Mednow Inc. — Interim / Quarterly Report 2021

Jun 29, 2021

MEDNOW INC. Management’s Discussion and Analysis For the three and nine months ended April 30, 2021 and 2020

MANAGEMENT’S DISCUSSION AND ANALYSIS

This Management’s Discussion and Analysis (this “MD&A”) provides a review of the results of operations, financial condition and cash flows for Mednow Inc. (“Mednow” or the “Company”), for the three and nine months ended April 30, 2021.

This MD&A should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements as at and for the three and nine months ended April 30, 2021 and 2020, including the supporting notes thereto. The Company’s unaudited condensed interim consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards (“IFRS”). All amounts are expressed in Canadian dollars, unless otherwise identified.

Unless otherwise stated, in preparing this MD&A the Company has taken into account information available to it up to the date of this MD&A, June 28 , 2021, being the date the Company’s board of directors (the “Board”) approved this MD&A and the Q3 2021 Financial Statements. All quarterly information contained herein is unaudited. Additional information about the Company can be found in the Company’s filings with securities regulatory authorities, which are available under the Company’s profile on SEDAR at www.sedar.com.

CAUTIONARY NOTE REGARDING FORWARD LOOKING INFORMATION

This MD&A contains statements which may be considered forward-looking. Forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those in such forward- looking statements. Forward-looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and the Company undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change except as required by applicable securities laws. Factors that could cause actual results to vary materially from results anticipated by such forward looking statements include changes in market conditions, fluctuations in the currency markets, changes in national and local governments, legislation, taxation, controls, regulations, and political or economic developments in Canada or other countries in which the Company may carry on business in the future; risks relating to the credit worthiness or financial condition of suppliers and other parties with whom the Company does business; inadequate insurance or inability to obtain insurance to cover these risks; availability and increasing costs associated with operational inputs and labor; business opportunities that may be presented to, or pursued by the Company; the Company’s ability to successfully integrate acquisitions; and the risk factors discussed or referred to in this MD&A. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Investors are cautioned against attributing undue certainty to forward-looking statements. Other than specifically required by applicable laws, we are under no obligation and we expressly disclaim any such obligation to update or alter the forward-looking statements whether as a result of new information, future events or otherwise except as may be required by law. These forward-looking statements are made as of the date of this MD&A.

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MEDNOW INC. Management’s Discussion and Analysis For the three and nine months ended April 30, 2021 and 2020

COMPANY OVERVIEW

Mednow Inc. (the “Company” or “Mednow”) is a healthcare technology company that provides pharmacy services including a user-friendly online interface to order and manage medical prescriptions, free home delivery of medications, and access to healthcare professionals through an intuitive virtual chat experience. The Company’s technological infrastructure includes its website, web application and forthcoming downloadable mobile application. The Company’s web application is accessible and compatible with the internet browsers Safari, Google Chrome, Mozilla FireFox, and Microsoft Edge on mobile phones and personal computers.

Mednow is a Canadian public company incorporated under the Canada Business Corporations Act on January 17, 2018. On March 9, 2021, the Company completed its initial public offering (“IPO”) and listed its common shares on the TSX Venture Exchange (“TSXV”) under the symbol “MNOW”. The registered corporate office address is 10th Floor, 595 Howe St., Vancouver, BC V6C 2T5. The Company’s website is www.mednow.ca. Mednow’s fiscal year end is on July 31, 2021.

THE OPPORTUNITY

The majority of healthcare services are currently accessed through brick-and-mortal retail stores. As a result of evolving consumer spending patterns since the onset of the COVID-19 pandemic, the demand for virtual healthcare services, such as the ability to order and receive prescription medications at home in a contactless and timely manner, has increased significantly. Mednow is well positioned to operate in the pharmacy services industry through its stateof-the-art, easy access, online technological infrastructure, established commercial relationships with traditional brickand-mortar retail drug stores, and through management’s extensive knowledge and expertise of pharmacy supply chain, logistics, economics, operations and regulatory requirements.

