AZN Capital Corp. — Management Reports 2021

Jan 30, 2021

Last Mile Holdings Ltd. Management’s Discussion and Analysis September 30, 2020 (Expressed in United States dollars)

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The following discussion and analysis is management’s assessment of the results and financial condition of Last Mile Holdings Ltd. (the “Company” or “Last Mile”) and should be read in conjunction with the accompanying unaudited condensed interim consolidated financial statements for the nine months ended September 30, 2020, and related notes contained, and the audited consolidated financial statements for the year ended December 31, 2019. The Company reports its consolidated financial position, results of operations and cash flows in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The effective date of this report is January 29, 2021.

All amounts contained herein are expressed in United States dollars, the Company’s presentation currency, unless otherwise stated.

Description of Business

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Subsequent to period end, Gotcha faced financial hardship related to COVID-19 restrictions and the assets of OjO and Gotcha were ultimately acquired by a third party arising from a defaulted debt and foreclosure process under Article 9 of the Uniform Commercial Code. As a result, during the three and nine months ended September 30, 2020, the goodwill was impaired to $nil (see Outlook for more details).

The Company was a light vehicle mobility solutions company operating in the United States and was one of the largest micro-mobility companies in the US based on its contracts with universities and municipalities, most of which are exclusive. With the acquisition of Gotcha Mobility LLC (“Gotcha Mobility”) in February 2020 (see “Gotcha Acquisition”), the Company offered a broad product suite of mobility product types for rideshare programs and delivery services, including bikes, stand-up scooters, and seated scooters.

The Company was formed though a business combination with Arcturus Ventures Inc. (“Arcturus”) and 1148486 BC Ltd (“1148486”) pursuant to which the Company effected a reverse takeover of Arcturus, (the “RTO”) a TSX Venture Exchange listed entity (“TSXV”), and the resulting issuer changed its name to OjO Electric Corp. in October 2019. In February 2020, the Company changed its name to Last Mile Holdings Ltd and its ticker is “MILE”.

2020 Highlights

-------------------------------------------------------------------------------------------------------------------------------------------During the nine months ended September 30, 2020, prior to certain declining impacts arising from COVID19, the Company:

• Successfully closed the acquisition of Gotcha Mobility in February 2020, a long-established brand in the micro mobility space with contracts enabling the Company to deploy in numerous locations across the US;

• Raised $6,454,975 from the issuance of equity in connection with the Gotcha Mobility transaction;

• • As a result of the acquisition of Gotcha Mobility and subsequent financing, the MVS share structure collapsed and the 140,000 MVS shares outstanding were converted to 140,000 LVS;

• Announced growth in operations with an over 200% increase in total monthly ride minutes from 416,600 minutes in January 2020 to 1,281,500 minutes ridden in May 2020; and

• Increased vehicles deployed by 17% from January 2020 to May 2020 and experienced a significant increase in usage where vehicles have only increased 17% and usage 208%.

• Announced the launch of an all-new fleet of redesigned e-bikes which use proprietary elements to offer a more comfortable ride, smoother electric motor and longer battery life;

• Closed a private placement to raise C$7.8 million at a price of C$0.075 per LVS, with a commitment of C$1.65 million in bridge financing which was converted into shares of the financing;

• Recorded a $12.7 million impairment on the Gotcha goodwill relating to the subsequent to period end Article 9 process (see Outlook for more details).

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Last Mile Holdings Ltd. Management’s Discussion and Analysis September 30, 2020 (Expressed in United States dollars)

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Outlook

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Subsequent to period end, Gotcha faced financial hardship related to COVID-19 restrictions. On November 25, 2020 Gotcha’s primary secured debt holder opted to sell its debt to a third party. The new debt holder issued a default and acceleration of the secured debt on November 27, 2020. Pursuant to Article 9 of the Uniform Commercial Code, the debt holder conducted a Public Disposition of Collateral pursuant to which it acquired, on December 29, 2020, substantially all of the assets of OjO and Gotcha for a credit bid, there being no other bidders for the assets. The Company is determining its path forward in light of these events.

Additional information relating to the Company is available on SEDAR at www.sedar.com.

