustments to tax payable or recoverable in respect of previous periods.

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

Deferred income tax liabilities are recognized for all taxable temporary differences, except where the deferred income tax liability arises from the initial recognition of goodwill, or the initial recognition of an asset or liability in an acquisition that is not a business combination and, at the time of the acquisition, affects neither the accounting profit nor taxable profit or loss and in respect of taxable temporary differences associated with investment in subsidiaries, interest in joint ventures and associates, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

3. Material accounting policy information (continued):

I) Income taxes (continued):

Deferred income tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which the asset is realized or the liability is settled, based on tax rates and tax laws enacted or substantively enacted at the consolidated statement of financial position date.

Current and deferred income taxes relating to items recognized directly in equity are recognized in equity and not in the consolidated statement of income (loss) and comprehensive income (loss).

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax assets against current income tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same tax authority on either the same taxable entities or in different taxable entities, and where there is the intent to settle the balance on a net basis.

m) Financial instruments:

Recognition and derecognition

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

Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred.

A financial liability is derecognized when it is extinguished, discharged, cancelled or expires.

Classification and initial measurement of financial assets

Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15 Revenue from Contracts with Customers, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).

Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:

Amortized cost;
Fair value through profit or loss (FVTPL); and
Fair value through other comprehensive income (FVOCI).

In the periods presented, the Company does not have any financial assets categorized as FVTPL or FVOCI.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

3. Material accounting policy information (continued):

m) Financial instruments (continued):

The classification is determined by both:

The entity's business model for managing the financial asset; and
The contractual cash flow characteristics of the financial asset.

All income and expenses relating to financial assets that are recognized in profit or loss are presented within net finance costs, except for impairment of trade receivables which is presented within operating and leasing expenses.

Subsequent measurement of financial assets

Financial assets at amortized cost

Financial assets are measured at amortized cost if the assets meet the following conditions (and are not designated as FVTPL):

They are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and
The contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding

After initial recognition, these are measured at amortized cost using the effective interest method.

Discounting is omitted where the effect of discounting is not significant.

Classification and measurement of financial liabilities

Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Company designated a financial liability at fair value through profit or loss.

Subsequently, financial liabilities are measured at amortized cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognized in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments).

All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within finance costs or finance income.

Derivative instruments

Derivative instruments are initially recorded at fair value including those derivatives that are embedded in a financial instrument or other contract but are not closely related to the host financial instrument or contract, respectively. Subsequent to initial recognition, changes in the fair values of derivative instruments are recognized in net loss, except for derivatives that are designated as cash flow hedges.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

3. Material accounting policy information (continued):

m) Financial instruments (continued):

Transaction costs are expensed as incurred for financial instruments classified or designated at fair value through profit or loss.

The following is a summary of the classification adopted by the Company for each significant category of financial instrument:

Financial instruments	Classification	Measurement
Cash	Financial assets at amortized cost	Amortized cost
Amounts receivable	Financial assets at amortized cost	Amortized cost
Bond receivable	Financial assets at amortized cost	Amortized cost
Mortgage reserve fund	Financial assets at amortized cost	Amortized cost
Accounts payable and accrued liabilities	Financial liabilities at amortized cost	Amortized cost
Convertible debentures	Financial liabilities at amortized cost	Amortized cost
Derivative liability	Financial liabilities at fair value	Fair value
Mortgages payable	Financial liabilities at amortized cost	Amortized cost
Tenants’ security deposits	Financial liabilities at amortized cost	Amortized cost

n) Impairment of assets:

i) Financial assets:

The Company applies an expected loss model that assesses the risk a financial asset will default rather than whether a loss has been incurred. The Company applied the simplified approach to estimate expected credit losses which requires the loss allowance to be measured for lifetime expected credit losses. While the Company's financial assets are subject to the expected credit loss requirements, the identified loss was not significant.

ii) Non-financial assets:

Investment properties are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

For the purpose of assessing impairment, assets are grouped into cash generating units ("CGU's"), defined as the lowest levels for which there are separately identifiable cash inflows. An impairment loss is recognized within impairment of assets for the amount by which the carrying amount of the individual asset or CGU exceeds its recoverable amount. The recoverable amount is the higher of the fair value less costs to sell and value-in-use. In determining fair value less costs to sell, recent market transactions are taken into account, if available. In the absence of such transactions, an appropriate valuation model is used. Value-in-use is assessed using the present value of the expected future cash flows of the relevant asset or CGU.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

3. Material accounting policy information (continued):

n) Impairment of assets (continued):

ii) Non-financial assets (continued):

Impairments are reversed to the extent that events or circumstances give rise to changes in the estimate of recoverable amount since the period the impairment was recorded. Impairment reversals are recognized within impairment of assets.

o) Fair values:

The fair value of a financial instrument is the amount of consideration that could be agreed upon in an arm's length transaction between knowledgeable, willing parties who are under no obligation to act. In certain circumstances, however, the initial fair value may be based on other observable current market transactions in the same instrument, without modification or on a valuation technique using market-based inputs.