STRATEGIC IMPERATIVES

The Company’s core strategic imperatives include national expansion of the pharmacy business across Canada, accretive acquisitions and investments in healthcare services and technology, pursuit of institutional contracts and business development initiatives, and continued efforts to increase user base of the Company’s services.

Through its third fiscal quarter, the Company incorporated two entities under the Canada Business Corporations Act, Mednow Pharmacy MB Ltd. and Mednow Pharmacy NS Ltd. Both entities are wholly owned subsidiaries of the parent company, Mednow Inc. Subject to regulatory approval, the Company will expand its pharmacy operations to service the provinces of Manitoba and Nova Scotia. In addition to this, the Company continues efforts to establish its pharmacy operations in the provinces of Alberta and Quebec. The Company expects to own and operate brick-andmortal retail pharmacy stores in these provinces, which will allow the Company to establish brand presence, service walk-in customers as well as service majority of customers through home delivery of medications ordered via its web and mobile applications. By the end of this calendar year, the Company expects to own and operate pharmacies in six (6) Canadian provinces, including the provinces of Ontario and British Columbia where Mednow currently operates its pharmacy businesses.

Mednow continues efforts to pursue large, institutional contracts, such as the recently signed agreement with the Police Pensioner’s Association of Ontario. These large contracts are expected to result in a lower cost of customer acquisition than traditional retail consumers.

STATEMENT ON COVID-19

The outbreak of the coronavirus, also known as “COVID-19,” has spread across the globe and is impacting worldwide economic activity. Conditions surrounding the coronavirus continue to rapidly evolve and government authorities have implemented emergency measures to mitigate the spread of the virus. The outbreak and the related mitigation measures may continue to have an adverse impact on global economic conditions as well as on the Company’s business activities. The extent to which the coronavirus may impact the Company’s business activities will depend on future developments, such as the duration of the outbreak, travel restrictions, business disruptions, and the effectiveness of actions taken in Canada and other countries to vaccinate its population, contain and treat the disease. The effects that these events will have are highly uncertain and as such, the Company cannot determine the corresponding financial impact at this time.

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MEDNOW INC. Management’s Discussion and Analysis For the three and nine months ended April 30, 2021 and 2020

CORPORATE DEVELOPMENTS

Capital Raise

During June 2020, the Company completed non-brokered private placements resulting in the issuance of an aggregate of 3,294,015 units at a price of $0.55 per unit, with each unit comprised of one Class A common share and one-half of one non-transferable Class A Common share purchase warrant. Each whole warrant entitles the holder to purchase, for a period of twenty-four (24) months from the date of Liquidity Event (as defined herein), one additional Share at an exercise price of $0.80 per Share.

Liquidity Event means the occurrence of (a) any of the following, which results in the common shares of the Company (or the common shares of a resulting issuer) being listed on (i) a recognized Canadian stock exchange; or (ii) a national United States stock exchange:

(a) The Company completing a bona-fide public offering of common shares under a prospectus or registration statement filed with securities regulatory authorities in Canada or the United States; or

(b) The consummation of any transaction including, without limitation, any consolidation, amalgamation, merger, plan of arrangement, reverse take-over, qualifying transaction or any other business combination or similar transaction.

On June 30, 2020 and July 10, 2020, the Company completed a brokered and non-brokered private placement of an aggregate of 2,635,274 units at a price of $1.75 per unit, with each unit comprised of one Class A common share and one-half of one non-transferable Class A common share purchase warrant. Each whole warrant entitles the holder to purchase, for a period of twenty-four (24) months from the date of Liquidity Event, one additional Share at an exercise price of $2.63 per share. In connection with the June 30, 2020 and July 10, 2020 private placements, the Company issued to certain brokers an aggregate of: (i) 131,764 units on the same terms as the units issued to subscribers; (ii) 210,822 Broker Warrants; and (iii) cash commission totaling $368,938.

