Avante Corp. — Annual Report 2021

Jul 20, 2021

AVANTE LOGIXX INC.

Consolidated Financial Statements

March 31, 2021 and 2020

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TABLE OF CONTENTS

Independent Auditor’s Report ..................................................................................................... - 2 - Consolidated Statements of Financial Position........................................................................... - 4 - Consolidated Statements of Loss and Comprehensive Loss....................................................... - 5 - Consolidated Statements of Changes in Equity .......................................................................... - 6 - Consolidated Statements of Cash Flows ..................................................................................... - 7 - 1. NATURE OF BUSINESS ................................................................................................................ - 8 - 2. BASIS OF PRESENTATION ................................................................................................ - 8 - 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES .............................................. - 9 - 4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS ..................................... - 20 - 5. LOSS PER SHARE .............................................................................................................. - 22 - 6. REVENUE RECOGNITION................................................................................................ - 23 - 7. ACCOUNTS RECEIVABLE ............................................................................................... - 24 - 8. INVENTORIES .................................................................................................................... - 24 - 9. PROPERTY, PLANT AND EQUIPMENT ......................................................................... - 25 - 10. CAPITALIZED COMMISSION ........................................................................................ - 26 - 11. GOODWILL AND INTANGIBLE ASSETS ..................................................................... - 26 - 12. BUSINESS ACQUISITIONS ............................................................................................. - 29 - 13. BANK INDEBTEDNESS AND VEHICLE LOANS ........................................................ - 32 - 14. OBLIGATIONS UNDER LEASE ..................................................................................... - 33 - 15. SHAREHOLDERS’ EQUITY ............................................................................................ - 33 - 16. PERFORMANCE SHARE UNITS .................................................................................... - 36 - 17. NON-CONTROLLING INTEREST ................................................................................. - 37 - 18. INCOME TAXES ............................................................................................................... - 37 - 19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT ........................................ - 39 - 20. CAPITAL MANAGEMENT ............................................................................................. - 45 - 21. RELATED PARTY TRANSACTIONS ............................................................................ - 46 - 22. REORGANIZATION AND ACQUISITION COSTS ....................................................... - 46 - 23. DISCONTINUED OPERATIONS .................................................................................... - 46 - 24. SEGMENT REPORTING ................................................................................................. - 49 - 25. SUBSEQUENT EVENTS .................................................................................................. - 51 -

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INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Avante Logixx Inc.

Opinion

We have audited the consolidated financial statements of Avante Logixx Inc. (the "Company"), which comprise the consolidated statements of financial position as at March 31, 2021 and 2020 and the consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at March 31, 2021 and 2020, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Information

Management is responsible for the other information. The other information comprises the Management's Discussion and Analysis, but does not include the consolidated financial statements and our report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

We obtained the Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

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Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor's report is Mark Jakovcic.

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Chartered Professional Accountants Licensed Public Accountants July 20, 2021 Toronto, Ontario

AVANTE LOGIXX INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT MARCH 31, 2021 AND MARCH 31, 2020

ASSETS CURRENT Cash and cash equivalents Accounts receivable (note 7) Inventories (note 8) Contract assets (note 6) Prepaid expenses NON-CURRENT ASSETS Property, plant & equipment (note 9) Capitalized commissions (note 10) Deferred tax assets (note 18) Intangible assets (note 11) Goodwill (note 11) Long term notes receivable (note 19c) Investment (note 19c) LIABILITIES CURRENT Bank indebtedness and vehicle loans (note 13) Accounts payable and accrued liabilities Promissory note (note 19b) Corporate tax payable (note 18) Obligations under lease (note 14) Contract liabilities (note 6) NON-CURRENT LIABILITIES Obligations under lease (note 14) Long term portion of bank indebtedness and vehicle loans (note 13) Convertible debentures (note 19a) Convertible debentures - derivative liability (note 19a) Deferred tax liability (note 18) TOTAL LIABILITIES SHAREHOLDERS' EQUITY Share capital (note 15a) Contributed surplus (note 15b and c) Accumulated other comprehensive deficit Accumulated deficit Non-controlling interest (note 17) TOTAL EQUITY TOTAL EQUITY & LIABILITIES AUTHORIZED FOR ISSUE ON BEHALF OF THE BOARD:	Mar 31, 2021	Mar 31, 2020
	1,623,754 $ 18,171,980 1,617,709 696,506 496,589	1,339,864 $ 16,520,900 1,845,699 529,737 771,125
	22,606,538 3,878,163 275,482 1,466,873 5,878,581 9,600,477 400,000 -	21,007,325 3,989,542 98,845 2,815,673 10,603,078 10,533,743 - 47,200
	44,106,114 $	49,095,406 $
	1,703,281 10,428,220 155,000 - 784,318 2,964,149	2,411,191 9,985,296 2,534,341 158,514 735,097 3,249,301
	16,034,968	19,073,740
	1,396,607 5,067,903 4,813,389 3,808,402 1,352,728	1,708,096 4,255,519 4,309,637 1,738,308 3,134,420
	16,439,029	15,145,980
	32,473,997	34,219,720
	21,434,492 1,536,099 (1,003,000) (10,335,474)	21,434,492 1,463,025 (955,800) (7,431,648)
	11,632,117 -	14,510,069 365,617
	11,632,117	14,875,686
	44,106,114 $	49,095,406 $

Signed "Craig Campbell" Director Signed "Samuel Duboc" Director See accompanying notes to the consolidated financial statements

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AVANTE LOGIXX INC. CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS FOR THE YEARS ENDED MARCH 31, 2021 AND MARCH 31, 2020

Revenues from continuing operations (note 6) Cost of sales Gross profit Operating expenses Salaries, benefits and commissions Administration Depreciation on capital assets (note 9) Amortization on intangible assets (note 11) Merchant transaction fees and bank charges Share based payments (note 15b, note 16) Income (loss) before other income and expenses Other (income) expenses Miscellaneous income Interest expense Foreign exchange (gain) loss Loss (gain) in fair value of derivative liability (note 19a) Income (loss) before reorganization and acquisition costs Reorganization and acquisition costs (note 22) Impairment loss on home automation business Income (loss) before income taxes Provision for income taxes Current income tax expense (recovery) (note 18) Deferred income tax expense (recovery) (note 18) Net Income (loss) from continuing operations for the year Net income from discontinued operations for the year net of tax (note 23) Net income (loss) for the year Net income (loss) for the year attributable to: Equity holders of the parent Non-controlling interests Other comprehensive income (loss) from continuing operations: Items that may be reclassified subsequently to net loss Unrealized gain (loss) on investments (note 19c) Total comprehensive income (loss) for the year Total comprehensive income (loss) for the year attributable to: Equity holders of the parent Non-controlling interests Net income (loss) per share attributable to equity holders of the parent (note 5) Basic and diluted income (loss) from continuing operations Basic and diluted income (loss) from discontinued operations Basic and diluted number of shares outstanding See accompanying notes to the consolidated financial statements	Forthe y	earended
	Mar 31, 2021	Mar 31, 2020
	91,715,784 $ 70,881,762	(Restated-Note 23)
		49,849,478 $ 38,161,036
	20,834,022	11,688,442
	9,672,536 5,072,517 1,096,406 3,612,908 343,021 93,056	8,006,608 4,133,838 1,090,296 1,476,268 233,799 201,966
	19,890,444	15,142,775
	943,578	(3,454,333)
	(82,554) 1,539,239 2,198 2,070,094	(59,508) 615,296 (65,452) (2,210,243)
	3,528,977	(1,719,907)
	(2,585,399) 680,795 -	(1,734,426) 1,898,752 172,274
	(3,266,194)	(3,805,452) (12,287) (1,175,481)
	51,979 (146,161)
	(3,172,012)	(2,617,684)
	370,063	(99,265)
	(2,801,949) $	(2,716,949) $
	(2,903,826) 101,877	(2,649,056) (67,893)
	(2,801,949) $	(2,716,949) $
	(47,200)	(542,800)
	(47,200) $	(542,800) $
	(2,849,149) $	(3,259,749) $
	(2,951,026) 101,877	(3,191,856) (67,893)
	(2,849,149) $	(3,259,749) $
	($0.150) $0.013 21,192,004	($0.124) ($0.001) 21,192,004

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AVANTE LOGIXX INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED MARCH 31, 2021 AND MARCH 31, 2020

Balance at April 1, 2019 Income (loss) for the year Share based payments Unvested share options cancelled Subsidiary dividend paid Balance at March 31, 2020 Balance at April 1, 2020 Income (loss) for the year Share based payments Share options expired/cancelled Sale of discontinued operations (note 23) Balance at March 31, 2021	Share Capital $21,434,492 - - - -	Contributed Surplus $1,261,059 - 338,760 (136,794) -	Deficit ($4,782,592) (2,649,056) - - -	Accumulated Other Comprehensive Deficit ($413,000) (542,800) - - -	Subtotal $17,499,959 (3,191,856) 338,760 (136,794) -	Non-controlling Interest $526,010 (67,893) - - (92,500)	Total Equity $18,025,969 (3,259,749) 338,760 (136,794) (92,500)
	$21,434,492	$1,463,025	($7,431,648)	($955,800)	$14,510,069	$365,617	$14,875,686
	$21,434,492 - - - -	$1,463,025 - 233,928 (160,854) -	($7,431,648) (2,903,826) - - -	($955,800) (47,200) - - -	$14,510,069 (2,951,026) 233,928 (160,854) -	$365,617 101,877 - - (467,494)	$14,875,686 (2,849,149) 233,928 (160,854) (467,494)
	$21,434,492	$1,536,099	($10,335,474)	($1,003,000)	$11,632,117	- $	$11,632,117

See accompanying notes to the consolidated financial statements

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AVANTE LOGIXX INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR YEARS ENDED MARCH 31, 2021 AND MARCH 31, 2020

Operating activities Comprehensive loss for the year Gain on disposal of capital assets Share based payments Interest on bank loans and leases Accretion on convertible debt (note 19a) Accretion on promissory note (note 19b) Depreciation on capital assets (note 9) Amortization on intangible assets (note 11) Amortization on capitalized commission Provision for income tax Loss (gain) on fair value of derivative liability (note 19a) Capitalization of commissions Net income (loss) from discontinued operations (note 23) Unrealized (gain) loss on investment (19c) Impairment of capital assets Net change in non-cash working capital: Accounts receivable Inventories Contract assets (note 6) Prepaid expenses Current income tax Accounts payable and accrued liabilities Contract liabilities (note 6) Cash from (used in) continuing operations Net cash flows attributable to discontinued operations Net cash from (used in) operating activities Financing activities Proceeds from loans Proceeds of convertible debentures, net of costs Principal loan payments Principal lease payments (note 14) Interest on bank loans, convertible debenture, and leases Promissory note payment (note 19b) Subsidiary dividend paid to NCI Cash from (used in) continuing operations Net cash flows attributable to discontinued operations Net cash from (used in) financing activities Investing activities Acquisition of subsidiary, net of cash (note 11) Net proceeds from sale of subsidiary (note 23) Cash sold on disposition of subsidiary (note 23) Dividend received Purchase of capital assets (note 9) Disposal of capital assets (note 9) Additions to vehicle leases Cash from (used in) continuing operations Net cash flows attributable to discontinued operations Net cash from (used in) investing activities Increase (decrease) in cash during the year Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year	Forthe yearended
	Mar 31, 2021 Mar 31, 2020 (Restated-Note 23) (2,849,149) $ (3,259,749) $ - (15,763) 93,056 201,966 358,183 - 1,082,232 350,777 90,659 33,096 1,096,406 1,090,296 3,612,908 1,476,268 188,574 160,125 (146,164) (1,375,049) 2,070,094 (2,210,243) (365,210) (51,404) (370,063) 99,265 47,200 542,800 - 172,274 4,908,726 (2,785,341) (2,141,780) (1,312,499) (201,270) (377,882) (166,769) 200,673 50,202 (114,643) (212,019) 150,097 1,068,622 518,452 428,071 (1,183,939) (1,174,943) (2,119,741) 3,733,783 (4,905,082) 236,016 565,987 3,969,799 (4,339,095) 18,199,741 4,040,000 - 8,106,656 (17,979,452) (665,359) (671,781) (591,959) (936,663) (323,467) (2,429,501) - - (92,500) (3,817,656) 10,473,371 (81,271) (130,940) (3,898,927) 10,342,431 - (6,797,030) 1,891,500 - (730,218) - - 250,000 (950,887) (228,997) 55,140 196,328 (58,437) - 207,098 (6,579,699) 5,920 (259,494) 213,018 (6,839,193) 283,890 (835,857) 1,339,864 2,175,721
	1,623,754 $ 1,339,864 $

*Total interest paid in the year ending March 31, 2021 is $936,663, March 31, 2020 $291,889

**Total corporate income tax payments made in the year ending March 31, 2021 is $285,252, March 31, 2020 $104,195 See accompanying notes to the consolidated financial statements

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AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

1. NATURE OF BUSINESS

Avante Logixx Inc. (the “Company”) develops security technologies, products and solutions for personal, condo and commercial protective services, monitoring and control applications, and sells and installs custom-made locks, doors and hardware. All of these activities are conducted through the following subsidiaries: Avante Security Inc. (“Avante Security”), which is 100% owned, Logixx Security Inc. (“Logixx Security”), which is 100% owned and City Wide Locksmiths Ltd. (“City Wide”), in which the Company held a 70% majority interest until sold on September 30, 2020 (see Note 23). The Company’s common shares are listed on the TSX Venture Exchange under the symbol XX.V (OTC: ALXXF).

Avante Security provides premium security services for residential customers in Toronto and Muskoka, Ontario through the use of advanced technology and a focus on client service. Avante Security’s business provides a complete offering ranging from system design, sales, installations, and monitoring to services such as alarm response and patrols, personal protection, house staff training, and secure transportation. Avante Security has a specialized skillset in high-rise security integration, monitoring and electronic building management. It also provides consulting and installation of automation and security solutions for the highend residential market. Avante Security’s signature offerings are its Rapid Alarm Response services, and its Intelligent Perimeter Protection Video Analytics. Avante Security also provides extensive offerings, which include Closed Circuit Television (“CCTV”), access controls and security services for travelling executives. Avante Security uses its proprietary two-way wireless communication technology for security and home automation applications and in other market segments for various remote control and monitoring functions.

