Newtopia Inc. — Interim / Quarterly Report 2021

Nov 10, 2021

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Management’s Discussion and Analysis

For the Three and Nine months Ended September 30, 2021

MANAGEMENT’S DISCUSSION AND ANALYSIS

Introduction

This Management’s Discussion and Analysis (“ MD&A ”) is provided to enable readers to assess the results of the operations and financial condition for Newtopia for the three and nine months ended September 30, 2021. This MD&A is dated November 10, 2021 and should be read in conjunction with the annual audited financial statements and related notes for the year ended December 31, 2020 (the “ Annual Financial Statements ”) and the unaudited Condensed Interim Financial Statements for the three and nine months ended September 30, 2021 (the “ Interim Financial Statements ” and, together with the Annual Financial Statements, the “Statements” ). Unless the context indicates otherwise, references to “Newtopia”, “the Company”, “we”, “us” and “our” in this MD&A refer to Newtopia Inc. and its operations.

Forward-looking information

Certain information included in this MD&A contains forward-looking information within the meaning of applicable Canadian securities laws. This information includes, but is not limited to, statements made in “Business Overview”, “Results from Operations”, “Debt Operations”, “Debt-Profile” and other statements concerning Newtopia’s objectives, its strategies to achieve those objectives, as well as statements with respect to management’s beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking information generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “would”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plan”, “continue”, or similar expressions suggesting future outcomes or events or the negative thereof. Such forward-looking information reflects management’s beliefs and is based on information currently available. All forward-looking information in this MD&A is qualified by the following cautionary statements.

Forward-looking information necessarily involves known and unknown risks and uncertainties, which may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, assumptions may not be correct and objectives, strategic goals and priorities may not be achieved. A variety of factors, many of which are beyond the Company’s control, affect the operations, performance and results of the Company, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results.

Although Newtopia believes that the expectations reflected in such forward-looking information is reasonable and represents the Company’s projections, expectations and beliefs at this time, such information involves known and unknown risks and uncertainties which may cause the Company’s actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking information. Important factors that could cause actual results to differ materially include, but are not limited to: ability to maintain and expand its customer base with products that result in lasting health benefits to customers; ability to invest in technology as tools to support and enhance the customer experience; risks of regulatory changes applicable to the healthcare industry in the United States; general economic conditions that we operate in; and the ability to raise financing to fund capital expenditures and operations. The reader is cautioned to consider these factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking information, as there can be no assurance that actual results will be consistent with such forward-looking information.

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The forward-looking information included in this MD&A is made as of the date of this MD&A and should not be relied upon as representing the Company’s view as of any date subsequent to the date of this MD&A. Management undertakes no obligation, except as otherwise required by applicable law, to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Business Overview

Newtopia was incorporated on May 9, 2008, pursuant to the provisions under the Ontario Business Corporations Act . The Company’s head office is located at 4101 Yonge Street, Suite 706, Toronto, Ontario, M2P 1N6.

On May 4, 2020, the Company commenced trading on the TSX Venture Exchange under the symbol “NEWU”. On August 26, 2021 Newtopia also listed on the U.S. OTCQB® Venture Market under the ticker “NEWUF.” With this listing both in the U.S. and Canada, the Company broaden its reach and increased visibility for U.S. investors, while providing greater liquidity in its stock.

Newtopia is a tech-enabled habit change provider focused on disease prevention and reducing the cost of care for health insurers. Newtopia leverages precision health tools (including genetic testing and behavioural evaluations) to develop and implement personalized experiences combining the best of human intervention (health coaches or “Inspirators” ) with the best of digital interaction. Through habit change and lifestyle intervention, individuals at risk of developing preventable chronic disease improve their habits around their physical and mental health. The Company partners with insurers and employers (primarily in the United States) and focuses its efforts on employees or members at risk of developing chronic diseases including, but not limited to, obesity, type 2 diabetes, heart disease, stroke or fatty liver disease. Each personalized program aims to sustainably reduce the five primary metabolic risk factors of chronic disease, including (1) waist circumference or BMI, (2) blood pressure, (3) blood glucose, (4) triglycerides, and (5) cholesterol, along with mental and emotional health risk factors, thereby delivering proven meaningful and growing healthcare risk reduction to individuals and cost savings to risk-bearing employers or insurers. While many population and disease management companies today focus on either managing those with chronic disease or offering general wellness or engagement solutions across the entire member population, the Company’s platform instead targets the approximately 50% to 80% at-risk population. Newtopia enables participants to sustainably change habits, maintain health, avoid or reduce their likelihood of developing chronic disease and reduce exorbitant healthcare costs in the United States by delivering clinical and cost savings outcomes proven to grow and improve over time.

