TruTrace Technologies Inc. — Management Reports 2021

Aug 26, 2021

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Management Discussion & Analysis

For the years ended April 30, 2021 and April 30, 2020 TruTrace Technologies Inc.

The following management discussion and analysis (MD&A) of the financial condition and results of operations is intended to help the reader understand the current and prospective financial position and operating results of TruTrace Technologies Inc. (the “Company” or “TruTrace”). This MD&A is current to August 25, 2021 and should be read in conjunction with the audited annual consolidated financial statements of TruTrace Technologies Inc., and the notes thereto, for the years ended April 30, 2021 and April 30, 2020, prepared in accordance with International Financial Reporting Standards (IFRS).

All financial information is presented in Canadian dollars, except where otherwise indicated.

Additional information is available on TruTrace’s website (trutrace.co) and all previous public filings are available through SEDAR (www.sedar.com).

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FORWARD-LOOKING STATEMENTS

The MD&A contains certain forward-looking statements relating to the Company’s plans, strategies, objectives, expectations and intentions. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “objective”, “ongoing”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends”, “confident”, “might” and similar expressions are intended to identify forward - looking information or statements. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this MD&A. The forward-looking information and statements included in this MD&A are not guarantees of future performance and should not be unduly relied upon. Forward-looking statements are based on current expectations, estimates, and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated and described in the forward-looking statements. Such information and statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated in such forwardlooking information or statements. In particular, but without limiting the foregoing, this MD&A may contain forward-looking information and statements pertaining to the fluctuations in the demand for the Company’s services; the ability for the Company to attract and retain qualified personnel; the existence of competitors; technological changes and developments; assumptions regarding foreign currency exchange rates and interest rates; the existence of regulatory and legislative uncertainties; the possibility of changes in tax laws and general economic conditions including the capital and credit markets; assumptions made about future performance and operations. The Company cautions that the foregoing list of assumptions, risks, and uncertainties is not exhaustive. The forward-looking information and statements contained in this MD&A speak only as of the date of this MD&A and the Company assumes no obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable securities laws.

NON-IFRS FINANCIAL MEASURES

Throughout this document, reference may be made to “working capital”, “EBITDA” and “adjusted EBITDA”, which are all non-IFRS measures. Management believes that working capital, defined as current assets less current liabilities, is an indicator of the Company’s liquidity and its ability to meet its current obligations. Management believes EBITDA provides an indication of the results generated by the Company’s principal business activities prior to how these activities are financed, assets are depreciated and amortized or how the results are taxed in various jurisdictions and further believes that Adjusted EBITDA, which normalize earnings to exclude certain amounts, is a useful measure for comparing results from one period to another. Readers are cautioned that these non-IFRS measures may not be comparable to similar measures used by other companies. Readers are also cautioned not to view these non-IFRS financial measures as an alternative to financial measures calculated in accordance with International Financial Reporting Standards (“IFRS”).

MARKET PROFILE AND INFORMATION

TruTrace Technologies Inc., headquartered in Toronto, ON, Canada, is a full-service technology company that has developed a fully integrated software platform, secured on a blockchain infrastructure that gives clients the ability to store, manage, share and immediately access quality assurance and testing details, Certificates of Authenticity (“CoA”), as well as motion and movement intelligence on inventory from batches and lots to serialized items.

The Company’s initial focus was in the legal cannabis industry with the deployment of their platform under the branded name StrainSecure™ which was designed to register and track cannabis intellectual property (“IP”) from genome to sale. StrainSecure™ records are proprietary, immutable, and cryptographically secure, thereby establishing, in a single source, an accurate, validated, and permanent account for cannabis strains from ownership to market.

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As global business continues to expand, the complexity throughout the supply chain has created unique challenges and opportunities for companies that can better support a safe, consistent and transparent product ecosystem.

As products are cultivated, processed, manufactured, packaged and brought to retail shelves, stakeholders are looking at new methods to power dynamic and collaborative product testing, quality assurance and tracking to ensure safety and authenticity.

TruTrace specifically addresses these unique challenges, including:

• Quality Testing: TruTrace’s software platform, in collaboration with the Company’s network of laboratory partners, provides an efficient and streamlined process for both mandatory and cGMP (Current Good Manufacturing Practice) based testing, including reducing administrative burdens associated with the contaminant/microbial, chemistry and pesticide testing process in order to help get products safely to market faster;

• Robust Collaboration and Interoperability : The TruTrace software—includes a robust collaboration and networking suite which gives users the ability to interact and engage with customers and partners as on details of batches/lots of product in real time. Whether relating to mandatory testing, or meeting the needs of commercial standards, this smart-hub of information supports a transparent and highly usable framework for managing the quality of products.

• DNA-Based Product Validation and Actionable Quality Assurance: The underlying blockchain technology used by TruTrace creates a genetic based registry and corresponding genetic fingerprint for electronic product identification, validation, and quality assurance to enable any participant on the platform, from regulators, producers, participants throughout the entire supply chain (if desired or required), to patients and consumers, with the ability to view and track the product from Genome to Sale™; and

• Intellectual Property Registration and Support: TruTrace Software as a Service (SaaS) platforms protects the unique intellectual property of growers, breeders and manufacturers. For instance, currently there is a limited legal framework for the issuance of patent protection of unique cannabis strains in either Canada or the United States. However, some form of intellectual property protection is important for the industry’s growth as products evolve and develop. Through the implementation of StrainSecure™, TruTrace aims to help provide this protection. For example, if a craft grower creates a popular strain with unique characteristics, the platform will enable intellectual property protection through simple registration of the strain’s genome within StrainSecure™, thereby locking that data into an immutable decentralized ledger. The resulting permanent record will be readily accessible in the event of future disputes, thus bringing a level of trust to the industry and ensuring associated fees are paid to all applicable parties in the market.

