ADYA INC. — Management Reports 2021

Apr 30, 2021

Adya Inc.

Management’s Discussion and Analysis

For the year ended December 31, 2020

Adya Inc. MD&A December 31, 2020 Page 1 of 16

Management’s Discussion and Analysis For the year ended December 31, 2020 Dated April 29, 2020

This document provides management’s discussion and analysis (“MD&A”) of our financial condition as at, and results of operations for, the year ended December 31, 2020 compared to 2019. This MD&A is intended to help the readers, including shareholders and stakeholders, understand the dynamics of Adya’s business and the key factors underlying its financial results, and should be read together with our audited annual consolidated financial statements and accompanying notes (“Annual Financial Statements”) for the year ended December 31, 2020.

The Annual Financial Statements, along with the comparative periods presented in them, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and the Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). All amounts in this document are in Canadian dollars.

Throughout this document, unless otherwise specified or the context otherwise indicates, the “Company”, “Adya”, “we”, “us” and “our” refer to Adya Inc. and its subsidiaries.

Additional information on Adya is available and can be found on Adya’s website at www.adya.ca or through the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and includes the Company’s other recent financial reports, securities and continuous disclosure documents.

The Annual Financial Statements and information and analysis in the MD&A includes amounts and conclusions based on informed judgments and estimates of the expected effects of current events and transactions with appropriate consideration as to materiality. In addition, in preparing the financial information, management must interpret the financial information, make determinations as to the relevancy of information to be included, and make estimates and assumptions that affect reported information.

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FORWARD-LOOKING STATEMENTS

This MD&A is dated April 30, 2021 and may contain forward-looking information related to our future financial condition and results of operations and anticipated future events and circumstances. This information is based on our estimates about the conditions in which we operate and our beliefs and assumptions regarding these conditions. Unless otherwise indicated, the forward-looking information in this MD&A describes our expectations on the date of this MD&A. In some cases, forward-looking information may be identified by words such as “anticipate”, “believe”, “could”, “expect”, “plan”, “seek”, “may”, “intend”, “will”, “forecast” and similar expressions.

This information is subject to important risks and uncertainties, which are difficult to predict, and is based on and subject to assumptions, which may prove to be inaccurate. Some of the risk factors that could cause results or events to differ materially from current expectations include but are not limited to: increasing competition; ability to achieve strategies and plans; timing of product introductions; ability to manage our cost structure; general economic and business conditions; demographic changes; reliance on systems; changing technology; demand for our products and services; changing regulations; dependence on key suppliers; reliance on key personnel; legal contingencies and changes in laws; and tax related risks. Some of these risk factors are largely beyond our control. Should any risk factor affect us 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. Unless otherwise indicated, forward-looking information does not take into account the effect that transactions, non-recurring or other special items, announced or occurring after this information is provided may have on our business. All of the forward-looking information reflected in this document and the documents referred to within are qualified by these cautionary statements. There can be no assurance that the results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences for us. Except as may be required by Canadian securities laws, we disclaim any intention and assume no obligation to update or revise any forward-looking information, even if new information becomes available, as a result of future events or for any other reason. Readers should not place undue reliance on any forward-looking information as various factors could cause actual future results, conditions or events to differ materially from expectations or estimates expressed in these forward-looking statements.

See the section titled “Definitions – Additional GAAP Measures and Non-GAAP Measures” for descriptions of Operating Income (loss), EBITDA, Adjusted EBITDA and the reconciliation of EBITDA and Adjusted EBITDA to net income (loss) for the periods presented. These items do not have a standardized meaning under IFRS and therefore are unlikely to be comparable to similar measures presented by other companies. EBITDA and Adjusted EBITDA are non-GAAP measures which should not be considered as a substitute or alternative for GAAP measures.

Adya Inc. MD&A December 31, 2020 Page 3 of 16

COMPANY OVERVIEW

Adya Inc. (“Adya” or the “Company”) is a publicly traded holding company and is currently a strategic shareholder in telecommunications and technology companies. With offices located in Toronto, Canada, the Company is focused on diversifying its portfolio through the acquisition of accretive businesses, with recurring revenue, high shareholder value, and annuity revenue streams. Adya has been publicly traded on the TSX Venture Exchange (TSX.V: ADYA) since 1997.