The Company’s personalized habit change platform focuses on physical and mental health risk reduction (i.e. whole person care) rather than disease management or aesthetic weight loss. The Company believes it is time to get ahead of the increasing prevalence of chronic disease and focus on sustainable prevention rather than disease management. The key to achieving sustainable risk and cost reduction is a focus on building confidence and habit change as opposed to increasing knowledge and education. While disease prevention is still limited in the market, most disease prevention guidelines and offerings focus on teaching a “one-size-fits-all” curriculum in order to build greater knowledge of how to live a healthier lifestyle. Built on similar assumptions as those within the dominant one-size-fits-all education model, the end goal of curriculum-based prevention is to educate individuals in order to build enough knowledge that will hopefully translate into the appropriate behaviour changes to reduce risk. However, in a personalized habit change model, the ultimate goal is not to teach and build knowledge; rather, it is to inspire and instill confidence in order to build new progressive habits and reduce risk. The biggest advantage of a habit change platform relative to a learning platform is sustainability and growth of outcomes and cost savings. With a

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habit change platform, the value increases over 12 and 24 months (and beyond) as opposed to producing short-term outcomes within the first few months, with both clinical risk factors and costs returning the following year. Therefore, habit change platforms produce a higher level of engagement, clinical risk reduction and cost savings that grow over time compared to many existing knowledge-based models.

The Company’s patented persuasive enterprise technology platform converges genetic testing and the latest social and behavioural science with real-time online human coaching and a cutting-edge virtual platform, wireless tracking devices, personalized gamification and a curated social health network to ensure lasting results at scale and a strong return on investment for risk-bearing insurers.

The Company markets to individuals (employees of the self-insured employer market or members of private and public health plans) covered by risk-bearing insurers that have out-of-range physical and mental health risk factors and is paid by the risk-bearing insurer on behalf of the member. These out-of-range factors can be identified by leveraging existing risk identification data including in-person biometric test outcomes, online health risk assessments, claims or risk screener data. Eligible at-risk individuals are offered an exclusive invitation to enroll. Once enrolled, they are referred to as participants, and complete a personal profile which helps the Company understand their personality type, level of motivation, readiness to change, eating habits, activity level and underlying social determinants of health. Participants are then personalitymatched with a Company Inspirator who acts as a personal health coach and works with each participant to build confidence and develop new progressive habits with respect to nutrition, exercise and behavioural/mental well-being. Participants and Inspirators meet virtually which leverages a combination of online video, text messaging, email or telephone. The use of virtual care has been part of the Newtopia program since day one, enabling the company to continue to provide whole person care despite lockdowns as a result of the global pandemic.

In addition to working with a health coach, participants are also provided tools for success in their personal program. These tools can include a genetic test, smart scale, activity tracker, access to a personalized mobile app and measuring tape for measuring waist circumference. The Company’s mobile platform provides participants access to their Inspirator, video lessons, reporting from bio-sensors, goals, messaging, and their progress from anywhere in the world. It also helps to extend the relationship between participant and Inspirator, and increase accountability and engagement between coaching sessions.

Newtopia is a pioneer in leveraging genetic testing primarily for behaviour change and engagement purposes. Newtopia’s genetic testing allows the Company to help participants understand if they have inherited any genetic factors that may be having an impact on their physical and mental health and to personalize lifestyle recommendations by gaining a deeper understanding of how genes impact an individual’s risk. The genetic test is designed specifically to look for genetic characteristics related to physical and mental health as well as lifestyle management. The Company provides specific geneticallydriven recommendations that are evidence and guideline-based for nutrition, exercise and behaviour management to combat the potential effect of those genetic characteristics. These recommendations could include changes in the proportion of fats, carbohydrates and proteins the participant eats, the form and intensity of exercise required to burn a sufficient number of calories and appropriate behavioural and mental health support and exercises related to satiety signals, cravings and resilience to stress. These genetically driven recommendations are then incorporated into the participant’s personalized lifestyle plan to further refine and personalize each participant’s experience in order to create more durable habit change. Newtopia’s Innovation Lab is frequently working on identifying new genes that could prove helpful in chronic disease prevention. Recently, the BDNF gene, which gauges reliance to stress, was add to Newtopia’s genetic profiling.

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In addition to its whole person care solution for lowering risk for broad chronic disease prevention, Newtopia delivers individualized support through the following personalized program focus areas:

1. Habit Change and Resiliency

2. Weight Management

3. Diabetes Prevention

4. Hypertension and Heart Health

5. Healthy Living with Diabetes

Corporate Update

Revenue during the three months ended September 30, 2021 increased by 22% over the same period of the previous year. In June 2021, Newtopia was granted expanded marketing opportunities within the employee population of an existing Fortune 50 health services client. The strong response in enrolments during June carried over into the third quarter. As enrollment fees transitioned into recurring engagement revenues, the Company posted a record number of quarterly engagements during the three months ended September 30, 2021 of 37,000 billable engagements. Along with the easing of COVID-19 restrictions and the return to more standard operating procedures in the United States, the Company anticipates this trend will continue into the fourth quarter of 2021.

Net loss and comprehensive loss during the three months ended September 30, 2021 decreased by 37% over the same period of the previous year, driven by the growth in revenue mentioned above and to a decline in operating expenses.

Revenue during the nine months ended September 30, 2021 decreased by 10% over the same period of the previous year. The prior year’s revenue during the nine months ended September 30, 2020 was particularly strong due to a novel incentivized program launched in early 2020 by one of its Fortune 500 financial services customers and innovation partners.

