Boardwalktech Software Corp.

MANAGEMENT’S DISCUSSION AND ANALYSIS

AS AT AND FOR THE THREE MONTHS AND NINE MONTHS ENDED DECEMBER 31, 2021

DATED: FEBRUARY 25, 2022

This Management’s Discussion and Analysis ("MD&A") for the three and nine months ended December 31, 2021 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 December 31, 2021 unaudited condensed interim consolidated financial statements and March 31, 2021 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 February 25, 2022, 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, 2022 is referred to as "current fiscal year", “Fiscal 2022" or similar words. The previous fiscal year, which ended on March 31, 2021, is referred to as "previous fiscal year", "Fiscal 2021" or similar words. The three-month quarter ended December 31, 2021 is referred to as “Q3 Fiscal 2022”and the previous three-month quarter ended September 30, 2021 is referred to as “Q2 Fiscal 2022” and the comparative three-month quarter ended December 31, 2020 is referred to as “Q3 Fiscal 2021”.

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.

FINANCIAL HIGHLIGHTS

Revenue for Q3 Fiscal 2022 totaled $1.06 million, down slightly from $1.08 million of revenue in the Q3 Fiscal 2021 and down 5% from $1.11 million of revenue in Q2 Fiscal 2022, as revenue from recurring software-as-a service (“SaaS”) subscription licenses and a 17% year-over-year increase in professional services were offset by a 21% yearover-year drop in revenue from older, legacy supplemental hosting and premium maintenance services contracts. Approximately 54% of revenue in Q3 Fiscal 2022 came from new and recurring SaaS licenses, which is a steady increase from 48% of revenue from SaaS licenses three years ago.

Gross margin for Q3 Fiscal 2022 was 86.8%, a 0.8%-point increase from Q2 Fiscal 2022 level of 86.0%, and an increase from 86.6% in Q3 Fiscal 2021 even given flat total revenue and infrastructure investments.

The reported loss for Q3 Fiscal 2022 was $(1.08) million, or a loss of $(0.03) per basic and diluted share, versus a $(0.66) million loss in Q3 Fiscal 2021, or $(0.03) per basic and diluted share, and a $(0.72) million loss in Q2 Fiscal 2022, or $(0.02) per basic and diluted share. These changed were primarily impacted by non-cash share-based payments ($0.3 million in higher in the current quarter) and a one-time benefit of $0.1 million of COVID-19 related rent abatement last year when the Company re-negotiated its office lease. Total adjusted operating expenses (excluding share-based payments and depreciation) in Q3 Fiscal 2022 were $1.4 million, a $0.1 million increase from $1.3 million in Q3 Fiscal 2021 and sequentially flat with $1.4 million in Q2 Fiscal 2022.

Boardwalktech Software Corp. Management Discussion and Analysis

Adjusted EBITDA (as defined in the Adjusted EBITDA and Non-IFRS Financial Measures section) for Q3 Fiscal 2022 was a loss of $(0.5) million, versus a $(0.4) million loss in Q3 Fiscal 2021 and a similar $(0.4) million loss in Q2 Fiscal 2022.

Non-IFRS net loss (as defined in the Adjusted EBITDA and Non-IFRS Financial Measures section) for Q3 Fiscal 2022 totaled $(0.5) million, or a loss of $(0.01) per basic and diluted share, versus a $(0.5) million non-IFRS loss in Q3 Fiscal 2021, or a loss of $(0.02) per basic and diluted share, and versus a $(0.5) million non-IFRS loss in Q2 Fiscal 2022, or a loss of $(0.01) per basic and diluted share. The flat year-over-year change in both non-IFRS and adjusted EBITDA losses continued to be impacted by legacy contracts ramping down.

OUTLOOK

Since the Company implemented its new SaaS business model in 2018, total revenue from new contracts signed since 2018 is now approximately 78% of total revenue (65% in prior quarter) and has grown at a 33% compound annual growth rate (“CAGR”), while revenue from new SaaS licenses signed since 2018 has grown at a 37% CAGR. The Company expects the contribution from professional services 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 new projects commence and the timing of when milestones are completed. 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.

Further, as mentioned previously, despite the dislocations caused by COVID-19, causing several customers to put plans on hold, the aggregate sales pipeline (by specific customer, project, target closing and factored contribution) has since expanded to approximately $9 million. We believe the breadth and size of that pipeline reflect these prospective customers’ demand and need for our real-time digital ledger platform by enterprises struggling with managing compliance, tracking, security, real-time accurate decisions, and still maintaining data quality and provenance, while addressing new structured and unstructured data challenges.

