HEALWELL AI Inc. - Management Reports 2021

MCI Onehealth Technologies Inc.

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following is a discussion of the consolidated financial condition and results of operations of MCI Onehealth Technologies Inc. and its subsidiaries (together, the “Company”) for the years ended December 31, 2020 and 2019 (the “MD&A”). The MD&A should be read in conjunction with the consolidated financial statements of the Company and the notes thereto for the years ended December 31, 2020 and 2019 (the “Financial Statements”). The Financial Statements were prepared in accordance International Financial Reporting Standards (“IFRS”).

FORWARD-LOOKING STATEMENTS

Certain statements in this MD&A, constitute “forward-looking information” and "forward looking statements" (collectively, "forward looking statements") within the meaning of applicable Canadian securities laws and are based on assumptions, expectations, estimates and projections as of the date of this MD&A. Forward-looking statements include statements with respect to projected revenues, earnings, growth rates, targets, revenue mix and product plans and the Company’s future growth, results of operations, performance and business prospects and opportunities. The words “plans”, “expects”, “projected”, “estimated”, “forecasts”, “anticipates”, “intend”, “guidance”, “outlook”, “potential”, “prospects”, “seek”, “aim”, “strategy”, “targets” or “believes”, or variations of such words and phrases or statements that certain future conditions, actions, events or results “will”, “may”, “could”, “would”, “should”, “might” or “can”, or negative versions thereof, “occur”, “continue” or “be achieved”, and other similar expressions, identify forward-looking statements. Forward-looking statements are necessarily based upon management’s perceptions of historical trends, current conditions and expected future developments, as well as a number of specific factors and assumptions that, while considered reasonable by the Company as of the date of such statements, are outside of the Company's control and are inherently subject to significant business, economic and competitive uncertainties and contingencies which could result in the forward-looking statements ultimately being entirely or partially incorrect or untrue. Forward looking statements contained in this MD&A are based on various assumptions, including, but not limited to the following: the overall Network Policy Control market including reliance on major customers; adoption of virtual series solutions; the requirement for increasingly innovative product solutions; the Company's ability to achieve its growth strategy; the demand for the Company’s products and fluctuations in future revenues; sufficiency of current working capital to support future operating and working capital requirements; the stability of general economic and market conditions; currency exchange rates and interest rates; equity and debt markets continuing to provide the Company with access to capital; the Company's ability to comply with applicable laws and regulations; the Company’s continued compliance with third party intellectual property rights; and that the risk factors noted below, collectively, do not have a material impact on the Company's business, operations, revenues and/or results. By their nature, forward-looking statements are subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections, or conclusions will not prove to be accurate, that assumptions may not be correct, and that objectives, strategic goals and priorities will not be achieved.

Known and unknown risk factors, many of which are beyond the control of the Company, could cause the actual results of the Company to differ materially from the results, performance, achievements, or developments expressed or implied by such forwardlooking statements. Such risk factors include but are not limited to those factors which are discussed in the Company’s annual information form for the year ended December 31, 2020 (the “ AIF ”), a copy of which is available on SEDAR at www.sedar.com. The risk factors are not intended to represent a complete list of the factors that could affect the Company and the reader is cautioned to consider these and other factors, uncertainties, and potential events carefully and not to put undue reliance on forward-looking statements. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are provided for the purpose

of providing information about management’s expectations and plans relating to the future. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, or to explain any material difference between subsequent actual events and such forward-looking statements, except to the extent required by applicable law. All the forward-looking statements contained in this MD&A are qualified by these cautionary statements.

NON-IFRS MEASURES

Earnings Before Interest and Other, Taxes, Depreciation and Amortization (“EBITDA”) is not a recognized measure under IFRS, and investors are cautioned that EBITDA should not be construed as an alternative to net income (loss) or cash flows from operating activities as an indicator of the Company’s performance or cash flows.

The Company’s method of calculating EBITDA may differ from other companies’ methods and may not be comparable to measures used by other companies. Management uses EBITDA to assist in identifying underlying operating trends and allows for a comparison of the Company’s operating performance on a consistent basis. Investors may also use EBITDA, amongst other financial measures, to assist in the valuation of the Company.

The Company prepares its financial statements in accordance with IFRS. This MD&A also includes certain measures which have not been prepared in accordance with IFRS such as Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA per share used to evaluate the Company’s operating performance as a complement to results provided in accordance with IFRS.

The term “Adjusted EBITDA” refers to net income (loss) before adjusting for share-based payment expense, depreciation and amortization, deferred share unit expense, restructuring costs, foreign exchange (gain) loss, finance income, finance costs and income taxes. The company believes that the items excluded from Adjusted EBITDA are not connected to and does not represent the operating performance of the Company. “Adjusted EBITDA margin” refers to the percentage that Adjusted EBITDA for any period represents as a portion of total revenue for that period.

