Management s Discussion & Analysis

Management s Discussion & Analysis For the three month interim period ended March 31, 2014 Medworxx Solutions Inc. 700-121 Richmond St W. Toronto, ON M5H 2K1

This Management s Discussion and Analysis ( MD&A ) comments on the financial condition and operations of Medworxx Solutions Inc. ( Medworxx or the Company ), for the three months 31, 2014 and updates our MD&A for fiscal year. The information contained herein should be read in conjunction with the Consolidated Financial Statements and Auditor s Report for fiscal and the unaudited Interim Consolidated Financial Statements for the three months 31, 2014. The Company prepares its Consolidated Financial Statements in accordance with International Financial Reporting Standards ( IFRS ) as set out in the Handbook of the Canadian Institute of Chartered Accountants ( CICA Handbook ). In 2010, the CICA Handbook was revised to incorporate IFRS, and requires publicly accountable enterprises to apply such standards effective for years beginning January 1, 2011. Accordingly, the Company has reported on this basis in these consolidated financial statements. All financial information contained in this MD&A and in the consolidated financial statements has been prepared in accordance with IFRS except for certain Non- IFRS Measures on page 19 of this MD&A. COMPANY PROFILE Founded in 2004 and based in Toronto, Ontario, Medworxx Solutions Inc. (Medworxx) delivers health information technology solutions to hospitals in Canada, the United States and the United Kingdom. Medworxx helps more than 300 hospitals meet daily challenges in patient flow and requirements in compliance and education. Powered by principles of utilization management, Medworxx Patient Flow Solution is based on clinical evaluations of every patient, every day from admission to discharge. Medworxx Patient Flow data enables hospitals to assess and analyze patient flow barriers, interruptions and delays to optimize care intensity, advance care plans and to gain insight into strategic indicators of quality and performance. Medworxx Patient Flow serves more than 34% of acute care beds in Canada. Medworxx Compliance and Education platform enables healthcare organizations to create and deploy relevant content, and to support regulatory and compliance requirements. Hospitals engage the power of knowledge to increase competency, improve quality, reduce costs and simplify distribution of information to staff. Medworxx s Management Team is comprised of experienced leaders in healthcare, sales, marketing, IT development, and finance. 2014 Management s Discussion and Analysis Page 2

COMPANY HIGHLIGHTS The Annualized Contract Value of recurring revenue at March 31, 2014 was 4.9M as compared to 4.8M at December 31,, an increase of 2.1%. Revenue for the three months 31, 2014 was 1,599,305, representing an increase of 10.1% over revenues of 1,452,806 in the same period last year. Revenue from the Patient Flow Platform for the three months 31, 2014 increased to 1,187,438 from revenues of 923,775 for the three months 31,, an increase of 263,663 representing growth of 28.5%. Revenue from the Compliance and Education Platform for the three months 31, 2014 decreased to 402,977 from revenues of 506,159 for the three months 31,, a decrease of 103,182 representing a decline of 20.4%. William Osler Health System (Osler) selected the Medworxx Patient Flow Platform to improve patient flow across its two hospital sites. Osler will implement the Medworxx Clinical Criteria module for 849 patient beds at Brampton Civic Hospital and Etobicoke General Hospital. To support its vision of patient-inspired health care without boundaries, Osler will introduce the Medworxx Clinical Criteria module to help monitor, plan and implement processes to improve inpatient resource utilization. Thunder Bay Regional Health Sciences Health Centre, ON, Canada purchased additional Medworxx Patient Flow modules Bed Management and Forms & Assessments. International deployment of the Medworxx Patient Throughput Review ( PTR ) program (previously referred to as the Appropriate Length Stay Audit ALSA ) is underway. Diagnostic patient flow reviews have been performed in several hospitals including: St. Joseph's Healthcare, ON, Canada; Niagara Health System, ON, Canada (Greater Niagara General and Welland Hospital); Capio Santé, France; Derby Hospitals NHS Foundation Trust, UK; and Groupe Hospitalier Paris Saint Joseph, France. A number of contracts were signed in the quarter for the Medworxx Compliance and Education platform including: Lady Dunn Health Centre, ON, Canada; and Transform Shared Service, ON, Canada. Blind River District Health Centre, ON, Canada, a client since 2010, and Kirkland and District Hospital, ON, Canada, a client since 2006, also expanded their use of Medworxx and have licensed additional users. Medworxx also agreed on a strategic collaboration with Leidos Health (formerly part of SAIC and includes the businesses of former maxit Healthcare and Vitalize Consulting Solutions) which formalizes their agreement to leverage each organization s global expertise in patient flow optimization. Leidos Health, a wholly-owned 2014 Management s Discussion and Analysis Page 3