Fair value measurements recognized in the consolidated statement of financial position are categorized using a fair value hierarchy that reflects the significance of inputs used in determining the fair values:

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

Each type of fair value is categorized based on the lowest level input that is significant to the fair value measurement in its entirety.

p) Recent accounting pronouncements and adopted policies:

Issued but not yet effective, in April 2024, the IASB issued a new IFRS accounting standard to improve the reporting of financial performance. IFRS 18 Presentation and Disclosure in Financial Statements replaces IAS 1 Presentation of Financial Statements. The standard will become effective January 1, 2027, with early adoption permitted. The Company is in the process of assessing the impact of this new standard on the Company's consolidated financial statements.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

4. Critical accounting judgments, estimates and assumptions:

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts in the consolidated financial statements. Management bases its judgments, estimates and assumptions on factors it believes to be reasonable in the circumstances, but which may be inherently uncertain and unpredictable. The uncertainty of these judgments, assumptions and estimates could result in actual results that differ from the estimates and outcomes that require a material adjustment to the carrying amount of assets and liabilities in the future.

a) Judgments:

The following are critical accounting judgments that have been made in applying the Company's accounting policies:

i) Investment properties:

The Company's accounting policy relating to investment properties is described in note 3(b). In applying this policy, judgment is applied to determine the significant components of each property, including the useful lives over which the componentized assets are to be amortized.

ii) Modification versus extinguishment of financial liability:

Judgment is required in applying IFRS 9 Financial Instruments to determine whether the amended terms of the loan agreements are a substantial modification of an existing financial liability and whether it should be accounted for as an extinguishment of the original financial liability.

iii) Assessment of control:

Judgment is required in determining whether the Company has control of its entities by assessing the definition of control in accordance with IFRS 10 Consolidated Financial Statements. There is judgment required to determine whether the Company has power; whether the Company has exposure or rights to variable returns; and whether the Company has the ability to use its power to affect the amount of its returns.

iv) Functional currency:

The determination of the functional currency for the Company and its subsidiaries was based on management's judgment of the underlying transactions, events and conditions relevant to each entity.

v) Impairment of long-lived assets:

Assets are evaluated at each reporting date to determine whether there are any indications of impairment. The Company considers both internal and external sources of information when making the assessment of whether there are indications of impairment for the Company's long-lived assets.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

4. Critical accounting judgments, estimates and assumptions (continued):

a) Judgments (continued):

vi) Convertible debentures:

In accordance with the substance of the contractual arrangement, convertible debentures are compound financial instruments that are accounted for separately by their components: a financial liability and an equity instrument.

The identification of convertible debenture components is based on interpretations of the substance of the contractual arrangement and therefore requires judgement from management. The separation of the components affects the initial recognition of the convertible debenture at issuance and the subsequent recognition of interest on the liability component. The determination of the fair value of the liability is also based on a number of assumptions, including contractual future cash flows, discount factors and the presence of any derivative financial instruments.

vii) Amounts receivable and bond receivable:

The determination of when receivables are impaired requires significant judgement as to their collectability.

b) Estimates:

The significant areas of estimation include the following:

i) Fair value of the investment properties:

The fair value of investment properties disclosed in note 5 is determined by management.

The determination of the fair value of investment property requires the use of estimates such as future cash flows from assets (i.e., tenant profiles, future revenue streams and overall repair and condition of the property), discount rates applicable to those assets' cash flows and capitalization rates. These estimates are based on market conditions existing at the reporting date.

ii) Investment properties – useful life:

Depreciation is recorded on the straight-line basis based upon management's estimate of the useful life and residual value. The estimates are reviewed at least annually and are updated if expectations change as a result of lease term. A change in the useful life or residual value will impact the reported carrying value of the investment properties resulting in a change in related depreciation expense.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

4. Critical accounting judgments, estimates and assumptions (continued):

b) Estimates (continued):

iii) Convertible debentures:

For convertible debentures containing an equity component, the Company assesses the value of the debt component which is calculated at the estimated fair value of the future interest and principal payments due under the terms of the convertible debentures, using an estimated discount rate based on Management's estimated cost of capital.

