Ynvisible Interactive Inc.

MD&A

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MANAGEMENT’S DISCUSSION AND ANALYSIS

NINE MONTHS ENDED SEPTEMBER 30, 2022

Date of Report: November 29, 2022

The following management’s discussion and analysis (“MD&A”) of the financial position and results of operations for Ynvisible Interactive Inc. (the “Company” or “Ynvisible”) should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the years ended December 31, 2021 and 2020 and the condensed interim consolidated financial statements for the three and nine months ended September 30, 2022 and 2021 (the “Financial Statements”). Except as otherwise disclosed, all dollar figures included therein and in the following MD&A are quoted in Canadian dollars. Additional information relevant to the Company’s activities can be found on SEDAR at www.sedar.com.

Overall Performance

Ynvisible Interactive Inc. is a public company listed on the TSX Venture Exchange under the trading symbol “YNV”, on the OTCQB under the symbol “YNVYF”, and FSE under the symbol “1XNA”.

Ynvisible is a manufacturer that has developed and integrated know-how, design skill, development acumen, scale manufacturing capability, intellectual property in electrochromic displays (“ECDs”), materials, inks, display systems, and complementing electronic components. Printed electronics use new materials with electronic properties that are processable into inks and can be printed into thin layers (using conventional print house equipment) onto flexible materials, such as plastic and paper.

Ynvisible's printed displays can be easily scaled up in production and integrated into finished, scalable product solutions like packaging labels, smart cards, and at-home electronic devices.

Ynvisible sells a mix of standard and customized ultra-low-power and easy-to-use electronic displays and indicators for everyday smart objects, Internet of Things (“IoT”) devices, and ambient intelligence (intelligent surfaces). The Company sells other products and services, including contracted research, prototyping, development, pilot production, production, and contract manufacturing services based on printed electronics, pilot and volume production of electrochromic displays, and tailored display solutions.

Ynvisible focuses on the marketing, sale, and development of ultra-low-power ECDs and devices, printable onto flexible substrates, using widely available industrial printing and converting techniques in its early market growth stage. The Company's products are less complicated to integrate and are a more cost-effective replacement to conventional LCDs, electrophoretic displays (e-paper), and LED indicators. The Company's vision is to bring everyday objects and surfaces to life, benefitting people in a smart and connected world.

Ynvisible aims to be a leading company in the emerging printed and flexible electronics sector. Ynvisible's mix of services, materials, and technology is unique in the general electronics and electronic display industry. The Ynvisible brand is gaining traction and notoriety among brand owners developing their IoT products.

The address of the Company’s head office and principal place of business is 830 – 1100 Melville Street, Vancouver, British Columbia, Canada, V6E 4A6, and the registered and records office is located at 1500 – 1055 West Georgia Street, Vancouver, British Columbia, Canada, V6E 4N7. The Company maintains a website at www.ynvisible.com.

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The Company’s ability to continue as a going concern, to fund work commitments and to ensure adequate working capital is dependent upon achieving profitable operations or upon obtaining sufficient additional financing. Management believes that the Company has sufficient working capital to meet the Company’s obligations over the next twelve months.

Management Discussion & Business Highlights

Status of On-Going Strategic Transition into Printed E-Paper Products Company

During Q3 2022, Ynvisible continued to strongly steer its actions and resources to accelerate its transition from a primarily project sales-based organization to a product-based company. The Company aims to accelerate time to market for its lowest power consuming printed e-paper displays, and exploit opportunities in the new rapidly growing e-paper markets (1.6 billion USD market in 2020, growing at CAGR 17.3% and expecting to reach 9.5 billion USD in 2030).

The Company is in a solid financial position to focus the efforts of its team on implementing the strategic shift and continues to manage its finances judiciously.

The implementation of the e-paper product strategy shift in the Company’s sales mix, has resulted in a drop in revenue during the first three quarters of 2022. Income from Customer Sales in Q3 2022 was $73,785, which is 75% lower than in Q3 2021. The drop in Revenue is a result of the decision to reduce activity in customer funded development projects and contract manufacturing services that do not show strategic fit with the Company’s objectives for sustainable business beyond the project. This has freed up internal resources to prioritize on the implementation of the new product-based business strategy. The Company expects Revenues to rapidly increase once it begins shipping its first products in volume.

Ynvisible began marketing the first generation of printed e-paper products announced in March 2022. During Q2 & Q3 the Company continued to build its sales team and global distribution channels. Market feedback has been positive and customers are expressing interest to place purchase orders with opportunity for repeat business.

Meanwhile Ynvisible’s team has been trained, aligned and united around the strategy and one shared goal. The team has been further strengthened to support the product strategy.

The Company aims to deliver its first mass deployable products to pending client purchase orders by Q2 2023. Ynvisible and its partners are currently working to ensure that the performance of the products and underlying technology fully meet target market requirements. This work includes testing and enhancing the products for sufficient life-time durability, improving product performance in certain extreme temperature and environmental conditions, and scaling up and optimizing production. Some delays were incurred during Q3 in the development process and production upscaling, due to technical challenges. The Company responded by increasing internal resources to product development and intensifying outsourced development efforts with partners such as Research Institutes of Sweden (RISE). Despite these unforeseen hurdles, the Company was successful in introducing its Electronic Signage (new product) at Electronica 2022, the world’s leading trade fair for electronics held in Munich, Germany in Q4/2022.