subsidiary of Leidos, employs over 2,000 healthcare consultants globally and specializes in a variety of healthcare solutions. Medworxx appointed Mr. Har Grover and Mr. Steve Garrington to the Medworxx Board of Directors. The Company also created a Corporate Advisory Committee to assist with the ongoing expansion strategy into international markets. 2014 Management s Discussion and Analysis Page 4

COMPANY STRATEGY Medworxx strategy is highlighted as follows: To become the de facto standard platform for patient flow management To expand distribution channels by developing relationships with healthcare management consulting organizations in new and existing markets To continuously develop or acquire synergistic products To enter new healthcare related markets in international geographies using existing technologies To leverage the Medworxx Patient Flow Patient Throughput Review program as a review and diagnostic solution, prior to hospitals implementing the solution operationally 2014 Management s Discussion and Analysis Page 5

Operating Results Medworxx Solutions Inc., Summary Financial Analysis: 31 2014 31 % Increase Revenues 1,599,305 1,452,806 10.1% Cost of sales 201,425 147,501 36.6% Selling, marketing and administrative expenses 1,264,793 1,175,501 7.6% Research and development expenses 476,142 455,118 4.6% Net Loss (311,948) (321,814) SUMMARY OF OPERATING RESULTS This report analyses the results for the three month period 31, 2014, with comparisons to the same period for the prior year. The interim unaudited consolidated financial statements for the period 31, 2014 (the Financial Statements) form an integral part of this Management s Discussion and Analysis. The Financial Statements can be found at www.sedar.com. Medworxx Solutions Inc., Summary of Operating Results: 31 2014 31 Revenue 1,599,305 1,452,806 Net Loss (311,948) (321,814) Net Loss per Share Basic (0.0117) (0.0123) Weighted average number of shares outstanding - Basic 26,682,125 26,265,158 Net Loss per Share Fully Diluted (0.0117) (0.0123) Weighted average number of shares outstanding - Diluted 26,682,125 26,265,158 2014 Management s Discussion and Analysis Page 6

Types of Revenue The Company generates revenue from the sale of software perpetual licenses, sale of annual renewable software licenses, maintenance and hosting services, and consulting services. Certain agreements provide for the delivery of application software and continuing post-contract services (PCS), such as support and maintenance for the application software sold. Revenue is allocated to multiple elements using the relative fair value method. For the three months 31, 2014, the Company generated total revenue of 1,599,305, representing an increase of 10.1% over revenue of 1,452,806 for the same period last year. The increase is attributable primarily to growth in the Patient Flow platform of 28.5% offset by the decrease in the Compliance and Education platform of 20.4%; the success and revenue growth of the Company is represented across multiple products and geographies. 2014 Management s Discussion and Analysis Page 7

Revenue Composition Recurring revenue includes annual renewable software license fees, maintenance services and hosting fees. Recurring revenue comprised of over 75% of total revenue, or 1,199,636, for the three months 31, 2014 in comparison to 77%, or 1,120,051, in the same period last year. Recurring revenue is a non-ifrs measure. As part of the sale of either a perpetual or an annual renewable license, a client can acquire, for a separate fee, maintenance and support services for the software. These maintenance and support services are renewable by the client on an annual basis as of the anniversary date of software purchase. The client may also acquire hosting services from the Company whereby the software is hosted on the Company s servers and the client is charged a recurring monthly fee for these services. Given the nature of this revenue stream and high probabilities of renewals, management classifies this revenue stream as recurring. Maintenance and hosting revenue for the three months 31, 2014 was 465,334, representing a 6.1% increase from revenue of 438,536 for the three months 31,. 2014 Management s Discussion and Analysis Page 8