Net loss and comprehensive loss during the nine months ended September 30, 2021 increased by 22% over the same period of the previous year, driven by sales and marketing expenditures incurred during the first half of the year in an effort to expand and drive new customer and future revenue growth. General and administrative expenses increased on a year-over-year basis reflecting the added costs associated with being a public company. Share based expenses also rose following the Company’s grant of stock options to all its employees in November 2020. This granting of options to the entire employee base was a one-time event upon the Company going public in May 2020.

On September 15, 2021, the Company issued $2,545,000 debenture units that included non-convertible debentures and commons share purchase warrants. The debentures will mature on September 15, 2023 and are secured by the assets of the Company and bear interest at a rate of 8.0% per annum payable quarterly in arrears in cash. The capital injection was a condition for the refinancing of the Company’s credit facility with a leading Canadian Schedule I Bank and the waiver of breaches by the Company of its cash runway covenant.

On September 30, 2021, the Company accordingly amended the credit facility for an increased revolving credit facility of $7.5 million, up from the $5.0 million in funding secured previously. This new credit facility, along with the $2.5 million private placement offering, doubles the amount of growth capital available to the Company for working capital and general corporate purposes. The Company will strategically leverage these funds to: (i) hire additional Inspirators for its growing participant base, (ii)

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expand its sales and marketing teams and (iii) advance its habit change technology to improve efficiencies and drive increased margins.

In July 2021, the Company announced the appointment of Roger Poirier, CFA to the Company’s Board of Directors. With Mr. Poirier’s appointment, Newtopia has expanded its Board of Directors to include five directors. Mr. Poirier has more than three decades of capital markets, finance and M&A experience and will serve on Newtopia’s Audit Committee.

COVID-19

On March 12, 2020, the World Health Organization declared the global outbreak of the COVID-19 virus as a pandemic. The outbreak has spread throughout Europe, the Middle East, Canada and the United States, causing companies and various international jurisdictions to impose restrictions, such as quarantines, closures, cancellations and travel restrictions.

The pandemic has led to widespread economic uncertainty and volatility in the financial markets which could adversely impact the Company’s cost and access to capital. With concerns over the spreading of the virus, the Company has proactively implemented several protective measures, including work-from-home arrangements for its staff, cancellation of conferences and limits on non-essential employee travel.

The recent release of effective COVID-19 vaccines has provided a positive boost to consumer confidence and to the outlook for an economic rebound. While these are positive trends and the Company confirms the rebound in economic activity also correlates with the Company’s current growth, the onset of the Delta variant has resulted in the reinstallation of some COVID-19-related restrictions in the United States, which could have a negative impact on Newtopia’s future operations in the event that the Delta variant or other variants of concern cause further or renewed restrictions. The future impact of COVID-19 therefore remains uncertain and could have a material adverse effect on the Company’s business, financial position, results of operations and/or cash flows.

Newtopia will continue to work with its stakeholders (including customers, employees and suppliers) to responsibly address this global pandemic. The Company continues to monitor the situation, to assess further possible implications to its business, supply chain and customers, and to take actions in an effort to mitigate adverse consequences.

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Selected Financial Information

` Revenue Cost of sales Gross profit Gross profit margin Operating expenses Operating loss Other expenses Net loss and comprehensive loss Basic and diluted loss per share Weighted average number of shares outstanding	2021 2020 $ $ $ % 2,904,863 2,389,374 515,489 22% 1,460,870 1,213,393 247,477 20% 1,443,993 1,175,981 268,012 23% 50% 49% 1% 2% 2,441,547 2,660,171 (218,624) (8%) (997,554) (1,484,190) 486,636 (33%) 123,050 271,145 (148,095) (55%) (1,120,604) (1,755,335) 634,731 (36%) (0.01) (0.02) 100,492,786 91,010,143 Three Months Ended September 30, Change

` Nine Months Ended September 30,

Revenue Cost of sales Gross profit Gross profit margin Operating expenses Operating loss Other expenses Net loss and comprehensive loss Basic and diluted loss per share Weighted average number of shares outstanding	2021	2020 Change
	$ 8,053,055 4,219,501 3,833,554 48% 9,251,991 (5,418,437) 435,940 (5,854,377) (0.06) 100,302,490	$ $ % 8,939,415 (886,360) (10%) 4,698,576 (479,075) (10%) 4,240,839 (407,285) (10%) 47% 1% 2% 7,857,624 1,394,367 18% (3,616,785) (1,801,652) 50% 1,186,669 (750,729) (63%) (4,803,454) (1,050,923) 22% (0.09) 56,464,872

Revenue

The Company’s performance-based revenue model consists of three elements: (1) Welcome Kit sales, (2) monthly subscription fees, and (3) outcome milestone fees. Welcome Kit sales are recognized when

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they are shipped to participants upon enrollment. Subscription fees are tied to participant engagement in the Company’s programs based on specific criteria outlined in an individual contract.

Certain customer contracts contain clauses that trigger success fees and/or outcome guarantees. Success fees are paid by customers upon the completion of certain target metrics such as a specific percentage weight loss on average across participants engaged in the program. Upon achievement of those metrics, success fees are billed on a monthly basis. Outcome guarantees result in a repayment of a portion of the engagement fees previously earned by the Company in the event that average participant weight-loss does not meet a targeted range.

