Sproutly Canada, Inc. — Interim / Quarterly Report 2021

Jan 29, 2021

SPROUTLY CANADA INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ("MD&A")

FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2020

The following is a discussion and analysis of the financial condition and results of operations of Sproutly Canada Inc. ("Sproutly" or the "Company") for the three and nine months ended November 30, 2020. This MD&A should be read in conjunction with the Company's unaudited condensed interim consolidated financial statements and accompanying notes for the three and nine months ended November 30, 2020 and November 30, 2019. All amounts in the MD&A are in Canadian dollars, except share and per share amounts or as indicated otherwise. The Company's accounting policies are in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

The effective date of this MD&A is January 27, 2021.

For reporting purposes, the Company prepares consolidated financial statements in Canadian dollars. Unless otherwise indicated, all dollar (''$'') amounts in this MD&A are expressed in Canadian dollars.

All references to we, our, us and Sproutly refer to the Company.

All references to management refer to the directors, senior officers and other officers of Sproutly, unless otherwise stated.

Cautionary Statement on Forward Looking Information

This MD&A and the Company's other public disclosure contain "forward-looking information" within the meaning of applicable Canadian securities laws ("forward-looking information") concerning the Company's business plans, including, but not limited to, anticipated results and developments in the Company's operations in future periods and other matters that may occur in the future. In certain cases, forward-looking information can be identified by the use of words such as "plans", "expects", "is expected", "budget", "target", "scheduled", "estimates", "forecasts", "intends", "anticipates", "determine", "continue", "projects", "potential", "proposed" or "believes", or variations or the negative of such words and phrases, or statements that certain actions, events or results "may", "could", "whether to", "would", "should", "likely", "might" or "will be taken", "occur" or "be achieved" or the negative of these terms or comparable terminology. Forward-looking information contained in this MD&A includes, but is not limited to, statements regarding the competitive and business strategies of the Company, the Company's ongoing investment strategy, market prices, values and other economic indicators, receipt and timing of governmental approvals, including Health Canada approvals, the performance of the Company's business and operations, the intention to grow the business, operations and potential activities of the Company, the expected production capacity and revenue of the Company's projects, the competitive conditions of the industry, the anticipated changes to Canadian federal laws regarding the use of recreational cannabis and the business impacts on the Company, whether the Company will continue to be in compliance with regulatory requirements, the Company's intention to build a brand and develop cannabis products, the Company's intention to build valuable intellectual property and the anticipated benefits therefrom including accelerated sales growth and profit margins, analyses and other information based on expectations of future performance and planned products, possible events, conditions or financial performance that is based on assumptions about future economic conditions and courses of action, timing, costs and potential success of future activities on the Company's facilities and projects, future outlook and goals, permitting time lines and requirements, regulatory and legal changes and requirements for additional capital, whether the Company will have sufficient working capital and its

ability to raise additional financing required in order to develop its business and continue operations, and planned expenditures and budgets and the execution thereof.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management in light of management's experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, including, without limitation, assumptions about possible events, conditions or financial performance that is based on assumptions about future economic conditions and courses of action, revenue from the Company's proposed operations, general economic, financial market, regulatory and political conditions in which the Company operates ,general demand and consumer interest in the Company's products, competition anticipated and unanticipated costs, the future market price of medical and recreational cannabis, the ability of the Company to generate cash flow from operations and obtain necessary financing on acceptable terms, government regulation of the Company's activities and products, including in the areas of taxation and environmental protection, the timely receipt of any required regulatory approvals, the ability of the Company to obtain qualified staff, equipment and services in a timely and cost-efficient manner, and the ability of the Company to conduct operations in a safe, efficient and effective manner.

While the Company considers these assumptions to be reasonable, the assumptions are inherently subject to significant business, social, economic, political, regulatory, competitive and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. Many assumptions are based on factors and events that are not within the control of the Company and there is no assurance they will prove to be correct.

Furthermore, by their very nature, forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, events, results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information. Such risks, uncertainties and other factors include, without limitation, those related to the industry-wide risks, fluctuations in capital markets and share prices, risks related to the ability to obtain financing needed to fund the continued development of the Company's business, the Company's ability to manage anticipated and unanticipated costs, risks related to securing users and customers of the Company's product, risks related to securing and protecting the Company's intellectual property rights, risks related to the Company's failure to economically commercialize its product, risks related to delays or other problems in the third-party manufacturing process, risks related to the Company's failure to obtain necessary Health Canada approvals as scheduled or at all, risks related to the Company's inability to maintain or improve its competitive position, risks related to the Company's ability to establish its business internationally, risks related to the Company's ability to maintain or improve upon the medical effectiveness and usefulness of its product to intended users in the medical services industry, risks related to the Company's failure to retain key personnel and hire additional personnel needed to develop its business, risks related to the Company's failure to adequately evaluate its current business and its future prospects, risks related to the Company's business practice reputation being negatively affected by unfavourable publicity or consumer perception of the cannabis industry or the Company, the impact of any negative scientific studies on the effects of cannabis, market conditions, volatility and global economic conditions, risks associated with agreements with third parties relating to the Company's business, including agreements to manufacture and sell the Company's product and the ability to conclude such agreements on favorable terms, environmental risks, governmental regulations,

restrictions imposed by the Canadian Securities Exchange and other regulatory authorities on the Company's business, the uncertainty of profitability based upon the Company's history of losses, risks related to foreign exchange rate fluctuations, as applicable, insurance and tax risks, general risks and uncertainties related to the Company's 's prospects and business strategy; and the risks described in the section of this MD&A entitled "Risk Factors".

