Memex Inc. — Interim / Quarterly Report 2023

May 18, 2023

Memex Inc.

Management's Discussion and Analysis

For the three and six-month periods ended March 31, 2023 and 2022

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Management's Discussion and Analysis (the "MD&A") of the financial condition and results of operations of Memex Inc. ("Memex" or the "Company") pertain to the three and six-month periods ended March 31, 2023. This MD&A should be read in conjunction with the Company's condensed interim consolidated financial statements and related notes for the same three and six-month periods then ended, and readers are encouraged to refer to the Company's consolidated financial statements for its most recent year ended September 30, 2022. The MD&A is prepared as at May 17, 2023, and is current to that date unless otherwise stated. The condensed interim consolidated financial statements and extracts of those financial statements provided within this MD&A, except as otherwise stated ("Other Financial Measures") have been prepared in accordance with International Financial Reporting Standards ("IFRS") and are presented in Canadian dollars, which is the Company's functional currency.

COMPANY OVERVIEW

Memex, with its head office in Burlington, Ontario is a corporation continued under the Alberta Business Corporations Act ("ABCA"). The Company is a reporting issuer in Ontario, British Columbia, Alberta and Saskatchewan.

Memex's flagship product, MERLIN Tempus™, a software-driven communications platform that delivers manufacturing productivity metrics including Overall Equipment Effectiveness ("OEE") in real time, has established Memex as a leader in the Industrial Internet of Things ("IIoT").

MERLIN measures and analyzes manufacturing and production performance and provides its users with real-time insights on operational efficiency, as well as unparalleled visibility at all levels of the manufacturing process from "Shop-Floor-to-Top-Floor." Its funnel of process data and analytics truly enables Data-Driven Manufacturing, a cornerstone of Continuous Improvement ("CI") and other lean manufacturing initiatives.

MERLIN's customers are generally focused in the discrete manufacturing and aerospace sectors. In addition to the Company's direct sales force it also utilizes a network of resellers, system integrators and Original Equipment Manufacturers ("OEM's") to support and expand its global sales footprint.

The MERLIN Tempus Suite provides effective quantification and management of OEE by revealing hidden capacity using real-time objective data, and it offers sustainable benefits that enable world-class OEE such as reducing costs, incorporating strategies for lean manufacturing, CI, and boosting bottom-line financial performance.

HIGHLIGHTS AND SIGNIFICANT EVENTS

Income from Operations and Net and Comprehensive Income

The Company's net loss from operations for the six-month period ended March 31, 2023 of $106 thousand was a $280 thousand (73%) improvement from the operating loss of $386 thousand in the prior year period. A $104 thousand (15%) margin improvement combined with a $177 thousand (16%) decline in operating spending were key to the improvement in results.

Over the past 8 quarters the Company has averaged ($22 thousand loss per quarter) slightly worse than break-even from operations, however, after adjusting for noncash expenses, has still remained operationally cash flow positive over this timeframe.

The Q2-2023 loss from ops of $118 thousand was $126 thousand (52%) less than the same period in the prior year, achieved on flat revenue but a 9% improvement in margin and $98 thousand less operating costs.

After interest and accretion costs the company produced a $164 thousand net and comprehensive loss for the first two quarters of 2023, representing a $293 thousand (64%) improvement from the year ago period. Interest charges in the current fiscal year were $13 thousand less than the year ago period.

Revenues, Bookings and Backlog

Memex reported $1.03 million in revenue for the six-month period ending March 31, 2023, which was $54 thousand (6%) higher than the prior year period. Quarterly revenue of $471 thousand was virtually unchanged from the $473 thousand in same quarter a year ago.

Bookings for the first six months of fiscal 2023 of $1.23 million were off $154 thousand (11%) from the year ago period. Quarterly bookings were up $128 thousand (30%) from the second quarter of 2022, although down 18% from the first quarter of 2023.

Despite continued customer interest, economic concerns out of the US as well as emerging competition in the machine monitoring technology marketspace continue to add to the challenge of closing new business.

Cash generated/consumed from Operations

MD&A - For the three and six-month periods ended March 31, 2023 and 2022 2. During the first six months of fiscal 2023 ended March 31, 2023, the Company consumed $43 thousand in cash from operations before changes in working capital balances, $285 thousand (87%) less than the prior year period. Cash collected for achieving project milestones as well as

future project deposits were key to preserving cash on hand and working capital.

OTHER FINANCIAL MEASURES

Management is using Project 'bookings' and 'backlog' as key performance indicators ("KPI's") in assessing the overall performance of the Company. Neither bookings, nor backlog, have any standardized meaning under International Financial Reporting Standards ("IFRS") and therefore may not be comparable to similar measures presented by other issuers.

Due to the nature of the Company's business and most of its product offerings, IFRS only allows for the recognition of revenue from most of Memex's sales and delivery efforts once all elements of that sale have been completed. This is regardless of the timing of the effort, or the expense laid out by the Company to deliver these orders (IFRS does not provide a 'percentage of completion' alternative for revenue recognition).

A combination of revenue recognition policies and varying customer implementation timelines create inconsistent fluctuations in revenue from period to period such that Management needed to consider other information when measuring and monitoring growth success beyond recognized revenue. Although Management views significant fluctuations in revenue as a key performance indicator, when considered in combination with fluctuations in bookings and backlog it gives a more complete understanding of the Company's overall performance.

Unearned revenue, reported with current liabilities in the Company's statement of financial position, consists of invoiced unearned software and service fees plus all invoiced and unearned project orders (i.e. deposits, progress billings). Backlog is the total of all unearned project orders, both invoiced and un-invoiced, that the Company has on-hand at any given time. A comparative illustration of unearned revenue and backlog is provided.

Management considers bookings to be the total dollar value of new project orders plus any service and software fees generated in each period. Bookings are the combination of revenue plus current backlog less any backlog that was on-hand at the beginning of the measurement period, adjusted for any changes in unearned services and future software rights.

