Boardwalktech Software Corp. — Interim / Quarterly Report 2020

Feb 28, 2020

Boardwalktech Software Corp. Condensed Interim Consolidated Financial Statements As at and for the three and nine months ended December 31, 2019 Stated in United States dollars (Unaudited)

Notice of No Auditor Review of Condensed Interim Consolidated Financial Statements

In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed these unaudited condensed interim consolidated financial statements as at and for the three and nine months ended December 31, 2019.

Boardwalktech Software Corp. Condensed Interim Consolidated Statements of Financial Position

(United States dollars)

(Unaudited)

As at		December 31 2019	March 31 2019
	Note
ASSETS
Current assets
Cash		722,014	195,464
Trade and other receivables	4	833,278	811,644
Prepaid expenses and deposits		121,020	164,501
Total current assets		1,676,312	1,171,609
Non-current assets
Property and equipment		11,527	15,002
Right-of-use asset	5	277,943	–
Total assets		1,965,782	1,186,611
LIABILITIES and SHAREHOLDERS’ DEFICIENCY
Current liabilities
Accounts payable and accrued liabilities	6	883,004	874,661
Deferred revenue	7	1,801,954	1,179,342
Deferred compensation		698,063	224,728
Current portion of term loan	8	2,347,382	1,015,817
Currentportion of lease liability	9	299,013	–
Total current liabilities		6,029,416	3,294,548
Non-current liabilities
Term loan	8	2,829,150	2,518,016
Lease liability	9	27,070	–
Total liabilities		8,885,636	5,812,564
Shareholders’ deficiency
Share capital	12	23,474,147	22,174,957
Contributed surplus		6,557,122	5,610,633
Accumulated other comprehensive income		(5,246)	1,088
Deficit		(36,945,398)	(32,412,152)
Total deficiency attributed to shareholders		(6,919,375)	(4,625,474)
Non-controllinginterest		(479)	(479)
Total shareholders’ deficiency		(6,919,854)	(4,625,953)
**Total liabilities and shareholders’ deficiency **		1,965,782	1,186,611

Going concern (Note 1) Subsequent events (Note 17)

Approved by the Board of Directors:

(signed) “Andrew T. Duncan” (signed) “ Steve Bennet”

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements. 1

Boardwalktech Software Corp. Condensed Interim Consolidated Statements of Loss and Comprehensive Loss

(United States dollars) (Unaudited)

		For the three	months ended	For the nine months ended	For the nine months ended
		December 31		December 31
		2019	2018	2019	2018
	Note		Restated – Note 16	Restated – Note 16
Revenue	10	1,152,182	1,362,921	3,495,746	3,608,165
Cost of sales		159,155	135,135	469,250	425,853
Gross margin		993,027	1,227,786	3,026,496	3,182,312
Expenses
Salaries, wages and benefits		949,759	1,287,539	3,161,601	3,678,315
Share-based payments	13, 14	239,974	547,040	938,689	1,248,678
General and administration		176,364	326,220	577,289	1,079,880
Consulting		87,342	217,397	388,678	642,365
Deferred compensation		333,113	–	670,738	169,526
Professional fees		79,128	117,248	299,022	306,019
Depreciation		66,883	754	198,894	2,443
Total operating expenses		1,932,563	2,496,198	6,234,911	7,127,226
Operating loss before other
expenses		(939,536)	(1,268,412)	(3,208,415)	(3,944,914)
Other expenses
Listing expense on reverse takeover		–	59,332	–	1,032,535
Transaction costs		–	–	–	1,230,122
Interest	11	200,307	188,712	597,535	581,376
Financing costs	11	220,256	193,068	727,296	2,673,769
Fair value adjustment of derivative
liability		–	–	–	10,009,363
Total other expenses		420,563	441,112	1,324,831	15,527,165
Loss for the period		(1,360,099)	(1,709,524)	(4,533,246)	(19,472,079)
Other comprehensive income
Items that may be reclassified to profit
or loss
Exchange differences on translation
of subsidiary
companies		(684)	–	(6,334)	–
Loss and comprehensive loss for the
period		(1,360,783)	(1,709,524)	(4,539,580)	(19,472,079)
Loss per share
Basic and diluted	15	(0.11)	(0.17)	(0.37)	(2.00)

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

2

Boardwalktech Software Corp. Condensed Interim Consolidated Statements of Changes in Shareholders’ Deficiency

(United States dollars)

(Unaudited)

