Tiny Ltd. - Management Reports 2022

==> picture [62 x 63] intentionally omitted <==

WECOMMERCE HOLDINGS LTD.

Management’s Discussion and Analysis

For the years ended December 31, 2021 and December 31, 2020

GENERAL INFORMATION AND CAUTIONARY STATEMENTS

Introduction

The following management’s discussion and analysis (“MD&A”) dated March 29, 2022, provides information concerning the financial condition and results of operations of the Company (as defined below) for the years ended December 31, 2021 and December 31, 2020. The following MD&A should be read in conjunction with the Company’s audited financial statements and notes thereto related to the year ended December 31, 2021. Additional information relating to the Company is available on the Company’s website at www.wecommerce.co and www.sedar.com

Basis of presentation

On December 9, 2020, Brachium Capital Corp. (a Canadian company previously listed on the TSX Venture Exchange under the symbol "BRAC.P") ("Brachium") acquired all the outstanding shares of WeCommerce Holdings Ltd. by way of a three-cornered amalgamation with Brachium changing its name to WeCommerce Holdings Ltd. (the "Company" or “WeCommerce”). Upon completion, the shareholders of Brachium held approximately 1% of the issued and outstanding shares of the Company and as a result, WeCommerce shareholders controlled the Company resulting in a reverse take-over. The resulting financial results are presented as a continuance of WeCommerce and comparative figures presented in the consolidated financial statements are those of WeCommerce.

As at December 31, 2021, the Company had the following wholly-owned operating subsidiaries:

WeCommerce Operations Ltd. (formerly Rehash Ltd.) Pixel Union Design Ltd. (“Pixel Union”) Foursixty Inc. (“Foursixty”) Stamped Technologies Pte. Ltd. (“Stamped”) Archetype Themes Limited Partnership (“Archetype”)

The Company’s registered office is at 2900-550 Burrard Street, Vancouver, BC, V6C 0A3, but operates its business as a fully remote business.

The Company manages its businesses on the basis of three reportable segments: Apps, Themes and Agency.

The Company is a holding company that, through its subsidiaries (the “Portfolio Companies”) is in the business of developing, selling and supporting applications (“Apps”) and storefront themes (“Themes”), as well as providing custom solutions through its Agency segment, for clients on ecommerce platforms (“ecommerce platforms”), such as Shopify Inc. (“Shopify”).

The MD&A and financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

In this MD&A, unless otherwise indicated, all dollar amounts are expressed in Canadian dollars. The information in this report is as of March 29, 2022, which is the date of filing. Disclosure in this document is current to March 29, 2022, unless otherwise noted.

WeCommerce’s class A common shares have traded on the Exchange under the symbol “WE.V” since December 14, 2020.

Forward-looking Information

This MD&A contains certain forward-looking statements and forward-looking information within the meaning of applicable securities law. Such forward-looking statements and information include, but are not limited to, statements or information with respect to: the Company’s future business and strategies; requirements for additional capital and future financing; estimated future working capital, funds available, uses of funds, future capital expenditures and other expenses for specific operations and intellectual property protection; industry demand; ability to attract and retain employees, consultants or advisors with specialized skills and knowledge; anticipated joint development programs; incurrence of costs; competitive conditions; general economic conditions; and scalability of developed technology.

Forward-looking statements and information are frequently characterized by words such as “plan”, “project”, “intend”, “believe”, “anticipate”, “estimate” and other similar words, or statements that certain events or conditions “may” or “will” occur. Although the Company’s management believes that the assumptions made and the expectations represented by such statement or information are reasonable, there can be no assurance that a forward-looking statement or information referenced herein will prove to be accurate. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include risks relating to reliance on the Shopify platform; the Company’s limited operating history; reliance on management and key employees; conflicts of interest in relation to the Company’s officers, directors, and consultants; additional financing requirements; resale of Common Shares in the publiclytraded market; market price fluctuations for the Common Shares; global financial conditions; management of growth; risks associated with the Company’s strategy of growth through acquisitions; tax risks; currency fluctuations; competitive markets; uncertainty and adverse changes in the economy; unsustainability of the Company’s rapid growth and inability to attract new customers, retain revenue from existing merchants, and increase sales to both new and existing customers; adverse effects on the Company’s revenue growth and profitability due to the inability to attract new customers or sell additional products to existing customers; future results of operations being harmed due to declines in recurring revenue or contracts not being renewed; security and privacy breaches; changes in client demand; challenges to the protection of intellectual property; infringement of intellectual property; ineffective operations through mobile devices, which are increasingly being used to conduct commerce; and risks associated with internal controls over financial reporting. The Company undertakes no obligation to update forward-looking statements and information if circumstances or management’s estimates should change except as required by law. The reader is cautioned not to place undue reliance on forward-looking statements and information. More detailed information about potential factors that could affect results is included in the documents that may be filed from time to time with the Canadian securities regulatory authorities by the Company.

For a more detailed discussion of certain of these risk factors, see “Risk Factors” below as well as the list of risk factors in the Company’s Annual Information Form available on SEDAR at www.sedar.com under the Company’s profile.

Non-IFRS financial measures

This MD&A makes reference to certain non-IFRS measures and ratios, hereafter, referred to as “non-IFRS measures”. These measures are not recognised measures under IFRS, and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the financial information reported under IFRS.

The Company uses non-IFRS measures including “EBITDA”, “EBITDA %”, “Adjusted EBITDA”, “Adjusted EBITDA %”, and “Constant Currency”. Management uses these non-IFRS measures to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. As required by Canadian securities laws, the Company reconciles these non-IFRS measures to the most comparable IFRS measures in this MD&A. For definitions and reconciliation of these non-IFRS measures to the relevant reported measures, see “Non-IFRS measures”.

COMPANY OVERVIEW

WeCommerce’s Portfolio Companies provide merchants with a suite of ecommerce software tools to start and grow their online stores. The family of companies and brands includes Pixel Union (comprising solely the prior Themes division of Pixel Union Design Ltd.), Orbit Apps (formerly the Apps division of Pixel Union), Knit Agency (formerly the Agency division of Pixel Union), Out of the Sandbox, Archetype, Foursixty and Stamped. As one of Shopify’s first partners since 2010, WeCommerce is focused on building, acquiring and investing in leading ecommerce technology businesses.

The Company has three reportable segments:

The Apps segment relates to the operations and recurring subscription revenues derived from providing the use of paid versions of the Company’s software to customers. The Portfolio Companies included in this segment include Stamped, Foursixty and Orbit Apps. These companies provide Software as a Service (“SaaS”) to merchants. Apps segment revenue is classified as recurring subscription revenue.
The Themes segment relates to the sale of theme design templates to customers operating their stores on various ecommerce platforms. Revenue is generated primarily from the sale of one-time sales of digital goods to customers. The Portfolio Companies included in this segment include Archetype and Pixel Union. Themes segment revenue is classified as digital goods revenue.
The Agency segment relates to the operations and service revenue associated with providing agency services to customers. Agency segment revenue is classified as agency services revenue.

The majority of the Company’s revenue is derived from providing ecommerce software tools to merchants who use Shopify as an ecommerce platform. As of December 31, 2021, over two million merchants use Shopify to power their business. Shopify has over 8,000 applications listed in its app store that extend the product capabilities of Shopify.

WeCommerce builds, invests in and acquires businesses within the Shopify ecosystem because the Company believes Shopify is the leading platform for small and mid-size merchants, the fragmented nature of the partner ecosystem, the attractive industry dynamics including the ongoing shift to online shopping, and the attractive economics that the businesses generally provide.

