Newtopia Inc. — Management Reports 2023

Nov 16, 2023

==> picture [312 x 123] intentionally omitted <==

Management’s Discussion and Analysis

Dated: November 15, 2023

For the Three and Nine Months Ended September 30, 2023

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 months ended September 30, 2023. This MD&A is dated November 15, 2023 and should be read in conjunction with the annual audited financial statements and related notes for the year ended December 31, 2022 (the “ Annual Financial Statements ”) and the unaudited Condensed Interim Consolidated Financial Statements for the three and nine months ended September 30, 2023 (the “ Interim Consolidated 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 U.S., 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.

Page 1

The forward-looking information included in this MD&A is made at 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 shares are listed on the TSX Venture Exchange under the symbol “NEWU” and on the U.S. OTCQB® Venture Market under the ticker “NEWUF”.

The Company’s head office is located at 33 Bloor Street East, 5[th] Floor, Toronto, Ontario, M4W 3H1.

Newtopia is a tech-enabled whole health platform helping people create positive lifelong habits that prevent, slow, or reverse chronic disease while reducing healthcare costs for health insurers. The platform leverages genetic, social and behavioral insights to create individualized prevention programs with a focus on metabolic disease, diabetes, mental health challenges, hypertension, weight management and musculoskeletal disorders. With a person-centered approach that combines virtual care, digital tools, connected devices and actionable data science, Newtopia delivers sustainable clinical and financial outcomes.

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 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

Page 2

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, 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 personality-matched 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 continually optimize its philosophy of humans helping humans amplified by technology.

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, and access to a personalized mobile or web app. 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 genetic engagement and leveraging behavioral genetic testing primarily for habit change and engagement purposes. Newtopia’s genetic testing allows the Company to help participants understand if they have inherited genetic factors that may be having an impact on their physical or mental health and to personalize lifestyle recommendations by gaining a deeper understanding of how genes impact an individual’s risk. Newtopia’s behavior 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 genetically-driven 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.

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:

Page 3

1. Habit Change and Resiliency

2. Weight Management

3. Diabetes Prevention

4. Hypertension and Heart Health

5. Healthy Living with Diabetes

Corporate Update

In part due to macro-economic trends emerging in the post-pandemic world, Newtopia embarked on a multi-quarter, strategic plan in 2022 to prioritize profitability over a “growth at all cost” mindset. Although revenue has seen a slight decline as a result, Newtopia is proud to post its first EBITDA positive quarter in the Company’s history, with a full $1.8M of cost removed from its operating model compared to prior year. For clarity, the EBITDA calculation is essentially revenue minus all cost to serve and operating expenses (Newtopia’s opex categories being Technology, G&A, and Sales/Marketing).

The third quarter also included a flurry of positive financing news for Newtopia:

On July 14, 2023, the Company closed a non-brokered offering of subordinated and postponed 13% secured non-convertible debenture units for gross proceeds of $1,500,000. Each unit is comprised of: (i) $10,000 principal amount of subordinated and postponed secured non-convertible debentures maturing on July 14, 2025; and (ii) for no additional consideration, such number of common shares in the capital of the Company equal to 20% of the principal amount of debentures purchased divided by $0.065, being the closing market price of the common shares of the Company on the TSX Venture Exchange on June 29, 2023. Pursuant to the offering, the Company issued an aggregate of 4,615,366 common shares.

On September 7, 2023, several investors associated with the Company’s March 2023 equity raise collectively exercised 2,590,490 warrants (converting to common shares), equating to Company proceeds of $258,299.

On September 15, 2023, the Company amended $1,735,000 of its $2,545,000 subordinated and postponed 8.0% secured non-convertible debentures issued on September 15, 2021 (maturing on September 15, 2023), to extend the maturity date by one year and to amend the annual interest to a rate of 12%. As consideration, the holders that agreed to the amendments received, for no additional consideration, an aggregate of 1,505,682 of common shares in the capital of the Company. Holders of $780,000 of the $2,545,000 debentures agreed to a one-month extension to allow the Company additional time to raise replacement subordinated and postponed 12% secured non-convertible debenture units. The proceeds raised from the offering would be used to repay the $780,000 debentures extended by one month and maturing on October 15, 2023. The Company also repaid $30,000 for debentures that were not extended and matured on September 15, 2023.

