Tenet Fintech : Consolidated Financial Statements (audited) 2023 and 2022

Tenet Fintech Group Inc.

Consolidated Financial Statements

For the years ended

December 31, 2023, and 2022

Independent Auditor's Report	2-6
Financial Statements
Consolidated Statements of Comprehensive Profit and Loss	7
Consolidated Statements of Changes in Equity	8
Consolidated Statements of Cash Flows	9
Consolidated Statements of Financial Position	10
Notes to Consolidated Financial Statements	11-55

Independent Auditor's Report

To the Shareholders of

Tenet Fintech Group Inc.

Opinion

Raymond Chabot

Grant Thornton LLP

Suite 2000

National Bank Tower

600 De La Gauchetière Street West

Montréal, Quebec

H3B 4L8

1. 514-878-2691

We have audited the consolidated financial statements of Tenet Fintech Group Inc. (hereafter "the Company"), which comprise the consolidated statements of financial position as at December 31, 2023 and 2022, and the consolidated statements of comprehensive profit and loss, the consolidated statements of changes in equity and the consolidated statements of cash flows for the years then ended, and notes to consolidated financial statements, including material accounting policy information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2023 and 2022, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (hereafter "IFRS Accounting Standards").

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 is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

We draw attention to Note 2 to the consolidated financial statements, which indicates the existence of a material uncertainty that may cast significant doubt about 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

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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 of our report, we have determined that the matter described below are the key audit matters to be communicated in our auditor's report.

Impairment assessment of goodwill and long-lived assets

As described in Note 4 to the consolidated financial statements, cash-generating units (CGUs) to which goodwill has been allocated are tested for impairment at least annually. All other individual assets or CGUs are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We identified the Company's impairment assessment of goodwill and long-lived assets as a key audit matter.

Why the matter was determined to be a key audit matter

The impairment assessment of goodwill and long-lived assets was significant to our audit given that management's assessment process is based on assumptions, specifically profit margins, growth rates and discount rates, which are affected by the anticipated market or economic conditions, giving rise to high estimation uncertainty. In addition, the balance of intangible assets, being $14,688,483 as at December 31, 2023, is material to the consolidated financial statements.

The Company's impairment testing, which resulted in significant impairment expenses on goodwill and intangible assets of $26,609,797 and $14,842,393, respectively, is disclosed in Note 12.

How the matter was addressed in the audit

Our audit procedures related to the Company's assessment of goodwill and long- lived assets included, among others:

• We evaluated the reasonableness of the Company's cash flows by comparing projections to:
• • historical results;
  • long-termeconomic growth forecasts;
  • current business plans;
• We used our valuation experts to assist us in evaluating the assumptions, methodologies and data used by the Company, in particular for growth rates, profit margins and discount rates;
• We tested the completeness and accuracy of the underlying data used in the Company's valuation model;
• We performed a sensitivity analysis on significant management assumptions used in the valuation model. The Company's assumptions are detailed in Note 12 to the consolidated financial statements.

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Information other than the consolidated financial statements and the auditor's report thereon

Management is responsible for the other information. The other information comprises the information included in Management's Discussion and Analysis, other than the consolidated financial statements and our auditor's report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the 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 on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. 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.

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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 group 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

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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 period and are, therefore, the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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

Montréal

April 29, 2024

1 CPA auditor, public accountancy permit nº A120795

TENET FINTECH GROUP INC.

Consolidated Statements of Comprehensive Profit and Loss

For the years ended December 31, 2023, and 2022

(In Canadian dollars, except weighted average number of outstanding shares)