Operational Capabilities Development & Background to Strategic Shift

During 2018 and 2019, Ynvisible built operational capabilities in the design, research and development (R&D), prototyping, and manufacturing of its proprietary ultra-low-power consuming printed electrochromic display technology. Several EU publicly co-funded projects were won and leveraged for financing to build the Company’s technology base, expand collaborative networks, and establish a critical base for future products.

Due to the Company’s small size and earlier limited financial resources for own product developments, the speed and direction of developments were largely defined through customer funded product development projects. Such customer tailored development projects continue to be carried out under confidentiality agreements. In customer paid projects the budgets and speed of developments to market entry are largely decided by said clients.

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During H1 2020, Ynvisible rapidly adjusted to the COVID pandemic by expanding its sales efforts to a wider range of cash generating customer project work. In particular the Company leveraged the resources of Consensum Production AB acquired in August 2019 (renamed Ynvisible Production AB) to sell production upscaling and contract manufacturing services to a diverse set of end clients. These services quickly became the biggest source of revenue for the Company.

In Q2 2020, the Company in-licensed an electrochromic display technology from RISE to expand Ynvisible’s technology platform to better respond to diverse client needs around low power display business. Also, in Q2 2020 Ynvisible acquired the electrochromic display business of rDot Displays in Sweden. The Company productized its prototyping process and the volumes for display kit deliveries and prototype sales increased rapidly.

Adopting a “two speed model”, Ynvisible began to engage with small companies, particularly start-ups, as they often bring more immediate public visibility on customer use cases and a drive for fast market entry.

As a result of the multiple actions taken in 2020 and 2021, Ynvisible achieved fast growth both in the number of paying customers and in total revenues. The Company gained valuable insights to various market needs and opportunities. However, as the diversity of client demands increased, the Company’s limited resources continued to be spread thinly across many different initiatives. As customer project deliveries took precedence the Company’s own product initiatives proceeded slowly.

With the financing raised during the first half of 2021, Ynvisible began a strategic shift from a largely projects based business to a more scalable products based business. An assessment of different target markets was carried out to identify the markets with the highest short term market potential for Ynvisible’s flexible ultra low power display offering.

In Q4 2021 the Company announced its short to medium term market focus to the following application spaces:
Digital signage
Smart monitoring labels
Retail labels & signage
Authenticity & security

The Company began to focus its team and resources on the development, manufacturing and commercialization of printed e-paper display products that address needs and opportunities within these application markets. The decision was made to build the company’s first printed e-paper products based on technology in-licensed from RISE, given its expected higher level of technology readiness in feature requirements and high volume producibility demands of the selected target market sectors.

A strategic shift to e-paper product company was initiated in Q1 2022. The Company’s first printed e-paper display product was announced in March 2, 2022. This shift impacted Ynvisible target set for 2022 with a visible slow down of revenue, with the aim to prioritize operations. This prioritization continued strongly in Q2 2022.

On April 27, 2022 Ynvisible announced the expansion of its license from RISE. The amended license agreement includes exclusive worldwide rights to key RISE patent families in printed low power displays. During Q1 and Q2 Ynvisible has worked closely with RISE to ensure that the performance of the products and underlying technology fully meet target market requirements. This work includes testing and enhancing the products for sufficient life-time durability and improving product performance in certain extreme temperature and environmental conditions, and optimizing and scaling up production to improve production yield rates. The Company is also expanding its collaboration with RISE to accelerate the development of Ynvisible’s future product offering.

Ynvisible continues to further develop its own proprietary intellectual property as a base for developing future products, and continues to deliver customer tailored development and R&D projects.

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Products & Services

Ynvisible’s revenue comes from a mix of (i) customer funded product development projects, (ii) printed e-paper display prototyping, (iii) sales of printed e-paper displays, and (iv) production upscaling and contract manufacturing services. Historically, the most substantial revenue-generating segment of the Company has been the sale of research, development, and production up-scaling services. This recognition provides a holistic view of the Company’s investment and growth strategy up to now as an emerging technology firm.

Today Ynvisible’s central aim is to accelerate speed to market by offering printed e-paper displays to identified e- paper market segments with unmet market needs for ultra low power mass producible displays.

Contract electronics development, production up-scaling, and contract manufacturing services continue to provide recurring revenue for the Company. However, during 2021 the Company discontinued contract printing and scale-up services for a large, low profit margin customer to create time for its own product scale-up and, to acquire new customers with better strategic fit for the Company. The Company anticipates that its capabilities to cost effectively design and produce printed systems, and supporting other start-up companies in the high growth sector of energy generation/storage, revenues from those services will fluctuate as a function of:

Customers’ material needs and their own internal production scale-up
Capacity of Ynvisible’s manufacturing lines in Linköping and Charneca De Caparica
Competition within the contract manufacturing printing market

Sales & Marketing

During the first three quarters of 2022, the Company continued to strengthen its sales and marketing operations to build global sales and distribution networks for printed e-paper display product roll-out. Outbound sales and marketing actions focused on selected e-paper display end user markets and customers. Project sales are focused on selling strategic development projects to key customer relationships.

