Newtopia Reports Record Second Quarter 2020 Financial Results

Revenue and gross profit increase 67% and 96% year-over-year; records highest engagement levels in company history in Q2

TORONTOAug. 12, 2020 /CNW/ – Newtopia Inc. (“Newtopia” or the “Company“) (TSXV: NEWU), a tech-enabled disease prevention company focused on healthy habit change, today reported financial results for its second quarter 2020.

“Amidst one of the most challenging financial quarters on record, we are very pleased to report record levels of engagement that drove second quarter revenue of $2.69 million and gross profit of $1.41 million. In the first six months of 2020, we have already exceeded revenue and gross profit1 for all of 2019 – an important achievement as we commenced trading as a public company in the quarter. It is a testament to a fundamental shift taking place in the health care sector toward virtual care and disease prevention,” said Jeff Ruby, Founder & CEO.

All amounts are expressed in Canadian dollars.

Second Quarter 2020 Highlights (vs. Q2 2019):

  • Revenue increased 67%, to $2.69 million
  • Gross profit1 increased 96%, to $1.41 million
  • Gross margin percentage improves to 52%, up from 45%

Operational Highlights:

  • Year to date revenue ($6.55 million) and gross profit ($3.06 million) exceed full year 2019 revenue and gross profit1 measures ($6.11 million and $1.97 million respectively).
  • Experienced strongest engagement levels in company history despite the unprecedented global impact of COVID-19
  • Commenced trading as a public company on May 4, 2020 under the ticker NEWU on the TSX Venture Exchange

“Growth in engaged participants in Q2 was the strongest we’ve ever seen, as the Company saw its highest level of total engaged participants in the quarter,” adds Ruby. “While COVID-19 has impacted mobility and services globally, our tech-enabled service has allowed participants to enjoy convenient and uninterrupted access to our habit-change platform throughout the pandemic.”

Newtopia’s platform leverages genetic, social and behavioral insights to create individualized CDC accredited prevention programs with a focus on type 2 diabetes, heart disease, stroke and weight. The Company’s individualized approach combines virtual care, digital tools, connected devices and actionable data science to deliver sustainable clinical and financial outcomes.

“We have a growing list of clients who are Fortune 500 innovators across the banking and financial services, health care, IT services and consulting, manufacturing, technology and retail sectors,” adds Ruby. “The global pandemic has demonstrated the importance of our virtual care platform to prevent chronic disease and reduce the underlying risks and cost drivers of COVID-19. Our performance-based model and proven outcomes create aligned incentives to mitigate healthcare costs for risk bearing employers and insurers and help keep people healthy.”

____________________________

1 Gross profit is defined as revenue which is comprised of onboarding welcome revenue, ongoing engagement fees and success fees, less cost of sales which is comprised of welcome kit, compensation expense for inspirators and care specialists and genetic testing costs. 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.continue to access

Second Quarter 2020 Financial Results

Newtopia’s revenue during the three months ended June 30, 2020 was $2.69 million, an increase of 67% over the prior period ($1.61 million). This growth reflected a continuation of strong engagement fee revenue from the Q1 program launch with a highly innovative existing Fortune 500 partner.

Gross profit for the three months ended June 30, 2020 increased by 96% to $1.41 million over the prior year period ($0.72 million). Strong engagement revenue in the quarter offset cost of sales coming from higher Inspirator (coach) costs, as overall margin improved to 52% over the prior year level of 45%. Engagement fee revenue made up over 90% of the revenue mix in the current year quarter as compared to approx. 65% in the same period for 2019, accounting for the overall improvement in margin.

Adjusted operating expenses2 in the three months ended June 30, 2020 increased by 60% to $2.50 million over the prior year period ($1.57 million) as the Company continued to add technology, sales and marketing and administrative resources in support of longer-term growth. The Company continues to take a measured approach to adding expenses in support of growth, as increases in these line items has been more modest than growth in revenue and gross profit. Overall, the Company had an adjusted operating loss3 of $1.09 million in the quarter, compared to a loss of $0.85 million in the prior year period.

____________________________________

2 Adjusted operating expenses consist of all cash-based technology, sales and marketing and administrative expenses including employment expenses for these functions excluding equity-settled share-based compensation. 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 Adjusted Operating Loss consists of Gross profit less adjusted operating income. Adjusted operating loss 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.

Other Corporate Matters

Subsequent to the quarter end, the Company has secured a $500,000 Promissory Note from a Canadian Financial Institution. The note is payable on demand and bears interest at 12% per annum. The funds will be used to support ongoing general operating activities which include, but not limited to, the roll out of a recently announced client, marketing and awareness campaigns and continued investment in technology advancement.