		December 31
	Note	2023	2022
Revenues		42,086,645	109,878,515
Expenses
Cost of service		28,571,434	82,691,068
Software delivery services		2,848,619	3,370,090
Salaries and fringe benefits		11,669,708	12,024,540
Service fees		3,682,113	3,056,834
Board remuneration		335,790	640,263
Consulting fees		305,848	1,291,970
Outsourced services, software and maintenance		5,382,448	3,243,877
Professional fees		3,627,081	3,704,960
Marketing, public relations and press releases		530,812	1,300,917
Office supplies, software and hardware		948,196	1,272,059
Lease expenses		234,425	173,948
Insurance		1,258,488	1,291,321
Finance costs	24.4	1,922,142	194,033
Expected credit loss	7-8	6,828,249	1,859,937
Travel and entertainment		230,421	395,735
Stock exchange and transfer agent costs		259,188	244,494
Translation cost (recovery) and others		(44,543)	138,229
Depreciation of property and equipment	10	168,025	89,664
Depreciation of right-of-use assets	10	616,533	615,179
Amortization of intangible assets	12	8,920,333	6,764,493
Amortization of financing issuance costs	15-16	93,043	29,020
Impairment of goodwill	12	26,609,797	35,697,890
Impairment of intangible assets	12	14,842,393	6,954,055
Impairment on investment in associate company	11	13,582	-
Change in fair value of contingent consideration payable	6.1	110,984	(591,220)
Change in fair value of debentures conversion options	15.6	175,008	-
Loss on investment in associate company	11	51,314	34,253
Loss on legal settlement	31.8	1,632,000	-
Gain on bargain purchase	6.2	-	(109,605)
Loss on foreign exchange		36,081	62,942
		121,859,512	166,440,946
Loss before income taxes		(79,772,867)	(56,562,431)
Income taxes (recovery)		(1,445,525)	(3,549,246)
Net loss		(78,327,342)	(53,013,185)
Net Profit (loss) attributable to :
Net Non-controlling interest	27	(1,495,367)	79,260
Owners of the parent		(76,831,975)	(53,092,445)
		(78,327,342)	(53,013,185)
Item that will be reclassified subsequently to profit or loss			(811,760)
Currency translation adjustment		(2,631,618)
Total comprehensive loss		(80,958,960)	(53,824,945)
Total comprehensive profit (loss) attributable to:
Non-controlling interest	27	(1,894,965)	9,040
Owners of the parent		(79,063,995)	(53,833,985)
		(80,958,960)	(53,824,945)
Weighted average number of outstanding shares		110,521,854	99,002,008
Basic and diluted loss per share		(0.695)	(0.536)

Going concern uncertainty (note 2)

Subsequent events (note 31)

The accompanying notes are an integral part of these consolidated financial statements.

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TENET FINTECH GROUP INC.

Consolidated Statements of Changes in Equity

Years ended December 31, 2023, and 2022

(In Canadian dollars)

		Capital stock
						Equity component	Accumulated other		Total
		Number of		Equity to	Contributed	of convertible	comprehensive		attributable to	Non controlling	Shareholders'
	Note	common shares	Amount	issue	surplus	debentures	income (loss)	Deficit	owners of parent	interest (note 27)	equity
Balance as at January 1, 2023		99,544,183	211,232,131	-	23,356,969	221,465	625,212	(133,089,887)	102,345,890	15,261,978	117,607,868
Issuance of shares and warrants	20.2-20.4	6,434,704	353,243	-	446,757	-	-	-	800,000	-	800,000
Equity component of convertible debentures	15	-	-	-	3,306,575	1,323,166	-	-	4,629,741	-	4,629,741
Issuance costs - equity component of convertible debentures	15	-	-	-	(51,272)	(33,445)	-	-	(84,717)	-	(84,717)
Deferred tax - equity component of convertible debentures	15	-	-	-	(1,052,993)	67,403	-	-	(985,590)	-	(985,590)
Issuance of broker compensation warrants	15	-	-	-	82,629	-	-	-	82,629	-	82,629
Exercise of warrants and broker warrants	20.2-20.4	2,142,858	521,814	-	(146,814)	-	-	-	375,000	-	375,000
Conversion of debentures	15-20.2	12,640,000	4,631,074	-	-	-	-	-	4,631,074	-	4,631,074
Modification of conversion options of convertible debentures	15.6	-	437,820	-	-	(466,517)	-	(437,820)	(466,517)	-	(466,517)
Share-based compensation	21	-	-	-	490,789	-	-	-	490,789	-	490,789
Subscription for shares by non-controlling interests	27	-	-	-	-	-	-	-	-	289,415	289,415
Issuance of shares for loan repayment	20.2	3,000,000	750,000	-	-	-	-	-	750,000	-	750,000
Payment of contingent consideration	6.1	-	-	721,289	-	-	-	-	721,289	-	721,289
Transactions with owners		123,761,745	217,926,082	721,289	26,432,640	1,112,072	625,212	(133,527,707)	113,289,588	15,551,393	128,840,981
Net loss		-	-	-	-	-	-	(76,831,975)	(76,831,975)	(1,495,367)	(78,327,342)
Other comprehensive loss		-	-	-	-	-	(2,232,020)	-	(2,232,020)	(399,598)	(2,631,618)
Total comprehensive loss for the year		-	-	-	-	-	(2,232,020)	(76,831,975)	(79,063,995)	(1,894,965)	(80,958,960)
Balance as at December 31, 2023		123,761,745	217,926,082	721,289	26,432,640	1,112,072	(1,606,808)	(210,359,682)	34,225,593	13,656,428	47,882,021
		Capital stock
						Equity component	Accumulated other		Total
		Number of		Equity to	Contributed	of convertible	comprehensive		attributable to	Non controlling	Shareholders'
	Note	common shares	Amount	issue	surplus	debentures	income (loss)	Deficit	owners of parent	interest (note 27)	equity
Balance as at January 1, 2022		97,167,183	208,219,490	150,000	21,531,185	-	1,366,752	(79,997,442)	151,269,985	14,320,381	165,590,366
Equity component of convertible debentures	15	-	-	-	465,825	319,209	-	-	785,034	-	785,034
Issuance costs - equity component of convertible debentures	15	-	-	-	(40,838)	(27,985)	-	-	(68,823)	-	(68,823)
Deferred tax - equity component of convertible debentures	15	-	-	-	(101,799)	(69,759)	-	-	(171,558)	-	(171,558)
Issuance of broker compensation warrants	15	-	-	-	54,417	-	-	-	54,417	-	54,417
Exercise of warrants and broker warrants	20.3	2,259,500	2,548,471	(150,000)	(522,971)	-	-	-	1,875,500	-	1,875,500
Exercise of options	21	117,500	464,170	-	(217,420)	-	-	-	246,750	-	246,750
Share-based compensation	21	-	-	-	2,188,570	-	-	-	2,188,570	-	2,188,570
Subscription for shares by non-controlling interests	27	-	-	-	-	-	-	-	-	932,557	932,557
Transactions with owners		99,544,183	211,232,131	-	23,356,969	221,465	1,366,752	(79,997,442)	156,179,875	15,252,938	171,432,813
Net profit (loss)		-	-	-	-	-	-	(53,092,445)	(53,092,445)	79,260	(53,013,185)
Other comprehensive loss		-	-	-	-	-	(741,540)	-	(741,540)	(70,220)	(811,760)
Total comprehensive profit (loss) for the year		-	-	-	-	-	(741,540)	(53,092,445)	(53,833,985)	9,040	(53,824,945)
Balance as at December 31, 2022		99,544,183	211,232,131	-	23,356,969	221,465	625,212	(133,089,887)	102,345,890	15,261,978	117,607,868

