BuildDirect.com Technologies Inc. — Interim / Quarterly Report 2021

Nov 18, 2021

BUILDDIRECT.COM TECHNOLOGIES INC.

Condensed Consolidated Interim Financial Statements

For the three and nine months ended September 30, 2021 and 2020

(Expressed in United States dollars)

(Unaudited)

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management. The Company’s independent auditor has not performed a review of these condensed consolidated interim financial statements in accordance with standards established by the CPA Canada for a review of interim financial statements by an entity.

BUILDDIRECT.COM TECHNOLOGIES INC.

Condensed Consolidated Interim Statement of Financial Position (Unaudited)

(Expressed in United States dollars)

	September 30,	December 31,	December 31,
	2021		2020
Assets
Current assets:
Cash and cash equivalents	$ 17,874,738	$	5,416,511
Restricted cash (note 3)	74,921		-
Short-term investments	118,000		118,000
Trade and other receivables (note 4)	3,059,098		2,727,955
Advances to vendors	2,870,902		391,641
Inventories (note 5)	6,204,115		5,446,940
Prepaid materials,expenses and deposits	815,114		994,597
Total current assets	31,016,888		15,095,644
Non-current assets:
Property and equipment (note 6)	544,667		835,921
Intangible assets (note 7)	9,621,692		11,326,135
Right-of-use assets (note 8)	3,376,327		900,834
Non-current advances to vendors	567,279		567,284
Total Assets	$ 45,126,853	$	28,725,818
Liabilities and Shareholders' Equity (Deficiency)
Current liabilities:
Accounts payable and accrued liabilities (note 9)	$ 10,388,872	$	6,834,980
Income taxes payable	1,283,537		-
Current portion of lease liabilities (note 10)	990,640		458,841
Deferred revenue	2,689,351		1,531,960
Loan payable (note 11)	3,810,038		3,927,113
Current portion of promissory note (note 13)	1,715,004		1,145,986
Currentportion of deferred considerationpayable	523,240		602,681
	21,400,682		14,501,561
Non-current liabilities
Deferred consideration payable	1,242,379		1,018,555
Lease liabilities (note 10)	3,370,647		1,476,044
Convertible notes (note 12)	-		12,120,679
Warrants (note 12)	1,517,051		480,321
Promissorynote(note 13)	4,197,089		4,552,670
	10,327,166		19,648,269
Shareholders' equity (deficiency):
Share capital (note 14)	122,959,732		92,459,612
Share based payment reserve	11,645,851		10,395,737
Deficit	(121,206,578)	(108,279,361)
	13,399,005		(5,424,012)
Total Liabilities and Equity	$ 45,126,853	$	28,725,818

Commitments and contingencies (note 18) Subsequent events (note 22)

See accompanying notes to Condensed Consolidated Interim Financial Statements.

Approved on behalf of the Board:

Dan Park

Milan Roy

Director

Director

1

BUILDDIRECT.COM TECHNOLOGIES INC.

Condensed Consolidated Interim Statement of Operations and Comprehensive Loss

(Unaudited)

(Expressed in United States dollars)

	For the three months ended September 30	For the three months ended September 30	For the nine months	ended September 30
	2021	2020	2021	2020
Revenue (note 16)	$ 22,355,658	$ 14,819,622	$ 66,649,723	$ 37,059,011
Cost of goods sold (note 5)	14,216,903	9,337,086	42,372,402	22,840,645
Gross Profit	8,138,755	5,482,536	24,277,321	14,218,366
Operating expenses:
Fulfillment costs	2,374,704	2,395,634	6,855,014	6,382,115
Selling and marketing	2,968,055	1,971,881	8,359,299	5,444,591
Administration	3,609,064	1,566,850	11,151,304	4,884,990
Research and development	472,539	(222,797)	1,298,102	(310,015)
Depreciation and amortization	794,995	168,970	2,746,238	614,420
	10,219,357	5,880,538	30,409,957	17,016,101
Loss from operations	(2,080,602)	(398,002)	(6,132,636)	(2,797,735)
Other income (expense):
Interest income	23,836	36,004	64,106	92,592
Interest expense	(527,408)	(183,823)	(1,829,265)	(591,192)
Finance costs (note 3)	(374,652)	-	(1,444,745)	-
Rental income	61,154	47,700	161,710	357,159
Fair value adjustment of convertible	4,964,539	-	(1,455,090)	-
debt and warrants (note 12)
Foreign exchange gain	98,063	301,735	9,899	382,595
Gain on sublease	-	-	-	129,148
Listing expenses (note 3)	(1,017,659)	-	(1,017,659)	-
	3,227,873	201,616	(5,511,044)	370,302
Income/(loss) before income taxes	1,147,271	(196,386)	(11,643,680)	(2,427,433)
Income tax expense	(474,031)	-	(1,283,537)	-
Net income/(loss) and comprehensive	$ 673,240	$ (196,386)	$ (12,927,217)	$ (2,427,433)
income/(loss)for theperiod
Deficit, beginning of period	$ (121,879,818)	$ (105,951,172)	$ (108,279,361)	$ (103,720,125)
Deficit,end ofperiod	$ (121,206,578)	$ (106,147,558)	$ (121,206,578)	$ (106,147,558)
Loss per share(expressed in $ per
share):
Basic loss per share	0.02	(0.01)	(0.44)	(0.11)
Diluted loss per share	0.02	(0.01)	(0.44)	(0.11)