As at December 31, 2020, Iris Technologies Inc. (Iristel) owned approximately 90% of the Company’s common shares and is the controlling shareholder of the Company.

Telecom Investments

Adya’s telecommunication investments services include full-service long distance, internet, business services and re-sale wireless services. It is one of the largest alternative telecommunications providers to both residential and business customers. Adya’s wholly owned subsidiaries are registered with the Canadian RadioTelevision and Telecommunications Commission (“CRTC”) as a licensed Class “A” Telecom Carrier and with the American Federal Communications Commission (“FCC”).

COVID-19

Adya has managed the impacts on its operations related to the COVID-19 crisis to ensure that it could pursue its operations and serve its customers as an essential service provider in the areas to where it operates. Given the quick spread of COVID-19 and an increase in countries imposing restrictions on movement, business and personnel required more time at home and more usage of data for work and leisure, resulting in less impact on the Telecom sector than others given the need to stay connected remotely. Short term negative impact has been on the travel segment of our business (Iroam) however this has partially been offset by an increase in revenue from Casual Calling to stay connected while maintaining social distance. The Company is also undertaking to launch new products and services to replace lost revenues. As a technology company, Adya already had in place the ability for our workforce to work remotely. However, our staff do require access to our data centers and network for maintenance. Additionally, customer equipment needs to be configured and tested before it is shipped. These activities are now either performed through staff rotation to minimize contact or at employee homes.

In the longer term there are some clear areas where Adya will be focusing its energy. Our Enterprise customer base is already undergoing a notable shift in work patterns to working from home. As such, our customers will be looking for solutions which allow them to collaborate remotely while ensuring security of data with remote workers. These are areas we are further investing in to help serve new emerging customer needs as a result of COVID. Our existing vendor and customer relationships as well as investments in developing such solutions means we will be well positioned to serve the new needs of our existing and new customers.

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SELECTED ANNUAL INFORMATION

The following is selected financial data derived from the audited consolidated financial statements of the Company as at December 31, 2020, December 31, 2019 and December 31, 2018 and for the years then ended.

	Year ended December 31, 2020	Year ended December 31, 2019	Year ended December 31, 2018
Total revenues	$ 5,730,374	$ 7,017,833	$ 8,507,837
Total loss	$(783,648)	$(192,760)	$(60,600)
Net lossper share – basic	$(0.033)	$(0.040)	$(0.026)
Net loss per share – diluted	$ (0.033)	$ (0.040)	$ (0.026)
	As at December 31, 2020	As at December 31, 2019	As at December 31, 2018
Total assets	$1,794,134	$1,865,030	$2,117,983
Total non-current financial liabilities	$ 739,999	$ 710,713	$ 2,190,454
Distribution or cash dividends	$nil	$nil	$nil

FINANCIAL REVIEW

The following discussion of the Company’s financial performance is based on the consolidated financial statements for the year ended December 31, 2020.

As at December 31, 2020, the Company had a cash and cash equivalents balance of $93,067 (December 31, 2019 - $87,728) and total current assets of $968,066 (December 31, 2019 - $1,087,959).

Long term assets consisted of right-of-use assets (for leased premises), property and equipment and intangible assets. As at December 31, 2020, long term assets totaled $826,0687 up from $777,071 at December 31, 2019 as the result of additional ROUs recognized during the year.

Current liabilities increased to $2,263,763 at December 31, 2020 from $1,580,298 at December 31, 2019, mainly as a result of an increase in trade payables and note payable to Iristel.

As at December 31, 2020, long term liabilities totaled $739,999 (December 31, 2019 – $710,713) and consisted of a $261,423 note payable due to Iristel (2019 - $350,000), lease liabilities of $438,576 (December 31, 2019 - $360,713) and CEBA loan obtained of $40,000 (December 31, 2019 – nil).

