Newtopia Reports Third Quarter 2023 Financial Results

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Nov 16, 2023, 16:47 ET

Achieves EBITDA Positive for first full quarter in Company history
Decreases operating expenses by 52% year-over-year
Improves Gross Margin (non IFRS)^¹ by 1,100 basis points year-over-year
Quarterly conference call scheduled for Nov 16, 2023 at 5 pm ET

TORONTO, Nov. 16, 2023 /PRNewswire/ - Newtopia Inc. ("Newtopia" or the "Company") (TSXV: NEWU) (OTCQB: NEWUF), a tech-enabled whole health platform creating sustainable healthy habits that prevent, slow, and reverse chronic disease, today announced its third quarter 2023 financial results, operational highlights and the filing of the Company's quarterly financial statements. These results pertain to the three and nine months ended September 30, 2023. All amounts are expressed in Canadian dollars, unless otherwise noted.

Third Quarter 2023 Financial Highlights (vs. Q3 2022):

Revenue of $2.43 million, as compared to $2.65 million.
Gross profit margin¹of 66%, as compared to 55%.

"Newtopia's Q3 2023 was all about profitability, as we delivered our Company's first EBITDA-positive quarter", said Jeff Ruby, Founder and CEO of Newtopia. "These results are even more impressive in light of the difficult macroeconomic backdrop, and I could not be prouder of our entire team for their efforts in reaching this Company milestone a full quarter ahead of our internal plan. While revenues remained soft in line with market conditions, by keeping our operating expenses in check, we were able to achieve bottom line profitability, making Newtopia one of the very few profitable health technology companies."

Ruby continued, "During the quarter, we maintained our key innovator clients while pursuing new initiatives in both the U.S. and Canada. Regarding the former, as previously announced, Newtopia has launched an innovative Health Coaching Project (the Project) in partnership with a prominent philanthropic foundation, designed to positively impact chronic disease burden on a regional basis in the southeastern United States. The Project has commenced with patients of a large primary care provider with nearly 20 locations in two counties who have been identified through biometric and diagnostic data indicating they suffer from type-2 diabetes or hypertension and have a corresponding BMI greater than 30. The Project is positioned to expand to other providers and employers in the region, home to a population of more than 500,000 people, and offers a blueprint for the deployment of scalable, value-based primary prevention efforts with large, national employers, payors and providers across the United States."

Third Quarter 2023 Financial Results

Revenue for the three months ended Sep 30, 2023 was $2.43 million, compared to $2.65 million in the prior-year period. Enrollment fee revenue, or revenue from Welcome Kit sales, totaled 7% of revenue for the quarter, compared with 8% in Q3 2022.

Non-IFRS gross profit for the third quarter 2023 totaled $1.60 million, as compared to $1.45 million in the prior-year period. This calculation consists of Newtopia's revenue less direct expenses, which include the cost of Welcome Kits sold to new participants and labor costs associated with hiring and training the Company's coaching team of Inspirators (health coaches). As a percentage of revenue, gross profit year to date has totaled 61%, compared to 50% in the prior-year period.

Operating expenses^² for the three months ended Sep 30, 2023 totaled $1.6 million, compared to $3.3 million in the prior-year period and $1.8 million in Q2 2023. For the third quarter, EBITDA^³ totaled a gain of $21 thousand, compared to a loss of $1.8 million in the prior-year period and a loss of $0.4 million in Q2 2023.

The Company ended the third quarter 2023 with approximately $0.6 million in cash, with additional access to its revolving line of credit with a Canadian Schedule-1 bank and a previously announced $2.5 million debenture issuance that was extended to September 2024.

2023 Outlook

Newtopia anticipates that the Company will remain EBITDA positive in the fourth quarter.

Conference Call

The Company will host a conference call today at 5 p.m. Eastern Time to discuss the third quarter 2023 results in further detail. To access the conference call, please dial (877) 407-3982 (U.S.) or (201) 493-6780 (International) 10 minutes prior to the start time and reference Conference ID number 13741435. The call will also be available via live webcast on the investor relations portion of the Company's website located at investor.newtopia.com.

A replay of the conference call will be available through December 7, 2023 which can be accessed by dialing (844) 512-2921 (U.S.) or (412) 317-6671 (International) and entering the passcode 13741435. The webcast will also be archived on the Company's website.

About Newtopia

Newtopia is a tech-enabled habit change provider focused on disease prevention and reducing the cost of care for health insurers. As a provider of whole person care, we prevent, reverse and slow the progression of chronic disease while enriching mental health, resilience and overall human performance. Newtopia's programs leverage genetic, social and behavioral insights to create individualized prevention programs with a focus on type 2 diabetes, heart disease, stroke and weight. With a person-centered approach that combines virtual care, digital tools, connected devices and actionable data science, Newtopia delivers sustainable clinical and financial outcomes. To learn more, visit newtopia.com, LinkedIn or X .