TruTrace’s leadership team combines decades of extensive experience across multiple industries, with specific expertise across corporate management, business development, advertising, information technology, including custom enterprise-based software, supply chain, legal and finance. The team’s extensive combined experience, specific expertise in the blockchain sector and its development of the most comprehensive, secure and community-driven product archival platform positions TruTrace for growing opportunities in a number of industry verticals.

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CORPORATE PROFILE

Organization

TruTrace was incorporated under the British Columbia Business Companies Act on October 19, 2011 and is listed on the Canadian Securities Exchange “CSE”, under the trading symbol “TTT’’. The head office and the records and registered office is located at 61 Regal Road, Toronto, ON, M6H 2J6.

TruTrace Technologies Inc. is a full-service software company that has developed a fully integrated software platform, secured on a blockchain infrastructure that gives clients the ability to store, manage, share and immediately access quality assurance and testing details, Certificates of Authenticity (“CoA”), as well as motion and movement intelligence on inventory from batches and lots to serialized item.

On May 17, 2018, the Company completed its Qualifying Transaction, pursuant to which it acquired all of the issued and outstanding shares of BLOCKStrain Technology Group Inc. (“PrivCo”), a private company incorporated on November 22, 2017, under the laws of British Columbia.

The Company changed its name from “BLOCKStrain Technology Corp.” to “TruTrace Technologies Inc.” on April 26, 2019.

Operations

TruTrace’s initial commercial deployment was StrainSecure™, a fully integrated blockchain platform which registers and tracks intellectual property and mandatory testing data for the cannabis industry, and is dedicated to making it safe and conformable for breeders and growers, large and small, to protect and release their genetics, strain varieties, and validated testing results into the public domain. TruTrace’s StrainSecure™ technology tracks the product at every testing point, from Genome to Sale™, so customers can make much more informed decisions about the products they choose, medical practitioners and patients can rely on standardized and verified medicine and suppliers can implement actionable quality assurance. The TruTrace registry and verification system gives producers, regulators, patients and customers everything they need to know, helping support safe and informed choices about all of the cannabis products placed into the supply chain.

TruTrace’s modern blockchain-technology aims to bridge the traditional medical and consumer packaged goods markets with the emerging legal cannabis industry. By being open and available to everyone, the platform is expected to help shape the future adoption and authenticity of the industry itself. Through use of a secure API network, TruTrace will make it easy for testing providers, grow facilities, app and software developers, medical practitioners, pharmacies, research groups, and major supply chain platforms to build applications and solutions, thereby helping fuel technology and innovation for the cannabis industry as a whole.

With compliance and regulation being a critical priority for industry participants, TruTrace is also focused on implementing StrainSecure™ as a method to ensure that applicable regulatory standards are adhered to, while

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providing real-time visibility of industry operations directly to, and collaboration with, agencies assigned to enforce and regulate cannabis activity nationwide. TruTrace uses powerful supply chain and IoT (“Internet of Things”) technology to allow for the tracking of cannabis movement from genetics to sale, while providing for the scalability of what is expected to become a globally traded product.

On February 12, 2021, the Company closed an oversubscribed non-brokered private placement of 30,000,000 units at a price of $0.05 per unit for gross proceeds of CAD $1,500,000 to advance the Company’s long term international strategy of providing blockchain secured and standardized processes for the management of testing and quality data of medical products, as well as general working capital. Management believes this oversubscribed capital raise indicates a significant interest in the importance of quality and traceability in the emerging global sector, which could have a positive financial impact on the Company.

On March 1, 2021, the Company announced the completion of a Letter of Intent with Georgia-based PharmaCentra LLC—through its subsidiary Cannabis BPO—to support a clinical trial ecosystem built on standardized protocols and testing of cannabis products for use in the medical industry. Management believes that the companies will soon be able to finalize a definitive agreement, which gives them the ability to offer a robust solution for the medical cannabis industry in Canada and the United States, which could thereby have a positive financial impact on the Company.

FINANCIAL AND OPERATION HIGHLIGHTS

		Year ended April 30,	Year ended
		2021	April 30, 2020
Revenue $	-	162,500	402,679
Adjusted EBITDA		(1,265,810)	(4,047,237)
EBITDA		(1,515,129)	(4,614,348)
Net and Comprehensive loss$		(1,620,895)	(4,639,182)
Revenue

• The Company’s proprietary software was built to enable TruTrace to serve as a full-service technology solution provider highlighted by a fully integrated blockchain platform that registers and tracks the quality of products throughout the supply chain, including within the legal cannabis industry from genome to sale. The product-based registry is proprietary, immutable, and cryptographically secure, thereby establishing, in a single source, an accurate, validated, and permanent account from ownership to market.

• Monetization of TruTrace’s suite of products includes, but is not limited to:

• ❖ Monthly SaaS Usage Fees

• ❖ Product Verification Fees ❖ Custom Development

• Third Party Publishing Licensing Fees

• The Company began generating revenue in the later part of the year ended April 30, 2019.

Earnings and net earnings

The Company’s loss was $1,620,895 for the year ended April 30,2021 compared to $4,639,182 for the year ended April 30, 2020. The larger loss in 2020 compared to 2021 was a result of high start-up and development costs not subsequently incurred.