For the nine months ended December 31		2019	2018
	Note		Restated – Note 16
Share capital
Balance, beginning of period as restated		22,174,957	562,887
Issuance of common shares	12	1,350,746	7,908,571
Exercise of common share warrants		–	376,628
Exercise of stock options		–	49,641
Reverse takeover		–	863,447
Conversion of preferred shares		–	9,346,400
Conversion of preferred share warrants		–	3,930,137
Share issue costs		(51,556)	(1,325,684)
Balance,end ofperiod		23,474,147	21,712,027
Contributed surplus
Balance, beginning of period		5,610,633	2,919,199
Agent options	12	7,800	(44,800)
Exercise of stock options		–	(20,489)
Share-basedpayments	13,14	938,689	1,248,678
Balance,end ofperiod		6,557,122	4,102,588
Accumulated other comprehensive income
Balance, beginning of period		1,088	–
Exchange differences on translation of subsidiary	companies	(6,334)	–
Balance,end ofperiod		(5,246)	–
Deficit
Balance, beginning of period as restated		(32,412,152)	(11,553,056)
Loss for theperiod		(4,533,246)	(19,472,079)
Balance,end ofperiod		(36,945,398)	(31,025,135)
Non-controlling interest
Balance,beginningand end ofperiod		(479)	(479)
Total shareholders’ deficiency		(6,919,854)	(5,210,999)

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements. 3

Boardwalktech Software Corp. Condensed Interim Consolidated Statements of Cash Flows

(United States dollars)

(Unaudited)

For the nine months ended December 31 2019	2018
Note Cash provided by (used in) the following activities: Operating activities Loss for the period (4,533,246) Depreciation 198,894 Share-based payments 13, 14 938,689 Listing expense on reverse takeover – Transaction costs – Interest 11 597,535 Financing costs 11 727,296 Fair value adjustment of derivative liabilities – Unrealized foreign exchange (2,500) Changes in non-cash working capital: Trade and other receivables (21,634) Prepaid expenses and deposits 43,481 Accounts payable and accrued liabilities 61,810 Deferred revenue 622,612 Deferred compensation 473,335	Restated – Note 16 (19,472,079) 2,443 1,248,678 1,032,535 1,230,122 581,376 2,673,769 10,009,363 (1,537)
	(97,894)
	3,822
	(819,869)
	(426,063)
	(100,969)
Cash flows used in operating activities (893,728)	(4,136,303)
Financing activities Proceeds from term loan 8 1,000,000 Term loan financing fees 8 (84,597) Repayment of term loan – Interest paid 11 (562,038) Lease payments 9 (233,253) Common shareproceeds, net of issue costs 12 1,306,990	– (215,244) (2,321,672) (581,376) – 7,406,506
Cash flowsprovided by financing activities 1,427,102	4,288,214
Investing activities Cash acquired in reverse takeover – Transaction costs – Purchases ofpropertyand equipment (6,104)	1,920 (14,002) (3,810)
Cash flows used in investing activities (6,104)	(15,892)
Change in cash 527,270 Foreign exchange effect on cash held in foreign currencies (720) Cash, beginning of theperiod 195,464
	136,019
	–
	92,282
Cash, end of theperiod 722,014	228,301
Taxespaid –
	–

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements. 4

Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Statements

For the three and nine months ended December 31, 2019 (United States dollars unless otherwise disclosed) (Unaudited)

1. Description of Business

Boardwalktech Software Corp. (“BWSC” or the “Company”) operates from locations in the United States and India and provides enterprise blockchain software products and services to global customers. BWSC is a publicly-traded company whose shares are listed on the TSX Venture Exchange under the symbol BWLK.V and on the OTCQB under the symbol BWLKF.

The Company designs and sells collaborative enterprise digital ledger data management technology offered as either a cloud-based platform service that runs industry, or customer specific applications, Boardwalk Application Engine (“BAE”) or Boardwalk Enterprise Blockchain (“BEB”) platforms.

The address of the Company’s corporate and registered office is 10050 N Wolfe Road, Cupertino, CA, 95014 USA.

Going concern

These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. During the nine months ended December 31, 2019, the Company generated a net loss of $4,533,246 and negative cash flows from operating activities of $893,728, though modest positive cash from operating activities in each of the last two quarter. As at December 31, 2019, the Company has an accumulated deficit of $36,945,398 and a working capital deficit of $4,353,104. As such, there is a material uncertainty related to these events and conditions that may cast significant doubt on the Company’s ability to continue as a going concern and therefore, it may be unable to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent on the ability of the Company to achieve positive cash flow from operations and/or obtain necessary equity or other financing to increase the number of licensed customers and continue with expansion in the digital ledger market.

The ability of the Company to be successful in obtaining additional future financing, if required, cannot be predicted at this present time. These unaudited condensed interim consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2. Basis of Presentation

Statement of compliance

These unaudited condensed interim consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board, applicable to the preparation of interim financial statements as set out in International Accounting Standard 34 Interim Financial Reporting.

The Company has consistently applied the same accounting policies throughout all periods presented except as noted in Note 3 for changes and impact of new accounting policies adopted effective April 1, 2019. These unaudited condensed interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended March 31, 2019.

Consolidation

These consolidated financial statements include the accounts of the following entities:

		Place of business	Legal
Name of entity	Principle activity	and operations	ownership
BWSC	Legal parent	Canada	–
	Accounting parent and
Boardwalktech, Inc.	operating company	United States	100% owned by BWSC
Boardwalktech Solutions Private	Research and development
Limited	company	India	98% owned byBoardwalktech

Authorization

These unaudited interim consolidated financial statements were authorized for issue in accordance with a resolution of the Board of Directors on February 28, 2020.