Forward Looking Statements

This news release contains forward-looking information and forward-looking statements, within the meaning of applicable Canadian securities legislation, and forward looking statements, within the meaning of applicable United States securities legislation (collectively, "forward-looking statements"), which reflects management's expectations regarding Newtopia's future growth, results from operations (including, without limitation, future production and capital expenditures), performance (both operational and financial) and business prospects and opportunities. Wherever possible, words such as "predicts", "projects", "targets", "plans", "expects", "does not expect", "budget", "scheduled", "estimates", "forecasts", "anticipate" or "does not anticipate", "believe", "intend" and similar expressions or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved, or the negative or grammatical variation thereof or other variations thereof, or comparable terminology have been used to identify forward-looking statements. All statements other than statements of historical fact may be forward- looking information. Such statements reflect Newtopia's current views and intentions with respect to future events, based on information available to Newtopia, and are subject to certain risks, uncertainties, and assumptions. Material factors or assumptions were applied in providing forward-looking information. While forward-looking statements are based on data, assumptions and analyses that Newtopia believes are reasonable under the circumstances, whether actual results, performance or developments will meet Newtopia's expectations and predictions depends on a number of risks and uncertainties that could cause the actual results, performance and financial condition of Newtopia to differ materially from its expectations. Forward-looking statements are not a guarantee and are based on a number of estimates and assumptions management believes to be relevant and reasonable, whether actual results, performance or developments will meet Newtopia's expectations and predictions depends on a number of risks and uncertainties that could cause the actual results, performance and financial condition of Newtopia to differ materially from its expectations. Certain of the "risk factors" that could cause actual results to differ materially from Newtopia's forward-looking statements in this press release include, without limitation: the termination of contracts by clients, risks related to COVID-19 including various recommendations, orders and measures of governmental authorities to try to limit the pandemic, including travel restrictions, border closures, non-essential business closures, quarantines, self-isolations, shelters- in-place and social distancing, disruptions to markets, economic activity, financing, supply chains and sales channels, and a deterioration of general economic conditions including a possible national or global recession; and other general economic, market and business conditions and factors, including the risk factors discussed or referred to in Newtopia's disclosure documents, filed with the securities regulatory authorities in certain provinces of Canada and available at www.sedar.com including Newtopia's final long form prospectus dated March 30, 2020.

Should any factor affect Newtopia's in an unexpected manner, or should assumptions underlying the forward-looking information prove incorrect, the actual results or events may differ materially from the results or events predicted. Any such forward-looking information is expressly qualified in its entirety by this cautionary statement. Moreover, Newtopia does not assume responsibility for the accuracy or completeness of such forward-looking information. The forward-looking information included in this press release is made as of the date of this press release, and Newtopia undertakes no obligation to publicly update or revise any forward-looking information, other than as required by applicable law.

Non-IFRS Financial Measures

The Company's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). Management uses certain non-IFRS measures, which are defined in the appropriate sections of this press release, to better assess the Company's underlying performance. These measures are reviewed regularly by management and the Company's Board of Directors in assessing the Company's performance and in making decisions about ongoing operations. In addition, we use certain non-IFRS measures to determine the components of management compensation. We believe that these measures are also used by investors as an indicator of the Company's operating performance. Readers are cautioned that these terms are not recognized IFRS measures and do not have a standardized meaning under IFRS and should not be construed as alternatives to IFRS terms, such as net income.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Key Financial Measures and Schedule of Non-GAAP Reconciliations

Gross Profit Information ¹

	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
	$	$	$	$
Revenue	2,434,606	2,653,411	7,440,297	8,052,111
Cost of revenue	(1,040,987)	(1,201,016)	(3,501,369)	(4,060,793)
Gross profit	1,393,619	1,452,395	3,938,928	3,991,318
Add Amortization of intangible asset	206,514	-	619,537	-
Non-IFRS adjusted gross profit	1,600,133	1,452,395	4,558,465	3,991,318

Gross profit margin	57 %	55 %	53 %	50 %
Non-IFRS adjusted gross profit margin	66 %	55 %	61 %	50 %