Logixx Security provides security services for enterprise customers across Canada. Services include protective services (also known as guarding) as well as security system design, sales, installations, and monitoring and alarm response. The development of Logixx Security into a national business has occurred through organic growth and completion of acquisitions.

On December 1, 2019, the Company completed the acquisition of A.S.A.P. Secured Inc. (“ASAP”), which provides high-end, low-profile security guards and patrols, as well as numerous security services across Canada (see Note 12). On April 1, 2020, ASAP was amalgamated into Logixx Security.

City Wide provides security locks, keys and door hardware to residential and commercial customers in the greater Toronto area, with a division catering to preeminent architects, designers and builders in the highend home markets. City Wide was a 70% owned subsidiary of the Company, but this ownership interest was sold on September 30, 2020 (see Note 23).

The address of the Company’s corporate office is 130 Bloor Street West, Suite 601, Toronto, Ontario, Canada.

2. BASIS OF PRESENTATION

a) Statement of compliance

These consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and using the accounting policies described herein.

The consolidated financial statements were authorized for issue by the Board of Directors on July 20, 2021.

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AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

2. BASIS OF PRESENTATION (CONTINUED)

b) Basis of measurement

These consolidated financial statements have been prepared using the historical cost convention. The consolidated financial statements are presented in Canadian dollars, which is also the Company’s functional currency, including all subsidiaries.

The preparation of these consolidated financial statements in compliance with IFRS requires management to make certain critical accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and other entities that the Company controls (subsidiaries). Control exists when the Company is exposed or has the existing rights to variable returns and the current ability to direct activities that significantly affect the entities’ returns. Consolidation of the subsidiaries begins on the date on which control is obtained and ends when control of the entity ceases to exist. The Company assesses control on an ongoing basis.

The financial statements of the Company and subsidiaries are prepared as of the same dates and periods. The consolidated financial statements are prepared using uniform accounting policies by all companies in the Company. Transactions and balances between the Company and its consolidated entities have been eliminated on consolidation.

Non-controlling interests are recorded in the consolidated financial statements and represent the noncontrolling shareholders’ equity in an entity consolidated by the Company for which the Company’s ownership is less than 100%. Transactions with non-controlling interests are treated as transactions with equity owners of the Company. Changes in the Company’s ownership interest in its subsidiaries are accounted for as equity transactions.

The Company’s composition is made of the subsidiaries listed below.

	Ownership	interest held at
Name of entity	Mar 31, 2021	Mar 31, 2020
Avante Security Inc.	100%	100%
Logixx Security Inc.	100%	100%
City Wide Locksmiths Ltd (note 23)	0%	70%
A.S.A.P. Secured Inc.	0%	100%

The Company’s ownership interest in A.S.A.P. Secured Inc. was not divested but amalgamated with Logixx Security Inc. on April 1, 2020. The Company’s 70% ownership in City Wide Locksmith’s Ltd was sold on September 30, 2020 (see Note 23).

• 9 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash and cash equivalents

Cash and cash equivalents include cash on hand and guaranteed investment certificates (“GICs”) with financial institutions and other short-term, highly liquid investments with original maturities of three months or less and interest rates that are readily convertible to known amounts of cash and subject to an insignificant risk of change in value.

Inventories

Inventories are valued at the lower of cost and net realizable value with cost being determined on a first-in, first-out basis, the exception to this being inventory held by the business formally known as Veridin (now Logixx Security), with cost determined by a weighted average cost.

The cost of inventories comprises costs of purchase and costs incurred bringing the inventories to their present location. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and estimated selling costs.

In determining inventory valuation, any obsolete or damaged inventory was written down to net realizable value.

Income Taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in net income except to the extent that it relates to a business combination or items recognized directly in equity or in other comprehensive loss/income.

Current income taxes are recognized for the estimated income taxes payable or receivable on taxable income or loss for the current year and any adjustment to income taxes payable in respect of previous years. Current income taxes are determined using tax rates and tax laws that have been enacted or substantively enacted by the year-end date.

Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differs from its tax base, except for taxable temporary differences arising on the initial recognition of goodwill and temporary differences arising on the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit or loss.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Deferred tax assets and liabilities are offset when the Company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

• the same taxable group company; or

• different group entities which intend either to settle current tax assets and liabilities on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

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AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary differences is restricted to those instances where it is probable that future taxable profit will be available against which the deferred tax asset can be utilized. At the end of each reporting period the Company reassesses unrecognized deferred tax assets. The Company recognizes a previously unrecognized deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Property, Plant & Equipment

Property, plant, and equipment are stated at cost less accumulated depreciation less any accumulated impairment.

Depreciation is provided for using the following rates and methods:

Computer Equipment	- 30%, declining balance basis
Computer Software	- Period of useful life (3 years), straight line basis
Equipment, furniture, and fixtures	- 20%, declining balance basis
Leasehold improvements	- Period of the lease, straight line basis
Vehicles	- 30%, declining balance basis
Right-of-use-assets	- Period of the lease, straight line basis
Buildings	- 4%, declining balance basis
Uniforms	- Period of useful life (3 years), straight line basis

Intangible assets

Externally acquired intangible assets are measured at cost less accumulated amortization and any accumulated impairment losses. The cost of intangible assets acquired through business combinations is their fair value at the acquisition date. These intangible assets are amortized on a straight-line basis over their estimated useful lives and are tested for impairment whenever events or changes indicate that their carrying amount may not be recoverable. Useful lives, residual values and amortization methods for these intangible assets with finite useful lives are reviewed at least annually.

Intangible assets are recognized on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques. The significant intangible assets recognized by the Company and their useful economic lives are as follows:

appropriate valuation techniques. The useful economic lives are as follows:	significant int
Trade Name	- 1-10 years
Trade Name - CWL (note 23)	- Indefinite
Trade Name - CWL acquired (note 23)	- 5-10 years
Customer relationships	- 5-12 years
Order backlog	- 1-4 years
Non-compete agreement	- 5 years

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AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Goodwill and Indefinite Life Intangible Assets

Goodwill arising on business combinations is recognized as an asset at the date that control is acquired. Goodwill and indefinite life intangible assets are subsequently measured at cost less any accumulated impairment losses and are not amortized but are tested for impairment on an annual basis or more frequently if there are indicators of impairment as described in the Impairment of Non-Financial Assets accounting policy. The cost of goodwill is calculated as the excess of purchase price of the acquired business over the estimated fair value of the tangible and intangible assets acquired and liabilities assumed at the date of acquisition and is allocated to the cash generating unit (“CGU”) expected to benefit from the acquisition. A CGU is the smallest group of assets for which there are separate identifiable cash flows.

Impairment of Non-Financial Assets

Non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount, which is the higher of value in use and fair value less costs to sell, the asset is written down accordingly. In measuring value in use, the expected future cash flows are discounted using a pretax discount rate that reflects the risks specific to the asset. Impairment testing of goodwill and indefinite life intangible assets is done annually at the March 31 year end or when there are indicators of impairment.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the CGU. Any impairment loss is charged to profit or loss, except to the extent they reverse gains previously recognized in other comprehensive loss/income. During the last quarter of fiscal 2020 management assessed the Company’s recent acquisitions and amalgamations resulting in three CGU’s as of March 31, 2020, a decrease from six at March 31, 2019. With the sale of its 70% interest in City Wide on September 30, 2020, the Company now has two CGU’s (2020 – three CGUs).

An impairment loss of an asset is reversed only if there have been changes in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. Reversal of an impairment loss is limited to the lower of the carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years, and its recoverable amount. The reversal of impairment loss of an asset is recognized in profit and loss.

Financial Instruments: Classification and Measurement

[a] Classification

Financial assets are classified by the Company in the following measurement categories: i) those to be measured at fair value through profit or loss (FVTPL), ii) those to be measured at fair value through other comprehensive income (FVOCI), and iii) those to be measured at amortized cost. Financial liabilities are measured at amortized cost unless designated to be measured at FVTPL. Classification depends on the contractual terms of the cash flows. Gains or losses for instruments measured at fair value are either recorded in profit or loss or other comprehensive income.

[b] Measurement

Financial instruments are measured at fair value on initial recognition as required, plus directly attributable transaction costs on the acquisition or issuance of financial assets and liabilities not measured at FVTPL. Transaction costs related to assets and liabilities measured at FVTPL are recorded in profit or loss at the time of acquisition or issuance. Trade receivables without a significant financing component are the exception and are initially measured at the transaction price.

• 12 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding, are generally measured at amortized cost at the end of the subsequent accounting periods using the effective interest rate method, less any impairment losses. Amortized cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs. All other financial assets are measured at their fair values at the end of accounting periods, with any changes recognized through profit and loss or other comprehensive income.

On initial recognition of a financial asset that is neither held for trading nor contingent on consideration recognized by an acquirer in a business combination, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in Other Comprehensive Income. This election is made on an investment-by-investment basis.

Convertible debentures are allocated between derivative liabilities and host debt on initial recognition with transaction costs attributable to the derivative liability expensed in the period. The host debt is net of attributable transaction costs. The derivative liability is measured at FVTPL using the Black Scholes pricing model.

Summary of Financial Instruments Classification and Measurement:

Financial assets and liabilities	Classification	Measurement
Cash and cash equivalents	Amortized cost	Amortized cost
Accounts receivable	Amortized cost	Amortized cost
Loans receivable	Amortized cost	Amortized cost
Investments	FVOCI	Fair value
Bank indebtedness and vehicle loans	Amortized cost	Amortized cost
Accountspayable & accrued liabilities	Amortized cost	Amortized cost
Obligations under finance lease	Amortized cost	Amortized cost
Convertible debt liability	Amortized cost	Amortized cost
Derivative liability	FVTPL	Fair value
Preferred share unitspayable	FVTPL	Fair value

Determination of fair value

Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

The balance sheet carrying amounts for cash and cash equivalents, accounts receivables, accounts payables and accrued liabilities, bank indebtedness and vehicle loans and obligations under lease approximate fair value due to their short-term nature. Due to the use of subjective judgments and uncertainties in the determination of fair values these values should not be interpreted as being realizable in an immediate settlement of the financial instruments.

• 13 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair Value Hierarchy:

Financial instruments that are measured subsequent to initial recognition at fair value or disclosed at fair value are grouped in Levels 1 to 3 based on the degree to which the fair value is observable:

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable marker data (unobservable inputs).

As at March 31, 2021 the 3 Sixty shares (note 19b) owned by the Company were recognized and measured at fair value and categorized as a Level 1, similar to the treatment at March 31, 2020. The conversion option derivative liabilities in respect of the convertible debentures issued by the Company (note 19a) were recognized and measured at fair value and categorized as a level 2.

Revenue from Contracts with Customers

Under IFRS 15, revenue is to be recognized in a manner that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances. The standard also specifies the accounting for the incremental cost of obtaining a contract and the costs directly related to fulfilling a contract.

The Company considered the terms of the contract in determining the five steps of the framework to recognize revenue from contracts with customers. The five-step model framework implemented by the Company is: i) identify the contract with a customer; ii) identify the performance obligations in the contract; iii) determine the transaction price; iv) allocate the transaction price to the performance obligations in the contract; and v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company enters into contracts with customers for a) protective services, b) monitoring and managed services, c) electronic services, and d) security devices and hardware.

Performance obligations for the majority of the contracts that the Company enters into are completed in less than twelve months, and as such, the Company applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose information about remaining performance obligations as the original expected durations are one year or less. However certain protective and monitoring and managed services range from one to three years.

Typically, the Company does not bundle distinct services within a single contract however in some instances contracts bundle distinct services, in which case each component of bundled goods and services are measured at their relative fair values, based on stand-alone selling prices. The performance obligations for contracts, whether installations, or installations and monitoring, or protective services and monitoring contracts are distinct from one and another.

Accounting for revenue recognition

The Company recognizes revenue from long term contracts based on the stage of completion of the performance obligation delivered. Revenue from contracts is recognized over time as the customer controls the asset as it is created, the Company’s performance creates and or enhances an asset in the customer’s control, and the Company has an enforceable right to payment for performance completed to date.

• 14 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Contract modifications will be accounted for as a separate contract with the customer, or it will be accounted for by modifying the accounting for the current contract with the customer. Modifications that are distinct from those delivered prior to the modification will be accounted for prospectively, if the modifications are not distinct, they will be accounted for retrospectively. Any modification to the Company’s customer contracts are considered distinct and separate, and, therefore are accounted for prospectively or under a new and separate contract. In the current year, the Company did not have any contract modifications.

The Company does not accept returns, with the exception of defective parts / equipment installed, which are under warranty by the parts/ equipment manufacturer, usually for a period of one year. The Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Therefore, the company does not adjust the transaction price.

Accounting for costs incurred in acquiring contracts

IFRS 15 requires the treatment of certain costs directly incurred in acquiring customer contracts (such as sales commissions) to be recognized as an asset and amortized into selling, general, and administrative expenses over time consistent with the pattern of transfer of the goods or services to which the asset relates. Previously, the Company expensed these costs as incurred. A significant portion of the Company’s open contracts at the end of the period are to be completed within 12 months or less. In instances where the contract term is longer than 12 months, the Company recognizes an asset and it is amortized into advertising and selling expenses over time.

Revenue Recognition and Deferred Revenue

The Company’s revenue recognition policy from its various sources is as follows:

• (i) Revenue from protective services subscribers includes performance obligations such as executive security services, general guarding and travel advisory services, which are recognized over the term of the subscriber agreement as the services are provided. Performance obligations satisfied at a point in time are secure transportation services. Contract liabilities (deferred revenue) result from subscribers that are billed in advance of the period in which such services are provided, on a bi-monthly, quarterly, semi-annual or annual basis.