For convertible debentures which do not contain an equity component, the Company is required to estimate the fair value of the embedded derivative liability which is calculated based on using a model which considers inputs requiring significant estimates.

i) Recoverability of accounts receivable and allowance for doubtful account:

The Company monitors its exposure for credit losses on its tenants' receivable balances and the credit-worthiness of them on an ongoing basis and records related allowances for doubtful accounts. Allowances are estimated based upon specific tenants, where a risk of default has been identified, and include a provision for specific defaults based upon historical experience and aging of accounts. As of December 31, 2024 and December 31, 2023, the Company recorded an allowance for doubtful accounts of $nil (2023 - $nil). If circumstances related to specific tenants change, estimates of the recoverability of receivables could also change. The Company also assesses the expected credit loss of non-trade financial assets, such as the bond receivable which is secured by interest in T-Westbrook Center LLC and East Winds Resort Ltd. In St Lucia (Note 6).

5. Investment properties:

	2024	2023
Balance, beginning of year	$ 35,454,191	$ 37,177,341
Capital additions	28,528	377,111
Depreciation	(1,301,556)	(1,346,765)
Foreign currency translation	3,251,096	(753,496)
Balance, end of the year	$ 37,432,259	$ 35,454,191

a) On March 30, 2016, the Company completed the purchase of a 100% interest in Metro Gateway Shopping Center, a retail real estate property located in Phoenix, Arizona.

The acquisition cost of $11,803,610 (US$9,100,000) before standard closing costs and adjustments was financed with a $7,886,368 (US$6,080,000) mortgage with the remainder financed with part of the proceeds from a $4,500,000 issuance of convertible unsecured subordinated debentures to a related party (note 8). The seller was at arm's length to the Company.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

5. Investment properties (continued):

On February 23, 2023, 74.99% ownership interest in the property was conveyed to a third party as a result of conversion of the outstanding note (note 8). The Company retains control over the asset.

b) On August 31, 2016, the Company completed the purchase of a 100% interest in 116th Street Centre, a retail real estate property located in Carmel, Indiana.

The acquisition cost of $12,894,330 (US$9,825,000) before standard closing costs and adjustments was financed in part through a first mortgage of $9,154,974 (US$6,975,750) with the remainder provided by $3,301,358 (US$2,515,512) of proceeds from the sale of the Company's interests in Swanway and San Tan joint ventures, and the bridging loans provided – 50% by Titanstar Finance Inc., a Company of which the Chairman of the Board of Directors was a principal, and 50% by a private company owned by a director of the Company. The seller was at arm's length to the Company. The bridge loans were settled in January 2018.

On February 23, 2023, 74.99% ownership interest in the property was conveyed to a third party as a result of conversion of the outstanding note (note 9). The Company retains control over the asset.

c) On September 15, 2015, the Company acquired a 49% interest in Martin Downs NSC, LLC, which holds Martin Downs Town Center ("MDTC"), a retail real shopping center located in Palm Springs, Florida, for total consideration of $3,146,172 (US$2,369,075), paid by issuance of common shares. The Company's interest is held through its wholly owned subsidiary, Realia US, Inc. The Company accounted for its interest under the equity method.

On August 31, 2018, the Company acquired an additional 9% ownership interest for $1,304,750 (US$1,000,000), and on October 17, 2018, the Company acquired an additional 41% interest. In consideration for the acquisition cost of $3,710,875, the Company issued 38,459,269 common shares. As of October 17, 2018, the Company held 99% in Martin Downs NSC, LLC and therefore, was deemed to have acquired control and therefore, began to consolidate Martin Downs NSC, LLC. It was determined, using the optimal concentration test permitted in the amendments of IFRS 3 Business Combination, that the transaction was not a business acquisition. Therefore, the transaction was accounted for at cost, as an asset acquisition, without remeasurement of the previously held equity interest in Martin Downs NSC, LLC.

On March 19, 2021, the Company acquired the remaining 1% for a total consideration of $47,108 (US$37,500).

On February 23, 2023, 74.99% ownership interest in the property was conveyed to a third party as a result of conversion of the outstanding note (note 8). The Company retains control over the asset.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

5. Investment properties (continued):

Management's estimated fair value of the Company's investment properties at December 31, 2024 was $59,239,576 (US$41,198,676) and at December 31, 2023 was $52,827,779 (US$39,942,370).

The valuation technique of the Company's investment property portfolio utilizes either individually or a combination of the Direct Comparison Approach or the Income Approach, which uses the "overall capitalization rate" method. This method requires that rental income from current leases and key assumptions about rental income, vacancies and inflation rates among other factors are used to determine a one-year income forecast for each individual property, and also considers any capital expenditures anticipated within the following year. A capitalization rate is also determined for each property based on market information related to the external sale of similar buildings within a similar geographic location. These factors were used to determine the fair value of investment properties at the reporting date.

The key valuation assumptions for the Company's investment properties are as follows:

	2024	2023
Capitalization rates – range	6.75% - 7.50%	6.75% - 7.50%
Capitalization rate – weighted average	7.06%	7.06%

If the capitalization rates were increased/decreased by 0.25%, the investment properties balance would increase/decrease by approximately US$1,421,000/-US$1,526,000 (2023 - US$1,467,000/-US$1,366,000).