About Newtopia
Newtopia is a tech-enabled disease prevention company focused on healthy habit change. Newtopia’s platform leverages genetic, social and behavioral insights to create individualized prevention programs with a focus on type 2 diabetes, heart disease, stroke and weight. Our person-centered approach combines virtual care, digital tools, connected devices and actionable data science to deliver sustainable clinical and financial outcomes. We serve some of the largest nationwide employers and health plans. To learn more, visit newtopia.com.

Forward Looking Information

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. These forward-looking statements include, among other things, clients continuing to offer Newtopia’s platform pursuant to agreements entered into. 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.

Neither 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.

Non-GAAP Financial Measures

The Company’s financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). Management uses certain non-GAAP 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-GAAP 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 GAAP measures and do not have a standardized GAAP meaning under IFRS and should not be construed as alternatives to IFRS terms, such as net income.

Neither 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.

NEWTOPIA INC.

Key Financial Measures and Schedule of Non-GAAP Reconciliations

Gross Profit Information 1

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

$

$

$

$

Revenue

2,687,055

1,608,658

6,550,041

3,369,704

Cost of sales

(1,276,626)

(888,903)

(3,485,183)

(1,965,088)

Gross profit

1,410,429

719,755

3,064,858

1,404,616

Gross margin

52%

45%

47%

42%

[1] Gross profit is defined as revenue which is comprised of onboarding welcome revenue, ongoing engagement fees and success fees, less cost of sales which is comprised of welcome kit, compensation expense for inspirators and care specialists and genetic testing costs. 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.

Reconciliation of Total Operating Expenses to Adjusted Operating Expenses [2]

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

$

$

$

$

Total operating expenses

2,950,467

2,442,762

6,112,977

5,146,086

Add (Subtract)

Stock-based compensation

(121,659)

(5,620)

(256,091)

(337,726)

Depreciation of property and equipment

(21,339)

(12,016)

(42,893)

(23,569)

Depreciation of right-of-use asset

(46,191)

(46,192)

(92,386)

(92,384)

Interest and accretion expense

(730,254)

(233,542)

(1,443,917)

Interest on lease obligations

(36,849)

(40,128)

(74,698)

(80,276)

Foreign exchange gain

(106,620)

(25,693)

96,491

(22,235)

Change in value of convertible      debenture derivative liabilities

(177,663)

(22,620)

(448,656)

(66,117)

Change in value of derivative liability

61,504

7,080

47,876

(2,476)

Loss on settlement of debt

(167,716)

Adjusted operating expenses

2,501,650

1,567,319

4,941,362

3,077,386

[2] Adjusted operating expenses consist of all cash-based technology, sales and marketing and administrative expenses including employment expenses for these functions excluding equity-settled share-based compensation. 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.

Adjusted Operating Loss [3]

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

$

$

$

$

Gross profit

1,410,429

719,755

3,064,858

1,404,616

Adjusted operating expenses

(2,501,650)

(1,567,319)

(4,941,362)

(3,077,386)

Adjusted operating loss

(1,091,221)

(847,564)

(1,876,504)

(1,672,770)

[3] Adjusted Operating Loss consists of Gross profit less adjusted operating income. Adjusted operating loss 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.

NEWTOPIA INC.
Condensed Interim Statements of Financial Position (Unaudited)
As at June 30, 2020 and December 31, 2019
(Expressed in Canadian Dollars)

June 30, 

December 31,

2020

2019

$

$

Assets

Current assets

Cash

1,182,547

2,386,341

Trade and other receivables

1,001,683

1,247,858

Prepaid expenses and deposits

265,788

462,605

Inventories

283,080

604,920

2,733,098

4,701,724

Property and equipment

155,326

186,376

Right–of–use asset

646,686

739,072

3,535,110

5,627,172

Liabilities

Current liabilities

Accounts payable and accrued liabilities

1,706,553

2,254,894

Lease obligations

221,884

156,340

Convertible debentures

3,993,758

Convertible debentures derivative liabilities

1,952,638

Retractable preferred shares 

7,420,265

Derivative liability

130,794

178,670

2,059,231

15,956,565

Non–current lease obligations

763,816

883,090

2,823,047

16,839,655

Equity/Deficit

Common shares

37,926,891

4,643,945

Shares to be issued

628,167

Preferred shares

13,011,033

Special warrants

9,164,731

Contributed surplus

8,452,295

5,172,192

Deficit

(46,295,290)

(43,204,384)

712,063

(11,212,483)

3,535,110

5,627,172

NEWTOPIA INC.
Condensed Interim Statements of Loss and Comprehensive Loss (Unaudited)
Three and Six Months Ended June 30, 2020 and 2019
(Expressed in Canadian Dollars)

