Boardwalktech Software Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

AS AT AND FOR THE THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 2020

DATED: NOVEMBER 27, 2020

This Management’s Discussion and Analysis ("MD&A") for the three and six months ended September 30, 2020 provides detailed information on the operating activities, performance and financial position of Boardwalktech Software Corp. ("Boardwalk" or the "Company"). This discussion should be read in conjunction with the Company’s September 30, 2020 unaudited condensed interim consolidated financial statements and March 31, 2020 audited annual consolidated financial statements and accompanying notes. The Company’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and are reported in U.S. dollars, unless otherwise stated. The information contained herein is current to November 27, 2020, unless otherwise stated.

The Company’s fiscal year commences April 1st of each year and ends on March 31st of the following year. The Company’s current fiscal year, which will end on March 31, 2021 is referred to as "current fiscal year", “Fiscal 2021" or similar words. The previous fiscal year, which ended on March 31, 2020, is referred to as "previous fiscal year", "Fiscal 2020" or similar words. The three- month quarter ended September 30, 2020 is referred to as “Q2 Fiscal 2021”and the previous three-month quarter ended June 30, 2020 is referred to as “Q1 Fiscal 2021” and the comparative three-month quarter ended September 30, 2019 is referred to as “Q2 Fiscal 2020”.

In this document unless otherwise specified, "we", "us", "our", "Company" and "Boardwalk" all refer to Boardwalktech Software Corp. collectively with its subsidiaries. The content of this MD&A has been approved by the Board of Directors, on the recommendation of its Audit Committee.

CAUTION REGARDING FORWARD LOOKING INFORMATION

Certain statements in this MD&A which are not historical facts constitute forward-looking statements or information within the meaning of applicable securities laws (“forward-looking statements”). Such statements include, but are not limited to, statements regarding Boardwalk’s projected revenues, gross margins, earnings, growth rates, the impact of new product design wins, market penetration and product plans. The use of terms such as “may”, “anticipated”, “expected”, “projected”, “targeting”, “estimate”, “intend” and similar terms are intended to assist in identification of these forward-looking statements. Readers are cautioned not to place undue reliance upon any such forward-looking statements. Such forward-looking statements are not promises or guarantees of future performance and involve both known and unknown risks and uncertainties that may cause Boardwalk’s actual results to be materially different from historical results or from any results expressed or implied by such forward-looking statements. Accordingly, there can be no assurance that forward-looking statements will prove to be accurate and readers are therefore cautioned not to place undue reliance upon any such forward-looking statements.

Factors that could cause results or events to differ materially from current expectations expressed or implied by forward looking statements contained herein include, but are not limited to: our history of losses and the risks associated with not achieving or sustaining profitability; the Company’s dependence on a limited number of customers for a substantial portion of revenues; fluctuating revenue and expense levels arising from changes in customer demand, sales cycles, product mix, average selling prices, manufacturing costs and timing of product introductions; risks associated with competing against larger and more established companies; competitive risks and pressures from further consolidation amongst competitors, customers, and suppliers; market share risks and timing of revenue recognition associated with product transitions; risks related to intellectual property, including third party licensing or patent infringement claims; the loss of any of the Company’s key personnel could seriously harm its business; risks associated with adverse economic conditions; delays in the launch of customer products; price re-negotiations by existing customers; legal proceedings arising from the ordinary course of business; ability to raise needed capital; ongoing liquidity requirements; and other factors discussed in the “Risk Factors” section. All forward-looking statements are qualified in their entirety by this cautionary statement. Boardwalk is providing this information as of

Boardwalktech Software Corp. Management Discussion and Analysis

the current date and does not undertake any obligation to update any forward-looking statements contained herein as a result of new information, future events or otherwise except as may be required by applicable securities laws.

Risks relating to the Company include, but are not limited to, the following:

the Company has a history of losses and may not achieve profitability in the future;
the Company has historically received a substantial portion of its revenue from a limited number of customers;
the Company expects its operating results to continue to fluctuate;
the Company faces intense competition and expects continued market competition in the future;
assertions by third parties of infringement by Boardwalk of, or of Boardwalk’s failure to protect, their intellectual property rights could result in significant costs and cause Boardwalk’s operating results to suffer;
the Company may have difficulty accurately predicting revenue for the purpose of appropriately budgeting and adjusting its expenses.
the loss of customers could affect the Company’s financial returns and future plans;
the Company’s customers may cancel future subscriptions that can adversely impact future recurring revenue;
the Company may be unable to generate funds required to meet its funding requirements, and may need to raise additional funds;
changes in industry standards or technology could impede the sale of Boardwalk’s products;
the loss of any of the Company’s key personnel could seriously harm its business;
the pattern of customer product ramps as they shift from legacy products to new products based on our more advanced designs could affect both the amount and timing of revenue recognized by the Company;
the Company’s failure to maintain compliance with applicable regulations in certain geographies or other jurisdictions may force it to cease distribution in those areas;
the majority of the Company’s operating expenses are denominated in U.S. dollars and Indian Rupee, therefore, the Company’s earnings are impacted by fluctuations in exchange rates between the U.S. dollar and other currencies; and
the Company may be involved in legal proceedings from time to time; arising in the ordinary course of its business and such proceedings may affect the Company’s financial position, results of operations or cash flows.