Consulting Services include installation, implementation, training, and integration related to Medworxx software. Customers are charged on a time and materials basis. Consulting services revenue for the three months ended March 31, 2014 was 243,278 representing a 38.6% increase in revenue of 175,560 for the three months ended March 31,. The revenue growth of the Company has been derived from the growth of the Patient Flow platform and partially offset by the decline in revenue in the Compliance and Education platform. The patient flow platform increased by 28.5% to 1,187,438 for the three months 31, 2014 from 923,775 for the three months ended March 31,. The following table highlights Revenue by product information for the eight consecutive quarters 31, 2014: Revenue by Product 2014 Q1 Q4 Q3 Q2 Q1 2012 Q4 2012 Q3 2012 Q2 Compliance & Education () 402,977 471,613 439,664 369,343 506,159 383,398 1,174,537 510,880 Growth on Prior Years Quarter (20.4%) 23.0% (62.6%) (27.7%) 28.4% (21.2%) 200.7% 7.5% Growth on Prior Quarter (14.6%) 7.3% 19.0% (27.0%) 32.0% (67.4%) 129.9% 29.6% Patient Flow () 1,187,438 1,064,800 919,436 1,160,951 923,775 852,068 885,115 860,181 Growth on Prior Years Quarter 28.5% 25.0% 3.9% 35.0% 13.6% 25.0% 37.9% 28.6% Growth on Prior Quarter 11.5% 15.8% (20.8%) 25.7% 8.4% (3.7%) 2.9% 5.7% Other () 8,890 13,396 27,428 8,353 22,872 81,083 25,310 41,585 Growth on Prior Years Quarter (61.1%) (83.5%) 8.4% (79.9%) (53.6%) (0.4%) (72.8%) (54.2%) Growth on Prior Quarter (33.6%) (51.2%) 228.4% (63.5%) (71.8%) 220.4% (39.1%) (15.6%) Total () 1,599,305 1,549,808 1,386,529 1,538,647 1,452,806 1,316,548 2,084,962 1,412,646 Growth on Prior Years Quarter 10.1% 17.7% (33.5%) 8.9% 15.6% 5.4% 85.2% 14.4% Growth on Prior Quarter 3.2% 11.8% (9.9%) 5.9% 10.3% (36.9%) 47.6% 12.4% 2014 Management s Discussion and Analysis Page 9

The success and revenue growth of the Company is represented by growth in the Patient Flow platform across multiple geographies. Medworxx is working to build its distribution channels in Canada, the United States, the United Kingdom, Australia, and France. Revenue for the quarter 31, 2014 was approximately 82.4% (84.1% - ) from Canadian clients, 9.8% (4.6% - ) from the United Kingdom clients, 5.4% (11.3% - ) from United States clients, and 2.4% (nil ) from French clients. The Company s revenue by geographic region is as follows: 31 2014 31 Canada 1,317,453 1,221,324 UK 157,383 67,364 USA 86,286 164,118 France 38,183 - The Company defines Annualized Contract Value ( ACV ) of recurring revenue as the contracted annual renewable software license fees, maintenance services and hosting fees. The ACV of recurring revenue at March 31, 2014 with existing clients was 4,891,146 as compared to 4,793,123 at December 31,, an increase of 2.0% and as compared to 4,626,583 at March 31,, a 5.7% increase. The growth in ACV of recurring revenue is comprised of growth of 13% (425,792) for the Patient Flow platform, and reduction in Compliance and Education platform of 11% (147,095) and in Other of 29% (14,134). As the full value of such contracts is recognized as revenue over 12 months, the growth in this value is an important metric for the Company. This is a non-ifrs measure. 2014 Management s Discussion and Analysis Page 10