Gotcha Mobility Transaction

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In February 2020, the Company completed its acquisition of Gotcha Mobility, announced in November 2019. Pursuant to a Membership Interest Purchase Agreement dated January 20, 2020, as amended, the Company acquired all of the outstanding securities of Gotcha Mobility (and its wholly owned subsidiaries) (the “Acquisition”) from Gotcha Media Holdings, LLC (the "Vendor") in consideration for the payment of $6 million in cash, of which $250,000 was paid on closing of the Acquisition ("Closing"), $750,000 was paid through the issuance of a deferred promissory note due on the six-month anniversary of Closing, and $5 million was paid through the issuance of a second deferred promissory note due on the second anniversary of Closing. The Company also issued 11,637,500 LVS to the Vendor, and has agreed to issue $2.5 million in LVS to the Vendor, subject to satisfaction of certain conditions, on the six-month anniversary of Closing, such shares to be issued at a deemed price equal to the five day volume weighted average price (VWAP) of the Company's LVS as traded on the TSXV immediately before the date of issuance, subject to a minimum price of C$0.05. The Company also funded certain operating expenditures of Gotcha Mobility of $250,000 in February 2020.

Subsequent to period end, Gotcha faced financial hardship related to COVID-19 restrictions and the assets of OjO and Gotcha were ultimately acquired by a third party arising from a defaulted debt and foreclosure process under Article 9 of the Uniform Commercial Code. As a result, during the three and nine months ended September 30, 2020, the goodwill was impaired to $nil.

The acquisition of Gotcha had been accounted for as a business combination where the Company acquired 100% ownership in Gotcha. The total consideration included the cash paid in February 2020, loans payable, LVS shares issued in February 2020 and August 2020, as well as working capital adjustment of $54,739, for total consideration of $12,304,739 as follows:

Cash paid	$	500,000
Working capital adjustment		54,739
Shares issued - 11,637,500 LVS issued		3,500,000
Shares issued - August 2020- 25,932 LVS issued		2,500,000
Loans payable		5,750,000
Total consideration	$	12,304,739

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Last Mile Holdings Ltd. Management’s Discussion and Analysis September 30, 2020 (Expressed in United States dollars)

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The initial purchase price is allocated on a provisional basis to the fair value of the net identifiable assets based on the Company’s best estimates of fair value. The ultimate valuation of the net assets acquired, including the fair value of equipment and all identifiable intangible assets will be finalized within 12 months of the acquisition date.

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The acquisition of Gotcha provided the Company with over 70 contracts to deploy their ridesharing systems, as well as an established workforce and operations. The initial estimate of goodwill realized in the acquisition is the result of executed contracts, an assembled work force, and synergies expected from fully combining and integrating Gotcha’s operations with those of the Company.

Overall Performance and Results of Operations

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The first quarter of 2020, which included the acquisition of Gotcha Mobility, was a key step in establishing the Company as a significant market competitor in micro mobility in the United States. By the end of March 2020, the Company was operating in 28 markets and had 3,300 vehicles in operation, a 214% increase in vehicles deployed since December 31, 2019.

During the second quarter of 2020, we operated 20 systems including the relaunch of Dallas which represented the first system with both OjO scooters and Gotcha scooters running as a multi modal system. During the quarter, 9 pedal bike markets were paused at the request of our operating partners out of concerns related to COVID 19, however most of our pedal bike systems continued to make partner payments to us during this period. At the end of June 2020, we operated 3,160 vehicles compared to 3,300 vehicles in operation at the end of March 2020.

Subsequent to period end, Gotcha faced financial hardship related to COVID-19 restrictions and the assets of OjO and Gotcha were ultimately acquired by a third party arising from a defaulted debt and foreclosure process under Article 9 of the Uniform Commercial Code. As a result, during the three and nine months ended September 30, 2020, the goodwill was impaired to $nil.

Three months ended September 30, 2020 and 2019

Comprehensive loss for the three months ended September 30, 2020 increased to $15,634,945 from $2,365,498 for the three months ended September 30, 2019. The results for the three months ended September 30, 2020 are not comparable to the three months ended September 30, 2019 as the Company was not public and only three locations were operating in 2019, while the September 30, 2020 figures include the results of Gotcha since its acquisition on February 28, 2020.

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Last Mile Holdings Ltd. Management’s Discussion and Analysis September 30, 2020 (Expressed in United States dollars)

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• The key components of the Company’s loss for the three months ended September 30, 2020 include:

• Revenues from rideshare systems of $818,864 (2019 – $116,328);

• Cost of ridesharing services of $1,714,601 (2019 - $383,650) which include both fixed and variable fees paid, such as fees paid to in market partners who managed the maintenance and deployment of the fleet;

• Equity-based compensation expense was $423,350 for the three months ended September 30, 2020, compared to $602,248 for the three months ended September 30, 2019, as the Company granted additional Class B units and options in late 2019 that are continuing to vest through 2020;

• Professional fees were $488,112 for the three months ended September 30, 2020, up slightly from $381,185 the previous year;

• Salaries, wages and management fees were $718,062 for the three months ended September 30, 2020 compared to $398,420 in the prior year which did not include Gotcha with over 40 employees; and

• Selling, general and administrative expenses were $342,285 for the three months ended September 30, 2020, a decrease from $439,620 in the prior year, which consists of marketing costs incurred to promote the Company’s ridesharing businesses as well as investor relations.

