Boardwalktech Software Corp. — Interim / Quarterly Report 2022

Feb 25, 2022

Boardwalktech Software Corp. Condensed Interim Consolidated Financial Statements As at and for the three and nine months ended December 31, 2021

Stated in United States dollars (Unaudited)

Notice of No Auditor Review of Condensed Interim Consolidated Financial Statements

In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed these unaudited condensed interim consolidated financial statements as at and for the three and nine months ended December 31, 2021.

Boardwalktech Software Corp. Condensed Interim Consolidated Statements of Financial Position

(United States dollars)

(Unaudited)

As at		December 31 2021	March 31 2021
ASSETS
Current assets
Cash		1,265,560	3,101,006
Trade and other receivables (Note 3)		816,456	493,627
Prepaid expenses and deposits		164,019	114,801
Share subscriptions receivable(Notes 11 and 16)		–	115,507
Total current assets		2,246,035	3,824,941
Non-current assets
Property and equipment		20,402	9,734
Right-of-use asset(Note 4)		435,920	642,407
Total assets		2,702,357	4,477,082
LIABILITIES and SHAREHOLDERS’ DEFICIENCY
Current liabilities
Accounts payable and accrued liabilities (Note 5)		231,502	399,475
Deferred revenue (Note 6)		1,024,089	937,991
Deferred compensation		–	14,830
Lease liability (Note 7)		244,990	215,048
Total current liabilities		1,500,581	1,567,344
Non-current liabilities
Lease liability (Note 7)		200,798	431,268
Total liabilities		1,701,379	1,998,612
Shareholders’ equity
Share capital (Note 11)		36,071,415	35,820,706
Contributed surplus		9,232,350	8,507,346
Accumulated other comprehensive (loss) income		(9,787)	(7,740)
Deficit		(44,292,521)	(41,841,363)
Total equity attributed to shareholders		1,001,457	2,478,949
Non-controllinginterest		(479)	(479)
Total shareholders’ equity		1,000,978	2,478,470
Total liabilities and shareholders’ equity		2,702,357	4,477,082

Approved by the Board of Directors:

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

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

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

(United States dollars) (Unaudited)

	For the three	For the three	For the three	For the nine	For the nine	For the nine
	months		ended	months		ended
	December 31			December 31
	2021		2020	2021		2020
Revenue(Note 8)	1,055,555		1,082,714	3,177,398		3,366,714
Cost of sales	139,000		145,248	441,980		449,304
Gross margin	916,555		937,466	2,735,418		2,917,410
Expenses
Salaries, wages and benefits	1,190,658		994,367	3,522,516		3,161,324
General and administration (Note 9)	104,054		87,610	301,389		226,919
Professional fees	80,104		71,757	261,580		209,149
Depreciation	72,903		66,501	216,354		197,913
Share-based payments (Note 13)	491,031		96,016	762,532		392,463
Consulting	43,741		48,575	124,300		140,875
Deferred compensation	–		117,646	–		255,031
Bad debt(Note 3)	–		–	–		4,500
Total expenses	1,982,491		1,482,472	5,188,671		4,588,174
Operating loss before other expenses	(1,065,936)		(545,006)	(2,453,253)		(1,670,764)
Other expenses
Rent concessions and imputed interest (Note 7)	16,023		(79,530)	(2,095)		(69,077)
Term loan interest and financingcosts(Note 10)	–		195,606	–		522,817
Loss for the period	(1,081,959)		(661,082)	(2,451,158)		(2,124,504)
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of subsidiarycompanies	255		(1,199)	(2,047)		(6,402)
Loss and comprehensive loss for theperiod	(1,081,704)		(662,281)	(2,453,205)		(2,130,906)
Loss per share(Note 14)
Basic and diluted	(0.03)		(0.03)	(0.06)		(0.10)

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

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Boardwalktech Software Corp.

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (Deficiency)

(United States dollars)

(Unaudited)

For the nine months ended December 31	2021	2020
Share capital
Balance, beginning of period	35,820,706	25,098,962
Unit private placement	–	1,604,005
Exercise of common share warrants (Note 11)	266,647	–
Share issue costs(Note 11)	(15,938)	(182,717)
Balance,end ofperiod	36,071,415	26,520,250
Contributed surplus
Balance, beginning of period	8,507,346	7,061,637
Exercise of common share warrants (Note 11)	(37,528)	–
Finders’ options	–	51,000
Share-basedpayments(Note 13)	762,532	392,463
Balance,end ofperiod	9,232,350	7,505,100
Accumulated other comprehensive income
Balance, beginning of period	(7,740)	(168)
Exchange differences on translation of subsidiarycompanies	(2,047)	(6,402)
Balance,end ofperiod	(9,787)	(6,570)
Deficit
Balance, beginning of period	(41,841,363)	(38,231,042)
Net loss for theperiod	(2,451,158)	(2,124,504)
Balance,end ofperiod	(44,292,521)	(40,355,546)
Non-controlling interest
Balance,beginningand end ofperiod	(479)	(479)
Total shareholders’ equity (deficiency)	1,000,978	(6,337,245)