This is not an exhaustive list of the risks and factors that may affect the Company's forward-looking information. Although the Company has attempted to identify important factors that could affect the Company and may cause actual actions, events, conditions, results, performance or achievements to differ materially from those described in the forward-looking information, there may be other factors that cause actions, events, conditions, results, performance or achievements not to be as anticipated, estimated or intended. In addition to those discussed in this MD&A, please refer to the risks described in the Company's public disclosure record.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained in this MD&A. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake any obligation to publicly update or revise any forward-looking information other than as required under applicable securities laws.

Description of Business

Sproutly was incorporated as "Stone Ridge Exploration Corp." on January 26, 2012, pursuant to the BCBCA. On July 6, 2018, the Company closed a plan of arrangement under the CBCA pursuant to which, among other things, Sproutly, Inc. completed a reverse takeover of Stone Ridge (now, "Sproutly Canada, Inc."). Pursuant to the Arrangement, Stone Ridge changed its name to "Sproutly Canada, Inc." and Sproutly, Inc. became a wholly-owned subsidiary of the Company.

Sproutly Canada, Inc., through its wholly owned subsidiary Sproutly, Inc., is a licensed producer of medical cannabis pursuant to the Access to Cannabis for Medical Purposes Regulations (Canada) (the "ACMPR") and operates a 16,600 square foot production facility in Toronto, Ontario, Canada.

On July 6, 2018, the Company, under its former name, Stone Ridge Exploration Corp. ("Stone Ridge"), completed a reverse takeover transaction (the "Arrangement") pursuant to which it acquired all of the issued and outstanding shares of Sproutly Inc. In connection with the closing of the Arrangement, the Company changed its name from "Stone Ridge Exploration Corp." to "Sproutly Canada Inc.".

Immediately prior to the completion of the Arrangement, Stone Ridge completed a consolidation of the Stone Ridge Shares on the basis of one post-Consolidation share for every two pre-Consolidation shares. Pursuant to the Arrangement, among other things, shareholders of Sproutly Inc. received approximately two (2) post-Consolidation Stone Ridge Shares in exchange for each common share of Sproutly Inc. held by such shareholder immediately prior to the effective time of the Arrangement.

The Common Shares of the Company resumed trading following the Amalgamation on the CSE on July 9, 2018 under the symbol "SPR". The Company is also quoted on the Frankfurt, Berlin and Munich exchanges under the symbol "38G", and on the OTCQB Venture Marketplace under the symbol "SRUTF"

Due to the fact that the Arrangement was considered to be a reverse takeover transaction, the comparative financial information of the Company for the year ended February 28, 2019 consists of financial information of Sproutly Inc. References to the Company in this MD&A prior to July 6, 2018 refer to Sproutly Inc. unless otherwise noted.

Recent Developments

On May 14, 2020, the Company announced a business transformation plan, shifting the Company's resources away from cannabis cultivation to focus on the commercialization of its proprietary APP Technology (the "Business Transformation Plan"). As part of the implementation of the Business Transformation Plan, Infusion Biosciences Inc. ("Infusion Biosciences") committed to further investment into the Company and to provide additional human capital resources to execute on the new plan.

Key elements of the plan include the following:

• A substantial change to the Company's business strategy to focus on its proprietary APP Technology for Cannabis 2.0 opportunities and away from the capital-intensive cannabis cultivation business
• Appointment of Dr. Arup Sen, CEO of Infusion Biosciences, Chief Science Officer of Sproutly Canada Inc. and inventor of the APP Technology, is appointed as CEO of Sproutly
• The Company intends to explore strategic alternatives with respect to its cultivation facility that is a Licensed Producer under the Cannabis Act of Health Canada
• A commitment to the Company for additional capital investment from Infusion Biosciences, owner of the APP technology and the largest shareholder of Sproutly
• Continuation of discussions with Moosehead Breweries to restructure the previously announced joint venture agreement to focus on the sale of Infuz2O, eliminate any capital investment requirement by Sproutly, and allowing broad commercialization of the APP technology via formulation and sale of unique custom ingredients for cannabis products
• The Company will implement cost-cutting initiatives to better align its expenses with current market conditions, including a reduction of staff by approximately 75%

On June 24, 2020, the Company announced that Justin Kates and Michael Bellas had resigned from the Board of Directors, effective June 22, 2020. Mr. Bellas remains a trusted advisor to the CEO, Dr. Arup Sen.

On July 6, 2020, the Company announced the Company's wholly-owned subsidiary, THR, entered into a cannabis supply agreement with the province of British Columbia (the "Supply Agreement") through the British Columbia Liquor Distribution Branch, and completed an initial sale into the province. British Columbia is the 5th province in Canada to carry Sproutly's CALIBER branded indoor-grown dried flower products ("CALIBER"). The Company also announced that Gregg Orr resigned from the Board of Directors and was replaced by the appointment of Sproutly's CFO, Craig Loverock, as a Director, effective June 30, 2020. In addition, the Company appointed Paul Marcellino to the Board of Directors, effective July 6, 2020 subject to regulatory approval.

