Enterprise Group, Inc. - Management Reports 2023

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

March 8[th] , 2023

All amounts herein are in U.S. Dollars unless otherwise stated.

OVERVIEW

The following Summary Financial Information and Management’s Discussion and Analysis of Results of Operations and Financial Condition (“MD&A”) was prepared by Management of ProntoForms Corporation (“ProntoForms” or the “Company”) and approved by the Board of Directors of the Company (the “Board of Directors”). Throughout this MD&A, unless otherwise specified, “ProntoForms”, “Company”, “we”, “us” and “our” refer to ProntoForms Corporation and its subsidiaries.

This annual MD&A discusses material changes in our financial condition, financial performance and cash flows for the years ended December 31, 2022 and 2021. Such discussion and comments on liquidity and capital resources of the Company should be read in conjunction with our audited financial statements and related notes for the years ended December 31, 2022 and 2021, which has been prepared in U.S. dollars using International Financial Reporting Standards (“IFRS”).

Management is responsible for ensuring that processes are in place to provide enough knowledge to support the representations made in the annual filings. Our Audit Committee and Board of Directors provide an oversight role with respect to all public financial disclosures by the Company and have reviewed this MD&A and the accompanying financial statements.

Alvaro Pombo, co-Chief Executive Officer, and David Croucher, Chief Financial Officer, in accordance with National Instrument 52-109 (“NI 52-109”), have both certified that they have reviewed the annual financial report and this MD&A (the “the annual Filings”) and that, based on their knowledge having exercised reasonable diligence, that (a) the annual Filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made with respect to the period covered by the annual filings; and (b) the annual financial report together with the other financial information included in the annual Filings fairly present in all material respects the financial condition, financial performance and cash flows of the Company, as of the date of and for the periods presented in the annual Filings.

Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost-effective basis Disclosure Controls and Procedures and Internal Controls over Financial Reporting as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

NON-GAAP MEASURES

This MD&A makes reference to certain non--GAAP financial measures, including non-GAAP net loss and non-GAAP loss from operations. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. These non-GAAP measures should be read in conjunction with our annual audited consolidated financial statements and the related notes thereto as at and for the year ended December 31, 2022. Readers should not place undue reliance on non-GAAP measures and should instead view them in conjunction with the most comparable GAAP financial measure. See the reconciliations of non-GAAP measures in the “Reconciliation of non-GAAP measures” section of this MD&A.

FORWARD LOOKING STATEMENTS

Certain statements in this MD&A may constitute forward-looking statements, including those identified by the expressions such as “anticipate”, “believe”, “estimate”, “expect”, “foresee”, “intend”, “plan”, or similar expressions to the extent that they relate to the Company or its management. The forward-looking statements are not historical facts but reflect the Company’s current assumptions and expectations regarding future events. Forward-looking statements in this MD&A include but are not limited to statements regarding subscriber additions, the variability of our revenues, anticipated market trends and technology adoption by our customers and industry peers, anticipated growth in revenue and expenses, the potential impacts of additional expenditures on revenue growth rates, the future availability of government grants or tax credit programs, the sufficiency of cash on hand and the Company’s ability to obtain financing necessary to continue operations. There can be no assurance that such statements will prove to be accurate, and actual results and future events may differ materially from those anticipated in such statements. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations and assumptions, including but not limited to the following: (i) there can be no assurance that the Company will earn any profits in the future or that profitability, if achieved, will be sustained; (ii) if the Company is not able to achieve profitability, it will require additional equity or debt financing, and there can be no assurances that the Company will be able to obtain additional financial resources on favourable commercial terms or at all; (iii) the Company’s quarterly revenues and operating results may fluctuate, which may harm its results of operations; (iv) the loss of business from a major customer, operator or other reseller could reduce the Company’s sales and harm its business and prospects; (v) a portion of the Company’s sales are through partners and resellers, and an adverse change in the Company’s relationship with any of such partners or resellers may result in decreased sales; (vi) the market for software as a service at a relatively early stage of development, and if it does not develop or develops more slowly than expected, the Company’s business will be harmed; (vii) the Company faces competition from other software solution providers, which may reduce its market share or limit the prices it can charge for its software solutions; (viii) a global economic downturn or market volatility may adversely affect our business and/or our ability to complete new financings; (ix) the business of the Company may be harmed if it does not continue to penetrate markets; (x) the success of the business depends on the Company’s ability to develop new products and enhance its existing products; (xi) the Company’s growth depends in part on the success of its strategic relationships with third parties; (xii) the financial condition of third parties may adversely affect the Company; (xiii) the US dollar may fluctuate significantly compared to the Canadian dollar, causing fluctuations in earnings and cash flow as most of our revenues are received in US dollars while most of our expenses are payable in Canadian dollars; (xiv) subscription services which produce the majority of the Company’s revenue are hosted by a third party service for the Company and any interruption in service could harm its results of operations; (xv) the Company may be liable to its customers or third parties if it is unable to collect data or it otherwise loses data; (xvi) the Company may be liable for the handling of personal information; (xvii) intellectual property claims against the Company may be time consuming, costly to defend, and disruptive to the business; (xviii) the Company uses open source software in connection with its products which exposes it to uncertainty and potential liability; (xix)

economic uncertainty and downturns in the software market may lead to decreases in the Company’s revenue and margins; (xx) any significant changes in the technological paradigm utilized for building or delivering applications in mobile devices could harm the Company’s business and prospects; and (xxi) if the Company loses any of its key personnel, its operations and business may suffer.

Please see “Risk Factors Affecting Future Results” for a more complete discussion of these and other risks. Readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

BUSINESS OVERVIEW AND OUTLOOK

ProntoForms is the global leader in field intelligence. Our platform’s field workflows and data collection capabilities enable enterprise field teams to increase the efficiency of field service personnel, optimize decision-making, decrease organizational risk, maximize the uptime of valuable assets, and deliver exceptional service experiences. Our subscribers use ProntoForms across multiple use cases, including asset inspection, compliance, installation, repair, maintenance, and environmental, health & safety with quantifiable business impacts.

Organizations within our prime focus verticals—medical device manufacturing, heavy manufacturing (elevator/escalator, building automation, heavy machinery, minerals & mining), energy resources, construction, and utilities—gain the following benefits through deploying ProntoForms:

Optimize Decision-Making

ProntoForms’ ability to eliminate data latency by capturing real-time, rich data from the field and ingesting it across multi-system environments means that every level of the organization can make better decisions. Internal leaders have increased visibility into field data and KPIs while field engineers have immediate access to information they need for decision-making on site.

Decrease Organizational Risk

ProntoForms ensures safety related to high-risk work and complex assets that require intensive regulatory tracking and reporting. Intuitive workflows reduce operational risks by installing and maintaining assets the correct way, every time.

Deliver Exceptional Service Experiences

ProntoForms is a differentiator for our customers as our guided user experience directs field engineers (full-time or contracted) to the most effective path of service completion, regardless of tenure or experience. This reduces the engineers’ administrative burden and empowers them to make real-time decisions and pursue revenue opportunities. For customers, this means having an engineer on site who can deliver an immediate summary of the work completed and is responsive to any additional needs.

Maximize Asset Uptime

It is mission critical for organizations with a high install base of complex assets to maintain uptime. Enterprise customers are moving towards outcome-based service mandates where outcomes and services are their central business model. ProntoForms is necessary to execute these mandates as a deep level of rich data must be captured and connected across the organization to refine and perfect the asset lifecycle stages.

Our dedication to providing our customers with value and our system-friendly capabilities have led ProntoForms to be named G2’s leader in Mobile Forms Automation Software year-over-year since 2018, most recently for Winter 2023. 99% of users rated ProntoForms 4 stars or above while 92% of those who replied said they would be likely to recommend ProntoForms to another person. A third-party researcher, Wakefield Research, published a customer-impact report that defines the quantifiable ROI that ProntoForms customers achieve by using the platform. It uncovered that 91% of surveyed customers said that ProntoForms has made the handling of complex work more efficient, 89% of customers have a reduction in administrative burden, and 83% experience improved engineer job satisfaction. Additional

third-party reports from Nucleus Research have found similar high-ROI results, with multi-million dollars saved by a global equipment manufacturer, a 1:3.5 cost benefit ratio for PrimeLine Utility Services, and over 3000 work hours saved per year for a floating liquid natural gas facility.

We compete in a mobile field automation market that remains highly fragmented. Niche providers focus on a narrow set of technologies or are targeted to a very specific vertical industry segment. ProntoForms is the most advanced solution that fully extends the capabilities of Enterprise Asset Management, Field Service Management and Safety Management systems with essential workflows and data capture that meet the needs of organizations that manage complex, distributed high-value assets.