OVERALL PERFORMANCE AND SELECTED ANNUAL INFORMATION

The following table summarizes the Company’s overall performance for the year ended December 31, 2021, as compared with the prior year:

compared with the prior year:
	For the three-months ended
		December 31,	For the year ended	December 31,
	2021	2020	2021	2020
Revenue
Recurring subscription revenue	7,346,415	2,232,030	22,383,829	6,887,246
Digital goods revenue	3,953,600	2,304,446	10,977,020	8,973,746
Agency service revenue	949,041	1,608,792	5,220,528	5,420,507
	12,249,056	6,145,268	38,581,377	21,281,499
Operating loss	(753,899)	(3,410,817)	(1,905,841)	(1,386,370)
Net income/(loss)	4,126,028	(5,469,103)	(842,922)	(4,416,476)
EBITDA(1)	8,240,074	(4,200,197)	12,594,526	17,902
EBITDA %(1)	67%	(68%)	33%	0.1%
Adjusted EBITDA(1)	3,490,740	1,706,264	11,586,037	6,340,058
Adjusted EBITDA %(1)	28%	28%	30%	30%
Cash provided by operating
activities	3,652,074	869,071	8,001,967	5,662,895
Basic earnings/(loss) per share	0.10	(0.18)	(0.02)	(0.18)
Diluted earnings/(loss) per share	0.10	(0.18)	(0.02)	(0.18)
			December 31,	December 31,
			2021	2020
Total assets			199,522,519	84,793,752
Total liabilities			90,806,351	18,822,875
Non-current financial liabilities			58,213,423	8,736,062

(1) Refer to Non-IFRS Measures section on page 8

FOURTH QUARTER HIGHLIGHTS

Revenue in Q4 2021 was $12,249,056, an increase of $6,103,788 or 99% (106% on a constant currency basis[(1)] ) compared to Q4 2020.
Apps segment revenue in Q4 2021 was $7,346,415, an increase of $5,114,385 or 229% (240% on a constant currency basis) compared to Q4 2020. Apps segment revenue includes the results of Stamped, which contributed revenues of $5,010,982 in Q4 2021. Foursixty contributed revenues of $1,236,586, an increase of $181,378 or 17% (21% on a constant currency basis) compared to Q4 2020.
Themes segment revenue in Q4 2021 was $3,953,600, an increase of $1,649,154 or 72% (77% on a constant currency basis) compared to Q4 2020. Archetype contributed revenues of $2,328,653 in Q4 2021.
● Agency segment revenue in Q4 2021 was $949,041, a decrease of $659,751 or 41% (40% on a constant currency basis) compared to Q4 2020.
Net income was $4,126,028 in Q4 2021 compared to net loss of $5,469,103 in Q4 2020. The net income for Q4 2021 includes fair value adjustments amounting to $5,302,617 which relate to the revaluation of contingent consideration payable as part of the acquisition of Stamped, Foursixty and Archetype. The net loss for Q4 2020 includes a listing expense of $1,634,081, relating to the reverse takeover completed during the quarter.
Unrestricted cash on hand at December 31, 2021 was $26,122,247 compared to $61,193,367 on December 31, 2020. Total debt outstanding at December 31, 2021 was $60,203,418 compared to $10,572,500 on December 31, 2020.
Adjusted EBITDA for Q4 2021 amounted to $3,490,740 or 28% of revenue, compared to $1,706,264 or 28% of revenue in Q4 2020.

Appointment of new Chief Executive Officer and Chairman of the Board

On December 2, 2021, the Company announced that it had appointed Alex Persson as Chief Executive Officer and the Chris Sparling as Chairman of the Board. Andrew Wilkinson, previously the Company’s Chairman of the Board, will continue to serve as a director of the Company. Mr. Persson joined WeCommerce in 2020, overseeing acquisitions and managing the Company’s portfolio of leading ecommerce technology companies. He has spent the bulk of his career working with Jefferies Financial Group’s senior management in various investing and operating roles. Mr. Persson has a B.S. from the University of Virginia and an M.B.A. from the Stanford Graduate School of Business.

Full Quarter of Archetype Revenue

Q4 2021 included the first full quarter of operating results from the acquisition of substantially all of the assets of Archetype Themes Inc. Archetype contributed $2,328,653 in gross revenue for the quarter. In October 2021, Thomas Kelly joined as CEO of Archetype.

RESULTS OF OPERATIONS

RESULTS OF OPERATIONS
	For the years ended	December 31,
	2021	2020
Revenue
Recurring subscription revenue	22,383,829	6,887,246
Digital goods revenue	10,977,020	8,973,746
Agencyservice revenue	5,220,528	5,420,507
	38,581,377	21,281,499
Expenses
Staff	14,789,944	10,144,476
Share-based compensation	1,890,466	4,169,265
Fees paid to ecommerce platforms	5,270,413	2,410,229
Depreciation and amortization	10,087,571	3,184,607
Professional fees	2,610,846	1,019,086
Occupancy	61,180	126,486
Advertising	1,964,562	499,813
General and office expenses	177,220	99,294
Hosting and subscriptions	1,556,015	606,941
Acquisition costs	1,461,844	170,659
Other	617,157	237,013
	40,487,218	22,667,869
Operating loss	(1,905,841)	(1,386,370)
Other expenses/(income)	(1,360,941)	2,606,252
Loss before taxes	(544,900)	(3,992,622)
Taxes	298,022	423,854
Net loss for theyear	(842,922)	(4,416,476)

Revenue

Revenue increased by $17,299,878 or 81% (92% on a constant currency basis) from $21,281,499 in 2020 to $38,581,377 in 2021. Revenues for the Apps segment increased by $15,496,583 or 225% (247% on a constant currency basis) from $6,887,246 in 2020 to $22,383,829 in 2021. The increase for the year can be mainly attributed to the acquisition of the assets of Stamped on April 6, 2021. Stamped contributed $13,320,214 of revenue for the year. The remaining increase can be attributed to the acquisition of Foursixty in 2020, with the inclusion of a full year’s worth of revenue in 2021 compared to six months in 2020.

Revenue for the Themes segment increased by $2,003,274 or 22% (29% on a constant currency basis) from $8,973,746 in 2020 to $10,977,020 in 2021. The increase is attributable to the acquisition of Archetype Themes on August 24, 2021, which contributed $3,493,222 of revenue in 2021. Excluding Archetype, revenue from the themes segment decreased by $1,489,948 or 17% (11% on a constant currency basis). Shopify implemented new requirements in 2021 for all themes to be sold on or off-site and no longer a combination of both, which resulted in lost sales on Pixel Union’s website. Themes revenue in 2020 also benefitted from the significant adoption of e- commerce made by small and medium sized businesses in response to the COVID-19 pandemic which created record breaking growth for the ecommerce market in 2020, including Shopify and new merchant growth.

Revenue for the Agency segment decreased by $199,979 or 4% (1% on a constant currency basis) from $5,420,507 in 2020 to $5,220,528 in 2021. In August 2021, a major client cancelled two projects, resulting in a loss of billings.

Expenses

Staff costs were $14,789,944 for the year ended December 31, 2021, compared to $10,144,476 in 2020, representing an increase of $4,645,468 or 46% over the prior year. The increase can be attributed to the inclusion of staff costs for Stamped and Archetype. In addition, the 2021 expenses include a full year’s staff expenses from Foursixty compared to the six-month inclusion in 2020. Also, the Company added headcount at the corporate head office level in 2021.