	Bookings	=	Revenue	+	Endingbacklog	-	Beginningbacklog	+ or -	Changes in unearned services & futuresoftware rights
--	----------	---	---------	---	-------------------	---	----------------------	--------	----------------------------------------------------------

OVERALL PERFORMANCE

Memex $1.03 million in revenue for the six-month period ended March 31, 2023 is a $54 thousand (6%) improvement from the $974 thousand reported in the year ago period;

The Company showed a $164 thousand net and comprehensive loss for the six-month period ended March 31, 2023, equating to $0.001 net and comprehensive loss per share, in comparison to a $457 thousand net and comprehensive loss in the year ago period and $0.003 loss per share, for a $293 thousand (64%) improvement;

Bookings for the six-month period ended March 31, 2023 totalled $1.23 million versus $1.38 million, down $154 thousand (11%) from the year ago period;

Gross margin percentage for the six-month period ended March 31, 2023 of 78.1% is up from the 71.8% achieved in the year ago period;

Cash consumed from operating activities (before changes in working capital balances) was $43 thousand for the six-month period ended March 31, 2023, down $285 thousand (87%) from the $328 thousand consumed from operations in the prior year period; and

The Company had $54 thousand in working capital (after excluding unearned revenue) and $146 thousand in cash on hand at March 31, 2023, as compared with $77 thousand working capital deficit (after similarly excluding unearned revenue) and $290 thousand in cash on hand at September 30, 2022.

SELECTED SIX MONTH INFORMATION

For the six months ended March 31(Canadian dollars - in thousands except per share performance)	2023	2022		% change
RevenuesGross marginOperating expenses	1,028803	974699		6%15%
Development	202	227		11%
Selling and marketing	242	346		30%
Administration	454	499		9%
Loss from operations	(106)	(386)		73%
Net and comprehensive loss for the period	(164)	(457)		64%
Basic and diluted loss per share	(0.001)	(0.003)		60%
Weighted average shares outstanding	137,623	137,623		0%
Actual shares outstanding	137,623	137,623		0%

RESULTS OF OPERATIONS

Revenues, Bookings and Backlog

Revenue for the current YTD of $1.03 million was $54 thousand higher (6%) than fiscal 2022 YTD.

Bookings for the six-month period ended March 31, 2023 of $1.23 million, were down $154 thousand (11%) from the prior year period. Closing backlog (accumulated and undelivered bookings) at March 31, 2023 of $656 thousand has increased by $79 thousand (14%) from September 30, 2022. Bookings representing the dollar value of projects booked in the fiscal year in excess of projects delivered.

For the six months ended March 31(In thousands of Canadian dollars)	2023	2022		% change
Revenue for the six month period ended	1,028	974		6%
+ Backlog - end of six month	656	933		30%
- Backlog - beginning of six month	(577)	(515)
+ or - change in unearned service & maint fees	123	(8)
Bookings for the six month period ended	1,230	1,384		11%

Gross Margin and Cost of Sales

Gross margin for the six-month period ended March 31, 2023, of $803 thousand is up $104 thousand (15%) from a year ago. The gross margin percentage is also up 9% from a year ago. Direct labour costs associated with product delivery declined $86 thousand (39%) along side a 6% improvement in revenue which achieved the substantial improvement even after an 89% increase in materials and other direct expenses.

Operating Expenses

Total operating expenses for the six-month period ended March 31, 2023, of $908 thousand was down $177 thousand (16%) from the year ago period. Most notably, non-direct-labour spending declined $161 thousand (24%) through worker attrition. These savings were offset most significantly by a $12 thousand (14%), increases in advertising and marketing spend.

Income (loss) from operations

The Company's loss from operations for the six-month period ended March 31, 2023 of $106 thousand, was $280 thousand (73%) better than the operating loss of $386 thousand for the prior year period.

Other transactions effecting net and comprehensive income (loss)

Interest, accretion and loss on extinguishment expense for the six-month period ended March 31, 2023 of $58 thousand is $13 thousand less than the year ago period, affected by minor revisions to the repayment terms of the Company's secured in December (2022) and March (2023), and is line with expectation.

Earnings per share

The basic and diluted loss per share of $0.001 for six-month period ended March 31, 2023 and the basic and diluted loss per share of $0.003 for six-month period ended March 31, 2022 were both based on a weighted average 137.6 million Common Shares outstanding.

LIQUIDITY

As at March 31, 2023 the Company had working capital (excluding unearned revenue) of $54 thousand and $146 thousand in cash on hand, as compared with a $77 thousand working capital deficit (excluding unearned revenue) and $290 thousand in cash on hand at September 30, 2022 (170% and 50% respectively).

On March 28, 2023, the Company's and its secured lender ("Secured Lender") came to a mutual arrangement to extend the term of its loan for one year to March 31, 2024 with required principal repayment requirements amended to $10 thousand per month (previously $35 thousand per quarter). Changes to the term and principal repayment requirements were not considered substantial, but rather modifications of the existing loan and were accounted for by adjusting the carrying value of the loan to the net present value of the amended repayment requirements using the same 16% discount rate, and resulted in a $1 thousand decrease in the carrying value of the loan.

As at(Canadian dollars - in thousands except working capital ratio)	March 31,2023	September 30,2022		% change
Cash on hand	146	290		50%
Current assets	728	586		24%
Total assets	968	894		8%
Current liabilities	1,721	1,519		13%
Long-term liabilities including lease	689	683		1%
Working capital*	(993)	(933)		6%
Modified working capital**	54	(77)		170%
Modified working capital ratio***	1.08 to 1	0.88 to 1

* Working capital = current assets less current liabilities

** Modified working capital = Working Capital plus unearned revenue

*** Modified working capital ratio = current assets / (current liabilities less unearned revenue)

Liquidity risk

It is possible that bookings and revenue will allow the Company to achieve positive cash flow, however, there is no way to determine if it will be sufficient to meet the Company's objectives, or for how long a combination of positive cash flow from operations and other funding sources may be available. Company management continues to monitor and manage cash flows to obtain reasonable comfort that all current and any future spending commitments made, can be settled with available resources.