Revenue from electronic installation services includes both the installation of security and home automation systems. The Company’s contracts with customers require highly complex integration services which are not separately identifiable from other promises in the contracts and, therefore, not distinct. As such, the entire contract is one performance obligation recognized over time using the percentage of completion basis, where milestones are clearly defined, and performance is tied to milestones reached and costs incurred compared to total estimated costs. A contract asset is recognized for unbilled amounts on these projects during construction.

• (ii) Revenue from monitoring and managed services is a distinct performance obligation and recognized over the term of the subscriber agreement as the services are provided. Contract liabilities (deferred revenue) result from subscribers that are billed in advance of the period in which such services are provided, on a bi-monthly, quarterly, semi-annual or annual basis.

• (iii) Revenues from the sale of security devices and hardware, are recognized upon delivery of goods and services to customers and acceptance of such goods and services by customers net of provisions for returns and discounts.

• 15 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (“CODM”). The CODM is the person or persons who are responsible for allocating resources and assessing performance of the operating segments. The CODM for the Company has been identified as the Chief Executive Officer.

The factors used to identify the Company’s reportable segments include a combination of how the businesses are managed, with separately accountable management teams, and the principal type of target customer (residential versus enterprise). Operating segments have not been aggregated as each division is a discrete reportable segment.

Discontinued Operations

A discontinued operation is a component of the Company’s business that has been disposed of or is classified as held for sale, the operations and cash flows of which can be clearly distinguished from the rest of the Company, and either (a) represents a separate major line of business or geographic area of operations; (b) is part of a single coordinated plan to dispose of a separate major line of business or geographic area of operations; or (c) is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held for sale. The results of discontinued operations are presented separately on the face of the consolidated statements of loss and comprehensive loss.

Share Capital

Equity instruments are contracts that give a residual interest in the net assets of the Company. Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Company’s common shares and share warrants are classified as equity instruments. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Earnings/(loss) per Share

Basic earnings/(loss) per share is computed by dividing the net income/(loss) applicable to common shares of the Company by the weighted average number of common shares outstanding for the relevant period.

Diluted earnings per common share is computed by dividing the net income/(loss) applicable to common shares by the sum of the weighted average number of common shares issued and outstanding and all additional common shares that would have been outstanding, if potentially dilutive instruments were converted.

Potential common shares (convertible securities such as warrants, convertible debentures and options) are only included in the computation of diluted earnings per share when their conversion decreases earnings per share or increases loss per share.

• 16 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Share-based Payment Transactions

Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the statement of comprehensive income/loss over the vesting period. Performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether these vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the statement of comprehensive income/loss over the remaining vesting period.

Where equity instruments are granted to employees, they are recorded at the fair value of the equity instrument granted at the grant date. The grant date fair value is recognized in comprehensive loss/income over the vesting period, described as the period during which all the vesting conditions are to be satisfied.

Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in the statement of comprehensive loss/income, unless they are related to the issue of shares. Amounts related to the issue of shares are recorded as a reduction of share capital.

When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

All equity-settled share-based payments are reflected in contributed surplus, until exercised. Upon exercise, shares are issued from treasury and the amount reflected in contributed surplus is credited to share capital, adjusted for any consideration paid.

Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vesting conditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration of vesting and recognizes the amount that otherwise would have been recognized for services received over the remainder of the vesting period. Any payment made to the employee on the cancellation is accounted for as the repurchase of an equity interest except to the extent the payment exceeds the fair value of the equity instrument granted, measured at the repurchase date. Any such excess is recognized as an expense.

The Black-Scholes option pricing model used by the Company to determine fair values was developed for use in estimating the fair value of freely traded options that are fully transferable and have no vesting restrictions. This model requires the use of highly subjective assumptions, including future stock price volatility and expected time until exercise.

• 17 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Performance Share Units

On November 25, 2020 the Company’s Board of Directors established a performance share unit (“PSU”) plan. Under this plan the holder has the opportunity to receive a cash payment based upon the relative performance measures, performance levels, and adjustment factors set out in the PSU grant. The vesting period can vary as set out in the PSU grant. The PSU plan’s fair value is determined by using a MonteCarlo simulation model at each reporting period with changes in fair value recorded to profit and loss. Share based payments expense is recognized based on the fair value of the awards that are expected to vest and remain outstanding at the end of the reporting period. The share-based compensation liability is included in trade accounts payable and accrued liabilities in the consolidated statement of financial position and the related compensation expense is included within share based payments on the consolidated statements of loss and comprehensive loss.

Foreign Currency Translation

Foreign currency accounts are presented in Canadian dollars, which is also the functional currency of the Company and its subsidiaries.

At the transaction date, each asset, liability, revenue and expense denominated in a foreign currency is translated into Canadian dollars by the use of the exchange rate in effect at that date. At the year-end date, unsettled monetary assets and liabilities are translated into Canadian dollars by using the exchange rate in effect at the period-end date and the related translation differences are recognized in net income.

Non-monetary assets and liabilities that are measured at historical cost are translated into Canadian dollars by using the exchange rate in effect at the date of the initial transaction and are not subsequently restated. Non-monetary assets and liabilities that are measured at fair value are translated into Canadian dollars by using the exchange rate in effect at the date the fair value is determined, and the related translation differences are recognized in net income or other comprehensive loss consistent with where the gain or loss on the underlying non-monetary asset or liability has been recognized.

Provisions

The Company recognizes provisions when there is a present obligation as a result of a past event. Two conditions must be met: the outflow of resources with economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. This treatment is used for claims, present legal, or constructive obligations.

When all or part of an expense is expected to be reimbursed to the Company, the reimbursement is recognized as a separate asset when certain. The expense is recognized in the consolidated statement of profit or loss net of any reimbursement.

Business Combinations

The Company applies the acquisition method in accounting for business combinations.

The Company measures goodwill as the difference between the fair value of the consideration transferred, including the recognized amount of any non-controlling interest in the acquiree, and the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date.

Consideration transferred includes the fair value of the assets transferred (including cash), liabilities incurred by the Company on behalf of the acquiree, and any equity interests issued by the Company. Consideration transferred may also include the fair value of any contingent consideration.

• 18 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Transaction costs that the Company incurs in connection with a business combination, such as legal fees, due diligence fees, and other professional and consulting fees, are expensed in the period as incurred.

New Standards and Interpretations

IAS 1: Presentation of Financial Statements

In January 2020, IASB issued Classification of Liabilities as Current or Non-current, which amends IAS 1 - Presentation of Financial Statements. The narrow scope amendments affect only the presentation of liabilities in the statement of financial position and not the amount or timing of their recognition. It clarifies that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period and specifies that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability. It also introduces a definition of ‘settlement’ to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. The amendments are effective for annual reporting periods beginning on or after January 1, 2023. Earlier application is permitted. The implementation of these amendments is not expected to have a significant impact to the Company’s classification of liabilities.

IFRS 3: Business Combinations

On May 14, 2020 the IASB published an amendment to IFRS 3 Business Combinations, and is effective on or after January 1, 2022, with earlier application permitted. The amendment has an explicit statement that an acquirer does not recognize contingent assets acquired in a business combination. The Company did not have a business combination in the year, but will adopt the amendment for future business combinations.

IAS 16: Property, Plant and Equipment

The IASB published an amendment to IAS 16 Property, Plant and Equipment on May 14, 2020 that will apply retrospectively to financial statements beginning on or after January 1, 2022. Early adoption is permitted. The amendment clarifies the accounting for the net proceeds from selling any items produced while bringing an item of property, plant and equipment into use. The Company is currently evaluating the impact of the standard on its consolidated financial statements and does not expect any retrospective changes at this time.

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AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

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

In March 2020, the World Health Organization declared, the outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, a pandemic. This has resulted in governments worldwide enacting emergency measures to limit the spread of the virus, including closure of non-essential businesses. As of the date of these financial statements, the Company’s operations are considered essential in all provinces in which the Company operates. As such, to date the Company has been able to continue operating with no material impact to operations.

There have been no material revisions to the nature and number of estimates and judgments made in prior periods. However, the effects of COVID-19 have required significant judgements and estimates to be made. For assumptions made by Avante Logixx Inc. in the estimates made to calculate the recoverable amount of CGU’s, refer to note 11. Additionally, while the changes in the estimates and judgements have not had a material impact on Avante Logixx Inc. to date, the effects of COVID-19 have required revisions to estimates of expected credit losses attributed to accounts receivable arising from sales to customers on credit terms, including the incorporation of forward-looking information to supplement historical credit loss rates.

Due to rapid developments and uncertainty surrounding COVID-19, it is not possible to predict the impact that COVID-19 will have on the Company’s operating results in the future, its suppliers, and its customers. Additionally, it is possible the Company’s financial prospects will change in the near term as a result of COVID-19. The Company is closely monitoring the impact of the pandemic on all aspects of its business.

Judgements

Information about critical judgements in applying accounting policies that have the most significant risk of causing material adjustment to the amounts reported in these consolidated financial statements are discussed below:

1. Business combinations

IFRS 3, Business Combinations, is applied to account for all business acquisitions. Identifying the fair value of assets and liabilities acquired, including intangible assets and residual goodwill requires significant judgement by management upon acquisition.

The Company uses judgement in determining the entities that it controls and therefore consolidates. The Company controls an entity when the Company has the existing rights that give it the current ability to direct the activities that significantly affect the entity’s returns. The Company consolidates all of its subsidiaries.

2. Allowance for doubtful accounts receivable and contract assets

The Company has exercised judgement in quantifying the allowance for doubtful accounts receivable. While it is possible that certain accounts receivable considered good may turn doubtful at a later date, there are no indicators that they would at the present time.

• 20 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

3. Income taxes

Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the Company’s current understanding of the tax law. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however, the final outcome may be materially different than the amount included in the tax liabilities.

In addition, the Company recognizes deferred tax assets relating to tax losses carried forward to the extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same taxable entity against which the unused tax losses can be utilized. Judgement is used to evaluate whether a deferred tax asset can be recovered based on the Company’s assessment of existing tax laws, estimates of future profitability, and tax planning strategies.

4. Provision for impairment of inventories

The provision for impairment of inventories requires estimation and judgement to assess the lower of cost and net realizable value. The provision is assessed by taking into account recent sales, aging of inventories, historical costs and other factors that affect inventory obsolescence.

5. Lease discount rate

The Company exercises judgement in determining the incremental borrowing rate when the interest rate is not implicit in the lease. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow over a similar term, with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.

6. Intangible assets and goodwill

Management is required to use judgement in determining the economic useful lives of identifiable intangible assets. Judgement is also required in identifying indicators of impairment and in identifying the Company’s cash generating units (“CGUs”).

7. Revenue and contract assets

There is judgement in determining the timing of revenue recognition pertaining to electronic installation services, where the entire contract is one performance obligation and is recognized over time using the percentage of completion basis. Timing of revenue recognition may differ from when customers are invoiced, which could result in contract assets or contract liabilities being recognized.

8. Segment Reporting

The Company has exercised judgement in identifying its reportable segments and applying the related aggregation criteria required under IFRS 8. The Company’s two reportable segments are Logixx Security and Avante Security. Logixx Security focuses on providing security services to enterprise clients across Canada, including corporations and municipalities. Avante Security focuses on providing security services to ultra-high net worth residential customers in the central Toronto and Muskoka regions of Ontario.

Estimates

The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income in the year of the change, if the change affects that year only, or in the year of the change and future years, if the change affects both.

• 21 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

The estimates and assumptions that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year include accrued liabilities. These estimates are created based on management’s assumptions, based on current circumstances, and management believes represent a reasonable basis upon which to estimate the future liability. With respect to intangibles, acquired through business combinations, the Company determines fair values using such estimates as discount rates, capitalization rates and terminal capitalization rates. These estimates take into account any material changes to the assumptions that occur when reviewed regularly by management. With respect to goodwill impairment testing, the Company determines value in use and fair value less costs of disposal using such estimates as cash flows and discount rates. These estimates are reviewed periodically by management.

Share-based payments and derivative liabilities are determined by the Black-Scholes option pricing model, which is used by the Company to determine the fair value of stock options, warrants and convertible debentures-derivative liability. Significant estimates are used in the calculation of the input variables in the Black-Scholes model, which includes: risk free interest rate, expected stock price volatility, expected life, and expected dividend yield. The fair value of the Company’s unvested performance share units is determined by a Monte Carlo valuation model and the significant estimates used to estimate the price of the Company’s common shares on the vesting date which includes: the current price of the Company’s common shares, the risk free interest rate over the life of the performance units, the expected stock price volatility, the number of trading days between the valuation date and the vesting date and the expected return on the Company’s common shares during the remaining vesting period of the performance units.

5. LOSS PER SHARE

The following reflects the income and share data used in the basic and diluted earnings per share computations for the period ended:

	Mar 31, 2021 Mar 31, 2020 restated For the year ended
Weighted average number of shares outstanding - basic and dilutive Earnings (loss) per share - basic and diluted from continuing operations Earnings (loss) per share - basic and diluted from discontinued operations Net income (loss) attributable to equity holders of the parent - basic and fully diluted from continuing operations Total net income (loss) attributable to equity holders of the parent - basic and fully diluted Net income (loss) attributable to equity holders of the parent - basic and fully diluted from discontinued operations	(0.150) $ (0.124) $ 0.013 (0.001) (3,172,012) (2,617,684) 268,186 (31,372)
	(2,903,826) $ (2,649,056) $ 21,192,004 21,192,004

Potential common shares are antidilutive when their conversion to common shares increases earnings per share or decreases loss per share from continuing operations. Antidilutive common shares are excluded from weighted average number of shares outstanding for the purposes of calculating the diluted earnings per share.

• 22 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

6. REVENUE RECOGNITION

a) Disaggregation of Revenue

Revenue is recognized in a manner that depicts the transfer of promised goods or services to the customer and at an amount that reflects the consideration expected to be received in exchange for transferring those goods and services. Standard 30-day payment terms apply to the majority of accounts receivable for the Company, with a few commercial guarding exceptions up to 180-day payment terms.