6. Bond receivable:

On August 24, 2022, the Company acquired from Hoche Partners Private Equity Investors, a company with two common directors, a short-term, senior bond of $9,318,375 (US$6,875,000) (the "PAI" bond). As at December 31, 2024, the value of the bond was $9,885,563. The bond had a maturity date of June 30, 2023, accrues interest of 8.25% which will be due and payable on maturity date and is secured by interest in certain real estate properties. Interest income of $1,859,027 was accrued as at December 31, 2024 (December 31, 2023 - $984,742) and recorded in amounts receivable. The maturity date of the bond receivable was extended to December 31, 2025. Subsequent to year-end, the Company exercised its option to convert the bond into 50% interest in the real estate properties (note 19).

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

7. Mortgages payable:

	2024	2023
Mortgage payable bears a fixed interest rate of 4.78% maturing September 2026. The loan is being amortized over 30 years and is payable in monthly payments of US$36,515, capital and interest	$ 8,785,190	$ 8,262,746
Mortgage payable bears a fixed interest rate of 4.42% maturing June 6, 2031. The loan is being amortized over 30 years and is payable in monthly payments of US$75,793, capital and interest (a)	20,450,204	19,159,464
	29,235,394	27,422,210
Less: deferred financing costs	(699,566)	(749,723)
Less: current portion	(508,788)	(439,156)
	$ 28,027,040	$ 26,233,331

a) On May 28, 2021, the Company refinanced the mortgages on Metro Gateway and Martin Downs Town Center. As part of the refinance, the Company obtained a cross-collateralized 10-year mortgage secured by the ownership interest in Martin Downs Town Center and Metro Gateway.

The mortgages payable are recorded at amortized cost and bear a weighted average effective interest rate of 4.63% as at December 31, 2024 (at December 31, 2023 – 4.63%). The mortgages payable are secured by the Company's investment properties.

The mortgage lenders require monthly reserves to be collected for tenant improvements, leasing commissions, capital improvements, taxes and insurance. As at December 31, 2024, the collective mortgage reserve balance was $1,755,271 (at December 31, 2023 - $1,449,046)

Principal repayments, as of December 31, 2024, based on scheduled repayments to be made on the mortgages payable over the next five years and thereafter are as follows:

2025	$ 624,279
2026	9,008,762
2027	452,819
2028	473,244
Thereafter	18,676,290
	$ 29,235,394

For the year ended December 31, 2024, the Company incurred $1,293,981 (December 31, 2023 - $1,291,391) of interest on the mortgages payable, which is included in finance costs (note 13).

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

8. Convertible debentures:

	2024	2023
Liability, beginning of year	$ 1,746,490	$ 17,477,157
Conversion of debt	-	(15,993,721)
Accretion	207,205	262,496
Foreign exchange	-	558
Liability, end of year	1,953,695	1,746,490
Transaction costs, beginning of year	(27,980)	(43,968)
Amortization of transaction costs	15,988	15,988
Transaction costs, end of year	(11,992)	(27,980)
Convertible debentures	$ 1,941,703	$ 1,718,510
Less: current portion	(1,941,703)	-
	$ -	$ 1,718,510

a) The Company entered into a trust indenture on July 31, 2013 with BNY Trust Company of Canada under which the Company could issue convertible debentures to a maximum principal amount of $11,500,000.

The BNY convertible debentures are redeemable by lender, unsecured, subordinated to senior indebtedness and were set to mature on September 30, 2018.

On September 28, 2018, the Debenture holders approved an Extraordinary Resolution authorizing (i) the maturity extension of the Debentures from September 30, 2018 to September 30, 2020; (ii) a reduction in the conversion price at which the Debenture may be converted into common shares of the Corporation from $0.08125 to $0.06 per common share; and (iii) an increase of the interest rate payable on the Debentures from 8.5% per annum to 9.5% per annum, which took effect as of October 1, 2018.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

8. Convertible debentures (continued):

a) (continued):

In June 2020, the Company began negotiations with the Debenture holders on a modification and extension. On September 30, 2020, the convertible debentures matured and negotiations with the Debenture holders remained ongoing. On February 19, 2021, the Company entered into a second amendment to the Convertible Debentures. The debenture was amended as follows:

Extended through September 30, 2025;
Repayment of $1,589,700 of outstanding principal balance;
Decreasing the interest rate payable on the Debentures from 9.5% per annum to 4.75% per annum, retroactive to October 1, 2020; and
The Company is to repay 50% of the principal amount outstanding at maturity in cash, and the remaining 50% of the principal amount outstanding at maturity by way of common shares at a price of $0.10 per share.