Foreign currency risk

The Company's reporting currency is the Canadian dollar. With the exception of on-site installation work virtually all the Company's operations are undertaken in Canada, and most expenses incurred are denominated in Canadian dollars. The Company's customer base continues to expand throughout North America and other parts of the world, and it generates the majority of its revenue outside of Canada, primarily within the US. All of Memex's foreign sales are contracted in US dollars. The Company's exposure to foreign currency risk occurs when the fair value of future cash flows fluctuate due to changes in foreign (US) exchange rates. Net foreign currency denominated assets held by the Company at any time are exposed to foreign exchange rate fluctuations.

As of March 31, 2023, the Company contracted one full-time US resident. All other labour is Canadian. At March 31, 2023, the company held $294 thousand (net) in US denominated assets.

Credit risk

The Company, in the normal course of business, monitors the financial condition and reviews the credit history of each new customer. The Company estimates and reserves its expected credit loss (its "ECL") for the twelve-month period following each reporting date.

As at March 31, 2023, there was a concentration of credit risk because $304 thousand (82%) of the Company's receivables were collectible from one customer, of which the entire amount was collected subsequent to March 31, 2023. At September 30, 2022, $66 thousand (62%) of the Company's receivables was collectible from three customers.

Cash and cash equivalents

Operating activities

Net cash utilized through operating activities for the six-month period ended March 31, 2023 of $50 thousand (after changes in non-cash working capital balances) is a $71 thousand (338%) decline from six-month period a year ago. Management continues to monitor cash consumption in an effort to ensure capital continues to be available to fund ongoing activities.

Investing activities

The Company spent $Nil (2022 - $Nil) on equipment additions during the current fiscal year.

Financing activities

For the six-month period ended March 31, 2023 the Company repaid $35 thousand of the secured term loan (YTD-2022 - $70K), $3 thousand in related party advances associated with secured term loan (YTD-2022 - $5K), $4 thousand in FedDev IBI financing (YTD-2022 - $45 thousand) and $6 thousand in FedDev RRRF financing (YTD-2022 - $Nil). The Company also reduced its lease liability by $46 thousand (YTD-2022 - $32K).

Below is a summary of the cash flows provided by (used in) operating, financing and investing activities:

For the six months ended March 31(Canadian dollars - in thousands)	2023	2022		% change
Net Cash flows provided through (used in):
Operating activities	(50)	21		338%
Investing activities	-	-		0%
Financing activities	(94)	(152)		38%
Cash, beginning	290	709		59%
Cash, end	146	578		75%

Contractual obligations

In March 2023 the Company's landlord, Children's Financial Group Inc., agreed to reduce the Company's rent to twenty percent of the otherwise payable amount for the twelve-month period between March 2023 and February 2024, in exchange for extending the lease term by roughly eight months, to February 2026. Taking into account the net present value of the future lease payments, this modification to the lease payment terms reduced the carrying value of the lease by $10 thousand at March 31, 2023. Future minimum lease payments (including the estimated common-area costs) for the annual periods ending March 31st are 2024 - $45 thousand, 2025 - $166 thousand, 2026 - $154 thousand.

CAPITAL RESOURCES

The Company is using its capital to finance current operations as well as its product development strategies. Memex capital consists of a combination of debt and equity; it has term-debt through the FedDev Ontario ("IBI" and "RRRF") as well as term-debt with a secured lender. FedDev repayments extend until 2027 and the secured term loan matures March 2024. Management believes the best way to maximize shareholder value is to use a combination of equity and debt financing to leverage operating, product development and growth strategies.

Operating and other bank credit facilities

Through the Royal Bank of Canada, the Company has a $100 thousand credit facility. This facility is being used through the issue of credit cards to Company employees. The Company has no other operating line or credit facility.

Outstanding share and other issued securities information

The following table shows the number of securities the Company has outstanding:

Thousands of securities outstanding as at	March 31,2023	May 23, 2023
Common Shares	137,623	137,623
Options to purchase common shares by current and former directors and officers1	7,900	7,900
Options to purchase common shares by non-officer employees and contractors1	400	400

1. Each Option entitles its holder to purchase one common share of the Company.

SUMMARY OF RESULTS FOR THE LAST 8 QUARTERS

As at and for the three month periods ending(In thousands except per share amounts)	Mar 31,2023	Dec 31,2022	Sep 30,2022	Jun 30,2022	March 31,2022	Dec 31,2021	Sep 30,2021	Jun 30,2021
OPERATIONS INFORMATION
Bookings	554	676	271	418	425	958	531	424
Change in backlog, unearned revenue	(83)	(119)	237	241	47	(456)	295	342
Revenue	471	557	508	659	473	502	825	767
Cost of sales	129	96	125	136	158	117	146	169
Gross margin	341	461	382	523	314	385	680	598
Gross margin percentage	72.5%	82.8%	75.3%	79.4%	66.5%	76.7%	82.3%	78.0%
Operating expenses
Development	96	107	87	111	111	116	148	117
Selling and marketing	125	118	169	164	149	197	166	163
Administration	234	220	208	210	286	213	168	206
Foreign exchange	5	5	(19)	(17)	13	1	(38)	25
Total operating expenses	460	449	445	468	558	527	444	510
Income (Loss) from Operations	(118)	12	(62)	55	(244)	(142)	236	88
Interest and other	(27)	(31)	60	(32)	(35)	(36)	(38)	(131)
Net and comprehensive income (loss)	(145)	(19)	(3)	23	(279)	(178)	198	(43)
Basic and diluted income (loss) per share	(0.001)	(0.000)	(0.000)	0.000	(0.002)	(0.001)	0.001	(0.000)
Weighted average shares o/s-period	137,623	137,623	137,623	137,623	137,623	137,623	137,623	137,623
CASH FLOW INFORMATION
Operating activities before chgs in NCWCB's*	(82)	39	(32)	80	(197)	(130)	247	98
Changes in NCWCB's*	64	(71)	35	(237)	199	150	(218)	82
Net Operating activities	(18)	(32)	4	(157)	2	19	29	180
Investing activities	-	-	-	-	-	-	-	-
Financing activities	(36)	(58)	(50)	(84)	(84)	(68)	(68)	(68)
Net cash flow	(54)	(90)	(46)	(241)	(82)	(49)	(39)	112
Cash, beginning of period	200	290	336	578	660	709	748	636
Cash, end of period	146	200	290	336	578	660	709	748
*NCWCB's=non cash working capital balances
BALANCE SHEET INFORMATION
Cash on hand	146	200	290	336	578	660	709	748
Working capital	(993)	(939)	(933)	(957)	(958)	(386)	(165)	(323)
Working capital (excl unearned rev)	54	(37)	(77)	(3)	224	745	709	756
Total assets	968	886	894	1,110	1,336	1,594	1,569	1,607
Shareholders' deficit	(1,442)	(1,457)	(1,308)	(1,323)	(1,358)	(1,113)	(936)	(1,135)