Revenue is recognized in a manner that depicts the transfer of promised goods or services to the customer and at an amount that reflects the consideration expected to be received in exchange for transferring those goods and services. Standard 30-day payment terms apply to the majority of accounts receivable for the Company, with a few commercial guarding exceptions up to 180-day payment terms.	Revenue is recognized in a manner that depicts the transfer of promised goods or services to the customer and at an amount that reflects the consideration expected to be received in exchange for transferring those goods and services. Standard 30-day payment terms apply to the majority of accounts receivable for the Company, with a few commercial guarding exceptions up to 180-day payment terms.	Revenue is recognized in a manner that depicts the transfer of promised goods or services to the customer and at an amount that reflects the consideration expected to be received in exchange for transferring those goods and services. Standard 30-day payment terms apply to the majority of accounts receivable for the Company, with a few commercial guarding exceptions up to 180-day payment terms.	Revenue is recognized in a manner that depicts the transfer of promised goods or services to the customer and at an amount that reflects the consideration expected to be received in exchange for transferring those goods and services. Standard 30-day payment terms apply to the majority of accounts receivable for the Company, with a few commercial guarding exceptions up to 180-day payment terms.
For the year ended Mar 31, 2021 Mar 31, 2020
Logixx Security Avante Security Intersegment elimination	Total	Logixx Security Avante Security Intersegment elimination	Total
Protective Services 71,582,396 $ 6,209,147 $ (375,807) $ Monitoring and Managed Services 258,577 3,535,623 (2,900) Electronic Services 3,111,505 7,397,243 0	77,415,736 $ 3,791,300 10,508,748	28,984,724 $ 6,507,915 $ (274,073) $ 259,613 $ 3,507,047 $ (2,900) 3,783,704 $ 7,083,448 $ - $	35,218,566 $ 3,763,760 $ 10,867,152 $
Total Revenue 74,952,478 $ 17,142,013 $ (378,707) $	91,715,784 $	33,028,041 $ 17,098,410 $ (276,973) $	49,849,478 $

(b) Contract Assets and Liabilities

		**Mar **	31, 2021		Mar 31, 2020
Work-in-progress - contracts in process	$		696,506	$	529,737

Timing differences between invoicing, cash collection, and revenue recognition results in accounts receivable and also results in unbilled revenue (contract assets), and deferred revenue (contract liabilities) on the consolidated statement of financial position. Amounts are billed in accordance with the terms of each customer contract, generally subsequent to the performance of obligations and related revenue recognition, resulting in accounts receivable and unbilled revenue with standard payment terms of ‘Net 30 Days’ for these types of contracts. For certain contracts, the Company receives customer payment prior to satisfying contracted obligations and recognizing revenue, resulting in deferred revenue (contract liabilities).

Contract liabilities balance at March 31, 2019	$	3,901,534
Additions during the year		14,660,120
Recognized during the year		(15,312,353)
Balance at March 31, 2020 to be recognized in fiscal year 2021		3,249,301
Contract liabilities balance at March 31, 2020		3,249,301
Additions during the period		9,362,252
Recognized during the period		(8,934,181)
Adjustmentfor Discontinued Operations		(713,223)
Contract liabilities balance at March 31, 2021 to be recognized in fiscal year 2022		2,964,149
Contractliabilities balance atMarch31,2021to berecognized after fiscalyear 2022		-
Contract liabilities balance at March 31, 2021	$	2,964,149

• 23 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

7. ACCOUNTS RECEIVABLE

The accounts receivable on the financial statements are net of allowance for doubtful accounts of $461,284 as at March 31, 2021 (March 31, 2020: $415,077). Changes in the allowance for doubtful accounts during the period were as follows:

Allowance for doubtful accounts

Allowance for doubtful accounts
		Mar 31, 2021		Mar 31, 2020
Allowance for doubtful accounts - opening balance	$	415,077	$	248,854
Netincrease during the year		46,207		166,223
Allowance for doubtful accounts - closingbalance	$	461,284	$	415,077

As at March 31, 2021 and March 31, 2020, the aging of the Company’s accounts receivables was as follows:

Trade receivables Unbilled trade receivables Non-trade receivables Allowance for doubtful accounts	Balance Due 1 - 30 Days 31 - 60 Days 61 - 90 Days Over 90 Days
	15,187,593 7,013,327 3,702,110 1,349,456 3,122,700 1,046,792 1,046,792 - - - 701,592 701,592 - - - (415,077) - - - (415,077)
Balance at March 31, 2020	$16,520,900 $8,761,711 $3,702,110 $1,349,456 $2,707,623
Trade receivables Unbilled trade receivables	17,081,383 8,014,716 4,874,552 1,149,631 3,042,484 1,412,986 1,412,986 - - -
Non-trade receivables	82,145 82,145 - - -
Allowance for doubtful accounts Currentportion vendor take back loan	(461,284) - - - (461,284) 56,750 56,750 - - -
Balance at March 31, 2021	$18,171,980 $9,566,597 $4,874,552 $1,149,631 $2,581,200

The consolidated entity has recognized a loss of $158,133 at March 31, 2021 (March 31, 2020: $209,773) in profit or loss in respect of the expected credit losses for the year. As at March 31, 2021, there was $3,042,484 (March 31, 2020: $3,122,700) of accounts receivable outstanding for over 90 days of which management did not consider $2,581,200 (March 31, 2020: $2,707,623) impaired.

8. INVENTORIES

		Mar 31, 2021		Mar 31, 2020
Inventory	$	1,617,709	$	1,845,699

All inventory is considered finished goods. Inventory expensed to cost of sales during the year ended March 31, 2021 amounted to $4,250,155 (March 31, 2020: $4,081,773 continuing operations).

• 24 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

9. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at March 31, 2020	Computer equipment Equipment, furniture and fixtures Leasehold improvements Computer software Right-of-use asset Vehicles Uniforms Buildings Total $ $ $ $ $ $ $ $ $	Computer equipment Equipment, furniture and fixtures Leasehold improvements Computer software Right-of-use asset Vehicles Uniforms Buildings Total $ $ $ $ $ $ $ $ $
	577 $	,386 900,768 $ 1,085,837 $ 392,198 $ 3,178,780 $ 521,711 $ - $ 473,300 $ 7,129,980 $
Additions during the year Disposals during the year	59	,584 71,594 50,267 19,860 1,364,919 - 749,583 - 2,315,807
	1	,704 4,000 - 7,025 687,601 - - - 700,330
Disposal of discontinued operations (note 23) Balance at March 31, 2021 Accumulated depreciation	66	,533 241,361 371,741 6,200 865,189 418,463 1,969,487
	568 $	,733 727,001 $ 764,363 $ 398,833 $ 2,990,909 $ 103,248 $ 749,583 $ 473,300 $ 6,775,968 $
Balance at March 31, 2020	415	,957 607,601 643,388 232,431 895,125 319,115 - 26,821 3,140,438
Depreciation from continuing operations for the year Depreciation from discontinuing operations for the year (note 23) Disposals during the year Disposal of discontinued operations Balance at March 31, 2021 Carrying Amounts Balance at March 31, 2020 Balance at March 31, 2021	51 2 60	,508 48,244 160,530 12,400 681,590 35,458 87,743 18,932 1,096,406 978 3,268 19,158 1,550 45,192 15,865 86,011 ,272 - - 6,901 492,135 - - - 501,309 ,991 211,951 144,914 1,808 179,670 324,407 923,741
	405 $	,180 447,162 $ 678,163 $ 237,672 $ 950,102 $ 46,031 $ 87,743 $ 45,753 $ 2,897,805 $
	161	,429 293,167 442,449 159,767 2,283,655 202,595 - 446,479 3,989,542
	163 $	,552 279,838 $ 86,200 $ 161,161 $ 2,040,807 $ 57,216 $ 661,840 $ 427,548 $ 3,878,163 $
Cost Balance at March 31, 2019 Acquired through business acquisition Additions during the year Additions on IFRS 16 adoption April 1, 2019 Reclass finance leases to right-of-use assets per IFRS 16 Disposals during the year Balance at March 31, 2020 Accumulated depreciation Balance at March 31 2019 Depreciation from continuing operations Depreciation from discontinued operations Reclass accumulated depreciation on finance leases to right-of-use assets per IFRS 16 On disposals during the year Balance at March 31, 2020 Carrying Amounts Balance at March 31 2019 Balance at March 31, 2020		Computer equipment Equipment, furniture and fixtures Leasehold improvement s Computer software Right-of-use asset Vehicles Buildings Total $ $ $ $ $ $ $ $
		548,384 856,876 1,154,790 266,197 - 1,204,228 473,300 4,503,775
		2,893 357 77,923 73,097 154,270 29,219 43,892 21,787 125,657 802,745 16,110 1,825 1,041,235 - - - - 1,805,822 - - 1,805,822 - - - - 755,614 (755,614) - - 3,110 - 90,740 13 263,324 16,110 1,825 375,122
		577,386 $ 900,768 1,085,837 $ 392,198 $ 3,178,780 $ 521,711 473,300 $ 7,129,980
		355,948 546,571 527,816 108,372 - 482,863 9,466 2,031,036
		58,272 52,861 181,635 123,801 654,786 1,587 17,354 1,090,296 1,737 8,170 38,316 258 102,310 47,109 - 197,900 - - - - 212,444 (212,444) - - - 104,379 - 74,415 - - 178,794
		415,957 607,601 643,388 232,431 895,125 319,115 26,820 3,140,438
		192,436 310,305 626,974 157,825 - 721,365 463,834 2,472,739
		161,429 $ 293,167 $ 442,449 $ 159,767 $ 2,283,655 $ 202,596 $ 446,479 $ 3,989,542

Depreciation expense included in the statement of income from continuing operations is $1,096,406 (March 31, 2020: $1,090,296) for the year ended March 31, 2021. Discontinued operations include depreciation expense of $86,011 (March 31, 2020: $197,900) for the year ended March 31, 2021.

The Company carries two categories of right-of-use assets: vehicles and property. At March 31, 2021 the carrying amount of vehicles under lease was $1,629,601 (March 31, 2020: $1,248,729), with $424,789 of depreciation included in the statement of income for the year ended March 31, 2021, (March 31, 2020: $339,606).

The right-of-use asset property had a carrying amount of $411,206 at March 31, 2021 (March 31, 2020: $1,034,926). Depreciation in the amount of $256,801 is included in the statement of income for continuing operations for the year ended March 31, 2021, (March 31, 2020: $315,180).

• 25 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

9. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

All assets of the Company, including its Accounts Receivables, Inventories and Property, Plant and Equipment, have been pledged as general security against the senior credit facilities established with the Company’s bankers (Note 13). Gains and losses on disposals are booked in the miscellaneous (income) expense line on the income statement.

10. CAPITALIZED COMMISSION

Commissions on long-term contracts (12 months in length or longer) are capitalized at the initiation of the contract and amortized over the length of the contract as revenue is recognized. The unamortized amount of commission on long-term contracts as of March 31, 2021 was $275,482 (March 31, 2020: $98,845), with $188,574 amortized in the year ended March 31, 2021 (March 31, 2020: $160,125).

11. GOODWILL AND INTANGIBLE ASSETS

A. INTANGIBLE ASSETS

A. INTANGIBLE ASSETS	A. INTANGIBLE ASSETS
Cost		Tradename City Wide Tradename Others Customer relationships Backlog Non-compete Total $ $ $ $ $ $
Balance at March 31, 2020		677,000 $ 3,585,266 $ 9,460,097 $ 293,000 $ 200,000 $ 14,215,364 $
Disposal of discontinued operations (note 23)		677,000 - 802,000 31,000 - 1,510,000
Balance at March 31, 2021		- 3,585,266 8,658,097 262,000 200,000 12,705,364
Amortization
Balance at March 31, 2020		6,510 $ 854,418 $ 2,445,023 $ 293,000 $ 13,333 $ 3,612,285 $
Amortization from continuing operations for the year Amortization from discontinued operations for the year		- 2,730,848 842,060 - 40,000 3,612,908 1,563 - - - - 1,563
Disposal of discontinued operations (note 23)		8,073 - 360,900 31,000 - 399,973
Balance at March 31, 2021		- 3,585,266 2,926,183 262,000 53,333 6,826,783
Carrying amounts
Balance at March 31, 2020		670,490 $ 2,730,848 $ 7,015,074 $ - $ 186,667 $ 10,603,078 $
Balance at March 31, 2021		- $ - $ 5,731,914 $ - $ 146,667 $ 5,878,581 $
Cost	Tr	adename City Wide Tradename Others Customer relationships Backlog Non-compete Total $ $ $ $ $ $
Balance at March 31, 2019	$	677,000 1,051,266 $ 6,731,097 $ 364,000 $ - $ 8,823,364 $
Acquired through business acquisitions Disposal of Impairment		- 2,600,000 2,750,000 - 200,000 5,550,000 - 66,000 21,000 71,000 - 158,000
Balance at March 31, 2020		677,000 3,585,266 9,460,097 293,000 200,000 14,215,364
Amortization
Balance at March 31, 2019	$	3,385 160,510 $ 1,754,947 $ 364,000 $ - $ 2,282,842 $
Amortization for the year Amortization from discontinued operations for the year Disposal of Impairment (note 11b)		- 759,909 703,026 - 13,333 1,476,268 3,125 - - - - 3,125 - 66,000 12,950 71,000 - 149,950
Balance at March 31, 2020		6,510 854,418 2,445,023 293,000 13,333 3,612,285
Carrying amounts
Balance at March 31, 2019	$	673,615 890,756 $ 4,976,150 $ - $ - $ 6,540,522 $
Balance at March 31, 2020	$	670,490 2,730,848 $ 7,015,074 $ - $ 186,667 $ 10,603,078 $

• 26 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

11. GOODWILL AND INTANGIBLE ASSETS (CONTINUED)

On company amalgamations, the previously acquired intangible asset tradename from externally acquired entities useful life decreases as operations are merged. The Company’s management has assessed no impairment as there is a period of operations during which both the purchased tradename and the existing tradename are utilized. As such, the purchased tradename assets for Intelligarde (rebranded to Logixx Security effective June 21, 2019), Veridin (amalgamated into Logixx Security on December 2, 2019), and ASAP (amalgamated into Logixx Security on April 1, 2020) were amortized in full over the fiscal year ending March 31, 2021.