Specifically, Ynvisible focused on:

Establishing sales and distribution channels in US, Europe and China
Optimize and scale up Ynvisible displays for selected target markets with clear addressable market needs 3. Establish technology partnerships to build and sell more value-added products

Ynvisible’s sales mix continues to include a full palette of services relating to the sale of e-paper displays, as well as contract research, electronics development, production up-scaling, and contract manufacturing printing services. However, the Company is no longer taking in every customer project opportunity, but is more carefully selecting opportunities that show more long term business potential or are compliant with the Company’s strategic objectives.

In Q3 2022, marketing highlights included.

The Company participated in different industry exhibitions and conferences:
Almascience Supply Chain workshop in Lisbon, Portugal, July 4 – speech
Marketing events in Q4 2022:
- Techblick Live in Eindhoven, Netherlands, October 12-13 – Exhibition booth
- Organic Electronics Association (OE-A) seminar on the topic Smart Objects and working group meetings in Tampere, Finland, October 18-19 – Invited talk
- IOTE ® 2022, the 18th International Internet of Things Exhibition in Shenzen, China, November 1517 – Exhibition booth by Ynvitech, Ynvisible’s sales partner will be showcasing Ynvisible’s products and services
- Electronica 2022 in Munich, Germany, November 15-18 – Exhibition booth, speech, product launch
Marketing events in Q1 2023:
- NRF 2023 in New York City, USA, January 14-17, 2023 – Exhibition booth
- o EuroShop in Düsseldorf, Germany February 26 - March 2, 2021

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LOPE-C, Munich, Germany, March 1–2, 2023 – Joint exhibition booth in the Swedish Printed Electronics Pavilion, invited speech
Embedded World, Nuremberg, Germany 14 -16 March 2023

Team, Management & Culture

Ynvisible’s team is a multidisciplinary team of over 30 professionals with diverse backgrounds (7 different nationalities) and skill sets. In its operations in Portugal, Sweden and Germany, the Company leverages the highly skilled labor base and competitive labor costs.

During H1 2022, the Company made changes to its executive leadership team to effectively develop into a productbased business and accelerate time to market for its printed e-paper display products. In January 2022 Chairman of the Board, Ramin Heydarpour, was appointed as (interim) CEO and Keith Morton, seasoned display industry sales executive, was hired as VP Sales & Marketing. In April 2022 Mr. Heydarpour was appointed permanent CEO and Inês Henriques as COO, to strengthen the Company’s operations management. The changes to the management structure were intended to ensure faster decision-making processes, more homogeneous strategic execution and stronger coherence across Ynvisible.

In Q3 2022, the Company continued to build its team with skill sets in product development, quality control, displays sales, and customer support.

Solid Financial Position to Implement Strategic Shift

The Company is in a good financial position to continue focusing the efforts of its team on the products based strategy kicked off this year. The Working Capital at the end of Q3 2022 was $12,614,312 and its average Gross Monthly Burn Rate was $530,000. The Company continues to manage its finances judiciously during this transitional process.

The implementation of the new strategy and prioritization of Company resources toward accelerating the transition toward printed e-paper display products-based business, led to a drop in Customer Sales and total income & gains in Q1 and Q2 2022. While Ynvisible continues to offer a mix of services to its clients, project sales opportunities are now more carefully weighed against fit with Ynvisible’s short to medium term strategic targets and for their profitability. This transition is also expected to impact total revenue development in Q4 2022.

Q3 2022 income from Customer Sales was $73,785, which represents 75% decrease compared to total income from customers, of $295,908 in the same period of 2021. The drop in Revenue is a result of the reduced invoicing in customer funded product development projects and contract manufacturing services. The company expects customer funded product development project revenue to slightly increase in the remainder of 2022 while still keeping the focus on product optimization.

Cost of Sales for Q3 2022 was $56,762, decreasing 79%, when compared with the $265,303 registered in the same period of 2021 and increasing 12% from the $50,532 in Q2 of 2022. The current gross margin fluctuates, as a result of the variation of the sales mix.

Third quarter income from sales and European funding is of $142,074, a 26% decrease compared to the prior period with some of the European projects coming to an end. Ynvisible intends to focus the full resources on Ynvisible product and scale up choosing carefully any new projects to ensure the alignment with Ynvisible strategy and longterm developments.

The Company's total income & gains for Q3 2022 was $279,768, a decrease of 8% from the prior quarter of $304,823. Total income & gains include customer sales, other income & gains, rental income, and EU co-funded project grants. EU year-to-date funding in 2022 was $346,883, a 22% decrease compared to the prior year.