The second amendment to the Convertible Debentures was considered an extinguishment of the existing convertible debentures and new convertible debentures were recognized as the modified terms were substantially different from the original terms. The difference between the fair value and carrying value on the extinguishment date was determined to be $1,487,079 and a derivative liability of $204,181 was recorded.

The Company used a discounted cash flow model with an estimated fair value interest rate of 12% to estimate the fair value of the liability.

As a condition of the BNY convertible debentures, the Company is required to maintain a debt service coverage ratio. As at December 31, 2024, the Company was in compliance with the covenant.

On October 1, 2025, the Convertible Debentures matured, and the Company paid off 50% of the principal balance of $1,476,150. The subsequent 50% was repaid via issuances of 24,602,500 shares.

b) On August 19, 2022, the Company entered into two convertible notes with an arm's length party, Global IH, Inc. for a combined principal amount of $15,993,721 (US$11,800,000) ("Global IH Notes"). The Global IH Notes bore an interest rate of 8.5% per annum, of which 3.0% was payable monthly in arrears and 5.5% shall accrue and be payable on the maturity date or conversion date.

At February 23, 2023, the Global IH Notes were converted into 74.99% ownership interest in Metro Gateway Shopping Center, 116th Street Centre and Martin Downs Town Center upon obtaining the mortgage loans servicers' approval.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

8. Convertible debentures (continued):

b) (continued):

The Company used a discounted cash flow model with an estimated fair value interest rate of 12% to estimate the fair value of the liability. A reconciliation of the face value of the convertible debentures is as follows:

	2024	2023
Principal, beginning of year	$ 2,952,300	$ 18,946,021
New convertible debt	-	-
Conversion of debt	-	(15,993,721)
Principal, end of year	$ 2,952,300	$ 2,952,300

For the year ended December 31, 2024, the Company incurred and paid $140,234 (December 31, 2023 – incurred and paid $331,790) of interest on the convertible debentures, which is included in finance costs (note 13). As at December 31, 2024, the Company revalued the derivative liability to $nil (December 31, 2023 - $148,516) and recorded a gain of $148,516 (December 31, 2023 – loss of $48,950).

9. Related party balances and transactions:

Other related party transactions and balances not already disclosed in the consolidated financial statements include:

a) Key management personnel compensation:

	2024	2023
CFO:
Consulting fees	$ 99,996	$ 99,996
Corporate Secretary:
Consulting fees	39,996	39,996
	$ 139,992	$ 139,992

Key management personnel include the members of the Board of Directors and executive officers of the Company. As at December 31, 2024, a receivable of $nil is owing from a related party (December 31, 2023 - US$184,755 (CA$244,357)).

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

9. Related party balances and transactions (continued):

e) Nominee:

On May 7, 2021, Realia Hospitality Inc., a wholly owned subsidiary of the Company, entered into a Nominee Ownership and Agency Agreement with Inovalis S.A., a related party whose CEO is on the Board of Director's of the Company, and Mirabeau Overseas Inc., an arm's length party, to act on their behalf in the acquisition of a Canadian partnership owning a hotel resort in St. Lucia. As part of the Nominee Agreement, Realia Hospitality Inc. is providing asset management services and received at December 31, 2024 $66,192 (US$48,333) (December 31, 2023 $65,033 (US$48,333)) in asset management fees. As at December 31, 2024, the Company holds $182,644 (December 31, 2023 - holds $194,759) of cash in care of the Canadian partnership. This cash is restricted, cannot be used by the Company, and is not recorded by the Company as at December 31, 2024.

f) Global IH Fund Management Fees:

On February 23, 2023, in connection with the Convertible Notes conversions, Realia Properties US entered into an agreement with Inovalis SA delineating asset management duties of the Company's Investment Properties. Per this agreement, of the 2.08% in annual management fees charged to the Investment Properties, Realia Properties US would be entitled to 0.62% in Asset Management Fees and Inovalis SA entitled to 1.46% in Fund Management Fees. As at December 31, 2024, the Company paid to Inovalis, from Investment Properties distributions, $649,828 (US$474,500) (December 31, 2023- $542,674 (US$403,325)).

As at December 31, 2024 a receivable of $nil (US$nil) is owing from Inovalis SA (December 31, 2023 – $244,357 (US$184,755)).

10. Share capital:

At December 31, 2024 and December 31, 2023, the authorized share capital comprised an unlimited number of common shares and non-voting, perpetual, redeemable preferred shares. No preferred shares have been issued to date. There were no share capital transactions for the year ended December 31, 2024 and December 31, 2023.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

11. Share options:

The Company's 2008 stock option plan was approved by the shareholders at the annual general meeting on December 2, 2009. The share option plan provides that the aggregate number of common shares reserved for issuance under the share option plan, together with any share options outstanding, will not exceed 10% of the Company's issued and outstanding common shares at any time. On July 12, 2019, the board of directors of the Company adopted a modification to the plan to adopt a 2% fixed stock option plan of up to a maximum of 5,104,422 options available for issuance. The exercise price of an option will be determined by the board of directors but will, in any event, not be less than the discounted market price of the Company's common shares at the time of the grant of the option.

