Enlighta Inc. — Management Reports 2023

Dec 15, 2023

ENLIGHTA INC. MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEARS ENDED JUNE 30, 2023 AND 2022

This Management’s Discussion and Analysis (“MD&A”) presents an analysis of the financial position of Enlighta Inc. (the “Company” or “Enlighta”) for the years ended June 30, 2023 and 2022. The following information should be read in conjunction with the audited consolidated financial statements for the years ended June 30, 2023 and 2022, including the notes contained therein. The preparation of financial data for Enlighta is in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Date of Report

This MD&A is dated December 15, 2023.

Forward Looking Statements

This MD&A contains forward-looking statements. These statements relate to future events or future performance and reflect our expectations and assumptions regarding our growth, results of operations, performance and business prospects and opportunities. Such forward-looking statements reflect our current beliefs and are based on information currently available to us. In some cases, forward-looking statements can be identified by terminology such as “may”, “would”, “could”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue” or the negative of these terms or other similar expressions concerning matters that are not historical facts. The forward-looking statements in this MD&A include, among others, statements regarding our future operating results, economic performance and product development and commercialization efforts, and statements in respect of:

• our expected future losses and accumulated deficit levels;

• our projected financial position and estimated cash burn rate;

• our requirement for, and our ability to obtain, future funding on favorable terms or at all;

• our potential sources of funding;

• our assessment of the benefits of our technology;

• our expectations regarding the progress, and the successful and timely completion, of the various stages of the regulatory clearance process;

• our plans to market, sell and distribute our technology;

• our expectations regarding the acceptance of our technology by the market;

• our expectations with respect to future corporate alliances and licensing transactions with third parties;

• our strategy with respect to the protection of our licensed intellectual property; and

• • our expectation to seek and acquire suitable business opportunities and assets.

A number of factors could cause actual events, performance or results, including those in respect of the foregoing items, to differ materially from the events, performance and results discussed in the forward-looking statements. Factors that could cause actual events, performance or results to differ materially from those set forth in the forwardlooking statements include, but are not limited to:

• the effect of continuing operating losses on our ability to obtain, on satisfactory terms, or at all, the capital required to maintain the Company as a going concern;

• the ability to obtain sufficient and suitable financing to support operations, development and commercialization of our technology;

• the risks associated with the development and commercialization of our technology;

• the risks associated with acquiring new technology or business opportunities;

• timing and feedback from researchers and clinicians;

• the regulatory approval process;

• • our ability to successfully compete in our targeted markets;

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• our ability to adequately protect proprietary information and technology from competitors;

• our ability to attract and retain key personnel and key collaborators;

• the potential for liability claims; and

• the substantial risks involved in early-stage technology development companies related to, among other things, commercialization, capitalization, cost containment, and potential litigation.

Although the forward-looking statements contained in this MD&A are based on what we consider to be reasonable assumptions based on information currently available to us, there can be no assurance that actual events, performance or results will be consistent with these forward-looking statements, and our assumptions may prove to be incorrect. These forward-looking statements are made as of the date of this MD&A.

Forward-looking statements made in this MD&A are made as of the date of the original document and have not been updated by us except as expressly provided for in this MD&A. As required by applicable securities legislation, in its capacity as a reporting issuer, it is Enlighta’s policy to update forward-looking information in its periodic MD&As, as required from time to time, and provide updates on its activities to the public through the filing and dissemination of news releases and material change reports.

OVERALL PERFORMANCE & BUSINESS OVERVIEW

Over the course of the fiscal year ended June 30, 2023, Enlighta accomplished the following had continued advanced clinical trial work with adipose stem cells at the Mayo Clinic.

Enlighta Inc. is a healthcare and green and clean technology company assessing and evaluating global strategic partnerships and in-licensing of technologies and assets for rapid growth and high value solutions. Enlighta has various intangible assets in the form of joint ventures and intellectual property and licensing agreements. Enlighta is currently assessing other opportunities for acquisition.