Boardwalktech Software Corp. Management Discussion and Analysis

FINANCIAL HIGHLIGHTS

Revenue for Q2 Fiscal 2021 totaled $1.1 million, an 11% decrease from $1.2 million of revenue in the Q1 Fiscal 2021 and 13% decrease from $1.2 million of revenue in the Q2 Fiscal 2020, due to a decline in professional services plus a drop in revenue from older, legacy supplemental hosting and premium maintenance services contracts (as noted in our prior filings). Approximately 66% of revenue in Q2 Fiscal 2021 came from new and recurring software subscription licenses (SaaS licenses), which is a steady increase from 53% of revenue from SaaS licenses 18 months ago. Further, since our new SaaS business model was implemented in 2018, with a new sales force, approximately 66% of the Company’s revenue for the first half of the current fiscal year has come from new contracts since 2018, versus 50% in the first six month of last year. The Company expects the contribution from professional service will continue to grow in absolute dollars over time but decrease as a percentage of total revenue, though levels are expected to fluctuate on a quarter-by-quarter basis as the new projects commence. Despite the COVID-19 situation when several customers initially put plans on hold, the aggregate pipeline has now continued to grow and now exceeds $7 million – reflecting the effort of our sales force and the attraction of our real-time digital ledger platform to enterprises struggling with remote work while addressing new structured and unstructured data challenges.

Gross margin for Q2 Fiscal 2021 was 86.3%, essentially flat with Q2 Fiscal 2020’s level of 86.4%, but a decrease from 87.0% in Q1 Fiscal 2021 primarily due to one-time infrastructure investment expenses in Q2.

The reported loss for Q2 Fiscal 2021 was $(0.9) million, or a loss of $(0.04) per basic and diluted share, versus a $(1.3) million loss in Q2 Fiscal 2020, or $(0.11) per basic and diluted share, and a $(0.6) million loss in Q1 Fiscal 2021, or $(0.03) per basic and diluted share, The 31% year-over-year improvement were due to continued control of operating expense as the Company shifts resources towards growth and monetizing its sales pipeline, while the sequential increase in IFRS loss was due to $0.2 million of positive non-cash de-recognition and accretion impacts in the prior quarter related to the June 30, 2020 term loan amendment. Total adjusted operating expenses (excluding share-based compensation and amortization) in Q2 Fiscal 2021 were $1.3 million, a $0.4 million decrease from $1.7 million in Q2 Fiscal 2020 and down slightly from $1.3 million in Q1 Fiscal 2021

Adjusted EBITDA (as defined in the Adjusted EBITDA and Non-IFRS Financial Measures section) for Q2 Fiscal 2021 was a loss of $(0.4) million, a 37% improvement from the $(0.6) loss in Q2 Fiscal 2020 but slightly more than the $(0.3) loss in Q1 Fiscal 2021 due to lower professional services revenue.

Non-IFRS net loss for Q2 Fiscal 2021 totaled $(0.5) million, or a loss of $(0.03) per basic and diluted share, versus a $(0.8) million non-IFRS loss in Q2 Fiscal 2020, or a loss of $(0.07) per basic and diluted share, and versus a $(0.5) million non-IFRS loss in Q1 Fiscal 2021, or a loss of $(0.02) per basic and diluted share. The year-over-year improvement reflect operating leverage as non-IFRS and adjusted EBITDA losses continued operation leverage as new SaaS licenses ramp, even when factoring in investments in new experienced sales hires and new marketing programs expected to result in new customers/bookings and higher revenues in future periods.

Subsequent Events: Close of Financing and Amendment to Loan Facility

On November 9, 2020, the Company closed a non-brokered private placement of equity units (each, a "Unit") for the issuance of 2,518,800 Units at CAD 0.50 per Unit, for gross proceeds of approximately $962,208 (CAD 1,259,400). 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 0.70 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 CAD 84,658 and issued 169,316 finders' common share purchase options with a term of 2 years and an exercise price of C$0.50 per common share to compensate finders who introduced purchasers under the Offering. The Company intends to use the proceeds from the Offering for general corporate purposes and the expansion of sales and marketing initiatives.

In addition to its financing on November 9, 2020, the Company has also agreed with SQN Venture Income Fund, LP (“SQN”) to amend and extend the maturity the loan facility currently in place with Boardwalktech Software Corp. pursuant to a loan amendment agreement entered into between the parties, dated November 1, 2020. Highlights of the loan amendment include:

Extension of the interest-only period by six months through February 28, 2021;
Extension of the maturity date of the loan to January 1, 2023;
A reset of the interest rate to 14.95%; and,
No additional warrants were granted in consideration of this amendment.