On July 31, 2020, the Company completed a non-brokered private placement of an aggregate of 49,465 units at a price of $1.75 per unit, with each unit comprised of one Class A common share and one-half of one non-transferable Class A common share purchase warrant. Each whole warrant entitles the holder to purchase, for a period of twenty-four (24) months from the date of Liquidity Event, one additional Class A common share at an exercise price of $2.63 per Share. In connection with the July 31, 2020 private placement, the Company issued to certain fiscal advisors an aggregate of: (i) 3,957 Advisory Warrants; and (ii) cash commission totaling $6,925.

On February 26, 2021, the Company’s IPO prospectus was filed with and accepted by the TSX Venture Exchange and receipted by the securities regulatory authorities in British Columbia and Ontario pursuant to the provisions of the applicable Securities Acts, and has been filed under Multilateral Instrument 11-102 Passport System in Alberta, Saskatchewan and Manitoba. The Class A common shares of the Company was listed and admitted to trading on TSX Venture Exchange, on the effective date of March 9, 2021.

On March 4, 2021, the Company completed its IPO for gross proceeds of $37,073,194 from the sale of 5,492,325 units at $6.75 per unit. Each unit is comprised of one (1) Class A common share of the Company and one-half of one Class A common share purchase warrant exercisable at $8.50 for 24 months.

As part of the transaction, the Company paid cash commission of $2,965,856 and issued 274,616 corporate finance units, and 439,386 broker warrant units.

Each corporate finance unit resulted in the issuance of one (1) Class A common share, and one half non-transferrable common share purchase warrant. Each whole warrant entitles the holder to purchase, for a period of twenty-four (24) months from the Liquidity Event, one additional Class A common share of the Company at an exercise price of $8.50 per share.

Each broker warrant unit will entitle the holder to acquire one (1) underlying broker unit of the Company at any time for a period of two (2) years from the Liquidity Event, at an exercise price equal to the issue price of $6.75. Total broker warrant units issued were 439,386 which when exercised would result in 439,386 Class A common shares and warrants which represent an option to acquire 219,693 additional Class A common shares at $8.50 per share.

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MEDNOW INC. Management’s Discussion and Analysis For the three and nine months ended April 30, 2021 and 2020

Pharmacy agreements

On September 15 and 24, 2020, the Company entered into a pharmacy agreement (the “Mednow East Pharmacy Agreement” and “Mednow West Pharmacy Agreement”) with Mednow East Inc. (“Mednow East”) and Mednow West Inc. (“Mednow West”), companies controlled by management and certain shareholders of Mednow, pursuant to which Mednow will provide Mednow East and Mednow West with non-exclusive marketing and technology support services to connect Mednow East and Mednow West with potential customers, and Mednow East and Mednow West will fulfill orders for pharmacy products through the Mednow web application, the dashboard and/or the virtual call center in exchange for consideration at fixed amounts based on volume of orders fulfilled. As part of the agreement, Mednow provided Mednow East and Mednow West with an on-demand, non-interest bearing loan. For further discussion and disclosure, please refer to “Related Party Transactions” below.

Stock options

On January 21, 2021, the Board of Directors authorized and approved the granting of 1,611,000 options under the Company’s Plan to various directors, officers, employees and technical consultants. An additional net amount of 349,500 options were authorized, approved and granted by the Board of Directors on June 11, 2021.

All options expire five years from the date of their grant.

Normal course issuer bid

On March 29, 2021, the Company gave notice of its intention to make a Normal Course Issuer Bid (the “Bid”) to be transacted through the facilities of the exchange. The notice provides that the Company may, during the 12-month period commencing April 1, 2021 and ending April 1, 2022, purchase up to 1,093,873 Class A common shares of the Company in total, being 5% of the total number of 21,877,460 Shares outstanding as at March 29, 2021. The share purchases are to be made on the open market through the facilities of the exchange and will be purchased for cancellation. The funding for any purchase pursuant to the Bid will be financed out of the working capital of the Company. The Company’s Bid will be made from time to time by Gravitas Securities Inc. on behalf of the Company through the facilities of the TSX Venture Exchange.

As of April 30, 2021, the Company purchased, for cancellation, a total of 16,800 common shares for $60,382 of cash consideration. The weighted average cost of the cancelled shares totaled $24,527 resulting in a loss on cancellation of $35,854 being allocated to deficit.