In accordance with TSX Venture Policy 2.5, the Company has not maintained the requirements for a TSX Venture Tier 2 company and as of February 10, 2023, the Company's listing on the TSX Venture Exchange transferred to NEX, and is subject to restrictions on share issuances and certain types of payments as set out in the NEX policies.

SELECTED ANNUAL INFORMATION

The following financial data, which has been prepared in accordance with International Financial Reporting Standards, is derived from the audited consolidated financial statements for the years ended June 30, 2023, 2022 and 2021.

	Year ended	Year ended		Year ended
	June 30, 2023	June 30, 2022		June 30, 2021
Total Revenue	$ -	$ -	$	-
Net loss	(468,918)	(3,626,713)		(837,103)
Total assets	31,051	45,510		3,045,076
Net loss per share
(Basic and diluted)	(0.03)	(0.21)		(0.05)

DISCUSSION OF OPERATIONS

Enlighta is currently a development stage company and has yet to record revenue from operations. The expenses of the consolidated company consist mainly of amortization plus administration activities.

In a prior year, the cost of securing certain Chinese business relationships had been recorded as an expense in the acquisition of Cloud Medical Group Inc. (“CMGI”). CMGI holds a series of agreements that have been assigned to the Company (“Assignment Rights”) and entitle the Company to cash flows earned from various medical-related joint

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ventures and license arrangements entered into by private companies operating in Mainland China. As the Assignment Rights pertain to businesses in their early stages, the Company has estimated that the Assignment Rights will generate only nominal revenue and, as such, the Company has assigned these agreements a nominal value of $1.

The intangible assets were impaired in the prior fiscal year 2022 to a nominal value of $1 and the Company recognized an impairment loss of $2,645,873. The reason for the impairment was due to the slower than expected progress in the clinical trials with the Mayo Clinic because of stagnating patient participation due to the pandemic and their internal access to funding.

General and administration expenses of $405,100 (2022 - $600,939) decreased by $195,839 compared to the year ended June 30, 2022 mainly because of decreased in professional fees, decrease in salaries and benefits and decrease in office costs paid or accrued.

General and Administration Expenses

	Year ended	Year ended
	June 30, 2023	June 30, 2022
Salaries and benefits	$ 230,946	$ 271,716
Professional fees	146,627	279,414
Offices and miscellaneous	27,527	49,809
Total	$405,100	$600,939

SELECTED QUARTERLY INFORMATION

The following financial data, which has been prepared in accordance with IFRS, is derived from the unaudited condensed consolidated interim financial statements for the quarters that were prepared.

	June 30	March 31	Dec 31	Sept 30
	2023	2023	2022	2022
Total Revenue	$ -	$ -	$ -	$ -
Net loss	(74,527)	(120,720)	(119,405)	(154,266)
Net loss per share
(Basic and diluted)	(0.00)	(0.01)	(0.01)	(0.01)
	June 30	March 31	Dec 31	Sept 30
	2022	2022	2021	2021
Total Revenue	$ -	$ -	$ -	$ -
Net loss	(2,918,991)	(212,466)	(252,650)	(242,606)
Net loss per share
(Basicand diluted)	(0.17)	(0.01)	(0.02)	(0.01)

Net loss was generally consistent or on a slight decreasing trend throughout the entire prior eight quarters except for the comparable quarter as explained by the impairment of intangible assets.

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FINANCIAL RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022

During the three months ended June 30, 2023, G&A expenses was lower compared to the three months ended June 30, 2022 mainly because the decrease in professional fees and office costs.