On September 15, 2023, the Company also announced the non-brokered offering of subordinated and postponed 12% secured non-convertible debenture units mentioned above. Each Unit is comprised of $10,000 principal amount of subordinated and postponed secured non-convertible debentures of the Company and such number of common shares in the capital of the Company as is equal to 10% of the principal amount of Debentures purchased divided by $0.115, being the closing market price of the common shares of the Company on the TSXV on September 11, 2023. The Debentures will mature on the date that is 12 months from the closing date. On September 29, 2023 and October 16, 2023, the Company closed the first and final tranches of the offering for gross proceeds of $380,000 and $425,000 and issued 330,424 and 369,562 common shares in the capital of the Company, respectively. The aggregate proceeds from the offering of $805,000 was used to fully repay the $780,000 debentures on October 15, 2023.

Page 4

Trends

Management regularly monitors economic conditions and estimates their impact on the Company’s operations and incorporates these estimates in both short-term operating and longer-term strategic decisions.

The Company’s unaudited condensed interim consolidated financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that the Company will continue in operation for the foreseeable future and be able to realize the carrying value of its assets and discharge its liabilities in the normal course of operations. The Company has incurred a comprehensive loss of $3.4M for the nine months ended September 30, 2023, and as of that date has an accumulated deficit of $69.8M. On the positive side, the Company remains focused on profitability and has improved its bottom line significantly over the past year.

The Company’s ability to continue as a going concern is dependent upon its ability to obtain additional financing and/or achieve profitable operations in the future. There’s no certainty that future financing will be available to the Company, and these conditions indicate the existence of a material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern. As a counterpoint, Newtopia has demonstrated its ability to successfully raise multiple debt and equity bridge financing rounds over the past 18 months.

Selected Financial Information

elected Financial Information
Revenue Cost of revenue Gross profit Gross profit margin Operating expenses Operating loss Other expenses Net loss and comprehensive loss Basic and diluted loss per share	Three Months Ended September 30,
	2023 2022 $ $ 2,434,606 2,653,411 1,040,987 1,201,016 1,393,619 1,452,395 57% 55% 1,738,985 3,474,002 (345,366) (2,021,607) 428,165 226,412 (773,531) (2,248,019) (0.01) (0.02)	Change
		$ % (218,805) (8%) (160,029) (13%) (58,776) (4%)
		2% 4%
		(1,735,017) (50%) 1,676,241 (83%) 201,753 89% 1,474,488 (66%) 0.01 (50%)

Page 5

Nine Months Ended September 30,

Revenue Cost of revenue Gross profit Gross profit margin Operating expenses Operating loss Other expenses Net loss and comprehensive loss Basic and diluted loss per share	2023 2022 $ $ 7,440,297 8,052,111 3,501,369 4,060,793 3,938,928 3,991,318 53% 50% 6,172,509 9,520,523 (2,233,581) (5,529,205) 1,143,797 578,248 (3,377,378) (6,107,453) (0.02) (0.06)	Change
		$ % (611,814) (8%) (559,424) (14%) (52,390) (1%)
		3% 6%
		(3,348,014) (35%) 3,295,624 (60%) 565,549 98% 2,730,075 (45%) 0.04 (67%)

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 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. 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 should average participant weight-loss not meet a targeted range.

The Company’s revenue during the three and nine months ending September 30, 2023 declined by 8% compared to the same periods in the previous year. The Company posted a record number of quarterly engagements during the prior year periods and as a result, revenues from engagements are comparably lower in the current periods.

Gross Profit

Gross profit is comprised of revenue less direct expenses, which consists of the cost of Welcome Kits sold to new participants, the labour costs associated with the Company’s coaching team (or “Inspirators”) and amortization of the intangible asset, which consists of a new engagement platform developed by the Company. Amortization of the platform for the three and nine months ended September 30, 2023 was $207K and $620K respectively.