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

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Boardwalktech Software Corp. Condensed Interim Consolidated Statements of Cash Flows

(United States dollars)

(Unaudited)

For the nine months ended December 31 2021	2020
Cash provided by (used in) the following activities: Operating activities Loss for the period (2,451,158) Depreciation 216,354 Share-based payments (Note 13) 762,532 Rent concessions and imputed interest (Note 7) (2,095) Term loan interest and financing costs (Note 10) – Unrealized foreign exchange (1,445) Changes in non-cash working capital: Trade and other receivables (322,829) Prepaid expenses and deposits (49,218) Accounts payable and accrued liabilities (167,973) Deferred revenue 86,098 Deferred compensation (14,830)	(2,124,504) 197,913 392,463 (69,077) 522,817 (7,676)
	(55,721)
	(32,787)
	(386,150)
	(303,792)
	242,190
Cash flows used in operating activities (1,944,564)	(1,624,324)
Financing activities Lease payments (Note 7) (198,433) Repayment of term loan – Term loan financing fees – Interest paid (Note 7) – Forgivable loan proceeds – Common shareproceeds,net of issue costs(Note 11) 328,688	(185,625) (500,000) (16,011) (443,730) 700,100 1,472,288
Cash flowsprovided by financing activities 130,255	1,027,022
Investing activities Purchase ofpropertyand equipment (20,663)	(6,858)
Cash flows used in investing activities (20,663)	(6,858)
Change in cash (1,834,972) Foreign exchange effect on cash held in foreign currencies (474) Cash, beginning of theperiod 3,101,006
	(604,160)
	982
	794,706
Cash, end of theperiod 1,265,560	191,528
Taxespaid –
	–

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

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Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2021 (United States dollars unless otherwise disclosed) (Unaudited)

1. Description of Business

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

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

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

2. Basis of Presentation

Statement of compliance

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

The Company has consistently applied the same accounting policies throughout all periods presented. These unaudited condensed interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended March 31, 2021.

Authorization

These unaudited interim consolidated financial statements were authorized for issue in accordance with a resolution of the Board of Directors on February 25, 2022.

Consolidation

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

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

Functional and presentation currency

The functional currency of BWSC is the Canadian dollar (“CAD”), the functional currency of Boardwalktech is the United States dollar (“USD”) and the functional currency of BWSPL is the Indian Rupee (“INR”). The presentation currency of the Company is the USD.

3. Trade and Other Receivables

The Company’s trade and other receivables consist of:

3. Trade and Other Receivables The Company’s trade and other receivables consist of:
As at	December 31 2021	March 31 2021
Trade receivables	329,560	264,930
Receivables from contracts with customers	477,675	219,400
Other	9,221	9,297
	816,456	493,627

As at December 31, 2021, four customers accounted for 78% of trade receivables (March 31, 2021 – three customers; 63%), each with balances greater than 10%.

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Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Financial Statements

For the three and nine months ended December 31, 2021 (United States dollars unless otherwise disclosed) (Unaudited)

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

	As at	December 31 2021	March 31 2021
	Current	644,685	460,330
	31 – 60 days past due	109,000	24,000
	61 – 90 days past due	4,800	–
	Past due forgreater than 90 days	57,971	9,297
		816,456	493,627

During the nine months ended December 31, 2021, the Company evaluated the collectability of trade and other receivables and lifetime expected credit losses and recognized $nil (nine months ended December 31, 2021 – $4,500) of bad debt expense. The assessment of expected credit losses due to doubts of collectability did not warrant the recognition of an additional allowance for credit losses. $48,750 of amounts past due for greater than 90 days were collected in February 2022.

4. Right-Of-Use Asset

The Company has recognized a right-of-use (“ROU”) asset and corresponding lease liability (Note 7) related to office premises. The ROU asset is depreciated on a straight-line basis over the term of the related lease.