TRANSACTIONS WITH RELATED PARTIES

Related parties include shareholders of the Company holding greater than 10% of total outstanding shares of the Company, as well as any close family members and enterprises controlled by these individuals. Related parties also include current and former key management personnel and the Board of Directors. As at May 23, 2023 only Company CEO and President, David McPhail holds (12.5%), through an entity he controls, more than 10% of the total outstanding shares of the Company.

During the six-month period ended March 31, 2023 key management personnel consisting of directors and senior management (C.E.O. and C.F.O.) received a total of $202 thousand in salaries, benefits and directors' fees (FY2022 - $208 thousand) as well as stock-based compensation valued (Black-Scholes) at $30 thousand (FY2022 - $34 thousand).

As at March 31, 2023, the balance of loans and advances to the Company from key management personnel totalled $161 thousand (before present value adjustment). An enterprise controlled by Company CEO and President, David McPhail is owed $102 thousand, $87 thousand for unpaid management fees between July 2010 and June 2011 and $15 thousand as part of the secured term loan financing arrangement. An enterprise controlled by a former key management employee is owed $52 thousand for unpaid management fees between July 2009 and April 2010. Company CFO, Ed Crymble is owed $7 thousand as part of the secured term loan financing arrangement.

The Company has engaged Lindsey MacCarthy LLP ("LMLLP") to manage its corporate legal matters. Joe Brennan is both a lawyer at LMLLP and a Director of the Company. During first six months of FY2023 the Company incurred $12 thousand in legal fees from LMLLP (2022 YTD - $8 thousand).

SELECTED SECOND QUARTER INFROMATION

For the three months ended March 31(Canadian dollars - in thousands except per share performance)	2023	2022		% change
Revenues	471	473		0%
Gross margin	341	314		9%
Operating expenses
Development	96	111		14%
Selling and marketing	125	149		16%
Administration	234	286		18%
Loss from operations	(118)	(244)		52%
Net and comprehensive loss for the period	(145)	(279)		48%
Basic and diluted loss per share	(0.001)	(0.002)		49%
Weighted average shares outstanding	137,623	137,623		0%

SECOND QUARTER RESULTS OF OPERATIONS

Revenues and Bookings

Q2-2023 revenue of $471 thousand was relatively unchanged from the $473 thousand generated in Q2-2022.

Bookings for the second quarter of 2023 of $554 thousand, were $128 thousand (30%) higher than Q2-2022. Closing backlog (bookings not delivered) of $656 thousand, was up $79 thousand (14%) from September 30, 2022 and $113 thousand from the beginning of the quarter.

For the three month periods ended March 31(In thousands of Canadian dollars)	2023	2022		% change
Revenue for the Quarter	471	473		0%
+ Backlog - end of period	656	933		30%
- Backlog - beginning of period	(543)	(935)
+ or - change in unearned service & maint fees	(30)	(45)
Bookings for the Quarter	554	426		30%

Gross Margin and Cost of Sales

Gross margin for the three months ended March 31, 2022 of $341 thousand is $27 thousand (9%) higher than the same quarter a year ago. Calculated as a percentage of revenue, gross margin increased 9% from Q2-2022.

Operating Expenses

Total operating expenses for the three-month period ended March 31, 2022 of $460 thousand were $98 thousand (18%) lower than the same quarter in fiscal 2022. Labour and benefits spending was $58 thousand (18%) lower, and stock-based compensation was $19 thousand (18%) lower, with only minor fluctuations in the other line items.

Income (loss) from operations

The Company's loss from operations for the quarter of $118 thousand was $126 thousand (52%) lower than the $244 thousand operating loss in the second quarter of 2022.

Other transactions effecting net and comprehensive income (loss)

Interest and accretion expense for the second quarter of 2023 of $27 thousand was $8 thousand lower than the same period a year ago.

Earnings per share

The basic and diluted loss per share of $0.001 for the current quarter and $0.002 basic and diluted income per share for the prior year quarter were both based on a weighted average 137.6 million Common Shares outstanding.

COVID

Health and safety - The Company's office still remains closed to the general public (since March 2020) and management continues its broad work-from-home policy for staff, although office attendance by some staff has increased. Management strives to continue to provide a safe working environment for those workers who do attend the office on occasion. Management continues to review and comply with all government requirements surrounding workplace safety.

Business and supply chain disruption - The Company has secured inventory to meet its current sales demand, and all projected sales for the foreseeable future. Client services work and customer/prospect interactions continue to be undertaken remotely whenever possible.

COVID's impact on the financial statements as presented – Although believed to have affected the Company's financial results at the beginning of pandemic back in fiscal 2020, management believes that any effects initially experienced have diminished significantly over time, with the least effect in the most recent quarter(s), and current fiscal year. The exact effect on results, including those presented in its latest financial statements are still impossible to determine.

Management has considered the effects COVID on the assumptions used in the preparation of its latest financial statements, and believe that the assumptions used are appropriate to reflect the Company's performance.