The Company views its $9 million sales pipeline as genuine, given explicit customer demand for specific projects that our real-time digital ledger platform provides. That said, the Company has also seen some sales cycles increase as new customers look to do broader deployments (requiring increased diligence work). The Company does encounter competitive solutions that tend to be on the low-end, less comprehensive, limited, or have inferior technology, but the Company believes the biggest competition tends to be internal (or “not invented here” efforts), so the Company needs to work with IT departments (and their security, compliance needs) as the business owners embrace the ROI that the Boardwalk platform provides. Thus, while the Company seeks to close all projects, it does recognize it probably will not, nor needs to in order to achieve its profitability and “land and expand” goals.

The Company expects revenue growth to increase in future quarters, and years, as the Company’s dedicated sales force closes deals within its sales pipeline. Further, the Company expects new sales and marketing investments, including those around the recently introduced product extension and new engagements in the financial services market to take two to three quarters for new software subscription sales (SaaS) to occur and impact financials.

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 and nine-month periods ended December 31, 2021 and December 31, 2020. 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.

in thousands of U.S. dollars	for Three-month period ended	for Nine-month period ended
except per share amounts Dec 31, Sept 30, Dec 31,		Dec 31, Dec 31,
Revenue Cost of sales		2021 2020 $3,177 $3,367 442 449 $2,735 $2,917 $4,210 $3,998 763 392 216 198 (2,453) (1,671) $0 $444 ($2) ($69) 0 79 (2,451) (2,125) - - ($2,451) ($2,125) ($0.06) ($0.10)
Gross Profit
SG&A expenses * Share-based payments Depreciation
Operating Income/(Loss)
Interest (term loan) Imputed interest, rent concessions Financing costs & other expenses

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

in thousands of U.S. dollars	as at Dec 31,	as at March 31,
Current assets	2021	2021
Cash	$ 1,266	$ 3,101
Trade and other receivables	816	494
Prepaid expenses and deposits	164	115
Share subscriptions receivable	-	116
Total current assets	$ 2,246	$ 3,825
Total non-current assets	456	652
Total assets	$ 2,702	$ 4,477
Current liabilities
Account payables and accrued liabilities	$ 232	$ 399
Deferred revenue	1,024	938
Deferred compensation	0	15
Current portion of lease liability	245	215
Total current liabilities	$ 1,501	$ 1,567
Lease Liability	201	431
Total Liabilities	$ 1,701	$ 1,999
Shareholder Equity	$ 1,001	$ 2,478
Total Liabilities and Shareholders’ Equity	$ 2,702	$ 4,477

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, accretion of term loan financing fees and the COVID-19 related rent abatement. 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)
in thousands of U.S. dollars
except per share amounts
Net Income (Loss) for the period
Adjustments:
Share-based payments
Depreciation
Fiancing costs
(Gain) loss on de-recognition of term loan
Forgiveness of PPP loan
Rent abatement
Total Adjustments
Non-IFRS Net Income (Loss)
Non-IFRS amount per share, basic and diluted:

Dec 31,
Sept. 30,
Dec 31,
Dec 31,
Dec 31,
2021
2021
2020
2021
2020
($1,082)
($716)
($661)
($2,451)
($2,125)
491
205
96
763
392
73
72
67
216
198
0
0
77
0
263
0
0
(40)
0
(184)
0
0
0
0
0
0
(14)
(82)
(57)
(82)
564
263
118
922
588
($518)
($453)
($543)
($1,529)
($1,537)
($0.01)
($0.01)
($0.02)
($0.04)
($0.07)
for Three-month period ended
for Nine-month period ended

*Adjusted-EBITDA* figures in U.S. dollars, thousands Operating Income (Loss) for the Period Add back (deduct) Depreciation Share-based Compensation expenses Adjusted EBITDA	Dec 31, Sept. 30, Dec 31, 2021 2021 2020 ($1,066) ($712) ($545) 73 72 67 491 205 96 ($502) ($434) ($382) for Three-month period ended	Dec 31, Sept. 30, Dec 31, 2021 2021 2020 ($1,066) ($712) ($545) 73 72 67 491 205 96 ($502) ($434) ($382) for Three-month period ended	for Nine-month period ended
		Sept. 30, 2021 ($712) 72 205	Dec 31, Dec 31, 2021 2020 ($2,453) ($1,671) 216 198 763 392 ($1,474) ($1,080)
	($502)	($434)

Boardwalktech Software Corp. Management Discussion and Analysis

OVERVIEW

Our Company

Boardwalk 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 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/atomic unit 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 workflow 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;

Sales and Distribution

Boardwalk primarily uses 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

Boardwalktech Software Corp. Management Discussion and Analysis

representatives 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 are handled by Boardwalk professional services group while deployment and professional services for reseller partner sales are mainly handled by the partner.