“Adjusted EBITDA per share” refers to Adjusted EBITDA divided by the weighted average number of Common Shares outstanding, which the Company calculate on a basic and diluted basis.

The Company believe that Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA per share are useful supplemental information as they provide an indication of the results generated by the Company’s main business activities prior to taking into consideration how those activities are financed and taxed as well as expenses related to share-based payment expense, impairment charge on non-financial assets, impairment of loan receivable and shared services, deferred share unit expense and the other items listed above. Accordingly, the Company believes that these measures may also be useful to investors in enhancing their understanding of the Company’s operating performance. See “ Results of Operations – Adjusted EBITDA ”.

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

CORPORATE BACKGROUND

The Company was incorporated on July 18, 2012 under the Business Corporations Act (Ontario) and was continued under the Canada Business Corporations Act on January 4, 2021. The principal activities of the Company are the operation of primary care medical clinics in the provinces of Alberta and Ontario, Canada.

GLOBAL PANDEMIC – COVID-19 UPDATE

In March 2020, the World Health Organization declared the outbreak of a disease caused by a novel strain of the coronavirus (COVID19) to be a pandemic. This pandemic has had widespread, rapidly evolving, and unpredictable impacts on global societies, economies, financial markets, and business practices. Federal and state governments have implemented measures to contain the virus, including physical distancing, travel restrictions, border closures, limitations on public gatherings, work from home, supply chain logistical changes and closure of non-essential businesses.

Epidemic and pandemic diseases, such as the outbreak of COVID-19, may have a significant impact on MCI. The Group continues to adapt to the impacts of COVID-19 on the business, with the health and safety of employees, patients, and communities as the highest priority. Since the World Health Organization’s declaration of the global pandemic in March 2020, we successfully expedited our business continuity program, however, a risk of this nature may still have a material adverse impact on our business, results of operations and financial condition.

In response to the negative economic impact of COVID-19, various government programs were announced to provide financial relief to affected businesses. The Government of Canada introduced the CEWS program, which subsidizes a portion of employee wages (up to a specified maximum) for Canadian employers whose businesses have met eligibility criteria. The program is intended to help employers rehire previously laid off workers, prevent further job losses, and better position Canadian businesses to resume normal operations. The Government of Canada also introduced the and Canada's Emergency Commercial Rent Assistance Program (“CECRA”) to provide rent and other relief to businesses, non-profits and charities that have experienced revenue declines during the COVID-19 pandemic. The Company has obtained approximately $2,967 in assistance from the Canada Emergency Wage Subsidy (CEWS) and Canada's Emergency Commercial Rent Assistance Program (CERCA) which has been recorded as reduction of the total General and administrative expenses.

The Company has considered the significant impact of COVID-19 on the business in 2020 with all but one clinic remaining open for the entire year. One clinic has remained closed since the second quarter due to the closure of the building. The Company has two other clinics within 1 kilometer of the closed location, which have enabled it to mitigate some of the impact of the closed location. The Company expects a return to full operations in all medical clinics by the end of 2021, with a growth in revenue for 2022.

Due to the fluidity of the COVID-19 pandemic and the uncertainty of its magnitude, outcome and duration, the Company is unable to definitively quantify its potential impact. The Company has taken measures to manage costs, including a reduction of operating expenses.

Business Overview

The Company, through its wholly owned subsidiaries provides healthcare and healthcare related services to patients and the employees of corporate customers through its network of 25 brick and mortar clinics (20 in Ontario and 5 in Alberta), complemented by telehealth, MCI Connect virtual platform rolling out, as well as on-site services for its corporate customers.

The Company performs approximately 850,000 healthcare and healthcare related consultations annually to individual consumers and the employees of 250 corporate customers through a team of 280 contracted physicians, 340 employees and other third-party healthcare contractors.

The Company’s mission is to empower patients and physicians with advanced technologies intended to increase access, improve quality and consistency of health services. MCI believes that this will improve the affordability of government-funded and privately funded primary care services. Industry statistics show 70% of all adverse medical events are estimated to be preventable. The Company believes that advanced technologies will play a key role in MCI’s ability to expand its healthcare and healthcare-related service offerings.

To this end, MCI is scaling development of its patient and doctor-facing applications to support new health services it intends to deliver through its proprietary virtual care platform MCI Connect. MCI Connect is currently offered through computer browsers

available on most computing platforms. Mobile versions of MCI Connect for mobile phones, connected wearables such as Apple’s iWatch are expected to be broadly available in 2021.

MCI is further scaling development of its data analytics platform BrightOS, which is expected to become available to MCI’s physicians as a tool to aid in their daily operations as well as to external customers in the later half of calendar 2021.