Revenue for the three months ended September 30, 2021 increased by 22% over the same period in the previous year due to strong participant enrolments following a participant outreach campaign with a Fortune 50 health services client that began in June 2021 and continued into the third quarter. As part of the outreach campaign, the Company was granted expanded marketing opportunities within the client’s employee population. The influx of enrolments has translated into a higher participant base of monthly recurring revenue opportunities. The Company has recorded 37,000 billable engagements during the three months ended September 30, 2021, the highest number of quarterly engagements ever recorded. The easing of COVID-19 restrictions in the United States and the return to normal in-person biometric testing have contributed to the Company’s return to growth in revenue during the third quarter.

Revenue for the nine months ended September 30, 2021 decreased by 10% over the same period in the previous year. Revenue was negatively impacted during the first-half of 2021 by social distancing restrictions which reduced in-person biometric employee testing and constrained the Company’s ability to identify and address at-risk populations. During this period when clients turned to remote methods of riskidentification, Newtopia identified novel options in partnership with its clients to approach entire populations with its habit change offering. The Company is now finding that more of its customers are open to a combined approach to risk identification, one that leverages in-person biometric testing with online health risk assessments to enable identification despite unfavorable macro-conditions.

Gross Profit

Gross profit is comprised of revenue less direct expenses, which consists of the cost of Welcome Kits sold to new participants and the labour costs associated with the Company’s coaching team or Inspirators. Welcome Kits carry very low gross profit and account for pass-through revenues to the Company. In the second quarter of 2021, a 300% increase in Welcome Kits resulted in a decline in gross profit margin.

Gross profit margins for the three and nine months ended September 30, 2021 were consistent with the gross profit margins reported in the same periods of the previous year. The gross profit margin of 50% recorded during the third quarter has increased over the gross profit margin of 42% of the previous quarter, reflecting the growth in engagement revenue that follows a period of high enrolment, or the significant number of Welcome Kits sold in the prior quarter.

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Operating Expenses

The table below sets forth the details of operating expenses for the three and nine months ended September 30, 2021 and 2020:

30, 2021 and 2020:
Technology and development Sales and marketing General and administrative Share-based compensation	Three Months Ended September 30,
	2021 $ 715,966 644,184 1,036,275 45,122 2,441,547 Nine	2020 $ $ % 812,228 (96,262) (12%) 781,307 (137,123) (18%) 946,108 90,167 10% 120,528 (75,406) (63%) 2,660,171 (218,624) (8%) Change Months Ended September 30
Technology and development Sales and marketing General and administrative Share-based compensation		,
	2021 $ 2,428,187 2,543,717 3,348,022 932,065 9,251,991	2020 $ $ % 2,382,216 45,971 2% 2,324,985 218,732 9% 2,773,804 574,218 21% 376,619 555,446 147% 7,857,624 1,394,367 18% Change

Operating expenses consist of administrative, technology and development, and selling and marketing expenses.

Technology and development expenditures during the three months ended September 30, 2021 decreased by 12% over the same period in the prior year, primarily as result of a reduction in senior-level resources during the current year’s quarter and research costs incurred during the previous year’s quarter related to a new CRM platform. Consistent with the previous quarters in 2021, the Company is making investments in a new CRM platform in order to improve service efficiency that will ultimately lead to higher gross margins on recurring engagement revenues. The adoption of the new CRM will eliminate the annual licencing cost associated with the existing platform of approximately $450,000 per year. The level of expenditures during the nine months ended September 30, 2021 were consistent with the same period in the prior year.

Selling and marketing expenses during the three months ended September 30, 2021 decreased by 18% over the same period in the prior year, primarily as result of lower sales headcount. Expenditures during the nine months ended September 30, 2021 increased by 9% over the same period in the prior year as the Company contracted new marketing and public relations firms in late 2020 and throughout the first half of 2021. These increased sales and marketing expenses helped drive outreach expansion to new client verticals with higher aggregations of potential participants. The Company’s sales funnel is growing commensurate with the increased investment in sales and marketing activities.

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General and administrative expenses during the three and nine months ended September 30, 2021 increased by 10% and 21%, respectively, over the same periods of the previous year. The increase is due to filing fees and charges associated with becoming a public company in May 2020. Employee compensation costs were also higher during the nine months ended September 30, 2021 with the addition of senior level resources in finance and data analytics.

Share-based compensation expenses during the three months ended September 30, 2021 decreased by 63%, compared to the share-based compensation expenses during the three months ended September 30, 2020, primarily due to the forfeiture of the options previously granted to certain former employees of the Company, following their departure during the quarter. Expenditures during the nine months ended September 30, 2021 increased by 147% over the same period in the prior year due to the expense related to stock options granted to all employees in November 2020, following the Company’s initial public offering in May 2020.