5

Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Statements

For the three and nine months ended December 31, 2019 (United States dollars unless otherwise disclosed) (Unaudited)

3. Changes in Significant Accounting Policies

IFRS 16 Leases

On April 1, 2019, the Company adopted IFRS 16 Leases (“IFRS 16”) using the modified retrospective approach which does not require restatement of prior period financial information as it recognizes the cumulative effect as an adjustment to opening retained earnings and applies the standard prospectively.

On adoption of IFRS 16, the Company’s lease liability related to contracts classified as leases is measured at the discounted present value of the remaining minimum lease payments, excluding short-term and low-value leases. The right-of -use (“ROU”) asset recognized was measured at amounts equal to the present value of the lease obligations. The weighted average incremental borrowing rate used to determine the lease liability at adoption was approximately 12.5%. The ROU asset and lease liability recognized relates to office premises. The Company elected not to apply lease accounting to certain leases for which the lease term ends within 12 months of the date of initial application and leases of low dollar value assets.

The cumulative effect of initially applying IFRS 16 was recognized as $523,839 as a lease liability (Note 9) with a corresponding amount for a ROU asset (Note 5). In accordance with IFRS 16, the ROU was reduced by the April 1, 2019 balance of deferred rent (Note 6) related to lease incentives.

In applying IFRS 16 for the first time, the Company used the following practical expedients permitted by the standard:

• § Use of a single discount rate to a portfolio of leases with similar characteristics;

• § Accounting for leases with a remaining term of less than 12 months as at April 1, 2019 as short-term leases;

• § Accounting for lease payments as an expense and not recognizing a ROU asset if the underlying asset is of low dollar value; and

• § The use of hindsight in determining the lease term where the contract contains terms to extend or terminate the lease.

Upon the adoption of IFRS 16, the Company adopted the following significant accounting policy effective April 1, 2019:

Leases

A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. A lease liability is recognized at the commencement of the lease term at the present value of the lease payments that are not paid at that date. At the commencement date, a corresponding right-of-use asset is recognized at the amount of the lease liability, adjusted for lease incentives received, retirement costs and initial direct costs. Depreciation is recognized on the ROU asset over the lease term. Interest expense is recognized on the lease liabilities using the effective interest rate method and payments are applied against the lease liability.

Key areas where management has made judgments, estimates, and assumptions related to the application of IFRS 16 include:

• § The incremental borrowing rates are based on judgments including economic environment, term, currency, and the underlying risk inherent to the asset. The carrying amount of the ROU assets, lease liabilities, and the resulting interest expense and depreciation expense, may differ due to changes in the market conditions and lease term.

• § Lease terms are based on assumptions regarding extension terms that allow for operational flexibility and future market conditions.

The following table reconciles the Company’s commitments at March 31, 2019, as disclosed in the Company’s audited March 31, 2019 consolidated financial statements, to the lease liability recognized on initial adoption of IFRS 16 on April 1, 2019:

Lease commitments disclosed at March 31, 2019	634,999
Correction for number of months in lease term	(54,627)
Discounted effect	(56,533)
Lease liabilityat April 1,2019	523,839

6

Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Statements

For the three and nine months ended December 31, 2019 (United States dollars unless otherwise disclosed) (Unaudited)

4. Trade and Other Receivables

The Company’s trade and other receivables consist of:

As at	December 31 2019	March 31 2019
Trade receivables	277,952	487,878
Receivables from contracts with customers	546,325	315,000
Other	9,001	8,766
	833,278	811,644

As at December 31, 2019, four customers accounted for 52% of trade and other receivables (March 31, 2019 – two customers; 37%), each with balances greater than 10%.

The Company’s trade and other receivables are aged as follows:

The Company’s trade and other receivables are aged as follows:
As at	December 31 2019	March 31 2019
Current	727,777	736,878
31 – 60 days past due	90,000	40,000
61 – 90 days past due	–	10,000
Past due forgreater than 90 days	15,501	24,766
	833,278	811,644

At December 31, 2019, the Company evaluated the collectability of trade and other receivables and lifetime expected credit losses and recognized $nil (March 31, 2019 – $nil) of bad debt expense and allowance for credit losses due to doubts of collectability.

5. Right-Of-Use Asset

The Company has recognized a right-of-use (“ROU”) asset and corresponding lease liability (Note 9) related to office premises. The ROU asset is depreciated on a straight-line basis over the 22 month term of the related lease.

March 31, 2019	–
Adoption of IFRS 16 (Note 3)	523,839
Deferred rent (Note 6)	(53,467)
Right-of-use asset	470,372
Depreciation	(192,429)
Net carryingamount as at December 31,2019	277,943

6. Accounts Payable and Accrued Liabilities

6. Accounts Payable and Accrued Liabilities
	December 31	March 31
	2019	2019
Accounts payable	833,004	753,781
Accrued liabilities	–	120,880
	833,004	874,661

Included in accrued liabilities at December 31, 2019 is $nil (March 31, 2019 – $53,467) of deferred rent (Note 5).