Boardwalktech Software Corp. Management Discussion and Analysis

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth selected financial information derived from the Company’s unaudited condensed interim consolidated financial statements for the three-month periods ended September 30, 2020 and September 30, 2019. The selected financial information was prepared in accordance with IAS 34 in a manner consistent with the Company’s annual financial statements. The following information should be read in conjunction with these statements and the accompanying notes.

ompanying notes.	ompanying notes.
in thousands of U.S. dollars		for Three-month period ended	for Six-month period ended
except per share amounts Sept 30, June 30, Sept 30,			Sept 30, Sept 30,
	2020 2020 2019		2020 2019
Revenue Cost of sales	$1,078 $1,206 $1,243 148 156 168 $931 $1,049 $1,074 $1,324 $1,354 $1,701 96 200 242 66 66 66 (555) (571) (935) $148 $147 $202 170 (128) 128 ($874) ($590) ($1,265) - - - ($874) ($590) ($1,265)		$2,284 $2,344 304 310
Gross Profit			$1,980 $2,033
SG&A expenses * Share-based payments Depreciation			$2,678 $3,472 296 699 131 132
Operating Income/(Loss)			(1,126) (2,269)
Interest expense Other expenses			$296 $397 42 507
Loss before taxes Taxes			($1,463) ($3,173) - - ($1,463) ($3,173)
Loss for the period

Loss per share, basic and diluted	($0.04) ($0.03) ($0.11)		($0.07) ($0.27)

SG&A expenses comprised of salaries and benefits, general & adminsitrative, consulting, deferred compensation and professional fees

in thousands of U.S. dollars	as at Sept	30,	as at March 31,	as at March 31,
Current assets	2020		2020
Cash	$	118	$	795
Trade and other receivables		414		313
Prepaid expenses and deposits		102		103
Total current assets	$	634	$	1,211
Total non-current assets		98		225
Total assets	$	732	$	1,436
Current liabilities
Account payables and accrued liabilities	$	670	$	945
Deferred revenue		1,309		1,382
Deferred compensation		904		767
Current portion of term loan		1,489		1,546
Current portion of lease liability		106		255
Total current liabilities	$	4,478		4,894
Term Loan		2,570		2,613
Forgivable Loan		700		-
Total Liabilities	$	7,748	$	7,507
Shareholder Equity	$ (6,657)		$ (6,071)
Total Liabilities and Shareholders’ Equity	$	732	$	1,436

Boardwalktech Software Corp. Management Discussion and Analysis

ADJUSTED EBITDA AND NON-IFRS FINANCIAL MEASURES

In addition to disclosing results in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”), the Company also provides supplementary Adjusted-EBITDA and non-IFRS financial measures, disclosed as a supplement to financial results in order to provide a further understanding of Boardwalk’ results of operational performance from management’s perspective. In particular, Boardwalk uses Adjusted-EBITDA and non-IFRS measures to highlight trends in its core business that may not otherwise be readily apparent solely from IFRS measures. Boardwalk management uses Adjusted-EBITDA and non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets, and to assess Boardwalk’s ability to meet its future capital expenditure and working capital requirements. Boardwalk believes that securities analysts, investors and other interested parties frequently use Adjusted-EBITDA and non-IFRS measures in the evaluation of issuers.

Non-IFRS net income (loss) is defined as net income (loss) before share-based payments, depreciation, certain financing costs and non-recurring or one-time items such as non-cash adjustments for de-recognition term loan and accretion of term loan financing fees. Non-IFRS net income (loss) does not have any standardized meaning prescribed by IFRS and is not necessarily comparable to similar measures presented by other companies. Non-IFRS net income (loss) from operations should not be considered in isolation or as a substitute for income (loss) reported in accordance with IFRS.

Adjusted EBITDA is defined as net income (loss) for the period less interest and related financing costs, accretion or other non-cash valuation impacts, taxes, depreciation, and share-based payments.

Boardwalk has provided a comparison of net income (loss) to non-IFRS net income (loss) and Adjusted EBITDA measures in the following tables:

Non-IFRS Net Income (Loss)

*Non-IFRS Net Income (Loss)*
in thousands of U.S. dollars except per share amounts Net Income (Loss) for the period Adjustments: Share-based payments Depreciation, including lease obligations Fiancing costs (Gain) loss on de-recognition of term loan Total Adjustments Non-IFRS Net Income (Loss) Non-IFRS amount per share, basic and diluted:	Sept 30, June 30, Sept 30, 2020 2020 2019 ($874) ($590) ($1,265) 96 200 242 66 66 66 170 16 203 0 (144) (75) 332 138 436 ($542) ($452) ($829) ($0.03) ($0.02) ($0.07) for Three-month period ended	for Six-month period ended
		Sept 30, Sept 30, 2020 2019 ($1,463) ($3,173) 296 699 131 132 186 420 (144) 87 470 1,338 ($994) ($1,835) ($0.05) ($0.16)

*Adjusted-EBITDA* figures in U.S. dollars, thousands Operating Income (Loss) for the Period Add back (deduct) Depreciation & Amortization Share-based Compensation expenses Adjusted EBITDA	Sept 30, June 30, Sept 30, 2020 2020 2019 ($555) ($571) ($935) 66 66 66 96 200 242 ($394) ($304) ($627) for Three-month period ended	Sept 30, June 30, Sept 30, 2020 2020 2019 ($555) ($571) ($935) 66 66 66 96 200 242 ($394) ($304) ($627) for Three-month period ended	Sept 30, June 30, Sept 30, 2020 2020 2019 ($555) ($571) ($935) 66 66 66 96 200 242 ($394) ($304) ($627) for Three-month period ended	Mar 31, Mar 31, 2020 2019 ($1,126) ($2,269) 131 132 296 699 ($698) ($1,438) Six-month period ended
			June 30, 2020 ($571) 66 200
		($394)	($304)

Boardwalktech Software Corp. Management Discussion and Analysis

OVERVIEW

Our Company

Boardwalktech Software Corp. (“Boardwalk” or the “Company”) was incorporated pursuant to the Business Corporations Act of British Columbia. The Company operates from locations in the United States and India and provides enterprise software-as-a-service (SaaS) to global customers.