Currently MCI’s revenue consists primarily of provincially funded medical consultations delivered through the Company’s 25 brick and mortar clinics, telehealth and virtual care platform in Ontario and Alberta as well as privately paid for health services delivered to corporate customers at the customer’s workplace.

KEY PERFORMANCE INDICATORS

Key performance indicators that the Company uses to manage its business and evaluate its financial results and operating performance include revenue, expenses, gross profit, gross margin, adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA per share, and net income (loss) and net income (loss) per share. The Company evaluates its performance on these metrics by comparing its actual results to management budgets, forecasts, and prior period performance.

SELECTED ANNUAL INFORMATION

The following table sets out selected financial information for the periods indicated. The selected financial information of the Company as of December 31, 2020 and 2019 and for the fiscal years ended December 31, 2020, 2019 and 2018 has been derived from the Company’s audited financial statements.

Revenue Expenses Physician fees Salary, wages, and benefits Occupancy costs Office expenses Depreciation and amortization Finance costs Expected credit losses Other income Interest income on subleases (Gain) loss on sublease contracts (Gain) loss on disposal of property and equipment Loss before taxes Income taxes Net Loss for the year ATTRIBUTED TO: Shareholders of MCI Onehealth technologies Inc. Non-Controlling interests Loss per share attributable to MCI Onehealth Technologies Inc- Basic and diluted loss per share			2020	2019	2018
		$ 38,573 $ 46,291 $ 44,699 25,649 31,030 29,932 5,828 8,180 8,198 2,373 3,168 3,012 4,253 2,177 2,242 2,955 3,120 3,146 607 666 692 202 313 299
		41,867 48,656 47,521
		(3,294) (2,365) (2,822) 1,872 2,276 2,521 64 76 79 19 - 11 - (17) 1
		1,955 2,335 (2,612)
		(1,339) (30) (210) (312) 91 33 (1,027) (121) (243)

		2020 2019 2018
		$ (1,029) (122) (229) 2 1 (13) $ (1,027) $ (121) $ (242)
		$ (0.03) $ (0.01) $ (0.01)

Results of operations.

(In thousands of dollars, except percentages and per share amounts):

	Three months ended Period over	Year ended Period over
	December 31 Change	December 31 Change
	2020 2019 $ %	2020 2019 $ $

Revenue	$ 10,983 $ 11,933 $ (950) (8)	$ 38,573 $ 46,291 $ (7,718) (17)

Expenses
Physicians’ fees	7,370 8,004 (634) (8)	25,649 31,030 5,381 (17)
Salary, wages, and benefits	2,563 2,097 466 22	5,828 8,180 (2,352) (2,349)
Occupancy costs	706 927 (221) (24)	2,373 3,168 (795) (25)
Office expense	2,492 565 1,927 341	4,253 2,177 2076 32
Expected credit losses	1 285 (284) (100)	202 313 (111) (35)
Interest income on subleases	(14) (31) 17 (55)	(64) (76) 12 (16)
Other income	(316) (658) 342 (52)	(1,872) (2,276) 404 (18)

	12,802 11,189 1,613 14	36,369 42.516 (6,147) (14)

Adjusted EBITDA	(1,819) 744 (2,563) (344)	2,204 3,773 (1,569) (42)

Finance costs	142 164 (22) (13)	607 666 (59) (9)
Depreciation and amortization	733 758 (25) (3)	2,955 3,120 (165) (5)
Gain (loss) On sublease
Contracts	(10) - (10) NM	(19) - (19) NM
Gain (loss) on disposal of
Property & equipment	- 17 (17) NM	- 17 (17) NM
	865 939 (74) 3,543	3,543 3,803 (224) (7)

Income (loss) before taxes	(2,684) (195) (2,489) 1,339	(1,339) (30) (1,309) 4,363
Income taxes	(627) 91 (718) (789)	(312) 91 (403) (443)
Net Income (loss)	(2,057) (286) (1,771) 619	(1,027) (121) (906) 749

Weighted average number of
Shares outstanding
Basic and diluted	39,306 38,004	38,333 38,004
Net income (loss) per share	$ (0.05) $ (0.01)	$ (0.03) $ (0.01)
Basic and diluted

NM means not meaningful.

Selected Statement of Financial Position Data

	Year ended December 31
	2020 2019
	$ in thousands

Cash and cash equivalents	894 1,128
Net investment in subleases	1,685 2,150
Property and equipment	13,572 15,830
Total Assets	22,358 22,684
Lease liability	13,833 15,850
Total liabilities	22,121 20,421
Total shareholders equity	237 2,262

Comparison of the quarters and fiscal years ended December 31, 2020 and 2019.