There were no share option transactions during the year ended December 31, 2024 and year ended December 31, 2023.

As at December 31, 2024, there were 360,000 (December 31, 2023 – 360,000) options outstanding and exercisable with a weighted average remaining of 0.6 years and exercise price of $0.06 (December 31, 2023 - 1.58 years and $0.06).

Total share-based compensation expense recognized for the year was $Nil (2023 - $Nil). All outstanding share options of the Company have expired on July 28, 2025.

12. General and administrative expenses:

	2024	2023
Insurance	$ 30,705	$ 23,999
Bank charges	3,485	3,575
Filing fees	23,832	71,529
Office costs	29,586	17,430
Professional and management fees	473,881	378,926
Travel	9,285	-
	$ 570,774	$ 495,459

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

13. Finance costs:

	2024	2023
Interest on mortgages, notes payable and convertible debenture $	$ 1,471,705	$ 1,623,722
Interest income on bond receivable	(795,509)	(721,825)
Interest income	-	-
Financing fees	68,901	11,027
Amortization of transaction costs (Note 8)	15,988	15,988
Accretion (note 8)	207,205	262,496
	$ 968,290	$ 1,191,408

14. Capital management:

The Company's objectives when managing capital of $45,420,979 (2023 - $41,750,153), which is share capital, contributed surplus, equity component of convertible debentures, accumulated other comprehensive income, deficit, notes payable, mortgages payable, due to related parties, convertible debentures and long-term debt, are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

The Company sets the amount of capital in proportion to risk. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the return capital to shareholders, issue new common shares, or sell assets to reduce debt.

The Company monitors capital from time to time using a variety of measures. Monitoring procedures are typically performed as a part of the overall management of the Company's operations. The Company's strategy during the year, which was unchanged from the prior year, was to maintain its ability to secure access to financing at a reasonable cost. The requirements and terms of sources of capital cannot be predicted and change in ways the Company cannot predict. There have been no changes to the Company's approach to capital management during the year ended December 31, 2024 and year ended December 31, 2023. The Company is not subject to externally imposed capital requirements. As at December 31, 2024, the Company was in compliance with its financial covenant (note 8).

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

15. Risk management and fair values:

The main risks that arise from the Company's financial statements are liquidity risk, interest rate risk, credit risk and foreign exchange risk. The Company's approach to managing these risks is summarized below.

Management's risk management policies are typically performed as a part of the overall management of the Company's operations. Management is aware of risks related to these objectives through direct personal involvement with employees and outside parties. In the normal course of its business, the Company is exposed to a number of risks that can affect its operating performance. Management's close involvement in operations helps identify risks and variations from expectations. The Company has not designated transactions as hedging transactions to manage risk. As a part of the overall operation of the Company, management considers the avoidance of undue concentrations of risk.

These risks and the actions taken to manage them include the following:

a) Liquidity risk:

Liquidity risk is the risk that the Company cannot meet its financial obligations associated with financial liabilities in full.

The Company's financial liabilities include accounts payable and accrued liabilities, convertible debentures, mortgages payable, and tenants' security deposit.

The following table provides the future non-discounted scheduled payments of financial liabilities, including estimated interest payments:

Years ended December 31,	2025	2026	2027	2028	2029 and thereafter
Mortgages payable	$ 1,937,860	$ 10,176,099	$ 1,307,800	$ 1,307,800	$ 20,826,084
Convertible debentures payable	3,057,476	-	-	-	-
Accounts payable and accrued liabilities	389,027	-	-	-	-
Tenants' security deposit	4,889	39,349	62,656	35,064	114,233
Total	$ 5,389,252	$ 10,215,448	$ 1,370,456	$ 1,342,864	$ 20,940,317

b) Interest rate risk:

Interest rate risk is the risk that changes in market interest rates may have an effect on the cash flows associated with financial instruments, known as interest rate cash flow risk, or on the fair value of other financial instruments, known as interest rate price risk.

As at December 31, 2024, all mortgages and convertible debentures are on a fixed interest rate. The Company strives towards fixed rate debt when possible.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

15. Risk management and fair values (continued):

c) Credit risk:

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company is exposed to credit risk on cash, bond receivable and accounts receivable. Credit risk arises from the possibility that debtors or tenants may be unable to fulfill their commitments. For a financial asset, this is typically the gross carrying amount, net of any amounts offset and any impairment losses.