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OUTLOOK AND GUIDANCE

This Outlook and Guidance contains forward-looking statements that the Company does not intend, and does not assume any obligation, to update, except as required by law. The forward-looking information and statements include:

• The current economic climate and its effect on the Company’s client base business;

• The Company’s ability to successfully acquire new customers;

• The Company’s ability to successfully implement its technology; and

• Management’s assumptions regarding the sustainability of recurring revenue streams and the Company’s expected profitability.

Business Overview

With the launch of the StrainSecure™ platform, TruTrace offers an easily integrated blockchain solution that tracks cannabis from Genome to Sale™ throughout the supply chain and provides actionable quality assurance and real-time testing data to the cannabis industry. In addition, the Company also released their TruTrace Enterprise™ SaaS platform, which was specifically designed to power the traceability of testing standards within the nutraceutical, food and pharmaceutical space with a focus on the authentication of source materials or ingredients used in formulation.

The Company’s StrainSecure™ platform will play a key role in the cannabis industry, servicing both licensed producers and micro cultivators alike. This will be done through the continued development of the Company’s technology, as well as through strategic partnerships with key players in the marketplace and how they will work with TruTrace moving forward.

TruTrace has developed a comprehensive verification system for required tests including: contaminant/microbial, chemistry and pesticide, and genetics tests for product verification, as well as a supply chain management platform that ensures transparency and quality assurance between all stakeholders. The Company wants to empower producers, manufacturers, distributors, medical practitioners, regulators and consumers with information regarding what truly is in their product.

The Company has been able to mirror its technology on the front end from an automation point of view, embedding it within laboratories that are conducting contaminant/microbial, chemistry, pesticide and genetic testing. As such, we have essentially digitized all aspects of the testing process, a crucial point for the integrity of the cannabis industry.

TruTrace’s goal within the legal cannabis industry is to build a framework for licensed producers (“LPs”) as well as micro cultivators that are entering the newly legalized ecosystem, helping them to easily and inexpensively move their products through testing procedures. TruTrace then places that testing data on the blockchain for immutability and intellectual property protection and feeds that information through the ecosystem for full visibility into the supply chain. The resulting outcome is a trustworthy source of product and inventory data that can be used to support anything from clinical trials to medical efficacy studies, as well as providing regulators, medical practitioners, patients and even retail consumers a much-desired level of actionable intelligence. With TruTrace, all parties can see whether a product is clean, safe, pesticide-free and truly is what it claims to be.

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RESULTS OF OPERATIONS

Revenue

TruTrace generates revenue in three principal areas:

Software as a Service (“SaaS”) / Manufacturer – The StrainSecure™ and TruTrace Enterprise™ platforms are SaaS offerings for provincially and federally licensed businesses, as well as manufacturers or distributors with an aim to provide collaborative and transparent data on the quality of their products. The StrainSecure™ platform is a blockchain enabled quality assurance, testing and inventory management system that integrates into third party ERP (Enterprise Resource Planning) compliance systems within the legal cannabis industry and serves as an interoperable smart-hub relating to the provenance and quality of cannabis. The system has modules specifically designed for various members of the value chain in cannabis and although it was designed for cannabis, has applications in several other industries. Similarly, the TruTrace Enterprise™ platform is a blockchain enabled quality assurance, testing and inventory management system that integrates into third party ERP compliance systems within traditional industries to serve as an interoperable smart-hub regarding the standardization and quality of products throughout the supply chain. In 2021, the company began working on a new iteration of StrainSecure™ (v2.0) and TruTrace Enterprise (v2.0) with enhanced automation, usability and seamless onboarding, as well as focusing on providing the following benefits to customers:

Real-Time Collaboration Amongst Stakeholders

Streamlining processes and providing greater visibility to stakeholders with notifications, in-app messaging and email alerts providing dynamic test results to provide collaboration at various levels of the supply chain.

Detailed Management of Inventory

No more data wrangling or inefficiencies as inventory is managed digitally from one central location. TruTrace Enterprise™ and StrainSecure™ can be used as stand-alone inventory systems or connect to existing platforms.

Recall Prevention and Management

The software includes dynamic and blockchain-secured management tools to both help prevent recalls and ensure a quick and comprehensive response if a recall is required. With TruTrace, everyone in the supply chain gets notified, increasing awareness and saving millions in potentially destroyed product.

Rapidly Meet Compliance Standards

TruTrace Enterprise™ and StrainSecure™ help stakeholders manage and validate all documentation required throughout the distribution process. Manufacturers can collaborate with laboratories, partners, regulators and standards review boards via the platform activity log and collaboration tool. Parties are notified when documents have been satisfactorily submitted and ensures all documents are safely stored in one place.

Interoperability

The supply chain is complicated. From Enterprise Resource Planning (EPR) to Warehouse Management (WMS), the manufacturing supply chain includes a vast array of players and service providers. With TruTrace’s secure API network, the process is simplified by connecting the software into legacy systems of clients and serving as a communications hub for all parties. TruTrace supports the billions of data points on the logistics supply chain to ensure higher quality together.

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Ability to Easily Integrate Blockchain and Internet of Things (IoT)

TruTrace led the charge in bringing blockchain and artificial intelligence to the emerging cannabis industry. Furthermore, as complex global markets continue to expand, the technology is provisioned to easily provide a client with blockchain and IoT capabilities.