Recent developments have seen consolidation among niche providers. While we do not consider these patterns to be unusual for an emerging industry, market dynamics, combined with our company size, suggest that the abundance of application and software vendors will continue to impact implementation cycles and buying decisions.

The conditions outlined above are subject to variability, and we caution readers that quarter-to-quarter comparisons of our operating results are not necessarily meaningful and should not be relied upon as the only indication of likely future performance or annual operating results.

See “Forward Looking Statements” above.

RECENT DEVELOPMENTS

2022

On March 9, 2022, the Company expanded the revolving credit facility with Toronto-Dominion Bank (“TD Bank”) by CAD $4,000,000 resulting in a total revolving credit facility of CAD $10,000,000. The interest rates and the maturity date remained the same as the original facility.

During the year ended December 31, 2022 2,281,388 common shares were issued upon the exercise of options for proceeds of $645,567.

In July 2022, the maturity date for the revolving credit facility with Toronto Dominion Bank (“TD Bank”) was extended from October 30, 2023 to October 30, 2024.

2021

During the year ended December 31, 2021, 3,355,902 common shares were issued upon the exercise of options for proceeds of $969,929.

In July 2021, the maturity date for the revolving credit facility with Toronto Dominion Bank (“TD Bank”) was extended from October 30, 2022 to October 30, 2023.

KEY PERFORMANCE INDICATORS

We use certain key performance indicators to assess performance and evaluate our business. Such key supplementary financial measures do not have any standardized meaning prescribed by IFRS and cannot be reconciled to a directly comparable IFRS measure. These key performance indicators may be calculated in a manner different from similar key performance indicators used by other companies.

Annual Recurring Revenue (“ARR”)

ARR is an element we use to estimate our recurring revenue for future reporting periods and is a measure we use to assess the performance of the business over time. We caution that recurring revenue will fluctuate by the amount and timing of additions and deletions in the following periods and by the foreign exchange impact on non-US Dollar ARR.

ARR is calculated as the annual equivalent of the recurring elements of our contracts with customers that are in effect at the end of the period. It excludes one-time professional service fees and assumes that customers will renew the contractual commitments on a periodic basis as those commitments come up for renewal unless such renewal is known to be unlikely at period end. Non-US Dollar ARR is converted at the period end exchange rate. As at December 31, 2022, 97% of ARR was denominated in US Dollars.

ARR ARR Growth - sequential (QoQ) - comparable (YoY) Proportion of Base from Customers with > $100k ARR ARR ARR Growth - sequential (QoQ) - comparable (YoY) Proportion of Base from Customers with > $100k ARR	2022
	December 31 September 30 June 30 March 31 21,585,219 20,894,207 20,002,999 19,637,584 3.3% 4.5% 1.9% -0.7% 9.1% 8.4% 7.1% 9.6% 43% 41% 41% 41% 2021
	December 31 September 30 June 30 March 31 19,778,939 19,274,177 18,680,498 17,923,224 2.6% 3.2% 4.2% 4.7% 15.6% 13.4% 15.8% 13.9% 41% 41% 40% 40%

In 2022, we saw growth of our ARR base of 9.1% compared to 15.6% in 2021. The restructuring of our sales team and transition to Enterprise sales commenced in 2021 caused volatility in bookings, particularly in the first half of 2022. In Q3 and Q4 of 2022 we saw an improvement in bookings with sequential growth of 4.5% in Q3 and 3.3% in Q4. We are focused on more growth through enterprise expansion and new sales by investing in product and sales and marketing. We use the metric “Proportion of Base from Customers with > $100k ARR” as an indicator of sales to larger customers and higher penetration within those accounts. Over time, larger customers have constituted a greater share of our revenue and we expect this trend to continue as larger enterprises recognize the value of our product. We caution that this indicator may fluctuate depending on the size of customers added or deleted in the following periods. See “Forward Looking Statements” above.

An ARR customer is defined as a separate and distinct buying entity, such as a company, an educational or government institution, or a distinct business unit of a large company that has an active contract with us or one of our partners to access our platform.

PRESENTATION OF FINANCIAL STATEMENTS

(in U.S. Dollars)

Summary Annual Financial Information

Statement of Operations Data

Revenue Loss from operations Net loss Non-GAAP loss from operations [1] Non-GAAP net loss [1] Basic and diluted loss per share [1] See Non-GAAP measures below	Year Ended December 31,	Year Ended December 31,
	2022 21,326,788 (4,325,589) (4,448,766) (3,091,935) (3,204,696) (0.03)	2021 2020 19,353,747 17,666,080 (4,161,257) (956,877) (4,464,188) (1,485,167) (3,295,188) (329,647) (3,569,939) (573,691) (0.04) (0.01)

Balance Sheet Data

Balance Sheet Data
Cash and cash equivalents Net working capital Total assets Long-term liabilities Total liabilities Total shareholders' (deficit) equity	Year Ended December 31,
	2022 6,112,071 2,676,784 12,670,938 6,007,585 15,375,805 (2,704,867)	2021 2020 6,082,289 7,747,542 2,451,784 5,104,412 11,593,110 13,564,924 3,479,659 3,705,786 11,728,432 11,072,055 (135,322) 2,492,869

DISCUSSION OF OPERATIONS

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Year ended

Revenue Recurring revenue Professional and other services	December 31, 2022 20,374,733 $ 952,055	2022 to 2021 Change from
		2,058,687 11% (85,646) -8% 1,973,041 10% 278,031 15% (98,010) -9% 180,021 6% 1,793,020 11% (147,602) -2% 1,740,829 18% 364,125 10% 1,957,352 10% (164,332) 4% 310,042 nm (130,288) 113% 15,422 0%
	21,326,788
Cost of revenue Recurring revenue Professional and other services	2,109,645 1,038,120
	3,147,765
Gross margin Expenses Research and development Selling and marketing General and administrative	18,179,023 85% 6,916,115 11,637,968 3,950,529
	22,504,612
Loss from operations Foreign exchange gain (loss) Finance costs	(4,325,589) 122,741 (245,918)
Net loss	(4,448,766) $

nm - not considered meaningful

The Company had a net loss of $4,448,766 for the year ended December 31, 2022 compared to a net loss of $4,464,188 for the year ended December 31, 2021. Non-GAAP net loss for the year ended December 31, 2022 was $3,204,696, down from $3,569,939 for the year ended December 31, 2021.

Loss from operations for the year ended December 31, 2022 was $4,325,589 compared to loss from operations of $4,161,257 for the year ended December 31, 2021. The increase in loss from operations in 2022 was due to an increase in expenses in the first half of the year as we built out our enterprise go-to-market team. In addition, expenses included $1,233,654 of share-based compensation versus $866,068 in 2021 which resulted in Non-GAAP loss from operations for the year ended December 31, 2022 of $3,091,935 compared to $3,295,189 for the year ended December 31, 2021 Our losses steadily decreased in the second half of 2022 as revenues increased and we held our expenses steady.

Three months ended December 31, 2022 compared to the three months ended December 31, 2021 and September 30, 2022

Revenue Recurring revenue Professional and other services	December 31, December 31, 2022 2021 5,289,635 $ 4,795,940 $ 321,122 210,783 5,610,757 5,006,723 472,269 495,294 246,937 282,913 719,206 778,207 4,891,551 4,228,516 87% 84% 1,599,196 1,709,265 2,734,628 2,580,664 1,002,856 970,370 5,336,680 5,260,299 (445,129) (1,031,783) (22,289) (58,859) (83,436) (29,229) (550,854) $ (1,119,871) $ Three months ended	Change from Q3 2022 to Q4 2022
	December 31, 2022 5,289,635 $ 321,122
		64,055 1% 83,396 35% 147,451 3% (57,731) -11% (26,738) -10% (84,469) -11% 231,920 5% (131,198) -8% (311,729) -10% 45,939 5% (396,989) -7% 628,909 -59% (165,944) nm (2,141) 3% 460,823 -46%
	5,610,757
Cost of revenue Recurring revenue Professional and other services	472,269 246,937
	719,206
Gross margin Expenses Research and development Selling and marketing General and administrative	4,891,551 87% 1,599,196 2,734,628 1,002,856
	5,336,680
Loss from operations Foreign exchange gain (loss) Finance costs	(445,129) (22,289) (83,436)
Net loss	(550,854) $

nm - not considered meaningful

The Company had a net loss of $550,854 for the three months ended December 31, 2022 compared to a net loss of $1,011,678 for the third quarter of 2022 and $1,119,871 in the comparable fourth quarter of 2021. NonGAAP net loss for the three months ended December 31, 2022 was $282,060 down from $1,115,341 for the previous third quarter of 2022 and down from $699,406 for the comparable quarter of 2021.