Medworxx Patient Flow platform, consisting of three modules Critical Criteria, Bed Management, and Forms and Assessment, is licensed on a per bed basis and the revenue generated per bed is primarily dependent on a number of factors such as the number of beds licensed, modules purchased, price increases and support upgrades. The following table highlights: the Annualized Contract Value ( ACV ) of Patient Flow recurring revenue the contracted annual renewable software license fees, maintenance services and hosting fees related to the Patient Flow platform; the revenue generated per bed the ACV, less revenue generated from Patient Throughput Reviews, related to the number of beds licensed; and modules licensed represents the total number of modules sold for the eight consecutive quarters 31, 2014: Revenue Generating Units 2014 2012 2012 2012 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 ACV of Patient Flow recurring revenue 3,634,342 3,520,904 3,479,080 3,414,488 3,208,550 2,956,441 2,956,024 2,892,089 Growth on Prior Year s Quarter 13.3% 19.1% 17.7% 18.1% 28.0% Growth on Prior Quarter 3.2% 1.2% 1.9% 6.4% 8.5% 0.0% 2.2% 15.4% Total beds under license 28,358 27,816 27,598 27,598 27,578 26,469 26,584 25,990 Growth on Prior Year s Quarter 2.8% 5.1% 3.8% 6.2% 26.8% Growth on Prior Quarter 1.9% 0.8% 0.0% 0.1% 4.2% (0.4%) 2.3% 19.5% Average revenue generated per bed () 123.90 122.24 121.69 119.35 116.34 111.69 111.20 111.28 Growth on Prior Year s Quarter 6.5% 9.4% 9.4% 7.3% 1.0% Growth on Prior Quarter 1.4% 0.5% 2.0% 2.6% 4.2% 0.4% (0.1%) (3.4%) Total modules licensed 40,025 38,773 37,754 34,678 34,548 32,010 32,125 31,381 Growth on Prior Year s Quarter 15.9% 21.1% 17.5% 10.5% 27.3% Growth on Prior Quarter 3.2% 2.7% 8.9% 0.4% 7.9% (0.4%) 2.4% 15.6% Average revenue generated per license () 87.78 87.69 88.95 94.98 92.87 92.36 92.02 92.16 2014 Management s Discussion and Analysis Page 11

Expenses Operating expenses before loss/gain on foreign exchange and interest on long-term debt for the three months 31, 2014 were 1,740,935, an increase of 6.8% over expenses of 1,630,619 for the three months 31,. The increase in expenses is primarily related to increased headcount. The Company s full time employee count has grown 8.7% to the three months 31, 2014 from the three months 31,. These numbers are in line with Management s planned investment in the expansion of sales and marketing and distribution channels for the Medworxx Patient Flow platform. Sales, marketing and administrative expenses for the three months 31, 2014 were 1,264,793 representing a 7.6% increase over expenses of 1,175,501 for the same period last year. The increase is due primarily to the planned sales and marketing investment in resources and other operating costs to build the sales force and channels for Medworxx Patient Flow Solution. Research and Development expenses for the three months 31, 2014 were 476,142 representing a 4.6% increase over expenses of 455,118 for the same period last year. 2014 Management s Discussion and Analysis Page 12

