Hello Pal International : Management Discussion and Analysis for the nine months ended November 30, 2021

Management Discussion and Analysis

For the nine months ended November 30, 2021

Hello Pal International Inc.

Report Dated January 27, 2022

INTRODUCTION

The following management's discussion and analysis of financial condition and results of operations ("MD&A") for the three and nine months ended November 30, 2021 prepared as of January 27, 2022, should be read in conjunction with the unaudited condensed interim consolidated financial statements for the three and nine months ended November 30, 2021 and the related notes thereto of Hello Pal International Inc. ("the Company"), together with the audited consolidated financial statements of the Company for the year ended February 28, 2021 as well as the accompanying MD&A for the year then ended.

The referenced consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board and as applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. The accounting policies and methods of computation followed in the preparation of the condensed interim consolidated financial statements are identical to those followed in the preparation of the audited financial statements for the year ended February 28, 2021. All dollar amounts are expressed in Canadian dollars unless otherwise indicated.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

Certain statements contained in this listing statement constitute "forward-looking statements." These statements, identified by words such as "plan," "anticipate," "believe," "estimate," "should," "expect" and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that 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, general business, economic, competitive, political and social uncertainties; lack of brand awareness; user acceptance of the Company's online applications and Livestream services, limited operating history of the Company; market fluctuations; and retention of key personnel, as well as those factors discussed in the section titled "Risk Factors."

Forward looking statements are based on a number of material factors and assumptions, including no material change to competitive environment, the Company will be able to access sufficient qualified staff, and there will be no material changes to the tax and other regulatory requirements governing the Company. While the Company considers these assumptions may be reasonable based on information currently available to it, these assumptions may prove to be incorrect. Actual results may vary from such forward-looking information for a variety of reasons, including but not limited to risks and uncertainties disclosed in the section titled "Risk Factors."

The Company intends to discuss in its quarterly and annual reports any events or circumstances that occurred during the period to which such documents relate that are reasonably likely to cause actual events or circumstances to differ materially from those disclosed in this MD&A. New factors emerge from time to time, and it is not possible for management to predict all of such factors and to assess in advance the impact of each such factor on our business or the extent to which any factor, or combination of such factors, may cause actual results to differ materially from those contained in any forwarding looking statement.

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GENERAL

The Company was incorporated in British Columbia on October 2, 1986 and changed its name to Hello Pal International Inc. on May 9, 2016.

The Company is the owner of an international social networking platform (the "Hello Pal Platform"). The Hello Pal Platform is a proprietary suite of mobile applications that focus on international social interaction, language learning and live streaming. Hello Pal's overriding mission is to bring the world closer together through social interaction, language learning and travel.

Hello Pal's core business is an international livestreaming service that operates through the flagship Hello Pal app. The livestreaming service allows Hello Pal app users to broadcast themselves to other users in real time and receive virtual gifts and coins, which can be redeemed for cash. Livestreaming is primarily used by users in China, Middle East and Southeast Asia.

The Hello Pal app has 5.8 million registered users from over 200 countries and regions, and 20,000 daily active users. In addition to livestreaming, users on the Hello Pal app are also able to find and chat with other people (ie. "pals") that directly meet the search criteria, such as, gender, language and nationality. Users can then chat using text or audio messaging with other users, using inbuilt language tools such as translation services.

Through its 51% ownership of Crypto Pal Technology Ltd. ("Crypto Pal"), Hello Pal is engaged in the mining of cryptocurrency in China. As of the date of this MD&A, Crypto Pal owns 2,334 mining rigs that are capable of mining either Litecoin, Dogecoin, Bitcoin and Ethereum. Hello Pal plans to launch a new Crypto Pal app to enhance livestreaming by permitting user access to mine and use cryptocurrency.

The Company is listed on the Canadian Securities Exchange ("CSE") under the symbol "HP" and quoted on the OTCQB Venture Marketplace under the symbol "HLLPF".

DESCRIPTION OF BUSINESS

The Company develops, markets and operates the Hello Pal Platform that also includes the Live Streaming Service. The Hello Pal Platform enables users to find and easily interact with users from all over the world through a variety of means, such as chat messaging, livestreaming, and audio/video calling. The Hello Pal Platform was launched on the Google Play Store in May 2015, iOS App Store in November 2015.

Key Features of the Hello Pal Platform

The Hello Pal Platform includes the following key features:

Livestreaming Service. Users are able to broadcast themselves live to other users all over the world using Hello Pal's livestreaming service. Realtime communication can also happen during a livestream using text messaging or joint audio sessions from selected users. All livestreaming sessions are monitored live and 24/7 by the Company's inhouse staff to ensure the content does not violate the Company's standards.