Boardwalk offers the Boardwalk Enterprise Digital Ledger Platform on an annual subscription basis, 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).

CURRENT PERIOD OPERATING RESULTS

Revenue

in thousands of U.S. dollars Dec 31, Sept 30, Dec 31, 2021 2021 2020 SaaS License (New and Renewals) $484 $529 $557 Legacy (Hosting and Maintenance) 89 86 112 Software Subscriptions and Service $573 $615 $669 Professional Services 483 490 414 Total Revenue $1,056 $1,106 $1,083 for Three-month period ended	for Nine-month period ended
	Dec 31, Dec 31, 2021 2020 $1,509 $1,662 256 455 $1,765 $2,116 1,412 1,251
Total Revenue	$3,177 $3,367

Boardwalk derives its revenues from two sources: (1) software subscriptions and services comprised of recurring software subscription revenues (SaaS) derived from customer licenses for a Right-to-Access the Company’s cloud services and legacy revenues for 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.

Q3 Fiscal 2022 compared to Q3 Fiscal 2021

Revenues for Q3 Fiscal 2022 totaled $1.06 million, a 3% decrease from $1.08 million of revenue in the Q3 Fiscal 2021, as a 13% decrease in SaaS license revenue (due to impacted COVID-19 customers) and a 21% decrease in legacy revenue was offset by a 17% increase in professional services revenue.

Q3 Fiscal 2022 compared to Q2 Fiscal 2022

Revenue for Q3 Fiscal 2022 totaled $1.06 million, a 5% decrease from $1.11 million of revenue in the Q2 Fiscal 2022, due primarily to an 8% decrease in SaaS license revenue from a previous disclosed non-renewal from a COVID impacted customer.

Fiscal 2022 YTD compared to Fiscal 2021 YTD

Revenue for the nine-month period ending December 31, 2021 was $3.2 million compared to $3.4 million for the nine-month period ending December 31, 2020. While overall recurring revenue was down 6%, revenue from professional services increased 13%, offset by a 9% decline in SaaS license and a 44% decrease in legacy revenue (supplemental hosting and premium services). Since our new SaaS business model was implemented in 2018, approximately 70% of the Company’s cumulative revenue year-to-date has come from new customers since 2018, an increase compared to 62% of the Company’s cumulative revenue during the first nine-months of last year.

Boardwalktech Software Corp. Management Discussion and Analysis

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:

Dec 31, Sept 30, Dec 31, 2021 2021 2020 Customer A 44.6% 38.6% 47.2% Customer B 19.4% 6.7% 0.0% Top 5 78.3% 66.7% 69.2% Top 10 89.5% 84.9% 83.3% for Three-month period ended	for Nine-month period ended
	Dec 31, Dec 31, 2021 2020 42.2% 46.7% 9.8% 0.0% 71.2% 68.3% 86.2% 82.7%

The addition of a new material customer in this quarter is a reflection of the Company’ “land and expand” strategy, as this customer has added multiple applications since its first license. 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.

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 %	Dec 31, Sept 30, Dec 31, 2021 2021 2020 $1,056 $1,106 $1,083 139 155 145 $917 $950 $937 86.8% 86.0% 86.6% for Three-month period ended	for Nine-month period ended
		Dec 31, Dec 31, 2020 2019 $3,177 $3,367 442 449
		$2,735 $2,917
		86.1% 86.7%

Q3 Fiscal 2022 compared to Q3 Fiscal 2021

Gross margin for Q3 Fiscal 2022 was 86.8%, a 0.2%-point increase from Q3 Fiscal 2021 level of 86.6%, even given flat revenue in the current quarter and higher third-party hosting expenses in last year’s quarter.

Q3 Fiscal 2022 compared to Q2 Fiscal 2022

Gross margin for Q3 Fiscal 2022 was 86.8%, a 0.8%-point increase from Q2 Fiscal 2022 level of 86.0%, even given lower revenue levels in the current quarter, due to a decrease in hosting expenses from upgrades in prior quarters

Fiscal 2022 YTD compared to Fiscal 2021 YTD

Gross margin for the nine-month period ending December 31, 2021 was 86.1% compared to 86.7% for the nine-month period ending December 31, 2020, primarily due to lower revenue.