The accompanying notes are an integral part of these consolidated financial statements.

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TENET FINTECH GROUP INC.

Consolidated Statements of Cash Flows

For the years ended December 31, 2023, and 2022 (In Canadian dollars)

		December 31
	Note	2023	2022
OPERATING ACTIVITIES
Net loss		(78,327,342)	(53,013,185)
Non-cash items
Expected credit loss	7-8	6,828,249	1,859,937
Depreciation of property and equipment	10	168,025	89,664
Depreciation of right-of-use assets	10	616,533	615,179
Amortization of intangible assets	12	8,920,333	6,764,493
Amortization of financing issuance costs	15-16	93,043	29,020
Impairment of goodwill	12	26,609,797	35,697,890
Impairment of intangible assets	12	14,842,393	6,954,055
Impairment on investment in associate company	11	13,582	-
Accretion on debentures and bonds	15-16	568,769	47,424
Accretion of lease interest	14	286,485	177,021
Interest income on deposit		(4,830)	-
Change in fair value of contingent consideration payable	6.1	110,984	(591,220)
Change in fair value of debentures conversion options	15.6	175,008	-
Share-based compensation	21	490,789	2,188,570
Deferred tax assets and liabilities	22	63,285	(5,280,727)
Loss on investment in associate company	11	51,314	34,253
Gain on bargain purchase	6.2	-	(109,605)
Loans receivable maturing in more than 12 months	7	778,688	1,928,360
Deposits made for transactions on platforms, long term	8.2	(10,782,714)	-
Net changes in working capital items
Restricted cash		189,634	(159,634)
Income tax payable		(1,927,956)	486,323
Accounts receivable	8.1	1,384,156	(7,159,488)
Deposits made for transactions on platforms, short term	8.2	16,170,116	5,808,549
Prepayments to third party subcontractors	8.1	4,476,211	4,519,672
Other debtors	8.1	(299,176)	335,981
Loans receivable maturing in less than 12 months	7	(352,499)	1,398,504
Assets held for sale		96,243	12,878
Other prepaid expenses		1,558,859	(142,417)
Trade accounts payable and accruals	13	5,498,954	(867,178)
Interest payable on debentures	13	394,639	-
Advances from third-party customers	13	(130,550)	(3,534,091)
Contract liabilities with third-party customers	13	(2,469,453)	(2,851,140)
Cash flows from operating activities		(3,908,431)	(4,760,912)
INVESTING ACTIVITIES
Investments	11	(279,520)	(1,061,798)
Deposit		-	(150,000)
Property and equipment - Addition	10	(819,940)	(51,745)
Property and equipment - Disposal	10	-	2,592
Intangible assets - additions	12	(7,063,421)	(11,586,393)
Cash, acquired on acquisition of subsidiaries	6.2	-	351,958
Cash flows from investing activities		(8,162,881)	(12,495,386)
FINANCING ACTIVITIES
Advances received from a company owned by a Director	13-25	1,667,742	-
Repayment of lease liabilities	14	(866,880)	(691,454)
Promissory note payable	18	1,410,000	-
Repayment of loan payable	19	(64,790)	-
Proceeds from the issuance of shares and warrants	20	800,000	-
Proceeds from the issuance of convertible debentures and warrants	15	8,457,676	854,400
Proceeds from the exercise of warrants	20	375,000	1,875,500
Proceeds from the exercise of options	21	-	246,750
Cash flows from financing activities		11,778,748	2,285,196
IMPACT OF FOREIGN EXCHANGE		(1,739,248)	(602,442)
Net decrease in cash		(2,031,812)	(15,573,544)
Cash, beginning of the year		3,223,370	18,796,914
Cash, end of the year		1,191,558	3,223,370