Other Expenses

The table below sets forth the details of other expenses for the three and nine months ended September 30, 2021 and 2020:

Depreciation of property and equipment Depreciation of right-of-use asset Interest on lease obligations Interest on promissory note Finance charges Amortization of deferred finance charges Foreign exchange gain Change in value of derivative liability	Three Months Ended September 30,	Three Months Ended September 30,
	2021 $ 16,163 46,192 27,875 - 39,454 27,890 (34,524) - 123,050	2020 $ $ % 19,012 (2,849) (15%) 46,192 - 0% 35,269 (7,394) (21%) 8,219 (8,219) (100%) 10,995 28,459 259% - 27,890 100% 39,778 (74,302) (187%) 111,680 (111,680) (100%) 271,145 (148,095) (55%) Change

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Nine Months Ended September 30,

Depreciation of property and equipment Depreciation of right-of-use asset Interest on lease obligations Interest on promissory note Finance charges Amortization of deferred finance charges Foreign exchange gain Change in value of convertible debenture derivative liabilities Change in value of derivative liability Loss on settlement of related party payable	2021 2020 $ $ $ % 50,938 61,905 (10,967) (18%) 138,579 138,578 1 0% 88,189 109,967 (21,778) (20%) - 8,219 (8,219) (100%) 60,402 244,537 (184,135) (75%) 112,926 - 112,926 100% 32,414 (56,713) 89,127 (157%) - 448,656 (448,656) (100%) (47,508) 63,804 (111,312) (174%) - 167,716 (167,716) (100%) 435,940 1,186,669 (750,729) (63%) Change

Depreciation of property and equipment during the three and nine months ended September 30, 2021 was lower by 15% and 18%, respectively, over the same periods of the previous year as a result of computer equipment additions during 2020 to support the growth in the coaching team.

Finance charges and the change in convertible debentures derivative liabilities mainly relate to convertible debenture units issued by the Company in November 2018. The convertible debenture units were converted following the Company’s listing in May 2020.

Finance and amortization of deferred finance charges in the three and nine months ended September 30, 2021 relate to the Company’s new credit facility secured in October 2020. Finance charges incurred on the closing of the facility are being deferred and amortized over the term of the facility.

The Company derives most of its revenue in U.S. currency and the weakening U.S. dollar relative to the Canadian dollar during the first quarter of 2020, due largely to the economic impact of COVID-19, resulted in the recognition of a substantial foreign exchange gain on the Company’s U.S. dollar monetary assets. As at September 30, 2021, the Company’s U.S.-denominated assets include U.S. cash and 97% of its trade receivables.

Loss on settlement of related party payable relates to the settlement of $400,000 of unpaid bonuses owing to the Company’s Chief Executive Officer (“ CEO ”) with 865,849 Common Shares and 188,571 stock options. The stock options are exercisable at $0.70 per Common Share until November 6, 2021. The aggregate fair value of the Common Shares and stock options at the date of the settlement was determined to be $567,716. The difference from the bonuses payable of $400,000 (being $167,716) was recognized as a loss on settlement of debt.

Total Assets

Total assets as at September 30, 2021 decreased by 33% from total assets as at December 31, 2020 due to a lower cash balance and unbilled revenue related to the variable success fee consideration for achieving weight loss targets, partially offset by an increase in trade and other receivables and intangibles (new CRM platform). The net cash outflow generated by operations, together with the investments in the new CRM

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platform, led to a reduction in cash during the nine months period ended September 30, 2021. The unbilled revenue balance as at December 31, 2020 related primarily to the high number of participants that enrolled in the first quarter of 2020 that successfully achieved weight loss success fee targets after 12 months. Trade and other receivables are higher due to the strong participant starts and engagements in the third quarter.

Total Liabilities

The Company’s total liabilities as at September 30, 2021 increased by 50% from December 31, 2020, primarily as result of the $2,545,000 debenture units with attached warrants issued by the Company in September 2021. The increase was partially offset by decreases in trade payables and the lease obligation.

Summary of Quarterly Results

The table below sets forth selected financial data for the most recent eight quarters ended September 30, 2021:

(In thousands, except loss per share)

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Revenue Net Loss Loss per Share
Quarter-ended (Unaudited) (Unaudited) (Unaudited)
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	$	$	$
September 30, 2021	2,905	(1,121)	(0.01)
June 30, 2021	2,529	(2,457)	(0.02)
March 31, 2021	2,619	(2,276)	(0.02)
December 31, 2020	2,477	(2,928)	(0.03)
September 30, 2020	2,389	(1,755)	(0.02)
June 30, 2020	2,687	(1,540)	(0.02)
March 31, 2020	3,863	(1,508)	(0.10)
December 31, 2019	1,538	(4,079)	(0.26)

The Company’s revenues fluctuate quarterly depending on the level of Welcome Kit sales, which usually occur in bulk at the outset of a new customer contract or in phases as customers roll out Newtopia’s programs to its at-risk employees. Recurring engagement revenues, which follow Welcome Kit sales, are subject to seasonality with greater participant engagement at the start of the calendar year. As new clients onboard or as new phases within existing clients launch, Welcome Kit revenue is followed by recurring engagement revenues. The easing of COVID-19 restrictions in the United States in the second half of the year and the return to normal in-person biometric testing impacted the seasonality of revenue in 2021, with most of the onboardings having moved from the beginning of the year to the second half of 2021.