Nine months ended September 30, 2020 and 2019

Comprehensive loss for the nine months ended September 30, 2020 increased to $22,150,168 from $4,693,807 for the nine months ended September 30, 2019. The results for the nine months ended September 30, 2020 are not comparable to the nine months ended September 30, 2019, as the Company was not public and had only three locations in 2019, while the September 30, 2020 figures include the results of Gotcha since its acquisition on February 28, 2020 plus the impairment of Gotcha at September 30, 2020.

The key components of the Company’s loss for the nine months ended September 30, 2020 included:

• Revenues from rideshare systems were $2,175,114 (2019 - $271,936), of which $1,900,365 represents the income earned from Gotcha pursuant to the acquisition on February 28, 2020;

• Cost of ridesharing services of $4,563,434 (2019 - $635,256) which includes both fixed and variable fees paid, such as fees paid to in market partners who managed the maintenance and deployment of the fleet, including costs for historical OjO markets; costs for customer service support, and merchant costs;

• Equity-based compensation expense was $423,350 for the nine months ended September 30, 2020, compared to $602,248 for the nine months ended September 30, 2019;

• Professional fees were $830,709 for the nine months ended September 30, 2020, representing an increase from $554,069 for the nine months ended September 30, 2019 mostly relating to additional support for the acquisition of Gotcha;

• Salaries, wages and management fees were $2,988,027 for the nine months ended September 30, 2020, an increase from $1,040,487 in the prior year. The increase is due to the expansion of the team with Gotcha with over 40 employees; and

• Selling, general and administrative expenses were $1,518,621 for the nine months ended September 30, 2020, an increase from $801,201 for the nine months ended September 30, 2019, which consists significantly of marketing costs incurred to promote the Company’s ridesharing business as well as for investor relations, and an overall increase as a result of the Gotcha acquisition and additional related overhead.

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Last Mile Holdings Ltd. Management’s Discussion and Analysis September 30, 2020 (Expressed in United States dollars)

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Liquidity and Capital Resources

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At September 30, 2020, the Company had a working capital deficit of $1,410,081 as compared to working capital deficit of $1,971,527 at December 31, 2019, and cash of $2,215,412 (December 31, 2019 - $719,529).

Selected Quarterly Information

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The following table sets forth a comparison of information for the previous eight quarters ending with September 30, 2020:

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Q3 2020 Q2 2020 Q1 2020 Q4 2019
$ $ $ $
Revenue 818,864 1,072,666 293,584 174,531
Loss and comprehensive loss (15,634,945) (3,473,177) (3,042,046) (16,226,726)
Basic and diluted loss per share (0.11) (0.04) (0.04) (0.51)
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Q3 2019 Q2 2019 Q1 2019 Q4 2018
$ $ $ $
Revenue 116,328 110,197 45,411 125,325
Loss and comprehensive loss (2,365,498) (911,518) (1,416,791) (1,063,841)
Basic and diluted loss per share NA NA NA NA
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* Basic and diluted loss per share has not been presented for the periods prior to the Company’s RTO in October 2019, as the Company was a limited liability corporation that had elected to be a partnership and thus had no shares outstanding.

Outstanding Share Data

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Outstanding as of the date of this MD&A were 3,031,956 Class B Units, 30,909,948 New Common A Units, 29,356,785 New Common A-1 Units, 204,629,951 common shares, 4,333,334 options, and 21,670,966 warrants.

Related Party Transactions

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Key management personnel include those persons having the authority and responsibility of planning, directing and executing the activities of the Company. The Company has determined that its key management personnel consist of the Company’s directors and officers.

Key management personnel compensation during the nine months ended September 30, 2020 and 2019 were as follows:

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September 30, 2020 September 30, 2019
Salaries and wages $ 430,167 $ 317,819
Equity-based compensation 478,893 579,115
$ 909,060 $ 896,934
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There were no other transactions with related parties during the nine months ended September 30, 2020 and 2019. There are no amounts owing to related parties as at September 30, 2020.