Revenue for 2020 was $5,730,374 compared to $7,017,833 for 2019. Net loss and comprehensive loss for 2020 was $783,648 compared to $192,760 in 2019.

Revenue

Revenues are earned from the access to, and the use of, Adya’s telecommunications network and infrastructure. Numerous types of telecommunications services are sold and packaged in different forms, which includes casual calling, subscriptions, wireless solutions, wholesale, Business Services, VoIP Home Phone, and prepaid calling cards.

Adya Inc. MD&A December 31, 2020 Page 5 of 16

The decline in revenue is mainly attributed to the decline in casual calling and long-distance, as these markets have continued to be highly competitive. Customers are receiving strong offers from their existing providers to stay with low long-distance rate calling offers and there has been a transition to other technologies for long distance communication. The decrease is in line with market trends.

The Company is also working to add to other product lines and services to offer more opportunities for additional sales and gross margin in 2021 and beyond.

Outlook

On the product and marketing side, the Company will focus on growing the business services unit by targeting niche and underserved customers while utilizing the Company’s Metaswitch that offers carrier-grade quality services. The Company will also, establish distribution partners outside Ontario and Quebec with an engagement program for agents and wholesalers.

Additionally, to offset the declines in LD, the Company has recently (in 2019) interconnected with both Bell and Rogers to offer Internet services. Residential product focus for 2021 will be offering improved Internet (DSL & Cable), along with HomePhone/Internet/IPTV bundle packages. The bundle offerings allow us crosssell to our large embedded customer base in Ontario & Quebec, and attract a different type of customer demographics than our current base.

Continuing into 2021, the Company is leveraging its Philippines call centre to increase the focus on providing onshore and offshore outsourcing for inbound and outbound call center services. This includes customer service, telemarketing, customer retention, billing collection, and technical support.

Gross Margin

Gross Margin
	2020	2019	%change
Gross margin	2,409,370	3,162,252	(24%)
Gross marginpercentage	42%	45%	(3%)

Operating expenses

Operating expenses
	2020	2019	%
General and administrative	$ 2,167,893	$ 2,635,652	(18%)
Marketing and selling	310,422	312,828	(1%)
Development and technical support	327,915	335,542	(2%)
Depreciation and amortization	294,527	171,035	72%
	$3,100,757	$3,455,057	(10%)

General & administration expenses (consisting of corporate costs, management and administrative personnel, legal, audit, rent, and office expenses) decreased mainly as the result of a reduction in salaries compared to 2019.

The marketing & selling expenses consisted of advertising, marketing and sales commissions and was comparable to the expense in 2019.

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Development & technical support (consisting of IT wages and technical support) changes are due to number of customer service representatives required to support the business.

Depreciation and amortization, a non-cash expense, increased compared to prior periods due to the addition of the depreciation of the right-of-use assets related to the office leases.

Other items

Finance charges primarily consists of interest and accretion expense on the leases, debentures and notes payable.

1 See “Definitions – Additional GAAP Measures and Non-GAAP Measures” for descriptions of Operating Income (loss), EBITDA and Adjusted EBITDA, and a reconciliation of EBITDA and Adjusted EBITDA to net income (loss) for the periods presented.

DEFINITIONS - ADDITIONAL GAAP MEASURES AND NON-GAAP MEASURES

The Company measures the success of its strategy through certain key performance indicators, which are outlined below. The following key performance indicators are not measurements in accordance with IFRS and should not be used as an alternative to net income or any other measure of performance under IFRS.

EBITDA and Adjusted EBITDA

We define EBITDA as earnings before interest costs, taxes, depreciation and amortization. Adjusted EBITDA also excludes acquisition costs, settlement charges and impairment charges. EBITDA and Adjusted EBITDA, which are non-GAAP financial measures, are commonly used measures used in the telecommunications industry to assist in understanding and comparing operating results. EBITDA and Adjusted EBITDA are reviewed regularly by management and our Board of Directors in assessing performance and in making decisions regarding the ongoing operations of the business and the ability to generate cash flows. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with IFRS. EBITDA and Adjusted EBITDA are not measures of financial performance nor do they have a standardized meaning under IFRS. In evaluating these measures, investors should consider that the methodology applied in calculating such measures may differ among companies and analysts. We have reconciled EBITDA and Adjusted EBITDA to their most comparable measure calculated in accordance with IFRS, being net income (loss) in the tables below.