Strategic Growth Drivers and Outlook

Through the latter part of 2020 and the first five months of 2021, Newtopia underwent a delayed rollout of products to some of its clients due to the impact of COVID-19. Beginning in June 2021, however, this pattern reversed itself due to an increased and expanded marketing effort with one of the Company’s customers, a Fortune 50 health services client, along with the beginning of the return to more standard operating procedures in the United States with the easing of pandemic-related restrictions throughout the country.

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The recent positive client onboarding trajectory in the second quarter resulted in a return to growth for the Company in the third quarter of 2021, with the second-half of 2021 anticipated to show overall revenue growth versus the first six months of the year. That said, with Q3 2021 being exceptionally strong due to the significant increase in Welcome Kits sold mid-year unlike prior years when onboarding commenced early in the year, the Company could see more moderate revenue performance to round out Q4 and the full year 2021.

Importantly, Newtopia’s underlying business is very healthy as indicated by record levels of recurring participant engagement in the second quarter 2021 that resulted in record enrolment in Q3 of 37,000 participants. In order to continue to expand its market share and further enhance overall engagement levels, the Company will focus on three key pillars of growth.

First, Newtopia will look to expand its current client base beyond the existing customer pipeline. The addressable market for chronic disease prevention is significant and growing. The Centers for Disease Control reports that 90% of the $4.0 trillion annual healthcare costs paid for by health insurers in the United States are spent to cover chronic physical and mental health conditions. Clients are expected to be generated from one of three verticals, though there can be additional opportunities to expand beyond these identified target markets. United States-based verticals include the 140 million lives covered by self-insured employers, the 100 million lives covered by private insurers and 100 million lives covered by the public and government insurers such as Medicare and Medicare Advantage. The Canadian market also offers an additional 38 million individuals covered by government supplied health insurance. The Company is in its early stages in the Canadian market, having at present signed with a single prevention pilot program. In the large public and private health plans, Newtopia has been leveraging its world-class advisors to wire into many of these accounts in the third quarter. This pipeline of potential new customers is strong, with 2021 outreach setting the stage for growth in 2022. The Company is in the early stages of opening up new client channels by repackaging its current offerings that focus on self-insured employers to make such offerings accessible to public and private health plans as well.

The second core pillar of growth will come from improving product density within new markets or crossselling of current products within Newtopia’s existing customer base. This cross-selling of products will include those on the prevention side, including weight management and diabetes prevention offerings, as well as those that reverse and slow chronic disease, including hypertension and related heart health conditions, all of which are aimed at improving resiliency and building strong, long-term habits. In June 2021, the Company also added new mental health offerings to its disease prevention platform as a means by which to provide whole health care (physical and mental) to the participant. Opportunities to cross-sell mental health offerings also now offer incremental revenue opportunities, and the Company believes it has positioned itself very strongly for future customer expansion. Newtopia’s research and development team is actively looking into identifying other chronic disease risk identifiers that will continue to differentiate the Company from other health tech providers.

The third pillar of growth will be to increase enrollment rates with its existing customers. Newtopia’s customer contracts are often set up in phases where only a portion of the total at-risk population is offered to onboard onto the Company’s health tech platform initially. As a result of this phased, strategic approach to customer contracts, the Company has only rolled out to approximately 20% of the potential population across Newtopia’s entire customer base at present. While an improvement in sales is not guaranteed, expanding with this current customer base offers significant opportunity for potential incremental revenue for the Company.

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To support these growth efforts, Newtopia will focus on making strategic investments in its technology that increase the efficiency of its services and provide participants with improved user engagement and better leverage of its health coaches while still maintaining the high-level of individualized care provided to the Company’s client base. As the Company expands its participant base, it may also make a number of investments to scale the business further including, but not limited to: bringing on additional Inspirators to maintain the same level of one-on-one service; enhancing claims processing and reimbursement toolset; and improving its enterprise risk management integrations.

For 2021, a total of $2.2 million in capital expenditures are anticipated to be made on a new and CRM platform to support these efforts and promote the aforementioned pillars of growth, of which $1.7 million have been incurred year-to-date. The Company has added further planned enhancements to its customer web and mobile application platforms and anticipates decreasing technology hiring expenses leveraging more expert consultants to build out key elements of its upgraded technology platform. An annual licensing cost associated with the existing CRM platform of approximately $450,000 per year will also be eliminated once migration to the new technology platform is completed. Of note, the Company’s capital expenditures will be capitalized over their lifetime and any increases in expenses in the future will continue to be more modest than the Company’s growth in revenue and gross profits.

In light of the push in revenue growth towards the second-half of the year and Newtopia’s investment in an important technology upgrade, the Company does not anticipate exiting the year cash flow neutral from operations. That said, with a strong business development pipeline, the Company is striving to hit cash flow positive from operations in 2022.