Stock-based compensation expense was $1,890,466 for the year ended December 31, 2021, compared to $4,169,265 in 2020, representing a decrease of $2,278,799 or 55% over the prior year. In 2020, there was an immediate vesting of certain options held in WeCommerce upon completion of the reverse takeover, which resulted in a high stock-based compensation expense.

Fees paid to ecommerce platforms were $5,270,413 for the year ended December 31, 2021, compared to $2,410,229 in 2020, representing an increase of $2,860,184 or 119% over the prior year. This is composed of fees paid to Shopify for partner sales as a percentage of gross sales. The increase was driven by higher revenues in 2021. Each portfolio company has different product offerings, and therefore, the fees based on the percentage of revenue may vary.

Depreciation and amortization costs were $10,087,571 for the year ended December 31, 2021, compared to $3,184,607 in 2020, representing an increase of $6,902,964 or 217% over the prior year. The increase is primarily due to additional amortization incurred relating to intangible assets recognized as part of the acquisition of Stamped and Archetype in 2021.

Professional fees were $2,610,846 for the year ended December 31, 2021, compared to $1,019,086 in 2020, representing an increase of $1,591,760 or 156% over the prior year. The increase includes recruitment fees for senior management positions, additional audit fees accrued and legal costs affiliated with corporate matters. Prior to the reverse takeover in 2020, these services were not required.

Advertising costs were $1,964,562 for the year ended December 31, 2021, compared to $499,813 in 2020, representing an increase of $1,464,749 or 293% over the prior year. The increase is primarily attributable to Google and Shopify marketing campaigns conducted during 2021, with no corresponding fees in the 2020 period.

Hosting and subscription fees were $1,556,015 for the year ended December 31, 2021, compared to $606,941 in 2020, representing an increase of $949,074 or 156% over the prior year. The increase is attributable primarily to the inclusion of Stamped, which drove increases to both hosting and subscription fees.

Acquisition costs were $1,461,844 for the year ended December 31, 2021, compared to $170,659 in 2020, representing an increase of $1,291,185 or 757% over the prior year. Acquisition costs include legal and professional fees paid as part of the Company’s acquisition strategy. In 2021, the costs are attributable to the acquisition of Stamped and Archetype; whereas in 2020, the costs predominantly relate to the acquisition of Foursixty.

Other income was $1,360,941 for the year ended December 31, 2021, compared to the other expenses of $2,606,252 in 2020, representing a change of $3,967,193 or 152% over the prior year. Included in Other Income for the year ended December 31, 2021, are revaluations to the contingent consideration payable that was part of acquisitions in 2020 and 2021. This includes a fair value gain of $6,741,462 for Stamped (See “Subsequent Events”), a fair value loss of $200,000 for Foursixty, and a fair value loss of $1,238,845 for Archetype. Excluding these fair value adjustments, other expenses are $3,862,299 for 2021. The increase in other expenses is attributable to finance costs incurred on the new debt facility in 2021 and unfavourable USD/CAD foreign exchange fluctuations from the revaluation of the facility held in USD and USD cash reserves.

NON-IFRS MEASURES

Investors are cautioned that non-IFRS measures used should not replace net income or loss (as determined in accordance with IFRS) as an indicator of the Company’s performance. These are supplemental measures management uses in managing the business and making decisions. These measures do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. These measures are not intended as a substitute for IFRS measures.

EBITDA and EBITDA %

EBITDA is defined as earnings (net income or loss) before finance costs, income taxes, depreciation and amortization. EBITDA is reconciled to net income (loss) from the financial statements.

EBITDA % ratio is determined by dividing EBITDA by total revenue for the year.

EBITDA and EBITDA % is frequently used by securities analysts and investors when comparing the Company’s results to other companies. EBITDA and EBITDA % are measures commonly reported and widely used as a valuation metric.

Adjusted EBITDA and Adjusted EBITDA %

Adjusted EBITDA removes unusual, non-cash or non-operating items from EBITDA such as listing expenses, acquisition costs, restructuring charges, asset impairments, non-cash stock-based compensation, fair value adjustments to contingent consideration payable and foreign exchange gains and losses. The Company believes adjusted EBITDA provides improved continuity with respect to the comparison of its operating performance over a period of time. Adjusted EBITDA is reconciled to net income (loss) from the financial statements. The definition of Adjusted EBITDA has been updated in the current year to reflect certain specific adjustments that had not been present in the 2020 adjustments, as these items were unique to 2021.

Adjusted EBITDA % is determined by dividing Adjusted EBITDA by total revenue for the year.

Adjusted EBITDA and Adjusted EBITDA % is frequently used by securities analysts and investors when comparing the Company’s results to those of other companies. It provides a consistent basis to evaluate profitability and performance trends by excluding items that the Company does not consider to be controllable activities for this purpose. Adjusted EBITDA and EBITDA % are measures commonly reported and widely used as a valuation metric.

Constant Currency

Constant currency is determined by applying the same foreign currency exchange rates to the financial results of the current and equivalent prior-year period. The Company’s reporting currency is the Canadian dollar but we conduct business in Canadian, U.S and Singapore dollars. The Company measures its performance before the impact of foreign currency. Constant currency is reconciled to revenue from the financial statements.

The Company believes Constant Currency allows for current financial performance to be understood against comparative periods without the impact of fluctuations in foreign exchange rates against the Canadian dollar.

NON-IFRS MEASURES RECONCILIATIONS

EBITDA and Adjusted EBITDA

*EBITDA and Adjusted EBITDA*
	For the three-months ended December 31,
	2021	2020
Net income/(loss)	4,126,028	(5,469,103)
Income tax expense	183,071	99,991
Depreciation and amortization	3,295,125	953,935
Finance costs	635,850	214,980
EBITDA	8,240,074	(4,200,197)
EBITDA %	67%	(68%)
*EBITDA adjustments*
Stock-based compensation	917,702	4,035,091
Foreign exchange (gain)/loss	(396,232)	109,234
Acquisition costs	30,616	70,366
Listing expense	-	1,634,081
Fair value adjustments of contingent consideration	(5,302,617)	-
Non-recurring professional fees	-	20,189
Severance costs	-	37,500
Loss on disposal of assets	1,197	-
Adjusted EBITDA	3,490,740	1,706,264
Adjusted EBITDA %	28%	28%

	For the years ended December 31,
	2021	2020
Net loss	(842,922)	(4,416,476)
Income tax expense	298,022	423,854
Depreciation and amortization	10,087,571	3,184,607
Finance costs	3,051,855	825,917
EBITDA	12,594,526	17,902
EBITDA %	33%	0.1%
*EBITDA adjustments*
Stock-based compensation	1,890,466	4,169,265
Foreign exchange (gain)/loss	1,010,460	146,254
Acquisition costs	1,461,844	170,659
Listing expense	-	1,634,081
Fair value adjustments of contingent consideration	(5,302,617)	-
Non-recurring professional fees	91,560	73,588
Severance costs	26,767	128,309
(Gain) on sale of themes	(355,513)	-
Loss on disposal of assets	168,544	-
Adjusted EBITDA	11,586,037	6,340,058
Adjusted EBITDA %	30%	30%

EBITDA % and Adjusted EBITDA %

*EBITDA % and Adjusted EBITDA %*
		For the three-months ended December 31,
				2021	2020
EBITDA			8,240,074		(4,200,197)
Revenue			12,249,056		6,145,268
EBITDA %				67%	(68%)
Adjusted EBITDA			3,490,740		1,706,264
Revenue			12,249,056		6,145,268
Adjusted EBITDA %				28%	28%