We expect our gross margins in future quarters to increase from recent levels as revenue volumes 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.

Boardwalktech Software Corp. Management Discussion and Analysis

figures in U.S. dollars, thousands Dec 31, Sept 30, Dec 31, 2021 2021 2020 Total Operating Expenses $1,982 $1,662 $1,482 Total Adjusted Operating Expenses* $1,419 $1,385 $1,320 for Three-month period ended	for Nine-month period ended
	Dec 31, Dec 31, 2021 2020 $5,189 $4,588 $4,210 $3,998

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

Q3 Fiscal 2022 compared to Q3 Fiscal 2021

Total adjusted operating expenses in Q3 Fiscal 2022 of $1.4 million was $0.1 million higher than adjusted operating expenses for Q3 Fiscal 2021, due to $0.1 million of higher compensation expenses for new customer support staff.

Q3 Fiscal 2022 compared to Q2 Fiscal 2022

Total adjusted operating expenses in Q3 Fiscal 2022 of $1.4 million was flat with adjusted operating expenses of $1.4 million in Q2 Fiscal 2022, as all expense categories were essentially flat with levels in prior quarter.

Fiscal 2022 YTD compared to Fiscal 2021 YTD

Total adjusted operating expenses for the nine-month period ending December 31, 2021 was $4.2 million versus adjusted operating expenses of $4.0 million for the nine-month period ending December 31, 2020. The $0.2 million increase was due to $0.1 million of higher net salary expenses ($0.36 million in higher wages less $0.26 million of lower deferred comp), plus $0.1 million of higher 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 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 are 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 Expenses (Income)

The breakdown of other income and expense is as follows:

figures in U.S. dollars, thousands Interest / Imputed Lease Financing Rent Abatement Other Expenses, net	Dec 31, Sept 30, Dec 31, 2021 2021 2020 $16 $18 $161 - - 37 - (14) (82) $16 $4 $116 for Three-month period ended	Dec 31, Sept 30, Dec 31, 2021 2021 2020 $16 $18 $161 - - 37 - (14) (82) $16 $4 $116 for Three-month period ended		Dec 31, Dec 31, 2021 2020 $55 $457 - 79 (57) (82) ($2) $454 Nine-month period ended
		Sept 30, 2021 $18 - (14)
	$16	$4

Interest in the Fiscal 2022 periods relates to imputed interest on the lease liability whereas interest in the Fiscal 2021 periods primarily relates to interest on the term loan. Financing expenses include the non-cash impact of losses for the non-cash impact of (gains) losses from de-recognition of the term loan related to loan amendments and the accretion of term loan financing fees. The term loan was fully repaid in the fourth quarter of Fiscal 2021. The COVID-19 related rent abatement resulted from the Company’s renegotiating its office lease extension.

Boardwalktech Software Corp. Management Discussion and Analysis

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 December 31, 2021, the Company’s reported cash balance was $1.3 million, compared to $3.1 million as at March 31, 2021.

Working capital

Working capital represents the Company’s current assets less its current liabilities. The Company’s working capital surplus was $0.7 million as at December 31, 2021 down from $2.3 million as at March 31, 2021. The nine-month period change includes a $1.8 million decrease in cash, a $0.3 million increase in trade receivables, a $0.1 million decrease in share subscriptions receivable, countered by a $0.2 million decrease in accounts payable and accrued liabilities, and a $0.1 million increase in deferred revenue. It should be noted that deferred revenue reflects new and recurring licenses that are contractually non-refundable at the beginning of each term, then recognized over the term (amortizing the deferred revenue down), versus a liability then paid down in cash

in thousands of U.S. dollars Current Assets Current Liabilities Working Capital	as at Dec 31, as at March31, 2021 2021 2,246 $ 3,825 $ 1,501 1,567 745 $ 2,258 $

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.