Risks and uncertainties to Memex due to COVID - With some uncertainty still remaining over the present and future effects of COVID, some (prospective) customers may still be hesitant to invest in Memex's goods and services until their own operations stabilize.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. These estimates and assumptions are affected by management's application of accounting policies and historical experience and are believed by management to be reasonable under the circumstances. Such estimates and assumptions are, and will continue to be, evaluated on an ongoing basis. However, actual results could differ significantly from these estimates.

Management believes that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of the Company's financial statements. It is believed that there have been no significant changes in the critical accounting estimates for the periods presented in the financial statements. A complete summary of the Company's significant accounting policies can be found in the accompanying notes to its latest annual consolidated financial statements.

Revenue recognition

The Company recognizes revenue at the time significant risks and rewards of ownership have been transferred to the customer or the services have been performed, the price is fixed or determinable, collectability is reasonably assured, and costs incurred or to be incurred can be measured reliably. Amounts invoiced to customers (primarily deposits, down payments and charges for ongoing maintenance or support services) that do not meet the revenue recognition criteria are considered 'unearned' and included with the Company's current liabilities for reporting purposes.

The Company enters into revenue arrangements that may consist of multiple deliverables ("Multiple-element arrangements") of software licensing, hardware, support service and installation. Except for software subscriptions and version upgrade rights, which are recognized over the periods to which the rights relate, revenue from arrangements involving multiple deliverables is recognized when collection is probable, and all elements have been delivered/completed. Revenue is allocated to each respective element based on its fair value.

The Company often requires a 40% deposit on multi-element arrangements as well as some contractual situations. Any deposits received are initially recorded as unearned revenue.

(a) Software licensing

The Company's software licensing revenue reflects sales to its clients primarily on a perpetual basis, where the customer receives an indefinite future right to use the software provided in accordance with the Company's terms of use. Unless the sale is part of a multipleelement arrangement, revenue from perpetual license sales is recognized once the software has been installed on client equipment, the

amount of revenue can reliably be measured, and collection is reasonably certain. Software licensing revenue also includes software version upgrade rights, which are charged to licensed users annually and recognized as revenue after collection over the periods to which the upgrade rights relate. Amounts collected prior to being earned are recorded as unearned revenue.

Software licensing revenue also includes the sale of ongoing licensing rights, where the client maintains the right to use the software as long as they pay their periodic licensing fee. Revenue from the sale of ongoing licensing rights is recognized over the periods to which the licensing rights relate.

(b) Hardware

Unless part of a multiple-element arrangement, revenue from the sale of hardware products is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the sale price is fixed or determinable, and collection is probable. Hardware is considered delivered to the customer once it has been shipped and title and risk of loss have been transferred. For most of the Company's hardware sales, these criteria are met at the time the product is shipped.

(c) Support services and installation

Unless part of a multiple-element arrangement, revenue from support services is recognized after the service has been provided and collection is probable. In instances where the Company invoices the client prior to performing support service, the prebilling is recorded as unearned revenue. Support revenue also includes the recognition of previously deferred revenue related to multi-element arrangements for installation, configuration and support.

Financial Instruments

(a) Financial assets

Non-derivative financial assets within the scope of IFRS 9 are classified and measured as "financial assets at fair value", as either fair value either through profit or loss ("FVPL") or through other comprehensive income ("FVOCI"), and "financial assets at amortized costs", as appropriate. The Company determines the classification of financial assets at the time of initial recognition based on the Company's business model and the contractual terms of the cash flows.

All financial assets are recognized initially at fair value plus, in the case of financial assets not at FVPL, directly attributable transaction costs on the trade date at which the Company becomes a party to the contractual provisions of the instrument.

Financial assets with embedded derivatives are considered in their entirety when determining their classification at FVPL or at amortized cost. Trade and other receivables held for collection of contractual cash flows are measured at amortized cost.

After initial recognition, financial assets measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the Effective Interest Rate ("EIR") method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the consolidated statements of operations and comprehensive income (loss).

Financial assets measured at FVPL include financial assets management intends to sell in the short term and any derivative financial instrument that is not designated as a hedging instrument in a hedge relationship. Financial assets measured at FVPL are carried at fair value in the consolidated statements of financial position with changes in fair value recognized in other income or expense in the consolidated statements of operations. The Company does not measure any financial assets at FVPL.

Financial assets measured at FVOCI are non-derivative financial assets that are not held for trading and the Company has made an irrevocable election at the time of initial recognition to measure the assets at FVOCI. The Company does not measure any financial assets at FVOCI.

After initial measurement, investments measured at FVOCI are subsequently measured at fair value with unrealized gains or losses recognized in other comprehensive income or loss in the consolidated statements of operations and comprehensive income (loss). When the investment is sold, the cumulative gain or loss remains in accumulated other comprehensive income or loss and is not reclassified to profit or loss.

Financial assets are derecognized when the contractual rights to receive the cash flows from these assets have ceased to exist or when the Company has transferred substantially all the risk and rewards of ownership of the assets. Where substantially all the risks and rewards of ownership of the financial asset are neither retained nor transferred, the Company derecognizes the transferred asset only if it no longer controls the asset. Control is represented by the practical ability to sell the transferred asset without the need to impose additional restrictions. If the Company retains control over the asset, it will continue to recognize the asset to the extent of its continuing involvement. When a financial asset is derecognized in full, a gain or loss is recognized in net income for an amount equal to the difference between the carrying amount of the asset and the value of the consideration received, including any new assets and/or liabilities recognized.

(b) Financial liabilities

Financial liabilities are measured at amortized cost, unless they are required to be measured at FVPL as is the case for held for trading or derivative instruments, or the Company has opted to measure the financial liability at FVPL. The Company's financial liabilities include accounts payable and accrued liabilities and long-term liabilities, which are each measured at amortized cost. All financial liabilities are recognized initially at fair value and in the case of long-term debt, net of directly attributable transaction costs.