Revenue

	Three months ended Period over	Year ended Period over
	December 31 Change	December 31 Change
	2020 2019 $ %	2020 2019 $ $
	($ in thousands except percentages)	($ in thousands except percentages)

Public insured health	$9,558 11,358 (1,800) (16)	34,436 43,309 (8,873) (20)
Other health services	185 436 (251) (58)	767 1,578 (811) (51)
Corporate health	1,240 139 1,011 792	3,370 1,404 1,966 140
Total	10,983 11,933 (950) (8)	38,573 46,291 (7,718) (17)

Revenue for the quarter ended December 31, 2020 was $10,983, a decrease of $950, or 8%, from $11,933 recognized in the comparative period in 2019. Total revenue for the fiscal year ended December 31, 2020 was $38,573, a decrease of $7,718, or 17%, from $46,291 recognized in the comparative period in 2019. Reduced total patients’ volumes due to COVID-19 as well as temporary closure of a clinic impacted the revenue compared to fiscal 2019.

Public insured health services— Public insured health services revenue for the quarter ended December 31, 2020 decreased by $1,800, or 16%, to $9,558, from $11,358 recognized in the comparative period in 2019. During the fiscal year ended December 31, 2020, Public insured health services revenue decreased by $ 8,873, or 20% to $34,436, from $43,309 recognized in the comparative period in 2019. Reduced total patient volumes due to COVID19 as well as temporary closure of a clinic impacted the revenue compared to fiscal 2019.

Other health services— Other health services revenue for the quarter ended December 31, 2020 decreased by $251, or 58%, to $185, from $436 recognized in the comparative period in 2019. During the fiscal year ended December 31, 2020, Private health services revenue decreased by $811, or 51% to $767, from $1,578 recognized in the

comparative period in 2019. Reduced total volumes due to COVID-19 as well as temporary closure of a clinic impacted the revenue compared to fiscal 2019.

The Company has several suppliers for most of the supplies consumed in its clinics and, as a result, the Company’s supply chains have not impacted its ability to service patients.

Corporate services— The Company’s Corporate health services revenue grew 792% and 140% year-on-year in the three and twelve-month periods ended December 31, 2020, respectively as compared to the three- and twelve months ended 2019, due to the addition of new customers and services.

Expenses

The following table sets forth the breakdown of its expenses by category and the change for the quarters and fiscal years ended December 31, 2020 and 2019:

	Three months ended Period over	Year ended Period over
	December 31 Change	December 31 Change
	2020 2019 $ %	2020 2019 $ $

Expenses
Physicians’ fees	7,370 8,004 (634) (8)	25,649 31,030 5,381 (17)
Salary, wages, and benefits	2,563 2,097 466 22	5,828 8,180 (2,352) (29)
Occupancy costs	706 927 (221) (24)	2,373 3,168 (795) (25)
Office expense	2,492 565 1,927 341	4,253 2,177 2076 95
Expected credit losses	1 285 (284) (100)	202 313 (111) (35)
Interest income on subleases	(14) (31) 17 (55)	(64) (76) 12 (16)
Other income	(316) (658) 342 (52)	(1,872) (2,276) 404 (18)
Finance costs	142 164 (22) (13)	607 666 (59) (9)
Depreciation and amortization	733 758 (25) (3)	2,955 3,120 (165) (5)
Gain (loss) On sublease
Contracts	(10) - (10) NM	(19) - (19) NM
Gain (loss) on disposal of
Property & equipment	- 17 (17) NM	- 17 (17) NM
	13,667 12,128 1,539 13	39,912 46,319 (6,398) (14)

Physicians’ fees in the three and twelve months ended December 31, 2020 decreased due to reduced Public insured health services total patients’ volumes due to COVID-19 as well as temporary closure of a clinic compared to fiscal 2019.

Salary, wages, and benefits

Salary, wages, and benefits in the three months ended December 31, 2020 increased $ 466 or 22% to $ 2,563 from $2,097 in the comparative period in 2019. Special bonus of $ 751, offset by the receipt of $354 from the CEWS program, accounted for the quarterly change.

Salary, wages, and benefits in the twelve months ended December 31, 2020 decreased $ 2,352 or 38% to $ 5,828 from $8,180 in the comparative period in 2019. During the year ended December 31, 2020, the Company received $2,241 from the CEWS program. The closure of a clinic and reduced clinic operations resulted in lower employee expenses in the year ended December 31, 2020 compared to fiscal 2019. Salary, wages, and benefits in the twelve months ended December 31, 2020 includes a special bonus of $ 751.

Occupancy costs

Occupancy costs in the three months ended Dec 31, 2020 decreased $ 221 or 24% to $ 706 from $927 in the comparative period in 2019. During the three months ended December 31, 2020, the Company received $64 from the Canada Emergency Rent Subsidy “CERS”-program compared with no such subsidies in 2019.