Gross profit for the three and nine months ended September 30, 2023 improved by 4% and 6%, respectively over the same periods in the previous year. However, on an apples to apples, year over year basis (true operations excluding amortization), the Company’s gross profit margin has increased year to date from 50% to 61%, a full 1100 basis point improvement. The Company has significantly improved profit margins

Page 6

by improving efficiencies amongst the front line coaching team and employing fractional coaches to better manage workflow.

Operating Expenses

The table below sets forth the details of operating expenses for the three and nine months ended September 30, 2023 and 2022:

30, 2023 and 2022:
	Three Months Ended September 30,
	2023	2022	Change
	$	$	$ %
Technology and development	446,504	1,259,596	(813,092) (65%)
Sales and marketing	317,544	645,452	(327,908) (51%)
General and administrative	814,967	1,370,557	(555,590) (41%)
Share-based compensation	158,584	140,314	18,270 13%
Depreciation of property and equipment	1,386	11,891	(10,505) (88%)
Depreciation of right-of-use asset	-	46,192	(46,192) (100%)
	1,738,985	3,474,002	(1,735,017) (50%)

			Nine	Months Ended September 30,
			2023	2022	Change
			$	$	$ %
Technology and development			1,891,276	2,909,996	(1,018,720) (35%)
Sales and marketing			1,094,976	2,158,597	(1,063,621) (49%)
General and administrative			2,714,405	3,869,565	(1,155,160) (30%)
Share-based compensation			466,887	404,112	62,775 16%
Depreciation of property and
equipment			4,965	39,674	(34,709) (87%)
Depreciation of right-of-use asset			-	138,579	(138,579) (100%)
			6,172,509	9,520,523	(3,348,014) (35%)

Operating expenses consist of administrative, technology & development, and sales & marketing expenses.

Technology and development expenditures during the three months ending September 30, 2023 decreased by 65% over the prior year as a result of headcount reductions and reduced vendor spend.

Sales and marketing expenses during the three and nine months ending September 30, 2023 decreased by 51% and 49% respectively over the prior year, as the Company downsized the team and cut marketing activities that failed to generate an ROI.

Page 7

General and administrative expenses during the three and nine months ended September 30, 2023 decreased by 41% and 30% over the prior year. The decrease was primarily driven by headcount reductions, exiting the Company’s expensive office lease, and reduced vendor spend.

Share-based compensation expenses during the three and nine months ended September 30, 2023 increased by 13% and 16% compared to prior year. The increase is due primarily to stock options granted in March and August 2023 as compensation to certain employees and the Company’s Board of Directors.

Depreciation of property and equipment during the three and nine months ended September 30, 2023 was lower by 88% and 87% respectively over prior year. The Company disposed of its office equipment after adopting a remote office model in the final quarter of 2022.

Other Expenses

The table below sets forth details of other expenses for the period ended September 30, 2023 and 2022:

	Three	Months Ended September 30,	Months Ended September 30,
	2023	2022	Change
	$	$	$ %
Interest and accretion expense	246,556	79,163	167,393 211%
Interest on lease obligations	5,221	17,485	(12,264) (70%)
Finance charges	145,024	70,269	74,755 106%
Amortization of deferred finance charges	39,710	68,140	(28,430) (42%)
Foreign exchange loss (gain)	(17,302)	(5,534)	(11,768) 213%
Capitalized borrowing costs	-	-	- 100%
Gain on settlement of related party payable	-	(3,111)	3,111
	428,165	226,412	201,753 89%

			Nine Months Ended September 30,
			2023	2022	Change
			$	$	$ %
Interest and accretion expense			593,979	276,884	317,095 115%
Interest on lease obligations			26,784	60,747	(33,963) (56%)
Finance charges			376,990	147,816	229,174 155%
Amortization of deferred finance charges			107,500	191,910	(84,410) (44%)
Foreign exchange loss (gain)			36,791	(28,998)	65,789 (227%)
Capitalized borrowing costs			-	(67,000)	67,000 (100%)
Gain on settlement of related party payable			(7,203)	(3,111)	(4,092) 132%
			1,143,797	578,248	565,549 98%