Loss from operations for the three months ended December 31, 2022 was $445,129 compared to $1,074,038 in the third quarter of 2022 and $1,031,783 in the comparable quarter in 2021. Non-GAAP loss from operations for the three months ended December 31, 2022 was $179,143 down from $850,409 in the previous third quarter of 2022 and down from $618,363 for the comparable 2021 fourth quarter.

The decrease in net loss during the three months ended December 31, 2022, compared to the three months ended September 30, 2022, was mainly due higher revenue and lower operating expenses caused by lower variable compensation and commissions and the foreign exchange effect on our Canadian denominated expenses.

We expect an increase in our 2023 first quarter losses with additional expenses related to organizational changes. We expect this will be followed by decreased losses for the remainder of 2023 as we continue to invest in product and sales in a controlled manner relative to our revenue growth. We are encouraged that the sales infrastructure is driving expected operational outcomes and we will continue to work to improve results. Our focus going forward is to continue to optimize our go-to-market investment towards enterprise customers in our four main verticals: medical equipment, heavy manufacturing, utilities and oil and gas.

Revenue

We earn recurring revenue from subscription fees for our cloud-based software.

The capabilities of our product offer the most value to large customers whose field services operations utilize large field services teams comprised of technically advanced service personnel undertaking complex maintenance activities. Our sales and marketing activities and the revenue we generate are increasingly comprised of these large enterprise customers.

We also generate professional services revenue by offering platform configuration services, training and assistance in connecting data to back-end systems. Since our product is relatively simple to configure, many of our customers choose to implement the ProntoForms software, integrate and build forms themselves or take advantage of ProntoForms deployment services.

Our revenue is generated through a combination of direct and indirect sales. Our current focus is on building sales primarily through direct channels as we believe this will provide us with the best opportunity for broad based subscription revenue growth. We expect that our increasingly global sales organization network will provide us with broad worldwide reach to capitalize on the expected growth in the mobile business application software market. See “Forward Looking Statements” above.

Revenue detail

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Year ended
December 31, December 31, Change from
2022 2021 2021 to 2022
Revenue
Recurring revenue $ 20,374,733 $ 18,316,046 $ 2,058,687 11%
Professional services $ 952,055 $ 1,037,701 (85,646) -8%
$ 21,326,788 $ 19,353,747 $ 1,973,041 10%
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Total revenue for the year ended December 31, 2022 was $21,326,788 compared to $19,353,747 for the year ended December 31, 2021, representing an increase of 10%.

Recurring revenue for the year ended December 31, 2022 was $20,374,733 compared to $18,316,046 in 2021 representing an increase of 11%. The increase was due to continued investment in sales and marketing activities which has subsequently driven larger revenue from expansions and new customers.

Professional services revenue decreased to $952,055 for the year ended December 31, 2022 compared to $1,037,701 in 2021, representing a decrease of 8% due to lower bookings in the first half of 2022. Professional service revenue mainly relates to the deployment services for new implementations or expansions for new use cases or in new geographies. See “Forward Looking Statements” above.

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Three months ended Change from
December 31, September 30, December 31, Previous Comparable
2022 2022 2021 2022 Q3 2021 Q4
Revenue
Recurring $ 5,289,635 $ 5,225,580 $ 4,795,940 1% 10%
Professional services $ 321,122 $ 237,726 $ 210,783 35% 52%
$ 5,610,757 $ 5,463,306 $ 5,006,723 3% 12%
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Total revenue for the three months ended December 31, 2022 was $5,610,757 compared to $5,463,306 in the third quarter of 2022 and $5,006,723 in the comparable quarter in 2021, representing an increase of 3% and 12% respectively.

Recurring revenue for the three months ended December 31, 2022 was $5,289,635 compared to $5,225,580 in the third quarter of 2022 and $4,795,940 for the comparable fourth quarter in 2021, representing an increase of 1% and 10% respectively. This increase is due to continued investment in sales and marketing activities.

The sequential increase in Q4 recurring revenue of 1% correlates loosely to the increased net ARR bookings in Q3 and Q4; however, Q3 recurring revenue was higher due to some incremental billing and revenue from prior period excess usage that was recognized in Q3. This had the effect of a higher Q3 and lower Q4 recurring revenue growth rate when compared to the relative growth in the ARR base.

Professional services revenue for the three months ended December 31, 2022 was $321,122 compared to $237,726 for the third quarter of 2022 and $210,783 for the comparable fourth quarter in 2021, representing an increase of 35% and 52%, respectively. The increase in professional service revenue relates to increased sales and delivery of larger engagements with enterprise customers in Q4 2022.

Professional service revenue tends to fluctuate based on the volume of project bookings and delivery and whether customers choose to do their own implementations. This revenue has also been affected by our transition to enterprise sales focus and we expect that these results will generally trend with ARR growth.

Cost of Revenue and Gross Margin

Cost of recurring revenue consists of hosting, software and support department costs. Cost of professional and other services revenue includes personnel and other costs for deployment and analytics services and other marketing and development costs as needed.

Gross Margin on: Total revenue Recurring revenue Professional services	Year ended	Year ended
	December 31, 2022 85% 90% -9%	December 31, 2021 85% 90% -9%

Total revenue gross margin for the year ended December 31, 2022 was $18,179,023 representing 85% of revenue compared to gross margin of $16,386,003 representing 85% for the comparable year in 2021.

Recurring revenue gross margin was $18,265,088 representing 90% of recurring revenue for the year ended December 31, 2022, compared $16,484,432 representing 90% in 2021.

Professional services gross margin was negative margin $86,065 representing -9% of professional services revenue for the year ended December 31, 2022 compared to a gross margin of ($98,429), representing -9% of professional services revenue for the year ended December 31, 2021.

Gross margins for 2022 were consistent with 2021. Recurring revenue gross margin also remained at 90% for both 2022 and 2021. Professional services are primarily managed to ensure timely customer deployments. Professional service gross margin tends to fluctuate based on the size, complexity and volume of projects and were slightly below break-even for 2022 as a whole.

Research and Development Expenses

Research and development expenses consist primarily of remuneration paid to engineering personnel and independent contractors whom we occasionally use to provide additional technical capacity on a short-term basis. Other research and development expenses include travel, rent and other occupancy costs for our engineering and technical support personnel.

For the year ended December 31, 2022, research and development expense decreased to $6,916,115 from $7,063,717 for the comparable period of 2021. Research and development expenses are shown net of Government Investment tax credits (“ITC’s”) and other government assistance. Total government assistance and ITC’s for the year ended December 31, 2022 was $110,065 compared to $138,234 in 2021.

Gross research and development expense Less: Investment tax credits Information and Communication Technology Council Program Gross research and development expense Less: Investment tax credits Information and Communication Technology Council Program	Three months ended
	December 31, September 30, December 31, 2022 2022 2021
	1,631,051 1,749,328 1,687,666 (31,856) (18,934) (18,029) - - (32,691)
	1,599,196 1,730,394 1,709,265
	December 31, December 31, 2022 2021 7,026,180 7,201,950 (90,438) (92,285) (19,627) (45,949) 6,916,115 7,063,717 Twelve months ended

We claim research and development deductions and related investment tax credits for income tax purposes based on management’s interpretation of the applicable legislation in the Income Tax Act of Canada. We expect that the ITC’s will continue to accrue at similar levels in the future. See “Future Looking Statements” above.

Gross research and development costs decreased slightly in 2022 compared to 2021 mainly due to foreign exchange as the majority of salaries are denominated in Canadian Dollars. We expect R&D expense to remain relatively flat or increase slightly. While we do not have any active government funding programs at this time, we continue to review various programs that may benefit us in the future. See “Forward Looking Statements” above.

Selling and Marketing Expenses

Our sales and marketing expenses consist primarily of compensation, including sales commissions paid to our sales and marketing personnel. Other significant sales and marketing expenses include travel, rent and other occupancy costs, and living costs for the sales and marketing staff, and other advertising, promotion and trade show costs.

Our sales and marketing expenses increased in the year ended December 31, 2022, to $11,637,968 from $9,897,139 for 2021.

Sales and marketing expense increased from prior year mostly due to our continued investment in our sales and marketing organization. The increase in sales and marketing expenses were through additional headcount, increased compensation plans and marketing incentives. We expect that sales and marketing expense will continue to increase moderately with added resources and with the accrual of variable sales compensation on new sales. As we grow, we plan to re-invest in sales and marketing in a controlled manner to pursue additional growth. See “Forward Looking Statements” above.