Occupancy costs in the twelve months ended Dec 31, 2020 decreased $ 795 or 25% to $ 2,373 from $ 3,168 in the comparative period in 2019. During the year ended December 31, 2020, the Company received $726 from the Canada Emergency Rent Subsidy “CERS”-program compared with no such subsidies in 2019.

Office expenses

Office expenses in the three months and twelve ended Dec 31, 2020 increased $1,927 and $ 2,076 or 341% and 32% respectively, compared to the comparative period in 2019.

The Company’s initial public offering and TSX listing related expenses of $637 and a special bonus of $ 750, in the quarter and the year ending December 31, 2020 (2019-Nil) accounted for the quarterly and yearly change.

Expected credit losses.

For the quarter and year ended December 31, 2020, expected credit losses were $1 and $202 compared to $285 and $313 for quarter and year ended December 31, 2019, respectively.

There were expected credit losses for amounts due from related parties in 2019, which accounted for the quarterly and yearly change.

Finance charges

For the quarter and year ended December 31, 2020, Finance charges were $142 and $607 compared to $ 164 and $666 for quarter and year ended December 31, 2019, respectively.

Amortization and depreciation

For the quarter and year ended December 31, 2020, Amortization and depreciation expenses were $733 and $2,955 compared to $758 and $3,120 for quarter and year ended December 31, 2019, respectively.

Gain on sublease contracts.

The gain was due to modifications to two existing subleases. Extension of one sublease and addition of extra space at another sublease accounted nor the gain.

Net income (loss) and Earnings (loss) per share

The Company reported a net loss of $2,057, or $(0.05) per share (basic and diluted), for the quarter ended December 31, 2020 compared to a net loss of $286, or $(0.01) per share (basic and diluted) for the comparative period in 2019. For the fiscal year ended December 31, 2020, the Company reported a net loss of $ 1,027, or $(0.03) per share (basic and diluted), compared to a net loss of $121, or $(0.01) per share (basic and diluted), for the comparative period in 2019.

On December 23, 2020, the Company filed Articles of Amendment to amend its share capital to change the 210.5 issued and outstanding common shares of the Company into 40,000,000 Class A Subordinate Voting Shares and 40,000,000 Class B Multiple Voting Shares.

Pursuant to a resolution dated December 30, 2020, 4,000,000 Class B Multiple Voting Shares were cancelled pursuant to section 1.5 of the articles of amendment dated December 23, 2020.

The weighted average number of shares outstanding and basic and diluted loss per share at December 31, 2019 were restated to reflect the recapitalization of the Company on December 23, 2020.

Adjusted EBITDA.

Adjusted EBITDA loss for the quarter ended December 31, 2020 was a loss of $1,819, as compared to an adjusted EBITDA income of $744, in the comparative period in 2019, due to bonuses and TSX listing related expenses.

For the fiscal year ended December 31, 2020, adjusted EBITDA was $ 2,204, as compared to $3,773 for the comparative period in 2019. The decrease was due to reduced revenues, incremental expenses related to $1,501 special bonuses and $638 in TSX listing related expenses. This was offset by CERS and CEWS subsidies received during the year.

Reconciliation of Adjusted EBITDA

The following table reconciles the Adjusted EBITDA to net loss:

	Three months ended	Year ended
	December 31	December 31
	2020 2019	2020 2019
	$ in thousands	$ in thousands

Total revenue	$ 10,983 11,933	38,573 46,291

Net Income (loss)	(2,057) (286)	(1,027) (121)
Add back (deduct)
Depreciation and amortization	733 758	2,955 3,120
Finance charges	142 164	607 666
Gain (loss) On sublease contracts	(10) -	(19) -
Gain (loss) on disposal of property and equipment	- 17	- 17
Income taxes	(627) 91	(312) 91
Adjusted EBITDA	(1,819) 744	2,204 3,773
Adjusted EBITDA Margin	(16.56) % (6.23) %	5.71 % 8.15 %

Summary of quarterly results:

The Company’s quarterly operating results have historically fluctuated within in a narrow band with modestly positive seasonality in the fourth and first fiscal quarters due to the cough and cold season. The COVID pandemic drove significant fluctuation during fiscal 2020 due to the lockdowns that negatively impacted patient volumes. The Company believes COVID will continue to cause wider than historic quarterly fluctuations going forward and is unable to predict their impact.. Therefore, the Company believes that past operating results and period- to-period comparisons should not be relied upon as an indication of the Company’s future performance.