On April 1, 2020, the Company changed the accounting estimates of the Trade Name intangible assets related to the acquisitions of Veridin Systems Canada Inc. (“Veridin”) and Intelligarde International Inc (“Intelligarde”). The Company reassessed the amortization period of the related Trade Names intangible assets from the original estimate of ten years down to three years. The net increase to intangible amortization expense recognized during fiscal year ending March 31, 2021 is $690,409.

Veridin and Intelligarde Trade Names	Previous estimate Mar 31, 2021
Net book value at March 31, 2020	2,730,848 $ 2,730,848 $
Amortization recognized in fiscal year 2021	2,040,439 2,730,848
Net book value at March 31, 2021	690,409 $ - $

The reduction to intangible amortization expense to be recognized in fiscal years 2022 to 2028 will be $90,439 per year, and in fiscal year 2029 the reduction will be $57,336.

Intangible amortization expensed in continuing operations is $3,612,908 for the year ended March 31, 2021, (March 31, 2020: $1,476,268). The intangible amortization included in the loss on discontinued operations is $1,563 for the year ended March 31, 2021 (March 31, 2020: $3,125).

B. GOODWILL

B. GOODWILL
Balance at March 31, 2018	$	3,610,237
Acquired through business acquisition of Watermark		345,404
Acquired through business acquisition of Veridin		2,522,897
Acquired throughbusiness acquisitionof Intelligarde		1,684,362
Balance at March 31, 2019	$	8,162,900
Acquired through business acquisition of ASAP		2,457,775
Impairment of Architronics		(86,933)
Balance at March 31, 2020	$	10,533,743
Disposal of discontinued operations (Note 23)		(896,712)
Settlement ofpurchase holdback of ASAP		(36,554)
Balance at March 31, 2021	$	9,600,477

The above intangible assets and goodwill were acquired upon the acquisitions of the businesses of INTO Electronics Inc. at August 22, 2014, LVS Inc. at April 1, 2015, Architronics Limited (“Architronics”) at March 1, 2017, Watermark Security Inc. at August 1, 2018, Veridin Systems Canada Inc. at September 16, 2018, Intelligarde International Inc. (currently doing business as Logixx Security Inc.) at November 30, 2018 and A.S.A.P Secured Inc. at December 1, 2019. INTO Electronics, LVS Inc, Architronics, and Watermark were previously amalgamated into Avante Security, and doing business under that name. Veridin was previously amalgamated into Logixx Security, and ASAP was amalgamated into Logixx Security on April 1, 2020 with both doing business as Logixx Security Inc.

• 27 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

11. GOODWILL AND INTANGIBLE ASSETS (CONTINUED)

As at March 31, 2020, the goodwill balance also reflected goodwill acquired upon the acquisition of City Wide Locksmiths Ltd. on April 1, 2016. However, such goodwill balance was removed as of September 30, 2020 concurrent with the Company’s sale of this ownership interest on September 30, 2020 (Note 23).

The Company expects to renew its primary brand names and trademarks upon expiry indefinitely and expects these to generate economic benefit. Also, the key assumptions used to calculate the fair value of these intangible assets include discount rates, growth rates and margins. The cost of goodwill is calculated as the excess of purchase price of the acquired business over the estimated fair value of the tangible and intangible assets acquired and liabilities assumed at the date of acquisition and is allocated to the cash generating unit (“CGU”) expected to benefit from the acquisition. A CGU is the smallest group of assets for which there are separate identifiable cash flows. During the fourth quarter of the fiscal year ended March 31, 2020, and after the sale of City Wide on September 30, 2020, management determined with recent amalgamations, that the Company has two CGU’s consisting of Avante Security and Logixx Security consistent with how the Company now manages its operations. The goodwill acquired as part of ASAP has been allocated to Logixx Security at March 31, 2020. Previously, each acquisition made by the Company was treated as a distinct CGU.

At March 31, 2020, the Company assessed an impairment loss of $172,274 on Architronics comprised of Goodwill, Customer Relationships, and inventory. There was no impairment loss during the fiscal year ended March 31, 2021.

		Mar 31, 2021		Mar 31, 2020
Goodwill	$	-	$	86,933
Customer Relationships		-		8,050
Inventory		-		77,291
Impairment Loss	$	-	$	172,274

Amortization

The amortization of tradenames, customer relationships and order backlog is included in amortization on intangible assets on the consolidated statements of loss and comprehensive loss.

Impairment testing for cash generating units with goodwill

For purposes of impairment testing, goodwill has been allocated to cash generating units (“CGUs”) as follows:

follows:
		2021		2020
Avante Security Inc.	$	2,971,999	$	2,971,999
City Wide Locksmiths Ltd.(a)		-		896,710
LogixxSecurityInc.		6,628,478		6,665,034
Balance at March 31	$	9,600,477	$	10,533,743

(a) City Wide was not impaired in FY2021, but was sold on September 30, 2020 (note 23)

The recoverable amount of all CGUs was based on value in use, determined by discounting the future cash flows to be generated from the continuing use of the CGU. In all cases, the recoverable amount was determined to exceed the carrying amount of the CGU and there was no impairment.

• 28 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

11. GOODWILL AND INTANGIBLE ASSETS (CONTINUED)

The key assumptions used in the estimation of value in use were as follows:

	Avante Security	Avante Security	Logixx Security	Logixx Security	City Wide(b)	City Wide(b)
	2021	2020	2021	2020	2021	2020
Pre-tax discount rate	20.6%	20.3%	21.6%	22.7%	0.0%	19.7%
Terminal value growth rate	1.0%	1.0%	1.0%	1.0%	0.0%	1.0%
Budgeted revenue growth rate (average)(a)	3.0%	2.7%	5.4%	21.6%	0.0%	3.9%
EBITDA margin (average)(a)	8.8%	17.5%	5.2%	5.0%	0.0%	9.2%
Cash flow period	5 years	5 years	5 years	5 years	Nil	5 years

(a) Budgeted revenue growth rate and EBITDA margin for Logixx Security in fiscal 2020 includes only four months of ASAP revenue and EBITDA from the date of acquisition

(b) City Wide was not impaired in FY2021, but was sold on September 30, 2020 (note 23)

Avante Security

The cash flow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rate was based on management’s estimate of the long-term annual EBITDA growth rate.

In respect of the recoverable amounts as of March 31, 2021 and March 31, 2020, budgeted EBITDA margin was estimated taking into account the revenue history of the past 2 years and estimated sales volume over the next five years.

City Wide

The cash flow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rate was based on management’s estimate of the long-term annual EBITDA growth rate.

In respect the recoverable amount as of March 31, 2020, budgeted EBITDA was estimated considering the revenue history of the past 3 years and estimated sales volume over the next five years.

The Company sold the 70% interest in City Wide on September 30, 2020 (note 23).

Logixx Security

The cash flow projections included specific estimates for five years and a terminal growth rate thereafter. The terminal growth rate was based on management’s estimate of the long-term annual EBITDA growth rate.

In respect the recoverable amounts as of March 31, 2021 and March 31, 2020, budgeted EBITDA margin was estimated taking into account the revenue history of the past year (but only 4 months with respect to ASAP as of March 31, 2020) and estimated sales volume over the next five years.

12. BUSINESS ACQUISITIONS

Acquisition of Veridin Systems Canada Inc. (rebranded and amalgamated with Logixx Security Inc. at December 2, 2019)

On September 17, 2018, the Company acquired all the outstanding shares of Veridin Systems Canada Inc. (“Veridin”) pursuant to a share purchase agreement between the Company and 1245893 Ontario Inc. and Vision Dynamics CCTV Inc. (“Vendors”) of Veridin, for an aggregate purchase price of $2,436,410, $1,900,746 paid in cash and the issuance of 238,095 (1,190,476 pre-stock consolidation) common shares in the capital of the Company to 1245893 Ontario Inc.

• 29 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

12. BUSINESS ACQUISITIONS (CONTINUED)

Within an escrow account, the Company held back $94,923 of the purchase price against certain representations and warranties. The parties are engaged in litigation processes to settle the amounts owing between the parties.

Acquisition of Intelligarde International Inc. (renamed Logixx Security Inc. as of June 21, 2019)

On November 30, 2018, the Company acquired all the outstanding shares of Intelligarde International Inc. (“Intelligarde” – currently doing business as Logixx Security Inc.). The total consideration paid for the outstanding shares of Intelligarde is $4,801,370 paid in cash subject to a post-closing working capital adjustment.

Within an escrow account, the Company held back $712,500 of the purchase price against certain representations and warranties of the vendors. The parties are engaged in litigation processes to settle the amounts owing between the parties.

Acquisition of A.S.A.P. Secured Inc. (rebranded and amalgamated with Logixx Security Inc. at April 1, 2020)

Effective December 1, 2019, the Company acquired all the outstanding shares of A.S.A.P Secured Inc. (“ASAP”). The total consideration paid for ASAP was initially $10,270,000 through the combination of cash payment on closing and issuance of a non-transferrable, promissory note in the principal amount of $2,625,000.

The consideration payable for the acquisition of ASAP was subject to certain post-closing net working capital adjustments (settled in June 2020) as well and gross profit adjustments to be settled when the final value of the Promissory Note was determined. The Promissory Note was also available to be used to settle unpaid claims by the Company against the ASAP vendor for breaches of representations, warranties and covenants of the vendor specified in the purchase agreement. The Promissory Note was due on March 4, 2021, and the amount payable was to range from $NIL to $2,625,000 depending on the gross profit performance of the acquired business over the first twelve months from acquisition closing and claims by the Company against the vendor. With the completion of that twelve-month period, the Company paid the maximum amount of $2,625,000 net of $36,554 for an agreed purchase price reduction and $155,000 for third-party litigation claims. The $155,000 was settled in April 2021, net of legal fees paid by the Company on behalf of the vendor. This net payment was funded by drawing on the unused portion of the $10,000,000 acquisition facility provided by Company’s bank (Note 13). The Promissory Note was discounted for accounting purposes at a rate of 3.95%. Net of this present value discount and the final agreed purchase price discount, the purchase price of ASAP is $9,300,518.

There were no finders’ fees payable in connection with this transaction. Acquisition costs in the amount of $223,853 were incurred on this transaction and expensed. This includes professional fees incurred towards financial, tax and legal due diligence, and legal costs in relation to the transaction.

ASAP (amalgamated with Logixx Security on April 1, 2020) is a commercial security services provider that offers high-end and low-profile security guards and patrols, as well as numerous complementary security services across Canada. The ASAP acquisition brings strategic capabilities to the Company and accelerates the realization of the Company’s vision of building a technology-enabled security solutions provider for commercial customers with capabilities, facilities and customers located across Canada.

• 30 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

12. BUSINESS ACQUISITIONS (CONTINUED)

This transaction qualifies as a business combination and was accounted for in accordance with IFRS 3 Business Combinations using the acquisition method of accounting. To account for the transaction, the Company performed a business valuation of ASAP at the date of acquisition and a purchase price allocation. The following table summarizes the consideration and closing date fair values of the net identifiable assets acquired pursuant to the ASAP acquisition:

Cash and cash equivalents Accounts receivable, deposits and prepaid expenses Property, plant and equipment Non-compete agreements Brand Customer relationships Goodwill Total Assets Accounts payable and accrued liabilities Corporate taxes payable Capitalized leases Deferred tax liability Total liabilities Net assets acquired Total Consideration Cash Present Value of promissory note payable March 4, 2021 (note 19)	November 30, 2019
	$38,797 5,658,959 154,270 200,000 2,600,000 2,750,000 2,457,775
	$13,859,801
	2,671,246 231,637 185,650 1,470,750
	$4,559,283
	$9,300,518
	$6,799,273 2,501,245
	$9,300,518

Goodwill represents intangible assets that cannot be measured directly such as company reputation and customer loyalty. The goodwill from the transaction will not be deductible for tax purposes.

For the four-month period ended March 31, 2020 following acquisition, ASAP contributed $10,275,471 to consolidated revenues and $323,328 to net income before income taxes and management fees.

• 31 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

13. BANK INDEBTEDNESS AND VEHICLE LOANS

Current and non-current bank indebtedness and vehicle loans was comprised of the following as at March 31, 2021 and March 31, 2020:

Mar 31, 2021 Mar 31, 2020 Current Portion Long-Term Portion Total Current Portion Long-Term Portion Total	Mar 31, 2021 Mar 31, 2020 Current Portion Long-Term Portion Total Current Portion Long-Term Portion Total
Line of credit - $ - $ - $ Term Loans 1,668,221 4,687,783 6,356,004 Mortgage 8,942 345,371 354,313	1,290,000 $ - $ 1,290,000 $ 1,050,146 3,749,785 4,799,931 8,487 354,369 362,856
Total credit facilities 1,677,163 5,033,154 6,710,317 Vehicle Loans 26,118 34,749 60,867	2,348,633 4,104,154 6,452,787 62,559 151,365 213,924
Balance at March 31 1,703,281 $ 5,067,903 $ 6,771,184 $	2,411,191 $ 4,255,519 $ 6,666,711 $

On November 20, 2020, the Company and its bankers entered into an amended and restated credit agreement to provide senior credit facilities to the Company. Under this agreement, the bank provided an acquisition facility of $10,000,000; a revolving demand credit facility of $5,000,000 of which $NIL has been drawn as at March 31, 2021 (March 31, 2020: $1,290,000) along with a $200,000 performance bond letter of credit (March 31, 2020: $200,000), and a credit card facility of $353,500 (March 31, 2020: $350,000). The Company also has a mortgage provided by the same bank of $354,313 outstanding at March 31, 2021, (March 31, 2020: $362,856). Security for the amended and restated credit facilities is provided pursuant to general security agreements and cross guarantees in favour of the bank that encumber all assets of the Company and subsidiaries on a first secured basis. In accordance with the terms of the senior credit facilities provided by the bank, on a rolling four-quarter basis, the Company must maintain a minimum Fixed Charge Coverage Ratio of 1.20 times and a maximum leverage ratio (Senior Funded Bank Debt to Adjusted EBITDA as defined in the credit agreement) of 3.50 times (declining to 3.00 times as of June 30, 2021). At March 31, 2021 the Company has a Fixed Charge Coverage Ratio of 1.70 and a leverage ratio of 1.70. Advances under the credit facilities provided by the bank is presented as current $1,677,163 and non-current $5,033,154 at March 31, 2021.