7. Deferred Revenue

The following table represents changes in deferred revenue for the nine months ended December 31, 2019:

The following table represents changes in deferred revenue for the nine months ended December 31, 2019:	The following table represents changes in deferred revenue for the nine months ended December 31, 2019:
Balance, March 31, 2019 1,179,342 Invoiced in the period, excluding amount recognized as revenue 2,932,709
Amount recognized as revenue	(2,310,097)
Balance,December 31,2019 1,801,954

7

Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Statements

For the three and nine months ended December 31, 2019 (United States dollars unless otherwise disclosed) (Unaudited)

8. Term Loan

A continuity of the Company’s term loan is as follows:

A continuity of the Company’s term loan is as follows:
Balance, March 31, 2019		3,533,833
Advances		1,000,000
Financing fees		(84,597)
Loss on de-recognition of term loan		86,811
Accretion of financingfees,warrant derivative liabilityand de-recognition charges		640,485
Balance, December 31, 2019		5,176,532
Current portion		(2,347,382)
Long-termportion		2,829,150

As at March 31, 2019, the Company had a term loan for a principal amount of $4,988,090 due to SQN Venture Income Fund LP (“SQN”) subject to the terms of an Amended and Restated Loan and Security Agreement and Amendment No. 2 to the June 15, 2018 Agreement signed on March 6, 2019 (the “March 2019 Agreement”). Pursuant to the March 2019 Agreement, the Company is required to make interest-only payments in the amount of $60,273 per month from January 1, 2019 to March 31, 2019 followed by monthly blended principal and interest payments of $204,293 from April 1, 2019 until the maturity date of August 31, 2019.

On June 7, 2019, the Company and SQN executed an Amended and Restated Loan and Security Agreement (the “June 2019 Agreement”). Key terms of the June 2019 Agreement are as follows:

• § An extension of the loan’s maturity to June 7, 2022;

• § A reduction of the interest rate from 14.5% to 12.5%;

• § An initial six-month interest-only period through to November 30, 2019; and

• § A new $1,000,000 working capital loan on terms similar to the new extension.

In connection with the $1,000,000 working capital loan, subject to the approval of the TSXV: (i) the Company will issue 1,200,000 common share warrants to SQN exercisable at CAD 0.60 per share for a period not to exceed the term of the loan; and (ii) SQN will convert $1,000,000 of the existing term loan and $249,404 of prepayment fees into common shares of the Company at a conversion price of $0.36 per share (Note 17). In contemplation of the debt-to-equity conversion, at the annual and special meeting of the Company’s shareholders held on December 4, 2019, the shareholders of Boardwalktech approved the creation of SQN as a "control person" (as defined under the policies of the TSXV) of the Company following the debt-to-equity conversion.

Other key terms of the term loan are as follows:

Loan prepayment option

The Company has the option to prepay the term loan in whole or in part in $500,000 increments, If the Company prepays any increment or the balance of the loan, a prepayment fee is payable to SQN and is calculated as follows:

• § For a prepayment made before June 15, 2019, a fee equal to five percent (5.0%) of the amount so prepaid;

• § For a prepayment made after June 15, 2019 but before June 15, 2020, a fee equal to four percent (4.0%) of the amount so prepaid; and,

• § For a prepayment made after June 15, 2020, a fee equal to three percent (3.0%) of the amount so prepaid.

Loan covenants

The Company must maintain the following covenants:

• § A minimum trailing three-month revenues of not less than $1,200,000, beginning with the monthly period commencing on August 1, 2019 and

• § A minimum cash balance of $250,000 in bank accounts subject to a deposit account control agreement in favor of SQN.

As at December 31, 2019, the Company was in compliance with the minimum cash balance covenant and received forbearance from SQN of not meeting the minimum trailing three-month revenues covenant.

During the nine months ended December 31, 2019, the Company recognized an $86,811 loss on de-recognition for the difference between the then carrying amount of the $4,988,090 principal amount of term loan and the present value of cash flows based on the terms of the June 2019 Agreement.

8

Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Statements

For the three and nine months ended December 31, 2019 (United States dollars unless otherwise disclosed) (Unaudited)

The carrying amount of the term loan as at December 31, 2019 is comprised of the following:

The carrying amount of the term loan as at December 31, 2019 is comprised of the following:
Principal amount of term loan	5,988,089
Unamortized balance of financing fees, warrant derivative liability and de-recognition charges	(811,557)
	5,176,532
Currentportion	(2,347,382)
Long-termportion	2,829,150

In January 2020, the Company made a $500,000 principal prepayment to SQN followed by a conversion of $500,000 of principal into 1,388,889 common shares of the Company (pending TSXV approval) in February 2020 (Note 17).

9. Lease Liability

The Company incurs lease payments related to office premises.