	Quarters ended
	Dec 31, Sept 30, June 30, Mar 31, Dec 31, Sept 30, June 30, Mar 31,
	2020 2020 2020 2020 2019 2019 2019 2019
	($ in thousands except per share amounts)

Revenue	$ 10,983 $ 9,837 $ 7,311 $ 10,442 $ 11,779 $ 11,553 $ 11,806 $11,153
Net Income (loss)	(2,059) 947 353 (268) (284) 23 192 (51)
Weighted average number of shares
Basic and diluted (in thousands)	38,333 38,005 38,005 38,005 38,005 38,005 38,005 38,005
Net income (loss) per share
Basic and diluted	$ (0.05) $ 0.02 $ 0.01 $ (0.01) $ (0.01) $ 0.00 $ 0.00 $ (0.00)

The weighted average number of shares outstanding and basic and diluted loss per share at each quarter were restated to reflect the recapitalization of the Company on December 23, 2020.

Liquidity and Capital Resources

As of December 31, 2020, the Company held cash and cash equivalents of $894. The Company believes that ongoing operations, working capital and associated cash flows in addition to the proceeds raised from the Company’s recently completed initial public offering provide sufficient liquidity to support its ongoing business operations and satisfy its obligations as they become due. Below is a summary of the Company’s cash flows from (used in) operating, financing, and investing activities for the periods indicated.

	Year ended December 31
	2020 2019
	$ in thousands

Net cash flows generated from (used in) operating activities	$ 4,222 $ 3,213
Net cash flows generated from (used in) financing activities	(4,222) (2,891)
Net cash flows generated from (used in) investing activities	(234) (122)
Increase (Decrease) in cash and cash equivalents	(234) 200
Beginning cash and cash equivalents	1,128 928
Ending cash and cash equivalents	$ 894 $ 1,128

Net cash flows used in operating activities.

The Company generated cash of $ 4,222 from operating activities for the fiscal year ended December 31, 2020. The Company generated cash of $ 1,731 attributable to movements in non-cash working capital with change arising from an increase in accounts payable, offset by an increase in accounts receivable and other assets. This was further increased by $ 2,486 of cash generated from operating activities.

The Company generated cash of $ 3,213 in operating activities for the fiscal year ended December 31, 2019. The Company used cash of $ 664 attributable to movements in non-cash working capital with change arising from a decrease in accounts payable, offset by an increase in accounts receivable and other assets. This was further offset by $ 3,877 of cash generated from operating activities.

Net cash flows used in financing activities.

For the fiscal year ended December 31, 2020, net cash used in financing activities was $ 4,222. This consisted of payments on finance leases of $ 2,606, offset by receipt of net investment in subleases of $456, the payment of a dividend of $ 2,009, the payment to a related party of $ 43 and repayment of a promissory note of $100. The Company also received $80 through the Canada Emergency Business Account ("CEBA") loan facility during the year.

For the fiscal year ended December 31, 2019, net cash used in financing activities was $ 2,891. This consisted of payments on finance leases of $ 2,930, offset by receipt of net investment in subleases of $449, the payment to related party of $ 310 and repayment of a promissory note of $100.

Net cash flows used in investing activities.

For the fiscal year ended December 31, 2020, net cash used in investing activities was $234, which consisted of purchase of property and equipment of $ 85, and investment in product development of $149 (net of noncash sharebased payment).

For the fiscal year ended December 31, 2019, net cash used in investing activities was $122, which consisted of purchase of property and equipment of $122.

Capital Management

The Company’s objective in managing capital is to ensure sufficient liquidity to pursue our growth strategy, fund research and development to enhance new product offerings, undertake selective acquisitions and provide sufficient resources to meet day-to-day operating requirements, while at the same time taking a conservative approach towards management of financial risk.

In managing the capital structure, the company takes into consideration various factors, including the growth of the business and related infrastructure. Company’s officers and senior management are responsible for managing the capital and do so through quarterly meetings and regular review of financial information. Company’s Board of Directors are responsible for overseeing this process. Company manages capital to ensure that there are adequate capital resources while maximizing the return to shareholders through the optimization of the cash flows from operations and capital transactions. To maintain or adjust capital structure, the Group may attempt to issue new shares or acquire or dispose of assets.

The Company does not have any externally imposed capital requirements.

CONTRACTUAL OBLIGATIONS

Commitments include operating leases for office equipment and facilities, amounts due to related parties and due to government for Canada Emergency Business Account “CEBA” loans

Lease obligations CEBA loans Due to related party loan	Minimum lease payments due < 1 year 1 – 5 years >5 years Total
	$ 3,014 $ 10,386 $ 1,748 $ 15,148 - 60 - - 1,210 1,210
	$ 4,224 $ 10,326 $ 1,748 $ 16,358

Aside from the aforementioned, the Company does not have any other business arrangements, or derivative financial instruments that would have a significant effect on its assets and liabilities as of December 31, 2020.

TRANSACTIONS WITH RELATED PARTIES

The following related parties have engaged in transactions with the Company:

a) Altima Dental Holdings Inc. - directors of the Company hold key management positions.
b) Altima Dental Services Ontario Inc. - directors of the Company hold key management positions.
c) MCI Dermatology (Woodbridge) Inc. - controlled by directors of the Company.
d) Onehealth Technologies Inc. - controlled by directors of the Company.
e) First Canadian Holding Corp. – controlled by directors of the company.