See accompanying notes to Condensed Consolidated Interim Financial Statements.

2

BUILDDIRECT.COM TECHNOLOGIES INC.

Condensed Consolidated Interim Statement of Changes in Equity (Deficiency) (Unaudited)

(Expressed in United States dollars)

For the nine months ended September 30, 2021 and 2020

	Series 1 AA Number Amount	Series 2 AA Number Amount	Common shares Share based payment Number Amount reserve Deficit Total
Balance – December 31, 2019 Loss and comprehensive loss for the period Share-based compensation expense	65,000,000 $ 50,481,532 - - - -	54,846,926 $ 41,974,552 - - - -	204 $ 28 $ 10,165,655 $ (103,720,125) $ (1,098,358) - - - (2,427,433) (2,427,433) - - 172,561 - 172,561
Balance – September 30, 2020	65,000,000 $ 50,481,532	54,846,926 $ 41,974,552	204 $ 28 $ 10,338,216 $ (106,147,558) $ (3,353,230)
Balance – December 31, 2020 Issuance of share capital (note 14) Impact of reverse acquisition (note 14) Loss and comprehensive loss for the period Share-based payment expense	65,000,000 $ 50,481,532 - - (65,000,000) (50,481,532) - - - -	44,642,845 $ 34,165,332 - - (44,642,845) (34,165,332) - - - -	10,229,285 $ 7,812,748 $ 10,395,737 $ (108,279,361) $ (5,424,012) 7,467,760 30,500,120 - - 30,500,120 11,928,244 84,646,864 - - - - - - (12,927,217) (12,927,217) - 1,250,114 - 1,250,114
Balance – September 30, 2021	- $ -	- $ -	29,625,289 $ 122,959,732 $ 11,645,851 $ (121,206,578) $ 13,399,005

In relation to the reverse acquisition transaction, as described in note 1 and note 3, on August 13, 2021, the shares of BuildDirect were exchanged on a 1:5.393 basis.

See accompanying notes to Condensed Consolidated Interim Financial Statements.

3

BUILDDIRECT.COM TECHNOLOGIES INC.

Condensed Consolidated Interim Statement of Cash Flows (Unaudited) (Expressed in United States dollars)