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News & Events

In July 2022, the Company granted 2,680,000 stock options to various directors, officers, consultants, and employees of the Company at an exercise price of $0.20 per share for a period of five years, vesting as follows: 1/4th at the date of grant, 1/4th at four months from the date of grant, 1/4th at eight months from the date of grant, and 1/4th at twelve months from the date of grant. In addition, the Company granted 25,000 stock options to a provider of investor relations services at an exercise price of $0.20 per share for a period of five years, vesting as follows: 1/4th at three months from the date of grant, 1/4th at six months from the date of grant, 1/4th at nine months from the date of grant, and 1/4th at twelve months from the date of grant.

Subsequent to June 30, 2022, 4,006,454 warrants with an exercise price of $0.50 per share expired unexercised.

Subsequent Events

In November 2022, Ynvisible announced the launch of its new Digital Signage Solution at Electronica 2022 conference. The product launch strengthens Ynvisible's transition to the new product-based strategy in the rapidly growing e-paper market (1.6 billion USD market in 2020, growing at CAGR 17.3% and expected to reach 9.5 billion USD in 2030, (Source: Allied Market Research, October 2022), and aims to accelerate time to market for its costeffective, low power-consuming printed e-paper displays.

in November 2022, the Company announced the resignation of Jani-Mikael Kuusisto, from the position of SVP Ventures, a part-time role he has held in the Company since stepping down as CEO in January 2021. Jani-Mikael is taking on the position of CEO in The Warming Surfaces Company Ltd., a spin-out from VTT Technical Research Centre of Finland.

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Selected Quarterly Information

All financial information in this MD&A has been prepared in accordance with IFRS. The following financial data is derived from the Financial Statements:

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Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
$ $ $ $
Sales 73,785 295,908 330,320 981,944
Operating expenses (1,670,050) (2,099,308) (4,956,721) (5,206,802)
Other items 168,764 153,374 633,503 569,502
Net loss (1,484,263) (1,912,767) (4,163,206) (4,358,908)
Total comprehensive loss (1,521,262) (1,903,554) (4,292,646) (4,467,535)
Loss per share (basic and diluted) (0.01) (0.02) (0.03) (0.04)
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As at September 30,
2022 2021
$ $
Working capital 12,614,312 16,702,600
Total assets 15,619,483 21,730,021
Total liabilities 970,637 2,240,093
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Operations

The following table sets forth selected financial information regarding the Company’s operating and administrative expenses for the three and nine months ended September 30, 2022 and 2021:

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For the three months ended For the nine months ended
September 30, September 30,
Operations 2022 2021 2022 2021
$ $ $ $
Sales 73,785 295,908 330,320 981,944
Cost of sales (56,762) (265,303) (170,308) (706,255)
Bad Debt - (34,061) - (34,061)
Compensation and consulting (728,083) (514,938) (2,148,736) (2,248,430)
Depreciation (145,804) (169,035) (454,956) (533,418)
Development and production (178,853) (60,214) (532,478) (235,212)
Interest and bank charges (2,181) (4,318) (8,612) (12,182)
Marketing and promotion (14,407) (587,659) (114,693) (655,887)
Office facilities and services (108,884) (60,388) (380,050) (152,368)
Professional fees (147,335) (222,255) (298,606) (453,994)
Share-based compensation (287,101) (408,893) (837,440) (713,586)
Transfer and listing fees (20,476) (19,567) (55,774) (137,051)
Travel and project investigation (36,926) (17,980) (125,376) (30,613)
Loss from operations (1,653,027) (2,068,703) (4,796,709) (4,931,113)
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Results of Operations for the Nine Months Ended September 30, 2022 and 2021

Loss from operations for the nine months ended September 30, 2022 increased to $4,796,709 compared to $4,931,113 during the nine months ended September 30, 2021. Key differences between the two periods are as follows:

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Expenses Increase / Decrease Explanation for Change
in Expenses
Sales Decrease of $651,624 Decreased due to the Company’s decision to slow down some
revenue streams to prioritize and focus the existing resources in
product optimization for scale up, aligned with the Company’s
strategy.
Cost of sales Decrease of $535,947 Decreased due to aligning with sales decrease.
Development and Increase of $297,266 Increased due to focusing on the product development and
production optimization for scale up.
Marketing and Decrease of $541,194 Decreased due to scaling down of marketing activities.
promotion
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Results of Operations for the Three Months Ended September 30, 2022 and 2021

Loss from operations for the three months ended September 30, 2022 increased to $1,653,027 compared to $2,068,703 during the three months ended September 30, 2021. Key differences between the two periods are as follows:

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Expenses Increase / Decrease Explanation for Change
in Expenses
Sales Decrease of $222,123 Decreased due to the Company’s decision to slow down some
revenue streams to prioritize and focus the existing resources in
product optimization for scale up, aligned with the Company’s
strategy.
Cost of sales Decrease of $208,541 Decreased due to aligning with sales decrease.
Compensation Increase of $213,145 Increased due to the Company engaging more consultants as a
and consulting result of the transition of the Company’s strategy.
Marketing and Decrease of $573,252 Decreased due to scaling down of marketing activities.
promotion
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Summary of Quarterly Results