The Company manages credit risk in respect of cash by holding it at major financial institutions with strong investment-grade ratings by a recognized agency. The Company has credit policies to address credit risk on accounts receivable (tenants), which may include the analysis of the financial position of the debtor or tenant and review of credit limits. The Company also may review credit history before establishing credit and review credit performance. In the case of a tenant, management carefully watches and monitors rent payments which are due each month. An allowance for expected credit losses or other impairment provisions are established based upon factors surrounding credit risk, historical trends and other information. Management assesses the credit worthiness of entities it advances loans prior to and on periodic basis. If it is determined that the counterparty is undergoing financial difficulty, management estimates a recoverable amount and books an allowance for expected credit losses.

A financial asset is past due when a debtor has failed to make a payment when contractually due. The Company has no financial assets that are past due and does not have an allowance for expected credit losses.

d) Foreign exchange risk:

Foreign exchange risk is the risk that changes in foreign exchange rates may have an effect on future cash flows associated with financial instruments. The Company is exposed to foreign exchange risk on transactions denominated in currencies other than the functional currency of each of the group's entities. Changes in the applicable exchange rates may result in a decrease or increase in foreign exchange income or loss. The Company may enter into forward exchange contracts to manage part of the foreign exchange risk exposures, but no forward contracts exist as at December 31, 2024 and December 31, 2023.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

15. Risk management and fair values (continued):

d) Foreign exchange risk (continued):

As at December 31, 2024 and December 31, 2023, the Company is exposed to currency risk for its US dollar equivalent of financial assets and liabilities denominated in currencies other than Canadian dollars as follows:

	2024	2023
Cash	$ 1,133,025	$ 588,464
Accounts receivable	-	244,357
Bond receivable	9,885,563	9,092,875
Accounts payable	(132,083)	(65,718)
Total	$ 10,886,505	$ 9,859,978

If the Canadian dollar had strengthened or weakened 5% against the US dollar with all other variables held constant, the Company would have additional income or loss from foreign exchange included in net income and equity for the year ended December 31, 2024 of approximately $544,000 (December 31, 2023 - $493,000).

e) Fair values:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Assets and liabilities measured at fair value in the consolidated statement of financial position or for which fair value disclosure is required in the notes to the consolidated financial statements are classified based on a three-level hierarchy as detailed in note 3(m).

For assets and liabilities that are recognized at fair value in the consolidated financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

	December 31, 2024		December 31, 2023
	Carrying value	Fair value	Carrying value	Fair value
Investment properties	$37,432,259	$59,239,576	$35,454,191	$52,827,779
Mortgages payable	$28,535,828	$28,535,828	$27,422,210	$27,422,210
Convertible debt	$1,941,703	$1,941,703	$1,718,510	$1,718,510

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

15. Risk management and fair values (continued):

e) Fair values (continued):

The valuation techniques and inputs for the Company's financial instruments are as follows:

i) Short term assets and liabilities

The carrying values of financial assets and financial liabilities not measured at fair value, such as cash, accounts receivable, bond receivable, accounts payable and accrued liabilities approximate their fair value due to the relatively short years to maturity of these items or because they are receivable or payable on demand.

ii) Mortgages payable and convertible debentures

The fair values of the mortgages payable and convertible debentures have been calculated based on discounted future cash flows using discount rates that reflect current market conditions for instruments having similar terms and conditions and therefore are classified as Level 2 in the fair value hierarchy.

iii) Investment properties

The fair value of the investment properties is determined by management, using recognized valuation techniques supported, in certain instances, by independent real estate valuation experts. Investment properties are classified as Level 3 investments.

There were no transfers between Level 1, Level 2 and Level 3 during the year ended December 31, 2024 and December 31, 2023.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

16. Income taxes:

A reconciliation between the statutory Canadian income tax rate and the actual effective rate is as follows:

	2024	2023
Net income (loss) before income taxes	$ 516,933	$ (117,055)
Basic statutory tax rate	27%	27%
Expected income taxes (recovery)	139,572	(31,605)
Adjustments resulting from:
Items non-deductible for income tax purposes	-	50,457
Change in deferred tax asset not recognized	(1,821,325)	1,225,477
Prior year adjustments and other	326,159	(1,396,552)
Tax rate differences outside Canada	1,296,656	196,987
Total income tax expense (recovery)	$ (58,938)	$ 44,764

The significant components of the Company's deferred income tax assets (liabilities) are as follows:

	2024	2023
Convertible debentures	$ (323,987)	$ (350,705)
Non-capital losses	323,987	890,149
Investment Properties	-	(539,444)
Net Deferred income tax assets (liabilities)	$ -	$ -

Unrecognized deferred tax assets:

	2024	2023
Non-capital losses carryforwards	$ 8,670,737	$ 5,105,148
Investment Properties	-	-
	$ 8,670,737	$ 5,105,148

As at December 31, 2024, the Company has non-capital losses of approximately $8,670,737 (2023 - $5,105,148) that may be applied against future income for income tax purposes. The future benefits from these tax losses have not been recorded in these consolidated financial statements due to uncertainty associated with their recovery.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