Boardwalk designs and licenses industry leading enterprise software solutions, based upon its unique patented digital ledger technology. The Company has over 50 employees and full-time contractors primarily at its Cupertino, California headquarters and its wholly owned-subsidiary in Mumbai, India. Through its extensive data management/database technology expertise, Boardwalk was first to market in 2005 with a proprietary and patented positional, cell data management technology (aka “digital ledger’) - what we call “transaction chaining”- which addresses the digital transformation issues companies face when working with multiple parties and exchanging information in real-time. The Company’s solutions resolve two enterprise business problems – connecting multiple users in the enterprise value chain to improve planning and results and the alignment of data from various/multiple enterprise systems of record used in planning and information exchange processes. Boardwalk’s unique technology allows multiple users secure simultaneous access to the same data in a relational database environment which supports concurrent access to record objects while being edited. Another key enterprise problem that is solved with Boardwalk’s technology is the chaining of transactions in a database to support provenance and immutable versioning and change management/change history. Concurrent with the Company’s initial go-to-market activities, a patent was filed to protect the IP associated with versioned sharing, consolidating, and reporting enterprise information. Also, in 2014 the Company applied for a patent to protect the IP associated with cell-based data management and this patent was issued in September 2018 which coincides with an existing patent issued July 2005 for managing time-based data at the cell or atomic unit level. Boardwalk’s revenue comes primarily from new and recurring license subscription agreements, maintenance, and service contracts. Boardwalk’s customers include over 20 companies in the Global 1000 / Fortune 500.

On June 11, 2018, Boardwalk began trading on the TSX Venture Exchange under the symbol ‘BWLK’; and on November 13, 2019, Boardwalk began trading on the OTC Markets Group/ OTCQB under the symbol "BWLKF".

Products and Solutions

The Boardwalk Enterprise Digital Ledger Platform is a complete enterprise platform that resolves trust and collaboration issues companies face when working with multiple parties, which enables customers to automate manual business processes and turn them into enterprise “digital” applications using our patented digital ledger data management technology. The Boardwalk Digital Ledger Platform can be used to build and maintain applications with multiple internal or external users working in Excel, a web form, or mobile environment as the user interface. The Company’s software supports a dynamic, cell-based smart contract and machine learning-enabled information exchange that combines Boardwalk’s temporal data management and enterprise integration environment with digital ledger-based trust and validation capabilities. The result is a private permissioned enterprise data management environment that supports time-based multi-party transactions and consensus models for automating previously established manual-based processes and turning them into connected digital applications.

Growth Strategy

Boardwalk’s objective is to be the leading provider of private permissioned digital ledger solutions for global enterprise customers of any size. Elements key to this strategy include:

expand our network of direct sales people;
expand our network of reseller sales channels;
broader adoption of Boardwalk’s solutions by new markets and new customers;
greater penetration of our existing customer base;
expand internationally;
introduction of new features and capabilities specifically focused on digital AI and Machine Learning
extending our digital ledger technology into an end-to-end operating system solution;

Boardwalktech Software Corp. Management Discussion and Analysis

Sales and Distribution

Boardwalk uses primarily a direct sales model where the Boardwalk Enterprise Digital Ledger Platform creates a unique go-to-market opportunity for the Boardwalk solution. For direct sales, the Company uses regional sales representatives paired with a Sales Development Representative (SDR) who will guide lead development, with sales reps on a standard back-end weighted commission plan while the SDR will have a base salary plus variable compensation. Boardwalk is also starting to grow its reseller partner sales program by recruiting new partners that can build and manage solutions for their clients leveraging Boardwalk and the Boardwalk Enterprise Digital Ledger Platform. Deployment and professional services for direct sales Boardwalk customers will be handled by Boardwalk professional services group while deployment and professional services for reseller partner sales will be mainly handled by the partner.

Boardwalk offers the Boardwalk Enterprise Digital Ledger Platform based on annual subscriptions, with pricing built around multiple digital applications and scale/size of data. Boardwalk engages enterprise clients with an annual subscription for the platform and associated applications and all platform capabilities are included such as:

Boardwalk Digital Ledger Server;
Boardwalk Application Design Studio;
Boardwalk Integration Framework;
Boardwalk Smart Contract engine;
Boardwalk APIs; and
Boardwalk Virtual Machines (Nodes).

Revenue

Boardwalk derives its revenues from two sources: (1) recurring software subscription revenues (SaaS), which are derived from customers accessing the Company’s cloud services, certain hosting services for dedicated servers, and from customers paying for additional services beyond the standard support that is included in the basic subscription fees; and (2) related professional services such as consulting, application development, quality assurance (QA), application delivery, and training. New revenue is defined as newly signed contracts during the reporting period for license subscriptions, while recurring or renewal revenue are revenue streams that have been extended from previous periods.