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Loss Per Share
Three months EU Co-Funded (Basic and
ended Sales Project Grants Net Loss Diluted)
$ $ $ $
September 30, 2022 73,785 68,289 (1,484,263) (0.01)
June 30, 2022 71,289 119,673 (1,402,450) (0.01)
March 31, 2022 185,246 158,921 (1,276,493) (0.01)
December 31, 2021 395,783 236,854 (1,527,203) (0.01)
September 30, 2021 291,451 131,290 (1,912,877) (0.02)
June 30, 2021 377,044 166,688 (1,329,178) (0.01)
March 31, 2021 313,449 146,360 (1,116,853) (0.01)
December 31, 2020 142,374 202,731 (1,072,585) (0.01)
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Variances quarter over quarter can be explained as follows:

In the quarters ended September 30, 2022, June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021, and December 31, 2020, net loss includes $287,101, $183,731, $366,608, $453,228, $408,893, $190,249, $114,444, and $105,588, respectively, in non-cash share-based compensation.

Liquidity

In management’s view, given the nature of the Company’s operations and the focus on delivering recurring revenues in the short term, profitability is a medium and longer term goal for the Company.

The Company has financed its operations to date primarily through the issuance of common shares and the exercise of stock options or warrants. The Company continues to seek capital through various means including the issuance of equity and/or debt.

The Financial Statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and to commence profitable operations in the future. These factors may cast significant doubt on the Company’s ability to continue as a going concern. While the Company is exerting its best efforts in this regard, the outcome of these matters cannot be predicted at this time. The Financial Statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue in business.

Capital Resources

The Company’s liquidity and capital resources are as follows:

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September 30, 2022 December 31, 2021
$ $
Cash and cash equivalents 12,692,343 16,107,403
Amounts receivable 670,401 1,067,968
Inventories 43,480 73,522
Prepaid expenses 161,511 189,860
Total current assets 13,567,735 17,438,753
Accounts payables and accrued liabilities (751,743) (1,100,268)
Current portion of lease liabilities (114,717) (298,757)
Deferred project grants (86,963) (603,639)
Working capital 12,614,312 15,436,089
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During the first quarter of 2021, the Company closed a non-brokered private placement of 12,857,142 units of the Company at $0.35 per share for gross proceeds of $4,500,000. In addition, the Company issued 450,000 common shares in connection with the exercise of 450,000 stock options with a weighted average exercise price of $0.32 for total proceeds of $145,600. In addition, the Company issued 7,161,563 common shares in connection with the exercise of 7,161,563 warrants with an exercise price of $0.60 for total proceeds of $4,296,938. In connection with the offering, the Company paid share issuance costs totaling $196,622 in cash and issued 452,280 finders’ units and 150,760 finders’ warrants to eligible finders.

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During the second quarter of 2021, the Company closed a private placement of 19,992,003 units of the Company at $0.61 per share for gross proceeds of $12,195,122. In connection with the offering, the Company paid share issuance costs totaling $1,151,040 in cash and issued 999,600 finders’ warrants to the finder agents. The finders’ warrants will be exercisable into a Class A common share at an exercise price of $0.61 for a period of 3 years from the date of issuance. In addition, the Company issued 20,000 common shares in connection with the exercise of 20,000 stock options with an exercise price of $0.37 for total proceeds of $7,400. In addition, the Company issued 842,247 common shares in connection with the exercise of 842,247 warrants with a weighted average exercise price of $0.60 for total proceeds of $478,348. The proceeds of the financing, options exercised, and warrants exercised will be used for general corporate and working capital, development, marketing, and increasing production capacity.

The net proceeds from the financings are included in the Company’s working capital of $12,614,312 as at September 30, 2022 (December 31, 2021 – $15,436,089).

Common Share Exchange

On September 4, 2019, the Company implemented a squeeze-out transaction, as per the applicable Portuguese law, pursuant to the RTO transaction, whereby the Company acquired the remaining 499,369 shares of YD Ynvisible, S.A., on a one-for-one basis for the Class A common shares of the Company, held by certain Minority Shareholders of YD Ynvisible, S.A. Accordingly, the Company recorded an obligation to issue 499,369 Class A common shares with a fair value of $172,282, which has been reported as RTO transaction costs. As a result of the squeeze-out transaction, the Company now owns 100% of YD Ynvisible, S.A.

In April 2022, the Company issued 5,000 Class A common shares to the SEA Minority Shareholders in exchange for 5,000 common shares of Ynvisible SA.

Cash Flows

Net cash used in operating activities for the nine months ended September 30, 2022 was $3,262,955 (September 30, 2021 - $3,688,738). The cash used consisted primarily of general and administrative expenses, net of non-cash expenditures and a net change in non-cash working capital, detailed in the statement of cash flows.

During the nine months ended September 30, 2022, cash used in investing activities was $55,697 (September 30, 2021 - $82,259) for the purchase of fixed and intangible assets and deposits paid.

During the nine months ended September 30, 2022, cash used in financing activities was $204,272 (September 30, 2021 cash provided by financing activities – $19,425,716). The Company repaid lease liabilities of $204,272 (September 30, 2021 - $247,702).