Software as a Service / Laboratories – The StrainSecure™ and TruTrace Enterprise™ platforms also serve as complementary SaaS systems for analytical and genetic laboratories and testing bodies. These platforms empower current processes and systems, such as a partner’s LIMS (Laboratory Information Management Systems) and other internal operations.

Software Development and Professional Service Fees – TruTrace also provides custom development and consulting services to industry stakeholders with an aim to support an open and collaborative infrastructure of companies required to provide a transparent and reliable supply chain. Our team works with clients to determine administrative inefficiencies and designs custom tools to fit their needs. Our management team and key personnel have broad experience in enterprise software development. We provide project-specific services to clients based upon their needs.

Transactional Verification and Traceability – The verification, validation and traceability of inventory within each platform are offered on a batch-by-batch or lot-by-lot basis as we secure and manage product data through a robust blockchain enabled system and serve as an interoperable layer in the testing and validation of product.

The following table highlights the financial information for the past three years.

DESCRIPTION	Year ended	Year ended	Year ended
	April 30, 2021	April 30, 2020	April 30, 2019
Revenues	162,500	402,679	10,000
Expenses	1,783,395	5,041,860	12,272,851
Net loss for the year	(1,620,895)	(4,639,182)	(14,783,169)
Comprehensive loss	(1,620,895)	(4,639,182)	(14,773,169)
Basic & diluted loss per share	(0.01)	(0.06)	(0.19)
Cash flow from operating activities	(825,749)	(2,117,514)	(8,966,557)
Cash	1,013,772	12,536	1,163,219
Total assets	1,428,663	89,817	1,364,071
Total long-term financial liabilities	120,977	242,197	-
Dividends	-	-	-

Revenue year over year declined from $402,679 to $162,500 for the year ended April 30, 2021. The decrease is due to timing and stages of development of client specific projects. The Company expects sales to increase over the next fiscal year due to this ongoing use, efforts to expand the sales pipeline to broader markets and new SAAS opportunities.

For the year ended April 30, 2021 total operating expenses were $1,783,395 compared to $5,041,860 for the year ended April 30, 2020. Key differences year over year are outlined in more detail below.

Salaries, subcontractors and benefits declined from $814,485 to $501,010. The decline is due to the Company greater efforts on controlling headcount such that only needed resources are employed and that superfluous resources are eliminated.

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General and administrative costs decreased from $754,865 to $569,054 in the current year. The decrease in the cost is due to the result of greater focus on efficiencies year on year and the change from a start-up status to an operational one.

Product development costs were $370,969 for the year ended April 30,2021 compared to $2,075,822 in the prior year. The change year over year is attributable to the large amount of product development incurred in the previous year on the base platform which is now fully operational and therefore requiring less capital outlay during the current year. Notwithstanding, the Company expects additional expenditures to be incurred in the future due to ongoing changes in the market, as well as technology enhancements to better serve clientele.

Stock-based compensation expense was $ 188,693 for the year ended April 30, 2021 compared to $567,111 in the prior year. This expense is driven by the timing of the issuance of options and the variables used for the calculation of the Black Scholes pricing model. Stock option expense is a non-cash expense.

Amortization of intangible assets was $63,265 for the year ended April 30, 2021. No amortization of intangible assets was incurred in the prior comparative year as the Company did not have intangible assets on its statement of financial position at that time.

During the year ended April 30, 2021, the Company recorded depreciation of $4,258 and in the prior year, depreciation was $5,836. The change in depreciation year on year is due to the Company’s declining balance amortization policy. This expense is non-cash.

Corporate development costs were $884 for the current year compared to $628,301 for the year ended April 30, 2020. The change is attributed to the Company having completed the structure of its initial commercial offering.

Finance expense increased from $25,301 in the prior comparative year to $45,062 for the year ended April 30, 2021. The increase is a result of the convertible debenture private placement which took place during the year and the interest and accretion expense charged thereon.

Foreign exchange gain for the year ended April 30, 2021 was $20,426 compared to foreign exchange loss of $74,162 in the comparative year. Foreign exchange gains and losses can be realized and unrealized and are the result of foreign currency fluctuations during the period and the timing of when items are settled. Foreign exchange gains and losses can fluctuate annually in relation to changes in the US/Canadian and Euro/Canadian exchange rate.

During the first quarter, the Company settled $950,000 of indebtedness (the “Indebtedness”) owed to its primary vendor responsible for software development, design and maintenance of the Company’s proprietary StrainSecure™ platform. Pursuant to the settlement of the Indebtedness, the Company issued 9,500,000 common shares of the Company to an assignee and 9,500,000 common shares to an officer of the Company who was a second assignee of the vendor. The Company recognized a gain of $95,000 on the settlement. No such settlement occurred in comparative periods.

During the year ended April 30, 2021, the Company incurred a charge of $239,297 to the statement of operations and comprehensive loss as a result of a modification of terms on one of its convertible note agreements. The Company did not incur a similar charge in the comparative period.

NON-IFRS FINANCIAL MEASURES

This MD&A contains references to certain financial measures and associated per share data that do not have any standardized meaning as prescribed by IFRS and may not be comparable to similar measures presented by other companies. These financial measures are computed on a consistent basis for each reporting period and include EBITDA, Adjusted EBITDA, Adjusted net earnings, and working capital.

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These non-GAAP measures are identified and defined as follows:

“ EBITDA ” is a measure of the Company’s operating profitability. EBITDA provides an indication of the results generated by the Company’s principal business activities prior to how these activities are financed, assets are depreciated and amortized or how the results are taxed in various jurisdictions.