Page 8

Interest on lease obligations as of September 30, 2023 decreased by 70% and 56% over the prior year periods. The Company terminated its expensive headquarters lease when it adopted a remote office model in the final quarter of 2022. Interest expense during the three and nine months ended September 30, 2022 relates to the lease obligation prior to the termination of the lease, whereas interest as of September 30, 2023 relates to the Company’s settlement to the lessor for early cancellation of the lease. This settlement will be paid in full by December 2023, resulting in significant savings for the Company going forward.

Interest and accretion expense relates to the amortization of the debt portion of the subordinated, postponed and secured non-convertible debenture units. Interest and accretion expense for the three and nine months ended September 30, 2023 increased by 240% and 123%, respectively over the same periods of the previous year, reflecting debenture issuances in December 2022 and July 2023.

Finance charges relate to interest and fees connected to the credit facility and other loans. Finance charges for September 30, 2023 were higher by 106% and 155% over the prior year, driven by the rising macro interest rate environment and Company debenture issuances in December 2022 and July 2023.

The Company derives most of its revenue in U.S. currency. The Company’s U.S.-denominated assets include U.S. cash and 100% of its trade receivables. The strengthening USD over the nine months ended September 30, 2023 has resulted in a foreign exchange gain during the period.

Amortization of deferred finance charges relates to the fees paid to the EDC to guarantee 50% of the Company’s credit facility with a Schedule 1 Canadian bank and to the maintenance fees paid to the lenders of the debentures. The charges are deferred and amortized over their respective terms. Amortization for the three and nine months ended September 30, 2023 was lower by 42% and 44% respectively as compared to prior year. Amortization in the prior year includes closing costs related to the credit facility that became fully amortized in December 2022.

ully amortized in December 2022.
Total assets Total liabilities Deficit Total liabilities and deficit		As at
	September 30, 2023 $ 5,430,058 11,719,752 (6,289,694) 5,430,058	December 31, 2022 $ 5,944,688 11,478,344 (5,533,656) 5,944,688	**Change **
			$ % (514,630) (9%)
			241,408 2% (756,038) 14%
			(514,630) (9%)

Total Assets

Total assets as of September 30, 2023 decreased by 9% from December 31, 2022 due to lower inventory levels and an intangible asset (tech platform) that is being amortized over its useful life of four years.

Total Liabilities

The Company’s total liabilities as of September 30, 2023 decreased 2% from December 31, 2022.

Page 9

Summary of Quarterly Results

The table below sets forth selected financial data for the most recent eight quarters ended September 30, 2023:

(In thousands, except loss per share)

	Revenue	Net Loss	Loss per Share
Quarter-ended	(Unaudited)	(Unaudited)	(Unaudited)
	$	$	$
September 30, 2023	2,435	(774)	(0.01)
June 30, 2023	2,357	(1,239)	(0.01)
March 31, 2023	2,649	(1,373)	(0.01)
December 31, 2022	3,114	(1,590)	(0.01)
September 30, 2022	2,653	(2,251)	(0.02)
June 30, 2022	2,532	(2,232)	(0.02)
March 31, 2022	2,867	(1,628)	(0.02)
December 31, 2021	2,403	(1,795)	(0.02)

Newtopia’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 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. Success Fees are typically triggered by milestones such as a participant’s one year mark in the program.

Strategic Growth Drivers and Outlook

In order to continue to expand its market share and further enhance overall engagement levels, the Company is focusing 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 2023.

Page 10

The Company is also in the early stages of opening 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, including the Medicare Advantage market. Health plan funding is highly dependent on a 5-star quality system. Star ratings are released annually and reflect the experience of a health plan’s membership base. An increase in a half a star could result in millions of dollars in additional funding for the health plan. The Newtopia platform is therefore resonating with health plans’ ability to increase their star ratings by working directly with Newtopia to fill in gaps in care that ultimately result in improved star ratings and funding.