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Last Mile Holdings Ltd. Management’s Discussion and Analysis September 30, 2020 (Expressed in United States dollars)

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Financial Instruments and Risk Management

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Financial Risk Management

Cash, accounts receivable, accounts payable and accrued liabilities, and loans payable are held at amortized cost which approximates fair value due to the short-term nature of these instruments.

Financial Instrument Risk Exposure

The Company is exposed in varying degrees to a variety of financial instrument related risks. The type of risk exposure and the way in which such exposure is managed is provided as follows:

Credit risk

Credit risk arises from the potential for non-performance by counterparties of contractual financial obligations. The maximum credit exposure at September 30, 2020 is the carrying amount of cash and accounts receivable. The Company does not have significant credit risk with respect to customers as the customers are largely municipalities and universities, and the Company generally invoices in advance of services provided.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company attempts to ensure there is sufficient liquidity to meet short-term business requirements, taking into account its current cash position and potential funding sources. As at September 30, 2020, the Company’s financial liabilities consist of accounts payable and accrued liabilities, and loans payable, all of which have maturities of less than one year. The Company manages its liquidity risk by reviewing its capital requirements on an ongoing basis. As at September 30, 2020, the Company had current liabilities of $5,934,545 and working capital deficit of $1,410,081.

Market Risk

Market risk is the risk of loss that may arise from changes in market factors, such as interest rates, foreign exchange rates, and commodity and equity prices. The Company does not have a practice of trading derivatives.

Foreign exchange risk

Foreign currency risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the Company’s functional currency. The majority of the Company’s transactions are transacted in the functional currency of the subsidiary to which the transaction relates and therefore the Company is not exposed to significant foreign exchange risk.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to interest rate risk relates to its ability to earn interest income on cash balances at variable rates. Changes in short-term interest rates will not have a significant effect on the fair value of the Company’s cash account.

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Last Mile Holdings Ltd. Management’s Discussion and Analysis September 30, 2020 (Expressed in United States dollars)

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Off-balance Sheet Arrangements

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The Company does not utilize off-balance sheet arrangements.

Proposed Transaction

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The Company does not have any proposed transactions as of the date of this MD&A.

Critical Accounting Estimates

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The presentation of consolidated financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and would impact future results of operations and cash flows. The Company’s significant accounting estimates and judgements are detailed in Note 2 of the financial statements and include: going concern, equipment and intangible asset useful lives, impairment of non-financial assets, revenue recognition, functional currency assessment, deferred taxes, business combination, and equity-based payment arrangements,

Subsequent Events

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See Outlook for more details.

Risks and Uncertainties

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The Company’s risk factors are set out in the Filing Statement of the Company (formerly Arcturus) which is available on SEDAR at www.sedar.com.

Management’s Report on Internal Control over Financial Reporting

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In connection with National Instrument (“NI”) 52-109 (Certification of Disclosure in Issuer’s Annual and Interim Filings) adopted in December 2008 by each of the securities commissions across Canada, the Chief Executive Officer and Chief Financial Officer of the Company will file a Venture Issuer Basic Certificate with respect to the financial information contained in the unaudited condensed interim consolidated financial statements and the audited annual consolidated financial statements and respective accompanying Management’s Discussion and Analysis.

The Venture Issuer Basic Certification does not include representations relating to the establishment and maintenance of disclosure controls and procedures and internal control over financial reporting, as defined in NI 52-109.

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Last Mile Holdings Ltd. Management’s Discussion and Analysis September 30, 2020 (Expressed in United States dollars)

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Forward-Looking Statements

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Some of the statements contained in this management discussion and analysis may be deemed “forwardlooking statements.” These include estimates and statements that describe the Company’s future plans, objectives or goals, and expectations of a stated condition or occurrence. Forward-looking information can often be identified by forward-looking words such as “anticipate”, “believe”, “expect”, “goal”, “plan”, “intend”, “estimate”, “may” and “will” or similar words suggesting future outcomes, or other expectations, objectives or statements about future events or performance. These risks and uncertainties could cause or contribute to actual results that are materially different from those expressed or implied.

Actual results relating to, among other things, results of exploration, reclamation, capital costs, and the Company’s financial condition and prospects, could differ materially from those currently anticipated in such statements for many reasons such as, but not limited to: changes in general economic conditions and conditions in the financial markets; changes in demand and prices for the minerals the Company expects to produce; litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; technological and operational difficulties encountered in connection with the Company’s activities; and changing foreign exchange rates and other matters discussed in this management discussion and analysis.

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