Below is a reconciliation of “EBITDA” to net loss for the years presented:

	2020	2019	**% change **
Net loss	$(783,648)	$(192,760)	307%
Income tax (recovery)	(1,458)	(3,838)	(62%)
Finance costs, net	99,391	167,075	(41%)
Depreciation and amortization	294,527	171,035	72%
EBITDA	$(388,272)	$149,188	(360%)

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QUARTERLY RESULTS SUMMARY

The following table sets forth certain information for 2020, as well as historical periods. The operating results for any quarter are not necessarily indicative of results for any future period:

Summary of results	2020	2020	2020	2020	2019	2019	2019	2019
($000’s)	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Revenue Telecommunication costs Gross profit Gross margin Operating expenses General and administration Marketing and selling Development and technical support Depreciation and amortization Operating income (loss) Finance costs, net Gain on settlement of debt Other income Loss before income taxes Income tax (recovery) Net loss	1,299 717	1,356 821	1,500 901	1,575 882	1,598 899	1,735 939	1,830 985	1,855 1,033
	582 45% (8) 80 80 110	535 39% 514 81 81 62	599 40% 826 75 82 61	693 44% 836 74 85 61	699 44% 614 74 81 88	796 46% 667 76 80 26	845 46% 673 77 81 26	822 44% 681 86 94 31
	262	738	1,044	1,056	857	849	857	892
	320 44 - (8)	(203) 17 - -	(445) 19 - -	(363) 19 - -	(158) 19 (253) (14)	(53) 46 - -	(12) 46 - (1)	(70) 56 - (3)
	284 1	(220) -	(464) -	(382) -	90 4	(99) -	(57) -	(123) -
	283	(220)	(464)	(382)	86	(99)	(57)	(123)
EBITDA	438	(141)	(384)	(302)	189	(27)	16	(35)
Adjusted EBITDA	438	(141)	(384)	(302)	189	(27)	16	(35)

Adya Inc. MD&A December 31, 2020 Page 8 of 16

LIQUIDITY AND CAPITAL RESOURCES

The Company’s cash flows from operating, investing and financing activities, as presented in the consolidated statements of cash flows, are summarized in the following table:

	2020	2019	**+/- **	**% Change **
	$	$
Cash provided (used) by operating activities	(226,914)	(127,891)	(99,023)	77%
Cash used in investing activities	(19,170)	(2,758)	(16,412)	595%
Cashprovided(used)byfinancingactivities	251,423	(405,650)	657,073	(162%)
Increase(decrease)in cash	5,339	(536,299)	541,638	(101%)

*Working capital is defined as current assets less current liabilities, and current ratio is calculated as current assets as compared to current liabilities.

Cash flows from operating activities decreased mainly due to the increase in net loss offset by the positive impact of changes in non-cash working capital items, mainly accounts payable.

Cash used in investing activities was for the purchase of equipment.

Cash from financing activities of $251,423 is comprised of $411,423 of proceeds from the note payable from Iriste and a $40,000 CEBA loan. These proceeds were offset by finance costs of $22,020 and repayments of debentures in the amount of $200,000.

The Company’s monthly burn rate on average, at its current operating level, will not be sufficient to ongoing operations to cover short-term and long-term operational needs as well as any capital costs. As such, the Company will need additional financing for costs related to operations, and to invest in its growth strategy. The Company is currently addressing its liquidity concerns by proactively planning future financings through related party loans, the sale of debt and (or) equity. The Company has been successful in the past at raising necessary funds but the timing and ability to do so will depend on the liquidity of the financial markets, economic conditions, as well as the acceptance of investors to small cap companies. There can be no guarantee that the Company will be able to secure any required financing.