Three Months Ended

Six Months Ended

June 30, 

June 30,

2020

2019

2020

2019

$

$

$

$

Revenue

2,687,055

1,608,658

6,550,041

3,369,704

Cost of revenue

1,276,626

888,903

3,485,183

1,965,088

Gross profit

1,410,429

719,755

3,064,858

1,404,616

Operating expenses

Technology and development

793,322

577,544

1,569,988

1,103,350

Sales and marketing

815,196

426,775

1,543,678

787,770

Administrative

893,132

563,000

1,827,696

1,186,266

Stock–based compensation

121,659

5,620

256,091

337,726

2,623,309

1,572,939

5,197,453

3,415,112

Other expenses (income)

Depreciation of property and equipment

21,339

12,016

42,893

23,569

Depreciation of right–of–use asset

46,191

46,192

92,386

92,384

Interest and accretion expense

730,254

233,542

1,443,917

Interest on lease obligations

36,849

40,128

74,698

80,276

Foreign exchange loss (gain) 

106,620

25,693

(96,491)

22,235

Change in value of convertible debenture derivative liabilities

177,663

22,620

448,656

66,117

Change in value of derivative liability

(61,504)

(7,080)

(47,876)

2,476

Loss on settlement of debt

167,716

327,158

869,823

915,524

1,730,974

Net loss and comprehensive loss

(1,540,038)

(1,723,007)

(3,048,119)

(3,741,470)

Loss per share

Basic and diluted

(0.02)

(0.11)

(0.08)

(0.24)

Weighted average number of common shares outstanding

Basic and diluted

62,468,935

15,535,919

39,002,427

15,535,919

NEWTOPIA INC.
Condensed Interim Statements of Changes in Equity (Deficit) (Unaudited)
Six Months Ended June 30, 2020 and 2019
(Expressed in Canadian Dollars)

Common
Shares

Shares To
Be Issued

Preferred
Shares

Special
Warrants

Contributed
Surplus

Deficit

Total

$

$

$

$

$

$

$

Balance, December 31, 2019

4,643,945

13,011,033

9,164,731

5,172,192

(43,204,384)

(11,212,483)

Net loss and comprehensive loss

(3,048,119)

(3,048,119)

Stock–based compensation

256,091

256,091

Conversion of Convertible Debentures

6,039,000

589,594

6,628,594

Modification of warrants

42,787

(42,787)

Conversion of retractable preferred shares

7,420,265

7,420,265

Conversion of preferred shares

13,011,033

(13,011,033)

Conversion of Special warrants

6,812,648

(9,164,731)

2,352,083

Settlement of debt

528,168

39,548

567,716

Exercise of warrants

99,999

99,999

Balance, June 30, 2020

37,926,891

628,167

8,452,295

(46,295,290)

712,063

Balance, December 31, 2018

4,643,945

13,011,033

2,701,639

(32,799,372)

(12,442,755)

Net loss and comprehensive loss

(3,741,470)

(3,741,470)

Stock–based compensation

337,726

337,726

Issuance of Special Warrants, net of cash issuance costs

4,289,416

4,289,416

Special Broker Warrants issued

(112,457)

112,457

Balance, June 30, 2019

4,643,945

13,011,033

4,176,959

3,151,822

(36,540,842)

(11,557,083)

NEWTOPIA INC.
Condensed Interim Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 2020 and 2019
(Expressed in Canadian Dollars)

Six Months Ended June 30,

2020

2019

$

$

Cash flows used in operating activities:

Net loss and comprehensive loss

(3,048,119)

(3,741,470)

Items not involving cash:

Depreciation of property and equipment

42,893

23,569

Depreciation of right–of–use asset

92,386

92,384

Stock–based compensation

256,091

337,726

Interest and accretion expense

233,542

1,443,917

Interest on lease obligations

74,698

80,276

Loss on settlement of debt

167,716

Change in value of convertible debenture derivative liabilities

448,656

66,117

Change in value of derivative liability

(47,876)

2,476

(1,780,013)

(1,695,005)

Net change in non–cash working capital

Trade and other receivables

246,175

(809,636)

Inventories

321,840

333,249

Prepaid expenses and deposits

196,817

30,516

Accounts payable and accrued liabilities

(148,341)

10,343

(1,163,522)

(2,130,533)

Interest paid

(1,944)

(1,163,522)

(2,132,477)

Cash flows used in investing activities

Purchase of property and equipment

(11,843)

(21,636)

(11,843)

(21,636)

Cash flows from (used in) financing activities:

Repayment of lease obligations

(128,428)

(81,443)

Issuance of Special Warrants, net of cash issuance costs 

4,289,416

Proceeds from exercise of non–broker warrants

99,999

(28,429)

4,207,973

Increase (decrease) in cash

(1,203,794)

2,053,860

Cash, beginning of period

2,386,341

1,428,558

Cash, end of period

1,182,547

3,482,418

Supplemental disclosure of cash flow information

Non–cash settlement of debt 

400,000

For further information: Chief Executive Officer: Jeff Ruby, jruby@newtopia.com; Media Contact: Rikki Bennie, rbennie@newtopia.com, 1.888.639.8181 ext 208

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