CURRENT PERIOD OPERATING RESULTS

Revenue

CURRENT PERIOD OPERATING RESULTS Revenue
in thousands of U.S. dollars Sept 30, June 30, Sept 30, 2020 2020 2019 Software Subscriptions and Service $708 $739 $766 Professional Services 370 467 477 Total Revenue $1,078 $1,206 $1,243 for Three-month period ended		Sept 30, Sept 30, 2020 2019 $1,447 $1,447 837 896 for Six-month period ended
Total Revenue		$2,284 $2,344

Q2 Fiscal 2021 compared to Q2 Fiscal 2020

Revenues for Q2 Fiscal 2021 totaled $1.1 million, a 13% decrease from $1.2 million of revenue in the Q2 Fiscal 2020, primarily due to a 22% decline in professional services plus lower revenue from legacy (hosting and premium services) contracts.

Q2 Fiscal 2021 compared to Q1 Fiscal 2021

Revenues for Q2 Fiscal 2021 decreased 11% from $1.2 million of revenue in the Q1 Fiscal 2021, primarily due to a 21% decline in professional services plus lower revenue from legacy (hosting and premium services) contracts.

Boardwalktech Software Corp. Management Discussion and Analysis

Fiscal 2021 YTD compared to Fiscal 2020 YTD

Revenue for the six-month period ending September 30, 2020 was $2.3 million compared to $2.3 million for the sixmonth period ending September 30, 2019. Revenue from SaaS licenses was flat even with an expected decline in legacy contracts (supplemental hosting and premium services), while revenue from Professional Services declined 7%. Since our new SaaS business model was implemented in 2018, approximately 67% of the Company’s revenue year-to-date has come from new customers since 2018, versus 50% during the first six-months of last year.

Despite the COVID-19 situation when several customers initially put plans on hold, the aggregate pipeline has now continued to grow sequentially and exceeds $7 million – reflecting the effort of our sales force and the attraction of our real-time digital ledger platform to enterprises struggling with remote work while addressing new structured and unstructured data challenges.

Approximately 66% of revenue in Q2 Fiscal 2021 came from new and recurring software subscription licenses (i.e., SaaS licenses), which is a steady increase from 53% of revenue from SaaS licenses 18 months ago. As the Company and its new sales staff continue to engage with new customers and increases its pipeline, we expect Professional Services revenue to increase in absolute terms, but decline as a percentage of overall revenue. Further, the Company believes that a large portion of its Professional Services revenue will be ongoing, and even recurring, as customers partner with Boardwalk’s expertise to find new methods and new applications for utilizing Boardwalk’s unique digital ledger platform.

The Company expects revenue growth to increase in future quarters, and years, as the Company’s recent sales force expansion closes deals within that pipeline. The recent financing has been done to help facilitate, support and accelerate those sales efforts. Further, the Company expects new sales and marketing investments, including those around the recently introduced Network of Words (NOW) and Diamond Lane products to take two to three quarters for new software subscription sales (SaaS) to occur and impact financials.

Revenue Derived from Major Customers

Based on information from our direct and reseller sales, our customers representing greater than 10% of our revenue for the periods are:

ods are:
	for Six-month period ended for Three-month period ended
Sept 30, June 30, Sept 30, Sept 30, Sept 30,
2020 2020 2019 2020 2019 Customer A 45.5% 47.4% 39.9% 46.5% 37.6% Top 5 73.7% 76.7% 72.8% 75.3% 70.9% Top10 88.8% 88.5% 87.5% 88.6% 86.6%

Currently, the Company’s quarterly revenues can be impacted by and fluctuate due to the timing and frequency of new and existing customers. While we currently receive a substantial portion of our revenue from a limited number of customers, we expect our customer concentration to continue to decline in the future. To this point, the Company has seen both the number of customers who represent 10% or more of total revenue for a period decline from four customers in Fiscal 2016 to one customer in Fiscal 2021.

Gross Margin

Our revenue, cost of sales, and gross margin for the fiscal periods indicated are as follows:

thousands of U.S. dollars Revenue Cost of Sales Gross Margin $ Gross Margin %	Sept 30, June 30, Sept 30, 2020 2020 2019 $1,078 $1,206 $1,243 148 156 168 $931 $1,049 $1,074 86.3% 87.0% 86.4% for Three-month period ended	Sept 30, Sept 30, 2020 2019 $2,284 $2,344 304 310 Six-month period ended
		$1,980 $2,033
		86.7% 86.8%

Boardwalktech Software Corp. Management Discussion and Analysis

Q2 Fiscal 2021 compared to Q2 Fiscal 2020

Gross margin for Q2 Fiscal 2021 was 86.3%, essentially flat with Q2 Fiscal 2020’s level of 86.4%, even with the impact of lower revenue and one-time infrastructure investment expenses in the current quarter. Those enhancement expenses involved an upgrade/ refresh of our IaaS platform to better serve our clients (newer firewall, latest OS/database, swap-out of older server blades).

Q2 Fiscal 2021 compared to Q1 Fiscal 2021

Gross margin for Q2 Fiscal 2021 decreased from 87.0% in Q1 Fiscal 2021 due to lower revenue levels, while cost of sales actually decreased in absolute dollars even with the one-time infrastructure investment expenses in Q2.

Fiscal 2021 YTD compared to Fiscal 2020 YTD

Gross margin for the six-month period ending September 30, 2020 was 86.7% compared to 86.8% for the six-month period ending September 30, 2019. Despite the lower revenue and infrastructure investments in Q2 Fiscal 2021, the costs of sales decreased in absolute dollars, reflecting the results of prior enhancements.