On July 30, 2020, the Company announced it has entered into a second supplemental indenture dated July 23, 2020 (the "Second Supplemental Indenture") between the Company and TSX Trust Company, as trustee, which amends the terms of its convertible debenture indenture dated October 24, 2018 (the "Original Indenture"), as amended by the first supplemental indenture dated April 24, 2020 (the "First Supplemental Indenture", and together with the Original Indenture, the "Indenture") providing for the issue of 8.0% senior unsecured convertible debentures in the aggregate principal amount of up to $10,750,000 (the "Debentures"). Pursuant to the Second Supplemental Indenture, the Indenture was modified to provide for certain payments of principal and interest under the Indenture to be settled by the Company in cash or common shares of the Company, subject to the prior written approval of

Debenture holders holding more than 20% of the outstanding Debentures. As of July 30, 2020, Debentures in the principal amount of $5,239,000 were outstanding and due to mature on October 24, 2020. The Debentures were originally convertible by the holders thereof into common shares of the Company at a price of $0.75 per common share. Pursuant to the First Supplement Indenture, the Company and the Debenture holders approved an amendment to the conversion price to $0.105 per share.

On August 27, 2020, the Company announced it has secured a private loan (the "Loan") of $855,000 from Infusion Biosciences Inc. (the "Lender"), a related party of the Company (the "Debt Financing"). The Loan carries an interest rate of 15% per annum accruing and compounding monthly, payable on maturity on or before October 24, 2020 (the "Maturity Date").

The Loan is evidenced by a secured convertible debenture (the "Convertible Debenture") that provides the Lender with the right to convert the principal and accrued interest of the Loan into units of the Company (the "Debt Units") at a conversion price of $0.07 per Debt Unit. Each Debt Unit will consist of one common share in the capital of the Company (a "Common Share") and one Common Share purchase warrant (a "Warrant"), with each Warrant entitling the Lender to acquire one Common Share (a "Warrant Share") at an exercise price equal to $0.08 for a period of two years from date of issuance.

As a condition of the Loan, the Company agreed to amend terms included in the $1 million private loan (the "Original loan") from the Lender, which was previously announced on January 28, 2020. The Original Loan carried an interest rate of 10% per annum accruing and compounding monthly, payable on the Maturity Date. The Original Loan is evidenced by a secured convertible debenture that provided the Lender with the right to convert the principal of the Original Loan into units (the "Original Units") of the Company at a conversion price of $0.19 per Original Unit. As a result of the amendment, the interest rate has been amended to 15% effective as of the date of the amendment and the conversion price has been reduced to $0.07 per Original Unit. Each Original Unit consists of one Common Share and one Warrant, with each Warrant entitling the Lender to acquire one Common Share at an exercise price equal to $0.08 for a period of two years from date of issuance.

The Company also announced a non-brokered private placement of 1,500,000 units of the Company (the "Equity Units"), at a price of $0.07 per Equity Unit to raise gross proceeds of $105,000 (the "Private Placement"). Each Equity Unit consists of one Common Share and one Warrant, with each Warrant entitling the holder to acquire one Warrant Share at an exercise price equal to $0.08 for a period of two years from date of issuance.

In addition, the Company has completed a settlement of outstanding current debt of the Company in the amount of $180,000 through the issuance of 1,800,000 Common Shares at a price of $0.10 per share.

On September 10, 2020 the Company announced it intended to settle an aggregate of $182,340 of payroll indebtedness owed to certain current and former employees for past services rendered through the issuance of 2,604,867 common shares at a deemed issuance price of $0.07 per share.

On September 23, 2020, the Company announced it had entered into a third supplemental indenture dated September 23, 2020 (the "Third Supplemental Indenture") between the Company and TSX Trust Company, as trustee, which amends the terms of its convertible debenture indenture dated October 24, 2018 (the "Original Indenture"), as amended by the first supplemental indenture dated April 24, 2020 (the "First Supplemental Indenture") and as further amended by the second supplemental indenture dated July 23, 2020 (the "Second Supplemental Indenture", and together with the Original Indenture and the Third Supplemental Indenture, the "Indenture") providing for the issue of 8.0% senior unsecured convertible debentures in the aggregate principal amount of up to $10,750,000 (the "Debentures"). In connection with the execution of the Third Supplemental Indenture, the Company wishes to extend the

maturity date from October 24, 2020 to April 24, 2021, and to reduce the conversion price from $0.105 to $0.06 per share.

On September 30, 2020, the Company announced that it had agreed to settle an aggregate of approximately $69,300 of indebtedness owed to one arms-length creditor for past services rendered through the issuance of 1,386,000 common shares at a deemed issuance price of $0.05 per share. All common shares issued in satisfaction of the indebtedness are subject to a four month hold period from the date of issuance.

On October 15, 2020, the Company announced that THR had received an amended extract sales license from Health Canada (the "Sales License"). Under its Sales License, THR is now authorized to manufacture and sell Cannabis 2.0 products directly to provincial distributors and other authorized Canadian retail supply channels. THR's ability to sell Cannabis 2.0 products allows it to utilize its licensed APP technology and offer the Company's strain specific cannabis extracts, edible and beverage products in Canada through its existing provincial sales relationships.