The primary need for liquidity is to fund working capital requirements of the business. The primary source of liquidity has primarily been through cash generated from operations and supplemented by private financings and loans from its controlling shareholder, Iristel.

The Company has the following financial commitments:

• i. Loan payable of $40,000 (Canada Emergency Business Account loan). Up to $10,000 of that amount will be eligible for loan forgiveness if $30,000 is fully repaid on or before December 31, 2022. If the loan is not repaid by December 31, 2022, it will be extended for an additional 3-year term bearing an interest rate of 5% per annum. The loan can be repaid at any time without penalty and no principal payments are required until December 31, 2025 when the full amount of the loan is due. Monthly interest must be paid during the additional 3-year term.

• ii. Unsecured promissory note in the amount of $761,423, that bear interest of 7.5% per annum (calculated monthly) and due on November 19, 2021. $500,000 of the notes are due on November 19, 2021, and $261,423 comes due September 9, 2022.

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• iii. On December 1, 2019, the Company entered into a 33-month lease agreement for office space. Under the lease, the Company is required to pay a monthly rent based on the number of desks occupied (currently $7,000/month).

• iv. On January 22, 2019, the Company renewed an existing lease for a further 5 years, commencing March 1, 2019. Under the lease, the Company is required to pay an initial monthly rent of $14,993, with an annual increase of 2%.

• v. Subsequent to December 31, 2020, the Company borrowed an additional $63,906 from its grid promissory note, bearing interest at 7.5% per annum, payable November 19, 2021.

The Company has no capital expenditure commitments and has the ability to reduce or increase other discretionary costs depending on the level of available funds.

Overall, given working capital at December 31, 2020, the Company will require additional funding to be able to fulfil its operating requirements for 2020 and beyond.

RELATED PARTY TRANSACTIONS

The Company rented its former head office space from a company owned by a former Director of the Company and a vendor of G3 Telecom, and paid rent in the year ended December 31, 2020 in the amount of $nil (2019 - $145,000).

The Company defines key management personnel as its CEO, CFO and directors. Key management personnel compensation is as follows:

		2020		2019
Wages,salaries,director fees and other benefits	**$ **	23,167	$	290,514

In addition to their salaries and allowances, key management personnel also participate in the Company's share option program and short-term health and dental benefits. Certain executive officers are subject to a mutual term of notice of six months. Upon resignation at the Company's request, they are entitled to certain termination benefits, either cash or a percentage of gross salary.

Directors received compensation for their services as directors of the Company. Additionally, the directors are able to participate in the Company’s share option program. Outside of directors’ fees, certain former directors or companies affiliated with these former directors also participated in transactions with the Company for legal services and received amounts totaling nil (2019 - $36,134), which is the amount agreed to by the parties.

The Company rented its former head office space from a company owned by a former Director of the Company, and incurred rent in the year end December 31, 2020 in the amount of $nil (2019 - $148,500). Effective December 1, 2019, the Company rents is head office from another related party, Iris-Tel, Adya’s controlling shareholder, for which a Right of Use asset has been recognized.

Effective December 31, 2016, companies owned by two former directors of the Company (both resigned in November 2019), subscribed for notes payable in the amount of $200,000 each for a total of $400,000 as described in Note 10(a). The notes payable bear interest at 7.5% per annum (calculated monthly) and are due December 31, 2020. On November 19, 2019, one of the notes payable was repaid in full. Total Interest accrued

Adya Inc. MD&A December 31, 2020 Page 10 of 16

and paid on the loans during the year ended December 31, 2020 was $9,400 (2019 - $27,500). During 2020, the second note payable (with accrued interest) was repaid.

Effective November 19, 2019, Iristel, subscribed for an unsecured grid note payable of up to $500,000. During 2019 and 2020, $350,000 and $150,000 respectively were advanced under this note. The notes payable bear interest at 7.5% per annum (calculated monthly) and is due November 19, 2021. On September 30, 2020, the Company issued a second grid promissory note up to $500,000 to Iris Technologies Inc. The notes payable bears interest at 7.5% per annum (calculated monthly) and is due September 30, 2020. As at December 31, 2020, $261,423 was advanced under the second grid promissory note. A further $63,906 was advanced subsequent to year end. Total Interest accrued under the two grid promissory notes as at December 31, 2020 was $38,692 (2019 - $2,897).