Subsequent to April 30, 2021, the Company purchased, for cancellation, a total of 242,900 common shares for $720,688 of cash consideration. The total shares purchased for cancellation to date is 259,700 for total cash consideration of $781,070. Under the terms of the Bid, the Company can purchase up to an additional 834,173 common shares for the purpose of cancellation.

SELECTED FINANCIAL INFORMATION

Selected financial information of the Company for the three and nine months ended April 30, 2021 and 2020, and the year ended July 31, 2020, is set forth below.

	Three Months Ended April 30,	Three Months Ended April 30,		Ended April 30,	Year Ended July 31,
			Nine Months
	2021	2020	2021	2020	2020
Revenue	$ 124,200	$ —	$ 289,800	$ —	$ —
Netloss and comprehensiveloss	(2,182,888 )	(38,000 )	(3,562,772 )	(59,358 )	(469,502 )
Total assets	36,871,403	169,136	36,871,403	169,136	5,540,787
Total liabilities	1,144,795	246,785	1,144,795	246,785	154,683
Basic and diluted net loss and comprehensive loss per common share	$ (0.11 )	$ (0.01 )	$ (0.21 )	$ (0.01 )	$ (0.06 )

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MEDNOW INC. Management’s Discussion and Analysis For the three and nine months ended April 30, 2021 and 2020

DISCUSSION OF OPERATIONS

Comparison of the Three Months Ended April 30, 2021 and 2020

	Three Months Ended April 30,	Three Months Ended April 30,
	2021	2020 Variance
Revenue	124,200	— 124,200
Marketing and sales	209,242	— 209,242
Generaland administrative	1,816,365	38,000 1,778,365
Depreciationand amortization	44,944	— 44,944
Net loss and comprehensive loss for the period	2,182,888	38,000 2,144,888

Results of operations for the three months ended April 30, 2021 as compared to 2020

The total loss and comprehensive loss for the three months ended April 30, 2021, was $2,182,888 ($0.11 per share) compared to $38,000 ($0.01 per share) for the three months ended April 30, 2020. The movements in revenue and expenses are detailed below:

• Revenue increased by $124,200 during the three months ended April 30, 2021 from the Company’s pharmacy agreements with the two fulfillment sites in Toronto and Vancouver.

• Marketing and sales expenses increased by $209,242 during the three months ended April 30, 2021 as the Company focused on branding and online marketing its web app.

• General and administrative expense increased by $1,778,365 during the three months ended April 30, 2021. The increase in expense is primarily related to i) increased legal and professional fees in connection with the Company’s go public transaction, ii) a full quarter of director fees as compared to $nil in the prior year period, iii) increased staff and contractor costs as the Company built out its internal teams, and iv) increased office expenses in connection with the increased head count and operations.

Comparison of the Nine Months Ended April 30, 2021 and 2020

	Nine Months Ended April 30,	Nine Months Ended April 30,
	2021	2020 Variance
Revenue	289,800	— 289,800
Marketing and sales	462,101	2,634 459,467
Generaland administrative	3,016,119	56,724 2,959,395
Depreciationand amortization	105,475	— 105,475
Net loss and comprehensive loss for the period	3,562,772	59,358 3,503,414

Results of operations for the nine months ended April 30, 2021 as compared to 2020

The total loss and comprehensive loss for the nine months ended April 30, 2021, was $3,562,772 ($0.21 per share) compared to $59,358 ($0.01 per share) for the nine months ended April 30, 2020. The movements in revenue and expenses are detailed below:

• Revenue increased by $289,800 during the nine months ended April 30, 2021 from the Company’s pharmacy agreements with the Company’s first two fulfillment sites in Toronto and Vancouver.

• Marketing and sales expenses increased by $459,467 to $462,101 during the nine months ended April 30, 2021 as the Company focused on branding and online marketing of its web app.