After initial recognition, financial liabilities measured at amortized cost are subsequently measured at the end of each reporting period at amortized cost using the EIR method. Amortized cost is calculated by taking into account any discount or premium on acquisition and any fees or costs that are an integral part of the EIR. The EIR amortization is included in finance cost in the consolidated statements of operations and comprehensive income (loss).

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires with any associated gain or loss recognized in other income or expense in the consolidated statements of operations and comprehensive income (loss).

Asset impairment

(a) Financial assets

The Company's only financial assets subject to impairment are other accounts receivable, which are measured at amortized cost. The Company has elected to apply the simplified approach to impairment as permitted by IFRS 9, which requires the expected lifetime loss to be recognized at the time of initial recognition of the receivable. To measure estimated credit losses, accounts receivable have been grouped based on shared credit risk characteristics, including the number of days past due. An impairment loss is reversed in subsequent periods if the amount of the expected loss decreases, and the decrease can be objectively related to an event occurring after the initial impairment was recognized.

(b) Non-financial assets

Property, equipment and intangible assets are tested for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. For the purpose of measuring recoverable amounts, assets that cannot be tested individually are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units – "CGUs").

The recoverable amount of an asset or CGUs is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognized if the carrying value of an asset or a CGU exceeds its recoverable amount. Impairment losses are recognized in profit or loss.

The Company evaluates impairment losses for potential reversals when events or circumstances warrant such consideration.

Leases

The Company's lease is measured at the discounted present value of the remaining minimum lease payments at its weighted average incremental borrowing rate. A contract is a lease (or may contain a lease) if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. A lease liability is recognized at the commencement of the lease term at the present value of the lease payments that are not paid at that date. At the commencement date, a corresponding right-of-use asset is recognized at the amount of the lease liability, adjusted for lease incentives received, retirement costs and initial direct costs. Amortization is recognized on the right-of-use asset over the lesser of the lease term and the asset's useful life. The lease liability is subsequently measured at amortized cost using the effective interest method. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases (lease term of 12 months or less) and leases for which the underlying asset is of low value. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Research and development expense

Since becoming a reporting issuer in October 2013, all expenses related to research and development activities have been expensed as incurred.

Development costs of certain hardware components incurred prior to becoming a reporting issuer, net of investment tax credits, were capitalized as deferred development costs. These costs are being amortized over their estimated product life estimated to be 2024.

Income taxes

Income taxes are accounted for using the asset and liability method. This creates deferred income tax assets and liabilities which can be affected by changes in income tax rates and the assumption of the income rates that are most likely to apply when the deferred income tax asset or liability is settled. The effect of changes in income tax rates is recognized in the year during which these rates change. As appropriate, a valuation allowance is recognized to decrease the value of the tax assets to an amount that is more likely than not to be realized. In estimating the realization of deferred income tax assets, management considers whether a portion or all deferred tax assets are more likely or not to be realized. Realization is subject to future taxable income.

RISKS AND UNCERTAINTIES TO THE COMPANY

There are several inherent risks associated with the business of the Company. The following are certain risk factors related to the business being carried on which should be carefully considered. It is believed that these are factors that could cause actual results to be different from expected and historical results, but the risks presented below may not be all of the risks that the Company may face. The following information is a summary only of certain risk factors and is qualified in its entirety by reference to, and must be read in conjunction with, the detailed information appearing elsewhere in this MD&A. Other sections of this MD&A include additional factors that could have an effect on the business and financial performance of the business of the Company.

The markets in which the Company currently competes are competitive and change rapidly. Therefore, new risks may emerge, and management may not be able to predict all of them or be able to predict how they may cause actual results to be different from those contained in any forward-looking statements. You should not rely upon forward-looking statements as a prediction of future results.

Refinancing of maturing long-term debt

Memex management and the Strategic Review Committee (independent members of Memex's Board of Directors) are looking for refinancing alternatives for the secured term loan with the goal to have this debt either extended or renewed prior to its maturity in March 2024.

If Memex is unable to extend the term of the secured term loan, or source alternative financing to repay the Secured Lender prior to its maturity it will be in default, and the lenders will be entitled to pursue all remedies available to them under the terms of that loan including but not limited to, enforcing on its security and seizing all of the assets of Memex. Such an event would have a material adverse effect on the business, operations and capital of Memex and could lead to the suspension of operations. There can be no guarantee that Memex will be able to extend the term of the secured term loan or source alternative financing. Further, in the event that Memex is able to extend the term of the Secured Lender or source alternative financing, there is no guarantee that such the terms of the extension or the alternative financing will be on terms favourable to Memex or its shareholders.

History of losses and the inability to achieve or sustain profitability

Although the Company showed a profit for the year ended September 30, 2021 it was preceded by net losses for the years ended September 30, 2012 through 2020 and subsequently with a loss for the year ended September 30, 2022. There is no certainty that the Company will become profitable beyond fiscal 2022 or if it will incur net losses in 2023 and beyond.

The Company expects to continue to incur product development, sales and marketing expenses, which will most likely be in advance of sales generated by those efforts. If the Company is unable to convert its development costs into revenue it may be difficult to achieve and maintain profitability. Beyond this, the Company may incur significant losses in the future for a number of reasons including other risks described in this document, and it may encounter unforeseen expenses, difficulties, complications, delays and other unknown events. Accordingly, the Company may not be able to achieve or maintain profitability.

No assurance that cash flow from operations, debt or equity financing will be available

The Company anticipates continuing to make operating expenditures as it implements its growth strategy. These operating expenditures may be financed out of cash generated from operations and possible future debt or equity financing. However, the ability to finance such expenditures out of cash generated from operations will depend on the financial performance of the Company. The ability of the Company to finance such expenditures from possible future debt or equity financings will be dependent on, among other factors, the overall state of capital markets, the financial condition of the Company and investor demand for investments in the technology sector and the Company's securities in particular. To the extent that either internal or external sources of capital become limited or unavailable, or only available on onerous terms, the Company's ability to maintain existing assets may be impaired, and its assets, liabilities, business, financial condition and results of operations may be materially and adversely affected as a result. Readers are encouraged to review Note 1 – 'Nature of business and going concern' to its most recent financial statements.

