Alithya Group inc. — Interim / Quarterly Report 2022

Aug 12, 2021

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Interim Condensed Consolidated Financial Statements of Alithya Group inc.

For the three months ended June 30, 2021 and 2020 (unaudited)

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TABLE OF CONTENTS

		Page
Interim	Consolidated Statements of Operations	3
Interim	Consolidated Statements of Financial Position	4
Interim	Consolidated Statements of Changes in Shareholders’ Equity	5
Interim	Consolidated Statements of Comprehensive Loss	6
Interim	Consolidated Statements of Cash Flows	7
Notes to Interim Condensed Consolidated Financial Statements for the three months ended June 30,
2021 and 2020
1.	Governing statutes and nature of operations	8
2.	Summary of significant accounting policies	8
3.	Business combination	11
4.	Leases	13
5.	Intangibles	14
6.	Goodwill	15
7.	Long-term debt	15
8.	Share capital	17
9.	Earnings per share	19
10.	Additional information on consolidated loss	20
11.	Financial expenses	20
12.	Supplementary cash flow information	21
13.	Segment and geographical information	21

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands of Canadian dollars, except per share data) (unaudited) Revenues Cost of revenues Gross margin Operating expenses Selling, general and administrative expenses Business acquisition and integration costs Depreciation Amortization of intangibles Foreign exchange loss Operating loss Financial expenses Loss before income taxes Income tax expense (recovery) Current Deferred Net loss Basic and diluted loss per share		For the three months ended June 30,
	Notes 10 10 5 11 9	2021 2020 $ $ 102,921 70,711 74,581 50,308 28,340 20,403 22,747 19,416 3,943 913 1,553 882 3,380 3,654 68 8 31,691 24,873 (3,351) (4,470) 949 728 (4,300) (5,198) (48) 789 (2,220) (1,458) (2,268) (669) (2,032) (4,529) (0.02) (0.08)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at (in thousands of Canadian dollars) (unaudited) Assets Current assets Cash Accounts receivable and other receivables Income taxes receivable Unbilled revenue Tax credits receivable Prepaids Non-current assets Restricted cash Tax credits receivable Property and equipment Right-of-use assets Intangibles Deferred tax assets Goodwill Liabilities and Shareholders' Equity Current liabilities Accounts payable and accrued liabilities Deferred revenue Income taxes payable Current portion of lease liabilities Current portion of long-term debt Non-current liabilities Long-term debt Lease liabilities Deferred tax liabilities Shareholders' equity Share capital Deficit Accumulated other comprehensive (loss) income Contributed surplus		June 30, March 31, 2021 2021 $ $ 10,653 6,903 81,114 69,363 — 642 19,710 9,924 4,805 4,936 3,227 3,923 119,509 95,691 3,238 3,233 12,915 7,809 10,206 8,449 14,542 11,118 85,633 36,590 6,595 7,465 113,025 72,906 365,663 243,261 75,683 51,571 10,167 10,288 487 — 2,715 1,923 51,733 35,134 140,785 98,916 10,617 19,817 16,464 13,536 10,933 2,980 178,799 135,249 278,122 197,537 (98,222) (96,190) (1,126) (508) 8,090 7,173 186,864 108,012 365,663 243,261
	Notes 4 5 6 4 7 7 4 8

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the three months ended June 30,

(in thousands of Canadian dollars, except share data) (unaudited)

Balance at March 31, 2021 Net loss Other comprehensive loss Total comprehensive loss Share-based compensation Share-based compensation on shares vested during the period, issued on business acquisitions Acquisition of R3D ConsultingInc. Total contributions by,and distributions to,shareholders Balance as at June 30, 2021 Balance as at March 31, 2020 Net loss Other comprehensive loss Total comprehensive loss Share-based compensation Share-based compensation on shares vested during the period, issued on business acquisitions Issuance of Subordinate VotingShares from settlement of DSUs Total contributions by,and distributions to,shareholders Balance as at June 30, 2020	Notes 8	Shares outstanding Number 58,695,438 — — — — — 25,182,676 25,182,676 83,878,114 58,073,517 — — — — — 7,718 7,718 58,081,235	Share capital $ 197,537 — — — — — 80,585 80,585 278,122 195,335 — — — — — 32 32 195,367	Deficit $ (96,190) (2,032) — (2,032) — — — — (98,222) (78,780) (4,529) — (4,529) — — — — (83,309)	Accumulated other comprehensive income(loss) $ (508) — (618) (618) — — — — (1,126) 6,123 — (2,328) (2,328) — — — — 3,795	Contributed surplus Total $ $ 7,173 108,012 — (2,032) — (618) — (2,650) 439 439 478 478 — 80,585 917 81,502 8,090 186,864 4,691 127,369 — (4,529) — (2,328) — (6,857) 319 319 1,246 1,246 (32) — 1,533 1,565 6,224 122,077