Gifts, Payments and Earnings. Users are able to give other users virtual gifts, such as during livestreaming from a viewer to the livestreamer host, through a user's Moments postings, or simply through a user's profile. Gifts are purchased using the Hello Pal Platform's virtual currency ("coins"), which are obtained primarily when a user makes top-up payments via the various payment platforms such as through Apple's Appstore, Google's Playstore, or payment systems

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such as Alipay and Wechat Pay. Credits (known as 'Charm') are earned by users whenever gifts have been received, which may then be redeemed for cash by those users, thereby enabling users to have earnings through their participation on the Hello Pal Platform.

Matching and Chat. The Hello Pal Platform includes extensive filtering and matching abilities so that users can finder other users, people or parties (ie. "pals") that directly suit and meet the user's defined criteria, such as language spoken, gender and nationality. Users can then chat using text or audio messaging with other users, using the inbuilt language tools such as translation services.

Phrasebooks. The Hello Pal Platform has phrasebooks in 8 languages each with over 2,000 phrases. A user can choose a phrase, listen to the recorded audio of the phrase and repeat the phrase. After, the user is able to send their recording of the phrase they learned to another user.

OPERATIONS UPDATE

As of the end of January 2022, the Company's Hello Pal Platform has exceeded 5.8 million registered users, has realized an ongoing increase in the average number of daily new users, and is continuing to experience user growth by building a highly diversified global user base.

On April 24, 2019, the Company announced the soft-launch of the Company's Live Streaming Service through the release of version 6.0 of the Hello Pal Platform. On July 9, 2019, the Company announced the official launch of its Live Streaming Service, and users have since been able to broadcast themselves live to other users, receive virtual gifts, and redeem the gifts for cash.

The launch of the Live Streaming Service has added growth momentum to the Company's userbase. The result of the cooperation with Vortex Live Inc., the launch also marks the beginning of the Company's revenue stream. Since March of 2020, Hello Pal's livestreaming service has achieved daily active livestream users of 10,000.

In February 2021, the Company commenced the marketing operations for its livestreaming services in the Middle East market, with a focus on the United Arab Emirates, Saudi Arabia, Egypt and Bahrain. The Company has already begun to work with several key partners to begin this expansion, including those with an established network of livestreaming hosts in the Middle East. Such partners will help bring in a diverse community of livestreaming hosts and provide livestream content on Hello Pal that caters to the Arabic-speaking world. The Company has already been testing the Middle East market over the past several months, and initial results have been more than encouraging. Notably, largely due to the Middle East efforts, non-China revenue now accounts for 20% of its total revenue as of May 2021.

ACQUISITION OF CRYPTO PAL

On May 25, 2021, the Company entered into a definitive purchase agreement (the "Agreement") with a company controlled by Shanghai Yitang Data Technology Co. Ltd. ("Yitang"), under which the Company acquired an initial 51% interest in Crypto Pal, with an option to increase such interest to 100% (the "Transaction"). At the time of acquisition, Crypto Pal owned 12,500 mining rigs dedicated to mining Dogecoin (DOGE), Litecoin (LTC), Bitcoin and Ethereum (ETH) (the "Mining Assets").

The Company has also entered into a guaranteed services agreement (the "Guaranteed Services Agreement") with Yitang to ensure that its Mining Assets are hosted across multiple locations so as to ensure diversification of risk. Pursuant to the Guaranteed Services Agreement, Yitang will

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guarantee the hosting of the Mining Assets as well as power supply and will provide management and hosting services.

The consideration for the Transaction is $1,500,000 payable in cash and 1,800,000 units of the Company valued at $2,250,000. Each unit has a deemed value of $1.25 and consists of one common share of the Company and one-half of one common share purchase warrant. Each whole warrant will entitle the holder thereof to acquire one common share at an exercise price of $2.00 for a period of two years from the date of issue.

For a period of two years following the completion of the Transaction, the Company will have the option to acquire a further 49% interest in Crypto Pal (for a total interest of 100%) for an additional payment, as to half in cash and half in common shares, where the valuation of the Mining Assets is dependent on their net profit over a 12-month period immediately preceding the date on which this option is exercised, multiplied by a formulated multiplier.