General and Administrative Expenses

Our general and administrative expenses consist primarily of remuneration paid to executive, finance,

legal and corporate administrative staff. Other significant general and administrative expenses include legal and accounting professional fees, travel and insurance, rent and other occupancy costs.

Our general and administrative expenses increased to $3,950,529 for the year ended December 31, 2022 compared to $3,586,404 for the same period in 2021.

The general and administrative expenses increased from prior year due to travel and events, salaries and share-based compensation to support the growth in the organization. We expect that general and administrative expenses will increase slightly from the addition of executive depth but otherwise remain flat as we have the infrastructure in place to support growth in operations and subscribers. See “Forward Looking Statements” above.

Foreign Exchange Gain (Loss)

The Company reported a foreign exchange gain of $122,741 for the year ended December 31, 2022 compared to a foreign exchange loss of $187,301 in 2021. The foreign exchange gain primarily arose from the effect on our net Canadian Dollar liability position as the US Dollar strengthened against the Canadian Dollar.

Finance costs

Finance costs relate primarily to the interest and accretion on the CAD $10 million two-year revolving operating facility with TD Bank. Interest on the TD Bank loan bears interest at a combination of prime plus 1% (7.85 (6.85% + 1%) at December 31, 2022) and a Bankers acceptance + 2.5% (7.18% (4.68% + 2.5%) at December 31, 2022).

LIQUIDITY AND CAPITAL RESOURCES

As at December 31, 2022, cash and cash equivalents were $6,112,071 with an undrawn amount of $ 1,354,821 remaining on our $7,383,000 (CAD $10 million) TD credit facility. Given the existing cash and cash equivalents balance, combined with certain sales-related efforts and available capacity in the credit facility agreement at the date of authorization of the financial statements for the year ended December 31, 2022 we believe there is sufficient liquidity to meet our current and planned financial obligations in the foreseeable future. Our future financing requirements will depend on many factors including our growth rate, subscription renewal activity, the timing and extent of spending to support development of our platform, and the expansion of sales and marketing activities. Our TD credit facility matures on October 30, 2024 and while we currently expect that we will have sufficient cash flow for us to continue operations in our present form, there is a risk that the Company may not be able to comply with long-term debt covenants, obtain sufficient other additional financing or that such arrangements may result in dilution to existing shareholders. Turmoil and uncertainty in the financial and business markets may impact our ability to raise additional financing proceeds and the terms related to the financing. See “Forward Looking Statements” above.

Operating Activities

Cash outflows from operating activities for the year ended December 31, 2022 totaled $3,417,073 compared to cash outflows from operating activities of $2,097,147 for 2021. The higher outflow used in operating activities was driven primarily by a change in working capital which was mainly due to an increase in accounts receivable.

Financing Activities

Cash inflows from financing activities for the year ended December 31, 2022 totalled $3,519,329 compared to cash inflows from financing activities of $691,263 in 2021.

During the year ended December 31, 2022, the company drew down an additional $3,178,124 on its credit facility. Also, 2,281,388 common shares were issued upon the exercise of options, for proceeds of $645,567. These were offset by lease obligation payments of $296,834.

During the year ended December 31, 2021, 3,355,902 common shares were issued upon the exercise of options for proceeds of $969,929. This was offset by lease obligation payments of $278,666.

Investing Activities

Purchases of property and equipment was $101,324 for the year ended December 31, 2022 compared to $85,803 for the year ended December 31, 2021 and relate primarily for computers and office equipment for the day to day activities of employees. We currently have no material commitments for capital expenditures.

ADOPTION OF NEW ACCOUNTING POLICIES

There were no new accounting policies adopted in the year-ended December 31, 2022.

OTHER OBLIGATIONS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS

The Company leases office premises from a company controlled by the Chairman of the Board, Sir Terrence Matthews. This office premise is included as part of the right-of-use assets of $148,515 and as part of lease obligations of $172,947. Operating expenses under the related party lease have the following minimum annual payments.

		Related party
		commitment
2023	$	176,058

Loans totaling $396,768 ($537,407 CAD) have been issued to the CEO to purchase common shares. The loans are non-interest bearing and principal is repayable on demand.

The 2,668,488 common shares acquired under the CEO Share Purchase Loans are pledged as security against the share purchase loans and are held as security by the Company until such time as the individual loans are repaid. The share purchase loans were due on demand but were modified in February 2023, to be payable upon sale of shares or if the Company’s share price reaches $1.50 or greater for a period of at least thirty (30) days subject to certain conditions being met. The market value of the underlying common shares for the CEO Share Purchase Loans as at December 31, 2022 was $925,968.

Despite their legal form, the CEO Share Purchase Loans are accounted for similar to the grant of an option under IFRS. As such, for accounting purposes, the common shares issued and the share purchase loans granted under the loan and share pledge agreements are not recognized as outstanding until such time as payments are received on the loan balances. The $79,331 ($107,451 CAD) related party loan receivable for related tax remittances is treated as a current receivable.

The following table provides a summary of the rent and the Company’s other contractual obligations outstanding as at December 31, 2022:

Accounts payable and accrued liabilities Office lease obligations Long-term debt	Payments due by Period
	Carrying amount Contractual cash flows Year 1 Years 2-3 2,686,287 $ 2,686,287 $ 2,686,287 $ - $ 172,947 176,058 176,058 - 6,007,585 6,749,552 432,823 6,316,728
	8,866,819 $ 9,611,897 $ 3,295,168 $ 6,316,728 $

SUMMARY OF OUTSTANDING SHARES AND DILUTIVE INSTRUMENTS

The authorized capital of the Company consists of an unlimited number of common shares, of which 132,739,871 common shares were issued and outstanding as of the date of this MD&A.

The stock option plan (the “Option Plan”) of the Company is administered by the Board of Directors, which is responsible for establishing the exercise price (at not less than the Discounted Market Price as defined in the policies of the TSX Venture Exchange) and the vesting and expiry provisions. The maximum number of common shares reserved for issuance for options that may be granted under the Option Plan is 21,679,583. Options granted under the Option Plan to purchase up to an aggregate of 16,483,850 (average exercise price of CAD $0.68) common shares are issued and outstanding.

Assuming that all the outstanding options and warrants are vested and exercised, 149,223,721 common shares would be issued and outstanding on a fully diluted basis.

An additional 3,200,000 options to purchase common shares were issued at an exercise price of CAD $0.50 in February 2023.

QUARTERLY INFORMATION

Revenue Loss from operations Net loss Weighted average number of shares outstanding basic and diluted Net loss per common share, basic and diluted	Three months ended
	December 31, September 30, June 30, March 31, 2022 2022 2022 2022 5,610,756 $ 5,463,306 $ 5,211,616 $ 5,041,110 $ (445,129) $ (1,074,037) $ (1,316,718) $ (1,489,705) $ (550,848) $ (1,011,677) $ (1,342,633) $ (1,543,608) $ 128,763,361 128,763,361 128,278,739 125,869,247 (0.00) $ (0.01) $ (0.01) $ (0.01) $

Revenue Loss from operations Net loss Weighted average number of shares outstanding basic and diluted Net loss per common share, basic and diluted	Three months ended
	December 31, September 30, June 30, March 31, 2021 2021 2021 2021 5,006,723 $ 4,892,514 $ 4,841,047 $ 4,613,463 $ (1,031,783) $ (997,230) $ (1,065,268) $ (1,066,976) $ (1,119,870) $ (1,114,890) $ (1,124,616) $ (1,104,812) $ 125,869,247 125,918,010 125,277,003 124,499,218 (0.04) $ (0.01) $ (0.01) $ (0.01) $

RECONCILIATION OF NON-GAAP MEASURES

We use Non-GAAP financial measures, including Non-GAAP Loss from Operations and Non-GAAP Net Loss, to provide investors with supplemental measures of our operating performance and to highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. Management also uses non-GAAP measures to facilitate operating performance comparisons, prepare annual operating budgets and assess our ability to meet working capital requirements.

Non-GAAP Loss from Operations

The Company uses “Non-GAAP Loss from Operations” as a non-GAAP financial measure within the MD&A but it is not a defined term under IFRS to assess performance. Non-GAAP Loss from Operations adjusts the Loss from Operations to exclude our share based compensation plans.