Results of Operations The following table highlights selected financial information for the eight consecutive quarters 31, 2014: 2014 Q1 Q4 Q3 Q2 Q1 2012 Q4 2012 Q3 2012 Q2 Revenues () 1,599,305 1,549,809 1,386,529 1,538,648 1,452,806 1,316,548 2,084,962 1,412,647 Net Income / (Loss) () (311,948) (330,723) (453,623) (236,319) (321,815) (298,440) 323,003 (57,884) EBITDA () (275,304) (243,337) (426,874) (210,649) (298,212) (259,613) 512,695 5,865 Adjusted EBITDA () (262,896) (221,722) (377,534) (161,110) (244,064) (178,884) 579,898 42,886 Net income (loss) per share - Basic () (0.012) (0.012) (0.017) (0.009) (0.012) (0.011) 0.013 (0.002) Weighted average number of shares outstanding - Basic 26,682,125 26,470,321 26,343,278 26,330,127 26,265,158 26,213,380 25,734,309 25,734,309 Net income (loss) per share - Diluted () (0.012) (0.012) (0.017) (0.009) (0.012) (0.011) 0.012 (0.002) Weighted average number of shares outstanding - Diluted 26,682,125 26,470,321 26,343,278 26,330,127 26,265,158 26,213,380 27,206,181 25,734,309 For the three months 31, 2014 the Company incurred a net loss of 311,948 on revenue of 1,599,305 versus a net loss of 321,815 on revenue of 1,452,806 for the same period last year. This change is a result of the Company s commitment to growing the Patient Flow Solution by building product enhancements and investing in sales, marketing and channel development. EBITDA, defined as Earnings Before Interest, Taxation, Depreciation, and Amortization, a non-ifrs measure, for the three months 31, 2014 was (275,304) as compared to an EBITDA of (298,212) for the same period last year. Adjusted EBITDA, defined as Earnings Before Interest, Taxation, Depreciation, Amortization, and Stock Option Expense, a non-ifrs measure, for the three months 31, 2014 was (262,896) as compared to an Adjusted EBITDA of (244,064) for the same period last year. 2014 Management s Discussion and Analysis Page 13

Financial Condition A discussion of the significant changes in our Consolidated Balance Sheets: March 31, 2014 December 31, Change % Change Cash 2,418,831 2,900,649 (481,818) (16.6%) Trade and other receivables 881,108 1,174,336 (293,228) (25.0%) Deferred revenue 2,222,807 2,614,489 (391,682) (15.0%) Cash was 2,418,831, a decrease of 481,818 or 16.6% from December 31,. The primary reason for the decrease in cash is the funding of operating activities of 499,184 (refer to Liquidity and Capital Assets for a discussion of the changes in cash). Trade and other receivables were 881,108, a decrease of 293,228 or 25.0% which is driven by the timing of the customer billing cycle. Deferred revenues were 2,222,807 representing a decrease of 391,682 or 15.0% from December 31, which is driven by the timing of the customer billing cycle of recurring contracts. Obligations and Commitments COMMITMENTS The Company s contractual obligations and commitments consist of its lease on its head office facilities located in Toronto, ON. The lease provides for payment of utilities, property taxes and operating costs. In addition, the Company is committed to operating lease payments for computer software, equipment and office furniture. The Company has also entered into a lease agreement with Royal Bank of Canada, effective June 12,. RBC has acquired and leased to the Company, office furniture and equipment (see Credit Facilities section). 2014 Management s Discussion and Analysis Page 14

STOCK BASED PAYMENTS During the year ended December 31, 2007 and prior to the reverse takeover transaction with Medworxx Inc., the board of directors approved loans totalling 79,887 to members of the Company s senior executive, for the purpose of exercising 998,215 vested stock options. These loans are secured by the shares acquired. The loans bear simple interest at 5% per annum. To the extent that these loans receivable by the Company from related parties are secured against shares of the Company, these shares are excluded from outstanding shares for the purposes of calculating basic earnings per share and are considered contingently returnable for the purposes of calculating diluted earnings per shares. The loans and interest are to be repaid quarterly over the following 19 months and are repayable in full by October 12, 2015, due to an extension granted by the board of directors. At March 31, 2014 the outstanding loan receivable and accrued interest of 38,883 (March 31, - 44,267) was included in contributed surplus and secured against 294,108 Class A common shares. Interest for the period 31, 2014 amounted to 529 (March 31, - 529) and is included in contributed surplus. INCOME TAXES As at January 1, 2014, the Company had 5,440,033 of non-capital losses in Canada, which can be used to reduce taxable income in future years. 2014 Management s Discussion and Analysis Page 15