Cash inflows (outflows) by activity: in thousands of U.S. dollars Dec 31, Sept 30, Dec 31, 2021 2021 2020 Operating Activities ($912) ($177) ($610) Investing Activities (8) (8) (3) Financing Activities (39) (10) 686 for Three-month period ended	Cash inflows (outflows) by activity: in thousands of U.S. dollars Dec 31, Sept 30, Dec 31, 2021 2021 2020 Operating Activities ($912) ($177) ($610) Investing Activities (8) (8) (3) Financing Activities (39) (10) 686 for Three-month period ended	Dec 31, Dec 31, 2021 2020 ($1,945) ($1,624) (21) (7) 130 1,027 Nine-month period ended	Dec 31, Dec 31, 2021 2020 ($1,945) ($1,624) (21) (7) 130 1,027 Nine-month period ended
Net Inflows (outflows)	($959) ($195) $74		($1,835) ($604)

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.

Q3 Fiscal 2022 compared to Q3 Fiscal 2021

During Q3 Fiscal 2022, net cash usage from operating activities was $(0.9) million versus cash usage of $(0.6) million during Q3 Fiscal 2021. In addition to Adjusted EBITDA operating losses, the cash usage for the current quarter also included $0.3 million from an increase in trade receivables, $0.1 million attributed to deferred revenue, and $0.1 million of rent abatement benefit last year. Share-based payments were $0.4 million higher than last year due to the granting of restricted share units in Q2 Fiscal 2022.

Boardwalktech Software Corp. Management Discussion and Analysis

Q3 Fiscal 2022 compared to Q2 Fiscal 2022

During Q3 Fiscal 2022, net cash usage from operating activities was $(0.9) million, which was $0.7 million higher than the $(0.2) million of net cash usage from operations in Q2 Fiscal 2022. Much of this difference in sequential cash usage came from a $0.3 million increase in trade receivables (versus a $0.6 million decrease, cash inflow, in the prior quarter), $0.2 million of lower deferred revenue, and $0.3 million impact from higher share-based payments in the current quarter.

Fiscal 2022 YTD compared to Fiscal 2021 YTD

For the nine-month period ending December 31, 2021, net cash usage from operating activities was $(1.9) million versus $(1.6) million for the nine-month period ending December 31, 2020. In addition to slightly higher Adjusted EBITDA losses, the nine-month period of Fiscal 2022 saw higher cash usage from $0.3 million of lower trade payables and accrued liabilities and $0.3 million of lower deferred compensation to improve the Company’s balance sheet, plus $0.4 of higher trade receivables versus the comparable nine-month period in Fiscal 2021.

Cash Flows from Investing Activities

Net cash out flows from investing activities in all periods are minor and relate to purchases of property and equipment for the replacement of laptops and the upgrade of internal servers to support new customer projects

Cash Flows from Financing Activities

As of March 22, 2021, the Company had paid off all principal, interest, prepayment fees, and other indebtedness owed by the Company to SQN and eliminated all debt levels from a peak of $7.3 million in June 2018; which in turn had positive impacts on reported cash flows from Financing Activities and a reduction in interest and financing costs.

Q3 Fiscal 2022 compared to Q3 Fiscal 2021

During Q3 Fiscal 2022, the net cash outflow from financing activities was $(0.04) million versus an inflow of $0.7 million during Q3 Fiscal 2021. Q3 Fiscal 2022 net outflow came from $0.05 million of proceeds for exercised common stock warrants offset by $0.09 million of office lease payments, versus Q3 Fiscal 2021 which saw $0.9 million of proceeds from a unit private placement financing, offset by $0.2 million of debt interest payments and $0.03 million of office lease payments.

Q3 Fiscal 2022 compared to Q2 Fiscal 2022

During Q3 Fiscal 2022, the net cash outflow from financing activities was $(0.04) million versus net cash usage of $(0.01) million in Q2 Fiscal 2022. Q3 Fiscal 2022 net outflow came from $0.05 million of warrant proceeds offset by $0.09 million of office lease payments compared to $0.06 million of warrant proceeds offset by $0.07 million of office lease payments in Q2 Fiscal 2022.

Fiscal 2022 YTD compared to Fiscal 2021 YTD

For the nine-month period ending December 31, 2021, net cash inflows from financing activities was $0.1 million versus $1.0 million of net cash inflows from financing activities for the nine-month period ending December 31, 2020. Fiscal 2022 period saw $0.3 million of proceeds from exercised common stock warrants offset by $0.2 million of office lease payment, versus $1.5 million of private placement proceeds and $0.7 million of forgivable loan proceeds offset by a similar level of office lease payments and $0.9 million of debt interest and principal repayments.