			For the	years ended December 31,
				2021	2020
EBITDA			12,594,526		17,902
Revenue			38,581,377		21,281,499
EBITDA %				33%	0.1%
Adjusted EBITDA			11,586,037		6,340,058
Revenue			38,581,377		21,281,499
Adjusted EBITDA %				30%	30%
*Constant Currency*
	For the three-months			% Change
	ended December 31,
				Foreign
			As	exchange	Constant
	2021	2020	reported	impact	currency
Revenue
Recurring subscription revenue	7,346,415	2,232,030	229%	11%	240%
Digital goods revenue	3,953,600	2,304,446	72%	5%	77%
Agency servicerevenue	949,041	1,608,792	(41%)	1%	(40%)
	12,249,056	6,145,268	99%	7%	106%

	For the	years ended		% Change
	December 31,
				Foreign
			As	exchange	Constant
	2021	2020	reported	impact	currency
Revenue
Recurring subscription revenue	22,383,829	6,887,246	225%	22%	247%
Digital goods revenue	10,977,020	8,973,746	22%	7%	29%
Agencyservice revenue	5,220,528	5,420,507	(4%)	3%	(1%)
	38,581,377	21,281,499	81%	11%	92%

LIQUIDITY AND CAPITAL RESOURCES

Overview

Cash on hand at December 31, 2021, amounted to $26,122,247 compared to $61,193,367 at December 31, 2020.

The Company’s main sources of funding are cash generated from operations along with its ability to raise capital from equity and debt financing.

On March 31, 2021, the Company repaid, in full, the outstanding principal of its credit facility with BDC, for an amount of $10,400,000 and a new debt facility agreement was signed on April 6, 2021.

Long term debt is as follows:

Long term debt is as follows:
	December 31,	December 31,
	2021	2020
Term loan	48,651,571	-
Revolving facility	12,633,600	-
BDC loan	-	10,700,000
Deferred financingcosts	(1,081,753)	(127,500)
	60,203,418	10,572,500
Less:
Current portion	(3,486,450)	(1,866,438)
Deferred financingcosts – current portion	300,418	30,000
	57,017,386	8,736,062

While ongoing capital expenditure is likely to remain modest, the Company expects to increase the number of portfolio companies currently owned by the group by investing in leading Shopify businesses. On April 6, 2021, the Company acquired substantially all of the assets of Stamped and on August 24, 2021, the Company acquired substantially all of the assets of Archetype Themes.

Cash flows

Analysis of cash flows:

	Years ended	December 31,
	2021	2020
Cash provided by operating activities	8,001,967	5,662,895
Cash provided by financing activities	76,815,219	61,947,637
Cash used in investing activities	(119,449,032)	(9,286,746)
Foreign exchange on cash	(439,274)	-
(Decrease)/increase in cash	(35,071,120)	58,323,786

Operating activities

During the year ended December 31, 2021, cash flows provided by operating activities was $8,001,967 compared to $5,662,895 for the prior year. The increase of $2,339,072 is mainly attributable to a higher net income for 2021 compared to 2020. Revenue increased by $17,299,878 in 2021 as a result of the 2021 acquisition of Stamped and Archetype. This increase was offset by increases in staff expense of $4,645,468, $2,860,184 in fees paid to ecommerce platforms, $1,591,760 in professional fees, $1,464,749 in advertising and $1,291,185 in acquisition costs. The remaining decrease is attributable to changes in working capital balances of $507,042 in 2021 when compared to 2020.

Financing activities

For the year ended December 31, 2021, cash flows provided by financing activities was $76,815,219 compared to $61,947,637 for the prior year. The increase of $14,867,582 for the year is mainly attributable to the drawdown of the new term loan and revolving credit facility (2020: $nil), partially offset by a cash outflow of $10,700,000 to repay the Company’s bank loan, which included the early repayment of $10,400,000 of principal (repayment of $800,000 in 2020). The 2020 period includes net proceeds of $63,566,832 from the issuance of equity during the year, compared to $31,190,076 in 2021.

Investing activities

For the year ended December 31, 2021, cash flows used in investing activities was $119,449,032, compared to $9,286,746 for the prior year. The decrease of $110,162,286 is attributable to cash used to acquire the assets of Stamped in April 2021 and Archetype in August 2021, which made up $116,948,738 of cash outflows compared to $10,813,190 incurred in 2020 to acquire Foursixty. During the year ended December 31, 2021, the Company also paid out contingent consideration of $2,651,518 in cash (2020: $nil).

SUMMARY OF QUARTERLY RESULTS

The following table summarizes the results of the Company’s operations for the last eight quarters. This unaudited quarterly information has been prepared in accordance with IFRS.

accordance with IFRS.
	2021 2020
	Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Revenue Recurring subscription revenue Digital goods revenue Agency service revenue	7,346,415 6,825,881 5,931,691 2,279,842 2,232,030 2,082,268 1,417,379 1,155,569 3,953,600 2,888,589 1,963,283 2,171,548 2,304,446 2,437,078 2,485,847 1,746,376 949,041 1,228,814 1,454,843 1,587,830 1,608,792 1,306,245 1,245,022 1,260,448
Total operating expenses	12,249,056 10,943,284 9,349,817 6,039,220 6,145,268 5,825,591 5,148,248 4,162,393 13,002,955 11,281,785 10,027,142 6,175,336 9,556,085 4,877,042 4,262,702 3,972,040
Operating income/(loss) Other income/(expenses)	(753,899) (338,501) (677,325) (136,116) (3,410,817) 948,549 885,546 190,353 5,062,998 2,538,326 (497,950) 1,661,681 1,958,295 302,963 281,326 63,668
Income/(loss) before taxes Income tax expense (recovery):	4,309,099 (2,876,827) (179,375) (1,797,797) (5,369,112) 645,586 604,220 126,685 183,071 110,144 44,628 (39,821) 99,991 239,981 96,524 (12,642)
Net income/(loss) EBITDA(1) EBITDA %(1) ADJUSTED EBITDA(1) ADJUSTED EBITDA %(1)	4,126,028 (2,986,971) (224,003) (1,757,976) (5,469,103) 405,605 507,696 139,327 8,240,074 843,687 3,018,097 492,668 (4,200,197) 1,797,519 1,493,139 927,442 67% 8% 34% 8% (68%) 31% 29% 22% 3,490,740 3,394,242 2,700,081 2,000,974 1,706,264 1,994,711 1,727,065 912,018 28% 31% 30% 33% 28% 34% 34% 22%

Notes:

Reference to “Q1” is to the three-month period ended March 31; Reference to “Q2” is to the three-month period ended June 30; Reference to “Q3” is to the three-month period ended September 30 and reference to “Q4” is to the three-month period ended December 31.

Quarterly results for Q2 and Q3 2020 were adjusted to reflect an immaterial deferral of digital goods revenue over a period of 12 months from the date of sale.
** Quarterly results for Q2 2021 were adjusted to reflect an immaterial deferral of recurring subscription revenue over a period of 12 months from the date of sale.

(1) Non-IFRS measure

Q2 2020 and subsequent quarters include the results of Foursixty Inc., acquired on June 1, 2020.
Other expenses for Q4 2020 includes a one-time listing expense of $1,634,081 relating to the reverse acquisition transaction.
Q2 2021 includes the results of Stamped acquired on April 6, 2021.
Q3 2021 includes the results of Archetype acquired on August 24, 2021.
Q4 2021 includes the fair value adjustments on contingent consideration relating to Stamped, Archetype and Foursixty

OFF-BALANCE SHEET ARRANGEMENTS

As at the date of this MD&A, the Company has not entered into any off-balance sheet arrangements.