• General and administrative expense increased by $2,959,395 to $3,016,119 during the nine months ended April 30, 2021. The increase in expense is primarily related to i) increased legal and professional fees in connection with the Company’s go public transaction, ii) a full quarter of director fees as compared to $nil in the prior year period, iii) increased staff and contractor costs as the Company built out its internal teams, and iv) increased office expenses in connection with the increased head count and operations.

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MEDNOW INC. Management’s Discussion and Analysis For the three and nine months ended April 30, 2021 and 2020

SUMMARY OF QUARTERLY RESULTS

The following financial data for each of the eight most recently completed quarters has been prepared in accordance with IFRS.

		For the three months ended	For the three months ended	For the three months ended	For the three months ended	For the three months ended	(unaudited)	(unaudited)	(unaudited)
		July 31,		October 31,		**January **	31,		April30,
		2019		2019		2020			2020
Revenue		—		—			—		—
Netloss and comprehensiveloss		(11,621 )		(1,989	)	(18,724 )			(38,000	)
Totalassets		118,139		131,431		137,010			169,136
Total liabilities		136,428		154,291		176,632			246,785
Basic and diluted loss and comprehensive loss
per common share	$	(0.00 )	$	(0.00	)	$	(0.00 )	$	(0.01	)

		For the three months ended (unaudited)	For the three months ended (unaudited)	For the three months ended (unaudited)	For the three months ended (unaudited)	For the three months ended (unaudited)	For the three months ended (unaudited)	For the three months ended (unaudited)	For the three months ended (unaudited)
		July 31,		October 31,		January 31,			April30,
		2020		2020		2021			2021
Revenue		—		41,400		124,200			124,200
Netloss and comprehensiveloss		(410,789 )		(509,097	)	(870,787	)		(2,182,888	)
Totalassets		5,540,787		5,121,398		4,487,634			36,871,403
Total liabilities		154,683		244,391		449,074			1,144,795
Basic and diluted loss and comprehensive loss
per common share	$	(0.05 )	$	(0.03	)	$ (0.04 )		$	(0.11	)

LIQUIDITY AND CAPITAL RESOURCES

The Company has incurred ongoing losses and expects to incur further losses in the development of its business. At April 30, 2021, the Company had working capital of $34,711,965 and has an accumulated deficit of $4,086,478 since its inception. While the Company has been successful in securing financings in the past, there is no assurance that it will be able to do so in the future. As at April 30, 2021, the Company had $32,978,537 in cash (July 31, 2020 - $5,255,396).

The condensed interim consolidated financial statements for the three and nine months ended April 30, 2021 and 2020 do not include any additional adjustments to the recoverability and classification of certain recorded asset amounts, classification of certain liabilities and changes.

Financial instruments and risk management

Capital risk management

The Company’s objectives in managing its capital are to ensure the Company’s ability to continue as a going concern and to maintain a flexible capital structure of equity and debt financing to optimize the costs of capital with minimal risks. The Company considers the items included in shareholders’ equity to be capital. The Board of Directors monitors the Company’s capital position on a regular basis. There were no changes to the Company’s capital management policy during the three and nine months ended April 30, 2021.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk through the management of its capital structure.

The following table has been prepared based on the undiscounted cash flow of financial liabilities based on the earliest date on which the Company could be required to pay. The Company continues to pursue future financing options.

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MEDNOW INC.

Management’s Discussion and Analysis For the three and nine months ended April 30, 2021 and 2020

	**On **	1-3	3 months to	Greater **than **
As at April 30, 2021	demand	months	1 year	1 year	Total
Accounts payable and accruedliabilities	1,118,049	—	—	—	—
Due to relatedparties	26,746	—	—	—	—
Total	$ 1,144,795	$ —	$ —	$ —	$ —
	**On **	1-3	3 months to	Greater **than **
As at April 30, 2020	demand	months	1 year	1 year	Total
Accounts payable and accruedliabilities	108,650	—	—	—	—
Due to relatedparties	46,033	—	—	—	—
Total	$ 154,683	$ —	$ —	$ —	$ —

Credit risk

The Company’s credit risk arises from its cash deposit with banks, of which there is $32,978,537 deposited as at April 30, 2021 (July 31, 2020 - $5,255,396), accounts receivable of $443,247 (July 31, 2020 - $nil) and its due from related parties of $1,326,826 (July 31, 2020 - $nil), which represents the entities maximum exposure to credit risk. Sales tax receivable is not considered a significant component of credit risk as it relates to sales tax recoverable from the government. Accounts receivable and due from related parties are entirely concentrated to Mednow East Inc. and Mednow West Inc., which are discussed in Note 10.