Balance, March 31, 2019	–
Lease liability for ROU asset (Notes 3 and 5)	523,839
Imputed interest	35,497
Payments	(233,253)
Balance, December 31, 2019	326,083
Current portion	(299,013)
Long-termportion	27,070

Total expected payments under the Company’s office lease agreement are as follows:

	Monthly	Total
January 1, 2020 to October 31, 2020	26,518	265,180
November 1, 2020 to January 31, 2021	27,313	81,939

10. Revenue

The following table presents the Company’s revenue disaggregated by type:

	For the three months ended	For the three months ended	For the nine months ended	For the nine months ended
	December 31		December 31
	2019	2018	2019	2018
Software subscriptions and services	746,316	640,396	2,220,597	2,043,835
Professional services	405,866	722,525	1,275,149	1,564,330
Total revenue	1,152,182	1,362,921	3,495,746	3,608,165

During the current reporting period, the Company reclassified $27,000 of revenue from professional services to software subscriptions and services for annual premium service agreements renewed in the second fiscal quarter that are more similar to other maintenance or subscription obligations than they are to professional services. This reclassification is reflected in disaggregated revenue by type for the nine months ended December 31, 2019.

The Company’s revenue is generated in the United States. For the nine months ended December 31, 2019, 39.2% of the Company’s revenue was earned through sales to one major customer (nine months ended December 31, 2018 – 16.0% of revenue to one major customer). As at December 31, 2019, trade and other receivables included $546,325 of receivables from software subscriptions and services customers (March 31, 2019 – $315,000) and $277,952 of receivables from professional services customers (March 31, 2019 – $487,878) (Note 4).

9

Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Statements

For the three and nine months ended December 31, 2019 (United States dollars unless otherwise disclosed) (Unaudited)

11. Interest and Financing Costs

For the three months ended December 31	For the three months ended December 31	For the nine months ended December 31
2019 2018		2019 2018
Interest Restated – Note 16		Restated – Note 16
Term loan (Note 8) 190,247 188,712		562,038 581,376
Lease liability (Note 9) 10,060 –		35,497 –
200,307 188,712		597,535 581,376
For the three months ended December 31
		For the nine months ended December 31
2019 2018		2019 2018
Financing costs(Note 8) Restated – Note 16		Restated – Note 16
Accretion 220,256 193,068		640,485 490,272
Loss (gain) on de-recognition of term loan – –		86,811 (1,474,384)
Success fee – –		– 3,657,881
220,256 193,068		727,296 2,673,769

12. Share Capital

12. Share Capital
Issued common shares:		Number of Shares	Amount
Balance, March 31, 2019		10,881,516	22,174,957
Unit private placement (a)		1,001,016	482,923
Unit private placement (b)		2,555,588	867,823
Share issue costs		–	(51,556)
Balance,December 31,2019		14,438,120	23,474,147

(a) In April and May 2019, the Company closed two tranches of a Unit private placement for the aggregate issuance of 1,001,016 Units at CAD 0.65 per Unit, for gross proceeds of $482,923 (CAD 650,660). Each Unit is comprised of one common share and one-half of one common share purchase warrant of the Company. Each whole warrant is exercisable at a price of CAD 1.10 per share for a period of 24 months following the closing and will be subject to early redemption by the Company if the trading price of the Company’s common shares is greater than CAD 1.75 for 10 consecutive trading days. The Company paid aggregate finder's fees of $7,381 (CAD 9,913) to compensate finders who introduced purchasers under the private placement plus $12,268 of other issuance costs. An officer of the Company subscribed for 30,612 Units.

The issue date aggregate fair value of the common share warrants was estimated to be $45,500 using the BlackScholes pricing model based on the following assumptions:

Issue date share price	CAD 0.42 – 0.475	Expected dividend yield	0%
Exercise price	CAD 1.10	Risk-free interest rate	2.37% – 2.42%
Expected volatility	129%	Forfeiture rate	0%
Expected life	1 year	Fair value per common share warrant	$0.08 – $0.10

(b) On November 27, 2019, the Company closed the first tranche of a non-brokered Unit private placement for the issuance of 2,555,588 Units, of which 985,000 Units were subscribed at CAD 0.45 per Unit and 1,570,588 Units were subscribed at $0.34, for gross proceeds of $867,823. Each Unit is comprised of one common share and one-half of one common share purchase warrant of the Company. Each whole warrant is exercisable at a price of CAD 0.65 per share for a period of 24 months following the closing and will be subject to early redemption by the Company if the trading price of the Company’s common shares is greater than CAD 1.00 for 10 consecutive trading days. The Company paid aggregate finder's fees of $16,767 (CAD 22,263) and issued 49,250 finders’ options (categorized as common share warrants) with a term of two years and an exercise price of $0.45 to compensate finders who introduced purchasers under the private placement plus $7,340 of other issuance costs. Directors and officers of the

10

Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Statements

For the three and nine months ended December 31, 2019 (United States dollars unless otherwise disclosed) (Unaudited)

Company subscribed for 100,000 Units.