On December 17, 2020, the Company executed a Letter of Intent to enter into a commercial relationship with Cannabis Manufacturer's Guild Ltd. ("CMG"). The agreement will allow Sproutly to expand and diversify its flower and Cannabis 2.0 product offerings utilizing brands developed by CMG and its affiliates (the "Acquired Products"), through the Company's wholly-owned subsidiary, Toronto Herbal Remedies Inc. The agreement allows Sproutly to sell the Acquired Products and facilitate potential business-tobusiness sales of the Company's proprietary whole plant extracts to CMG's network of Guild members.

On January 11, 2021, the Company executed a Letter of Intent to enter into a commercial relationship with CannaHive Inc. The agreement will allow the Company to further expand its Cannabis 2.0 product offerings at the Company's wholly-owned subsidiary, THR.

Outlook

The Company's objective is to capitalize on the growing legal recreational cannabis market in Canada, as well as in other global jurisdictions that are legally regulated for cannabis sales both medically and recreationally by legislation similar to the Cannabis Act (Canada), the Cannabis Regulations and other applicable law. The Company's vision is to become a leader in the production of cannabis and cannabisbased products specifically in the beverage and consumables markets by utilizing the "Aqueous Phytorecovery Process" cannabis extraction technology (the "APP Technology") licensed for Canada, Europe, Australia, Jamaica, and Israel (collectively, the "Territory") by the Company's acquisition of Infusion Biosciences Canada Inc. ("Infusion Biosciences Canada"). The Company intends to work with partners to formulate, brand and distribute beverages and other consumer packaged goods products in the Territory and also develop proprietary consumable products.

As a licensed producer under ACMPR and owner of a sales license under Health Canada regulations, the Company intends to distribute its products through the provincial distribution channels permitted in the recreational and medicinal cannabis markets.

Selected Information

	For the three months ended			For the nine months ended
		November 30,		November 30,
	2020	2019	2020	2019
	$	$	$	$
Revenue	69,120	640,925	439,044	774,757
Net revenue	35,250	640,925	244,892	774,757
Gross profit (loss)	(5,273)	1,103,836	(17,588)	2,037,692
Expenses	584,521	1,773,651	2,348,306	6,972,577
Loss from operations	(589,794)	(759,815)	(2,365,894)	(4,934,885)
Net loss	(1,207,513)	(1,513,018)	(4,939,749)	(7,446,869)
Total comprehensive loss	(1,207,513)	(1,513,018)	(4,939,749)	(7,446,869)
Basic and diluted loss per share	-	(0.01)	(0.02)	(0.04)
Weighted average number of common shares	279,176,471	220,157,235	256,550,309	197,611,419

Results of Operations

Financial Results for the three months ended November 30, 2020 and November 30, 2019

During the three months ended November 30, 2020, the Company reported a net loss of $1,207,513 and a loss per share of nil, compared to a net loss of $1,513,018 and a loss per share of $0.01 for the three months ended November 30, 2019.

For the three months ended November 30, 2020, the Company generated net revenue of $35,250 from the sale of 33,600 grams of flower and incurred cost of sales of $64,900. In addition, the Company recognized a gain of $32,154 in realized fair value adjustments on inventory sold during the quarter and recorded an inventory impairment of $8,047.

During the quarter, the Company experienced a decrease in sales to 33,600 grams compared to quarter ended August 31, 2020 (126,756 grams) and an increase compared to quarter ended May 31, 2020 (13,032 grams). The decrease in sales from the prior quarter was primarily due to staff turnover which was resolved in December 2020. Overall, sales continued to be adversely impacted by the COVID-19 pandemic. The impact of the pandemic led to the implementation of the business transformation plan at the end of Q1 in which the Company scaled back its cultivation and sale of flower operations and shifted its focus on the APP technology for Cannabis 2.0 (see Recent Developments). Sales were also lower compared to the quarter ended November 30, 2019 as the Company made a one time sale of 366,100 grams of flower to another licensed producer and generated net revenue of $640,925.

General and administrative expenses decreased by $839,079 for the three months ended November 30, 2020, compared to the same period in 2019. The difference was primarily attributed to a decrease of $247,213 in wages and $294,346 in office and administrative expenses resulting from the business transformation plan that scaled back on the cannabis cultivation and reduced staffing by approximately 75%. In addition, professional fees decreased by $247,346 as Sproutly narrowed its strategic focus to commercializing the APP technology, whereas the Company was incurring professional service fees in the

same period in the prior year on potential business opportunities. The remaining reduction in general and administrative expenses of $50,174 was attributed to scaling down activities related to investor relations.

Depreciation decreased by $108,626 during the three months ended November 30, 2020 as a result of an impairment write-down of $50,351,000 on the Company's property, plant and equipment and intangible assets in prior year ended February 29, 2020.

Financing and other costs decreased to $683,768 for the three months ended November 30, 2020, a decrease of $74,906 compared to three months ended November 30, 2019. This was the result of a decrease in interest expense of $28,234 from the settlement of interest accruing loans as well as a lower accretion expense of $46,905.

Marketing expenses decreased by $20,511 during the three months ended November 30, 2020 compared to the same period in the previous year. The Company has completed most of its marketing initiatives related to launching of its dried flower brand in prior periods and is currently focusing its resources towards the commercialization of the APP technology.