EBITDA is derived from the condensed consolidated statements of operations and comprehensive income (loss) and is calculated as follows:

		Year ended	Year ended
		April 30, 2021	April 30, 2020
Net loss	$	(1,620,895)	(4,639,182)
Depreciation and amortization		67,523	5,836
Interest expense	$	38,243	18,998
EBITDA		(1,515,129)	(4,614,348)

“ Adjusted EBITDA ” is used by management and investors to analyze EBITDA (as defined above) prior to the effect of foreign exchange, other income and expenses, and share-based payment expense. Adjusted EBITDA is not intended to represent net earnings as calculated in accordance with IFRS. Adjusted EBITDA provides an indication of the results generated by the Company’s principal business activities prior to how these activities are financed, assets are depreciated, amortized and impaired, the impact of foreign exchange, how the results are taxed in various jurisdictions, effects of share-based payment expenses, and normalized other expenses not recurring in nature.

Adjusted EBITDA is calculated as follows:

		Year ended	Year ended
		April 30, 2021	April 30, 2020
EBITDA	$	(1,515,129)	(4,614,348)
Plus:
Stock-based compensation		188,693	567,111
Debt term modification		239,297	-
Less:
Gain on settlement of debt		(178,671)	-
Adjusted EBITDA	$	(1,265,810)	(4,047,237)

ADDITIONAL GAAP MEASURES DEFINITIONS

“ Funds provided by operations ” is used by management and investors to analyze the funds generated by the Company’s principal business activities prior to consideration of working capital, which is primarily made up of highly liquid balances. This balance is reported in the Condensed Consolidated Statements of Cash Flows and is included in the cash provided by operating activities section.

NET EARNINGS, TOTAL COMPREHENSIVE LOSS AND CASH FLOWS

		Year ended	Year ended
		April 30, 2021	April 30, 2020
Adjusted EBITDA	$	(1,265,810)	(4,047,237)
EBITDA		(1,515,129)	(4,614,348)

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Total comprehensive loss	(1,620,895)	(4,639,182)
Funds used in operations before working capital changes	(1,265,584)	(3,951,491)
Funds used in operations$	(825,749)	(2,117,514)

The Company’s changes year on year which lead to the Company’s comprehensive loss is highlighted above in more detail

For the year ended April 30, 2021, Adjusted EBITDA was $(1,265,810) and $(4,047,237) for the year ended April 30, 2020.The variance year on year is principally due to having low corporate development costs, development costs and administrative costs in 2021 offset by a large gain on settlement of debt.

The Company’s funds used in operations were $(825,749) for the year ended April 30, 2021, and mainly covered product development and customer roll-out costs. In the prior year the major contributing expenses to use of funds from operations of $(2,117,514) were corporate development costs and stock-based compensation charges.

The Company applied for the Canadian Emergency Business Loan for $60,000. The Company was approved and received the funds during the year. The loan has to be repaid by the Company by December 31, 2022, to receive loan forgiveness of $20,000.

FINANCIAL AND OPERATING HIGHLIGHTS - QUARTERLY ANALYSIS

		2021		2021	2021	2021
		**Q4 **		Q3	Q2	Q1
Revenue	$	500	$	- $	72,000 $	90,000
Adjusted EBITDA		(316,691)		(343,553)	(526,536)	(79,029)
EBITDA		(865,823)		(349,115)	(534,140)	233,950
Net (loss) income		(821,773)		(417,972)	(603,843)	222,693
Comprehensive (loss) income	$	(821,773)	$	(417,972) $	(603,843) $	222,693

		2020		2020	2020	2020
		Q4		Q3	Q2	Q1
Revenue	$	(248,841)	$	300,000 $	303,520 $	48,000
Adjusted EBITDA		(738,426)		(1,134,933)	(846,514)	(1,372,942)
EBITDA		(827,206)		(1,179,023)	(913,223)	(1,740,474)
Net loss		(803,175)		(1,180,421)	(914,652)	(1,740,934)
Comprehensive loss	$	(803,175)	$	(1,180,421) $	(914,652) $	(1,740,934)

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LIQUIDITY AND CAPITAL RESOURCES

Working capital

“ Working capital ” is used by management and the investment community to analyze the operating liquidity available to the Company. Working capital is defined as current assets less current liabilities.

Working capital is derived from the consolidated statements of financial position and is calculated as follows:

As at	April 30, April 30, Increase (decrease) in 2021 2020 Workingcapital
Current Assets Cash and cash equivalents Sales taxes receivable Subscriptions receivable Prepaid Expenses Current Liabilities Accounts payable and accrued liabilities Workingcapital deficit	$ 1,013,772$ 12,536 $ 1,001,236 31,110 29,396 1,714 50,000 - 50,000 5,000 31,991 (26,991)
	$ 1,099,882$ 73,923 $ 1,025,959 $ 1,800,663$ 2,416,837$ (616,174)
	$ 1,800,663$ 2,416,837$ (616,174)
	$ (700,781) $ (2,342,914) $ 1,642,133

Working capital improved since the year ended April 30, 2020 due to the closing on a non-brokered private placement, funding under the Canadian Emergency Business Loan program offered by the federal Government of Canada and the settlement of certain debt for shares with suppliers.