Fair value hierarchy

The Company applies a three-tier hierarchy to classify the determination of fair value measurements for disclosure purposes. Inputs refer broadly to the data and assumptions that market participants would use in pricing the investment. Observable inputs are inputs that are based on market data from independent sources. Unobservable inputs are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing an investment based on the best information available in the circumstances. The three-tier hierarchy of inputs is as follows:

Level 1 - quoted prices in active markets for identical investments.

Level 2 - inputs other than quoted prices included in Level 1 that are observable for the investment, either directly (as prices) or indirectly (derived from prices).

Level 3 - inputs for the investment that are not based on observable market data (unobservable inputs).

The carrying value of cash, accounts payable and accrued liabilities and due to related parties approximates their fair values due to the short-term nature.

CASH FLOWS BY ACTIVITY

Comparison of the Three Months Ended April 30, 2021 and 2020

The table below outlines a summary of cash inflows and outflows by activity for the three months ended April 30, 2021, and 2020.

	Three Months Ended April 30,	Three Months Ended April 30,
	2021	2020
Net cashusedinoperating activities	$ (2,086,876 )	$ (44,420 )
Net cashprovided byfinancing activities	$ 33,615,446	$ —
Net cash (used in) provided by investing activities	$ (614,284 )	$ 46,503

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MEDNOW INC. Management’s Discussion and Analysis For the three and nine months ended April 30, 2021 and 2020

Cash used in Operating Activities

The Company’s cash outflows from operating activities for the three months ended April 30, 2021, primarily relate to (i) legal and professional fees related to general corporate matters as well as those related to the preparation of the Company’s public offering, (ii) wages and salary costs as Mednow starts to establish and solidify its team, and (iii) marketing costs as the Company launched and commended marketing of its product offering.

During the three months ended April 30, the Company’s cash outflows from operating activities primarily relate to wages and salary costs of the Mednow team as the Company began hiring and building out its team.

Cash provided by Financing Activities

During the three months ended April 30, 2021, the Company received proceeds from issuance of units in connection with its IPO Financing. These proceeds were partially offset by the cash consideration of shares purchased in connection with the normal course issuer bid. During the three months ended April 30, 2020, the Company did not have any financing related activity.

Cash (used in) provided by Investing Activities

During the three months ended April 30, 2021, the Company’s cash outflows from investing activities related to the purchase of certain automation equipment for pharmacy fulfilment, and development costs associated with the build out of the Company’s digital platform.

During the three months ended April 30, 2020, the Company’s cash inflows from investing activities related to advances received from Care Health Inc. to fund the Company’s operations.

Comparison of the Nine Months Ended April 30, 2021 and 2020

The table below outlines a summary of cash inflows and outflows by activity for the nine months ended April 30, 2021, and 2020.

The table below outlines a summary of cash inflows and outflows 2021, and2020.	by activity for the nine months ended April 30,	by activity for the nine months ended April 30,
	Nine Months Ended April 30,
	2021	2020
Net cashusedinoperating activities	$ (3,643,074 )	$ (67,133 )
Net cashprovided byfinancing activities	$ 33,615,446	$ —
Net cash (used in) provided by investing activities	$ (2,249,231 )	$ 70,103

Cash used in Operating Activities

The Company’s cash outflows from operating activities for the nine months ended April 30, 2021, primarily relate to (i) legal and professional fees related to general corporate matters as well as those related to the preparation of the Company’s public offering, (ii) wages and salary costs as Mednow starts to build its front and back-offices teams, and (iii) marketing costs as the Company launched and commended marketing of its product offering.