Share-based payments decreased for three months ended November 30, 2020 by $220,914 compared to same period last year due to the cancellation of 5,739,703 options for terminated employees in the prior quarter ended August 31, 2020.

For the three months ended November 30, 2020, the Company recognized a gain on extinguishment and modification of loans of $169,742 compared to nil for the same period in 2019.

Items relevant only for the three months ended November 30, 2020, and not for the three months ended November 30, 2019 were:

• $1,500 in rent subsidies received the Government of Canada under the Canada Emergency Rent Assistance program;
• $111,501 in expenses related to recognition of deferred loss on convertible bridge loan financing; and
• $21,936 in income related to the recognition of deferred gain on a related party loan.

Financial Results for the nine months ended November 30, 2020 and 2019

During the nine months ended November 30, 2020, the Company reported a net loss of $4,939,749 and a loss per share of $0.02, compared to a net loss of $7,446,869 and a loss per share of $0.04 for the nine months ended November 30, 2019.

For the nine months ended November 30, 2020, the Company generated net revenue of $244,892 from the sale of 173,388 grams of flower and incurred cost of sales of $440,945. In addition, the Company recognized a loss of $1,008 from changes in fair value of biological assets, but at the same time recorded a gain of $161,862 in realized fair value adjustments on inventory sold during the period. The Company also recorded a reversal related to inventory impairment of $17,611 on inventory sold during the year. During the nine months ended November 30, 2019, the Company generated net revenue of $774,757 for from the sale of 399,558 grams of flower and incurred cost of sales of $496,637 along with $639,458 of inventory impairment. In addition, the Company recognized a gain of $2,712,966 from changes in fair value of biological assets and recognized a loss of $313,936 in realized fair value of adjustments on inventory sold during the year. These differences are due to the actual and projected selling price of flower being much higher during the nine months ended November 30, 2019 compared to the same period in 2020.

General and administrative expenses decreased by $3,720,577 for the nine months ended November 30, 2020, compared to the same period in 2019. The difference was primarily attributed to a decrease of $1,257,747 in wages and a decrease of $783,627 in office and administration expenses resulting from the business transformation plan that scaled back the cannabis cultivation business and reduced staffing by approximately 75%. In addition, professional fees decreased by $814,219 as Sproutly narrowed its strategic focus on the commercialization of the APP technology, whereas the Company was incurring professional service fees in the same period in the prior year on potential business opportunities. The remaining reduction in expense of $864,984 is attributed to scaling down activities related to investor relations.

Depreciation decreased by $317,880 during the nine months ended November 30, 2020 as the result of an impairment write-down of $50,351,000 on the Company's property, plant and equipment and intangible assets in prior year ended February 29, 2020.

Financing and other costs decreased to $2,304,726 for the nine months ended November 30, 2020, a decrease of $225,700 compared to nine months ended November 30, 2019. This was the result of decreasesin interest expense of $169,352 from the settlement of interest accruing on loans, bank charges of $15,663 and accretion expenses of $12,683.

Marketing expenses decreased by $253,017 during the nine months ended November 30, 2020 compared to the same period in the previous year. The Company has completed most of its marketing initiatives related to launching its dried flower brand in prior periods and is currently focusing its resources on the commercialization of the APP technology.

Share-based payments decreased for nine months ended November 30, 2020 by $332,797 compared to same period last year due to the cancellation of 5,739,703 options for terminated employees in the prior quarter ended August 31, 2020, while these options were still vesting for the nine months ended

November 30, 2019. In addition, options that are outstanding for both periods have been fully or close to fully vested for the nine months ended November 30, 2020 compared to 2019.

For the nine months ended November 30, 2020, the Company recognized a gain on extinguishment and modification of loans of $147,170 compared to $356,234 for the same period in 2019.

Items relevant to only for the nine months ended November 30, 2020 and not for the nine months ended November 30, 2019 were:

• $21,713 in rent subsidies received the Government of Canada under the Canada Emergency Rent Assistance program;
• $20,892 gain from disposal of property, plant and equipment;
• $9,525 gain on sublease;
• $491,429 in expenses related to recognition of a deferred loss on convertible bridge loan financing; and
• $35,351 in income related to recognition of a deferred gain on a related party loan.

The Company also incurred expenses of $296,965 and $5,198 related to loss on settlement on contingent consideration and changes in fair value of contingent consideration respectively, for the period ended November 30, 2019 compared to nil for both for the nine months ended November 30, 2020. The contingent liability was related to an earn-out provision as part of the Infusion Biosciences Canada and SSM Partners acquisition which was settled in the prior year.

Use of Proceeds

The Company completed a short form prospectus financing in December 2018 for gross proceeds of $20,760,000. The following table provides a comparison of the actual use of proceeds as compared to the original estimated expenditures, including an explanation of the impact of any variations on the Company's ability to achieve its business objectives and milestones.

	Previous Disclosure re: Use of ProceedsActual Use of Proceeds
Use of Proceeds	Estimated Expenditure	Actual Expenditure	Explanation of Variance and Impact of
			Variance
Completion of Infusion	$4,525,000	$4,525,000	N/A
Biosciences Canada
acquisition
SSM acquisition earnout	$4,975,000	$4,975,000	N/A
Interest on the Convertible	$1,600,000	$890,000	Two interest payments remain. Total
Debentures			interest payable is lower due to a
			conversion of $2.5 million. Further
			conversions are anticipated.
Strategic investment	$2,500,000	$792,000	Unexpected delays related to the
opportunities			Moosehead agreement resulted in
			reduced expenditures.
THR Facility enhancements	$250,000	$405,000	Installation of additional harvesting and
			packaging equipment to improve
			efficiency.
Staffing initiatives	$750,000	$875,000	Greater than anticipated staff required
			at THR.