The Transaction did not meet the definition of a business combination and therefore, has been accounted for as an asset purchase of Mining Assets with the Company acquiring 51% of Crypto Pal on May 25, 2021. The consideration for the acquisition of Crypto Pal has been allocated at fair value of the assets acquired and liabilities assumed, based on management's best estimate and taking into account all available information at the time of acquisition. The following table summarizes the fair value of the total consideration paid and the aggregate fair value of identified assets acquired and liabilities assumed:

Purchase price	$
Cash	1,500,000
1,800,000 units of the Company at $1.25 per share	2,250,000
Transaction costs	256,499
	4,006,499

Net assets acquired	$
Cryptocurrency	298,147
Non-controlling interest	3,849,381
Mining assets	7,557,733

As at November 30, 2021, Crypto Pal has sold 10,500 of its 12,500 mining rigs acquired from the Transaction, proceeds of which were used to purchase 334 new mining rigs and resulting in a gain on disposal of $342,955.

VORTEX AGREEMENT

On January 29, 2019, the Company entered into a cooperation agreement (the "Cooperation Agreement") with Vortex Live Inc. ("Vortex") and the principals of Vortex (the "Vortex Team") whereby Vortex would develop and implement live-streaming video functionality into the Hello Pal Platform ("Live Streaming Service"). The principals of Vortex bring to the Company a combined experience in the live streaming industry of over 30 years, and provide the Company with not only the core technological know-how and experience in developing live-streaming apps, but also the crucial management and operational skillset required to generate revenue on an ongoing basis. Vortex has also funded part of the development of Live Streaming Service by paying the Company $826,030.

In return for developing the Live Streaming Service, the Company will issue up to 54,000,000 shares to the Vortex Team based on the following milestones:

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1. 20,000,000 shares upon the launch of the Live Streaming Service by March 31, 2019, and the Company achieving monthly revenue of RMB 1,000,000 (approximately CAD$200,000) by May 31, 2019 - This milestone has been achieved and the Company issued 16,182,000 shares pursuant to this milestone on November 16, 2020.
2. 9,000,000 shares upon the Company achieving monthly revenue of RMB 5,000,000 (approximately CAD$1,000,000) and accumulated revenue of RMB 23,000,000 (approximately CAD$5,000,000) by December 31, 2019 - This milestone has been achieved and the Company issued 7,758,000 shares pursuant to this milestone on November 16, 2020.
3. 13,500,000 shares upon the Company achieving monthly revenue of RMB 10,000,000 (approximately CAD$2,000,000), accumulated revenue of RMB 70,000,000 (approximately CAD$14,000,000) over preceding 12 months, net positive cash flow and net profit of RMB 1,000,000 (approximately CAD$200,000) by December 31, 2020 - This milestone has been achieved and the fair value of 13,500,000 shares estimated to be $2,025,000 pursuant to this milestone is recorded as shares to be issued as at February 28, 2021.
4. 11,500,000 shares upon the Company achieving monthly revenue of RMB 20,000,000 (approximately CAD$4,000,000), accumulated revenue of RMB 180,000,000 (approximately CAD$28,000,000) over preceding 12 months and net profit of RMB 10,000,000 (approximately CAD$2,000,000) by December 31, 2021.

The above is collectively referred to as the "Vortex Transaction".

RESULTS OF OPERATIONS

Nine months ended November 30, 2021

The Company recorded a net loss of $2,341,061 ($0.01 per share) for the nine months ended November 30, 2021 as compared to a net loss of $1,592,140 ($0.01 per share) for the nine months ended November 30, 2020.

During the nine months ended November 30, 2021, the Company recorded revenues from its Live Streaming Service of $17,596,813 while incurring direct costs of $15,892,908, generating a gross profit of $1,703,905 and a gross profit of 9.7%. The revenues increased 101% from the 2020 revenues of $8,740,211. During the nine months ended November 30, 2021, the Company significantly increased its revenues from its Live Streaming Service as it expanded its operations and grew its user base. The Company also recognized income from cryptocurrency mining of $1,869,865 from its Mining Assets as a result of the acquisition of Crypto Pal.

Variances of note in administrative expenses are:

Bitcoin revaluation loss of $28,065 (2020 - $26,204)was incurred as a result of the 2 bitcoins payable to a shareholder which shall be repaid in the form of bitcoins or cash equivalent to the value of bitcoin on the day of repayment.

Depreciation and amortization of $926,697 (2020 - $386,879)relates to the depreciation of property and equipment and amortization of software application and the Mining Assets. Depreciation and amortization expense increased, due to higher amortization taken on the software application as a result of the significant additions during the year ended February 28, 2021 and also due to the amortization on the Mining Assets as a result of the acquisition of Crypto Pal.

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