During the nine months ended April 30, the Company’s cash outflows from operating activities primarily relate to wages and salary costs of the Mednow team as the Company began hiring and building out its team.

Cash provided by Financing Activities

During the nine months ended April 30, 2021, the Company received proceeds from issuance of units in connection with its IPO Financing. These proceeds were partially offset by the cash consideration of shares purchased in connection with the normal course issuer bid. During the nine months ended April 30, 2020, the Company did not have any financing related activity.

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MEDNOW INC. Management’s Discussion and Analysis For the three and nine months ended April 30, 2021 and 2020

Cash (used in) provided by Investing Activities

During the nine months ended April 30, 2021, the Company’s cash outflows from investing activities related (i) to loan advances to the Company’s fulfillment sites as well as flagship stores in Vancouver and Toronto through its Mednow East and West Pharmacy Agreements, (ii) the purchase of certain automation equipment for pharmacy fulfilment, and (iii) development costs associated with the build out of the Company’s digital platform.

During the nine months ended April 30, 2020, the Company’s cash inflows from investing activities related to advances received from Care Health Inc. to fund the Company’s operations.

CRITICAL ACCOUNTING ESTIMATES

In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. The Company’s accounting policies and estimates used in the preparation of the condensed interim financial statements are considered appropriate in the circumstances but are subject to judgments and uncertainties inherent in the financial reporting process. Such judgments include:

• The Company measures the fair value of share purchase warrants issued using the Black-Scholes option pricing model, which incorporates the assumptions regarding contractual life of the warrants, volatility, dividend yield, and risk-free rates. The Company is required to calculate the fair value of these warrants at the date of issuance;

• Management applied judgment in determining whether the Company is able to continue as a going concern;

• • Management applied judgment in determining the recoverability, if any, of the Company’s deferred tax assets in relation to unused tax losses by estimating the probability, timing and level of any future taxable profits; and

• Management applied judgment in reviewing the carrying values of the intangible assets to determine whether any impairment indicators existed

SIGNIFICANT ACCOUNTING POLICIES

On August 1, 2020, the Company adopted IFRS 15 Revenue from Contracts with Customers during the three and nine months ended April 30, 2021 as the Company entered into a service contract with related parties. IFRS 15 prescribes a five-step recognition and measurement model for revenue from contracts with customers and related costs. Under IFRS 15, the Company recognizes revenue on the transfer of services to customers for the amount that reflects the consideration expected to be received in exchange for those services promised. The Company’s revenue recognition policy is as follows:

Revenue Recognition

Marketing and Technology Support Services

The Company provides marketing and technology support services to pharmacies by connecting individuals to a network of pharmacies. The pharmacies pay the Company fixed consideration each month based on the aggregate revenues the pharmacy earns from the underlying customer in that month for using the marketing and technology support services. Under the arrangement, the performance obligation is the use of the marketing and technology support service each month and accordingly, the performance obligation is fulfilled through the passage of time and therefore this service revenue is recognized as the services are provided each month.

Staffing Services

The arrangement with pharmacies carries the option to provide the pharmacies with services from the Company’s employees at a fixed hourly rate to assist with the fulfillment of orders to pharmacy customers. Under this arrangement, the performance obligation is the employee’s services to the pharmacy and the consideration is the

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MEDNOW INC. Management’s Discussion and Analysis For the three and nine months ended April 30, 2021 and 2020

prescribed rate defined in the contract. Revenue is recognized as the performance obligation is fulfilled which is as the Company’s employees conducts order fulfillment for the pharmacy. No revenue has been recognized for these services during the three and nine months ended April 30, 2021 (2020 – nil).