Brand development andcorporate marketinginitiatives	$1,500,000	$2,228,000	Additional efforts related to promotingthe Company's products, technologiesand brands on various media platforms.Additional expenditures on marketingresearch on the Company's products andbranding.
General and administrativeexpenses	$1,500,000	$2,910,000	Increase utilities rates and consumptionat THR.Additional expenditures on supplies andthird-party professional services atfacility (i.e., environment monitoring,waste removal, etc.) to ensurecompliance with Health Canadastandards. Architectural designs andpermit costs on reagent facility.
General working capital	$970,250	$970,250	N/A
Total	$18,570,250	$18,570,250

Summary of Quarterly Results

	Nov 30,	Aug 31,	May 31,	Feb 29	Nov 30	Aug 31	May 31	Feb 28
	2020	2020	2020	2020	2019	2019	2019	2019
			$	$	$	$	$	$
Revenue	69,120	344,049	25,875	246,384	640,925	133,832	-	-
Excise duties	(33,600)	(148,402)	(12,150)	(94,169)	-	-	-	-
Net Revenue	35,520	195,647	13,725	152,215	640,925	-	-	-
Cost of sales	64,900	300,613	75,432	294,039	363,132	133,505	-	-
Loss (reversal) related to inventory
impairment	8,047	(25,658)	-	1,447,527	424,519	214,939	-	-
Gross loss before fair value	(37,427)	(79,308)	(61,707)	(1,589,351)	(146,726)	(214,612)	-	-
adjustments
Realized fair value adjustments on
inventory sold	(32,154)	(105,238)	(24,471)	97,377	277,543	36,393	-	-
Unrealized loss (gain) on changes in
fair value of biological assets	-	-	1,008	696,112	(1,438,105)	(256,217)	(1,018,644)	(177,982)
Gross profit (loss)	(5,273)	25,830	(38,244)	(2,382,840)	1,013,836	5,212	1,018,644	177,982
Expenses
General and administration	431,062	389,755	509,412	1,200,522	1,270,141	1,640,771	2,148,893	2,197,393
Marketing	6,036	6,280	7,358	972	26,547	128,042	118,102	29,713
Depreciation and amortization	28,566	30,675	29,935	158,160	137,192	136,895	131,969	134,009
Share-based payments	118,857	463,102	319,269	272,703	339,771	403,104	491,150	609,864
Impairment charge for non-
financial assets	-	-	-	50,351,000	-	-	-	-
Loss from operations	(589,794)	(872,882)	(903,218)	(54,366,197)	(759,815)	(2,303,600)	(1,871,470)	(2,792,997)
Other expense (income)
Other expense (income)	17,037	(41,680)	43,848	54,415	(9,526)	59,046	(19,241)	8,410
Finance and other costs	683,768	765,909	855,050	819,955	758,674	881,793	889,959	871,744
Government subsides	(1,500)	(20,213)	-	-	-	-	-	-
Foreign exchange	(1,409)	(6,558)	1,112	(1,522)	4,055	6	1,289	(2,243)
Gain on disposal of assets	-	(20,892)	-	-	-	-	-	-
Gain on sublease	-	(9,525)	-	-	-	-	-	-
Loss (Gain) on extinguishment and
modification of loans	(169,742)	22,572	-	-	-	(356,234)	-	-
Loss on convertible bridge loan
financing	111,501	189,964	189,964	80,528	-	-	-	-
Gain on related party loan	(21,936)	(13,415)	-	-	-	-	-	-
Gain on extinguishment of lease
obligation	-	-	-	(18,304)	-	-	-	-
Loss on settlement of contingent
consideration	-	-	-	-	-	-	296,965	-
Changes in fair value of
contingent consideration	-	-	-	-	-	-	5,198	23,274
Net loss before tax	(1,207,513)	(1,739,044)	(1,993,192)	(55,301,269)	(1,513,018)	(2,888,211)	(3,045,640)	(3,694,182)
Income tax expense (recovery)	-	-	-	(1,137,144)	-	-	-	-
Net loss	(1,207,513)	(1,739,044)	(1,993,192)	(54,164,125)	(1,513,018)	(2,888,211)	(3,045,641)	(3,694,182)
Net loss per share (i)	-	(0.01)	(0.01)	(0.24)	(0.01)	(0.02)	(0.02)	(0.03)

The changes in the Company's financial results on a quarter-by-quarter basis are due primarily to the increased level of activity in the Company as it completed the RTO, the acquisition of Infusion Biosciences and SSM Partners, and finished construction of its facility and commenced operations. The Company began generating revenue from the sale of dried flower in the quarter ended August 31, 2019.

(i) Net loss per share fluctuates from period to period and is impacted by the amount of loss incurred and the number of weighted average number of common shares outstanding.