The issue date aggregate fair value of the common share warrants and finders’ options was estimated to be $194,200 and $7,800, respectively, using the Black-Scholes pricing model based on the following assumptions:

Issue date share price	CAD 0.44	Expected dividend yield	0%
Exercise price	CAD 0.65 & $0.45	Risk-free interest rate	1.63%
Expected volatility	105%	Forfeiture rate	0%
Expected life	2 years	Fair value per common share warrant	$0.15 & $0.16

Shares subject to escrow:

Shares subject to escrow:	Shares subject to escrow:
		Common shares	Non-voting common shares(1)
Released 15% on each six-month anniversary date of June 7, 2018, with the final 15% released on June 7, 2021
Balance, March 31, 2019		858,434	2,550,467
Released		(343,374)	(1,020,186)
Balance, December 31, 2019		515,060	1,530,281
Released 15% on each six-month anniversary date of June 7, 2018, with the final 25% released on June 7, 2021		73,739 (26,026)	281,890 (99,490)
Balance, March 31, 2019
Released
Balance, December 31, 2019		47,713	182,400
Total		932,173 562,773	2,832,357 1,712,681
March 31, 2019
December 31,2019

(1) Non-voting common shares have the same rights and privileges as other common shares, including the same dividend rights, except for the purpose of electing the Company’s directors, in which case they are not entitled to vote. These non-voting common shares obtain voting rights to elect the Company’s directors upon the Company’s receipt of written notice by the non-voting common shareholders to convert the share status to voting common shares following their release from escrow. As at December 31, 2019, no non-voting common shares had been converted to voting common shares.

13. Common Share Warrants

13. Common Share Warrants
	Number of	Weighted Average
	Warrants	Exercise Price
Balance, March 31, 2019	822,191	1.17
Issued (Note 12(a))	500,509	0.85(2)
Issued (Note 12(b))	1,277,794	0.50(3)
Issued (Note 12(b))	49,250	0.45
Issued for investor relation services	150,000	0.35(4)
Balance,December 31,2019	2,799,744	0.75

On July 16, 2019, the Company issued 150,000 common share warrants exercisable at CAD 0.46 per share until July 16, 2024 to an investor relations firm as compensation for past services.

The issue date fair value of the common share warrants has been recorded as share-based payment expense estimated at $45,000 using the Black-Scholes pricing model based on the following assumptions:

Issue date share price	CAD 0.475	Expected dividend yield	0%
Exercise price	CAD 0.46	Risk-free interest rate	1.88%
Expected volatility	118%	Forfeiture rate	0%
Expected life	5 years	Fair value per common share warrant	$0.30

11

Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Statements

For the three and nine months ended December 31, 2019 (United States dollars unless otherwise disclosed) (Unaudited)

Information about common share warrants outstanding and exercisable at December 31, 2019 is as follows:

			Weighted Average
		Weighted Average	Life Remaining
ExpiryDate	Number	Exercise Price	(Years)
February 22, 2021	502,651	0.85(2)	1.15
April 9, 2021	316,315	0.85(2)	1.27
May 7, 2021	140,385	0.85(2)	1.35
May 10, 2021	43,809	0.85(2)	1.36
November 27, 2021	1,277,794	0.50(3)	1.91
November 27, 2021	49,250	0.45	1.91
July 16, 2024	150,000	0.35(4)	4.55
December 21, 2027	319,540	1.67	7.98
	2,799,744	0.75	2.50

(2) CAD 1.10 at the December 31, 2019 CAD to USD exchange rate. (4) CAD 0.46 at the December 31, 2019 CAD to USD exchange rate.

(3) CAD 0.65 at the December 31, 2019 CAD to USD exchange rate.

14. Share-Based Payments

Stock options:

As at March 31, 2019 and December 31, 2019, the Company had 828,915 stock options outstanding and exercisable. Information about stock options as at December 31, 2019, is summarized in the following table:

			Weighted Average
		Weighted Average	Life Remaining
ExpiryDate	Number	Exercise Price	(Years)
December 3, 2023	183,915	0.44	3.93
December 3, 2025	10,000	0.44	5.93
January 28, 2026	40,000	0.44	6.08
April 26, 2026	7,500	0.44	6.32
February 10, 2028	587,500	2.00	8.12
	828,915	1.55	7.05

Agent options:

As at March 31, 2019 and December 31, 2019, the Company had 134,801 agent options outstanding. Agent options are exercisable at CAD 5.25 until June 4, 2020.

RSUs:

RSUs:
	RSUs
	Outstanding
Balance, March 31, 2019	875,000
Forfeited	(21,667)
Balance,December 31,2019	853,333

As at December 31, 2019, the Company had 853,333 RSUs outstanding of which 290,007 RSUs vested on June 4, 2019 and 281,674 RSUs will vest on June 4, 2020 and 281,652 RSUs will vest on June 4, 2021.