Included in revenue earned from arms length transactions during the year ended December 31, 2020 was approximately $250,000 generated through use of Iris Technology Inc.’s service carrier lines. The Company owed Iris Technology Inc. $219,763 as at December 31, 2020 (2019 - $8,475) for rent and service costs.

OFF BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements.

ACCOUNTING ESTIMATES

The preparation of the consolidated financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Key areas requiring judgment and estimation uncertainty include:

• Allowance for doubtful accounts - In developing the estimates for an allowance against existing receivables, the Company considers general and industry economic and market conditions as well as credit information available for the customer and the aging of the account. Changes in the carrying amount due to changes in economic and market conditions could significantly affect the earnings for the period;

• Useful lives of intangible assets and property and equipment - Management's judgment involves determining the expected useful lives of depreciable assets, to determine depreciation and amortization methods, and the asset's residual value;

• Impairment of non-financial assets - The process to determine whether there are triggering events of impairment of non-financial assets as well as the calculation of value in use requires use of assumptions such as estimates of future cash flows, discount rates and terminal growth rates;

• Share based payments - In valuing stock options granted, the Company uses the Black-Scholes option pricing model. Several assumptions are used in the underlying calculation of fair values of the Company's stock options using the Black-Scholes option pricing model including the expected life of the option, risk-free interest rate and volatility of the underlying stock;

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• Provisions - Judgment is required to assess the likelihood of an outflow of the economic benefits to settle contingencies, such as litigations, which may require a liability to be recognized. Significant judgments include assessing estimates of future cash flows and the probability of the occurrence of future events;

• Valuation of deferred income tax assets and liabilities - A deferred tax asset is recognized for unused losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable income will be available against which they can be utilized. Detailed estimates are required in evaluating the probability that deferred tax assets will be utilized. The Company's assessment is based on existing tax laws, estimates of future profitability, and tax planning strategies; and

• Going concern – the preparation of the consolidated financial statements in accordance with IFRS on a going concern basis assumes the realization of assets and discharge of liabilities in the normal course of business within the foreseeable future. Management uses judgment in determining assumptions for cash flow projections, such as anticipated financing, anticipated revenue and future commitments to assess the Company’s ability to continue as a going concern. A critical judgment is that the Company continues to raise funds going forward and satisfy their obligations as they become due.

ADOPTION OF NEW ACCOUNTING POLICIES

CAPITALIZATION

As at the date of this MD&A, the Company had 23,613,540 common shares outstanding and 23,250 share options, which are exercisable at an average strike price of $1.00 per share at various dates prior to January 2022.

BUSINESS RISKS AND UNCERTAINTIES

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board is responsible for developing and monitoring the Company’s risk management policies.

The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

The Company’s Audit Committee oversees how management monitors compliance with the Company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.

The following areas summarize the principal risks and uncertainties that could affect Adya’s future results.

Competition

Telecommunications providers are continually increasing the range of services they offer as well as lowering their long-distance rates to become more competitive. There can be no assurance that our current or future competitors will not provide services superior to those we provide, or at lower prices, adapt more quickly to evolving industry trends or changing market requirements, enter the market in which we operate, or introduce competing services. Any of these factors could decrease our revenue, lower our subscriber base or increase churn. Adya intends on mitigating these risks through offering more innovative solutions that will remove

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itself from the price sensitive market, and further optimize its cost structure in anticipation of future price declines and drive more aggressive pricing.

Technology

The market for the Company’s services is characterized by rapid change and technological improvements. Failure to respond in a timely and cost-effective way to these technological developments could result in serious harm to the Company’s business and operating results. A substantial portion of the Company’s revenues are derived and expected to continue to be derived from providing telecommunications services that are based upon today’s leading technologies and that are capable of adapting to future technologies.