4. Right-Of-Use Asset The Company has recognized a right-of-use (“ROU”) asset and corresponding lease liability (Note 7) related to office premises. The ROU asset is depreciated on a straight-line basis over the term of the related lease.	4. Right-Of-Use Asset The Company has recognized a right-of-use (“ROU”) asset and corresponding lease liability (Note 7) related to office premises. The ROU asset is depreciated on a straight-line basis over the term of the related lease.
Carrying amount, March 31, 2021 642,407 Depreciation (206,487)
Carryingamount,December 31,2021 435,920
5. Accounts Payable and Accrued Liabilities
As at December 31 2021 March 31 2021
Accounts payable 180,818 291,691 Accrued liabilities 50,684 107,784
231,502 399,475
6. Deferred Revenue A continuity of deferred revenue is as follows: Balance, March 31, 2021 937,991 Invoiced in the period, excluding amount recognized as revenue 1,851,022
Invoiced in the period, excluding amount recognized as revenue
Amount recognized as revenue	(1,764,924)
Balance,December 31,2021	1,024,089
7. Lease Liability The Company incurs lease payments related to office premises. Balance, March 31, 2021 646,316 Imputed interest 54,600 Payments (198,433) Rent concessions (56,695)
Balance, December 31, 2021 445,788 Current portion (244,990)
Long-termportion 200,798

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Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Financial Statements

For the three and nine months ended December 31, 2021 (United States dollars unless otherwise disclosed) (Unaudited)

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

	Monthly	Total
January 31, 2022	28,348	28,348
February 1, 2022 to January 31, 2023(1)	29,198	321,176
February 1, 2023 to July 31, 2023	30,074	180,443

(1) January 1, 2022 to February 28, 2022 is a free rent period.

8. Revenue

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

	For the three months ended	For the three months ended	For the nine months ended	For the nine months ended
	December 31		December 31
	2021	2020	2021	2020
Software-as-a-service (SaaS)	484,163	557,186	1,509,256	1,661,666
Legacy (hosting andmaintenance)	88,538	111,878	255,668	454,529
Software subscriptions and services	572,701	669,064	1,764,924	2,116,195
Professionalservices	482,854	413,650	1,412,474	1,250,519
Total revenue	1,055,555	1,082,714	3,177,398	3,366,714

The Company’s revenue is generated in the United States. For the nine months ended December 31, 2021, 42.2% of the Company’s revenue was earned through sales to one major customer (nine months ended December 31, 2021 – 46.7% of revenue to one major customer). As at December 31, 2021, trade and other receivables (Note 3) included $477,675 of receivables from software subscriptions and services customers (March 31, 2021 – $219,400) and $329,560 of receivables from professional services customers (March 31, 2021 – $264,930).

9. Nature of Expenses

The nature of the Company’s general and administrative expenses is as follows:

	For the three months	ended	For the nine months	ended
	December 31		December 31
	2021	2020	2021	2020
Office	46,931	41,739	119,680	87,703
Rent and utilities	19,585	29,231	72,728	77,434
Marketing	26,116	16,006	76,942	50,774
Shareholder, regulatory and other	4,604	634	13,333	10,647
Travel and lodging	6,818	–	18,706	361
	104,054	87,610	301,389	226,919

10. Term Loan Interest and Financing Costs

	For the three months ended	For the three months ended	For the nine months ended	For the nine months ended
	December 31		December 31
	2021	2020	2021	2020
Term loan interest	–	158,579	–	443,730
Accretion of term loan	–	76,981	–	262,806
Gain on de-recognition of term loan	–	(39,954)	–	(183,719)
	–	195,606	–	522,817

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Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Financial Statements

For the three and nine months ended December 31, 2021 (United States dollars unless otherwise disclosed) (Unaudited)

11. Share Capital

11. Share Capital
Issued common shares:		Number of Shares	Amount ($)
Common shares
Balance, March 31, 2021		42,017,014	35,820,706
Exercise of common share warrants (a)		442,595	266,647
Shareissue costs		–	(15,938)
Balance,December 31,2021		42,459,609	36,071,415

(a) During the nine months ended December 31, 2021, the Company issued 442,595 common shares on the exercise of 442,595 common share warrants for gross cash proceeds of $229,119 (CAD 287,627) plus $37,528 of fair value reclassified from contributed surplus.

• (b) During the nine months ended December 31, 2021, the Company collected $115,707 of share subscriptions receivable related to share issuances in the prior year.

Non-voting and escrowed common shares:

The following common shares and non-voting common shares are escrowed and subject to release as follows:

		Common shares	Non-voting common shares(3)
Released 15% on each six-month anniversary date of June 7, 2018, with the final 15% released on June 7, 2021
Balance, March 31, 2021		171,686	510,094
Released		(171,686)	(510,094)
Balance, December 31, 2021		–	–
Released 15% on each six-month anniversary date of June 7, 2018, with the final 25% released on June 7, 2021		21,688 (21,688)	82,909 (82,909)
Balance, March 31, 2021
Released
Balance, December 31, 2021		–	–
Total		193,374 –	593,003 –
March 31, 2021
December 31,2021

(3) In total, 3,400,622 non-voting shares were originally held in escrow and released as noted above. Non-voting common shares have the same rights and privileges as other common shares, including the same dividend rights, except for the purpose of electing the Company’s directors, in which case they are not entitled to vote. These non-voting common shares obtain voting rights to elect the Company’s directors upon the Company’s receipt of written notice by the non-voting common shareholders to convert the share status to voting common shares following their release from escrow. As at December 31, 2021, 1,109,684 non-voting common shares were converted to voting common shares, leaving a balance of 2,290,938 non-voting shares.