Term loans pursuant to the acquisition facility consisted of the following drawings:

					Balance Due	Balance Due
		Initial Draw	Interest Rate		Mar 31, 2021		Mar 31, 2020	Maturity Date
Facility 1	$	3,000,000	4.9%	$	1,740,885	$	2,318,037	December 2023
Facility 2		1,750,000	prime rate + 1%		1,358,782		1,698,363	January 2025
Facility 3		1,000,000	prime rate + 1%		766,667		966,667	January 2025
Facility 4		2,625,000	prime rate + 1%		2,625,000		-	March 2026
Deferred Financing		(208,841)	-		(135,330)		(183,136)	February2024
Total	$	8,166,159		$	6,356,004	$	4,799,931

The $5,000,000 revolving credit facility bears interest at the bank’s prime rate plus 0.85% per annum based on amounts drawn from time to time and is repayable on demand by the bank.

The mortgage has an interest rate of 4.68% per annum. The mortgage loan was used to purchase a building in Port Carling for Avante Security’s Muskoka operations. The mortgage outstanding balance at March 31, 2021 is $354,313, (March 31, 2020: $362,856).

At March 31, 2020, the Company, through City Wide, had an outstanding balance of $153,223 towards loans from auto credit companies to purchase vehicles. While one of these loans was interest-free, the others ranged between 2.99% and 4.99%. The monthly payments on these loans ranged between $555 and $1,163, and were repayable in full between August 2020 and July 2024. With the sale of the Company’s 70% ownership interest in City Wide, such loans are no longer reflected on the Company’s balance sheet as of March 31, 2021 (see Note 23).

• 32 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

13. BANK INDEBTEDNESS AND VEHICLE LOANS (CONTINUED)

At March 31, 2021, the Company has an outstanding balance of $60,867 (March 31, 2020: $213,924 of which $153,223 related to City Wide) towards loans from auto credit companies to purchase vehicles. While one of these loans is interest-free, the others range between 0.99% and 7.53%. The monthly payments on these loans range between $404 and $1,045, and these will be repaid in full between August 2021 and February 2027.

14. OBLIGATIONS UNDER LEASE

The lease payments are discounted using the interest rate implicit in the lease, or if that cannot be determined, the Company’s incremental borrowing rate.

	Vehicle	lease liability	Property lease liability	Property lease liability	Total liability	Total liability
Balance at March 31, 2020	$	1,456,628	$	986,565	$	2,443,193
Additions during the year		1,105,340		201,142		1,306,482
Disposals during the year		(143,262)		(620)		(143,882)
Disposal of discontinued operations		(154,043)		(560,842)		(714,885)
Reclass vehicle addition to property		(97,575)		97,575		-
Principal payments from continuing operations		(418,305)		(253,476)		(671,781)
Principalpayments from discontinued operations		(15,723)		(22,479)		(38,202)
Balance at March 31, 2021		1,733,060		447,865		2,180,925
Current obligations under lease		582,906		201,412		784,318
Long-term obligations under lease		1,150,154		246,453		1,396,607
Total Balance at March 31, 2021	$	1,733,060	$	447,865	$	2,180,925

The Company leased certain vehicles with a value of $1,733,060 (March 31, 2020: $1,456,628), at an effective annual rate of interest of 8.49% (March 31, 2020: 6.45%). Blended monthly payments of $56,279 plus applicable taxes (March 31, 2020: $52,346) for 48 to 60 months ending between August 2020 and December 2025, with a buy out obligation of $977,741 (March 31, 2020: $638,509). Interest expense from these leases, included in the statement of loss for the year ended March 31, 2021 is $84,868 (March 31, 2020: $31,904).

Various office properties with a value of $447,865 (March 31, 2020: $986,565), are leased with blended monthly payments of $18,964 plus applicable taxes. An incremental borrowing rate of 4.80% is used. The property leases end between December 2021 and December 2024. Interest expense from these leases, included in the statement of income for year ended March 31, 2021 was $21,177 (March 31, 2020: $53,107). Several property leases have ended and are now considered month to month terms as extensions are negotiated.

15. SHAREHOLDERS’ EQUITY

[a] Share capital issued and outstanding

[a] Share capital issued and outstanding
Unlimited common shares	Number of Shares	Amount
Balance at March 31, 2019	21,192,004	$21,434,492
Balance at March 31, 2020	21,192,004	$21,434,492
Balance at March 31, 2021	21,192,004	$21,434,492

• 33 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

15. SHAREHOLDERS’ EQUITY (CONTINUED)

[b] Share options

The Company has an incentive Share Option Plan (“the Plan”) under which non-transferable options to purchase common shares of the Company may be granted to directors, officers, employees or service providers of the Company. The terms of the Plan provide that the Directors have the right to grant options to acquire common shares of the Company at not less than the closing market price of the shares on the day preceding the grant at terms of up to ten years. No amounts are paid or payable by the recipient on receipt of the option.

Options for Directors vest when granted, while vesting of options for non-directors is as follows: 33.33% on the second anniversary; 33.33% on the third anniversary; and the remainder on the fourth anniversary following the grant date. Options granted to non-directors prior to fiscal year 2015 vested as follows: 33.33% on the grant date; 33.33% on the first anniversary of the grant date; and the remaining 33.33% on the second anniversary of the grant date.

On September 29, 2015, the shareholders of the Company approved an amendment to the stock option plan whereby it reverted to a 10% rolling stock option plan. This plan is approved annually by the shareholders of the Company and was again approved by the shareholders on September 17, 2020. Accordingly, the Company has a total of 679,200 options available to be issued as at March 31, 2021, with the maximum term remaining at 10 years (March 31, 2020: 348,866). Prior to September 29, 2015, the Company had an Option plan whereby it could issue a maximum of 7,145,000 options with a term of up to 10 years.

	Number of Options	Weighted Average Exercise Price
Balance at March 31, 2019	1,586,333	$2.03
Options issued during the year	385,000	1.55
Options exercised duringtheyear	(201,000)	1.62
Balance at March 31, 2020	1,770,333	$1.97
Options cancelled during the year	(325,000)	1.99
Options expired during the year	(55,333)	1.58
Optiongranted duringtheyear	50,000	1.55
Balance at March 31, 2021	1,440,000	$1.97

Share options granted during the year ended March 31, 2021 consisted of 50,000 options at a strike price of $1.55 granted on October 14, 2020. During the fiscal year 2021, 55,333 share options expired without being exercised and 325,000 share options were cancelled due to terminations of employment. The weighted average grant date fair values of share options granted during the year ended March 31, 2021 were $0.75 per option, (March 31, 2020: $0.89). All options were granted at an exercise price greater than or equal to the trading price on the day of the grant that is considered fair value. Options were granted in the year ending March 31, 2020 totaling 385,000 options at an excise price of $1.55. None of the outstanding options were exercised in the year ending March 31, 2021. All options granted in the year ending March 31, 2020 expire between December 2024 and January 2025 and the options granted in October 2020 expire on October 14, 2025.

Using the Black-Scholes pricing model, the Company recognized $73,074 of share based compensation, arising from $233,298 of share based compensation, net of $160,854 of cancelled and expired options during the year ending March 31, 2021 (March 31, 2020: $201,966 net recognized, $338,760 compensation and removed $136,794 for expired or cancelled).

• 34 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

15. SHAREHOLDERS’ EQUITY (CONTINUED)

In calculating the share-based compensation expense, the Company used the assumptions as listed below as at the date of grants:

	Fiscal 2021	Fiscal 2020
Risk-free interest rate	0.80%	1.75%
Expected volatility	80.51%	55.33 to 66.31%
Expected time until exercise	5 years	5 years
Expected dividend yield	NIL	NIL
Expected forfeiture	5%	5%
Share price	$0.99	$1.50 to $1.55

The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information.

The following table summarizes stock options vested and outstanding at March 31, 2021:

Grant Date	Outstanding	Remaining	Vested	Exercise Price	Expiry Date
2016-09-06	15,000	0.44	15,000	1.30	2021-09-06
2017-10-29	15,000	1.58	15,000	1.30	2022-10-29
2018-01-10	200,000	1.78	200,000	1.65	2023-01-10
2018-01-10	200,000	1.78	200,000	1.90	2023-01-10
2018-01-10	200,000	1.78	200,000	2.20	2023-01-10
2018-01-10	200,000	1.78	-	2.55	2023-01-10
2018-09-19	65,000	2.47	21,667	2.25	2023-09-19
2018-10-02	200,000	2.51	66,667	2.25	2023-10-02
2019-12-02	95,000	3.68	-	1.55	2024-12-02
2020-01-20	200,000	3.81	-	1.55	2025-01-20
2020-10-14	50,000	4.54	-	1.55	2025-10-14
	1,440,000	2.38	718,334	$1.97

[c] Share warrants

The Company issued broker warrants as part of a fully-underwritten, common-share bought-deal on June 12, 2018, pursuant to a short form prospectus. The warrants were granted at an exercise price equal or greater to the trading price on the day of grant that was considered fair value. 258,750 post consolidation warrants were issued at that time and had a 1:1 ratio to shares. Such warrants expired without having been exercised on June 12, 2020, which was the date that was 24 months after issue.

• 35 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

15. SHAREHOLDERS’ EQUITY (CONTINUED)

A summary of the changes in the warrants during the year ended March 31, 2021 is as follows:

	Number of Warrants	Weighted Average	Weighted Average
	Outstanding		Exercise Price
Balance at March 31, 2019	258,750	$	2.00
Balance at March 31, 2020	258,750	$	2.00
Expiration of broker warrants June 12,2020	(258,750)		(2.00)
Balance at March 31, 2021	-	$	-

16. PERFORMANCE SHARE UNITS

On November 25, 2020, the Company’s Board of Directors established a performance share unit (“ PSU ”) compensation program. It provides for a cash payment to eligible participants equal to the number of PSUs granted multiplied by the Company’s volume weighted average share price (“ VWAP ”) in effect during the thirty days prior to a future valuation date scaled downwards for vesting criteria linked to that VWAP in effect during the thirty days prior to the valuation date.

On November 25, 2020, the Company announced that the Chief Executive Officer was awarded 200,000 performance stock units payable on March 31, 2023 at the Corporation’s 30-day volume weighted share price in effect on that date, scaled downward to 0% payout if that VWAP is less than $3.39 per share, 50% payout if great than or equal to $3.39 per share, 75% payout if greater than or equal to $3.75 per share or 100% payout if greater than or equal to $4.00 per share. Such award, if any, will be settled in cash within 150 days following March 31, 2023.

The Company uses Monte-Carlo simulation valuation techniques to estimate the potential future value that might exist as of March 31, 2023 in respect of issued but unvested PSU grants. Such estimate is then discounted based on the risk-free interest rate as of the valuation date. Assumptions included in the fair value of the unvested PSU grants include:

• The Company’s share price on the valuation date, which was $1.52 per share on March 31, 2021;

• The remaining term and number of trading days from the valuation date until the vesting date of March 31, 2023;

• The average expected annual return on the Company’s shares of 15.0% as of March 31, 2021;

• The expected volatility of the price of the Company’s common shares as of the valuation date, which was 80.0% on March 31, 2021; and

• The average risk-free interest rate over the remaining term of 0.23% as of March 31, 2021.

The present value of such estimated potential liability is recalculated by the Company every fiscal quarter end. Within Accounts Payable and Accrued Liabilities on the Statement of Financial Position, the Company reflects the net present value of the potential obligation, prorated by the number of months that have elapsed since the date of grant versus the total number of months from the PSU grant date to the maturity date. The difference between the balance sheet liability amounts at the balance sheet date versus the fiscal period’s opening liability is reflected as an expense, or recovery, within Share Based Payments on the Consolidated Statements of Loss and Comprehensive Loss. At March 31, 2021, the present value of the estimated potential liability on March 31, 2023 is $139,900. The expense reflected in the year ending March 31, 2021 was $19,982.

• 36 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

17. NON-CONTROLLING INTEREST

The 70% ownership in City Wide Locksmiths was sold by the Company on September 30, 2020 (Note 23). Information relating to Non-Controlling Interest (“NCI”) for the years ended March 31, 2021 and March 31, 2020 is below. Revenue, net income, and cashflow for 2021 are for the period from April 1, 2020 to the date of disposal, September 30, 2020.

		2021		2020
		City Wide		City Wide
NCI Percentage		30%		30%
Non-current assets	$	-	$	2,270,427
Current assets		-		1,805,892
Non-current liabilities		-		(1,284,339)
Current liabilities		-		(1,517,543)
Net assets		-		1,274,437
Net assets attributable to NCI		-		382,331
Revenue	$	3,102,511	$	5,891,820
Net income (loss)		339,589		(226,311)
Net income(loss)allocated to NCI		101,877		(67,893)
Cash flows from operating activities		236,016		554,139
Cash flows from financing activities (dividends to NCI - $92,500 in fiscal 2020)		(81,271)		(380,940)
Cash flows from investing activities		5,920		(9,492)
Net increase in cash and cash equivalents		160,665		163,707

18. INCOME TAXES

In prior annual fiscal years, the Company incurred non-capital losses for income tax purposes. Those losses are available to the Company to reduce the current portion of income taxes payable, if any. Income tax expense is recognized based on management’s estimate of tax rates of 26.5% expected to be in effect for the Company’s full financial year.