CRITICAL ACCOUNTING ESTIMATES

The most significant accounting judgements and estimates that the Company has made in the preparation of the financial statements are described in Note 2(e) with the associated accounting policy in Note 3 to the audited consolidated financial statements for the year ended December 31, 2021.

TRANSACTIONS WITH RELATED PARTIES

The Company had the following balances owing to related parties:

	2021	2020
Payable to TinyManagement Ltd.	613	1,387

Tiny Management Ltd. is controlled by Andrew Wilkinson, a director of the Company.

Excluding key management compensation as disclosed in Note 17 of the Annual Consolidated Financial Statements, there were no additional related party transactions in 2021.

CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION

No new significant standards were adopted in 2021.

FINANCIAL RISK FACTORS

The Company is exposed to a number of risks as a result of holding financial instruments including credit risk, liquidity risk and currency risk.

(i) Credit risk

Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations. The Company manages credit risk on cash by primarily using major Canadian chartered banks for all cash deposits. The cash balance at December 31, 2021 was $26,122,247 (2020: $61,193,367). Credit risk on trade receivables is managed by assessing the credit quality of the counterparty. As at December 31, 2021, the trade and other receivables were within normal repayment terms with the exception of one customer for which the Company has recorded an expected credit loss provision.

(ii) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet the Company’s respective obligations as they come due. Liquidity requirements are managed through frequent monitoring of cash inflows and outflows, preparation of cash flow forecasting and its available credit facilities. The Company expects to finance its operations and cash flows from its current available resources without further support from its shareholders and lenders. However, to the extent that additional cash resources are required due to unforeseen circumstances, the Company anticipates support from its shareholders and lenders, although there can be no guarantees.

(iii) Currency risk

Currency risk is the risk of financial loss due to unfavorable changes in foreign exchange rates. The Company is exposed to currency risk as a result of its financial instruments denominated in US dollars, including cash, bank loan, trade and other receivables, and trade and other payables. At December 31, 2021, the Company’s total exposure to currency risk (stated in Canadian dollars) was $51,664,282 (2020: $4,224,291). The Company uses certain derivative financial instruments, primarily forward foreign exchange contracts, to manage foreign currency exposures. The Company does not use derivative financial instruments for speculative purposes, and they are not designated as hedges. At December

31, 2021, the outstanding forward contracts enable the Company to convert USD $2,002,052 to CAD $2,500,000 up to November 1, 2022 (2020: Outstanding forward contracts enabled the Company to convert USD $1,297,395 to CAD $1,700,000 up to November 24, 2021).

OUTSTANDING SHARE DATA

OUTSTANDING SHARE DATA
	March 28, 2022	December 31, 2021
Share price - closing	8.12	13.34
Market capitalization (in thousands)	333,566	533,644
Outstanding
Shares	41,079,513	39,824,209
Restricted share units	243,682	252,105
Deferred share units	14,000	14,000
Performance share units	190,000	190,000
Options	1,370,637	1,370,637

SUBSEQUENT EVENTS

On March 10, 2022, the Company announced that it had successfully closed the acquisition of all of the outstanding common shares of Kno Technologies Inc. (“KnoCommerce”), a leading ecommerce survey and insights platform provider that enables merchants to capture and act on zero-party data collected directly from customers.

On closing, WeCommerce paid KnoCommerce upfront cash consideration of USD $1,900,000 and USD $200,000 to be held in trust for 180 days. The upfront consideration was funded with cash on hand. WeCommerce will also be required to make earn-out payments (contingent consideration) if KnoCommerce achieves certain revenue targets during the 18 months following the closing date. The contingent consideration is expected to be settled at the Company’s sole discretion, in either cash, the issuance of common shares of WeCommerce, or a combination thereof.

The Company is still in the process of estimating the fair value of the shares purchased, including the the fair value of the contingent consideration. Due to the timing of the acquisition, subsequent to period end, the Company is unable to provide additional information as the accounting for the acquisition is incomplete.

RISK FACTORS

(a) The Company’s acquisition strategy and businesses through its Portfolio Companies are dependent on the Shopify ecosystem and any strain on such reliance could adversely impact its ability to operate.

The Company’s Portfolio Companies principally generate revenues through the sale of solutions to merchants on the Shopify platform. Moreover, WeCommerce’s acquisition strategy targets businesses within the Shopify ecosystem. As a result, WeCommerce’s business and prospects are dependent on the ongoing success of the Shopify ecommerce platform.

The Company’s Portfolio Companies have agreed to the terms of service applicable to Shopify partners and must abide by the terms of its agreements with Shopify. If a Portfolio Company were to breach its agreement with Shopify, it may no longer be permitted to operate on the Shopify platform. In addition, Shopify controls the Shopify partner ecosystem, including the types of products that may be offered on the platform and which businesses may become Shopify partners on the platform. If Shopify were to significantly change or alter the Shopify partner ecommerce ecosystem in a manner adverse to Shopify partners generally, or the Portfolio Companies specifically, this could adversely affect the Company’s business, results of operations and financial condition.

Finally, the business of Shopify is itself subject to a number of risks. For a description of the risk factors Shopify has identified as being relevant to its business, see Shopify’s Annual Information Form dated February 16, 2022, which is available at www.sedar.com. If there was a decline in the use by merchants of the Shopify ecommerce platform, this could adversely affect the Company’s business, results of operations and financial condition.

(b) The Company has previously operated at a net loss throughout its limited operating history, and no assurance can be provided that its proposed business model and growth strategy will be successful and may continue to operate at a net loss.

WeCommerce has a limited business history and in the last year has operated at an operating loss. While members of WeCommerce’s management and the Board have significant expertise within the ecommerce sector, WeCommerce itself has a limited history of operations and there can be no assurance that the business will be successful or profitable or the Company will be able to successfully execute its proposed business model and growth strategy. If the Company is unable to execute its business model and growth strategy, it may have a material adverse effect on the Company’s business, results of operations and financial condition. Further, the Company will therefore be subject to many of the risks common to earlystage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial, and other resources, and limited revenues. There is no assurance that WeCommerce or its Portfolio Companies will be successful in achieving a return on shareholders’ investment and the likelihood of success must be considered in light of the early stage of operations.

(c) The failure to successfully execute and integrate acquisitions could materially adversely affect the Company’s business, results of operations and financial condition.