Liquidity

At April 30, 2021, the Company had $1,013,772 (April 30, 2020: $12,536) of cash and cash equivalents on hand. The Company has convertible debentures which can be and have been converted into equity at the option of the holder. The Company shall have the right to require the convertible debenture holders to convert any principal and interest amount outstanding if, for any 10 consecutive trading days commencing on the date that is four months plus one day following the grant date and prior to the maturity date, the closing price of the common shares of the Company is greater than $0.50, subject to adjustment as provided for in the certificate representing the debenture. Therefore, liquidity risk relates to its accounts payable and accrued liabilities and debentures, as the Company may encounter difficulty discharging its obligations.

While the Company has been able to demonstrate the ability to raise capital to fund its operations to date, it has not yet been able to generate the sales volumes required to create positive cash flows from operations. Although the certainty of cash flows is variable in nature, the Company has engaged in steps to commercialize its core products and services in a profitable manner.

The Company considers the items included in capital to include shareholders’ equity. The Company manages its capital structure and makes adjustments to it in light of changes in economic and business conditions, the financing environment and the risk characteristics of its underlying assets. In order to maintain or adjust its capital structure, the Company may issue new shares, new debt, or scale back the size and nature of its operations. The Company is not subject to externally imposed capital requirements.

Management intends to regularly review its ongoing level of cash flow from operations, as well as its level of capital resources, and actively manage its affairs. This review will consider factors such as the current economic environment, changes in demand for the Company’s services, capital spending requirements, foreign exchange rates, working capital needs, and profitability of the Company’s operations, any of which could materially affect the Company’s ability to meet its obligations.

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Additional financing may be necessary in a variety of circumstances, including the requirement of working capital to ramp up operations required by continued growth, the occurrence of adverse circumstances, fluctuations in foreign currency translation, or the decision to expand geographically into new markets or by acquisition. It is anticipated that the required financing may be raised by bank debt, other forms of debt, or the issue of equity. It is possible that such financing will not be available, or not available on favorable terms.

SUBSEQUENT EVENTS

On June 16, 2021, the Company announced the appointment of Robert Lelovic as Chief Financial Officer, replacing Robert Galarza, who held the interim-CFO role until that time.

OUTSTANDING SHARE DATA

Issued share capital includes the following as at:

	August 25, 2021	April 30, 2021	April 30, 2020
Common Shares issued and outstanding	152,693,781	152,693,781	83,361,732
Option Outstanding	8,850,000	12,850,000	14,900,000
Warrants Outstanding	39,573,843	39,573,843	2,907,350

COMMITMENTS AND CONTINGENCIES

Operating lease

The Company has no contractual commitments as on April 30, 2021.

RELATED PARTY TRANSACTIONS

Summary of key management personnel compensation:

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 directors and key management personnel during the year ended April 30, 2021 and 2020 set out below:

	Year ended	Year ended
	April 30, 2021	April 30, 2020
General and administrative - Director fees	$62,700	$126,500
Salaries, subcontractors, and benefits	$300,000	$359,187
Stock-based compensation	$184,903	$158,463
	$547,603	$644,150

Corporate Development Costs

On June 1, 2018, the Company entered into a master services agreement with a company controlled by a director to provide marketing, web development, planning, patent work, administrative services, and facilitation

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and negotiation services. For the year ended April 30, 2021, the Company incurred fees of $nil (April 30, 2020$132,980).

Product Development Costs

On January 19, 2018, the Company entered into a master services agreement and a statement of work to develop the initial phases of the product development strategy necessary to launch the TruTrace platform. The Company shares an officer with the service provider. For the year ended April 30, 2021, the Company incurred fees of $370,969 (April 30, 2020-$2,075,822).

Software License fees

The Company incurred $385,410 of software license fees paid or payable to an officer of the Company.

Balances due to related parties

As at April 30, 2021, the Company was indebted to a company with a common officer in the amount of $ 361,963 (April 30, 2020 - $1,060,959) which was included in accounts payable and accrued liabilities.

Subscription receivable

As at April 30, 2021, the Company has $50,000 outstanding from related parties related to the February 12, 2021 private placement.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

General Objectives, Policies and Processes:

The Board of Directors has overall responsibility for the determination of the Company’s risk management objectives and policies and retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Company’s finance function.

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company’s competitiveness and flexibility. Further details regarding these policies are set out below.

a) Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Financial instruments which are potentially subject to credit risk for the Company consist primarily of cash.

The carrying amount of financial assets represents the maximum credit exposure. All cash is held at a Canadian Chartered Bank.

b) Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. If future cash flows are uncertain, the liquidity risk increases.

The Company monitors its risk of shortage of funds by monitoring the maturity dates of existing financial liabilities. The Company’s financial liabilities are comprised of accounts payable and accrued liabilities, and notes and loan payable. The Company anticipates it will have adequate liquidity to fund its financial liabilities through its existing working capital and equity issues. Furthermore, a portion of liabilities are expected to be settled in

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common shares of the Company, thereby mitigating liquidity risk. However, there is no assurance that the Company will have sufficient cash flow to be able to discharge its future financial liabilities.

		Payment due	by Period
	< 1year	>1 and < 2years	2 - 3years	Total
Accounts payable and accrued liabilities	$ 1,800,663	$ -	$ -	$1,800,663
Convertible debentures	-	75,826	5,151	80,977
Loans payable	-	40,000	-	40,000
	$ 1,800,663	$ 115,826	$ 5,151	$ 1,921,640

c) Interest Rate Risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Cash flow interest rate risk is limited to potential decreases on the interest rate offered on cash held with chartered Canadian financial institutions. The Company considers this risk to be immaterial.

d) Exchange Rate Risk

Exchange rate risk is the risk that a variation in exchange rates between the Canadian dollar and US dollar or other foreign currencies will affect the Company’s operations and financial results. The Company incurs certain expenses in US dollars and is exposed to foreign exchange rate fluctuation. These expenses are subject to exchange rate risk.