Non-GAAP loss from Operations

	Three months ended
December 31, 2022 (445,129) $ 265,986 (179,143) $	September 30, 2022 (1,074,038) $ 223,629 (850,409) $ Year ended	December 31, 2021
		(1,031,783) $ 413,420
		(618,363) $
December 31, 2022 (4,325,589) $ 1,233,654 (3,091,935) $	December 31, 2021 (4,161,257) $ 866,068 (3,295,189) $	December 31, 2021
		(956,877) $ 627,230
		(329,647) $

Management use this information to measure operating results in relation to available working capital and cash and believes that this measure provides useful supplemental information to investors and is computed on a consistent basis for each reporting period. We believe that securities analysts, investors and other interested parties frequently use Non-GAAP measures in the evaluation of issuers.

Non-GAAP Net Loss

The Company uses “Non-GAAP Net Loss” as a non-GAAP financial measure within the MD&A but it is not a defined term under IFRS to assess performance. Non-GAAP Loss from Operations adjusts Net loss to exclude share based compensation, accretion of long-term debt and any change in fair value of derivative.

Non-GAAP Net loss

Three months ended

Non-GAAP Net loss		Three months ended
GAAP Net loss Add back: Share based compensation Accretion on long-term debt	December 31, 2022 (550,854) $ 265,986 2,808 (282,060) $	September 30, 2022 (1,342,633) $ 223,629 3,663 (1,115,341) $	December 31, 2021
			(1,119,871) $ 413,420 7,045
			(699,406) $

	Year ended
December 31, 2022 (4,448,767) $ 1,233,654 10,417 - (3,204,696) $	December 31, 2021 (4,464,188) $ 866,068 28,181 - (3,569,939) $	December 31, 2020
		(1,485,167) $ 627,230 280,976 3,270
		(573,691) $

Management use this information to measure financial results in relation to available working capital and cash and believes that this measure provides useful supplemental information to investors and is computed on a consistent basis for each reporting period. We believe that securities analysts, investors and other interested parties frequently use Non-GAAP measures in the evaluation of issuers.

Additional information relating to the Company may be found at www.SEDAR.com.

RISK FACTORS AFFECTING FUTURE RESULTS

There are a number of risk factors that could cause future results to differ materially from those described herein. The risks and uncertainties described herein are not the only ones the Company faces. Additional risks and uncertainties, including those that the Company does not know about now or that it currently deems immaterial, may also adversely affect the Company’s business. If any of the following risks actually occur, the Company’s business may be harmed and its financial condition and results of operations may suffer significantly.

Risks Related to the Business

Lack of Profitability

At December 31, 2022, the Company had not yet achieved profitable operations and has accumulated losses since inception. There is no assurance that the Company will earn any profits in the future, or that profitability, if achieved, will be sustained. If the Company is not able to achieve profitability, it will require additional equity or debt financing, and there can be no assurances that the Company will be able to obtain additional financial resources on favourable commercial terms or at all. Failure to obtain such additional financial resources could affect the Company’s plans for growth or result in it being unable to satisfy its obligations as they become due, either of which could have a material adverse effect on the Company’s business and its financial condition.

The Company’s quarterly and annual revenues and operating results may fluctuate, which may harm its results of operations

The Company recognizes subscription and support revenue over the terms of its customer agreements. As a result, most of the Company’s quarterly and annual revenue results from agreements that commenced in previous quarters. Consequently, a shortfall in demand for the Company’s applications in any quarter may not significantly reduce its subscription and support revenue for that quarter but could negatively affect subscription and support revenue in future quarters/years.

Some of the factors affecting the Company’s revenue and results, many of which are outside of its control, include:

competitive conditions in the Company’s industry, including new products, product announcements and incentive pricing offered by its competitors;
the Company’s ability to hire, train and retain sufficient technical, sales, and professional services staff;
the Company’s ability to maintain existing relationships with channel partners and customers and to create new relationships with potential channel partners and customers;
varying size, timing and contractual terms of orders for the Company’s licenses or other services, which may delay the recognition of revenue;
the discretionary nature of the Company’s customers' purchase and budget cycles and changes in their budgets for, and timing of, software, equipment and related purchases;
the length and variability of the sales cycles for the Company’s products;
order cancellations;
market acceptance of new and enhanced versions of, or add-ons to, the Company’s software applications;
strategic decisions by the Company or its competitors, such as acquisitions, divestitures, spinoffs, joint ventures, strategic investments or changes in business strategy;
the Company’s ability to complete its service obligations related to sales in a timely manner;
general weakening of the economy resulting in a decrease in the overall demand for the Company’s applications and services;
the geographical mix of the Company’s sales, together with fluctuations in foreign currency exchange rates;
changes in personnel and related costs;
changes in the Company’s pricing policies and the pricing policies of its competitors; and
timing of product development and new product initiatives, including add-ons.

Because the Company’s quarterly and annual revenue is increasingly dependent upon a relatively small number of sales and deployments to large customers, even minor variations in the rate and timing of conversion of its sales prospects into revenue could cause the Company to plan or budget inaccurately, and those variations could adversely affect its financial results.

In addition, because the expenses associated with generating customer agreements are generally incurred up front, but the resulting subscription and support revenue is recognized over the life of the customer agreement, increased growth in the number of customers may result in the Company’s recognition of more upfront costs than offsetting subscription and support revenue in the earlier periods of the terms of the Company’s agreements.

In light of the foregoing, quarter-to-quarter comparisons of the Company’s operating results are not necessarily meaningful and should not be relied upon as indications of likely future performance or annual operating results. Reductions in revenue or net income between quarters or the Company’s failure to achieve expected quarterly earnings per share could cause the market price of the common shares to decline or have a material adverse effect on its business, financial condition and results of operations.

Reliance on major customers and resellers

The Company currently relies on a limited number of major customers, and resellers for a significant portion of its revenues. The loss of business from a major customer and an adverse change in the Company’s relationship with any of its resellers could reduce the Company’s sales and harm its business and prospects. If the Company is unable to retain and expand its business with key customers and resellers on favourable terms, or develop new relationships with customers and resellers, then the business, financial condition and results of operations of the Company could be adversely affected.

The Company’s business may be harmed if it does not continue to penetrate markets and continue to grow

If the Company fails to further penetrate its core markets and existing geographic markets, or to successfully expand its business into new markets or through the right sales channels, the growth in sales of the Company’s products, along with its operating results, could be negatively impacted. Some of the Company’s competitors are larger and better capitalized and as a result, they may be better able to expand more quickly and through more sales channels. Some of the Company’s competitors provide end-to-end solutions. If the various core markets in which the Company's products are offered fail to grow, or grow more slowly than the Company currently anticipates, or if the Company is unable to establish new markets for its products, the Company's business, operating results, and financial condition could be materially adversely affected.

The Company’s success depends on its ability to develop new products and enhance its existing products

The markets for the Company’s products are competitive and are characterized by rapidly changing

technology, evolving industry standards and frequent new product introductions. To keep pace with the technological developments, satisfy increasingly sophisticated customer requirements and achieve market acceptance, the Company must enhance and improve existing products and it must continue to introduce new products and services. Currently, the Company’s products embody complex technology and are designed to be compatible with current and evolving industry standards. If the Company is unable to successfully develop new products or enhance and improve its existing products or if it fails to position and/or price its products to meet market demand, the Company’s business and operating results will be adversely affected. Accelerated product introductions and short product life cycles require high levels of expenditures for research and development that could adversely affect its operating results. Further, any new products the Company develops could require an investment of significant resources, long development and testing periods and may not be introduced in a timely manner or may not achieve the broad market acceptance necessary to generate significant revenue. The Company may determine that certain new products do not have sufficient potential to warrant the continued allocation of resources and may elect to terminate one or more new product candidates. If a new product is terminated in which the Company has invested significant resources, the Company’s prospects may suffer since resources were expended on a project that did not yield a return on the Company’s investment and it missed the chance to allocate such resources to potentially more productive uses and this may negatively impact the Company’s business, financial condition and operating results. In addition, as the Company develops new products, they may render some of its older products redundant or obsolete.

As the Company discontinues the sale of these older products, it must manage the supplier commitments and customer expectations. If the Company is unable to properly manage the possible discontinuation of these older products, it could have a material adverse effect on its business, financial condition and results of operations.