Liquidity and Capital Resources

The Company's objectives when managing its liquidity and capital resources are to ensure sufficient liquidity to support its financial obligations, while executing on its operating and strategic plans. The Company manages its working capital by monitoring operational and cash flow forecasts to identify cash flow needs for general corporate and working capital purposes.

	November 30, 2020	February 29, 2020
Cash$	98,032	$32,287
Other current assets	829,555	1,389,840
Non-current assets	15,055,920	15,170,752
Current liabilities	10,927,476	9,744,534
Non-current liabilities	481,571	3,933,500
Working capital deficit	(9,999,889)	(8,322,410)

As at November 30, 2020, the Company had cash available of $98,032 (February 28, 2019 - $32,287) and a working capital deficit of $9,999,889 (February 28, 2020 - working capital deficit of $8,322,410).

Cash from Operating Activities

The Company used $982,719 in operating activities during the nine months ended November 30, 2020. The Company has incurred losses to date. The Company's subsidiary, THR, received its flower sales license from Health Canada effective October 16, 2019 and its extracts sales license effective October 15, 2020. As a result, the Company began to generate revenue from the sale of flower through authorized distributors and retailers near the end of the fiscal year ended February 29, 2020, and has yet to record revenue related to Cannabis 2.0 products.

Cash from Financing Activities

During the nine months ended November 30, 2020, Sproutly received proceeds of $855,000 from a related party loan, $105,000 from a private placement and drew $80,000 from its line of credit. The Company paid $21,935 in lease obligations and received $11,502 in sublease payments.

Cash from Investing Activities

During the nine months ended November 30, 2020, Sproutly used $7,103 for plant and equipment and received $26,000 in proceeds from the sale of equipment.

Liquidity Outlook

The Company has incurred losses to date. The Company began to generate revenue in the second quarter of fiscal 2020 but will incur losses until revenues reach a level where operations become profitable. The Company's ability to reach profitability is dependent on the successful implementation of its business strategy. While Management is confident in the success and profitability of the business, there can be no assurance that Sproutly will gain adequate market acceptance for its products or be able to generate sufficient gross margins to reach profitability.

The Company acknowledges that there is material uncertainty over the Company's ability to meet its funding requirements as they fall due. The Company's ability to continue in the normal course of operations is dependent on its ability to raise additional capital through debt and equity financings or refinancing debt as it comes due. While the Company has been successful in raising capital in the past, there is no assurance that it will be successful in closing further financing in the future. Also, there can be no assurance that additional financing can be obtained in a timely manner, or at all, especially in light of the potential impact of the COVID-19 global pandemic on capital markets. Accessing the capital markets can be particularly challenging for companies operating in the cannabis industry. The Company has significantly reduced its operating costs and has put into motion various initiatives to expand revenues as part of the Company's strategic plan to attain profitability and positive cash flow in fiscal 2022.

Capital Structure

The following table summarizes the maximum number of common shares potentially outstanding as at November 30, 2020 and as of the date of this MD&A if all outstanding options and warrants were converted to common shares:

	As of November 30,2020	As of the date of thisMD&A
Common shares	288,756,749	306,001,192
Options	17,350,104	17,350,104
Warrants	1,500,000	1,500,000
Convertible Debenture units	68,333,333	51,666,667
Infusion Biosciences Convertible Bridge Loan	31,064,094	31,064,094
Fully diluted	407,004,280	407,582,057

As at November 30, 2020, the Company had no off-balance sheet arrangements.

Related Party Transactions and Balances

(a) Compensation of key management personnel

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of members of the Company's Board of Directors and corporate officers.

The remuneration of key management personnel during the period ended November 30, 2020 are as follows:

		Three months ended		Nine months ended
	November 30,November 30,		November 30,	November 30,
	2020	2019	2020	2019
	$	$	$	$
Management compensation(i)(ii)	66,625	186,347	243,363	792,389
Share-based payments(iii)	75,823	239,464	643,304	923,675
	142,448	425,811	886,667	1,716,064

• (i) Management compensation consisted of salaries for the Chief Executive Officer, President, Chief Financial Officer, Chief Operating Officer, Chief Science Officer and Chief Commercial Officer.
• (ii) As of November, 2020, the Company owed $231,916 to key management personnel and directors.
• (iii) Share-based payments are the fair value of options granted and vested to key management personnel and directors of the Company under the Company's stock option plan.
• (b) Related party loan

The Company entered into a $855,000 secured loan agreement with Infusion Biosciences Inc.

(c) Convertible bridge loan

On January 28, 2020, the Company secured a private loan with Infusion Biosciences Inc. for $1,000,000.

(d) Contingent consideration payable

The Company settled a contingent consideration payable to a related party on March 20, 2019 of $4,975,000 as part of the acquisition of SSM Partners. For the period ended November 30, 2020, the Company recognized a change in fair value of contingent consideration of nil (November 30, 2019 - $5,198) and a loss on settlement of contingent consideration of nil (November 30, 2019 - $296,965).

SPROUTLY CANADA INC. MANAGEMENT DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2020 Significant Accounting Judgments, Estimates and Assumptions

The preparation of the Company's consolidated financial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions about the carry 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 relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

Significant judgments, estimates and assumptions that have the most significant effect on the amounts recognized in the financial statements are described in Note 2 to the Company's financial statements which accompany this MD&A and are available under the Company's profile at www.sedar.com.