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE	LOSS
	For the three months ended June 30,
(in thousands of Canadian dollars) (unaudited) Net loss Other comprehensive loss Items that may be classified subsequently to profit or loss Cumulative translation adjustment on consolidation of foreign subsidiaries Comprehensive loss	2021 2020 $ $ (2,032) (4,529) (618) (2,328) (618) (2,328) (2,650) (6,857)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

		For the three months ended June 30,
(in thousands of Canadian dollars) (unaudited) Operating activities Net loss Items not affecting cash Depreciation and amortization Amortization of finance costs Share-based compensation Unrealized foreign exchange gain Foreign exchange loss (gain) on repayment of long-term debt Forgiveness of PPP loan Interest accretion on balances of purchase payable Loss on disposal of property and equipment Other Deferred taxes Changes in non-cash working capital items Net cash from operating activities Investing activities Additions to property and equipment Additions to intangibles Restricted cash Business acquisition, net of cash acquired Net cash used in investing activities Financing activities Increase in long-term debt, net of related transaction costs Repayment of long-term debt Repayment of lease liabilities Lease incentives Net cash from (used) in financing activities Effect of exchange rate changes Net change in cash Cash, beginning of period Cash, end of period Cash paid (included in cash flow (used in) from operating activities) Interest paid Income taxes paid (recovered)	Notes 11 7 11 12 3	2021 2020 $ $ (2,032) (4,529) 4,933 4,536 63 53 917 1,565 (2) (332) 3 (197) (5,868) — 207 210 — 147 — (122) (2,220) (1,458) 4,525 7,490 2,558 11,892 526 7,363 (341) (607) — (2) (5) (1,006) (401) — (747) (1,615) 27,535 17,741 (23,080) (18,569) (462) (288) — 917 3,993 (199) (22) (82) 3,750 5,467 6,903 8,810 10,653 14,277 660 460 (902) 2

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)

1. GOVERNING STATUTES AND NATURE OF OPERATIONS

Alithya Group inc. (“Alithya” or the “Company”) and its subsidiaries (collectively with Alithya, the “Group”) are leaders in strategy and digital transformation. Alithya's integrated offer is based on four pillars of expertise: business strategies,enterprise cloud solutions, application services, and data and analytics. The Group deploys leading-edge solutions, services, and skill to develop tools designed to meet the unique needs of customers in a variety of sectors, including financial services, manufacturing, renewable energy, telecommunications, transportation and logistics, professional services, healthcare, and government.

The Company’s Class A subordinate voting shares (the “Subordinate Voting Shares”) trades on the Toronto Stock Exchange (“TSX”) and on the NASDAQ Capital Market (“NASDAQ”) under the symbol “ALYA”.

The Company is the Group’s ultimate parent company and its head office is located at 1100, Robert-Bourassa Boulevard, Suite 400, Montréal, Québec, Canada, H3B 3A5.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These interim condensed consolidated financial statements have been prepared in accordance with the accounting policies adopted in the most recent annual consolidated financial statements for the year ended March 31, 2021, except for changes as detailed below.

The accounting policies have been applied consistently by all Alithya entities.

BASIS OF PREPARATION

Statement of Compliance

The Company’s interim condensed consolidated financial statements are presented in Canadian dollars, which is also the parent company’s functional currency. They have been prepared in accordance with IAS 34 - Interim Financial Reporting. They do not include all of the information required in annual financial statements in accordance with International Financial Reporting Standards ("IFRS"), and should be read in conjunction with the consolidated financial statements for the year ended March 31, 2021.

These interim condensed consolidated financial statements were approved and authorized for issue by the Board of Directors (the “Board”) on August 11, 2021.

Basis of Measurement and Comparative Figures

The interim condensed consolidated financial statements have been prepared on an accrual basis and under the historical cost basis except for certain assets and liabilities initially recognized in connection with business combinations, which are measured at fair value.

Certain figures have been reclassified to conform to the current year presentation.