Amounts due to related parties are as follows:

Due to (from) Onehealth Technologies inc. Due to (from) Altima Dental Holdings Inc.	2020 2019 $ (43) $ - 1,253 $1,253 $ 1,210 $ 1,253

The Company engaged in the following transactions with related parties:

Altima Dental Holdings Inc. Repayment of due to related parties Altima Dental Services Ontario Inc. Occupancy costs Rental income MCI Dermatology (Woodbridge) Inc. Advances to related party Expected credit loss expense (Note 5) First Canadian Holding Corp. Occupancy cost Rent forgiveness	2020 2019
	$ - $310 150 149 415 415 13 305 13 305 54 77 - 77

Advances to and from related parties that are non-interest bearing and due on demand. All related party transactions have been recorded at the amount of consideration established and agreed upon by the related parties in the normal course of business.

FINANCIAL RISK MANAGEMENT

In the normal course of its business, the Company engage in operating and financing activities that generate risks in the following primary areas:

a) Credit Risk

Credit risk is the risk that one party to a financial instrument will cause financial loss for the other party by failing to discharge an obligation. The Company's main credit risks relate to its accounts receivable and net investments in sublease. The Company's accounts receivable does not represent a significant concentration of credit risk because the largest part of the accounts is collected from branches of provincial governments (2020 - 66%; 2019 - 90%). The credit risk related to receivables from branches of provincial governments is considered to be low due to strong provincial credit ratings, lowering the risk of default. The Company's remaining accounts receivable and net investment in subleases are diversified among a range of corporations and individual patients and tenants. There has been no change in the assessment of credit risk from the prior year.

b) Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk, and price risk. The Company is mainly exposed to interest rate risk. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. As described in Note 10, the Company is exposed to interest rate risk with respect to its credit facilities. As of December 31, 2020 and 2019 no amounts were drawn on these facilities.

The following table summarizes the carrying value of the Company’s financial instruments:

Cash Accounts receivable Accounts payable and accrued liabilities Net investment in subleases Lease liabilities Promissory note Related party loan Other liabilities	2020 2019
	$ 894 $ 1,128 3,637 2,622 6,998 3,223 1,685 2,150 13,833 15,850 - 96 1,210 1,253 80 -

Financial assets and liabilities are recognized on the consolidated statement of financial position at fair value in a hierarchy that is based on significance of the inputs used in making the measurements. The levels in the hierarchy are:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices)
Level 3 - Inputs for the asset or liability that are not based on observable market data (i.e., unobservable inputs)

Due to the short-term maturities of cash, accounts receivable, accounts payable, related party loans, other liabilities, accrued liabilities, and the promissory note the carrying amounts of these financial instruments approximate fair value at the respective balance sheet date.

There were no financial instruments measured or disclosed categorized as level 1, 2 or 3 fair value within the hierarchy as at December 31, 2020 and 2019. There were no transfers of assets or liabilities between levels during the years ended December 31, 2020 and 2019. The reported amounts of net investment in subleases and lease liabilities approximates fair value due to the application of a market rate of interest when initially recognizing the financial assets or financial liability.

c) Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company is exposed to this risk mainly with respect to its accounts payable and accrued liabilities and promissory note payable. The Company manages this risk by managing its working capital, ensuring that sufficient credit is available and by generating sufficient cash flow from operations. The following are the contractual maturities of financial liabilities as of December 31, 2020:

Lease liabilities Accounts payable and accrued liabilities Due to related party CEBA Loan	< 1 year 2 – 5 years >5 years
	$ 2,591 $ 9,555 $ 1,687 6,998 - - 1,210 - - - 60
	$ 10,799 $ 9,615 $ 1,687

CRITICAL ACCOUNTING ESTIMATES

General

The preparation of consolidated financial statements in accordance with IFRS requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, revenues, and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the annual consolidated financial statements are disclosed.

Significant accounting estimates, judgements and assumptions include the following:

a) Leases

Management uses judgment and estimates in the determination of the lease term for some lease contracts in which the Group is a lessee including whether the Group is reasonably certain to exercise lessee options. Management uses judgment and estimates in the determination of the incremental borrowing rate used to measure lease liabilities.

b) Estimated useful lives of property and equipment.