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 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 is to increase enrolment 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 30% of the potential population across Newtopia’s entire customer base at present. While an increase in sales isn’t guaranteed, expanding with this current customer base offers significant opportunity for potential incremental revenue for the Company.

Going forward, 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 a high-level of individualized care. 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.

Liquidity and capital resources

The table below sets forth the cash flows for the nine months ended September 30, 2023 and 2022:

iquidity and capital resources he table below sets forth the cash flows	for the nine months ended September 30, 2023 and 2022:	for the nine months ended September 30, 2023 and 2022:	for the nine months ended September 30, 2023 and 2022:
Cash generated by (used in) Operating activities Investing activities Financing activities Increase (decrease) in cash	Nine Months Ended September 30,
	2023 $ -1,926,160 -2,548 2,158,392 229,684	2022 $ -4,755,950 -989,178 5,322,036 -423,092	**Change **
			$ % 2,829,790 (59%) 986,630 (100%) -3,163,644 (59%)
			652,776 (154%)

Page 11

Cash used in operating activities during the nine months ended September 30, 2023 decreased by 59% as compared to September 30, 2022. This decrease is mainly attributed to the Company’s cost saving initiatives implemented during the first nine months of 2023.

Cash used in investing activities during the nine months ended September 31, 2022 relate to the investment by the Company on the acquisition and integration of a new engagement platform software. This development was completed in July 2022, and no development costs were incurred during the nine months ended September 30, 2023.

Cash inflow from financing activities during the nine months ended September 30, 2023 decreased by 59% over the same period of the previous year due mainly to $3.1M raised in April 2022 from a private placement offering of common shares and share purchase warrants.

Financing

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.

Below is a summary of recent, successfully raised financing activities:

Upon the maturity of Debentures on September 15, 2023, the Company amended $1,735,000 of the $2,545,000 8% Debentures to (a) extend the maturity date of the Debentures by one year to September 15, 2024; (b) bear interest at a rate of 12% for the period from September 15, 2023 until the new maturity date; and (c) include an early repayment fee equal to (i) six percent (6%) of the principal amount of the Debentures if such repayment occurs prior to March 15, 2024; or (ii) four percent (4%) of the principal amount of the 8% Debentures if such repayment occurs following March 15, 2024 but prior to September 15, 2024 (the "Amendment Debentures"). As consideration, the holders that agree to the amendments will receive, for no additional consideration, such number of common shares in the capital of the Company (the "Bonus Amendment Shares") as is equal to 10% of the principal of amount of Amendment Debentures held divided by $0.115, being the closing market price of the common shares of the Company on the TSXV on September 11, 2023. The Bonus Amendment Shares are subject to a four month hold period that expires on January 16, 2024. An aggregate of 1,505,682 Bonus Amendment Shares were issued to the holders of the $1,735,000 Amendment Debentures.

In addition to the above amendments to the 8% Debentures, $780,000 of the $2,535,000 8% Debentures was extended at the maturity date by one month until October 15, 2023 to allow the Company additional time to raise up to $2,545,000 in a non-brokered offering of replacement debenture units announced by the Company on September 15, 2023 (see (iii)) to repay any of the 8% Debentures that do not agree to the amendments provided under the Amendment Debentures.

On September 15, 2023, the Company repaid $30,000 of the $2,535,000 8% Debentures that matured on September 15, 2023.

On September 15, 2023, the Company announced a non-brokered offering (the "Replacement Offering") of subordinated and postponed 12% secured non-convertible debenture units (the "Replacement Units").