INTANGIBLES

Intangible assets consist mainly of customer relationships, non-compete agreements, internal-use business solutions and software licenses and tradenames. Internal use business solutions and software licenses (“Software”) are recorded at cost. In addition, internal-use business solutions developed internally are capitalized when they meet specific capitalization criteria related to technical and financial feasibility and when the Group demonstrates its ability and intention to use them. Amortization of internal-use business solutions commences once the solution is available for use. Customer relationships, internal-use business solutions and software licenses acquired through business combinations are initially recorded at their fair value. The Group amortizes its intangible assets using the straight-line method over their estimated useful lives, as follows:

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

	Method	Period
Customer relationships	Straight line	3 - 10 years or over the term
		of the underlying contract
Non-compete agreements	Straight line	3 - 10 years
Software	Straight line	3 years
Tradenames	-	Indefinite

The residual value, depreciation method and useful life of each asset are reviewed at least once a year, at the reporting date.

SHARE-BASED COMPENSATION PLANS

Share purchase plan

The Company operates a share purchase plan for eligible employees of the Company and its subsidiaries. Under this plan, the Group matches the contributions made by employees up to a maximum percentage of the employee's salary. The Group’s contributions to the plan are recognized in salaries within cost of revenues and selling, general and administrative.

Long-term incentive plan

The Company operates a long-term incentive plan for eligible employees and directors of the Company and its subsidiaries which provides for various types of awards, including equity-settled stock options, deferred share units (“DSUs”), restricted share units (“RSUs”) and performance share units (“PSUs”) awards. The Board, at its discretion, may elect to settle the RSUs and PSUs in the form of a cash payment. The Company accounts for the RSUs and PSUs as equity-settled awards as management intends to settle these awards through the issuance of capital stock.

The fair value of the share-based expense is based on the grant date fair value of the award expected to vest over the vesting period with a corresponding adjustment through contributed surplus. Forfeitures are estimated at the time of the grant and are included in the measurement of the expense and are subsequently adjusted to reflect actual events. For awards with graded vesting, the fair value of each tranche is recognized on a straightline basis over its vesting period.

Any consideration paid by participants on exercise of stock options is credited to capital stock together with any related share-based compensation expense originally recorded in contributed surplus. If the amount of the tax deduction (or estimated future tax deduction) exceeds the amount of the related cumulative remuneration expense for stock options, this indicates that the tax deduction relates not only to remuneration expense but also to an equity item. In this situation, the Company recognizes the excess of the associated current or deferred tax to contributed surplus prior to an award being exercised, and any such amounts are transferred to capital stock upon exercise of the stock options.

When DSUs, RSUs and PSUs are settled, the recorded fair value of the award is removed from contributed surplus and credited to capital stock.

SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES AND ESTIMATION UNCERTAINTY

The preparation of these interim condensed consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the amounts reported as assets, liabilities, income and expenses in the interim condensed consolidated financial statements. Actual results could differ from those estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which they occur and in any future periods affected.

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

The judgments, estimates and assumptions applied in the interim condensed consolidated financial statements including key sources of estimation uncertainty, were the same as those applied in the Group's last annual audited consolidated financial statements for the year ended March 31, 2021.

Assessment of COVID-19 impact

As a result of the continued and uncertain economic and business impact of the COVID-19 pandemic, the Group has reviewed its estimates, judgments and assumptions used in the preparation of its interim condensed consolidated financial statements, including the determination of whether indicators of impairment exist for its tangible and intangible assets, including goodwill, estimated losses on revenue from fixed-fee arrangement contracts, the credit risk of its counterparties, and the estimates and judgments used for the measurement of its deferred tax assets. The estimates, judgments and assumptions used were the same as those applied in the Group's last annual audited financial statements for the year ended March 31, 2021.

FUTURE ACCOUNTING STANDARDS

At the date of authorization of these interim condensed consolidated financial statements, certain new standards, amendments and interpretations, and improvements to existing standards have been published by the IASB but are not yet effective and have not been adopted early by the Group. Management anticipates that all the relevant pronouncements will be adopted in the first reporting period following the date of application. Information on new standards, amendments and interpretations, and improvements to existing standards, which could potentially impact the Group’s consolidated financial statements, are detailed as follows:

New Standards and Interpretations Issued but Not Yet Effective

On January 23, 2020, the IASB issued amendments to IAS 1 - Presentation of Financial Statements, to clarify the classification of liabilities as current or non-current. In July 2020, the IASB issued final amendments to defer the effective date to annual periods beginning on or after January 1, 2023. Early adoption is permitted. For the purposes of non-current classification, the amendments removed the requirement for a right to defer settlement or roll over of a liability for at least twelve months to be unconditional. Instead, such a right must have substance and exist at the end of the reporting period. The amendments also clarify how a company classifies a liability that includes a counterparty conversion option. The amendments state that: settlement of a liability includes transferring a company’s own equity instruments to the counterparty; and when classifying liabilities as current or non-current, a company can ignore only those conversion options that are recognized as equity. Management is currently assessing, but has not yet determined, the impact of this new standard on the Group’s consolidated financial statements.