Reconciliation of Total Operating Expenses to Adjusted Operating Expenses ²

	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
	$	$	$	$
Total expenses	2,167,150	3,700,414	7,316,306	10,098,771
Add (Subtract)
Share-based compensation	(158,584)	(140,314)	(466,887)	(404,112)
Depreciation of property and equipment	(1,386)	(11,891)	(4,965)	(39,674)
Depreciation of right-of-use asset	-	(46,192)	-	(138,579)
Interest and accretion expense	(246,556)	(79,163)	(593,979)	(276,884)
Interest on lease obligations	(5,221)	(17,485)	(26,784)	(60,747)
Finance charges	(145,024)	(70,269)	(376,990)	(147,816)
Amortization of deferred finance charges	(39,710)	(68,140)	(107,500)	(191,910)
Foreign exchange loss (gain)	17,302	5,534	(36,791)	28,998
Capitalized borrowing costs	-	-	-	67,000
Impairment of right-of-use asset	-	-	-	-
Loss on extinguishment of debt	(15,336)	-	(15,336)	-
Debt modification	6,380	-	6,380	-
Gain on settlement of related party payable	-	3,111	7,203	3,111
Adjusted operating expenses	1,579,015	3,275,605	5,700,657	8,938,158

EBITDA ³

	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
	$	$	$	$
Non-IFRS adjusted gross profit	1,600,133	1,452,395	4,558,465	3,991,318
Adjusted operating expenses	(1,579,015)	(3,275,605)	(5,700,657)	(8,938,158)
EBITDA	21,118	(1,823,210)	(1,142,192)	(4,946,840)

NEWTOPIA INC.
Condensed Interim Consolidated Statements of Financial Position (Unaudited)
As at September 30, 2023 and December 31, 2022
(Expressed in Canadian Dollars)


	September 30,	December 31,
	2023	2022
	$	$
Assets
Current assets
Cash	575,634	345,950
Trade and other receivables	1,774,627	1,557,640
Contract asset	15,330	190,000
Prepaid expenses and deposits	239,555	205,843
Inventories	117,420	325,571
Deferred costs	86,029	76,269
	2,808,595	2,701,273

Property and equipment	5,635	8,052
Intangible asset	2,615,826	3,235,363
	5,430,056	5,944,688
Liabilities
Current liabilities
Trade and other payables	1,889,258	2,584,039
Credit facility	4,362,850	4,823,545
Lease obligations	106,486	544,700
Deferred revenue	48,185	48,185
Debentures	2,550,619	2,409,103
	8,957,398	10,409,572
Debentures	2,762,368	1,068,772
	11,719,766	11,478,344
Equity/Deficit
Common shares	49,385,725	47,978,992
Contributed surplus	14,073,223	12,861,449
Deficit	(69,748,658)	(66,374,097)
	(6,289,710)	(5,533,656)
	5,430,056	5,944,688

NEWTOPIA INC.
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss (Unaudited)
Three and Nine Months Ended September 30, 2023 and 2022
(Expressed in Canadian Dollars)


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2023	2022	2023	2022
	$	$	$	$

Revenue	2,434,606	2,653,411	7,440,297	8,052,111
Cost of revenue	1,040,988	1,201,016	3,501,663	4,060,793
Gross profit	1,393,618	1,452,395	3,938,634	3,991,318

Operating expenses
Technology and development	446,504	1,259,596	1,891,276	2,909,996
Sales and marketing	317,544	645,452	1,094,976	2,158,597
General and administrative	814,967	1,370,557	2,714,405	3,869,565
Share‑based compensation	158,584	140,314	466,887	404,112
Depreciation of property and equipment	1,386	11,891	4,965	39,674
Depreciation of right‑of‑use asset	‑	46,192	‑	138,579
	1,738,985	3,474,002	6,172,509	9,520,523

Other expenses (income)
Interest and accretion expense	246,556	79,163	593,979	276,884
Interest on lease obligations	5,221	17,485	26,784	60,747
Finance charges	145,024	70,269	376,990	147,816
Amortization of deferred finance charges	39,710	68,140	107,500	191,910
Foreign exchange (gain)/loss	(17,302)	(5,534)	36,791	(28,998)
Capitalized borrowing costs	‑	‑	‑	(67,000)
Debt modification	8,956	‑	8,956	‑
Loss on settlement of related party payable	(3,111)	‑	(10,314)	‑
	425,054	229,523	1,140,686	581,359
Net loss and comprehensive loss	(770,421)	(2,251,130)	(3,374,561)	(6,110,564)

NEWTOPIA INC.
Condensed Interim Consolidated Statements of Changes in Equity (Deficit) (Unaudited)
Nine Months Ended September 30, 2023 and 2022
(Expressed in Canadian Dollars)