Page 12

Up to 255 Units may be issued pursuant to the Replacement Offering. Each Unit is comprised of: (i) $10,000 principal amount of subordinated and postponed secured non-convertible debentures of the Company (the "Replacement Debentures"); and (ii) for no additional consideration, such number of common shares in the capital of the Company (the "Bonus Replacement Shares") as is equal to 10% of the principal amount of Debentures purchased divided by $0.115, being the closing market price of the common shares of the Company on the TSXV on September 11, 2023. The Debentures will mature on the date that is 12 months from the closing date of the Replacement Offering and are secured by the assets of the Company and bear interest at a rate of 12% per annum payable quarterly in arrears in cash. The Replacement Debentures may be repaid in part or in full at any time subject to an early repayment fee equal to: (i) six percent (6%) of the principal amount of the Replacement Debentures if such repayment occurs prior to six months following the closing date; or (ii) four percent (4%) of the principal amount of the Replacement Debentures if such repayment occurs following the date that is six months following the closing date but prior to the maturity date.

The Company will pay to the holders of the Replacement Debentures an annual work and credit maintenance fee of 2% of the principal amount in cash to be paid on the date that is two months following the completion of the Replacement offering.

As consideration for certain services provided to the Company in connection with the Replacement Offering, the Company may pay a finder's fee comprised of a cash fee equal to 6% of the principal amount of Replacement Debentures purchased by subscribers that are introduced to the Company by each such finder and such number of compensation options to purchase common shares in the capital of the Company (the "Replacement Compensation Options") calculated based on 6% of the principal amount of Replacement Debentures purchased by subscribers that were introduced to the Company by each such finder divided by $0.115, being the closing market price of the common shares of the Company on the TSXV on September 11, 2023. Each Replacement Compensation Option is exercisable into one common share of the Company at $0.115 per share, subject to adjustments in certain events, until the date that is 24 months following the closing date.

On September 29 and October 15, 2023, the Company closed the first and second tranches of Replacement Units for gross proceeds of $380,000 and $425,000 respectively. The Debentures issued in connection with these tranches have a 12-month term, and the Company will pay to the holders a work and credit maintenance fee of 2% of the principal amount in cash payable on October 29 and November 15, 2023. The Company will defer and amortize the maintenance fee over the date the fee is due to the maturity date.

On July 14, 2023, the Company closed a non-brokered offering of subordinated and postponed 13% secured non-convertible debenture units (the "July 2023 Units"). Each July 2023 Unit is comprised of: (i) $10,000 principal amount of subordinated and postponed secured non-convertible debentures maturing on July 14, 2025; and (ii) for no additional consideration, such number of common shares in the capital of the Company equal to 20% of the principal amount of debentures purchased divided by $0.065, being the closing market price of the common shares of the Company on the TSX Venture Exchange on June 29, 2023. The Company issued 150 July 2023 Units for gross proceeds of $1,500,000 and pursuant to the offering issued 4,615,366 Common Shares.

On March 7, 2023, the Company closed a private placement offering of units (the "March 2023 Units") at a price of $0.07 per unit for gross proceeds of $1,534,960. Each March 2023 Unit is comprised of: (i) one Common Share in the capital of the Company; (ii) a first one-half of one Common Share purchase warrant (each whole first warrant, an "A Warrant"); and (iii) a second one-half of one Common Share purchase warrant (each whole second warrant, a "B Warrant"). Each A Warrant entitling the holder thereof to acquire

Page 13

one Common Share at an exercise price of $0.10 per A Warrant Share for a period of six months from the closing date of the offering. Each B Warrant entitling the holder thereof to acquire one Common Share at an exercise price of $0.15 per B Warrant Share for a period of 24 months from the closing date of the Offering. As consideration for certain services provided to the Company in connection with the offering, the Company paid an aggregate of $42,151 and issued 595,021 compensation options exercisable to acquire one Common Share at a price of $0.07 per Common Share for a period of 24 months following the closing date of the offering, as finders' fees to certain persons.

Credit Facility

On December 4, 2020, the Company closed an Operating Credit Line Agreement (the “ Facility ”) in the amount of $5,000,000 with a Schedule I bank (the “ Bank ”). The Company could 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 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 covered the period from October 14, 2020 to September 30, 2021. In October 2021 the guarantee was extended until September 30, 2022, and in October 2022 the guarantee was further extended until October 2024.