Liquidity and Capital Assets The Company s cash position at March 31, 2014 was 2,418,831 and 2,610,226 at March 31,. Trade and other receivables were 881,108, a decrease of 293,228 or 25.0% which is driven by the timing of the customer billing cycle. CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 31 2014 31 Change Change % Net income (loss) (311,948) (321,814) 9,866 3.1% Items not affecting cash 49,875 91,116 (41,241) 45.3% Net change in non-cash working capital (237,112) (798,488) 561,376 70.3% Cash used in operating activities (499,184) (1,029,186) 530,002 51.5% The company incurred a net loss of 311,948 for the three months 31, 2014 compared to a net loss of 321,814, an improvement of 9,866 from last year, as described in the Operating Results section of this MD&A. Items not affecting cash decreased by 49,875 represented by the decrease in stock-based compensation and accrued interest on exercised loans of 48,058, partially offset by the increase in amortization and depreciation of 6,817. Changes in non-cash working capital increased 561,376 in comparison to prior year. This is primarily due to the large decrease in trade and other receivables from 2012 to of 834,164 which was caused by timing of billings, partially offset by the increase in accounts payable and accrued liabilities from 2012 to of 159,732. 2014 Management s Discussion and Analysis Page 16

CASH USED IN INVESTING ACTIVITIES 31 2014 31 Favourable (Unfavourable) Favourable (Unfavourable) % Cash used in investing activities (58,768) (19,391) (39,377) 203.1% Cash used in investing activities relates to the purchase of equipment and intangible assets for the three months 31, 2014. CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 31 2014 31 Favourable (Unfavourable) Favourable (Unfavourable) % Cash provided used in financing activities 76,134 (384,396) 460,530 (119.8%) Cash provided by financing activities was 76,134 for the three months 31, 2014 and the cash used in financing activities was 384,396 for the same period in the prior year. The difference is mainly due to the repayment of convertible debentures (407,050 including interest) in the first quarter of and broker warrants that were exercised in the first quarter of 2014 (88,400). CREDIT FACILITIES The Company signed an agreement with Royal Bank of Canada, dated July 27, 2012, to provide a 500,000 revolving demand facility, bearing interest at the Royal Bank prime rate plus 3.5%. This borrowing cannot exceed the aggregate of 75% of certain accounts receivable. The bank has a first ranking security interest in all property of the Company. As the company did not borrow against this facility, there was no interest incurred and paid on the Royal Bank loan for the three months 31, 2014 and. The Company is in compliance with all debt covenants at March 31, 2014. The Company has entered into a performance based loan agreement with the Health Technology Exchange, 2014 Management s Discussion and Analysis Page 17

effective March 31, 2011. The Health Technology Exchange is a program that supports the Government of Ontario to accelerate innovation, commercialization and growth of Ontario s medical and assistive technologies sector. The Company distributes and sells the Medworxx Patient Flow Solution platform in the United Kingdom (the project). The loan is a non-revolving term loan in the maximum principal amount of up to 50,000 to assist the Company with partial financing of the project. Interest is payable at 4.25% per annum. Repayment is based on the commercialization of the project. Each payment shall be equal to 10% of the gross revenue derived from the Continuum Solutions license for the preceding fiscal year. Repayment will be required on June 30, 2014 for sales occurring within the fiscal year and annually, thereafter, until the obligations are repaid. At January 9, 2012, the company received 45,000 under the loan. The first repayment of 7,474 was made on the performance based loan on August 15, and as at March 31, 2014, 37,526 is outstanding. The Company has entered into a lease agreement with Royal Bank of Canada, effective June 12,. RBC has acquired and leased to the Company, property and equipment. Interest is payable at 6.00% per annum with a lease term of 60 months and an option to purchase the equipment for 1.00. At December 31,, the company received of 206,770 and accounted for it as a finance lease. CONTINGENT OFF-BALANCE SHEET AND OTHER ARRANGEMENTS The Company has obligations with respect to license, maintenance and support arrangements for any 12 month period. This obligation is reflected on the Company s balance sheet through its deferred revenue balance. Outside of deferred revenue, the Company has no material obligations or contingencies, other than described below. On October 19, 2011, a former employee filed suit against the Company claiming wrongful dismissal and breach of contract in the amount of 323,471. The Company believes that the claims are without merit and the Company will take such action as is advised to protect the Company s interests. The proceedings are still in an early stage and as such there is uncertainty surrounding the final outcome. However, the Company does not believe that the final outcome will have a material adverse effect on the financial position and results of operations. 2014 Management s Discussion and Analysis Page 18