Subscription services are hosted by a third-party service for the Company

Subscription services, which produce the majority of the Company’s revenue, are hosted by a third party service for the Company. The success and growth of the Company’s subscription services are highly dependent on the Company’s ability to provide reliable services. Any interruption in service could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company may be liable to its customers or third parties and may lose customers if it is unable to collect data or it otherwise loses data

Because of the large amount of data that the Company collects and manages through the activities of its customers using the Company’s application, it is possible that errors in the Company’s systems or in third party systems used by the Company to deliver its service could cause the information that it collects to be incomplete or contain inaccuracies that the Company’s customers or third parties regard as significant. Furthermore, the Company’s ability to collect and report data may be interrupted by a number of factors, including its inability to access the Internet, the failure of its network or software systems or third-party network or software systems relied upon by the Company, security breaches or computer viruses. The Company may be liable to its customers or third parties for damages they may incur resulting from such events. The Company’s errors and omissions insurance may be inadequate to compensate the Company for such liability, may not cover all claims or may not be available in the future on acceptable terms or at all. In addition, if the Company supplies inaccurate or incomplete information or experiences interruptions in its ability to capture, store and supply information in real time or at all, the Company’s reputation could be harmed and it could lose customers. The Company currently carries professional liability errors & omissions insurance of $10 million USD to cover the risk of significant loss due to errors made by its employees or technology systems that result in third-party claims against the Company.

The Company may be liable for the handling of personal information

Personal information collected by the Company’s customers using the Company’s applications is stored on handheld devices that are not owned by the Company and is temporarily stored on servers that are owned by the Company or third parties (“subcontractors”) contracted by the Company. Government bodies and agencies around the world have adopted or are considering adopting laws regarding the collection, use and disclosure of personal information. Increasingly, the Company is being requested to

provide specific guarantees with respect to its compliance with such laws. The Company’s compliance with privacy laws and regulations and its reputation among the public may depend on its and / or its subcontractors’ adherence to such laws and regulations.

The Company relies on representations made to it by its customers that their own use of the Company’s application and the information collected by them via the Company’s application do not violate any applicable privacy laws or regulations. If these representations are false, if the Company’s customers do not comply with applicable privacy laws and regulations or if personal information is compromised at the customer level or on servers owned or used by the Company, the Company could face potential adverse publicity and possible legal or other regulatory action.

Cyber Risks

The Company provides software as a service and as a result it faces cyber risks that include, but are not limited to data breaches, unauthorized access and denial of service attacks as well as associated financial, reputational and business interruption risks. In its business, the Company collects, stores and processes personal information of its customers and despite all precautions taken by the Company, including its recent SOC2 compliance efforts, there is a risk of unauthorized access or security breaches resulting from third-party action, employee error, malfeasance or otherwise, which can lead to the loss of information, litigation, indemnity obligations and other significant liabilities. The Company could also be exposed to regulatory penalties for the unauthorized release of confidential information. Furthermore, the Company could face reputational harm relating to a negative perception of the Company’s applications which could result in the loss of customers. The Company actively monitors for these such risks and is committed to cyber security with a goal of maintaining and protecting its overall data security. However, despite such efforts by the Company, it may not be able to fully mitigate such cyber security risks given the evolving methods used to comprise data security, which are generally not identified until they are launched against a target. The Company currently carries technology errors and omissions insurance and cyber liability insurance to mitigate the risk of significant loss due to errors made by its technology systems that result in third-party claims against the Company; however, depending on the type and scale of the incident the Company’s errors and omissions and/or cyber liability insurance may be inadequate to compensate the Company for such liability, may not cover all claims or may not be available in the future on acceptable terms or at all. The Company’s risk to its business may increase as it expands its web-based and cloudbased products and services offered and as the Company increases the number of countries in which it operates.

Failure to manage the Company’s growth successfully may adversely impact its operating results

The growth of the Company’s operations places a strain on managerial, financial and human resources. The Company’s ability to manage future growth depends upon a number of factors, including its ability to rapidly:

build and train sales and marketing staff to create an expanding presence in the evolving marketplace for the Company’s products, and to keep staff informed regarding the technical features, issues and key selling points of its products;
attract and retain qualified technical personnel in order to continue to develop reliable and saleable products and services that respond to evolving customer needs;
expand its distribution channels to ensure that resellers across multiple industry and geographic segments will perceive the Company as a credible market participant and reliable supplier that will enable the profitable growth of their business;
develop customer support capacity as sales increase, so that the Company can deliver costeffective scalable support services to support its sales efforts in a manner that does not divert resources from product development efforts; and
expand the Company’s internal management, financial and IT controls significantly, so that it can maintain control over its operations and provide support to other functional areas within the Company’s business as the number of personnel and size of its business increases.

Any failure to manage the Company’s growth or achieve profitability could have a material adverse effect on its business, financial condition or results of operations.

The Company may lose sales, or sales may be delayed, due to the long sales and implementation cycle for its products

The Company’s customers typically invest substantial time, money and other resources researching their needs and available competitive alternatives before deciding to purchase the Company’s applications. Generally, the larger the (i) customer; and/or (ii) potential sale, the more time, money and other resources will be invested. As a result, it may take many months after the Company’s first contact with a customer before a sale can actually be completed. The Company may invest significant sales and other resources in a potential customer that may not generate revenue for a substantial period of time, if at all. The time required for implementation of the Company’s products varies among its customers and may last several months, depending on its customers’ needs, the resources they apply to a project and the products deployed.

During these long sales and implementation cycles, events may occur that affect the size or timing of the order or even cause it to be cancelled. For example:

purchasing decisions may be postponed, or large purchases reduced, during periods of economic uncertainty;
the Company or its competitors may announce or introduce new products; or
the customer's own budget and purchasing priorities may change.

If these events were to occur, sales of the Company’s products or services may be cancelled or delayed, which would reduce its revenue.

If the Company is required to change its pricing models to compete successfully, its margins and operating results may be adversely affected

The highly competitive market in which the Company conducts its business may require the Company to reduce its prices. If the Company’s competitors offer discounts on certain products or services in an effort to recapture or gain market share of other software products, the Company may be required to lower prices or offer other favourable terms to compete successfully. Any such change would likely reduce its margins and could adversely affect its operating results. Some of the Company’s competitors may bundle software products that compete with the Company for promotional purposes or as a long-term pricing strategy or provide guarantees of prices and product implementations. These practices could, over time, limit the prices that the Company can charge for its products. If the Company cannot offset price reductions with a corresponding increase in the number of sales or with lower spending, then the reduced software licence revenue resulting from lower prices would adversely affect its margins and operating costs.

The Company’s growth depends in part on the success of its strategic relationships with third parties.

Identifying partners and negotiating and documenting relationships with them require significant time and resources as does integrating third-party content and technology. The Company’s agreements with technology and content providers are typically non- exclusive and do not prohibit them from working with the Company’s competitors or from offering competing services. The Company’s competitors may be effective in providing incentives to third parties, including its partners, to favour their products or services or to prevent or reduce subscriptions to the Company’s application suite either by disrupting the Company’s relationship with existing customers or by limiting its ability to win new customers. In addition, global economic conditions could adversely affect the businesses of the Company’s partners, and it is possible that they may not be able to devote the additional resources the Company’s expects to the relationship. Although the Company believes that it has a good relationship with most of its existing third

parties and partners, if the Company is unsuccessful in establishing or maintaining its relationships with these third parties, the Company’s ability to compete in the marketplace or to grow its revenue could be impaired and its operating results would suffer. Even if it is successful, continued establishment and maintenance of these third-party relationships may not result in increased customer usage of the Company’s application suite or revenue.

The financial condition of third parties may adversely affect the Company

The Company relies on third party suppliers to provide it with components and services necessary for the completion and delivery of its products. In addition, the Company periodically outsources limited aspects of the development and testing of its products to third parties and a significant increase in the price of the services provided by these third parties, or delays in their deliveries, could have a material adverse effect on the Company’s business, financial condition and results of operations. In the event that any of the third parties with whom the Company has significant relationships, including its channel partners and third party suppliers, files a petition in or is assigned into bankruptcy or becomes insolvent, or makes an assignment for the benefit of creditors or makes any arrangements or otherwise becomes subject to any proceedings under bankruptcy or insolvency laws with a trustee, or a receiver is appointed in respect of a substantial portion of its property, or such third party liquidates or winds up its daily operations for any reason whatsoever, then the Company’s business, financial position and results of operations may be materially and adversely affected.