We expect our gross margins in future quarters to increase relative to levels recognized in Fiscal 2020 as revenue levels grow, but may fluctuate period-to-period due to a variety of factors, including the average prices of our products and services, our product mix, the timing and pass-through of cost reductions to our customers, as well as the timing of signing and entering into development agreements.

Operating Expenses

The following table provides an analysis of the Company’s total operating expenses plus adjusted operating expenses which exclude non-cash share-based compensation expenses, as a percentage of total revenue. The analysis following the table will primarily focus on the adjusted operating expenses for the respective periods.

figures in U.S. dollars, thousands Sept 30, June 30, Sept 30, 2020 2020 2019 Total Operating Expenses $1,486 $1,620 $2,009 Total Adjusted Operating Expenses* $1,324 $1,354 $1,701 for Three-month period ended	Six-month period ended
	Sept 30, Sept 30, 2020 2019 $3,106 $4,302 $2,678 $3,472

* adjusted Operating Expenses exclude non-cash share-based compensation and amortization

Q2 Fiscal 2021 compared to Q2 Fiscal 2020

Total adjusted operating expenses in Q2 Fiscal 2021 of $1.3 million was $0.4 million lower than adjusted operating expenses for Q2 Fiscal 2020, due to $0.1 million of lower consultant and professional services expenses, $0.3 million of lower total compensation expenses and $0.2 million of lower general and administrative expenses (as part of the Company’s cost control and resource re-allocations).

Q2 Fiscal 2021 compared to Q1 Fiscal 2021

Total adjusted operating expenses in Q2 Fiscal 2021 of $1.3 million was lower than adjusted operating expenses of $1.4 million in Q1 Fiscal 2021, mainly due to a lower G&A expenses.

Fiscal 2021 YTD compared to Fiscal 2020 YTD

Total adjusted operating expenses for the six-month period ending September 30, 2020 was $2.7 million versus adjusted operating expenses of $3.5 million for the six-month period ending September 30, 2019. The $0.8 million decrease was due to $0.3 million of lower consultant and professional services expenses, $0.2 million of lower total compensation expenses and $0.3 million of lower general and administrative expenses.

The Company plans to selectively expand the size of our sales and marketing organizations through additional expenditures and new hires, in order to support additional customers and close new opportunities in our sales pipeline, as we continue to expand into existing and new markets. Overall, we expect our SG&A expenses to increase in

Boardwalktech Software Corp. Management Discussion and Analysis

absolute dollars, but longer term to generally decrease as a percentage of revenue, as our investments in SG&A translate into higher sales. We note that there is a lag between the investment in new SG&A costs (such as the hiring of new sales personnel) and the revenue generated from those expenses (via new customer wins), though the timing of that lag may vary by markets.

As a percentage of revenue, research and development costs is expected to fluctuate from one quarter or period to another, but we do not expect any significant changes in R&D spending, nor a requirement to do so in order to meet our revenue and strategic plans in the next 12 months. The Company continues to invest in and develop both new upgrades to our platform and new updates, and thus expects overall R&D spending to increase in absolute dollars but decrease as of percentage of total revenue.

Other Income (Expense)

The breakdown of other income and expense is as follows:

figures in U.S. dollars, thousands Interest Expense Other Expenses Other Expenses, net	Sept 30, June 30, Sept 30, 2020 2020 2019 $148 $147 $202 170 (128) 128 $318 $19 $330 for Three-month period ended	Sept 30, June 30, Sept 30, 2020 2020 2019 $148 $147 $202 170 (128) 128 $318 $19 $330 for Three-month period ended		Sept 30, Sept 30, 2020 2019 $296 $397 42 507 $338 $904 Six-month period ended
		June 30, 2020 $147 (128)
	$318	$19

Other expenses include the non-cash impact of (gains) losses for the de-recognition of the term loan related to loan amendments and the accretion of term loan financing fees.

Q2 Fiscal 2021 compared to Q2 Fiscal 2020

Other expenses (income) for Q2 Fiscal 2021 of $0.3 million was essentially unchanged from Q2 Fiscal 2020, as lower interest payments and accretion charges on the Company’s term loan with SQN Venture Income Fund LLP (“SQN”) was offset by $0.1 million beneficial non-cash de-recognition impact in Fiscal 2020.

Q2 Fiscal 2021 compared to Q1 Fiscal 2021

Similarly, other expenses (income) for Q2 Fiscal 2021 of $0.3 million was $0.3 million higher than expenses (income) recognized in Q1 Fiscal 2021, due to two non-cash improvements of $0.1 million in de-recognition gains and $0.2 million of lower accretion expenses in Q1 Fiscal 2021.

Fiscal 2021 YTD compared to Fiscal 2020 YTD

Other expenses (income) for the six-month period ending September 30, 2020 was $0.3 million versus adjusted operating expenses of $0.9 million for the six-month period ending September 30, 2019. The $0.6 million decrease was due to $0.1 million of lower interest expenses (as total principal levels decrease) plus $0.2 million of lower accretion and $0.2 million of lower de-recognition gains from the term loan.

With the exception of future monthly interest payments on the Company’s long-term debt, the remaining Other Expenses are considered to be one-time impacts to loss for the period.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has financed its operations primarily through the sale of equity securities, debt, and cash from operating activities.

Cash

As at September 30, 2020, the Company’s reported cash balance was down $0.6 million to $0.1 million, compared to $0.8 million as at March 31, 2020.