The Company’s cash and cash equivalents decreased by $3,415,060 from $16,107,403 at December 31, 2021 to $12,692,343 at September 30, 2022.

Proposed Transactions

There are no proposed transactions that will materially affect the performance of the Company other than those disclosed elsewhere in this MD&A.

Off Balance Sheet Arrangements

At September 30, 2022 and as of the date of this report, the Company had no material off-balance sheet arrangements such as guarantee contracts, contingent interest in assets transferred to an entity, derivative instruments obligations or any obligations that trigger financing, liquidity, market or credit risk to the Company.

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Transactions with Related Parties

As of September 30, 2022, the Company had the following directors and officers:

Ramin Heydarpour – Chief Executive Officer and Chairman of the Board Jani-Mikael Kuusisto – Senior VP Ventures, Vice Chairman of the Board Carlos Pinheiro Baptista, PhD – Chief Technology Officer Keith Morton – VP of Sales and Marketing Darren Urquhart, CPA, CA – Chief Financial Officer Inês Henriques, PhD – Director Alexander Helmel – Director Alex Langer – Director Benjamin Leboe – Director

The Company has incurred charges during the nine months ended September 30, 2022 and 2021 from directors and officers, or companies controlled by them, for management and consulting fees and share-based compensation as follows:

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Nine Months ended September 30,
2022 2021
$ $
Jani-Mikael Kuusisto – Salary 64,130 126,348
Jani-Mikael Kuusisto – Share based compensation 4,934 -
Inês Henriques – Salary 105,306 72,507
Inês Henriques – Share based compensation 9,867 -
Tommy Höglund – Consulting fees 29,024 95,091
Tommy Höglund – Share based compensation - 12,332
Michael Robinson – Salary 33,784 108,376
Michael Robinson – Share based compensation - 61,884
Alexander Helmel – Consulting fees 27,000 24,000
Alexander Helmel – Share based compensation 4,934 -
Carlos Pinheiro Baptista – Salary 101,606 94,944
Carlos Pinheiro Baptista – Share based compensation 9,867 -
Benjamin Leboe – Consulting fees 14,500 10,500
Benjamin Leboe – Share based compensation 4,934 -
Ramin Heydarpour - Consulting fees 135,000 46,000
Ramin Heydarpour - Share based compensation 69,582 18,935
Alex Langer – Consulting fees 13,500 6,000
Alex Langer – Share based compensation 55,712 28,335
Darren Urquhart – Consulting fees 22,500 22,500
Darren Urquhart – Share based compensation 4,934 -
Total cash consulting and management fees 546,350 606,266
Total share-based compensation 164,764 121,486
Total compensation for officers and directors 711,114 727,752
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Note: Share based compensation is a non-cash expense for valuing stock option grants that is computed using the Black-Scholes Valuation Model.

As at September 30, 2022, accounts payable and accrued liabilities include $20,500 (December 31, 2021 - $37,225) due to officers and directors. Accounts payable and accrued liabilities due to related parties are unsecured and have no specified terms of repayment. During the nine months ended September 30, 2022, the Company received $nil (September 30, 2021 - $39,714) in rent payments from Jordao Capital Corp., a company controlled by Alexander Helmel.

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Related party transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Disclosure of Data for Outstanding Common Shares, Stock Options, and Warrants

The following table summarizes the outstanding common shares, stock options, and warrants of the Company:

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As at September 30, 2022 Date of this MD&A
Common shares 124,671,915 124,671,915
Stock options 10,334,166 9,634,166
Warrants 20,891,603 20,891,603
Fully Diluted 155,897,684 155,197,684
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Details of the outstanding stock options as at the date of this MD&A:

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Weighted
Average Number of Options Number of Options
Expiry Date Exercise Price $ Outstanding Vested and Exercisable
January 19, 2023 0.30 1,425,000 1,425,000
February 21, 2023 0.40 175,000 175,000
May 25, 2023 0.30 100,000 100,000
May 1, 2024 0.37 1,130,000 1,130,000
October 2, 2024 0.30 252,500 252,500
May 20, 2025 0.33 195,000 195,000
September 16, 2025 0.25 215,000 215,000
November 11, 2025 0.29 125,000 125,000
November 18, 2025 0.30 75,000 75,000
March 17, 2026 1.29 60,000 60,000
June 3, 2026 0.63 100,000 100,000
July 1, 2026 0.75 1,801,666 644,998
July 22, 2026 0.62 80,000 26,667
August 26, 2026 0.55 250,000 250,000
October 20, 2026 0.44 370,000 130,000
December 7, 2026 0.32 500,000 166,666
April 13, 2027 0.23 20,000 -
July 20, 2027 0.20 2,705,000 1,346,250
September 22, 2027 0.20 55,000 13,750
0.39 9,634,166 6,430,831
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Details of the outstanding warrants as at the date of this MD&A:

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Weighted
Average Number of Warrants
Expiry Date Exercise Price $ Outstanding
May 18, 2024 0.76 19,892,003
May 18, 2024 0.61 999,600
0.75 20,891,603
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Controls and Procedures