RELATED PARTY TRANSACTIONS

The Company’s related parties include key management personnel. Key management personnel includes the directors (executive and non-executive) and officers of the Company. Remuneration of key management personnel that was included in general and administrative expenses on the statement of loss and comprehensive loss was as follows:

	Three months ended April 30,	Three months ended April 30,	Nine months ended April **30, **	Nine months ended April **30, **
	April
Management and director remuneration	$ 226,276	$ —	$ 475,716	$ —
Stock-based compensation expense - directors and officers	125,066	—	139,118	—
	$ 351,342	$ —	$ 614,834	$ —

On September 15 and 24, 2020, the Company entered into a pharmacy agreement (the “Mednow East Pharmacy Agreement” and “Mednow West Pharmacy Agreement”) with Mednow East Inc. (“Mednow East”) and Mednow West Inc. (“Mednow West”), companies controlled by management and certain shareholders of Mednow, pursuant to which Mednow will provide Mednow East and Mednow West with non-exclusive marketing and technology support services to connect Mednow East and Mednow West with potential customers, and Mednow East and Mednow West will fulfill orders for pharmacy products through the Mednow web application, the dashboard and/or the virtual call center in exchange for consideration at fixed amounts based on volume of orders fulfilled. As part of the agreement, Mednow provided Mednow East and Mednow West with an on-demand, non-interest bearing loan.

	As at April 30,	As at July 31,
	2021	2020
Due to/from related party
MednowEastInc	$ 711,371	$ —
Mednow WestInc.	615,455	—
Care Health Inc.	(26,746 )	(46,033 )
	1,300,080	(46,033 )
Related party balances included inaccounts receivable
MednowEastInc.	244,431	—
Mednow WestInc.	167,537	—
Mednow Clinic Ltd.	31,279	—
	443,247	—
Total related party balances	$ 1,743,327	$ (46,033 )

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Management’s Discussion and Analysis For the three and nine months ended April 30, 2021 and 2020

MEDNOW INC.

	Three months ended April 30,	Three months ended April 30,	Nine months ended April 30,	Nine months ended April 30,
	2021	2020	2021	2020
Revenues
MednowEastInc.	$ 62,100	$ —	$ 144,900	$ —
Mednow West Inc.	62,100	—	144,900	—
	124,200	—	289,800	—
General and administrative - management fees
Care Health Inc.	$ 15,000	$ —	$ 45,000	$ —

All due to/from related party balances are non-interest bearing, unsecured and due on demand.

The Company pays a management fee to Care Health Inc. for the use of its office space, accounting and bookkeeping services, and pharmacist training. The Company entered into a formal management services agreement with Care Health Inc. on September 25, 2020. For a monthly fee of $5,000, Care Health Inc. shall provide Mednow with back office support including, but not limited to, human resources, accounting and general administrative support and advisory services, as the board of directors of Mednow may reasonably request from time to time. Care Health Inc. is related due to common directors and management. Care Health Inc. is also a shareholder of Mednow.

The related party transactions are conducted in the normal course of business operations and were measured at the exchange amount, which is the amount agreed to by the related parties.

As at April 30, 2021, included in accounts payable and accrued liabilities was $99,988 (2020 – $nil) of payments owed to key management personnel.

OFF BALANCE SHEET ARRANGEMENTS

As at April 30, 2021, the Company had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

OUTSTANDING SHARE DATA

The Company is authorized to issue an unlimited number of preferred shares without nominal or par value and an unlimited number of common shares. The table below lists the securities outstanding:

	As at June 28, 2021
Commonshares	21,617,759
Options	1,960,500
Warrants
Share purchase warrants	5,938,725
Brokerwarrants	755,619
Advisorywarrants	5,935
Total Common Shares on a fully-diluted basis	30,278,538

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MEDNOW INC. Management’s Discussion and Analysis For the three and nine months ended April 30, 2021 and 2020

RISK FACTORS AND UNCERTAINTIES

The Company is subject to various financial, operational and political risks that could have a significant impact on its business, profitability and levels of operating cash flows. Although the Company assesses and seeks to mitigate these risks by careful management of its activities, resources and employing qualified personnel, these risks cannot be eliminated. Such risks include, but are not limited to, business and country risks discussed below.

For a discussion of these and additional risk factors, please refer to the Company’s prospectus under “Risk Factors” therein. The prospectus filed on February 26, 2021, is available under the Company’s profile on SEDAR at www.sedar.com.

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