The reconciliation of Income taxes computed at the Canadian statutory tax rates to income tax expense was as follows:

		Mar 31, 2021		Mar 31, 2020
				(Restated)*
(Loss) before income taxes	$	(3,266,194)	$	(3,805,452)
Statutory tax rates		26.50%		26.50%
Income taxes at statutory tax rates		(866,000)		(1,008,000)
Change in unrecognized deferred tax asset		80,000		244,021
Prior year differences and other		463,818		(145,532)
Permanent differences, including non-deductible expenses and non-taxable
gains/losses		228,000		(278,257)
	$	(94,182)	$	(1,187,768)

*Restated for discontinued operations (note 23)

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

• 37 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

18. INCOME TAXES (CONTINUED)

Significant components of the Company’s deferred tax assets and liabilities are as follows:

Deferred Tax Assets	Mar	31, 2021	Mar	31, 2020
Losses carried forward	$	1,226,293	$	1,757,913
Issuance costs		159,168		169,111
Finance lease		577,945		647,446
SR&ED tax credits		688,651		688,651
Reserves		122,240		179,485
Convertible debentures		94,815		-
Capital losses		37,130		-
Charitable donations		-		28,526
Investments		132,897		126,644
		3,039,139		3,597,776
Deferred tax assets used against tax liabilities		(709,747)		(51,399)
Unrecognized deferred tax asset		(862,519)		(782,102)
Net deferred tax asset	$	1,466,873	$	2,815,673
Deferred Tax Liability
Fixed assets		(709,747)		(547,258)
Intangible assets		(1,352,728)		(2,587,162)
Deferred tax assets used against tax liabilities		709,747		51,399
Net deferred tax liabilities	$	(1,352,728)	$	(3,134,420)

When assessing the realizability of deferred tax assets, management considers whether it is probable that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of taxable income during the periods in which those temporary differences become deductible. The amount of the tax asset considered realizable could change materially in the near term, based on deferred taxable income during the carry forward period.

As at March 31, 2021, the Company has operating losses for income tax purposes in the amount of $4,627,519 which may be carried forward to reduce taxable income of future years (March 31, 2020: $6,639,000).

The losses expire as follows:

Expiry 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040	Total - $ - - - 11,400 26,751 9,332 9,334 92,615 92,531 83,822 84,256 349,610 2,285,169 1,582,699
	4,627,519 $

• 38 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

18. INCOME TAXES (CONTINUED)

Tax credits recoverable at March 31, 2021 represents Scientific Research & Experimental Development (“SR&ED”) tax credits received by the Company in fiscal years 2009, 2010, and 2011.

19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

[a] Convertible debentures

On November 27, 2019, the Company issued unsecured convertible debentures with a total principal amount of $8,264,000. The debentures mature on November 27, 2024 and bear an annual interest rate of 7%, due semi-annually. The debentures are convertible, at the option of the holder, in whole or in part, at a conversion price per share of $1.56 at any time prior to the maturity date into common shares of the Company. Total professional and legal fees of $301,311 were incurred on the transaction. The Company decided not to draw up to $9,736,000 under a second tranche under the convertible debenture agreement that was previously available to the Company until August 27,2020 and such option to draw expired on that date.

So long as the holder of the convertible debentures owns at least 10% of the Company’s common shares, it has the right to maintain the same percentage ownership of the Company’s common shares subsequent to an issuance of the Company’s common shares as held by the holder immediately prior to such issuance. If the holder owns more than 10% of the Company’s common shares, the holder is entitled to nominate one member to the Company’s board of directors.

Pursuant to the indenture, the Company’s consolidated total indebtedness (excluding the Convertible Debentures) shall not exceed 6.5 times Adjusted EBITDA on a rolling four quarter basis and consolidated senior indebtedness shall not exceed 3.5 times Adjusted EBITDA on a rolling four quarter basis. The Company was in compliance with the financial covenants applicable to the debenture for the reporting period on March 31, 2021, and accordingly, the accounting treatment is to categorize the convertible debentures as non-current liabilities.

While the total contractual liability excluding future interest payments is $8,264,000, for accounting purposes the convertible debentures are compound financial instruments containing a principal debt and interest component and a conversion option. The conversion option is classified as a derivative financial liability, as the option is not closely related to the principal debt and features of the conversion option may result in conversion of debt into a variable number of common shares. The debentures do not meet the IAS 32(16) fixed-for-fixed test as conversion of debt into a variable number of common shares results from the Company declaring a dividend, a stock split, granting options, warrant, or shares at less than 95% of the current market price. The conversion option was separated from the host debt and valued at its fair value on the date of issuance, with all attributable transaction costs expenses when incurred. The Company valued the derivative liability component of the debenture using the number of common shares issued per increment of principal and the Black Scholes pricing model, at a risk free interest rate of 0.73% (March 31, 2020: 1.52%), volatility of 66.82% (March 31, 2020: 68.56%), which is based on historical volatility of the Company’s common shares, an expected maturity date of five years from the date of issue and no dividends issued by the Company over that time frame.

The principal debt and interest component is classified as a financial liability and carried at amortized cost. On initial recognition, these components were allocated the residual of the total proceeds less the fair value of the conversion option, net of transaction costs.

• 39 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

On initial recognition, the conversion option derivative liability component was $3,948,551 and the host debt liability component was $4,158,105 net of transaction cost attributable to the debt component. Transaction costs in the amount of $143,967 were expensed in the year ending March 31, 2020 attributable to the conversion option. The conversion option derivative liability is reported at fair value, with gains and losses included in other expenses on the statement of income and comprehensive income. For the year ended March 31, 2021 a loss of $2,070,094 was recognized (March 31, 2020: a gain of $2,210,243).

Accretion charges attributable to the debenture of $1,082,232 were included in interest expense on the statement of loss and comprehensive loss in the year ending March 31, 2021, of which $578,480 relates to interest paid or owing during the year, (March 31, 2020: $350,777 of which $199,245 related to interest paid or owing during the year).

or owing during the year).
		Liability		Derivative		Total carrying
7% Debenture(Issued November 27, 2019)	component			liability		amount
Balance at March 31, 2019	$	-	$	-	$	-
November 27, 2019 issuance		4,315,449		3,948,551		8,264,000
Deferred issue costs		(157,344)		-		(157,344)
Accretion of debenture		350,777		-		350,777
Interest		(199,245)		-		(199,245)
Fair valuegain		-		(2,210,243)		(2,210,243)
Balance at March 31, 2020	$	4,309,637	$	1,738,308	$	6,047,945
Accretion of debenture		1,082,232		-		1,082,232
Interest		(578,480)		-		(578,480)
Fair value loss		-		2,070,094		2,070,094
Balance as of March 31, 2021	$	4,813,389	$	3,808,402	$	8,621,791
Contractual liability					$	8,264,000

[b] Financial liabilities

On December 2, 2019, the Company issued a Promissory Note as part of the acquisition of A.S.A.P. Secured Inc. The Promissory Note was payable on March 4, 2021 and the amount payable ranged from $NIL to $2,625,000 depending on the performance of the acquired business over the first twelve months from acquisition closing. On the date of issue in November 2020, the Promissory Note was discounted at a rate of 3.95% for accounting purposes. The face value of the Promissory Note was paid in two installments on March 4, 2021 and April 5, 2021 (Note 12) net of $36,554 for a purchase price reduction agreed between the parties and legal fees in respect of third-party claims paid by the Company but attributable to the vendor. This total net payment was funded by drawing on the unused portion of the $10,000,000 acquisition facility provided by the Company’s bank (Note 13).

• 40 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

Promissory note (issued December 1, 2019)		Carrying amount
Balance at March 31, 2019	$	-
December 1, 2019 issuance		2,501,245
Accretion forthe year		33,096
Balance at March 31, 2020	$	2,534,341
Accretion for the period		90,659
Payment		(2,429,501)
Reduction in purchase price		(36,554)
Reimbursement ofexpenses		(3,945)
Balance at March 31, 2021	$	155,000

[c] Financial assets

On October 23, 2018, the Company subscribed to a private placement by 3|Sixty Secure Corp. (“3 Sixty”) of 1,180,000 Purchased Subscription Receipts, at the price of $0.85 per Purchased Subscription Receipt, for $1,003,000. Each Purchased Subscription Receipt entitled the holder to receive upon satisfaction or waiver release of escrow release conditions on or before release deadline of 120 days of the close date, one underlying share of 3 Sixty in accordance with the provisions of the Subscription Receipt Agreement.

The release conditions were dependent on the completion of the Reverse Take-Over (“RTO”) of Petro Vista by 3 Sixty. The classification of the subscription is fair value level 2, to other comprehensive income and will be reported at fair value with gains and losses included in other comprehensive income. On January 4, 2019, the RTO of Petro Vista by 3 Sixty took place, fulfilling the escrow release conditions and the Receipts were converted to one underlying share of 3 Sixty in accordance with the provisions of the Subscription Receipt Agreement. The investment in 3 Sixty is now classified as a level 1 to other comprehensive income and is reported at fair value based on quoted market prices in active markets. An unrealized loss of $47,200 was recognized to other comprehensive income during the year ended March 31, 2021 (March 31, 2020: loss of $542,800) per the summary below.

	Subscription
	receipts	Investment
Balance at March 31, 2019	1,180,000		590,000
Changein fair value			(542,800)
Balance at March 31, 2020		$	47,200
Changein fair value			(47,200)
Balance at March 31, 2021		$	-

On July 15, 2020, 3 Sixty announced a delay to filing 2019 fiscal year end financial results and the intention to file amended and restated interim financial statements. In response, the Ontario Securities Commission issued a cease trade order on 3 Sixty’s shares. Effective July 14, 2021 the shares were delisted. The Company, while making this investment in 3 Sixty, also signed a memorandum of understanding with 3 Sixty, signed on September 26, 2018, in which 3 Sixty will refer business to the Company on a preferred basis for a number of services ancillary to the cannabis industry, including certain executive security and residential services, integrated security systems, and risk management and due diligence services related to employees and contractors such as employee background screening and duty of care compliance programs.

• 41 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

In connection with the sale of its 70% ownership interest of City Wide on September 30, 2020, the Company received a vendor take back note of $450,000 benefiting from a second secured lien on all assets of City Wide. The balance of the note on March 31, 2021 is $450,000, (March 31, 2020: $NIL), with $50,000 recorded in accounts receivable representing the current portion of the note receivable and $400,000 recorded as a long term note receivable on the statement of financial position. The note bears interest at 3.0% until September 30, 2021, 3.5% until September 30, 2022, 4.0% until September 30, 2023, 5.0% until September 30, 2024, and then 6.0% until September 30, 2025. Installments of $50,000 plus interest are due annually and the note is fully repayable on or before September 30, 2025.

[d] Risk management

The Company is exposed through its operations to the following financial risks:

• Market Risk

• Credit Risk

• Liquidity Risk

In common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments. This note describes the Company’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these consolidated financial statements.

There have been no substantive changes in the Company’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous years unless otherwise stated in this note.

General Objectives, Policies and Processes:

The Board of Directors has overall responsibility for the determination of the Company’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Company’s management. The Board of Directors receive quarterly reports from the Company’s management, through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

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

a) Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices are comprised of four types of risk: foreign currency risk, interest rate risk, commodity price risk and equity price risk.

Foreign Currency Risk:

Foreign currency risk is the risk that a variation in exchange rates between the Canadian dollar and other foreign currencies will affect the Company’s operations and financial results.

• 42 -

AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

During the year ending March 31, 2021, approximately 17.1% of the Company’s revenues were received or receivable in U.S. dollars, while a smaller percentage of its total costs were paid or payable in U.S. dollars. The impact of a 1% change in the foreign exchange rate would be a $170,000 or a 0.2% change to the Company’s net loss for the year and total comprehensive loss for the year on the statements of loss and comprehensive loss. A significant change in the currency exchange rates of the U.S. dollar relative to the Canadian dollar could have an adverse effect on the Company’s results of operations, financial position and cash flows.

Interest Rate Risk:

Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates. At March 31, 2021, the Company has a revolving credit facility and bank loans subject to floating interest rates amounting to $4,750,449 (March 31, 2020: $3,955,030). This interest rate risk is offset by the potential changes in the interest rate offered on cash and cash equivalents held with chartered Canadian financial institutions. The Company considers its net exposure to interest rate risk to be immaterial as the majority of its total debt, including convertible debentures and net of cash balances, is payable at fixed interest rates.

Equity Price Risk:

Equity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The maximum equity price risk resulting from financial instruments held by the Company, including the investment in 3 Sixty, is equivalent to the fair value of the equity investments as at March 31, 2021. As the market price of the Company’s common shares increases, the likelihood of the Company having an obligation on March 31, 2023 under the PSU’s increases (refer to Note 16).

b) Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. For credit risk on accounts receivable see Note 7. Financial instruments, which are potentially subject to credit risk for the Company consist primarily of cash and cash equivalents. The carrying amounts of financial assets represent the maximum credit exposure. The Company has gross credit exposure at March 31, 2021 relating to cash of $1,623,754 (March 31, 2020: $1,339,864). All cash is held in Canadian banks which have credit ratings of AA- or A+ and Aa2 from rating agencies Standard & Poor’s and Moody’s respectively. The Company has performed a sensitivity analysis on changes in the credit risk associated with these banks and considers this risk to be minimal for all cash assets based on changes that are reasonably possible at the reporting date.

c) Liquidity Risk

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

Typically, the Company ensures that it has sufficient cash on demand to meet expected operational expenses for a period of approximately 90 days. To achieve this objective, the Company prepares annual financial budgets and updates short-term liquidity requirements at least monthly based on revised estimates. Further, the Company utilizes delegated authorizations for varying expenditure levels and types to further manage expenditure. The Company also monitors its risk of shortage of funds by monitoring the maturity dates of existing trade and other accounts payable.