In addition, the day-to-day operations of our business are highly dependent on their information technology systems. An inability to enhance information technology systems to accommodate additional customer growth and support new products and services could have an adverse impact on our ability to acquire new subscribers, manage subscriber churn, produce accurate and timely subscriber invoices, generate revenue growth and manage operating expenses, all of which could adversely impact our financial results and position.

Reliance on systems and system failures

We rely on various complex systems that are used in the provision of services to customers and the management of customer relationships and billings. These systems are made up of many integrated parts consisting of cable, equipment, buildings and towers, IT equipment, IT software and related data. The success of our operations depends on how well these components are protected against damage from fire, adverse weather, natural disasters, power loss, hacking, computer viruses, disabling devices, vandalism, acts of war or terrorism, and other events. Any of these things could cause operations to be shut down indefinitely and adversely affect our revenues and costs.

Our operations also depend on timely replacement and maintenance of our networks and equipment. To mitigate the effect of this risk, we have business continuity and disaster recovery plans, including certain redundancies that have been built into our network to reduce downtime arising from natural and other disasters; however, there can be no assurance that these plans will be effective.

In addition, many aspects of our business depend to a large extent on various IT systems and software, which must be improved and upgraded regularly and replaced from time to time, sometimes at significant cost. Implementing system and software upgrades and conversions is a very complex process, which may cause adverse consequences including billing errors and delays in customer service. Should these consequences occur, these events could significantly damage our customer relationships and business and have a material adverse effect on our operating results.

Regulatory

Regulatory changes issued by the Canadian Radio-television and Telecommunications Commission (CRTC) could have a material adverse impact on Adya’s procedures, costs and revenues. The Company is federally regulated by the CRTC and Industry Canada. The CRTC regulates certain tariff charges in which Adya pays to certain local carrier exchanges and may issue changes that may have a material unfavorable impact on the Company’s financial results. To mitigate these risks, the Company monitors industry developments very closely through industry advisors.

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Management team and dependence on key personnel

Adya operates with a small but effective and experienced management team that strives to oversee all aspects of operations, and by calling upon the services of financial, industry and technology experts in areas when deemed appropriate.

The success of the Company is heavily dependent on its management team and key personnel and on its ability to motivate, retain and attract highly skilled persons. There can be no assurance that the Company will successfully attract and retain additional qualified personnel to manage its current needs and anticipated growth. The failure to attract such qualified personnel to manage growth effectively and/or the replacement of any management team member or key personnel could have a material adverse effect on the Company’s business, financial condition or results of operations. All team members are encouraged to document each of their key tasks and responsibilities as a means of mitigating this risk.

Niche Company

As a niche telecommunications long-distance provider serving primarily ethnic communities, the Company at this time does not have the full diversification in services compared to other larger telecommunications companies. Therefore, the Company is exposed to unforeseen changes in the long-distance market that could adversely affect the Company’s future financial results. To mitigate these risks steps have been taken toward being a more diversified company by offering not only long-distance services but as a provider of additional telecommunications services such as wireless.

Currency

The Company’s functional currency is the Canadian dollar, but it regularly transacts in U.S. dollars for a portion of its business activities. The Company purchases wholesale long distance minutes in U.S. dollars but a majority of the sales are in Canadian dollars, therefore gross margins are negatively impacted by a weaker Canadian dollar. The assets, liabilities, revenues and expenses denominated in U.S. dollars will be affected by changes in the exchange rate fluctuations in the market between the Canadian and U.S. dollar.

Credit

The Company is subject to credit risk through trade and other receivables, which consists of amounts represented by the large number of subscription services customers that are invoiced directly, and amounts owed from a large number of customers through various LECs from casual calling revenues.

Liquidity

The Company derives most of its liquidity from cash from operating activities. The Company may require additional capital in the future and no assurance can be given that such capital will be available at all or available on terms acceptable to Adya.

Where Adya issues shares in the future, such issuance will result in the then existing shareholders of Adya sustaining dilution to their relative proportion of the equity in the Company.