The Company will be continually pursuing a strategy of organic growth through acquisitions and has acquired multiple businesses, including Stamped Technologies Pte. Ltd in April 2021, Archetype Themes Inc. in August 2021, and most recently Kno Technologies Inc. in March 2022 and it regularly evaluates potential acquisitions. As part of this organic growth, the Company may not be successful in integrating acquisitions or the businesses acquired may not perform as well as expected. While the acquisitions to date have not caused major disruptions to the business, any future failure to manage and successfully integrate acquired businesses could materially adversely affect the business, results of operations, and financial condition. Acquisitions involve numerous risks, including the following:

Difficulties in integrating and managing combined operations, technology platforms, or offerings of the acquired companies and realizing the anticipated economic, operational and other benefits in a timely manner, which could result in substantial costs and delays, and failure to execute on the intended strategy and synergies;
Failure of the acquired businesses to achieve anticipated revenue, earnings, or cash flow;
Diversion of management’s attention or other resources from the existing business;
The Company’s inability to maintain key customers, business relationships, suppliers, and brand potential of acquired businesses;
Uncertainty of entry into businesses or geographies in which the Company has limited or no prior experience or in which competitors have stronger positions;
Unanticipated costs associated with pursuing acquisitions or greater than expected costs in integrating the acquired businesses;
Responsibility for the liabilities of acquired businesses, including those that were not disclosed to us or exceed the Company’s estimates, such as liabilities arising out of the failure to maintain effective data protection and privacy controls, and liabilities arising out of the failure to comply with applicable laws and regulations, including tax laws;
Difficulties in or costs associated with assigning or transferring to the Company’s or its subsidiaries the acquired companies’ intellectual property or its licenses to third-party intellectual property;
Inability to maintain the Company’s culture and values, ethical standards, controls, procedures and policies;
Challenges in integrating the workforce of acquired companies and the potential loss of key employees of the acquired companies;
Challenges in integrating and auditing the financial statements of acquired companies that have not historically prepared financial statements in accordance with IFRS; and
Potential accounting charges to the extent goodwill and intangible assets recorded in connection with an acquisition, such as trademarks, customer relationships, or intellectual property, are later determined to be impaired and written down in value.

In addition, acquisition targets are held privately and the Company may experience difficulty in evaluating such potential target businesses as the information concerning these businesses are not publicly available. An acquisition could also result in a potentially dilutive issuance of equity securities. The failure of the Company to successfully manage its strategy of growth through acquisitions could have a material adverse effect on the Company’s business, results of operations and financial condition.

(d) The Company may be unable to successfully fund future acquisitions of new businesses due to the lack of availability of additional debt or equity financing at the Company level on acceptable terms, which could impede the implementation of its continued growth strategy.

In order to execute the Company’s continued growth strategy post Amalgamation, it will require additional equity and/or debt financing in order to undertake acquisitions or other business combination transactions. Since the timing and size of acquisitions cannot be readily predicted, the Company may need to be able to obtain funding on short notice to benefit fully from attractive acquisition opportunities. Such funding may not be available on commercially acceptable terms. In addition, the level of indebtedness may impact the Company’s ability to borrow at the Company level and/or increase its debt levels that exceed industry standards. Another source of capital may be raised through further issuances of equity or convertible debt securities, in which case, existing shareholders could suffer significant dilution, and any new equity securities issued could have rights, preferences, and privileges superior to those of the Company’s shareholders. These risks may materially adversely affect the Company’s financial condition, business and results of operations.

(e) The Company is dependent upon its officers, directors, management and key employees and their loss could adversely affect the Company’s ability to operate.

The Company’s success is highly dependent on the retention of key personnel both within the Company level and within its Portfolio Companies. The availability of persons with the necessary skills to execute the business strategy of the Company or a particular Portfolio Company is very limited and competition for such persons is intense. As the Company’s business activity grows, additional key financial and administrative personnel, as well as additional staff, may be required. Although the Company believes that it will be successful in attracting, training and retaining qualified personnel, there can be no assurance of such success. If the Company is unsuccessful in attracting, training and retaining qualified personnel, the efficiency of operations may be affected. In addition, if any of its executive officers, directors or key employees join a competitor or form a competing company, the Company may lose know-how, key professionals and staff members as well as partners.

The Company does not maintain any key person insurance on the life of any of its directors, officers or key personnel. The unexpected loss of the services of one or more of its directors or officers could have a detrimental effect on us.

(f) The Company’s officers and directors may allocate their time to other businesses, which may raise potential conflicts of interest as to how much time to devote to its affairs.

The Company may be subject to various potential conflicts of interest because some of its officers, directors and consultants may be engaged in a range of business activities, including certain officers, directors and consultants that provide services to other companies involved in ecommerce. The Company’s executive officers, directors and consultants may devote time to their outside business interests, so long as such activities do not materially or adversely interfere with their duties to the Company. In some cases, the Company’s executive officers, directors and consultants may have fiduciary obligations associated with these business interests that interfere with their ability to devote time to the Company’s business and affairs and that could adversely affect the Company’s operations. These business interests could require significant time and attention of the Company’s executive officers, directors and consultants. In addition, the Company may also become involved in other transactions which conflict with the interests of its directors, officers and consultants who may from time-to-time deal with persons, firms, institutions, or corporations with which the Company may be dealing, or which may be seeking investments similar to those desired by it. The interests of these persons could conflict with those of the Company. In addition, from time to time, these persons may be competing with the Company or a Portfolio Company for available

investment opportunities. Conflicts of interest, if any, will be subject to the procedures and remedies provided under applicable laws. In particular, in the event that such a conflict of interest arises at a meeting of the Company’s directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In accordance with applicable laws, the directors of the Company are required to act honestly, in good faith and in the best interests of the Company.

(g) If the Company is unable to maintain its obligations under its Credit Facilities, it may suffer adverse consequences impacting its liquidity.

The Company has Credit Facilities which require the Company to make certain interest payments, provide a first-ranking security interest over all of its assets and contain a number of covenants that impose significant operating and financial restrictions, which may limit the Company’s ability to engage in acts that may be in its long-term best interest. If the Company’s cash flows and cash and cash equivalents are insufficient to fund its debt service obligations, including repayment or renewal of the Credit Facilities at the end of each of their term, the Company could face liquidity problems and could be forced to seek amendments to the Credit Facilities, or reduce or delay investments and capital expenditures, dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance the Company’s indebtedness, including the Credit Facilities. The Company may not be able to affect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternatives may not allow the Company to meet its scheduled debt service obligations. There can be no certainty that the Company will be able to repay or renew the Credit Facilities at maturity and the failure to do so would have a material adverse effect on the Company.

In addition, a breach of the covenants under the Credit Facilities could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross acceleration or cross default provision applies. In the event the lender accelerates the repayment of the Company’s borrowings, the Company may not have sufficient assets to repay its indebtedness. The security interests provided by the Company under the Credit Facilities may adversely affect the Company’s ability to secure other types of financing. As a result of the security interests granted to JPMorgan Chase Bank, any default under the Credit Facilities, including any covenants thereunder, could result in the loss of the Company’s entire interest in its material assets.

(h) The return on your investment in WeCommerce’s Common Shares is uncertain and you may not realize the expected returns, given the volatility in certain securities markets in North America.

In recent years, the securities markets in the United States and Canada have experienced a high level of price and volume volatility, and the market prices of securities of many companies have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that continuing fluctuations in price will not occur. It may be anticipated that any quoted market for the Company’s Common Shares will be subject to market trends generally, notwithstanding any potential success of the Company in creating revenues, cash flows or earnings. The value of the Company’s Common Shares will be affected by such volatility. If an active public market for the Company Common Shares does not develop, the liquidity of a shareholder’s investment may be limited, and the share price may decline.

There can be no assurance that the publicly traded market price of the Company’s Common Shares will be high enough to create a positive return for the existing investors. Further, there can be no assurance that the Company Common Shares will be sufficiently liquid to permit investors to sell their position in the Company without adversely affecting the stock price. In such event, the probability of resale of the Company’s Common Shares would be diminished.

(i) Global Financial Conditions

Current global financial conditions have been subject to increased volatility and access to financial markets may become severely restricted. These factors may impact the ability of the Company to obtain equity or debt financing in the future and, if obtained, on terms favourable to the Company. Increased levels of

volatility and market turmoil could adversely impact the Company’s operations and the value and the price of the Company’s Common Shares could also be adversely affected.