	Common Shares	Contributed Surplus	Deficit	Total
	$	$	$	$
Balance, December 31, 2022	47,978,992	12,861,449	(66,374,097)	(5,533,656)
Net loss and comprehensive loss	‑	‑	(3,374,561)	(3,374,561)
Share‑based compensation	‑	466,887	‑	466,887
Settlement of related party payable	‑	182,451	‑	182,451
March 2023 private placement offering, net of issuance costs	930,218	537,077	‑	1,467,295
March 2023 private placement offering, compensation options	(26,443)	26,443	‑	‑
Exercise of warrants	318,065	(59,766)	‑	258,299
Bonus Amendment Shares	78,262	‑	‑	78,262
Bonus Replacement Shares	15,300	14,651	‑	29,951
Bonus shares issued on July 2023 Debenture Offering	91,331	44,031	‑	135,362
Balance, September 30, 2023	49,385,725	14,073,223	(69,748,658)	(6,289,710)
Balance, December 31, 2021	45,177,120	11,652,200	(58,673,634)	(1,844,314)
Net loss and comprehensive loss	‑	‑	(6,110,564)	(6,110,564)
Share‑based compensation	‑	404,112	‑	404,112
Private Placement Offering of Units, net of issuance costs	2,624,495	511,839	‑	3,136,334
Compensation options issued to brokers	(83,230)	83,230	‑	‑
Adjustment of issuance costs on Debentures	‑	4,733	‑	4,733
Settlement of related party payable	‑	87,121	‑	87,121
Balance, September 30, 2022	47,718,385	12,743,235	(64,784,198)	(4,322,578)

NEWTOPIA INC.
Condensed Interim Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 2023 and 2022
(Expressed in Canadian Dollars)


	Nine Months Ended September 30,
	2023	2022
	$	$
Cash flows used in operating activities:
Net loss and comprehensive loss	(3,374,561)	(6,110,564)
Items not involving cash:
Depreciation of property and equipment	4,965	39,674
Depreciation of right‑of‑use asset	‑	138,579
Amortization of intangible asset	619,537	‑
Amortization of deferred finance charges	107,500	191,910
Capitalized borrowing costs	‑	(67,000)
Share‑based compensation	466,887	404,112
Accretion expense	353,530	124,184
Interest on lease obligations	26,784	60,747
Debt modification	8,956	‑
Loss on settlement of related party payable	(10,314)	‑
	(1,796,716)	(5,218,358)
Net change in non‑cash working capital
Trade and other receivables	(216,987)	(231,205)
Inventories	208,151	(260,852)
Prepaid expenses and deposits	(33,712)	55,880
Trade and other payables	(502,016)	1,043,867
Deferred revenue	‑	(10,248)
Contract asset/liability	174,670	(135,034)
	(2,166,610)	(4,755,950)
Cash flows used in investing activities
Purchase of property and equipment	(2,548)	(3,829)
Intangible asset development costs	-	(985,349)
	(2,548)	(989,178)
Cash flows from (used in) financing activities:
Credit facility withdrawals	4,706,984	8,028,277
Credit facility repayments	(5,167,679)	(5,478,831)
Credit facility financing costs	(117,260)	(81,831)
Repayment of lease obligations	(464,998)	(281,913)
Proceeds from private placement issuance of Units, net of issuance costs	1,467,295	3,136,334
Proceeds from issuance of debenture units, net of transaction costs	1,746,201	‑
Repayment of Debentures	(30,000)	‑
Proceeds from exercise of warrants	258,299	‑
	2,398,842	5,322,036
Increase/(Decrease) in cash	229,684	(423,092)
Cash, beginning of period	345,950	811,584
Cash, end of period	575,634	388,492

___________________________________
¹	Gross profit is defined as revenue, which is comprised of onboarding Welcome Kit revenue, ongoing engagement fees and success fees, less cost of sales, which is comprised of Welcome Kit costs, compensation expense for Inspirators and care specialists, genetic testing costs and the amortization of intangible assets. Gross margin percentage is calculated by dividing gross profit by total revenue for the defined period. Gross profit is considered by management to be an integral measure of financial performance and represents the amount of revenues retained by the Company after incurring direct costs. However, gross profit is not a recognized measure of profitability under IFRS. The Company defines Non-IFRS gross profit as gross profit plus amortization of intangible assets, for a true revenue less direct cost calculation and an "apples to apples" comparison vs. prior periods.
²	Adjusted operating expenses consist of all cash-based technology, sales and marketing and administrative expenses. Adjusted operating expense is not a measure of financial performance under IFRS and should not be considered a substitute for total operating expenses, which we believe to be the most directly comparable IFRS measure.
³	EBITDA stands for "earnings before interest, tax, depreciation and amortization". Although a commonly used financial metric, EBITDA is not a measure of financial performance under IFRS and should not be considered a substitute for loss from operations which we believe to be the most directly comparable IFRS measure.