In accordance with the terms of the Facility, the lender received 210,526 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 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. In October 2021 the guarantee obtained from Export Development Canada was extended until September 30, 2022.

On June 29, 2022, the Company entered into a 2nd amendment of the Facility with the Bank to replace the cash runway ratio covenant with a covenant to maintain minimum total liquidity thresholds for the months from May to September 2022 and to reduce the cash runway ratio covenant for the month of October 2022.

The Company was not in compliance with the covenants of the Facility from September 30, 2022 to the date of this MD&A. On November 1, 2022, the Bank agreed to not accelerate repayment of the Facility on the conditions that the Company receives minimum capital injections of $700,000 by November 11, 2022 and $2,500,000 by December 15, 2022. The maximum credit on the Facility was capped at $4,880,760. Any injection in the form of debt financing would be fully subordinated to the Facility.

On May 15, 2023, the Bank issued a letter to the Company with the following amendments i) the Company was to provide evidence by May 31, 2023 of its intention to raise capital no less than $1,500,000 by June 30, 2023, ii) the Facility was to be repaid on or prior to November 30, 2023, iii) effective May 23, 2023, the Company is to pay 15% annual interest on advances in excess of the lesser of the borrowing base and the maximum limit of the Facility which is adjusted from $4,880,760 to $4,900,000, and iv) pricing on the Facility is increased by 3%, payable in kind and subject to ratable forgiveness tied to full repayment of the loan before November 30, 2023. On July 14, 2023, the Company successfully raised $1.5M from a private

Page 14

placement of debenture units (See above). The Bank and Newtopia continue to work together and provide mutual updates on a regular basis, and as of the date of this MD&A no additional measures have been taken.

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 158,335,300 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. On September 14, 2022, the Company amended and restated the existing plan. Under the new plan, the maximum number of options that may be granted cannot exceed 23,598,557, representing 20% of the aggregate of issued and outstanding Common Shares on September 14, 2022, the date of the annual and special meeting of shareholders of the Company. As of the date of this MD&A, there are 18.8M stock options outstanding under the Plan.

As of the date of this MD&A, there are outstanding 33.1M non-broker warrants to purchase up to 21.7M Common Shares and 2.6M compensation options to purchase up to 2.6M 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 Consolidated 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 estimates include fair value measurements and the valuation process.

New Accounting Standards

There are no pending IFRS standards and interpretations that are expected to have a material impact on the Company’s unaudited Condensed Interim Consolidated Financial Statements.

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, 2023 and 2022 consisted of the following:

	Three Months	Ended September 30,	Nine Months Ended	Nine Months Ended
September 30,
	2023	2022	2023	2022
	$	$	$	$
Salaries, fees and short-term benefits	668,697	824,526	2,285,514	2,458,408
Share-based benefits	198,980	160,282	628,587	417,846
	867,677	984,808	2,914,101	2,876,254

Page 15

On March 10, 2023, the Company issued 2.2M stock options to the directors of the Company for fees related to the three months ended December 31, 2022 and year ended December 31, 2023 of $33,125 and $132,500, respectively. Each option vests quarterly over one year and is exercisable at a price of $0.10 per common share at any time up to March 3, 2028. The fair value of the stock options was determined at $198,000 using the Black-Scholes option pricing model with the following assumptions: risk free interest rate 3.16%, expected life of 5 years and expected volatility of 124.19%.

As of September 30, 2023, bonuses payable to members of the Company's executive team and to the directors were $176,200 and $157,290, respectively (September 30, 2022: $477,678 and $103,328, respectively).

Financial Instruments and Risk Management

The Company may be exposed to risks of varying degrees of significance that affect its ability to achieve its strategic objectives. The main objectives of the Company’s risk processes are to ensure that the risks are properly identified and managed within Board approved policies and guidelines. The principal risks to which the Company is exposed to are as follows:

Customer Concentration Risk

Newtopia’s client base is currently fairly concentrated with two significant accounts comprising 89% of total revenues.

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 customer base, which consists primarily of US 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.

Page 16

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 of September 30, 2023, 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.

Page 17