Subsequent to September 30, 2020, the Company closed a private placement financing and raised approximately $0.9 million of net proceeds.

Boardwalktech Software Corp. Management Discussion and Analysis

Working capital

Working capital represents the Company’s current assets less its current liabilities. The Company’s working capital deficit was $(3.8) million as at September 30, 2020 as compared to $(3.7) million at March 31, 2020. The six-month period change was primarily from a decrease in cash of $0.6 million (half of that from interest paid on term loan) which offset a $0.4 million decrease in current liabilities (even with a $0.1 million increase in deferred compensation).

in thousands of U.S. dollars Current Assets Current Liabilities WorkingCapital	as at Sept 30, 2020 634 $ 4,478 (3,844) $	as at March31, 2020
		1,211 $ 4,894
		(3,683) $

The Company expects working capital to increase as revenue growth occurs. While the Company plans to keep its targeted collection days in-line with its payment terms, aggregate trade receivables level should increase in absolute dollars as revenue levels grow.

The following table shows our cash flows from operating activities, investing activities and financing activities for the periods indicated.

ods indicated.
Cash inflows (outflows) by activity:	for Three-month period ended		Six-month period ended
in thousands of U.S. dollars Sept 30, June 30, Sept 30, 2020 2020 2019 Operating Activities ($115) ($900) $45 Investing Activities (1) (3) (3)			Sept 30, Sept 30, 2020 2019 ($1,015) ($944) (4) (6)
Financing Activities	(365)	705 (277)		341 852
Net Inflows (outflows)	($480)	($197) ($235)		($678) ($98)

Cash Flows Used in Operating Activities

Cash flows applied to operating activities primarily consist of our net loss adjusted for non-cash expenses and for changes in working capital items. Non-cash adjustments to operating activities generally include depreciation, sharebased payments and interest and financing fees. Working capital adjustments generally include changes in accounts receivable, which will increase as revenue increases, deferred revenue, and changes to accounts payable as we purchase more goods and services from suppliers to support such growth.

Q2 Fiscal 2021 compared to Q2 Fiscal 2020

During Q2 Fiscal 2021, net cash usage from operating activities was $(0.1) million versus modest cash inflow of $0.0 million during Q2 Fiscal 2020. As noted previously, Adjusted EBITDA in the current quarter improved by 25% versus the same quarter last year. In addition to these operating losses, the cash usage for the current quarter also included $0.3 million from trade payables, and $0.4 million from deferred revenue, mostly offset by inflows of $0.9 million from trade receivables and $0.1 million of deferred compensation.

Q2 Fiscal 2021 compared to Q1 Fiscal 2021

During Q2 Fiscal 2021, net cash usage from operating activities was $(0.1) million, which was $0.8 million lower than the $(0.9) million of net cash usage from operations in Q1 Fiscal 2021, even as Adjusted EBITDA in Q2 Fiscal 2021 was $0.1 million lower than Q1 Fiscal 2021. Much of this difference in sequential cash usage improvement came from a $0.9 million decrease in trade receivables (versus a $1.0 million increase in the prior quarter) and $0.1 million of higher deferred compensation; offset by cash usage from $0.3 million of lower trade payables, $0.4 million of lower deferred revenue.

Fiscal 2021 YTD compared to Fiscal 2020 YTD

For the six-month period ending September 30, 2020, net cash usage from operating activities was $(1.0) million versus $(0.9) million. Despite a $0.7 million improvement in Adjusted EBITDA, the six-month period of Fiscal

Boardwalktech Software Corp. Management Discussion and Analysis

2021 saw high cash usage from $0.1 million of trade receivables, $0.2 million of lower trade payables, and $0.4 million higher usage from deferred revenue sources versus the comparable six-month period in Fiscal 2020.

Cash Flows from Financing Activities

Q2 Fiscal 2021 compared to Q2 Fiscal 2020

During Q2 Fiscal 2021, the net cash usage from financing activities was $(0.4) million versus $(0.3) million during Q2 Fiscal 2020. Q2 Fiscal 2021 saw $0.1 million of higher interest payments than Q2 Fiscal 2020, even though the current quarter included interest payment for both Q2 Fiscal 2021 and Q1 Fiscal 2021 as interest payment were deferred and paid after the Company executed an Amended and Restated Loan and Security Agreement (the “June 2020 Agreement”) on June 30,2020.

Q2 Fiscal 2021 compared to Q1 Fiscal 2021

During Q2 Fiscal 2021, the net cash usage from financing activities was $(0.4) million versus $0.7 million net cash inflows from financing activities in Q1 Fiscal 2021. During Q1 Fiscal 2021, key inflows included $0.6 million from a private placement completed in in June 2020 and $0.7 million in April 2020 from a forgivable loan (granted by the SBA Payroll Protection Program, “PPP”), offset by $0.5 million repayment of principal on the term loan, and $0.1 million of office lease payments; while Q2 Fiscal 2021 had $0.3 million of interest payments that included the interest for both quarters.