The Company’s success depends in part on its ability to protect its rights in its intellectual property

The Company relies on various intellectual property protections, including contractual provisions, patents, copyright, trade secrets, trademarks and know-how to preserve its intellectual property rights. Although it currently has patents and patent applications, most of the Company’s core technology is primarily protected by trade secrets and copyright. The Company typically enters into agreements with its employees, consultants, customers, channel partners and vendors in an effort to control ownership of its intellectual property and access to and distribution of its software, documentation and other proprietary information. Despite these precautions, there may be authors of some of the intellectual property that forms part of the Company’s software products who have not assigned their intellectual property rights to the Company and who have not waived their moral rights with respect thereto. The steps the Company takes may not prevent misappropriation of its intellectual property, and the agreements it enters into may not be enforceable. It may also be possible for third parties to obtain and use the Company’s intellectual property without its authorization. Policing unauthorized use of intellectual property is difficult, time-consuming and costly. Further, some foreign laws do not protect proprietary rights to the same extent as the laws of Canada or the United States. Additionally, the absence of internationally harmonized intellectual property laws makes it more difficult to ensure consistent protection of the Company’s proprietary rights. Trademark protection is an important factor in establishing product recognition. The Company’s ability to protect its trademarks from infringement could result in injury to any goodwill which may be developed in its trademarks. Moreover, the Company may be unable to use one or more of its trademarks because of successful third-party claims. To protect its intellectual property, the Company may become involved in litigation, which could result in substantial expenses, divert the attention of management, cause significant delays, materially disrupt the conduct of its business or adversely affect its revenue, financial condition and results of operations.

Intellectual property claims brought against the Company could be time consuming, costly to defend and disruptive to its business

The Company cannot determine with certainty whether any existing third-party patents or the issuance of any third-party patent would require the Company to alter its technology, obtain licenses or cease certain activities. The Company may become subject to claims by third parties that its technology infringes their property rights due to the growth of software products in the Company’s target markets, the overlap in functionality of these products and the prevalence of software products. The Company may become subject to these claims either directly or through indemnities against these claims that it routinely provides to its customers. Litigation may be necessary to determine the scope, enforceability and validity of such thirdparty proprietary rights or to establish the Company’s proprietary rights. Some of the Company’s competitors have substantially greater resources than it does, and those competitors may be able to sustain

the costs of complex intellectual property litigation to a greater degree and for a longer period of time than the Company. Regardless of their merit, any such disputes could:

be time consuming;
be expensive to defend;
divert management’s attention and focus away from the Company’s business;
subject the Company to significant liabilities; and
require the Company to enter into costly royalty or licensing agreements or to modify or stop using the infringing technology.

Further, if the Company is found to have infringed any patents, trademarks or other intellectual property rights, a court could award significant damages and enjoin the Company from distributing its products that infringe the patents, trademarks or other intellectual property in jurisdictions in which such rights are affected. This could result in a material adverse effect on the Company’s business, results of operations and financial condition.

The loss of the Company’s rights to use software currently licensed to it by third parties could increase its operating expenses by forcing the Company to seek alternative technology and adversely affect its ability to compete

The Company licenses certain software used in its products and operations from third parties, generally on a nonexclusive basis, and it uses components from suppliers which are reliant on intellectual property used by such suppliers. The termination or non-renewal of any of these licences, or the failure of these licensors or suppliers to adequately maintain, protect or update their software or intellectual property rights, could delay the Company’s ability to ship its products or offer its products under a software as a service model while it seeks to implement alternative technology offered by other sources and could require significant unplanned investments on the Company’s part. In addition, alternative technology may not be available on commercially reasonable terms. In the future, it may be necessary or desirable to obtain other third-party technology licences relating to one or more of the Company’s products or relating to current or future technologies to enhance its product offerings. There is a risk that the Company may not be able to obtain licensing rights to the needed technology or components on commercially reasonable terms, if at all.

The Company uses open-source software in connection with its products which exposes it to uncertainty and potential liability

Certain of the Company’s products make use of or incorporate open-source software components. These components are developed by third parties over whom the Company has no control. It has no assurances that those components do not infringe upon the intellectual property rights of others. The Company could be exposed to infringement claims and liability in connection with the use of those open-source software components. The developers of open-source software are under no obligation to maintain or update that software, and the Company may be forced to replace such software components with internally developed or commercially licensed software. Certain open-source software licences provide that any software that makes use of or incorporates software distributed under that licence will itself become subject to the same general distribution rights and other terms of that licence. As a result, there is a risk that third parties, including the Company’s competitors, could have the right to use and distribute certain elements of its products.

The Company’s ability to recruit and retain management and other qualified personnel is crucial to its ability to develop, market and support its products

Several members of the Company’s senior management team are critical to its business and if these individuals do not remain with the Company in the future, their absence may have a negative impact on its financial condition and results of operations. The Company’s future success depends, in part, on the continued efforts and abilities of its senior management team. Their skills, experience and industry contacts significantly benefit the Company. Although the Company offers competitive compensation packages to attract and retain its senior management team and although it has employment agreements with these employees, it cannot be certain that they or other key employees will all choose to remain employed by the Company. The Company does not carry key person insurance on any of these employees for the benefit of the Company. If the Company loses the services of one or more of these individuals, or if one or more of them decide to join a competitor or otherwise compete directly with the Company, its business, operating results, and financial condition could be harmed.

The Company also depends on the services of its key technical, sales and management personnel. Many of these individuals would be difficult to replace if they were to leave the Company’s employment. The loss of the services of any of these persons could have a material adverse effect on its business, results of operations and financial condition. The Company’s success is also highly dependent on its continuing ability to identify, hire, train, motivate and retain highly qualified management, technical, sales and marketing personnel. Competition for such personnel can be intense, and the Company cannot assure that it will be able to attract or retain highly qualified personnel in the future. The Company’s inability to attract and retain the necessary management, technical, sales and marketing personnel may adversely affect its future growth and profitability. It may be necessary for the Company to increase the level of compensation paid to existing or new employees to a degree that its operating expenses could be materially increased.

The Company’s ability to develop new software solutions and to enhance its existing software solutions depends, in part, on its ability to recruit and to retain top quality software programmers. If the Company is unable to hire and to retain sufficient numbers of qualified programming personnel, it may not be able to develop new software solutions or to improve its existing software solutions in the time frame necessary to execute its business plan.

Any significant changes in the technological paradigm used for building or delivering applications in Smartphone devices may harm the Company’s business and prospects

The technological paradigm used for building or delivering applications in Smartphone devices may be subject to significant changes. The Company’s business and future success depends, in part, on its ability to accurately predict and anticipate the evolving technology and to keep pace with such changes in technology and industry standards. If the Company is unable to successfully address these developments on a timely basis or at all, then the Company’s business, financial position and results of operations may be materially and adversely affected.

The Company’s software products may contain errors or defects that could result in lost revenue, delayed or limited market acceptance, or product liability claims with substantial litigation costs

As a result of their complexity, software products may contain undetected errors or failures when entering the market. Despite testing performed by the Company and testing and use by current and potential customers, defects and errors may be found in new software products after commencement of commercial shipments or the offering of a service using these software products. In addition, because the Company’s products are sold and marketed in different countries, the products must function in and meet the requirements of many different communication environments and be compatible with various communication systems and mobile handsets and associated products. In these circumstances, the Company may be unable to successfully correct the errors in a timely manner or at all. The occurrence of errors and failures in the Company’s software products could result in negative publicity and a loss of, or delay in, market acceptance of those software products. Such publicity could reduce revenue from new licenses and lead to increased customer attrition. Alleviating these errors and failures could require significant expenditure of capital and other resources by the Company. The consequences of these errors and failures could have a material adverse effect on the Company’s business, results of operations and

financial condition. Any errors, defects, or other performance problems with the Company’s products could result in financial or other damage to its customers. The Company’s customers or other third parties could seek to recover damages from the Company in the event of actual or alleged failures of its software solutions. Although its license agreements with customers typically contain provisions designed to limit the Company’s exposure to potential claims, as well as any liabilities arising from these claims, the provisions may not effectively protect against these claims and the liability and associated costs. Accordingly, any such claim could have a material adverse effect upon the Company’s business, results of operations, and financial condition. In addition, defending this kind of claim, regardless of its merits, or otherwise satisfying affected customers, could entail substantial expense and require the devotion of significant time and attention by key management personnel.

Currency exchange rate fluctuations and other risks associated with the Company’s international operations may adversely affect its operating results

The Company is subject to risks of doing business internationally, including fluctuations in currency exchange rates, increases in duty rates, difficulties in obtaining export licenses, difficulties in the enforcement of intellectual property rights and political uncertainties. The Company is exposed to foreign currency fluctuations in the US dollar, GBP and Euro, which may have a material adverse effect on its business, financial condition and operating results. In particular, the US dollar may fluctuate significantly compared to the Canadian dollar, causing reduced revenue and cash flow as most of the Company’s revenues are received in US dollars while most of the Company’s expenses are payable in Canadian dollars.