17. Earnings per share:

The calculation of basic and diluted earnings (loss) per share for the relevant year is based on the following:

	December 31, 2024	December 31, 2023
Net income (loss) for the year attributed to Shareholders of Realia	$ 361,878	$ (174,376)
Basic weighted average number of common shares outstanding	255,221,137	255,221,137
Effect on dilutive securities:
Options	-	-
Diluted weighted average number of common shares outstanding	255,221,137	255,221,137
Basic income (loss) per share	$ 0.00	$ (0.00)
Diluted income (loss) per share	$ 0.00	$ (0.00)

18. Supplemental cash flow information:

Changes in operating assets and liabilities are based on the following:

	December 31, 2024	December 31, 2023
Accounts receivable	$ 111,036	$ (270,186)
Prepaid expenses	61,012	(81,595)
Accounts payable and accrued liabilities	(128,045)	(495,958)
Change in operating assets and liabilities	$ 44,003	$ (847,739)

Non-cash transactions:

$nil of additions to investment properties (2023 - $119,203) are included in accounts payable and accrued liabilities.

19. Subsequent events:

On December 31, 2024, the Company exercised its option to convert its interest in the PAI bonds (note 6) into a 50% ownership interest in RLP Hospitality East Winds, Inc., secured by East Winds Resort., a resort in St. Lucia. The Company will be seeking shareholder and TSX-V approval over the transaction. If received, the transfer will be effectuated. As of the date of these consolidated financial statements, the approval has not been received.

On April 23, 2025, the Company sold 116th Street Center in an arm's length transaction for USD $12,050,000.

REALIA PROPERTIES INC.

Notes to Consolidated Financial Statements (Expressed in Canadian dollars)

Years ended December 31, 2024 and 2023

19. Subsequent events (continued):

On October 1, 2025, the Convertible Debentures matured, and the Company paid off 50% of the principal balance of $1,476,150. The subsequent 50% was repaid via issuances of 24,602,500 shares.

AI assistant

Realia Properties Inc. — Audit Report / Information 2024

46382_rns_2025-11-28_0f86678f-0c76-4f66-81cf-6ab391cd9306.pdf

REALIA PROPERTIES INC.

INDEPENDENT AUDITOR'S REPORT

Opinion

Basis for Opinion

Material Uncertainty Related to Going Concern

Key Audit Matters

Assessment of the recoverability of bond receivable

Other Information

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

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

REALIA PROPERTIES INC.

REALIA PROPERTIES INC.

REALIA PROPERTIES INC.

REALIA PROPERTIES INC.

2. Basis of presentation and statement of compliance (continued):

3. Material accounting policy information:

3. Material accounting policy information (continued):

3. Material accounting policy information (continued):

3. Material accounting policy information (continued):

g) Convertible debentures (continued):

h) Share options and warrants:

3. Material accounting policy information (continued):

3. Material accounting policy information (continued):

Foreign currency transactions and balances

3. Material accounting policy information (continued):

I) Income taxes (continued):

m) Financial instruments:

Recognition and derecognition

Classification and initial measurement of financial assets

3. Material accounting policy information (continued):

Subsequent measurement of financial assets

Financial assets at amortized cost

Classification and measurement of financial liabilities

Derivative instruments

3. Material accounting policy information (continued):

m) Financial instruments (continued):

n) Impairment of assets:

i) Financial assets:

ii) Non-financial assets:

3. Material accounting policy information (continued):

n) Impairment of assets (continued):

ii) Non-financial assets (continued):

o) Fair values:

p) Recent accounting pronouncements and adopted policies:

4. Critical accounting judgments, estimates and assumptions:

a) Judgments:

i) Investment properties:

ii) Modification versus extinguishment of financial liability:

iii) Assessment of control:

iv) Functional currency:

v) Impairment of long-lived assets:

4. Critical accounting judgments, estimates and assumptions (continued):

4. Critical accounting judgments, estimates and assumptions (continued):

5. Investment properties:

5. Investment properties (continued):

5. Investment properties (continued):

6. Bond receivable:

7. Mortgages payable:

8. Convertible debentures:

8. Convertible debentures (continued):

8. Convertible debentures (continued):

9. Related party balances and transactions:

9. Related party balances and transactions (continued):

10. Share capital:

11. Share options:

12. General and administrative expenses:

13. Finance costs:

14. Capital management:

15. Risk management and fair values:

15. Risk management and fair values (continued):

15. Risk management and fair values (continued):

15. Risk management and fair values (continued):

16. Income taxes:

17. Earnings per share:

18. Supplemental cash flow information:

19. Subsequent events:

19. Subsequent events (continued):

Realia Properties Inc. Audit Report / Information 2024