RSUs entitle participants the conditional right to receive one common share of the Company for each share unit. RSUs typically vest in three equal tranches on the first, second and third anniversaries of the grant date. RSUs automatically convert to common shares on the vesting date, with the exception of the first vested tranche which will be converted to common shares following approval by the Company’s Board of Directors.

During the nine months ended December 31, 2019, the Company recognized $893,689 (nine months ended December 31, 2018 – $1,248,678 as restated (Note 16)) of share-based payment expense related to RSUs. As at December 31, 2019, the remaining unvested balance of share-based payments was $787,843.

12

Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Statements

For the three and nine months ended December 31, 2019 (United States dollars unless otherwise disclosed) (Unaudited)

15. Per Share Amounts

15. Per Share Amounts	15. Per Share Amounts
For the three months ended For the nine months ended
December 31	December 31
2019 2018 2019 2018
Restated – Note 16	Restated – Note 16
Loss for theperiod (1,360,099) (1,709,524)	(4,533,246) (19,472,079)
Basic and diluted weighted average
number of shares 12,826,988 9,876,214	12,127,271 9,747,204
Basic and diluted net lossper share (0.11) (0.17) (0.37) (2.00)

All warrants, stock options, agent options and RSUs were excluded from the diluted per share amounts as their effect is antidilutive.

16. Restatement

In connection with the audit of the Company’s March 31, 2019 consolidated financial statements, management identified errors in prior year consolidated financial statements were corrected retrospectively in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” as well as adjustments related to the June 4, 2018 reverse take-over and for the adoption of IFRS 9, some of which had an impact on quarterly interim periods the year ended March 31, 2019:

• § The conversion option associated with preferred shares issued prior to April 1, 2017 was not correctly accounted for as a derivative liability on the issue dates and subsequent consolidated statement of financial position dates;

• § Preferred share warrants issued in connection with term loan agreements and amendments entered into between February 1, 2016 and March 31, 2018 were not correctly accounted for as derivative liabilities on the issue dates and subsequent consolidated statement of financial position dates;

• § Lease incentives for a free-rent period received during the year ended March 31, 2018 were not recognized on a straight-line basis over the term of the office lease;

• § A cut-off error was identified with respect to deferred compensation recognized in the year ended March 31, 2019 for which a portion related to the year ended March 31, 2018;

• § The fair value of the reverse takeover (“RTO”) and related transaction costs; and

• § Adjustments related to term loan amendments.

In addition, the restatement includes the correction of the allocation of share-based payment expense recognized during the year ended March 31, 2019 to the quarterly interim periods.

The effect of the restatement on the December 31, 2018 comparative figures is summarized below.

Consolidated Statement of Loss and Comprehensive Loss for the three months ended December 31, 2018:

	Previously
	reported	Restatement		Reclass(h)	Restated
Revenue	1,372,921	(10,000)	(g)	–	1,362,921
Cost of sales	135,135	–		–	135,135
Gross margin	1,237,786	(10,000)		–	1,227,786
Expenses
Salaries, wages and benefits	1,287,539	–		–	1,287,539
Share-based payments	543,799	3,241	(f)	–	547,040
General and administration	328,588	(2,368)	(c)	–	326,220
Consulting	217,397	–		–	217,397
Professional fees	94,263	–		22,985	117,248
Depreciation	754	–		–	754
Total expenses	2,472,340	873		22,985	2,496,198
Operating loss before other (income) expenses	(1,234,554)	(10,873)		(22,985)	(1,268,412)
Interest and financing costs	252,931	211,166	(b)	(22,985)	441,112
Total other expenses	252,931	211,166		(22,985)	441,112
Income (loss) and comprehensive income (loss)
for theperiod	(1,487,485)	(222,039)		–	(1,709,524)
Income(loss) per share – basic and diluted	(0.15)				(0.17)

13

Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Statements

For the three and nine months ended December 31, 2019 (United States dollars unless otherwise disclosed) (Unaudited)

Consolidated Statement of Loss and Comprehensive Loss for the nine months ended December 31, 2018:

	Previously
	reported	Restatement		Reclass(h)	Restated
Revenue	3,618,165	(10,000)	(g)	–	3,608,165
Cost of sales	425,853	–		–	425,853
Gross margin	3,192,312	(10,000)		–	3,182,312
Expenses
Salaries, wages and benefits	3,678,315	–		–	3,678,315
Share-based payments	1,352,378	(103,700)	(f)	–	1,248,678
General and administration	1,086,982	(7,102)	(c)	–	1,079,880
Consulting	642,365	–		–	642,365
Deferred compensation	270,495	(100,969)	(d)	–	169,526
Professional fees	237,062	–		68,957	306,019
Depreciation	2,443	–		–	2,443
Total expenses	7,270,040	(211,771)		68,957	7,127,226
Operating loss before other (income) expenses	(4,077,728)	201,771		(68,957)	(3,944,914)
Listing expense	758,530	274,005	(e)	–	1,032,535
Transaction costs	–	1,230,122	(e)	–	1,230,122
Interest and financing costs	4,516,356	282,130	(b)	(68,957)	3,255,145
		(1,474,384)	(b)
Fair value adjustment of derivative liabilities	–	7,786,805	(a)	–	10,009,363
		2,222,558	(b)
Total other (income) expenses	5,274,886	10,321,236		(68,957)	15,527,165
Loss and comprehensive loss for theperiod	(9,352,614)	(10,119,465)		–	(19,472,079)
Lossper share – basic and diluted	(0.96)				(2.00)