The accompanying notes are an integral part of these consolidated financial statements.

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TENET FINTECH GROUP INC.

Consolidated Statements of Financial Position

As at December 31, 2023 and December 31, 2022 (In Canadian dollars)

		As at	As at
		December 31,	December 31,
	Note	2023	2022
ASSETS
Current
Cash		1,191,558	3,223,370
Restricted cash	6.1-16	23,333	212,967
Loans receivable	7	16,507,353	16,154,854
Assets held for sale		211,838	308,081
Debtors	8.1	14,067,180	28,149,428
Deposits made for transactions on platforms	8.2	10,669,761	26,839,877
Prepaid expenses		1,053,170	1,872,094
Other current assets	9	7,733,174	-
		51,457,367	76,760,671
Loans receivable	7	220,523	1,039,989
Deposits made for transactions on platforms	8.2	10,782,714	-
Deposit		81,304	76,474
Property and equipment	10	3,509,324	3,410,832
Investments	11	1,183,005	1,048,337
Intangible assets	12	14,688,483	32,011,270
Goodwill	12	-	26,609,797
Foreign deferred tax assets	22	-	310,097
		81,922,720	141,267,467
LIABILITIES
Current
Accounts payable, advances and accrued liabilities	13	15,114,779	10,926,447
Lease liabilities	14	309,000	493,852
Bonds	16	400,000	373,547
CEBA Loan	17	100,000	100,000
Promissory note payable	18	1,410,000	-
Loan payable	19	675,145	-
Debentures	15	563,388	-
Conversion option	15	46,240	-
Contingent consideration payable	6.1	757,486	-
Current tax liabilities		2,184,050	4,112,006
		21,560,088	16,005,852
Debentures	15	7,822,405	2,109,903
Conversion option	15	33,840
Lease liabilities	14	2,478,836	2,622,339
Foreign deferred tax liability	22	1,631,111	-
Canadian deferred tax liability	22	-	1,039,295
Contingent consideration payable	6.1	514,419	1,882,210
		34,040,699	23,659,599
SHAREHOLDERS' EQUITY
Capital stock	20	217,926,082	211,232,131
Shares to be issued	6.1	721,289	-
Contributed surplus		26,432,640	23,356,969
Equity component of convertible debentures	15	1,112,072	221,465
Accumulated other comprehensive income (loss)		(1,606,808)	625,212
Deficit		(210,359,682)	(133,089,887)
Shareholders' equity attributable to owners of the parent		34,225,593	102,345,890
Non-controlling interest	27	13,656,428	15,261,978
Total shareholders' equity		47,882,021	117,607,868
		81,922,720	141,267,467
Going concern uncertainty (note 2)
Subsequent events (note 31)
The accompanying notes are an integral part of these consolidated financial statements.
On behalf of the Board,
/S/ Johnson Joseph	/S/ Yves C. Renaud
Director	Director

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