General and Administration Expenses

	Three Months Ended	Three Months Ended
	June 30	June 30
	2023	2022
Salaries and benefits	$ 57,408	$ 56,563
Professional fees	26,279	89,398
Offices and miscellaneous	(5,694)	4,177
Total	$ 77,993	$ 150,138

DIVIDENDS

There are no restrictions that could prevent Enlighta from paying dividends on its common shares. Enlighta has not paid any dividends on its common shares as it will incur losses for the foreseeable future and it is not contemplated that Enlighta will pay any dividends in the immediate or foreseeable future. It is Enlighta’s intention to use all available cash flow to advance business development.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2023, Enlighta had cash of $28,500 (June 30, 2022 - $41,654) and negative working capital of $2,964,259 (June 30, 2022 – negative working capital of $2,495,341).

	Year ended	Year ended
	June 30	June 30
Cash provided by (used in)	2023	2022
Operating activities	$ (310,375)	$ (380,215)
Financing activities	297,221	362,025
Investing activities	-	-
Total	$ (13,154)	$ (18,190)

There are no committed capital expenditures required to meet the Company’s planned research and commercialization efforts.

The Company will require additional funds for product development, for ongoing regulatory fees, and general operations. The Company is currently seeking to raise additional capital and, in particular, is exploring opportunities for private placements with potential individual investors and/or institutional investors and other means of equity or debt financing.

There can be no assurance that financing will always be available to the Company in the amount required at any particular time or for any particular period or, if available, that it can be obtained on terms satisfactory to the Company.

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

Enlighta has no existing contractual obligations other than as described herein. There are no off-balance sheet arrangements.

TRANSACTIONS BETWEEN RELATED PARTIES

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Related parties include shareholders with a significant ownership interest in the Company, its subsidiaries, affiliates of shareholders with a significant ownership interest in the Company, and the Company’s key management personnel. The related party transactions are in the normal course of operations and have been valued in these financial statements at fair value, which is the amount of consideration established and agreed to by the related parties.

• (a) Balances with related parties:

	2023	2022
Trade and other payables	502,909	346,375
Due to relatedparties - current	2,220,890	1,940,117

As at June 30, 2022, the related parties had not repaid the related party loans totaling $23,412. The Company thus recorded an allowance for the full amount of $23,412 in fiscal 2022 due to uncertainty of collectability of the amounts.

Included in due from related parties at June 30, 2023 is $315,419 (RMB1,728,323) (2022: $331,867) loans received from a related company in prior years. The loans are unsecured, bear no interest and are due on demand.

• (b) Transactions during the year with key management and companies with shareholders in common:

		2023		2022
Salaries (included in general and administration)	$	141,750	$	180,750
Research and development	$	78,604	$	39,403
Rent (included in general and administration)	$	-	$	18,000
Professional fees(included ingeneral and administration)	$	73,552	$	-

SIGNIFICANT ACCOUNTING POLICIES

All significant accounting policies are fully disclosed in Note 3 of the audited consolidated financial statements for the year ended June 30, 2023.

SHARE DATA

As of the date of this management discussion, the Company has 17,080,529 common shares without par value issued and outstanding.

RISKS AND UNCERTAINTIES

Risks Related to Enlighta’s Technology

1. Enlighta is dependent on new and unproven technologies.

Enlighta’s risks as an early stage commercial enterprise are compounded by its heavy dependence on new, emerging and/or unproven technologies. If these technologies do not produce satisfactory results, Enlighta’s business may be harmed.

1. Enlighta’s success depends on the successful commercialization of its technology.

The successful commercialization of Enlighta’s technology is crucial for its success. Enlighta and its strategic partners and collaborators may face unforeseen difficulties in developing and marketing Enlighta’s technology. There is no guarantee that market acceptance will materialize upon the successful manufacturing

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and sale of any product. If Enlighta’s technology and products do not result in commercially successful products, Enlighta’s business could be adversely affected.