On May 14, 2020, the IASB published Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37), which specifies which costs a company includes when assessing whether a contract will be loss-making. The amendments are effective for annual periods beginning on or after January 1, 2022. Management is currently assessing, but has not yet determined, the impact on the Group’s consolidated financial statements.

Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group’s consolidated financial statements.

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)

3. BUSINESS COMBINATION

Alithya IT Services Inc.

Overview

On April 1, 2021, the Company acquired all of the outstanding shares of R3D Consulting Inc. (now Alithya IT Services Inc.) ("Alithya IT" or "R3D") (the “R3D Acquisition”), a private Québec firm that specializes in digital solutions.

The purchase price was paid by the issuance of 25,182,676 Subordinate Voting Shares of the Company, subject to customary post-closing purchase price adjustments, at a value of $3.20 per share, which was the closing share price on the TSX on April 1, 2021, cash of $978,000 and assumption of accounts payable and accrued liabilities and long-term debt of $45,000 and $8,887,000, respectively, on the closing date. The accounting for this acquisition and the purchase price allocation have not yet been finalized.

The fair value of the assets acquired, liabilities assumed, and the purchase consideration is preliminary pending completion of their valuation. Should new information, obtained within one year of the date of acquisition, about the facts and circumstances that existed at the date of the R3D Acquisition, result in adjustments to the below amounts, or require additional provisions for conditions that existed at the date of the R3D Acquisition, the fair value will then be revised. The R3D Acquisition is being accounted for using the acquisition method of accounting.

For the three months ended June 30, 2021, the Company incurred acquisition-related costs of approximately $1,646,000. These costs have been recorded in the consolidated statement of operations in business acquisition and integration costs.

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020 (Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)

3. BUSINESS COMBINATION (CONT'D)

Purchase Price Allocation

The preliminary allocation of the fair value of the assets acquired and the liabilities assumed is detailed as follows:

Acquisition of Alithya IT Services Inc.	$
Current assets Cash Accounts receivable and other receivables Unbilled revenue Prepaids Non-current assets Tax credits receivable Property and equipment Right-of-use assets Intangibles Deferred tax assets Goodwill Total assets acquired Current liabilities Accounts payable and accrued liabilities Income taxes payable Deferred revenue Current portion of lease liabilities Current portion of long-term debt Non-current liabilities Lease liabilities Deferred tax liabilities Total liabilities assumed Net assets acquired
	577 10,165 7,169 91
	18,002
	3,234
	2,207 4,212 52,777 763 40,627
	121,822
	15,070
	155
	125 592 8,887
	24,829
	3,620 11,810
	40,259
	81,563

Goodwill

The goodwill recognized consists mainly of the future economic value attributable to the profitability of the acquired business, as well as its workforce and expected synergies from the integration of Alithya IT into the Group's existing business. The Company does not expect the goodwill to be deductible for income tax purposes.

Consideration paid

The following table summarizes the acquisition date fair value of each class of consideration as follows:

Acquisition of Alithya IT Services Inc.	$
Cash paid Issuance of 25,182,676 Subordinate Voting Shares Total consideration transferred	978 80,585
	81,563

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)

3. BUSINESS COMBINATION (CONT'D)

Alithya IT 's contribution to the Group results

The Alithya IT business contributed revenues of approximately $19,993,000 and a loss before income taxes of $1,709,000, including amortization of intangibles and integration costs of $951,000 and $1,792,000, respectively, to the Group. These amounts have been calculated using Alithya IT's results and adjusting for:

• differences in accounting policies between the Group and Alithya IT; and

• the additional amortization that would have been charged assuming the fair value adjustments to intangibles had been applied from April 1, 2021.