(Unaudited) (Expressed in United States dollars)
	For the three	months ended	For the nine	months ended
	September 30		September 30
	2021	2020	2021	2020
Cash provided by (used in):
Operating activities:
Net income (loss) for the period	$ 673,240	$ (196,386)	$ (12,927,217)	$ (2,427,433)
Add (deduct) adjustments and items not affecting cash:
Depreciation	794,995	168,970	2,746,238	614,420
Income tax expense	474,031	-	1,283,537	-
Stock-based compensation expense	196,284	57,520	1,250,114	172,561
Other interest and finance cost	428,276	113,271	1,516,191	331,980
Interest on leases	99,132	70,552	313,075	259,212
Interest earned on lease receivables and other	(23,836)	(36,005)	(64,106)	(92,592)
Fair value adjustment on convertible debt and warrants	(4,964,539)	-	1,455,090	-
Finance costs	374,652	-	1,444,745	-
Listing expenses	1,017,659	-	1,017,659	-
Unrealized foreign exchange (gain) loss	(106,672)	86,201	(2,693)	(101,301)
Gain on lease modification	-	-	-	(129,148)
	(1,036,778)	264,123	(1,967,367)	(1,372,301)
Changes in non-cash operating working capital:
Short-term investments	-	-	-	(83,000)
Trade and other receivables	(248,624)	64,327	(496,573)	62,519
Inventories	(362,857)	355,623	(757,175)	(137,978)
Prepaid materials, expenses and deposits	29,693	(108,352)	179,483	1,235,941
Advances to vendors	(1,519,636)	(56,407)	(2,479,256)	347,061
Accounts payable and accrued liabilities	2,193,898	1,394,718	4,081,745	2,158,478
Deferred revenue	(433,406)	(1,945,101)	1,157,391	(678,864)
Total operating activities	(1,377,710)	(31,069)	(281,752)	1,531,856
Investing activities:
Purchase of property and equipment	(26,081)	(98,672)	(54,730)	(105,508)
Principal received on lease receivables	56,384	51,548	165,430	151,241
Interest received	23,836	36,005	64,106	92,592
Cash acquired from reverse acquisition	220,920	-	220,920	-
Total investing activities	275,059	(11,119)	395,726	138,325
Financing activities:
Subscription receipts proceeds	-	-	16,177,383	-
Restricted cash related to subscription receipts	15,032,370	-	(74,921)	-
Subscription receipts issuance costs	(374,652)	-	(1,444,745)	-
Proceeds from exercise of stock options	7,097	-	17,265	-
Principal lease payments	(234,520)	(153,198)	(744,902)	(517,046)
Interest paid	(431,864)	(183,823)	(1,471,445)	(591,192)
Loan repayment	-	-	(114,382)	-
Total financing activities	13,998,431	(337,021)	12,344,253	(1,108,238)
Increase/(Decrease) in cash and cash equivalents	12,895,780	(379,209)	12,458,227	561,943
Cash and cash equivalents, beginning of period	4,978,958	4,398,665	5,416,511	3,457,513
Cash and cash equivalents, end of period	$ 17,874,738	$ 4,019,456	$ 17,874,738	$ 4,019,456

See accompanying notes to Condensed Consolidated Interim Financial Statements.

4

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

1. Nature of business:

BuildDirect was incorporated under the Canada Business Corporations Act (CBCA) on October 20, 1999. BuildDirect is an innovative marketplace for purchasing and selling building materials online. The BuildDirect platform connects homeowners and home improvement professionals in North America with suppliers and sellers of quality building materials from around the world, including flooring, tile, decking and more. The head office of the Company is located in Vancouver British Colombia.

On December 31, 2020, BuildDirect completed the acquisition of 100% of the outstanding shares of Charter Distributing Company (“FloorSource”). FloorSource was incorporated in 1980 and is a wholesale flooring distributor with four locations (distribution centers and showrooms) in the state of Michigan (“MI”). FloorSource provides carpeting, carpet padding, hardwood, vinyl, laminate and flooring supplies to customers such as contractors, project management companies and retailers.

On August 13, 2021, BuildDirect.com Technologies Inc. (“BuildDirect” or the “Company”), VLCTY Capital Inc. (“VLCTY”, a Canadian company previously listed on the TSX Venture Exchange), and a wholly owned subsidiary company (9923896 Canada Inc.) of VLCTY, entered into a threecornered amalgamation agreement with VLCTY changing its name to BuildDirect.com Technologies Inc. The transactions represent a reverse acquisition whereby the Company is considered the acquirer of VLCTY; the resulting financial statements are presented as a continuance of BuildDirect (accounting acquirer), and comparative figures presented in the consolidated financial statements are those of BuildDirect (see Note 3).

2. Significant accounting policies:

• (a) Basis of presentation:

These condensed consolidated interim financial statements, which have been approved by the Board of Directors, have been prepared in accordance with International Accounting Standard 34, lnterim Financial Reporting ("IAS 34"). These condensed consolidated financial statements have been prepared using the same accounting policies as those disclosed in the BuildDirect.com Technologies Inc. annual financial statements as at and for the year ended December 31, 2020. Accordingly, these condensed consolidated interim financial statements do not include all disclosures required for annual financial statements and should be read in conjunction with annual financial statements as at and for the year ended December 31, 2020 (which were prepared in accordance with International Financial Reporting Standards, or "IFRS").

Selected explanatory notes are included in these interim financial statements to explain events and transactions that are significant to an understanding of the changes in the Company’s financial position and performance since the last annual financial statements of BuildDirect.com Technologies Inc.

(b) Use of Judgements, Estimates and Assumptions:

The preparation of these interim financial statements in accordance with IAS 34 requires management to use judgement and make estimates and assumptions that affect the

5

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

2. Significant accounting policies (continued):

• (b) Use of Judgements, Estimates and Assumptions (continued):

application of accounting policies, the reported amounts of assets and liabilities at the date of the interim financial statements, and the reported amounts of revenue and expenses during the reporting periods. The judgements, estimates and associated assumptions are based on historical experience and other factors that management considers to be relevant and are subject to uncertainty. Judgements, estimates, and underlying assumptions are reviewed on an ongoing basis, and revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Actual results could differ from these estimates due to changes in interest rates, foreign exchange rates, inflation, and economic conditions. The areas of significant judgement and estimation were identified in BuildDirect.com Technologies Inc.’s most recent audited consolidated financial statements for the year ended December 31, 2020.