Management estimates the useful lives of property and equipment based on the period during which the assets are expected to be available for use. The amounts and timing of recorded expenses for depreciation of property and equipment for any period are affected by these estimated useful lives. The estimates are reviewed at least annually and are updated if expectations change as a result of physical wear and tear, technical or commercial obsolescence and legal or other limits to use. It is possible that changes in these factors may cause significant changes in the estimated useful lives of the Group's property and equipment in the future.

c) Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs of disposing of the asset. The value in use calculation is based on a discounted cash flow (“DCF”) model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the performance of the assets of the cash generating unit being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. Changes in these assumptions could result in impairment being recorded.

d) Accounts Receivable

The Company evaluates the collectability of the trade receivables at both a specific and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired, together with receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics.

SHARE CAPITAL

Outstanding Share Data

The Company has authorized an unlimited number of Class A Subordinate Voting Shares, an unlimited number of Class B Multiple Voting Shares and an unlimited number of Preferred Shares (2019 – unlimited number of common share and preference shares). As at December 31, 2020, there were 40,000,000 Class A Subordinate Voting Shares and 36,000,000 Class B Multiple Voting Shares issued and outstanding (2019 – 200 common shares).

CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures:

Management is responsible for establishing and maintaining disclosure controls and procedures as defined under National Instrument 52-109. At December 31, 2020, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective and that material information relating to the Company was made known to them and was recorded, processed, summarized, and reported within the time periods specified under applicable securities legislation.

Internal controls over financial reporting:

Management is responsible for designing and maintaining internal controls over financial reporting (“ICFR”) as defined under National Instrument 52-109. At December 31, 2020, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these internal controls and procedures was effective in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with IFRS using the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Framework (2013).

The Chief Executive Officer and the Chief Financial Officer have evaluated, or caused to be evaluated under their supervision, whether there were changes to its ICFR during the quarter and fiscal year ended December 31, 2020 that have materially affected or are reasonably likely to materially affect the Company’s ICFR. No such changes were identified through their evaluation.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that its objectives are met. Due to inherent limitations in all systems, no evaluations of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Accordingly, the Company’s disclosure controls and procedures and its internal controls over financial reporting are effective in providing reasonable, not absolute assurance that the objectives of its control systems have been met.

CONTINGENCIES

In October 2019, a claim was lodged against MCI Medical Clinics Inc. asserting that the subsidiary had breached a lease agreement for a clinic. The matter is currently being considered by the courts, and the Group expects judgment before the end of 2021. The Group considers it to be too early to make a determination as to its probability of the outcome and has therefore not recognized a provision in relation to this claim. The potential undiscounted amount of the total payments that the Group could be required to make, if there was an adverse decision related to the lawsuit, is estimated to be approximately $3,000,000.

In October 2017, a claim was lodged against MCI Medical Clinics Inc. asserting medical malpractice. The matter is currently being considered by the courts, and the Company expects judgment before the end of 2022. The Company considers it to be too early to make a determination as to its probability of the outcome and has therefore not recognized a provision in relation to this claim. The potential undiscounted amount of the total payments that the Company could be required to make, if there was an adverse decision related to the lawsuit, is estimated to be approximately $5,250,000.

Subsequent Events

On January 5, 2020, the Company closed its initial public offering (“IPO”) of an aggregate of 6,000,000 Class A Subordinate Voting Shares at a price of $ 5.00 per share for aggregate proceeds of $30,000,000. The Class A Subordinate Voting Shares started trading on the TSX at the opening of the business on January 6, 2021.

In connection with the IPO, the Company incurred share issue costs of $1,885 and the net proceeds from the IPO were $28,115. The Company booked a total of $ 926 during the year ended December 31, 2020, of which $ 437 were included in the Statement of comprehensive loss and $ 489 are included in Other assets (note 7) which will be reallocated to share capital upon completion of the IPO.

In connection with the IPO, the Company had granted the Underwriters an over-allotment option (the “OverAllotment Option”), exercisable in whole or in part for a period of 30 days following the closing of the IPO, to purchase up to an additional 900,000 Class A Subordinate Voting Shares at a price of $5.00 per share for additional gross proceeds of up to approximately $4,500,000 to the Company, if the OverAllotment Option was exercised in full. The Over-Allotment Option was not exercised by the underwriters.

On January 6, 2021, the Company granted 3,420,000 options to purchase Class A Subordinate Voting Shares with an exercise price of $5.00 per share with a four-year vesting period with 25% of the options vesting in equal annual instalments after the first year. These options have expected life of 5 years.

On February 16, 2021, the Company acquired Onehealth Technologies Inc., a company under the control of two directors of the Company. The purchase consideration was $1.00 and the assumption of the obligations of Onehealth Technologies Inc. under a promissory note in the amount of $115.

On March 15, 2021, MCI Medical Clinics Inc., amended its line of credit facility with the bank to increase the line to $1.5 million from $1.0 million.

On March 26, 2021, the Company invested $250 to purchase an interest in Acorn Biolabs, Inc. through a Simple Agreement for Future Equity (SAFE) instrument issued by Acorn Biolabs, Inc.