Fiscal 2021 YTD compared to Fiscal 2020 YTD

For the six-month period ending September 30, 2020, net cash inflows from financing activities was $0.4 million versus $0.9 million of net cash inflows from financing activities for the six-month period ending September 30, 2019. While the Fiscal 2021 period did see $0.1 million of higher proceeds from private placements and $0.7 million from the forgivable PPP loan in April 2020, the Company received a $1.0 million working capital facility in June 2019. Further, the Company had $0.5 million of higher loan principal payments this year versus the comparable period of Fiscal 2020

During the past two years since the Company’s reverse takeover transaction in Q1 Fiscal 2019, the Company has reduced the principal amount of debt owing to SQN debt from $7.3 million when it was restructured on June 15, 2018 to $4.5 million as of September 30, 2020. The total reported amount of the SQN term loan liability is $3.7 million, as detailed in Note 7 of the September 30, 2020 unaudited condensed interim consolidated financial statements.

Cash Flows from Investing Activities

Net cash out flows from investing activities resulted from purchases and disposals of property and equipment (primarily laptop equipment and internal servers).

Liquidity and Cash Resource Requirements

The Company’s unaudited condensed interim consolidated financial statements were prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. The unaudited condensed interim consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that would be necessary should the Company be unable to continue as a going concern.

As at September 30, 2020, the Company has not yet achieved profitable operations, and has an accumulated deficit of $39.7 million. Whether, and when, the Company can attain profitability and positive cash flows from operations have uncertainty, which casts significant doubt upon the Company’s ability to continue as a going concern. The application of the going concern assumption is dependent upon the Company’s ability to generate future profitable operations and obtain necessary financing to do so. While the Company has been successful in obtaining financing to date, there can be no assurance that it will be able to do so in future on terms favourable for the Company. In addition to its operations, the Company may need to raise capital in order to fund its operations. The Company believes it will be able to acquire sufficient funds to cover planned operations through the next twelve-month period from

Boardwalktech Software Corp. Management Discussion and Analysis

anticipated revenue growth during Fiscal 2021, continued credit access from its primary lender and other sources, plus other potential strategic options. The outcome of these matters cannot be predicted at this time.

Share Capital

apital
	Common	Common	Stock	Restricted
	shares	share warrants	options	share units
Balance, March 31, 2020	19,323,097	5,846,988	828,915	853,333
Issued	1,768,389	921,815	-	-
Balance, Seprtember 30, 2020
and the date of this MD&A	21,091,486	6,768,803	828,915	853,333

Off-Balance Sheet Arrangements

During the periods presented, the Company did not have, nor do we currently have, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Financial Instruments and Risk Management

Boardwalk’s activities expose it to a variety of financial risks. Boardwalk is exposed to credit risk and liquidity risk because of holding certain financial instruments. Boardwalk is not exposed to significant market risk (currency, interest rate, or other) as it does not hold financial instruments that expose Boardwalk to market risk. Boardwalk’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on Boardwalk’s financial performance.

Risk management is carried out by senior management, in particular, the board of directors of Boardwalk.

Fair Value

Boardwalk’s financial instruments consist of cash, trade and other receivables, accounts payables and accrued liabilities, term loan, lease liability and forgivable loan. The carrying amounts of the current financial instrument items approximate their fair value due to their short period to maturity. The carrying amount of long-term financial instrument items approximate their fair value due to market determined interest and discount rates. As at September 30, 2020, the Company measured all of its financial instruments at amortized cost.

Market Risk and Foreign Currency 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 comprise these types of risk: interest rate risk, currency risk, commodity price risk and other price risk, such as equity risk. Financial instruments affected by market risk include loans and borrowings and deposits.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. However, the Company’s exposure to the risk of changes in market interest rates is minimal given that the Company has no bank debt obligations with floating interest rates.

Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily for trade receivables) and to a lesser degree from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

Boardwalktech Software Corp. Management Discussion and Analysis

Trade accounts receivable

Customer credit risk is managed through the Company’s established policy, procedures and control relating to customer credit risk management. In order to further reduce charges for doubtful accounts, the Company has recently adopted new policies to insure customer acceptance is explicitly confirmed in writing before an invoice is generated against recognized or deferred revenue.

Financial instruments and cash deposits

Credit risk from balances on deposit with banks and financial institutions is managed in accordance with the Company’s policies. Investments of surplus funds are made only with approved counterparties and within credit limits approved for each of those counterparties. The limits are set to minimize the concentration of risks and therefore mitigate financial loss through potential counterparty failure.

Liquidity risk

The Company’s objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements at any point in time. The Company achieves this by maintaining sufficient cash and cash equivalents, managing cash from operations, and if required through financing activities.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the six months ended September 30, 2020 that have materially affected, or are likely to materially affect, the Company’s internal control over financial reporting.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in accordance with IFRS requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses in the reporting period. We regularly evaluate our estimates and assumptions related to revenue recognition, accounts receivable, share-based transaction expense, and warrant liability. We base our estimates and assumption on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenues, costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between our estimates and actual results, our future results of operations will be affected. For a description of our critical accounting estimates, please refer to Note 4, Accounting Estimates and Judgments, in our audited consolidated financial statements for the fiscal year ended March 31, 2020.

New standards, interpretations and amendments adopted by the Company

The accounting policies followed in the Company’s unaudited condensed interim consolidated financial statements are consistent with those used to prepare the annual consolidated financial statements for the year ended March 31, 2020. The Company did not adopt any new standards, interpretations or amendments during the six months ended September 30, 2020.

Boardwalktech Software Corp. Management Discussion and Analysis

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Boardwalktech Software Corp. — Interim / Quarterly Report 2021

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