4. LEASES

Right-of-use assets

The following right-of-use assets relate to right-of-use real estate:

As at	June 30, 2021 March 31, 2021 $ $ 11,118 11,492 4,212 2,611 (764) (1,906) — (830) 3 28 (27) (277) 14,542 11,118
Beginning balance as at April 1, 2021 and 2020 Additions Depreciation Reassessment Lease inducement allowance Exchange rate effect Ending balance

Lease liabilities

As at	June 30, 2021 March 31, 2021 $ $ 15,459 13,232 4,212 2,611 (639) (1,992) — 2,243 177 595 — (830) — (110) (30) (290) 19,179 15,459 2,715 1,923 16,464 13,536
Beginning balance as at April 1, 2021 and 2020 Additions Lease payments Lease incentives Lease interest Reassessment Concession Exchange rate effect Ending balance Current portion

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)

4. LEASES (CONT'D)

Contractual lease payments under the lease liabilities as at June 30, 2021 are as follows:

As at	June 30, 2021
Less than one year One to two years Two to five years More than five years Total undiscounted lease payments at period end	$
	3,366 3,292 9,469
	5,627
	21,754

Amounts recognized in net loss

As at	For the three months ended June 30, 2021 2020
Interest on lease liabilities Variable lease payments	$ $ 177 135 844 791 1,021 926

Total cash outflow for leases for the three months ended June 30, 2021 was $1,483,000 and $1,214,000 for the three months ended June 30, 2020, respectively.

5. INTANGIBLES

As at		June 30, 2021	June 30, 2021			March 31, 2021	March 31, 2021
Cost Additions, purchased Additions through business acquisition Additions, internally generated Disposals / retirements Foreign currency translation adjustment Subtotal Accumulated amortization Amortization Disposals / retirements Subtotal Net carrying amount	Customer relationships	Software	Non- compete agreements	Total	Customer relationships	Software	Non- compete agreements Total
	$	$	$	$	$ 73,722 — — — (2,933) (3,069)	$ 4,377 7 — 159 (29) (180)	$ $ 7,530 85,629 — 7 — — — 159 (237) (3,199) (391) (3,640)
	67,720	4,334	6,902	78,956
	— 52,777 —	— — — — (8)	— — — — (37)	— 52,777 — — (354)
	— (309)
	120,188	4,326	6,865	131,379	67,720 31,970 8,996 (2,933)	4,334 1,242 1,258 (29)	6,902 78,956 613 33,825 1,485 11,739 (236) (3,198)
	38,033 2,808	2,471 237	1,862 335	42,366 3,380 —
	—	—	—
	40,841	2,708	2,197	45,746	38,033	2,471	1,862 42,366
	79,347	1,618	4,668	85,633	29,687	1,863	5,040 36,590

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)

6. GOODWILL

As at			June 30, 2021	June 30, 2021
Beginning balance Business acquisition (note 3) Foreign currency translation adjustment Net carrying amount	Canada	ADT	France	EPM US	ERP US Total
	$	$	$	$	$ $
	26,950	7,694 — —	137 — (1)	8,915 —	29,210 72,906 — 40,627 (389) (508)
	40,627
	—			(118)
	67,577	7,694	136	8,797	28,821 113,025
As at			March 31, 2021
Beginning balance Foreign currency translation adjustment Net carrying amount	Canada	ADT	France	EPM US	ERP US Total
	$ 26,950 —	$ 7,694 —	$ 150 (13)	$ 10,012 (1,097)	$ $ 32,802 77,608 (3,592) (4,702)
	26,950	7,694	137	8,915	29,210 72,906

7. LONG-TERM DEBT

The following table summarizes the Group’s long-term debt:

As at

June 30, March 31,

Senior secured revolving credit facility (the "Credit Facility")(a) Balance of purchase payable with a nominal value of $3,100,000, non-interest bearing (5.8 % effective interest rate) payable April 3, 2022 Balance of purchase payable with a nominal value of $1,800,000, non-interest bearing (6.0 % effective interest rate), payable on October 1, 2022 Balance of purchase payable with a nominal value of $8,465,750 (US$6,825,000), non-interest bearing (6.0 % effective interest rate), payable on December 13, 2022 Balance of purchase payable with a nominal value of $3,258,750, non-interest bearing (5.7 % effective interest rate) payable on February 1, 2022 Unsecured promissory notes (US$ nil; March 31, 2021 US$4,800,000)(b) Deferral of employment tax payments (US$1,877,873)(c) Other Unamortized transaction costs (net of accumulated amortization of $539,617 and $476,685) Current portion of long-term debt

2021 2021 $ $ 44,349 31,023 3,016 2,988 1,674 1,649 7,779 7,770 3,155 3,112 — 6,034 2,329 2,361 184 213 (136) (199) 62,350 54,951 51,733 35,134 10,617 19,817

(a) The Credit Facility is available to a maximum amount of $60,000,000, which was increased until September 30, 2021 to $70,000,000, and can be drawn in Canadian and the equivalent amount in U.S. dollars. It is available in prime rate advances, LIBOR advances, bankers’ acceptances and letters of credit up to $2,500,000.