Retention of key personnel

The Company's performance is substantially dependent on the performance of its executive officers and key employees. The loss of the services of any of the Company's executive officers or other key employees could significantly harm its business. Memex does not currently have a formal succession program or management training program in place for succession or training of management.

Competition

The Company is engaged in an industry that is highly competitive, evolving and is characterized by technological change. As a result, it is difficult for it to predict whether, when and by whom new competing technologies or new competitors may enter the market. Some of these current and potential competitors are much larger than the Company with access to significant resources it cannot currently match. The Company cannot assure that it will be able to compete effectively against current and future competitors. In addition, competition or other competitive pressures may result in price reductions, reduced margins or loss of market share, any of which could have a material adverse effect on the Company's business, financial condition or results of operations.

Protection of intellectual property

The Company's commercial success depends to a significant degree upon its ability to continue to develop and improve its core product software, MERLIN, and to maintain the associated hardware technologies and products that support this software. Despite its efforts to protect and maintain security around the Company's Intellectual Property ("IP"), competitors and other third parties may be able to design around or develop products similar to those of Memex.

A number of the Company's competitors and other third parties have been issued patents, or may have filed patent applications, or may obtain additional patents or other IP rights for technologies similar to those that the Company has developed, or may develop, use or commercialize, in the future. As certain patent applications in the United States and other countries are maintained in secrecy for a period of time after filing, and as publication or public awareness of new technologies often lags behind actual discoveries, the Company cannot be certain that it has

been the first to develop the technology. Further, prosecution and protection of the rights sought in patent applications and patents can be costly and uncertain, often involve complex legal and factual issues and consume significant time and resources.

In addition, while the Company generally enters into confidentiality and non-disclosure agreements with its employees, consultants, contract manufacturers, distributors and dealers and with others to attempt to limit access to and distribution of its proprietary and confidential information, it is possible that:

• misappropriation of its proprietary and confidential information, including technology, will nevertheless occur;
• its confidentiality agreements will not be honored or may be rendered unenforceable;
• third parties will independently develop equivalent, superior or competitive technology or products;
• disputes will arise with its current or future strategic licensees, customers or others concerning the ownership, validity, enforceability, use, patentability or registerability of IP; or
• unauthorized disclosure of its expertise, trade secrets or other proprietary or confidential information will occur.

The Company cannot assure that it will be successful in protecting, maintaining or enforcing its IP rights. If it is not successful in protecting, maintaining or enforcing its IP rights, then the Company's business, operating results and financial condition could be materially adversely affected.

Intellectual property of others

The Company's commercial success depends, in part, upon it not infringing or violating IP rights owned by others. The industry in which the Company competes has many participants that own, or claim to own, IP. The Company cannot determine with certainty whether any existing third-party patents, or the issuance of any new third-party patents, would require it to alter its technologies or products, obtain licenses or cease certain activities, including the sale of its core product.

The Company may in the future receive claims from third parties asserting infringement and other related claims. Litigation may be necessary to determine the scope, enforceability and validity of third-party IP rights or to protect, maintain and enforce the Company's IP rights. Some of the Company's competitors have, or are affiliated with companies having, substantially greater resources than it has, and these competitors may be able to sustain the costs of complex IP litigation to a greater degree and for longer periods of time than the Company can. Regardless of whether claims that it is infringing or violating patents or other IP rights have any merit, those claims could adversely affect the Company's relationships with current or future distributors and dealers of its products, adversely affect its reputation with customers, be time-consuming and expensive to evaluate and defend, cause product shipment delays or stoppages, divert management's attention and resources, subject the Company to significant liabilities and damages, require it to enter into royalty or licensing agreements or require it to cease certain activities, including the sale of products.

If it is determined that the Company has infringed, violated or is infringing or violating a patent or the IP right of any other person or if it is found liable in respect of any other related claim, then, in addition to being liable for potentially substantial damages, the Company may be prohibited from developing, using, distributing, selling or commercializing certain of its technologies or applications unless it obtains a license from the holder of the patent or other IP right. The Company cannot assure that it will be able to obtain any such license on a timely basis or on commercially favorable terms, or that any such licenses will be available, or that workarounds will be feasible and cost-efficient. If it does not obtain such a license or find a cost-efficient workaround, the Company's business, operating results and financial condition could be materially adversely affected and it could be required to cease related business operations in some markets and restructure its business to focus on its continuing operations in other markets.

Information technology systems and security

The Company utilizes many information technology systems for the management of its business. The reliability and security of these systems is critical. If the functionality of these systems is interrupted or fails and cannot be restored quickly, or if the technologies are no longer supported, the Company's ability to conduct its business could be compromised. Further, although the technology systems the Company utilizes are intended to be secure, there is a risk that an unauthorized third party could access the systems. Such a security breach could lead to adverse consequences, including but not limited to, the unavailability, disruption or loss of key functionalities within the Company's control systems and the unauthorized disclosure, corruption or loss of sensitive company, customer or personal information. The Company attempts to prevent such breaches through the implementation of various technology security measures, engaging skilled consultants and employees to manage the Company's technology applications and improve policies and procedures. There is no guarantee that these measures will be effective.

Failure to manage growth

The Company's failure to manage its growth successfully may adversely impact its operating results. The Company's ability to manage growth will require it to continue to build its operational, financial and management controls, human resource policies, and reporting systems and procedures. The Company's ability to manage its growth will also depend in large part upon a number of factors, including the ability for it to expand its internal, operational and financial controls significantly so that it can maintain control over operations, attract and retain qualified

technical personnel in order to continue to develop its core product ensuring that it continues to respond to evolving customer needs, build a sales team to keep customers and channel partners informed regarding the technical features issues and key selling points of its products and services, develop support capacity for customers as sales increase, and build a channel network to create an expanding presence in the evolving marketplace for its products and services.