Disclosure controls and procedures (‘DC&P’) are intended to provide reasonable assurance that information required to be disclosed is recorded, processed, summarized and reported within the time periods specified by securities regulations and that information required to be disclosed is accumulated and communicated to management. Internal controls over financial reporting (‘ICFR’) are intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

TSX Venture listed companies are not required to provide representations in filings relating to the establishment and maintenance of DC&P and ICFR, as defined in Multinational Instrument MI 52-109. In particular, the CEO and CFO certifying officers do not make any representations relating to the establishment and maintenance of (a) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation, and (b) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in their certificates regarding absence of misrepresentations and fair disclosure of financial information. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in MI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

Forward-Looking Statements

All statements made in this MD&A, other than statements of historical facts, are forward-looking statements. The Company’s actual results may differ significantly from those anticipated in the forward-looking statements and readers are cautioned not to place undue reliance on these forward-looking statements. Except as required by securities regulations, the Company undertakes no obligation to publicly release the results of any revisions to forward-looking statements that may be made to reflect events or circumstances after the date of this MD&A or to reflect the occurrence of unanticipated events. Forward-looking statements include, but are not limited to, statements with respect to the development of products, sales growth and global expansion, the impact of the Company's products and services on customers and marketplaces, future financial or operating performance of the Company, the ability to capitalize on future opportunities and estimates regarding the size and scope of target markets and their potential for growth.

In certain cases, forward-looking statements can be identified by the use of words such as “aims”, “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, risks related to the integration of acquisitions; future costs of materials and labor; speed of technology adoption in target markets and emergence of competing technologies, and other risks of the printed electronics and technology industries; and delays in obtaining financing.

Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

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Critical Judgments and Accounting Estimates

When preparing the financial statements in conformity with IFRS, management undertakes a number of judgments, estimates and assumptions about the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The actual results may differ from the judgments, estimates and assumptions made by management.

Significant areas of judgments and estimation uncertainty considered by management in preparing the financial statements are as follows:

a. The amounts disclosed related to fair values of stock options and warrants issued and the resulting effects on profit or loss are based on estimates of future volatility of the Company’s share price, expected lives of the options and expected dividends.
b. The valuation of deferred income tax assets is based on estimates of the probability of the Company utilizing certain tax pools and assets and on the impact of future changes in legislation, tax rates and interpretations by taxation authorities.
c. The application of IFRS 16 requires the Company to make judgments that affect the valuation of the right-ofuse assets and the valuation of lease liabilities. These include: determining agreements in scope of IFRS 16, determining the contract term and determining the interest rate used for discounting of future cash flows. The lease term determined by the Company is comprised of the non-cancellable period of lease agreements, periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. The present value of the lease payment is determined using a discount rate representing the rate of a commercial mortgage rate, observed in the period when the lease agreement commences or is modified.
d. Depreciation of tangible and intangible assets is dependent upon estimates of useful lives, which are determined through the exercise of judgement. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions and the useful lives of assets.
e. At the end of each reporting period, the Company reviews the carrying amounts of its long-lived assets consisting of Fixed Assets, Intangible Assets, and Goodwill to determine whether there is any indication that the carrying amount is not recoverable. The determination of whether any such indication exist requires significant management judgment. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When an individual asset does not generate independent cash flows, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cashgenerating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs of disposal and value in use. Fair value is determined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. Many factors are used in assessing recoverable amounts and are outside of the control of management and it is reasonably likely that assumptions and estimates will change from period to period. These changes may result in future impairments.

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f. Judgement is required to determine if the Company’s acquisitions represent a business combination or an asset purchase. The assessments requires management to determine if the acquisitions acquired represented an integrated set of activities with inputs, processes and outputs. The acquisition of rdot AB was considered to be an asset acquisition.

Estimates are made in determining the fair value of assets and liabilities, including the valuation of separately identifiable intangibles acquired as part of an acquisition. Management exercises judgment in estimating the probability and timing of when cash flows are expected to be achieved, which is used as the basis for estimating fair value. Future performance results that differ from management’s estimates could result in changes to liabilities recorded, which are recorded as they arise through profit or loss. The fair value of identified intangible assets is determined using appropriate valuation techniques which are generally based on a forecast of the total expected future net cash flows of the acquiree. Valuations are highly dependent on the inputs used and assumptions made by management regarding the future performance of these assets and any changes in the discount rate applied. Acquisitions that do not meet the definition of a business combination are accounted for as asset acquisitions. Consideration paid for an asset acquisition is allocated to the individual identifiable assets acquired and liabilities assumed based on their relative fair values. Asset acquisitions do not give rise to goodwill.

g. The amounts receivable balance is recorded at the estimated recoverable amount, which involves the estimate of uncollectible accounts.
h. Inventories are carried at the lower of cost and net realizable value which requires the Company to utilize estimates related to selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to sell the inventory.
i. In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, customers, economies, and financial markets globally, potentially leading to an economic downturn. It has also disrupted the normal operations of many businesses, including the Company’s. This outbreak could decrease spending, adversely affect demand for the Company’s product and harm business and results of operations. It is not possible to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or results of operations at this time.