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)

7. LONG-TERM DEBT (CONT'D)

The advances bear interest at the Canadian or U.S. prime rate, plus an applicable margin ranging from 0.00% to 1.50%, or bankers’ acceptances or LIBOR rates, plus an applicable margin ranging from 1.00% to 2.75%, as applicable for Canadian and U.S. advances, respectively. Until June 30, 2021, the applicable margin on the Canadian or U.S. advances and the bankers' acceptances and LIBOR advances is set at 1.50% and 2.75%, respectively. Thereafter, the applicable margin will be determined based on threshold limits for certain financial ratios.

As security for the Credit Facility, Alithya provided a first ranking hypothec on the universality of its assets excluding leased equipment and Investissement Québec’s first ranking lien on tax credits receivable for the financing related to refundable tax credits, to a maximum of $7,500,000. Under the terms of the agreement, the Group is required to maintain certain financial covenants which are measured on a quarterly basis. The Credit Facility matures in 2022 and is renewable for additional one-year periods at the lender’s discretion.

The Group was in compliance with all of its financial covenants as at June 30, 2021 and March 31, 2021.

(b) As a result of the COVID-19 pandemic, on May 5, 2020, five U.S. subsidiaries of the Group received funding under the Paycheck Protection Program ("PPP") of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") administered by the U.S. Small Business Administration ("SBA") and entered into unsecured promissory notes (the "Notes") in the aggregate principal amount of US$6,300,000 ($7,932,000). The Notes have a term of five years at an interest rate of 1% per annum, with a deferral of payments until the date on which the applicable forgiveness is decisioned, with respect to any portion of the Notes which may not be forgiven.

Under the terms of the CARES Act, PPP loan recipients can apply for forgiveness for all or a portion of loans granted under the PPP, which the Group applied for between November 17, 2020 and January 5, 2021. The Group accounts for the forgiveness as government assistance with a corresponding reduction in the cost of the related item. Such forgiveness is to be determined, subject to limitations and ongoing rule making by the SBA, based on the necessity of the loan at the time of application and the timely use of loan proceeds for payroll costs, including payments required to continue group health care benefits, and certain rent, utility, and mortgage interest costs and the maintenance of employee and compensation levels. The PPP loans, even after notice of forgiveness by the SBA, are subject to subsequent audit by the SBA, for a period of six years after receiving such notice.

During the three months ended June 30, 2021 and 2020, the Group recognized an aggregate amount of $5,868,000 (US$4,800,000) and nil, respectively, as government assistance for the last two remaining PPP loans. On June 15, 2021, the Group received confirmation of full loan forgiveness by the SBA of one of the subsidiary loans, and believes it has reasonable assurance for recognizing forgiveness on the last remaining PPP loan, as evidenced by the reception of four full loan forgiveness decisions, out of five PPP loans obtained in May 2020. The amount was included against the net loss for the period ended June 30, 2021.

(c) The CARES Act allows employers to defer the payments of the employer share of social security taxes during the period beginning on March 27, 2020 and ending on the earlier of December 31, 2020 or the date the Company receives a decision from the lender that the PPP loan is forgiven. The payment of the deferred social security taxes is due fifty percent on December 31, 2021 and the remaining amount on December 31, 2022.

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)

8. SHARE CAPITAL

8. SHARE CAPITAL
	Subordinate Voting Shares		Multiple Voting Shares
Beginning balance as at April 1, 2021 Business acquisition of R3D (note 3) As at June 30, 2021	Number of shares 51,373,822 25,182,676 76,556,498	$ 193,552 80,585 274,137	Number of shares $ 7,321,616 3,985 — — 7,321,616 3,985

During the three months ended June 30, 2021, the following transaction occurred:

• As part of the R3D Acquisition, 25,182,676 Subordinate Voting Shares, with a total value of $80,585,000, were issued in consideration of the acquisition.