In order to finance future operations and development efforts, the Company may raise funds through the issue of common shares or securities convertible into common shares. The articles of the Company allow it to issue, among other things, an unlimited number of common shares for such consideration and on such terms and conditions established by its directors without the approval of its shareholders. The Company cannot predict

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the size of future issues of common shares or securities convertible into common shares or the effect, if any, that future issues and sales of the common shares will have on the price of the common shares. Any transaction involving the issue of previously authorized but unissued common shares or securities convertible into common shares would result in dilution, possibly substantial, to present and prospective shareholders of the Company.

General economic conditions

Our businesses are affected by general economic conditions, consumer confidence and spending. Recessions or declines in economic activity or economic uncertainty generally cause an erosion of consumer and business confidence and may materially reduce discretionary consumer spending. Any reduction in discretionary spending by consumers and businesses or weak economic conditions may materially negatively affect us through decreased demand for our products and services including decreased revenue and profitability, higher churn and higher bad debt expense.

Dependence on service providers

A number of service providers provide certain essential components of our business operations to our employees and customers, including network, payroll, call center support, certain information technology functions, and invoice printing and facilitation. Our network systems are connected to the systems of other telecommunications carriers, and we rely on them to deliver some of our services. Interruptions in these services can adversely affect our ability to provide services to our customers. To mitigate this risk, we have contracted with a number of service providers to enable redundancies in critical areas.

COVID-19

Subsequent to December 31, 2019, the outbreak of the novel strain of corona virus, specifically identified as “COVID-19”, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Corporation and its operating subsidiaries in future periods.

KEY PERFORMANCE INDICATORS (KPI’s) AND NON-IFRS MEASURES

The Company uses a number of key performance indicators as measurement tools, which are outlined below. The following key performance indicators are not measurements in accordance with IFRS and should not be used as an alternative to net income (loss) or any other measure of performance under IFRS.

Gross Margin

Gross margin is determined by deducting all telecommunications-related expenses from revenue. Telecommunications expenses include fixed and variable carrier costs, billing and collections charges to local exchange carriers and support costs for all telecommunications facilities. Gross margin is an indicator of the Company’s profit directly tied to its services before general operating expenses.

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EBITDA

Earnings before interest, taxes, depreciation and amortization (EBITDA) are commonly used in the telecommunications industry to assist in understanding and comparing operating results. The Company believes that this measure is important in assessing its profitability before the impact of depreciation and amortization and non-operating factors. EBITDA is also a useful measure of the Company’s ability to service debt, invest in capital equipment or distribute dividends to its shareholders.

Adjusted EBITDA

The term “Adjusted EBITDA” refers to the net income (loss) before adjusting for depreciation and amortization, impairment charge on non-financial assets, settlement charges, acquisition costs, finance income, finance costs, and income taxes. “Adjusted EBITDA margin” refers to the percentage that Adjusted EBITDA for any period represents as portion of total revenues for that period.

We believe EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin are useful supplemental information as they provide an indication of the results generated by the Company’s main business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration expenses related to impairment charge on non-financial assets, acquisition costs and other items listed above. Accordingly, we believe that these measures may also be useful to investors in enhancing their understanding of the Company’s operating performance.

See “Results of Operations – Adjusted EBITDA”.

EBITDA, Adjusted EVITA, and Adjusted EBITDA margin are not measures recognized by IFRS and do not have standardized meaning prescribed by IFRS. Therefore, EBITDA, Adjusted EBITDA, Adjusted EBIDTA margin and may not be comparable to similar measures presented by other issuers. Investors are cautioned that EBITDA, Adjusted EBITDA and Adjusted EBITDA margin should not be construed as an alternative to the net income (loss) as determined in accordance with IFRS

CONTINGENCIES

From time to time, the Company has been, and expects to continue to be, subject to legal proceedings and claims in the ordinary course of business. Such claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources. The Company is not aware of any legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on the Company's financial condition or results of operations.

ADDITIONAL INFORMATION

Additional information about Adya is available:

• At the www.adya.ca website

• At the www.sedar.com website

• Via email to investorrelations@adya.ca, or

• Via phone at 416-499-5463

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