Boardwalktech Software Corp. Management Discussion and Analysis

Share Capital

pital
	Common	Common	Stock	Restricted
	shares	share warrants	options	share units
Balance, March 31, 2021	42,017,014	16,591,017	828,915	1,724,418
Issued	442,595	-	-	4,211,400
Exercised	-	(442,595)	-	-
Forfeited	-	-	(10,000)	-
Expired	-	(1,563,053)	-	-
Balance, December 31, 2021	42,459,609	14,585,369	818,915	5,935,818
Issued	-	-	-
Exercised	-	-	-	-
Expired	-	-	-	-
Balance,date of this MD&A	42,459,609	14,585,369	818,915	5,935,818

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 December 31, 2021, 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 nine-months ended December 31, 2021 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.

Estimates

Critical accounting estimates are those that require management to make assumptions about matters that are highly uncertain at the time the estimate or assumption is made. Critical accounting estimates are also those that could potentially have a material impact on the Company’s financial results where a different estimate or assumption is used. The significant areas of estimation uncertainty are:

Expected credit losses

The Company's trade and other receivables are typically short-term in nature, as payment for License and Software Service Agreements is prepaid at the beginning of the license term, and the Company recognizes an amount equal to the lifetime ECL based on a probability-weighted matrix. The Company measures loss allowances based customerspecific factors, historical default rates and forecasted economic conditions. The amount of ECLs is sensitive to changes in circumstances of forecast economic conditions.

Revenue recognition

Where the outcome of performance obligations for contracts can be estimated reliably, revenue is recognized. The Company recognizes revenue when obligations have been satisfied and, where such provisions exist, the Company does not begin revenue recognition for license subscriptions that have conditional or trial periods until such periods expire. Where the outcome of performance obligations for sales contracts cannot be reliably measured, contract revenue is recognized in the current year to the extent that costs have been incurred until such time that the outcome of the performance obligations can be reasonably measured. Significant estimation assumptions are required to

Boardwalktech Software Corp. Management Discussion and Analysis

estimate total contract costs, which are recognized as expenses in the year in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognized as an expense immediately.

Leases

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

Share-based payments

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Determining the fair value of such share-based awards granted as common share warrants and stock options requires estimate as to the appropriate valuation model (Black-Scholes pricing model) and the inputs for the model require assumptions including the rate of forfeiture of warrants or options granted, the expected life of the warrant or option, the Company’s share price and its expected volatility, the risk-free interest rate and expected dividends. RSUs are valued based on the market price of the Company’s shares at the time of grant.

Deferred taxes

Deferred taxes are based on estimates as to the timing of the reversal of temporary and taxable differences, substantively enacted tax rates and the likelihood of assets being realized.

Judgments

Judgment is used in situations when there is a choice and/or assessment required by management. The following are critical judgments apart from those involving estimations, that management has made in the process of applying the Company’s accounting policies and that have a significant effect on the amounts recognized in the consolidated financial statements.

Determination of CGUs

For the purposes of assessing impairment of non-financial assets, the Company must determine CGUs. Assets and liabilities are grouped into CGUs at the lowest level of separately identified cash flows. Determination of what constitutes a CGU is subject to management judgment. The asset composition of a CGU can directly impact the recoverability of assets included within the CGU. Management has determined that the Company has one CGU.

Leases

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

Contingencies

Management uses judgment to assess the existence of contingencies. By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. Management also uses judgment to assess the likelihood of the occurrence of one or more future events.

Going concern

The going concern assessment requires management’s judgment 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.

Taxation

The calculations for current and deferred taxes require management’s interpretation of tax regulations and legislation in the various tax jurisdictions in which the Company operates, which are subject to change. The measurement of deferred tax assets and liabilities requires estimates of the timing of the reversal of temporary differences identified and management’s assessment of the Company’s ability to utilize the underlying future tax deductions against future taxable income before they expire, which involves estimating future taxable income.

The Company is subject to assessments by various taxation authorities in the tax jurisdictions in which it operates and these taxation authorities may interpret the tax legislation and regulations differently. In addition, the calculation of

Boardwalktech Software Corp. Management Discussion and Analysis

income taxes involves many complex factors. As such, income taxes are subject to measurement uncertainty and actual amounts of taxes may vary from the estimates made by management.

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, 2021. The Company did not adopt any new standards, interpretations or amendments during the nine months ended December 31, 2021.

Boardwalktech Software Corp. Management Discussion and Analysis

AI assistant

Boardwalktech Software Corp. — Interim / Quarterly Report 2022

43149_rns_2022-02-25_0d9c1813-7375-4ec7-bfa5-354c78da891b.pdf