Risks and Uncertainties

The Company is subject to a number of risks and uncertainties due to the nature of its business. The Company’s activities expose the Company to various operational and financial risks that could have a significant impact on its level of operating cash flows in the future. Readers are advised to study and consider risk factors stressed below. The following are identified as main risk factors that could cause actual results to differ materially from those stated in any forward-looking statements made by, or on behalf of, the Company.

COVID-19 Pandemic

In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, customers, economies, and financial markets globally, potentially leading to an economic downturn. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our product and harm our business and results of operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business or results of operations at this time.

MD&A

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Global Semiconductor Shortage

The 2020/2021 semiconductor shortage has highlighted the need for adjustments in capacity and sourcing patterns between automakers, tier-1 suppliers, semiconductor suppliers, and their foundries. The Company’s contract manufacturing partners and the Company’s clients rely on a supply of semiconductor chips for a wide range of functional electronic and display needs. While the impact on across all electronics sector production is already significant, the situation remains fluid and the Company’s contract manufacturing partners and customers are tracking this situation on an ongoing basis.

Operational Risks

The Company is subject to operational risk from such factors as personnel and/or environmental accidents at production facilities; fire; patent disputes; changes in supplier pricing; non-performance of obligations under existing agreements; technical difficulties including plant and equipment breakdown; loss of significant customers; problems with product transportation and logistics; legal action from persons or entities adversely impacted by the Company’s business; and the ability to obtain financing to maintain operations.

Customer Demand

The Company is subject to risk from cyclic customer demand for its services and products. Global, regional and seasonal economic, political and military events including recessions and wars; competition including pricing and availability of similar products from competitors; changes in technology; and changes in laws and regulations affecting the Company’s customers.

Governmental Regulation

Regulatory standards continue to change, making the review process longer, more complex and therefore more expensive. Electrochromic display production on the Company’s facilities is affected by government regulations relating to such matters as environmental protection, health, safety and labour, restrictions on production, price control, and tax increases. There is no assurance that future changes in such regulations couldn’t result in additional expenses and capital expenditures, decreasing availability of capital, increased competition, reserve uncertainty, title risks, and delays in operations. The Company relies on the expertise and commitment of its management team, advisors, employees and contractors to ensure compliance with current laws.

Financial Risks

The Company is exposed to financial risks arising from its financial assets and liabilities. The Company manages its exposure to financial risks by operating in a manner that minimizes its exposure to the extent practical. The main financial risks affecting the Company are:

Credit Risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company’s cash and cash equivalents are exposed to minimal credit risk. The credit risk on cash and cash equivalents is low because the counterparties are highly rated banks.

Cash and amounts receivable are subject to the impairment requirements of IFRS 9, however, impairment was not identified. The carrying amount of cash, amounts receivable and deposits represents the maximum credit exposure.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s cash and cash equivalents is exposed to minimal interest rate risk as the Company invests cash at floating rates of interest in highly liquid instruments, when applicable.

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Liquidity Risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company ensures that it has sufficient capital to meet short term financial obligations after taking into account its cash on hand.

Foreign Currency Risk

The Company’s functional currency is the Canadian dollar. The Company funds the operations of Ynvisible SA in Portugal, Ynvisible GmbH in Germany, and Ynvisible Production in Sweden by using Euros and Swedish krona, respectively, converted from its Canadian dollar bank accounts. Based on the Company’s Euro and Swedish krona denominated financial instruments at September 30, 2022, a 10% change in exchange rates between the Canadian dollar and the Euro and Swedish krona, respectively, would result in an approximately $135,900 and $43,800, respectively, change in foreign exchange gain or loss.

Other MD&A Requirements

This MD&A is intended to assist the reader’s understanding of Ynvisible and its operations, business, strategies, performance and future outlook from the perspective of management.

This MD&A may contain management estimates of anticipated future trends, activities, or results; these are not a guarantee of future performance, since actual results may vary based on factors and variables outside of management’s control. Management is responsible for the preparation and integrity of the financial statements, including the maintenance of appropriate information systems, procedures and internal controls. Management is also responsible to ensure that information disclosed externally, including the financial statements and MD&A, is complete and reliable. Ynvisible’s Board of Directors follows recommended corporate governance guidelines for public companies to ensure transparency and accountability to shareholders. The Board’s Audit Committee meets with management to review the financial statement results, including the MD&A, and to discuss other financial, operating and internal control matters. The Audit Committee is free to meet with the independent auditors at any time.

Approval

A copy of this MD&A will be provided to anyone who requests it and can be located, along with additional information, on the SEDAR website at www.sedar.com including, not but limited to:

the Company’s condensed interim consolidated financial statements for the three and nine months ended September 30, 2022 and 2021; and
the Company’s audited consolidated financial statements for the years ended December 31, 2021 and 2020.

The Board of Directors of Ynvisible has approved the disclosure contained in this MD&A as of the date of this report.

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Ynvisible Interactive Inc. — Interim / Quarterly Report 2022

43745_rns_2022-11-29_5166bf0c-125f-43bc-874f-0a85805a5904.pdf