(c) Going Concern:

These consolidated financial statements have been prepared on the basis that the Company is a going concern, which assumes that the Company will continue to realize its assets and discharge its liabilities in the normal course of operations. The Company generated a loss from operations of $2,080,602 and $6,132,636 for the three months and nine months ended September 30, 2021, respectively, and had negative cash flow from operations of $1,377,710 and $281,752 for the three months and nine months ended September 30, 2021, respectively. Management has forecasted its cash flow requirements and believes that it has sufficient cash resources, including the proceeds from the subscription receipts offering, to support operations for at least the next twelve months from September 30, 2021.

The ability of the Company to continue as a going concern is dependent on its ability to achieve positive cash flow from operations, to maintain or obtain additional debt or equity financing and to achieve and maintain profitable operations. These consolidated financial statements do not give effect to any adjustments to the carrying value of recorded assets and liabilities, revenue and expenses, the consolidated statements of financial position classifications used and disclosures that might be necessary should the Company be unable to continue as a going concern.

3. Reverse Acquisition of VLCTY Capital Inc. by BuildDirect.com Technologies Inc.:

On March 19, 2021, the Company entered into a definitive agreement with VLCTY Capital Inc. (“VLCTY”), a public company trading on the TSX Venture Exchange (“TSXV”), whereby the Company would complete a reverse take-over of VLCTY pursuant to which, among other things, VLCTY would acquire all of the issued and outstanding securities of BuildDirect (the “Transaction”) in a share for share exchange.

6

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

3. Reverse Acquisition of VLCTY Capital Inc. by BuildDirect.com Technologies Inc. (continued):

Immediately prior to the completion of the Transaction which took place on August 13, 2021, VLCTY effected: (i) a share consolidation, resulting in an aggregate of approximately 226,091 common shares of VLCTY being issued and outstanding immediately prior to the Transaction; (ii) a name change pursuant to which VLCTY changed its name to "BuildDirect.com Technologies Inc."; and (iii) the adoption of the new equity incentive plan.

Also immediately prior to the completion of the Transaction, the Company effected a consolidation of all of the outstanding BuildDirect common shares and the Class AA preference shares (collectively, the “BuildDirect Shares”) on the basis of 5.393 pre-consolidation BuildDirect Shares to 1 post-consolidation BuildDirect Share, resulting in an aggregate of 22,243,251 BuildDirect common shares being issued and outstanding, and an additional 3,563,072 BuildDirect Shares issued upon concurrent conversion of the convertible notes.

Upon completion of the Transaction, the Company issued replacement options under the new equity incentive plan to the holders of stock options previously issued under BuildDirect employee stock option plans, in exchange for all outstanding BuildDirect Options, exercisable to acquire 2,859,877 shares at exercise prices between USD $0.5393 and $1.94148 per share. The Company also issued replacement warrants for 753,725 common share purchase warrants in the newly amalgamated company (note 12).

Private Placement Subscription Receipts Offering

In connection with the Transaction, on April 30, 2021, BuildDirect obtained funding from a private placement offering (the “Offering”) of 3,487,000 subscription receipts (the “Subscription Receipts”) at an issue price of CDN$5.75 per Subscription Receipt for aggregate gross proceeds of CDN $20,050,250 (USD $16,177,384) and were recorded as a subscription receipts obligation on the consolidated statement of financial position. After deducting the agents’ commission and certain expenses of the offering (“financing costs”) totalling CDN $1,326,273 (USD $1,070,093), the net proceeds of CDN $18,723,977 (USD $15,107,291) were deposited in escrow were recorded as restricted cash on the consolidated statement of financial position and released upon closing of the Transaction. Financing costs of $1,549,804 were expensed in connection with the financing.

The Subscription Receipts were automatically converted into 3,487,000 common shares and 3,487,000 common share purchase warrants of the Company upon completion of the Transaction. Each warrant entitles the holder to purchase one common share of the Company at a price of CDN$6.90 per share at any time up to 24 months from the closing of the Transaction. If prior to the expiry date of the warrant, the daily volume-weighted average trading price of the Company exceeds CDN$8.00 per share for a period of at least 30 consecutive trading days, the Company may accelerate the expiry of the warrant to a date not earlier than the date that is 30 days following the acceleration of the warrant.