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AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

The following table sets out the Company’s contractual maturities (representing undiscounted contractual cash flows including interest) of financial liabilities and derivatives:

	Up	**to 3 months **	3 to 12 months	3 to 12 months		1 to 2 years		2 to 5 years	Over 5 years	Over 5 years		Contractual amount		Carrying amount
At March 31, 2020	$	12,134,068	$	4,481,765	$	2,366,282	$	13,602,231	$	1,287,357	$	33,871,703	$	27,677,485
Accounts payable and accrued liabilities		10,428,220		-		-		-		-		10,428,220		10,428,220
Promissory note		155,000		-		-		-		-		155,000		155,000
Bank indebtedness and vehicle loans		475,505		1,420,465		1,887,380		2,830,596		1,032,887		7,646,833		6,771,184
Obligations under lease		203,667		599,445		855,653		676,266		-		2,335,031		2,180,925
Convertible debentures		289,240		289,240		578,480		9,363,112		-		10,520,072		8,621,791
At March 31, 2021	$	11,551,632	$	2,309,150	$	3,321,513	$	12,869,974	$	1,032,887	$	31,085,156	$	28,157,120

Contractual amounts reflect undiscounted principal payments and future interest payments. Carrying amount excludes interest, is discounted, includes any residual value and is adjusted for the derivative component where applicable.

The working capital as at March 31, 2021 was $6,571,570 compared to $1,933,585 at March 31, 2020.

d) The Covid-19 Pandemic

While the Company is not immune to the impacts of the Covid-19 pandemic, the majority of the Company’s services remain ongoing, certain of which have been deemed “essential” by governing authorities. However, there remains some risk that certain project work will be deferred, or restricted and new orders delayed or that certain customers could become adversely affected by the pandemic. To date there are no significant impacts to the Company related to COVID-19.

The Company sold its non-wholly owned subsidiary, City Wide, on September 30, 2020 (Note 23). City Wide qualified for the Government of Canada’s Canada Emergency Wage Subsidy (“CEWS”) program and recorded $125,412 in government grants earned and received during the six-month period ending September 30, 2020 reflected within the loss from discontinued operations for the Company’s fiscal year ended March 31, 2021. There were no unfilled conditions or other contingencies attached to the government assistance that was recognized.

Determination of fair value

Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

The balance sheet carrying amounts for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, bank indebtedness and vehicle loans and finance leases, other payables, and derivative liabilities approximate fair value due to their short-term nature. Due to the use of subjective judgments and uncertainties in the determination of fair values these values should not be interpreted as being realizable in an immediate settlement of the financial instruments.

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AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

Fair Value Hierarchy:

Financial instruments that are measured subsequent to initial recognition at fair value or disclosed at fair value are grouped in Levels 1 to 3 based on the degree to which the fair value is observable:

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable marker data (unobservable inputs).

• All financial instruments at fair value are level 1, except conversion option and promissory note which are considered level 2.

20. CAPITAL MANAGEMENT

The Company monitors its cash, common shares, warrants and stock options as capital. The Company‘s objectives when maintaining capital are:

• To preserve the ability to ensure business continuity thereby creating a return for the shareholders, investors and other interested parties.

• To ensure adequate return for the shareholders by pricing of services that is adjusted to the level of risk in the business activity.

To support business activity and maximize shareholder value, the Company takes into consideration various factors, including the growth of the business-related infrastructure and the up-front cost of taking on new customers. The Company’s officers and senior management are responsible for managing the capital and do so through monthly meetings and regular review of financial information. The Board of Directors is responsible for overseeing this process. The Company manages capital with the objective of maintaining adequate capital resources through the optimization of the cash flows from operations and capital transactions.

In the prior year, the Company received a waiver of the financial covenant breaches before the reporting period ended, March 31, 2020, with no change to accounting treatment. At March 31, 2021, the Company was in compliance with all covenants with its lenders.

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AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

21. RELATED PARTY TRANSACTIONS

The Company provided services to a private company controlled by a significant shareholder and officer of the Company. In the year ended March 31, 2021, the Company billed $NIL (March 31, 2020: $4,294) at commercial rates.

The Company entered into a contract effective May 1, 2018 with a private company controlled by a significant shareholder to provide consulting services for the Company. The Company incurred $167,020 of expense in the year ended March 31, 2021 (March 31, 2020: $364,202).

The Company entered into a contract with a private company controlled by a significant shareholder and officer of the Company to provide services for the Company. For the year ended March 31, 2021 the Company incurred $7,677 (March 31, 2020: $2,057) for these services.

Remuneration of Directors and Officers was as follows:

	For the year	ended
Directors and Officers Remuneration	Mar 31, 2021	Mar	31, 2020
Salaries, short term employee benefits	774,865		836,197
Share basedpayments	175,564		252,454
	950,429	1,088,651

22. REORGANIZATION AND ACQUISITION COSTS

The Company incurred reorganization and acquisition costs in the amount of $680,795 for the year ended March 31, 2021, (March 31, 2020: $1,898,752). These costs included professional fees paid to consultants, financial and legal advisors for business acquisitions undertaken by the Company, fees related to business amalgamations, rebranding, reorganization expenses, including $109,035 of severance expense for terminations as part of a restructuring effort (March 31, 2020: $784,111 severance expense).

23. DISCONTINUED OPERATIONS

On August 10, 2020, the Company announced its intention to sell its 70% majority interest in City Wide for $2,341,500. The subsidiary was sold on September 30, 2020 resulting in a loss on disposition before income tax of $9,627 and is reported in the twelve-month period ending March 31, 2021 as a discontinued operation. The Company received $1,891,500 in cash and an amortizing, interest bearing vendor take back note of $450,000 receivable on or before September 30, 2025. The ownership interest in City Wide was acquired by the Company on April 1, 2016. The Company’s financial results for the prior fiscal periods reported throughout these consolidated financial statements have been adjusted to reflect continuing operation results and figures that exclude these City Wide discontinued operations.

As a result of the sale on September 30, 2020, during the twelve-month period ending March 31, 2021, the Company recognized the following loss on disposition in the consolidated statement of loss and comprehensive loss:

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AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

23. DISCONTINUED OPERATIONS (CONTINUED)

Gross cash proceeds of sale Vendortake back loan	1,891,500 $ 450,000
Total consideration less: transaction cost Net proceeds of sale Assets	2,341,500 85,944 2,255,556
Total current assets Total non-current assets Total assets Liabilities	2,661,109 3,234,948
	5,896,057
Total current liabilities Total non-current liabilities Total liabilities Total net assets	1,952,782 1,210,598
	3,163,380 2,732,677
Non-ControllingInterest	(467,494)
Loss on disposal, before tax	(9,627) $

The Company lost control of $730,218 of cash balance included in the total current assets disposed. Such balances were restricted by minimum working capital requirements set out in the shareholder agreement. In addition, at the time of the sale, City Wide had vehicle loans reflected within the liabilities disclosed in the above table.

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AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

23. DISCONTINUED OPERATIONS (CONTINUED)

The results of the discontinued operations are presented below for the following periods of April 1 to September 30:

Revenues Cost of sales Gross profit Operating expenses Income (loss) before other income and expenses Other (income) expenses Interest expense Foreign exchange loss Income (loss) before income taxes Provision for income taxes Current income tax expense Deferred income tax expense (recovery) Net Income from discontinued operations for the period Loss on disposal Net income (loss) from discontinued operations for the period Net income (loss) from discontinued operations for the period of October 1 to March 31 Net income (loss) from discontinued operations for the year	2021	2020
	3,102,511 $ 1,735,589	re-presented 3,080,494 $ 1,852,327
	1,366,922 801,830	1,228,167 1,043,351
	565,092	184,816
	19,965 26,458	(3,589) (8,123)
	46,423	(11,712)
	518,669 136,469 2,510	196,528 139,475 (18,204)
	379,690	75,257
	(9,627)	-
	370,063 $	75,257 $
	-	(174,522)
	370,063 $	(99,265) $

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AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

24. SEGMENT REPORTING

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenue and expenses that relate to transactions with any of the Company’s other components. The operating results of all operating segments are reviewed regularly by the Company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assessing their performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company operates in two reportable segments described below.

Logixx Security provides security services for enterprise customers across Canada. Services include protective services (also known as guarding) as well as security system design, sales, installations, and monitoring and alarm response.

Avante Security provides premium security services for residential customers in Toronto and Muskoka, Ontario through the use of advanced technology and a focus on client service. Avante Security’s business provides a complete offering ranging from system design, sales, installations, and monitoring to services such as alarm response and patrols, personal protection, house staff training, and secure transportation.

The Company accounts for intersegment sales as if they were to external customers. Divisional reporting in respect of the reportable segments was not established by the Company until February 2020 and the cost to develop it retrospectively would be excessive. Therefore, none of the profit or loss line items disclosed in the note below are available by segment for the year ending March 31, 2020, except for revenue which is disclosed in Note 6 by segment.

Revenues from one customer of the Company’s Logixx Security segment represents approximately $15,056,999, or 16.4% of the Company’s consolidated revenues during the year ending March 31, 2021.

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AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

24. SEGMENT REPORTING (CONTINUED)

Segment statements of loss and comprehensive loss for the year ending March 31, 2021 are included below:

Revenues Cost of sales Gross profit Operating expenses Salaries, benefits and commissions Administration Depreciation on capital assets Amortization on intangible assets Merchant transaction fees and bank charges Share based payments Income (loss) before other income and expenses Other (income) expenses Miscellaneous (income) expense Interest expense Foreign exchange (gain) loss Loss in fair value of derivative liability Total Other (income) expenses Income (loss) before reorganization, and acquisition costs Reorganization and acquisition costs Income (loss) before income taxes Provision for income taxes Current income tax expense (recovery) Deferred income tax expense (recovery) Net Income (loss) for the period Other comprehensive income (loss) Unrealized loss on investments Total comprehensive income (loss) for the period from continuing operations	Logixx Security Avante Security Corporate Intersegment eliminations Total 74,952,478 $ 17,142,013 $ - (378,707) $ 91,715,784 $ 61,187,304 10,070,265 - (375,807) 70,881,762
	13,765,174 7,071,748 - (2,900) 20,834,022 2,011,168 2,777,505 4,883,863 - 9,672,536 6,013,899 2,304,492 (3,242,974) (2,900) 5,072,517 312,551 703,992 79,863 - 1,096,406 - - 3,612,908 - 3,612,908 59,971 256,828 26,222 - 343,021 - - 93,056 - 93,056
	8,397,589 6,042,817 5,452,938 (2,900) 19,890,444 5,367,585 1,028,931 (5,452,938) - 943,578 81,459 (55,084) (108,929) - (82,554) 1,162,875 108,362 268,002 - 1,539,239 (46,781) 50,491 (1,512) - 2,198 - - 2,070,094 - 2,070,094
	1,197,553 103,769 2,227,655 - 3,528,977 4,170,032 925,162 (7,680,593) - (2,585,399) 484,458 - 196,337 - 680,795 3,685,574 925,162 (7,876,930) - (3,266,194) 51,979 - - - 51,979
	513,918 276,576 (936,655) - (146,161)
	565,897 276,576 (936,655) - (94,182)
	3,119,677 648,586 (6,940,275) - (3,172,012) - - (47,200) - (47,200)
	- - (47,200) - (47,200)
	3,119,677 $ 648,586 $ (6,987,475) $ - $ (3,219,212) $

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AVANTE LOGIXX INC. Notes to Consolidated Financial Statements March 31, 2021 and March 31, 2020

24. SEGMENT REPORTING (CONTINUED)

Segment assets and liabilities as at March 31, 2021 and March 31, 2020 are as follows:

Segment assets are as follow:		Logixx Security		Avante Security		City Wide		Corporate		Total
As at March 31, 2020	$	13,859,580	$	9,867,658	$	3,155,708	$	22,212,460	$	49,095,406
As at March 31, 2021	$	19,088,781	$	8,560,906	$	-	$	16,456,427	$	44,106,114
Segment liabilities are as follow:		Logixx Security		Avante Security		City Wide		Corporate		Total
As at March 31, 2020	$	6,194,408	$	13,445,626	$	2,482,445	$	12,097,241	$	34,219,720
As at March 31, 2021	$	15,242,268	$	10,854,073	$	-	$	6,377,656	$	32,473,997

25. SUBSEQUENT EVENTS

On June 30, 2021, the Company entered into a senior secured credit agreement with a bank that fully replaced the Company’s existing senior secured banking arrangements and mortgage provided by its former bank. The new credit agreement provides an $8,000,000 revolving credit facility (“Facility A”), a $10,000,000 non-revolving term loan facility (“Facility B”) and a $3,000,000 delayed-draw non-revolving term loan credit facility (“Facility C”), each with a three year maturity date ending May 19, 2024. The Company has the ability to draw upon Facility A and is subject to a borrowing base consisting of eligible cash, accounts receivable, and inventory. The Company may draw upon Facility B in two tranches; Tranche 1 has a limit of $6,000,000 and Tranche 2 has a limit of $4,000,000. Tranche 2 may be drawn upon until July 31, 2021, after which the Tranche 2 limit is reduced to zero. Facility C is available until December 31, 2022 to fund delayed purchase price payments or other funding requirements applicable to future permitted acquisitions. The new credit agreement also provides for a corporate credit card facility and hedge-transaction credit facilities. Security for the new credit agreement consists of upstream guarantees from the Company’s subsidiaries, supported by general security agreements providing for a first secured pledge of all assets of the Company and its subsidiaries. In accordance with the terms of these senior secured credit facilities, on a rolling four-quarter basis, the Company must maintain a minimum Fixed Charge Coverage Ratio of 1.10 times and a maximum leverage ratio of Funded Debt (net of permitted cash balances and excluding the convertible debentures) to Adjusted EBITDA of 3.25 times with a permitted two-quarter step up, following a permitted acquisition, of 3.50 times.

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