Risks Associated with the Financial Results of Enlighta

1. Enlighta currently has negative operating cash flow.

Enlighta has had negative operating cash flow. There can be no certainty Enlighta will ever achieve or sustain profitability or positive cash flow from its operating activities. In addition, Enlighta’s working capital and funding needs may vary significantly depending upon a number of factors including, but not limited to:

• the level of sales and gross profit;

• costs associated with development from its various operations;

• fluctuations in certain working capital items, including inventory and accounts receivable, that may be necessary to support the growth of Enlighta’s business or new product introductions;

• progress of Enlighta’s development programs and costs associated with completing clinical studies and other regulatory processes;

• collaborative license agreements with third parties;

• the cost of filing, prosecuting and enforcing Enlighta’s patent claims or the patent claims of its licensors, and enforcing other intellectual property rights such as copyrights and trademarks;

• expenses associated with litigation;

• opportunities to in-license complementary technologies or potential acquisitions;

• potential milestone or other payments Enlighta may make to licensors or corporate partners; and

• technological and market developments that affect Enlighta’s potential revenue levels or competitive position in the market place.

4. Enlighta incurs expenditures in foreign currency and does not hedge against foreign currency risks.

A portion of Enlighta’s expenditures are in United States dollars and other foreign currencies and, therefore, Enlighta is subject to foreign currency fluctuations which may, from time to time, affect its financial position and results of operations.

Public Company Risks

1. Enlighta is controlled by its current officers, directors and principal shareholders.

Enlighta’s directors, executive officers, principal stockholders and their affiliates beneficially own a significant percentage of the outstanding shares of common stock. As a result, these stockholders, acting together, would have the ability to control the outcome of matters submitted to Enlighta’s stockholders for approval. This would include the election of Enlighta Board, and approval of matters dealing with the merger, consolidation or sale of all or substantially all of Enlighta’s assets.

In addition, these stockholders, acting together, would have the ability to control the management and affairs of Enlighta. Accordingly, this concentration of ownership might harm the market price of Enlighta’s common stock by:

• delaying, deferring or preventing a change in corporate control;

• impeding a merger, consolidation, takeover or other business combination involving Enlighta; or

• • discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of Enlighta.

• The requirements of being a public company may strain Enlighta’s resources, divert management’s attention and affect Enlighta’s ability to attract and retain qualified board members.

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Continued compliance with the reporting requirements of the Exchange is anticipated to be a drain to Enlighta’s financial resources, potentially making some future activities more difficult, time-consuming or costly. In addition to filing annual (audited) and quarterly financial statements and material change reports required by the Canadian Securities Administrators, Enlighta is required to comply with the Policies of the Exchange and pay fees associated with such Exchange filings. Enlighta’s management team and other personnel will need to devote a substantial amount of time to compliance initiatives and to meeting the obligations that are associated with being a public Company, which may divert attention from other business concerns. These obligations, in turn, could have a material adverse effect on Enlighta’s business, financial condition and results of operations.

In addition, legal, accounting and other expenses associated with public Company reporting requirements have increased significantly in the past few years. Enlighta anticipates that general and administrative costs associated with regulatory compliance will continue to increase with recently adopted or amended corporate governance requirements

7. Future financing may have a dilutive effect on existing shareholders.

The completion of any future equity financing may result in substantial dilution to Enlighta’s shareholders.

8. Enlighta’s directors may from time to time have conflicts of interest.

Directors of Enlighta may, from time to time, serve as directors of, or participate in ventures with other companies, or have shareholdings in other companies and, to the extent that such other companies may participate in ventures in which Enlighta may participate, conflicts of interest may arise which may be harmful to Enlighta’s interests. Each director will attempt not only to avoid dealing with such other companies in situations where conflicts might arise but will also disclose all such conflicts in accordance with the BCBCA and will govern themselves in respect thereof to the best of their ability in accordance with the obligations imposed upon them by law.

9. Enlighta has never declared or paid a dividend.

Enlighta has never declared or paid any dividends on the common shares. Enlighta currently intends to retain its future earnings, if any, to finance further development and the expansion of Enlighta’s business. As a result, the return on an investment in Enlighta’s common shares will depend upon any future appreciation in value. There is no guarantee that the common shares will appreciate in value or even maintain the price at which shareholders have purchased their shares.