The Company also plans to continue to expand its international sales and marketing efforts. There are a number of risks inherent in the Company’s international business activities, including unexpected changes in governmental policies concerning the import and export of goods, services and technology and other regulatory requirements, tariffs and other trade barriers, costs and risks of localizing products for foreign countries, higher credit risks, potentially adverse tax consequences, limits on repatriation of earnings and the burdens of complying with a wide variety of foreign laws. The financial stability of foreign markets could also affect the Company’s international sales. In addition, revenue that the Company earns abroad may be subject to taxation by more than one jurisdiction, which could materially adversely affect its earnings. Additional risks the Company faces in conducting business internationally include longer payment cycles, scalable support offerings and difficulties in managing international operations. These include constraints associated with local laws regarding employment, difficulty in enforcing agreements through foreign legal systems and financial reporting compliance requirements. Each of these factors could have an adverse effect on its business, financial condition and results of operations.

Software product development delays could harm the Company’s competitive position and reduce its revenues

If the Company experiences significant delays in releasing new or enhanced software products, its position in the market could be harmed and its revenue could be substantially reduced, which would adversely affect its operating results. In particular, the Company may experience software product development delays associated with the integration of recently acquired software products and technologies. Delays may occur for many reasons, including the inability to hire a sufficient number of developers, discovery of bugs and errors, or the inability of its current or future software products to conform to customer and industry requirements.

If the Company’s customers demand performance guarantees, the costs and risks associated with offering its software solutions will increase

The Company and its competitors are being requested, from time to time, to provide specific performance guarantees with respect to the functionality of certain aspects of its software solutions. Similarly, the Company has been requested to quote fixed-price bids for its software solutions. These requests present risks, because no two implementations of its software solutions are identical, and therefore the Company cannot accurately predict precisely what will be required to meet these performance standards. If this trend continues, the Company’s profitability may be affected if it is required to spend more to meet its commitments.

The Company may be subject to challenges by taxing authorities which may adversely affect its business

Although the Company is of the view that all expenses and tax credits claimed by it, including research and development expenses and related tax credits, are reasonable and deductible and have been correctly determined, there can be no assurance that the Canadian and United States taxation authorities will agree. If the Canadian and United States taxation authorities successfully challenge such expenses or the correctness of such income tax credits claimed, the Company’s operating results could be adversely affected. If the Canadian and United States taxation authorities reduce the tax credit either by reducing the rate of the grant or the eligibility of some research and development expenses in the future, the Company’s operating results may be adversely affected. We are also subject to taxation in various jurisdictions and the applicable taxing authorities may disagree with the Company’s tax positions in such jurisdictions.

Risks Relating to the Industry

The market for software as a service is in the growth stage of development, and if it does not develop or develops more slowly than the Company expects, the Company’s business will be harmed.

Factors that may affect the market acceptance of software as a service include:

perceived security capabilities and reliability;
perceived concerns about ability to scale operations for large enterprise customers;
concerns with entrusting a third party to store and manage critical employee data; and
the level of configurability or customizability of the software.

If organizations do not perceive the benefits of software as a service, the market for the Company’s software may not develop further, or it may develop more slowly than the Company expects, either of which would adversely affect the Company’s business.

The Company faces competition from other software solution providers, which may reduce its market share or limit the prices it can charge for its software solutions

The Company’s competitors may announce new products, services or enhancements that better meet the needs of customers or changing industry standards. Increased competition may cause price reductions, reduced gross margins and loss of market share, any of which could have a material adverse effect on the Company’s business, financial condition and results of operations. Many of its competitors and potential competitors have significantly greater financial, technical, marketing, service and other resources than the Company has. Many of these companies also have a larger installed base of users, have longer operating histories or have greater name recognition than the Company. The Company’s relatively smaller size may be considered negatively by prospective customers. Its competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements or may devote greater resources to the development, promotion and sale of their products than the Company does. Many competitive factors affect the market for its products and its ability to earn maintenance, professional services and new license revenue. Some of these factors are: vendor and product reputation; industry specific expertise; cost of ownership; ease and speed of implementation: customer support; product architecture, quality, price and performance; product performance attributes, such as flexibility, scalability, compatibility, functionality and ease of use; and vendor financial stability.

Economic uncertainty and downturns in the software market may lead to decreases in the Company’s revenue and margins

The market for the Company’s products depends on economic conditions affecting the broader software market. The current significant global economic downturn may cause businesses to delay or cancel software projects, reduce their overall information technology budgets or reduce or cancel orders for the Company’s products. In this environment, customers may experience financial difficulty, fail to purchase or defer the budget for the purchase of the Company’s products or cease operations. This, in turn, may lead to longer sales cycles, delays or failures in payment and collection, and price pressures, causing the Company to realize lower revenue and margins. In addition, customers may be reluctant to purchase products from smaller suppliers such as the Company and this could result in reduced customer wins. If growth in software deployments does not continue or is significantly slower than forecasted by the market experts, this could have an adverse effect on the Company’s business, financial condition and results of operations. A deterioration in the economic environment may accelerate the effect of the various risk factors described in this MD&A, as well as result in other unforeseen events that could impact the Company’s business and financial condition.

The impact of geopolitical and other global or local events may have a significant effect on the Company’s operations

Various events, including natural disasters, extreme weather conditions, power loss, telecommunication and system failures, computer viruses, physical attacks, cyber-attacks, labour disputes, civil unrest, war, political instability, terrorism, and contagious illness outbreaks, or the perceived threat of these events, may cause a disruption of the Company’s normal operations and may disrupt the domestic and international travel of the Company’s sales and other personnel. Any disruption in the ability of its personnel to travel could have a material and adverse impact on the Company’s ability to provide service to its customers, which could, in turn, have a material adverse effect on its business, results of operations and financial condition. In addition, these events or the perceived threat of these events may require the Company to reorganize its day-to-day operations to minimize the associated risks. Any expense related to the reorganization of its day-to-day operations, even on a short-term basis, could also have a material adverse effect on the Company’s business, results of operations and financial condition.

Government regulation of the Internet may have an adverse effect on the Company’s business

The application of existing laws and regulations to the Company, relating to issues such as user privacy, defamation, pricing, advertising, taxation, promotions, consumer protection, content regulation, quality of products and services, and intellectual property ownership and infringement, can be unclear. Customer’s ability to use and share data could be affected by laws and regulations relating to the solicitation, collection, processing or use of personal or consumer information, potentially reducing demand for Internet-based solutions and restricting the Company’s ability to store, process, analyze and share data through the Internet. In addition, the Company will also be subject to new laws and regulations directly applicable to its activities. Any existing or new legislation applicable to the Company could expose it to substantial liability, including significant expenses necessary to comply with such laws and regulations.

International government regulations may adversely affect the Company’s business

Because regulatory schemes vary by country, the Company (as well as parties it carries on business with) may be subject to rules and regulations in foreign countries of which it is not presently aware. If that were to be the case, then the Company could be subject to travel restrictions and/or sanctions by a foreign government that could materially adversely affect its ability to deploy its products in such country or to subscribers in such country. The Company cannot guarantee that it will be able to obtain the necessary travel permissions, licenses and regulatory approvals in the future or that such travel permissions, licenses and approvals will be granted on a timely basis, if at all. The failure to obtain the necessary travel permissions, licenses and authorizations internationally could have a material adverse effect on the Company’s ability to generate revenue and on its overall competitive position.

Additional Risk Factors

The Company’s share price will fluctuate

The trading price of the Company’s common shares is subject to change and could in the future fluctuate significantly. The fluctuations could be in response to numerous factors beyond the Company’s control, including: quarterly variations in results of operations; announcements of technological innovations or new products by the Company, its customers or competitors; changes in securities analysts’ recommendations; announcements of acquisitions; changes in earnings estimates made by independent analysts; general fluctuations in the stock market; or revenue and results of operations below the expectations of public market securities analysts or investors. Any of these could result in a sharp decline in the market price of the common shares.

In addition, stock markets have occasionally experienced extreme price and volume fluctuations. The market prices for high-technology companies have been particularly affected by these market fluctuations and such effects have often been unrelated to the opening performance of such companies. These broad market fluctuations may cause a decline in the market price of the common shares.

The Company’s significant shareholders will have the ability to control certain corporate actions

The Company’s significant shareholders may be in a position to exercise significant influence over all matters requiring shareholder approval, including the election of directors, determination of significant corporate actions, amendments to the Company’s articles and by-laws and the approval of any business combinations.

Dividends

The Company does not currently intend to pay any cash dividends on its common shares in the foreseeable future and therefore its shareholders may not be able to receive a return on their shares unless they sell them. The Company’s current policy is to retain earnings to finance the development of new lines of products and to otherwise reinvest in the Company. The Company’s dividend policy will be reviewed from time to time by the board of directors of the Company in the context of its earnings, financial condition and other relevant factors. Until the Company pays dividends, which it may never do, its shareholders will not be able to receive a return on its common shares unless they sell them.