12. Common Share Warrants

12. Common Share Warrants
	Number of	Weighted Average
	Warrants	Exercise Price
Balance, March 31, 2021	16,591,017	0.64
Exercised (Note 11)	(442,595)	(0.51)
Expired	(1,563,053)	(0.60)
Balance,December 31,2021	14,585,369	0.65

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Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Financial Statements

For the three and nine months ended December 31, 2021 (United States dollars unless otherwise disclosed) (Unaudited)

Information about common share warrants outstanding and exercisable at December 31, 2021 is as follows:

	Weighted Average	Weighted Average	Weighted Average	Weighted Average
Number of	Exercise Price	Exercise Price		Life Remaining
Warrants	(CAD)	(USD Equivalent) (4)		(Years)
99,200	0.45		0.35	0.19
187,306	0.50		0.39	0.68
1,200,000	0.60		0.47	0.43
1,718,044	0.65		0.51	0.19
3,148,154	0.70		0.55	0.82
7,913,125	0.90		0.71	1.07
319,540	–		1.67	5.98
14,585,369	0.79		0.65	0.96

(4) Translated to CAD at the December 31, 2021 USD exchange rate.

13. Share-Based Payments

Stock options:

As at March 31, 2021, the Company had 828,915 stock options outstanding and exercisable. During the nine months ended December 31, 2021, 10,000 options were forfeited. Information about the Company’s 818,915 stock options outstanding and exercisable as at December 31, 2021 is summarized in the following table:

ExpiryDate	Number Weighted Average Exercise Price Weighted Average Life Remaining (Years)
December 3, 2023	173,915 0.44 1.92 10,000 0.44 3.93 40,000 0.44 4.08 7,500 0.44 4.32 587,500 2.00 6.12
December 3, 2025
January 28, 2026
April 26, 2026
February 10, 2028
	818,915 1.56 5.09

RSUs:

RSUs entitle participants the conditional right to receive one common share of the Company for each share unit. RSUs will be converted to common shares following approval by the Company’s Board of Directors.

	Number	Number
	Outstanding	Vested
Balance, March 31, 2021	1,724,418	1,724,418
Granted	4,211,400	75,000
Balance,December 31,2021	5,935,818	1,799,418

On August 31, 2021, the Company granted 4,211,400 RSUs to officers, directors and employees of the Company, of which 75,000 RSUs vested on September 30, 2021, 2,494,448 RSUs will vest on August 31, 2022, 1,166,660 RSUs will vest on August 31, 2023 and 475,292 RSUs will vest on August 31, 2024. The fair value of these RSUs was determined to be $2,535,260 based on the $0.60 (CAD 0.76) market price of the Company’s common shares on the grant date,

Share-based payments expense:

During the three and nine months ended December 31, 2021, the Company recognized $491,031 and $762,532 (three and nine months ended December 31, 2020 – $96,016 and $392,463) of share-based payment expense. As at December 31, 2021, the remaining unvested balance of share-based payments was $1,838,960.

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Boardwalktech Software Corp. Notes to Condensed Interim Consolidated Financial Statements

For the three and nine months ended December 31, 2021 (United States dollars unless otherwise disclosed) (Unaudited)

14. Per Share Amounts

14. Per Share Amounts
	For the	three months			ended	For the nine months			ended
		December		31		December		31
	2021				2020	2021			2020
Loss for theperiod	(1,081,959)				(661,082)	(2,451,158)		(2,124,504)
Basic and diluted weighted average
numberofshares	42,351,747			22,652,047		42,310,748		21,144,138
Basic and diluted net lossper share		(0.03)			(0.03)	(0.06)			(0.10)

All common share warrants, stock options and RSUs were excluded from the diluted per share amounts as their effect is anti-dilutive.

15. Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company generally relies on funds generated from operations, acquisitions and/or equity financing to provide sufficient liquidity to meet budgeted operating requirements.

As at December 31, 2021, maturities of the Company’s financial liabilities are as follows:

	Carrying	Contractual	March 31	March 31	March 31
	Amount	cash flows	2022	2023	2024
Accounts payable and accrued liabilities	231,502	231,502	231,502	–	–
Lease liability (Note 10)	445,788	501,620	29,198	352,126	120,296
	677,290	733,122	260,700	352,126	120,296

The Company has current assets of $2,246,035 to satisfy its financial liabilities to satisfy liabilities as they come due.

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