10. Enlighta’s technologies are vulnerable to damage and failure.

Despite the implementation of security measures, Enlighta’s internal computer systems are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failure. Any system failure, accident or security breach that causes interruption in Enlighta’s operations could result in a material disruption of its projects. To the extent that any disruption or security breach results in a loss or damage to Enlighta’s data or applications, or inappropriate disclosure of confidential or proprietary information, Enlighta may incur liability as a result. In addition, Enlighta’s technologies program may be adversely affected and the further development of its technologies may be delayed. Enlighta may also incur additional costs to remedy the damages caused by these disruptions or security breaches.

1. Enlighta and/or its directors may be subject to a variety of civil or other legal proceedings.

Enlighta and/or its directors may be subject to a variety of civil or other legal proceedings, with or without merit. Enlighta does not know of any such pending or actual legal proceedings as of the date of this MD&A.

12. Enlighta will need to raise additional capital in the future to fund its operations.

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Enlighta may require additional capital resources to further research and develop its products, obtain regulatory approvals and ultimately commercialize these products. Future cash requirements may vary materially from those expected if Enlighta elects to develop, acquire or license new technologies and products, or experiences operational delays or unexpected increases in costs related to regulatory approvals, manufacturing or the preparation, filing, prosecution, maintenance, defence and enforcement of patent claims. Sources of additional funding include collaborations and licensing arrangements, public or private equity or debt financing. If Enlighta’s research and development, or commercialization activities do not show positive results, or if capital market conditions in general, or with respect to medical device or development stage companies in particular, are unfavourable, Enlighta may be unable to raise funds when needed or on acceptable terms. Any additional equity financings may be dilutive to Enlighta’s existing stockholders.

If sufficient capital is not available, Enlighta may be required to delay, reduce the scope of, eliminate or divest one or more of its development projects any of which could have a material adverse effect on Enlighta’s business, financial condition, prospects, or results of operations.

13. Enlighta Shares are subject to share price volatility.

The stock market has from time to time experienced extreme price and volume volatility that is unrelated to the operating performance of particular companies. In addition, because of the nature of Enlighta’s business, certain factors such as Enlighta’s announcements, competition from developers of new medical devices or new technologies, government regulations, fluctuations in Enlighta’s operating results, results of clinical trials, general market conditions, developments in patent and proprietary rights, sales of substantial amounts of Enlighta’s stock by existing stockholders or insiders, and the departures of key personnel can have an adverse effect on the market price of Enlighta Shares. Furthermore, any negative change in the public’s perception of the prospects of medical and green technology companies in general could depress Enlighta’s share price regardless of results. As a result of this volatility, investors may not be able to sell their common stock at or above the price they acquired it.

Related Party Risk

1. Enlighta and related licensing companies, management companies and other companies have certain directors and officers in common and conflicts of interest may arise.

Enlighta relies on related companies to conduct all of the Company’s development and administration. The licenses allow Enlighta to use patented and patent-pending technology. Failure to maintain licenses in good standing will have a material adverse effect on the business of Enlighta.

Risks Associated with Doing Business in the People’s Republic of China

1. The Company faces the following additional risk factors that are unique to it doing business in China.

2. Government involvement

3. Changes in the laws and regulations in the People’s Republic of China

4. The chinese legal and accounting system

5. Currency controls

6. Additional compliance costs in the People’s Republic of China

7. Difficulties establishing adequate management, legal and financial controls in the People’s Republic of China

8. Capital outflow policies in the People’s Republic of China

9. Jurisdictional and enforcement issues

10. • Political system in the People’s Republic of China

ADDITIONAL INFORMATION

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Additional information about the Company is available for viewing on SEDAR at www.sedar.com.

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