CRITICAL ACCOUNTING JUDGEMENT AND ESTIMATES

The Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

BUSINESS RISKS

You should carefully consider the following risks and uncertainties in addition to other information in TruTrace’s filing statement dated May 10, 2018 with respect to the Transaction in evaluating the Company and its business. The market in which the Company competes is very competitive and changes rapidly. New risks may emerge from time to time and management may not be able to predict all of them or be able to predict how they may cause actual results to be different from those expected. References to “TruTrace” below refer to the Company and its affiliates as at the date hereof.

• Limited Operating History and History of Losses

TruTrace has only recently commenced commercial operations and has cash, accounts receivable, a note receivable, sales tax receivable, prepaids and deposits, and property and equipment as assets. TruTrace has no history of earnings and has not yet generated any revenue. As such, it is subject to many of the risks common to early-stage enterprises, including: under-capitalization; cash shortages; limitations with respect to personnel, financial, and other resources; and lack of revenue. Although TruTrace anticipates generating revenue in the future, it is also incurring substantial expenses in the establishment of its business. The success of the Company will ultimately depend on its ability to generate cash from its business. There is no assurance that the future expansion of the business will be sufficient to raise the required funds to continue the development of its

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business. There is no assurance that the Company 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 its operations.

• Service Interruptions

TruTrace intends to serve customers from third-party data center hosting facilities located in Ontario and Quebec. Any damage to, or failure of, TruTrace’s systems could result in interruptions to its service. As TruTrace continues to add data centers and add capacity in existing data centers, it may move or transfer its data and its customers’ data. Despite precautions taken during this process, any unsuccessful data transfers may impair the delivery of its services. Further, any damage to, or failure of, TruTrace’s systems generally could result in interruptions in its service. Interruptions in TruTrace’s service may reduce revenue, cause it to issue credits or pay penalties, cause customers to terminate their subscriptions and materially adversely affect its renewal rates and ability to attract new customers.

It is also expected that TruTrace’s business might be harmed if its customers believe its service is unreliable. TruTrace intends to replicate and back-up customer data as part of its disaster recovery plans. However, these plans may not be successful in all circumstances. The Company will not control the operation of any third party facilities it may use. All of the facilities it operates or utilizes would to be vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct. Despite precautions taken at these facilities, the occurrence of a natural disaster or an act of terrorism, a decision to close any facility without adequate notice or other unanticipated problems at these facilities could result in lengthy interruptions in TruTrace’s service. Even with its disaster recovery arrangements, TruTrace’s service could be interrupted and its business and financial condition could be materially adversely affected.

• Need for Continued Development of Technology

The success of TruTrace’s platform will be dependent on the accuracy, proper use and continuing development of its technological systems, including its business systems and operational platforms. Its ability to effectively use the information generated by its information technology systems, as well as its success in implementing new systems and upgrades, may affect its ability to: conduct business with its clients, including delivering services and solutions; manage its inventory and accounts receivable; purchase, sell, ship and invoice its products and services efficiently and on a timely basis; and maintain its cost-efficient operating model while expanding its business in revenue and in scale.

• Ability to Generate Profits

There can be no assurance that TruTrace will generate net profits in future periods. Further, there can be no assurance that it will be cash flow positive in future periods. In the event that TruTrace fails to achieve profitability, the value of its shares may decline. In addition, if TruTrace is unable to achieve or maintain positive cash flows, it will be required to seek additional funding, which may not be available on favorable terms, or at all.

• Regulatory Uncertainty

The legal global cannabis industry is still in its infancy and is dependent on the regulatory environment, including federal, state and local laws. Part of TruTrace’s business and achievement of its business objectives within this sector will be dependent, in part, on compliance with regulatory requirements enacted by governmental authorities for the collection and tracking of data related to the cannabis sector. While TruTrace expects that its business model will be perceived to be viable and compliant with applicable regulatory requirements, there is no guarantee that its platform will be adopted or utilized. To the extent that there are changes to existing regulations, the adoption and use of TruTrace’s platform may be adversely affected.

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In addition to the above, in jurisdictions such as the United States, the conflict between federal and state legislation could have a material adverse impact on TruTrace’s business. TruTrace’s management has determined that, at this time, it will only enter regulated markets where there is an alignment between all levels of government and if Canadian Securities Exchange (the “ CSE ”) has approved it conducting operations. However, there can be no assurance that the regulatory environment will remain favorable to the conduct of TruTrace’s business. Further, even within Canada, different provinces and local governmental authorities will have different regulatory requirements and it is possible that TruTrace’s platform may not be compatible with those requirements. This variability may be difficult and/or ineffective to manage from both a technological and cost standpoint. In the event that TruTrace’s business is determined to be non-compliant with certain applicable regulatory requirements, its business and financial condition could be materially adversely affected.

• Blockchain Related Risks

The use of blockchain technology for enterprise applications is in its early stages. While numerous use cases have been developed to demonstrate the efficiency, security and viability of blockchain technology, it is still largely unproven. There are risks that the underlying blockchain protocols and methodologies will not be scalable or sustainable in industry-wide applications. As a new and largely unregulated industry, changes in or more aggressive enforcement of laws and regulations around blockchain could adversely impact companies involved in the industry. Failure or delays in obtaining necessary approvals, or changes in government regulations and policies and practices could have an adverse impact on TruTrace’s future cash flows, earnings, results of operations and financial condition. Further, governmental agencies could shut down or restrict the use of blockchain platforms or blockchain based technologies. This could lead to a loss or interruption in business for TruTrace.