Liquidity and capital resources

The table below sets forth the cash flows for the nine months ended September 30, 2021 and 2020:

Cash used in Operating activities Investing activities Financing activities Decrease in cash	Nine Months Ended September 30,	Nine Months Ended September 30,	Nine Months Ended September 30,
	2021	2020	Change
	$ (5,244,587) (1,660,373) 2,699,209	$ (2,625,225) (15,725) 915,454	$ % (2,619,362) 100% (1,644,648) 10459% 1,783,755 195%
	(4,205,751)	(1,725,496)	(2,480,255) 144%

The Company may be adversely impacted by uncertain market conditions and adverse results from operations. The Company may face challenges due to such factors as the loss of a major customer contract, entry of new competitors or significant changes in healthcare regulations. Should expected revenue growth not materialize, the Company may be required to seek additional financing through the sale of equity securities and/or through debt.

Cash

The cash used in operating activities during the nine months ended September 30, 2021 increased by 100% as compared to cash used in operating activities during the nine months ended September 30, 2020. This increase is mainly attributed to the lower revenues and higher administrative, selling and marketing

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expenses incurred during the three and nine months ended September 30, 2021 relative to the same periods ended September 30, 2020.

Cash used in investing activities relate to the investment by the Company on the acquisition and integration of a new CRM platform software. This project was launched during the fourth quarter of the 2020 fiscal year and is expected to be completed by the first half of 2022.

The cash inflow from financing activities during the three and nine months ended September 30, 2021 and 2020 represent the combination of the private placement of $2,545,000 debenture units on September 15, 2021 and the withdrawal of money from the credit facility during the second and third quarters of 2021, net of the lease payments on the right-of-use asset lease obligation.

Financing

On December 4, 2020, the Company closed an Operating Credit Line Agreement (the “ Facility ”) in the amount of $5,000,000. The Company may avail itself of the operating credit under the Facility by way of either Canadian dollars at prime lending rate plus 2.25% or United States dollars at the U.S. base lending rate plus 2.25%. The Facility matures on December 4, 2022 (the “ Maturity Date ”), is secured by all Newtopia property and is subject to certain covenants where the Company is required to meet minimum cash runway ratios.

In connection with the Facility, the Company was required to obtain a guarantee from Export Development Canada of 50% of the available Facility plus accrued and unpaid interest up to a maximum of 120 days (the “ Guaranteed Amount ”). The Company agreed to pay a guarantee fee of 2.35% of the Guaranteed Amount and guaranteed interest on outstanding amounts at the lender’s prime rate minus 0.05%. The initial guarantee covers the period from October 14, 2020 to September 30, 2021.

In accordance with the terms of the Facility, the lender received 210,526 Warrants (the “ Warrants ”) on December 4, 2020, with each Warrant entitling the lender to acquire one common share at a price of $0.95 at any time within the earlier of the Maturity Date and December 4, 2025.

On September 15, 2021 (the “ Closing Date ”), the Company closed a non-brokered private placement of subordinated and postponed 8.0% secured non-convertible debenture units (the “ Units ”) for gross proceeds of $2,545,000 (the “ Offering ”). The additional loan funding was a condition for refinancing the Company’s Facility and waiver of breaches by the Company of its cash runway covenant.

Each Unit is comprised of: (i) $10,000 principal amount of subordinated and postponed secured nonconvertible debentures of the Company (the “ Debentures ”); and (ii) 1,724 common share purchase warrants of the Company (each whole warrant, a “ Warrant ”, and collectively, the “ Warrants ”). Each Warrant is exercisable for one common share of the Company (a “ Common Share ”) until September 15, 2023 (the “ Expiry Date ”). The exercise price of Warrants shall be $0.58 per share during the first year following the closing date of the Offering (the “ Closing Date ”) and $0.75 per share following the one year anniversary of the Closing Date until the Expiry Date. The securities issued pursuant to the Offering are subject to a four month hold period that expires on January 16, 2022. An aggregate of 438,777 Warrants were issued in connection with the closing of the Offering.

The Debentures will mature on September 15, 2023 (the “ Maturity Date ”) and are secured by the assets of the Company and bear interest at a rate of 8.0% per annum payable quarterly in arrears in cash.

The Debentures cannot be redeemed for four months from closing of the Offering; however can thereafter be repaid in part or in full at any time subject to an early repayment fee equal to: (i) 6% of the principal

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amount of the Debenture if repayment occurs prior to the date that is six months following the Closing Date; (ii) 4% of such principal amount if repayment occurs following the date that is six months following the Closing Date but prior to the first anniversary of the Closing Date; (iii) 3% of such principal amount if repayment occurs following the first anniversary of the Closing Date but prior to the date that is six months following such first anniversary; or (iv) 2% of such principal amount if repayment occurs following the date is six months following the first anniversary of the Closing Date but prior to the Maturity Date.

Finders acting in connection with this Offering received a finder’s fee in the aggregate total amount of $108,500 and an aggregate 187,067 finder’s warrants exercisable for Common Shares until September 15, 2022 at an exercise price of $0.58 per share.

The Company agrees to pay an annual work and credit maintenance fee of 2% of the Principal Amount in cash, due and payable annually in advance.

On September 30, 2021, the Company refinanced the Facility for an increased revolving credit facility of $7.5 million, up from the $5.0 million in funding secured previously.