Critical Accounting Policies and Estimates A description of the Company s accounting estimates that are critical to determining the Company s financial results and changes to accounting policies. The Company s interim consolidated financial statements are prepared in accordance with IFRS, which require the Company to make estimates and assumptions that affect the amounts reported in its consolidated interim financial statements. It has identified several policies as critical to the business operations and essential for an understanding of the results of operations. The application of these and other accounting policies are described in note 2 of the Company s interim consolidated financial statements. The Company believes there have been no significant changes in its critical accounting estimates from what was previously disclosed in its MD&A for the year ended December 31,. These policies are incorporated herein by reference. Preparation of the interim consolidated financial statements requires the Company to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the interim consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could vary significantly from those estimates. Significant areas requiring the Company to make estimates include: intangible assets impairment testing, royalty liabilities, accounts receivable and convertible debentures. Current Market Environment INTERNAL CONTROL OVER FINANCIAL REPORTING There were no changes that are likely to affect or materially affect the internal control over the Company s financial reporting. RECONCILIATION AND DEFINITION OF NON-IFRS MEASURES A description and calculation of certain measures used by management Recurring Revenue Recurring revenue is defined as annual renewable software license fees, maintenance services and hosting fees. 2014 Management s Discussion and Analysis Page 19

The Company defines annualized contract value of deferred revenue as the contracted annual renewable software license fees, maintenance services and hosting fees. Earnings before interest, taxation, depreciation and amortization ( EBITDA ) EBITDA is a measure used by management to evaluate operational performance. It is also a common measure that is reported on and used by investors in determining a company s ability to incur and service debt as well as a valuation methodology. Management believes that EBITDA enhances the information provided in the consolidated interim financial statements. EBITDA is a non-ifrs measure and should not be considered an alternative to operating income or net income (loss) in measuring the Company s performance. EBITDA should not be used as an exclusive measure of cash flows because it does not consider the impact of working capital growth, capital expenditures, debt principal reductions and other sources and uses of cash which are disclosed in the consolidated interim statements of cash flows. The following chart reflects the Company s calculation of EBITDA: EBITDA 31 2014 31 Net income (loss) (311,948) (321,814) Add: Interest (294) (6,520) Add: Amortization and impairment 36,939 30,122 EBITDA (275,304) (298,212) Adjusted EBITDA Adjusted EBITDA, defined as Earnings before Interest, Taxation, Depreciation, Amortization, and Stock Option Expense is an additional measure used by management to evaluate cash flows and the Company s ability to service debt. Adjusted EBITDA is a non-ifrs measure and should not be considered an alternative to operating income or net income (loss) in measuring the Company s performance. 2014 Management s Discussion and Analysis Page 20

The following chart reflects the Company s calculation of Adjusted EBITDA: Adjusted EBITDA 31 2014 31 EBITDA as above (275,304) (298,212) Add: Stock option expense 12,408 54,148 Adjusted EBITDA (262,896) (244,064) Risks and Uncertainties The Company operates in a dynamic environment that exposes it to a number of risks and uncertainties. For a description of the risks to which the Company is exposed, please refer to the audited Consolidated Financial Statements of the Company for the year ended December 31, and Management s Discussion and Analysis, which can be found on SEDAR at www.sedar.com. 2014 Management s Discussion and Analysis Page 21

FORWARD LOOKING STATEMENTS This MD&A contains forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as plans, expects or does not expect, is expected, budgets, estimates, intends, anticipates or does not anticipate, or believes, or recurring 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. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this MD&A. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to: the ability of the issuer to obtain financing if required; the economy generally; consumer interest in the services and products of the Company; competition; and anticipated and unanticipated costs. While the Company anticipates that subsequent events and developments may cause its views to change, the Company specifically disclaims any obligation to update these forward-looking statements except as may be required by applicable securities legislation. These forward-looking statements should not be relied upon as representing the Company s views as of any date subsequent to the date of this MD&A. 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. The factors identified above are not intended to represent a complete list of the factors that could affect the Company. 2014 Management s Discussion and Analysis Page 22