Share purchase plan

Under the Company’s share purchase plan, the Group contributes an amount equal to a percentage of the employee’s basic contribution, depending on the position held by the employee. The employee may make additional contributions, for total employee contributions, including basic contributions, of up to 10% of the annual gross salary. However, the Group does not match contributions in the case of such additional contributions. The employee and the Group’s contributions are remitted to an independent administrative agent who purchases Subordinate Voting Shares on the open market on behalf of the employee through either the TSX or NASDAQ. The Group's contribution expense is recognized as share-based compensation.

Long-Term Incentive Plan (the “Plan”)

The Company operates a plan which provides for awards of stock options, restricted shares, DSUs, RSUs, PSUs and share appreciation rights to eligible employees and directors of the Company and its subsidiaries, all of which once exercised or settled result in the issuance of Subordinate Voting Shares. At the Board's discretion, the RSUs and PSUs may be settled, in whole or in part, in cash.

Stock options

Under the Company’s Plan, the Board may grant, at its discretion, stock options to purchase Subordinate Voting Shares to eligible employees and directors of the Company and its subsidiaries. The Board establishes the exercise price at the time the stock options are granted, where the exercise price must in all cases be not less than the greater of the closing price of such shares on the TSX on the business day immediately prior to the grant date. Stock options vest, as set out in the applicable award agreement between the participant and the Company, which may include performance-based vesting conditions. Vesting is generally four years from the date of grant and the stock options may be exercised by the tenth anniversary of the grant date, except in the event of death, disability, retirement or termination of employment. The Plan provides that the aggregate number of Subordinate Voting Shares issuable pursuant to any type of awards under the Plan shall not exceed 10% of the aggregate number of Subordinate Voting Shares and Class B multiple voting shares (the "Multiple Voting Shares") issued and outstanding from time to time.

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)

8. SHARE CAPITAL (CONT'D)

The following table presents information concerning stock option activity for the period:

	Number of stock options Weighted average exercise price
Beginning balance as at April 1, 2021 Granted Forfeited Ending balance as at June 30, 2021 Exercisable at period end	$ 3,525,181 3.37 1,073,302 3.23 (72,500) 3.10 4,525,983 3.28 1,722,944 2.69

Included in the 1,722,944 of stock options exercisable as at June 30, 2021, 810,528 stock options are available to purchase Multiple Voting Shares.

On June 14, 2021, Alithya issued 774,202 and 299,100 stock options, to purchase a total of 1,073,302 Subordinate Voting Shares at a grant price of $3.23 and US$2.66, respectively.

DSUs

Under the Plan, the Board, subject to the provisions of the Plan and such other terms and conditions, may grant DSUs to obtain Subordinate Voting Shares to qualified employees and directors of the Company and its subsidiaries. The DSUs shall be settled on the date as set out in the applicable award agreement, between the participant and the Company, however not earlier than the participant’s termination date. If the agreement does not establish a settlement date then it shall be on the 90th day following the participant’s termination date for eligible Canadian participants and not earlier than on the date that is six months after the termination date for eligible U.S. participants.

The following table presents information concerning DSU activity for the period:

	Number of DSUs Weighted average grant date fair value
Beginning balance as at April 1, 2021 Granted Ending balance as at June 30, 2021	$ 330,246 2.97 46,310 3.39 376,556 3.02

On June 30, 2021, 46,310 fully vested DSUs, in aggregate, were granted to non-employee directors of the Company at a fair value of $3.39, per DSU, for an aggregate fair value of $156,991. The amounts have been recorded in share-based compensation expense.

RSUs

Under the Plan, the Board, subject to the provisions of the Plan and such other terms and conditions, may grant RSUs to obtain Subordinate Voting Shares to qualified employees and directors of the Company and its subsidiaries. The RSUs shall generally vest on the third anniversary of the date of grant and will settle as soon as practicable following the expiry of the vesting period, unless otherwise specified by the Board at the time of grant. The June 23, 2020 grants vested on the first anniversary date of the date of grant.

As at June 30, 2021, 181,498 fully vested RSUs, in aggregate, are outstanding with a grant date fair value of $2.26.

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)

8. SHARE CAPITAL (CONT'D)

PSUs

Under the Plan, the Board, subject to the provisions of the Plan and such other terms and conditions, may grant PSUs to obtain Subordinate Voting Shares to qualified employees and directors of the Company and its subsidiaries. The terms and conditions of each PSU grant, including the performance goals, shall be determined by the Board. The PSUs shall be settled on the date as set out in the applicable award agreement between the participant and the Company. The Board, at its discretion, may elect to settle the PSUs in the form of a cash payment.