Issued and Outstanding Share Capital

The Company’s authorized capital consists of an unlimited number of Common Shares and unlimited number of Class A Preferred Shares, issuable in series. As of the date of this MD&A, the issued and outstanding shares consists of 100,492,786 Common Shares with no Class A Preferred Shares outstanding.

The Company has established a stock option plan (the “ Plan ”) for the benefit of its employees, directors, officers and consultants. The maximum number of options that may be granted under the Plan cannot exceed 18,114,870, representing 20% of the aggregate of issued and outstanding Common Shares on May 4, 2020 being the date the Company’s Common Shares were listed for trading on the TSX Venture Exchange. As of the date of this MD&A, there are 15,066,546 stock options outstanding under the Plan.

As of the date of this MD&A, there are outstanding 15,521,993 non-broker warrants to purchase up to 15,521,993 Common Shares and 1,707,803 compensation options to purchase up to 1,707,803 Common Shares.

Significant Accounting Policies and Estimates

The Company’s significant accounting policies and accounting estimates under International Financial Reporting Standards (“ IFRS ”) are contained in the unaudited Condensed Interim Financial Statements. Certain of these policies involve critical accounting estimates as they require us to make particularly subjective or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts could be reported under different conditions or using different assumptions. Actual results may differ from estimates under different assumptions and conditions. Significant judgments include income taxes and significant estimates include fair value measurements and the valuation process.

Related party transactions

The Company’s key management is comprised of the Board of Directors and current or former members of the executive team of the Company. Key management compensation for the three and nine months ended September 30, 2021 and 2020 consisted of the following:

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

On March 2, 2020, the Company and its CEO agreed to settle $400,000 of unpaid bonuses related to 2019 and prior years with 865,849 common shares and 188,571 stock options. The stock options are exercisable at $0.70 per common share until November 6, 2021. As at September 30, 2021, there was a remaining $425,000 of unpaid bonuses related to prior years due to the CEO in accounts payable and accrued liabilities (September 30, 2020 - $600,000). The shares were issued to the CEO in March 2021 and $528,168 was allocated from shares to be issued to Common Shares in the statement of equity.

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

On May 19, 2021, the Company issued 797,200 stock options to the directors of the Company for fees related to the year ended December 31, 2021. Each option vests quarterly over one year and is exercisable at a price of $0.47 per common share at any time up to May 19, 2026. The fair value of the stock options was determined at $215,536 using the Black-Scholes option pricing model with the following assumptions: risk free interest rate 0.96%, expected life of five years and expected volatility of 69.80%. Amortization of the fair value of the stock options during each of the three months and nine months ended September 30, 2021 in the amount of $138,283 was applied against directors’ fees owing for the three month period ended September 30, 2021.

Customer Concentration Risk

Newtopia’s client base is fairly concentrated with two companies comprising 84% of the total revenues. As new clients are added to the Company’s platform, Newtopia anticipates this customer concentration risk will reduce significantly. In the third quarter of 2021, Newtopia expanded its sales strategy into new health insurer verticals, public and private health plans and risk-bearing providers which if on-boarded would significantly broaden the Company’s total addressable market and diversify its customer concentration. A strong pipeline of new business and an active sales process provides the Company with confidence that it will be able to reduce its customer concentration as it evolves and expands its target customer.

Credit risk

Credit risk arises from the possibility that Newtopia’s customers may experience financial difficulty and be unable to fulfil their contract commitments. The Company’s exposure to credit risk is mitigated by its

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customer base which consists primarily of United States’ healthcare insurance payors or self-insured employers that are typically large established Fortune 500 companies with high credit quality. In addition, the Company mitigates exposure to credit loss by placing its cash with major financial institutions.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate based on the changes in foreign exchange rates. The Company enters into transactions to purchase and sell goods denominated in foreign currencies, which relate to revenues, cost of sales, expenses, cash, accounts receivable and accounts payable balances. Balances are subject to rate fluctuations.

Disclosure controls and procedures and internal controls over financial reporting

Disclosure controls and procedures

The CEO and CFO have designed or caused to be designed controls to provide reasonable assurance that (i) material information relating to the Company is made known to management by others, particularly during the period in which the annual and interim filings are being prepared; and (ii) information required to be disclosed by the Company in its annual and interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time frame specified in the securities legislation. Based on the evaluations, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were adequate and effective.

Internal controls over financial reporting

Newtopia has established internal controls over financial reporting to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of the financial statements for external purposes in accordance with IFRS. Management, including the CEO and CFO, have determined that as at September 30, 2021, the internal controls over financial reporting were effective.

Inherent limitations

It should be noted that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Given the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, including instances of fraud, if any, have been detected. These inherent limitations include, among other items: (i) that management’s assumptions and judgments could ultimately prove to be incorrect under varying conditions and circumstances; (ii) the impact of any undetected errors; and (iii) controls may be circumvented by unauthorized acts of individuals, by collusion of two or more people, or by management override.

Additional Information

Additional information relating to the Company can be found on SEDAR at www.sedar.com.

APPROVAL

The Board of Directors of the Company has approved the disclosure contained in this MD&A.

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