• Intellectual Property Risk

TruTrace’s activities may infringe on patents, trademarks or other intellectual property rights owned by others. If TruTrace is required to defend itself against intellectual property rights claims, it may spend significant time and effort and incur significant litigation costs, regardless of whether such claims have merit. If TruTrace is found to have infringed on the patents, trademarks or other intellectual property rights of others, it may also be subject to substantial claims for damages or a requirement to cease the use of such disputed intellectual property, which could have an adverse effect on its operations. Such litigation or claims and the consequences that could follow could distract management of TruTrace from the ordinary operation of its business and could increase costs of doing business, resulting in a negative impact on the business, financial condition, or results of operations of the Company.

• Evolving Business Model

As digital assets and blockchain technologies become more widely available, management expects the services and products associated with them to evolve. As a result, to stay current with the industry, TruTrace’s business model may need to evolve as well. From time to time, TruTrace may modify aspects of its business model relating to its product mix and service offerings. It cannot offer any assurance that these or any other modifications will be successful or will not result in harm to the business. TruTrace may not be able to manage growth effectively, which could damage its reputation, limit its growth and negatively affect its operating results. Such circumstances would have a material adverse effect on the Company’s ability to continue as a going concern, which would have a material adverse effect on its business, prospects and operations, and harm TruTrace’s investors.

• Network Security Risks

TruTrace expects to obtain, transmit and store confidential user information in connection with its services. These activities are subject to the laws and regulations of Canada and other jurisdictions. The requirements imposed by these laws and regulations, which often differ materially among the many jurisdictions where

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TruTrace intends to offer services, are designed to protect the privacy of personal information and to prevent that information from being inappropriately disclosed. TruTrace expects to rely on a variety of technologies to secure its systems. Despite the implementation of network security measures, its infrastructure will potentially be vulnerable to computer break-ins and similar disruptive problems. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments, including improper acts by third parties, may result in a compromise or breach of the security measures that the Company uses to protect its systems. TruTrace could also suffer from an internal security breach.

Computer viruses, break-ins or other security problems could lead to misappropriation of proprietary information and interruptions, delays or cessation in service to TruTrace users. If internal TruTrace personnel or a third party were to misappropriate, misplace or lose corporate information, including financial and account information, customers’ personal information, or source code, its business may be harmed. TruTrace may be required to expend significant capital and other resources to protect against these security breaches or losses or to alleviate problems caused by these breaches or losses. If third parties gain improper access to TruTrace’s systems or databases or those of its partners or contractors, they may be able to steal, publish, delete or modify confidential customer information. A security breach could expose TruTrace to monetary liability, and lead to inquiries, fines, or penalties.

• Reliance on Key Personnel

TruTrace’s success depends in large measure on certain key personnel and the contributions of these individuals to its immediate operations are likely to be of central importance. The loss of the services of such key personnel could have a material adverse effect on the Company. In addition, the competition for qualified personnel in the technology industry is intense and there can be no assurance that TruTrace will be able to continue to attract and retain all personnel necessary for the development and operation of its business. Investors must rely upon the ability, expertise, judgment, discretion, integrity, and good faith of TruTrace’s management.

• Management of Complex Software Implementation Projects

The successful deployment of TruTrace’s software will depend on managing complex implementation projects. A variety of factors may result in complex deployments being delayed, cancelled or failing, including: the inherent complexity of modern software; difficulty staffing the project with qualified personnel; difficulty managing a project in which the customer and multiple vendors must work together effectively; unrealistic deadlines; inability to realistically limit the scope of the project; problems with third party systems, software or services; inaccurate or faulty data; and insufficient time and investment spent in the planning and design phases of the project. As a result, TruTrace may not be able to successfully manage deployments of its software which could harm its reputation, be costly to correct, delay revenues, and expose it to litigation.

• Conflicts of Interest

Certain directors and officers of TruTrace are also directors and officers of other companies. In addition, they may devote time to other outside business interests, so long as such activities do not materially or adversely conflict with their duties to the Company. The interests of these persons could conflict with those of TruTrace. 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 TruTrace board of directors, a director who has such a conflict will abstain from voting for or against the approval of any such matter. In accordance with applicable laws, the directors of TruTrace will be required to act honestly, in good faith, and in the best interests of TruTrace.

• Competition

TruTrace expects to compete with other technology platforms focused on the supply chain, as well as the global cannabis sector. Market and financial conditions, and other conditions beyond TruTrace’s control, may make it

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more attractive to invest in other financial vehicles which could limit the market for TruTrace’s shares.

• Risks Relating to COVID-19

The recent outbreak of COVID-19 (Coronavirus) pandemic could impact the Company’s operations by negatively impacting the supply chain including both manufacturing and delivery of products to customers, create shortages of qualified staff, reduce consumption of product and reduce the availability of both equity and or debt in the marketplace. Such an outbreak, could have a material adverse effect on our business, financial condition, results of operations and our ability to raise capital either through equity of debt.

Other Information

Additional information about the Company is available under TruTrace’s profile on SEDAR at www.sedar.com.

Approval

This MD&A is authorized for issue by the Board on August 25, 2021.

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