Adverse changes in the economy could negatively impact the Company’s business. Future economic distress may result in a decrease in demand for products, which could have a material adverse impact on the Company’s operating results and financial condition. Uncertainty and adverse changes in the economy could also increase costs associated with developing and publishing products, increase the cost and decrease the availability of sources of financing, and increase the Company’s exposure to material losses from bad debts, any of which could have a material adverse impact on the financial condition and operating results of the Company.

(j) The Company’s Portfolio Companies are subject to certain risks associated with their foreign operations or business they conduct in foreign jurisdictions.

Due to WeCommerce’s present operations through its Portfolio Companies, and the intention to have future operations in jurisdictions outside Canada, the Company is expected to be exposed to certain risks, including exposure to local economic conditions; difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; longer payment cycles for foreign customers; adverse currency exchange controls; exposure to risks associated with changes in foreign exchange rates; potential adverse changes in political environments; withholding taxes and restrictions on the withdrawal of foreign investments and earnings; export and import restrictions; difficulties in enforcing intellectual property rights; and required compliance with a variety of foreign laws and regulations. One of the significant risks to highlight surrounds currency fluctuations.

Recent events in the global financial markets coupled with increased volatility in the currency markets, fluctuations in the exchange rate between the CAD dollar, US dollar and other currencies, may have a material adverse effect on the Company’s business, financial condition and operating results. The Company may, expand operations globally so it may be subject to additional gains and losses against additional currencies. WeCommerce does not currently have a foreign exchange hedging program in place. In the future, the Company may establish a program to hedge a portion of its foreign currency exposure with the objective of minimizing the impact of adverse foreign currency exchange movements. However, even if the Company develops a hedging program, it may not hedge its entire exposure to any one foreign currency and it may not hedge its exposure at all with respect to certain foreign currencies.

(k) WeCommerce’s rate of growth may not be sustainable and will depend on various factors, including the Portfolio Companies ability to attract new customers, retain revenue from existing merchants and increase sales to both new and existing customers.

The growth of WeCommerce’s operations has placed significant demands on managerial, financial and human resources. WeCommerce’s ability to continue its rate of growth will depend on a number of factors, including the availability of capital, existing and emerging competition and the ability to recruit and train additional qualified personnel. Moreover, as the Company’s business grows, the Company will need to devote additional resources to improving its operational infrastructure and continuing to enhance its scalability in order to maintain the performance of its business.

The Portfolio Companies principally generate revenues through the sale of solutions to merchants on the Shopify platform. The Portfolio Companies’ customers have no obligation to renew their subscriptions after their subscription term expires. As a result, even though the number of merchants using a Portfolio Company’s solutions may have grown, there can be no assurance that such Portfolio Company will be able to retain these customers. Many customers of the Portfolio Companies are in the entrepreneurial stage of their development and there is no guarantee that their businesses will succeed. New customers utilizing the Company’s Portfolio Companies services may also decide not to continue or renew their subscription for reasons outside of its control.

(l) If the Portfolio Companies are unable to attract new customers or sell additional products to existing customers, the corresponding impact to the Company’s revenue growth and profitability will be adversely affected.

To increase revenue and achieve and maintain profitability, the Portfolio Companies must regularly add new customers or sell additional solutions to existing customers. Numerous factors, however, may impede the ability to add new customers and sell additional solutions to existing customers, including the inability to convert companies that have been referred to them by the Company’s existing network into paying customers, failure to attract and effectively train new sales and marketing personnel, failure to retain and motivate current sales and marketing personnel, failure to develop relationships with partners or resellers and/or failure to ensure the effectiveness of its marketing programs, failure to offer high quality products and services at competitive prices. In addition, if prospective customers do not perceive that its solutions are of sufficiently high value and quality, the Company may not be able to attract the number and types of new customers that the Portfolio Companies are seeking.

(m) WeCommerce relies significantly on the recurring revenues generated by the Portfolio Companies, and if recurring revenue declines or contracts are not renewed, the impact to the Company’s future results of operations could be harmed.

In order for the Company to improve operating results, it is important that customers renew their agreements when their subscription terms expire with the Portfolio Companies. These customers have no obligation to renew their subscriptions after a subscription term. The Company’s businesses cannot guarantee customers will renew their subscriptions at the same or higher levels of service, or at all.

Sales of new or recurring subscriptions and software-related support service contracts and renewals after expiration of the contractual term may decline or fluctuate as a result of a number of factors, including end customers’ level of satisfaction with its software solutions; the price, performance and functionality of their software solutions; the availability, price, performance and functionality of products and services offered by their competitors; or changes in customers’ operations including reductions in their overall spending levels. If sales of new or recurring subscriptions and software related support service contracts decline, the Company’s overall revenue and revenue growth may decline.

(n) The growth of ecommerce and fierce competition within this industry will continually intensify and any missteps along the way may adversely impact its businesses and financial condition.

The Company’s businesses will face competition and new competitors will continue to emerge throughout the world. Services to be offered by competitors of the businesses may take a larger market share than anticipated, which could cause the Company’s performance to fall below expectations. It is expected that competition in the ecommerce environment will intensify. If competitors of the Company’s businesses develop and market more successful products or services, offer competitive products or services at lower price points, or if the Company’s businesses do not produce consistently high-quality and well-received products and services, revenues, margins, and profitability of the Company will decline.

(o) Any actual or perceived failure to protect confidential information against security attacks and privacy breaches could damage the Company’s reputation and substantially harm its business and results of operations.

Security and privacy breaches could delay or interrupt service to the Company’s customers, harm its reputation or subject the Company to significant liability and adversely affect business and financial results. The Company’s ability to retain customers and attract new customers could be adversely affected by an actual or perceived breach of security or privacy relating to customer information. Certain of the Company’s operations involve the storage and transmission of confidential information of customers and security breaches could expose the Company to a risk of loss of this information, litigation, indemnity obligations and other liability. If security measures are breached as a result of third-party action, employee error, malfeasance or otherwise, and, as a result, someone obtains unauthorized access to the Company’s customers’ data, including personally identifiable information regarding users, damage to its reputation is likely, the Company’s businesses may suffer, and significant liability could be incurred. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, the Company may be unable to prevent these techniques or to implement adequate preventative measures.

The Company has implemented technical, organizational, and physical security measures, including employee training, backup systems, monitoring and testing and maintenance of protective systems and contingency plans, to protect and to prevent unauthorized access to confidential information of the Company’s customers and to reduce the likelihood of disruptions to its systems.

Despite these measures, the Company’s information systems, including back-up systems and any third party service provider systems that it employs, are vulnerable to damage, interruption, disability or failure due to a variety of reasons, including physical theft, electronic theft, fire, power loss, computer and telecommunication failures or other catastrophic events, as well as from internal and external security breaches, denial of service attacks, viruses, worms and other known or unknown disruptive events. The Company or its third-party service providers may be unable to anticipate, timely identify or appropriately respond to one or more of the rapidly evolving and increasingly sophisticated means by which computer hackers, cyber terrorists and others may attempt to breach its security measures or those of its third-party service providers’ information systems.

If a breach of a Portfolio Company’s security measures occurs, the market perception of their effectiveness could be harmed, and the corresponding effect could mean loss of potential sales and existing customers. Furthermore, a security breach affecting a competitor or any other company that provides hosting services or delivers applications under a SaaS model, even if no confidential information is compromised, such market perception of security measures could diminish potential sales and existing customers could nonetheless still be lost. Any remedial costs or other liabilities related to any security or privacy incident may not be fully insured or indemnified by other means.