An inability to achieve any of these objectives could harm the business, financial condition and results of operations of the Company.

Litigation

Although there are currently no legal proceedings outstanding or, to the best of the knowledge of the Company, contemplated against it, the Company may become party to litigation from time to time in the ordinary course of business which could adversely affect its business.

Sales forecasting

The Company's revenues are difficult to forecast and, as a result, its quarterly operating results can fluctuate substantially. The Company has developed a pipeline approach to anticipate when revenue will occur, but these estimates can be significantly impacted by the sales process, economic conditions in general or specific in the Company's target markets, and the order cycle of its customers.

Foreign exchange

The presentation currency of the Company is the Canadian dollar. The Company does business and sells primarily into foreign markets, primarily the United States of America, with virtually all of its sales and most of its sales and marketing spending taking place in US dollars. The Company does not currently participate in hedging activities. Although it cannot predict the effect of possible future foreign exchange losses, if they occurred, they could have a material adverse effect on the Company's business, results of operation, and financial condition. Exchange rate fluctuations could also affect product pricing and negatively influence customer demand.

RISKS RELATED TO AN INVESTMENT IN COMMON SHARES OF THE COMPANY

Concentration of Voting Power

Many common shares of the Company are concentrated in the hands of the Company's Senior Management team and its Board of Directors, whose collective holdings currently total 14.3%. As a result, these shareholders may have a significant influence over any matters requiring shareholder approval, including the election of directors and significant corporate transactions such as a business combination, takeover proposal or other sale of the Company or its assets, for the foreseeable future.

Dilution and Future Sales of Common Shares

The Company may issue additional common shares in the future, which may dilute a shareholder's holding in the Company. The Company's articles permit the issuance of an unlimited number of common shares, and shareholders will have no pre-emptive rights in connection with such further issuances. The directors of the Company have the discretion to determine if an issuance of common shares is warranted, the price at which such issuance is affected and the other terms of issue of common shares. Also, additional common shares of the Company may be issued by the Company upon the exercise of options to acquire common shares under the Company's Stock Option Plan or Warrants to purchase common shares which are currently outstanding, which will result in further dilution to the shareholders of the Company.

Unpredictability and Volatility of the Common Share Price

There can be no assurance that a significant public market for the common shares of the Company will develop or be sustained. The current trading price of the common shares of the Company or the price at which the common shares have been issued in connection with the private placements may not be indicative of the market price of the common shares of the Company in the future. If an active public market for the common shares of the Company does not develop or is not maintained, the liquidity of an investment in such common shares may be limited, the market price could be subject to significant fluctuations and the price per share may decline.

The market price of the common shares of the Company could also fluctuate significantly as a result of many factors, including but not limited to the following: economic and stock market conditions generally, and specifically as they may impact participants in the software development industry; the Company's earnings and results of operations and other developments affecting the Company's business; sales of common shares of the Company into the market by the shareholders and/or the insiders of the Company; changes in financial estimates and recommendations by securities analysts following the common shares of the Company; earnings and other announcements by, and changes in market evaluations of, the software development industry; changes in business or regulatory conditions affecting participants in the software development industry; trading volume in the common shares of the Company; additions or departures of key personnel; and competitive pricing pressures in the software development industry.

In addition, the financial markets have experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of companies and that have often been unrelated to the operating performance of such companies. Accordingly, the market price of the common shares of the Company may decline even if the Company's operating results or prospects have not changed.

Dividends

If the Company generates earnings in the foreseeable future, it expects that such earnings will be retained to finance growth, both organically and by acquisitions, if any, and, when appropriate, repay debt. The directors of the Company will determine if and when dividends should be declared and paid in the future based on the Company's financial position at the relevant time. Each of the common shares of the Company entitles its holder to an equal share in any dividend declared and paid by the Company. The Company does not expect to pay any dividends in the foreseeable future. Investors seeking cash dividends should not purchase common shares of the Company.

Financial Market Turmoil

Global financial market and economic conditions can pose a significant threat to economic growth in almost all sectors and economies, causing a decline in consumer and business confidence, a reduction in credit availability and a dampening in business and household spending.

Economic Downturn in the Global Economy

At times when there is a downturn in the global economy, the Company and its industry peers may have restricted access to capital and may suffer from increased borrowing costs. The lending capacity of all financial institutions may be diminished, and risk premiums may increase. As the ability of the Company to meet future capital requirements may depend upon its ability to borrow money from third parties or make additional offerings of securities in the future, the ability of the Company to do so may be limited by, among other factors, the overall state of capital markets and investor demand for investments in the technology industry, more precisely in the software development industry and the Company's securities in particular.

To the extent that external sources of capital become limited or unavailable or only available on onerous terms, the ability of the Company to make capital investments and maintain existing assets may be impaired, and its assets, liabilities, business, financial condition and results of operations may be materially and adversely affected as a result. Failure to obtain any financing necessary for the growth plans of the Company may result in a delay in carrying out its business strategy.

Economic conditions and other factors may also reduce the demand for software products or services from that forecasted and factors expected to support or increase demand may not have the effect expected. Any reduction in demand may have a material adverse effect on the financial results or condition of the Company.

FORWARD-LOOKING STATEMENTS

This MD&A may contain certain "forward-looking statements" and certain "forward-looking information" as defined under applicable Canadian securities laws. Forward-looking statements and information can generally be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "continue," "plans" or similar terminology. Forward looking statements and information are subject to various known and unknown risks and uncertainties, many of which are beyond the ability of the Company to control or predict, that may cause the Company's actual results, performance or achievements to be materially different from those expressed or implied thereby, and are developed based on assumptions about such risks, uncertainties and other factors. While Memex anticipates that subsequent events and developments may cause its views to change, the Company undertakes no obligation to update forward-looking information except as required by applicable law. Such forward-looking information represents Management's best judgment based on information currently available. No forward-looking statement can be guaranteed, and actual future results may vary materially. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information.