Consolidated Statement of Changes in Cash Flows for the nine months ended December 31, 2018:

	Previously
	reported	Restatement		Reclass(h)	Restated
Cash flows used in operating activities	(4,835,502)	48,866	(c)(d)	650,333	(4,136,303)
Cash flows provided by financing activities	4,973,411	(34,864)	(b)	(650,333)	4,288,214
Cash flows used in investingactivities	(1,890)	(14,002)	(e)	–	(15,892)
Increase in cash	136,019	–		–	136,019
Cash,beginningofperiod	92,282	–		–	92,282
Cash,end ofperiod	228,301	–		–	228,301

(a) Preferred shares

Series A, A-1 and A-2 preferred shares were originally recognized as equity instruments at the amount of proceeds received on their issuance and/or conversion. However, anti-dilution provisions contained in the terms of the preferred shares would result in a variable number of common shares issued on the conversion of preferred shares under certain conditions. As a result, the conversion option associated with the preferred shares was fair valued and reclassified as a financial liability and accounted for as a derivative liability with any residual value being attributed to equity.

During the nine months ended December 31, 2018, the Company recognized a $7,786,805 adjustment for the increase in the fair value of the preferred share derivative liability as at June 4, 2018, the conversion date of the preferred shares.

(b) Term loan

156,802 Series A-1 preferred share warrants and the 310,662 Series A preferred share warrants issued to SQN between February 1, 2016 and March 31, 2017 were originally classified as equity instruments. However, anti-dilution provisions contained in the terms of the preferred share warrants would allow the preferred share warrants to be exercised at a lower exercise price under certain conditions. As a result, the preferred share warrants were reclassified a financial liabilities and accounted for as derivative liabilities.

During the three months ended December 31, 2018, the Company reclassified $41,602 of expenses net against the term loan and recognized $199,221 of accretion of the amortized cost of the term loan.

14

Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Statements

For the three and nine months ended December 31, 2019 (United States dollars unless otherwise disclosed) (Unaudited)

During the nine months ended December 31, 2018, the Company recognized the following adjustments:

• § $2,222,558 for the increase in the fair value of the preferred share warrant derivative liability as at June 4, 2018, the conversion date of the preferred share warrants;

• § $1,474,384 gain on de-recognition of the term loan for the difference between the carrying amount of the term loan and the present value of cash flows based on the terms of the Amended and Restated Loan and Security Agreement executed on June 15, 2018; and

• § $208,142 of expenses reclassified and net against the term loan and $490,272 of accretion of the amortized cost of the term loan.

(c) Lease incentives

During the year ended March 31, 2018, the Company received a lease incentive of a free-rent period for the Company’s office premises. Total rent payable under the terms of the lease should have been recognized as office rent on a straight-line basis over the term of the office lease. During the three and nine months ended December 31, 2018, the Company recognized reductions of $2,368 and $7,102, respectively, in general and administrative expenses related to amortized rent expense over the free-rent period.

(d) Deferred compensation

The Company reduced deferred compensation expense by $270,495 for contributions certain employees and team members made to the Company in the prior year ended March 31, 2018 offset by $169,526 of deferred compensation for contributions made during the nine months ended December 31, 2018.

(e) RTO

During the nine months ended December 31, 2018, the Company:

• § Increased the amount attributed to the listing expense on reverse takeover by $274,005 in connection with an increase in the fair value of the reverse takeover transaction including $1,920 of cash acquired; and

• § Recognized $1,230,122 of transaction costs comprised of $1,216,120 for the fair value of 399,424 common share warrants issued to a consulting service provider that assisted with the RTO transaction and $14,002 of other expenses.

(f) Share-based payments

During the three ended December 31, 2018, the Company increased share-based payments expense by $3,241 to correctly recognize the fair value of RSUs issued in June 2018 over the vesting terms of the RSUs.

During the nine months ended December 31, 2018, the Company reduced share-based payments expense by $103,700 to correctly recognize the fair value of RSUs issued in June 2018 over the vesting terms of the RSUs.

(g) Deferred revenue

During the three and nine months ended December 31, 2018, the Company reduced revenue by $10,000 for an amount correctly recognized as deferred revenue.

(h) Reclassification of expenses

Certain expenses were reclassified in the comparative three and nine months ended December 31, 2018 to conform with current year presentation.

17. Subsequent Events

In January 2020, the Company initiated a $500,000 principal prepayment to SQN (Note 8).

On February 28, 2020, the Company converted $500,000 of term loan principal (Note 8) into 1,388,889 common shares of the Company at $0.36 per share, pending approval of the TSXV.

15