(p) The Company and its Portfolio Companies are subject to laws and regulations concerning the collection, processing, storage, sharing, disclosure and use of customer information and other sensitive data, and our actual or perceived failure to comply with data privacy and security laws and regulations could damage the reputation and brand and adversely impact the operating results.

The Company and its Portfolio Companies are subject to various laws and regulations covering the privacy and protection of users’ data. Because the Portfolio Companies may handle, collect, store, receive, transmit, transfer, and otherwise process certain information, which may include personal information, regarding its customers or its customers’ users and employees in the ordinary course of business, WeCommerce and its Portfolio Companies may be subject to federal, state and foreign laws related to the privacy and protection of such data. These laws and regulations, and their application to our operating businesses, are increasingly shifting and expanding. Compliance with these laws and regulations could affect our business, and their potential impact is unknown. Any actual or perceived failure to comply with these laws and regulations may result in investigations, claims and proceedings, regulatory fines or penalties, damages for breach of contract, or orders that require us to change our business practices, including the way data is processed.

The Portfolio Companies may also be subject to breach notification laws in the jurisdictions in which they operate and may be subject to litigation and regulatory enforcement actions as a result of any data breach or other unauthorized access to or acquisition or loss of personal information. Any significant change to applicable laws, regulations, interpretations of laws or regulations, or market practices, regarding the processing of personal data, or regarding the manner in which the Portfolio Companies may seek to comply with applicable laws and regulations, could require the impacted Portfolio Companies to make modifications to its products, services, policies, procedures, notices, and business practices, including potentially material changes. Such changes could potentially have an adverse impact on the business.

(q) The Company’s businesses rely on their intellectual property and may rely on licenses to use others’ intellectual property, and if its businesses are unable to protect the intellectual property, are unable to obtain or retain licenses of other intellectual property, or if they may infringe upon or are alleged to have infringed upon on other intellectual property, it could have a material adverse effect on its financial condition, business and results of operations.

Each businesses’ success depends in part on their ability to secure intellectual property rights for its ongoing operations and future opportunities. The steps taken to protect such intellectual property rights

may not prevent third parties from using their intellectual property and other proprietary information without their authorization or independently developing intellectual property and other proprietary information that is similar. In addition, there is no assurance, that the Company’s rights will not be challenged, invalidated or circumvented. Further, the laws of certain countries may not protect proprietary rights effectively or to the same extent as the laws of the United States and Canada, and therefore there can be no assurance that the Company will be able to adequately protect its proprietary technology against unauthorized third party copying or use. Such unauthorized copying or use may adversely affect its competitive position. Further, there can be no assurance that the Company will successfully obtain licenses to any technology that may be required to conduct business or that, if obtainable, such technology can be licensed at a reasonable cost.

Stopping unauthorized use of their proprietary information and intellectual property and defending claims that they have made unauthorized use of others’ proprietary information or intellectual property, may be difficult, time-consuming and costly. The unauthorized use of its intellectual property and other proprietary information by others could reduce or eliminate any competitive advantage its businesses have developed or may cause them to lose sales or otherwise harm its business.

The Company’s businesses may become involved in legal proceedings and claims in the future either to protect their intellectual property or to defend allegations that they have infringed upon others’ intellectual property rights. Responding to any such claim, regardless of its merit, may be time-consuming, result in costly litigation, divert management’s attention and resources and cause the Company to incur significant expenses. Any meritorious claim of intellectual property infringement against the Company may potentially result in a temporary or permanent injunction, prohibiting it from marketing or selling certain products or requiring it to pay royalties to a third party. In the event of a meritorious claim or the inability of the Company to develop or license substitute technology, its business and results of operations may be materially adversely affected.

(r) Commerce is increasingly digital with mobile device transactions and if the Company’s business products or solutions are unable to integrate properly with the rapid technological changes, its business strategy and long-term development may be harmed.

Commerce transacted over mobile devices continues to grow more rapidly than desktop transactions. The Portfolio Companies are dependent on the interoperability of their solutions with third-party mobile devices and mobile operating systems as well as web browsers that are outside of the Company’s control. Any changes in such devices, systems or web browsers that degrade the functionality of its platform or give preferential treatment to competitive services could adversely affect usage of its platform. Mobile commerce is a key element in WeCommerce’s strategy and effective mobile functionality is integral to its long-term development and growth strategy. In the event that merchants and their buyers have difficulty accessing and using its platform on mobile devices, its business and operating results could be adversely affected.

(s) If the Company fails to maintain an effective system of internal controls over financial reporting, it may not be able to accurately report the Company’s financial results or prevent fraud, which in turn could lose shareholder confidence in its financial and other public reporting and adversely impact its business and the trading price of its shares.

Effective internal controls over financial reporting are necessary to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure of the Company’s internal controls could have an adverse effect on stated results of operations and increase legal, regulatory, and reputational risks. As a result, the Company may experience higher than anticipated operating expenses, as well as higher independent auditor fees during and after the implementation of these ongoing changes. If the Company is unable to implement any required changes to its internal control over financial reporting effectively or efficiently or is required to do so earlier than anticipated, it could adversely affect the Company’s operations, financial reporting and results of operations. If the Company fails to maintain an effective system of disclosure controls and internal control over financial reporting, its ability to produce timely and accurate financial statements or comply with applicable regulations could be adversely impacted.

(t) One of the Company’s Portfolio Companies, Foursixty significantly relies on the Instagram Platform and any breach on its agreement could adversely impact its operations and the Company’s business.

Foursixty has agreed to the terms of service applicable to Instagram marketing partners and must abide by the terms of its agreements with Instagram. If Foursixty were to breach its agreement with Instagram, it may no longer be permitted to operate on the Instagram platform which could have a detrimental effect to its operations. In addition, Instagram controls the Instagram marketing partner ecosystem, including the types of products that may be offered on the platform. If Instagram were to significantly change or alter the Instagram marketing partner ecommerce ecosystem in a manner adverse to Foursixty, this could in turn, adversely affect the Company’s business, results of operations and financial condition.

(u) Tax Risk

The Company will be considered to have been carrying on business in Canada for purposes of the Income Tax Act (Canada) (the “ Tax Act ”). However, the Company is operating in a new and developing industry that has had historically low regulations and tax compliance. There is risk that foreign governments may look to increase their tax revenues or levy additional taxes. While WeCommerce does not foresee any adverse tax effects, there is no guarantee that governments will not impose such additional adverse taxes in the future.

(v) Declines in ecommerce utilization generally, including as a result of the recovery of brick-and-mortar sales following the COVID-19 pandemic, could have a material adverse effect on the Company’s business, financial condition and the results of operations.

The Company’s Portfolio Companies are heavily reliant on the Shopify e-commerce platforms to merchants and from merchants’ utilization of themes, apps and customized solutions. Any decline in ecommerce utilization could adversely affect the business. There are a variety of factors that could lead to a decrease in e-commerce utilization, including general macroeconomic trends, changes in government regulation, users’ access to the internet, user preference, actual or perceived online security concerns or the effects of widespread health epidemics. For example, as a result of restrictions on brick-and-mortar businesses related to the outbreak of the COVID-19 pandemic, ecommerce sales increased significantly in 2020. As these COVID-19 restrictions are lifted and brick-and-mortar sales recover, ecommerce utilization may decline, which could have a material adverse effect on its business, financial condition and results of operations.