Recent Accounting Pronouncements Adopted

For details please refer to Note 2 of the November 30, 2020 financial statements which accompany this MD&A and are available under the Company's profile at www.sedar.com.

Recent Accounting Pronouncements Not Yet Effective

For details please refer to Note 2 of the November 30, 2020 financial statements which accompany this MD&A and are available under the Company's profile at www.sedar.com.

Financial Instruments and Other Instruments

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets, if applicable. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financialassetsat FVTPL	These assets are subsequently measured at fair value. Net gains and losses, includingany interest or dividend income, are recognized in profit or loss.
Financialassetsat amortized cost	These assets are subsequently measured at amortized cost using the effectiveinterest rate method. The amortized cost is reduced by impairment losses. Interestincome, foreign exchange gains and losses and impairment are recognized in profitor loss. Any gain or loss on derecognition is recognized in profit or loss.
Debt investmentsat FVOCI	These assets are subsequent measured at fair value. Interest income calculatedusing the effective interest rate method, foreign exchange gains and losses andimpairment are recognizedin profit or loss. Other net gains and losses arerecognized in OCI. On derecognition, gains and losses accumulated in OCI arereclassified to profit and loss.

Financial Assets – Subsequent measurement and gains and losses

Equity		These assets are subsequent measured at fair value. Dividends are recognized as
investments	at	income in profit or loss unless the dividend clearly represents a recovery of part of
FVOCI		the cost of the investment. Other net gains and losses are recognized in OCI. Changes
		in fair value are recognized in OCI and are never recycled to profit and loss, even if
		the asset is sold or impaired.

Financial Liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held for trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest rate method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

The Company classifies its financial assets and liabilities depending on the purpose for which the financial instruments were acquired, their characteristics, and management intent as outlined below:

Financial Instruments	Classification
Cash	Amortized cost
Accounts receivable (excluding GST and HST receivables)	Amortized cost
Accounts payable and accrued liabilities	Amortized cost
Loans and borrowings	Amortized cost
Convertible loans payable	Amortized cost
Contingent consideration payable	FVTPL

Fair value measurements and disclosures use the following hierarchy definitions in determining its classifications:

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

Level 2 - Inputs other than quoted prices included with Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices)

Level 3 - Inputs for the asset or liability that are not based on observable market data (that is unobservable inputs

Cash, trade receivables, accounts payable and accrued liabilities, on-demand loans and current borrowings approximate their fair value due to their short-term nature. The initial fair value of the Company's lease obligations and convertible bridge loan financing payable, loan payable, contingent consideration payable and due to related party has been measured using Level 3 valuation methods and the following summarizes the key assumptions used to estimate fair value as at November 30, 2020:

Valuation approachThe net investment of the lease wasvalued using Company specific interestrates over expected payment periods.The fair value of the sublease was$90,237.	Key inputsIncremental borrowingrate – 14% per annum.	Inter-relationship between inputsand fair value measurementAs the incremental borrowing ratedecreases, the fair value increases.
The liability of the loan payable wasvalued using Company specific interestrates assuming no conversion featuresexisted. The loan is accreted over theterm to maturity as a non-cash interestcharge with fair value and deferred gainof $433,283 and $38,717 respectively.	Market interest rate –21% per annum.	Asthemarketinterestratedecreases, the fair value increases.

(a) Credit risk

Credit risk is the risk of loss associated with a counterparty's inability to fulfill its payment obligations. Receivables are comprised of 33% GST and HST. The Company has assessed ECL in accordance with IFRS 9 and management determined ECL to be nominal due to the type of receivables.

(b) 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 has a planning and budgeting process in place to help determine the funds required to support the Company's normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its holdings of cash and financing opportunities.

Since incorporation, the Company's primary source of funding has been through debt and equity. The Company's access to financing is always uncertain. As at November 30, 2020, the Company had current assets of $927,587 to settle current liabilities of $10,927,476.

The Company has the following undiscounted loan obligations as at November 30, 2020, which are expected to be payable in the following respective periods:

Less than 1 year 9,330,448

$

Commitments

There are no commitments as at November 30, 2020.

Risks and Uncertainties

Details of the risks and uncertainties related to the Company's business are set out in the Management Discussion and Analysis dated February 29, 2020 under the heading "Risk Factors" which is available under the Company's profile on SEDAR at www.sedar.com.

CORPORATE DIRECTORY

Trading Symbol – SPR Exchange - CSE

Sproutly Canada Inc.

112-1020 Mainland Street Vancouver, BC V6B 2T5 www.sproutly.ca info@sproutly.ca

Officers and Directors

Dr. Arup Sen – CEO and Director Craig Loverock – CFO, Corporate Secretary and Director Con Constandis – Director Paul Marcellino– Director

Audit Committee

Con Constandis (Chairman) Dr. Arup Sen Paul Marcellino

Legal Counsel

Dumoulin Black LLP 10th floor – 595 Howe Street Vancouver, BC V6C 2T5 Tel: 604-687-1224 Fax: 604-687-8772

Auditor

MNP LLP 1021 West Hastings Street, Suite 2200 Vancouver, BC, Canada V6E 0C3 Tel: 604-685-8408

Transfer Agent

TSX Trust Company 650 West Georgia Street, Suite 2700 Vancouver, BC V6B 4N9 Tel: 604-696-4578