On June 14, 2021, the Board approved the issuance of 332,263 PSUs, in aggregate, vesting three years from the date of grant. However, the determination as to whether the performance goals related to each PSU grant are satisfied will take place in May or June of that third year subject to the terms set out in the award agreement.

Share-Based Compensation

The number of Alithya stock options granted to employees during the three months ended June 30, 2021 and 2020, the related compensation expense recorded, and the assumptions used to determine share-based compensation expense, using the Black-Scholes stock option pricing model, were as follows:

Period ended	June 30,
Compensation expense related to the options granted Number of stock options granted Weighted average fair value of options granted Aggregate fair value of options granted Weighted average assumptions Share price Exercise price Risk-free interest rate Expected volatility* Dividend yield Expected option life (years) Vesting conditions – time (years)	2021 2020 19 4 1,073,302 755,000 $1.20 $0.81 1,290 609 $3.23 $2.26 $3.23 $2.26 1.25 % 0.46 % 34.7 % 35.0 % — — 6.6 6.6 3.2 3.2

* Determined on the basis of observed volatility in publicly traded companies operating in similar industries.

9. EARNINGS PER SHARE

	For the three months ended June 30,
Net loss Weighted average number of common shares outstanding Basic and diluted loss per share	2021 2020 $ $ (2,032) (4,529) 83,878,114 58,078,691 (0.02) (0.08)

The stock options mentioned in Note 8 were not included in the calculation of diluted earnings per share since the Company suffered losses and the inclusion of these stock options would have an antidilutive effect.

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)

10. ADDITIONAL INFORMATION ON CONSOLIDATED LOSS

The following table provides additional information on the consolidated loss:

	For the three months ended June 30,
Employee compensation costs Government assistance - tax credits(a) - grants and loan forgiveness(b) Selling expenses(c) General and administrative expenses(c) Depreciation of property and equipment Depreciation of right-of-use assets	2021 2020 $ $ 62,367 51,556 (2,125) (1,464) (6,088) (1,398) 11,264 11,190 11,483 8,226 789 370 764 512

(a) Included in cost of sales.

(b) $4,764,000 and $1,324,000 (2020 - $1,308,000 and $90,000) are included in cost of sales and selling, general and administrative expenses, respectively.

(c) Including related employee compensation costs.

11. FINANCIAL EXPENSES

The following table summarizes financial expenses:

The following table summarizes financial expenses:
	For the three months ended June 30,
Interest on long-term debt Interest and financing charges Interest on lease liabilities Amortization of finance costs Interest accretion on balances of purchase payable Interest income	2021 2020 $ $ 479 310 75 25 177 135 63 53 207 210 (52) (5) 949 728

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(Tabular amounts are in thousands of Canadian dollars, except share and per share data in tables) (unaudited)

12. SUPPLEMENTARY CASH FLOW INFORMATION

Net change in non-cash working capital items is as follows:

	For the three months ended June 30,
Accounts receivable and other receivables Income taxes receivable Unbilled revenue Tax credits receivable Prepaids Accounts payable and accrued liabilities Income taxes payable Deferred revenue	2021 2020 $ $ (1,916) 7,613 642 597 (2,660) (2,545) (1,747) 2,484 754 (133) 9,261 119 332 — (141) (645) 4,525 7,490

13. SEGMENT AND GEOGRAPHICAL INFORMATION

The Company has examined its activities and has determined, based on information received on a regular basis by the decision-makers, that it has a single reportable segment.

Revenues by geographic location

The following table presents total external revenues by geographic location:

	For the three months ended June 30,	For the three months ended June 30,	For the three months ended June 30,
Canada U.S. Europe	2021		2020
	$	%	$ % 38,370 54.2 30,302 42.9 2,039 2.9 70,711 100.0
	68,234 31,434 3,253	66.3 30.5 3.2
	102,921	100.0

Long-lived assets by geographic location

The following table presents the total net book value of the Group’s long-lived assets by geographic location:

As at	June 30,	March 31,
Canada U.S. Europe	2021 $ % 159,337 71.3 63,004 28.2 1,065 0.5 223,406 100.0	2021
	$ 159,337 63,004 1,065 223,406	$ % 62,172 48.2 65,784 51.0 1,107 0.8 129,063 100.0

Alithya Group inc. – Interim Condensed Consolidated Financial Statements for the three months ended June 30, 2021 and 2020

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