Non-Brokered Private Placement Offering

In addition, under the terms of an Exempt Market Dealer Services Agreement, which was finalized immediately prior to the completion of the Transaction on August 13, 2021, BuildDirect obtained funding from a non-brokered private placement offering (the “Non-brokered Offering”) of 90,264 equity units (the “Units”) at an issue price of CDN $5.75 per Unit for aggregate gross proceeds of CDN $519,018 (USD $413,593) which was deposited in escrow. Of the funds deposited into escrow, USD $74,921 has been released to the Company in October 2021, and the remaining balance has been applied against legal fees.

7

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

3. Reverse Acquisition of VLCTY Capital Inc. by BuildDirect.com Technologies Inc. (continued):

The Units automatically converted into 90,264 common shares and 90,264 common share purchase warrants of the Company upon closing of the Transaction. Each warrant entitles the holder to purchase one common share of the Company at a price of CDN $6.90 per share at any time 24 months from the closing of the Transaction. If prior to the expiry date of the warrant, the daily volume-weighted average trading price of the Company exceeds CDN$8.00 for a period of at least 30 consecutive trading days, the Company may accelerate the expiry of the warrant to a date not earlier than the date that is 30 days following the acceleration of the warrant.

Closing of the reverse take-over Transaction

Following receipt of approval by the TSX Venture exchange on August 13, 2021, the Company completed a three-cornered amalgamation under a plan of arrangement under Section 192 of the Canada Business Corporations Act, whereby VLCTY and its wholly-owned subsidiary (9923896 Canada Inc.) amalgamated with BuildDirect to form a newly amalgamated company named BuildDirect.com Technologies Inc. that was subsequently listed on the TSX Venture exchange.

Through the reverse acquisition, VLCTY acquired legal control of BuildDirect by way of share exchange and subsequent amalgamation. However, as the shareholders of BuildDirect gained voting control of VLCTY pursuant the issuance of VLCTY common shares to the shareholders of BuildDirect, BuildDirect is determined to be the accounting acquirer and, consequently, the transaction has been accounted for as a reverse acquisition of VLCTY by BuildDirect. As VLCTY does not meet the definition of a business, the transaction is accounted for as a reverse acquisition of net assets, pursuant to IFRS 2 Share based Payments.

Under reverse acquisitions, the post reverse acquisition comparative historical financial statements of the legal acquirer, VLCTY, are those of the legal acquiree, BuildDirect, which is considered to be the accounting acquirer. These financial statements reflect the balance sheets, the results of operations and the cash flows of BuildDirect and its subsidiaries at their historical carrying amounts, since it is deemed to be the accounting acquirer.

In connection with the reverse acquisition, the following transactions occurred:

• On August 13, 2021, the Company completed a private placement offering of 3,487,000 subscription receipts for gross proceeds of CDN $20,050,250 or USD $15,944,533. Each subscription receipt was exchanged for one underlying share of BuildDirect valued at CDN $5.11 and one underlying warrant of BuildDirect valued at CDN $0.64. The Company issued 3,487,000 shares.

• Pursuant to the Exempt Market Dealer Services Agreement, BuildDirect issued 90,264 shares.

• Holders of common shares and preferred shares in the capital of BuildDirect received one (1) post-consolidated common share for 5.393 pre-consolidated common shares (or preferred shares) in the capital of the Company for each BuildDirect share held immediately before the amalgamation.

• Pursuant to the terms of the convertible notes, immediately following the completion of the Amalgamation and the concurrent financing, the Company issued 3,563,072 common shares in settlement of the convertible notes.

8

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

3. Reverse Acquisition of VLCTY Capital Inc. by BuildDirect.com Technologies Inc. (continued):

The acquisition date fair value of the deemed consideration transferred by the accounting acquirer, BuildDirect for its interest in the accounting acquiree, VLCTY is determined based on the fair value of equity interest that would have been issued by BuildDirect to acquire the same ultimate percentage ownership in the combined entity, if it were the legal parent and acquirer. The deemed consideration of 226,091 shares and 11,305 warrants were determined to have a combined fair value of USD $1,038,855.

At the time of this transaction, VLCTY did not constitute a business as defined under IFRS 3 Business Combination; therefore, the difference between the consideration given to acquire VLCTY and the fair values of the net assets of VLCTY is recorded as a listing expense.

The net assets acquired pursuant to the acquisition are as follows:

Fair value of reverse acquisition consideration	$ 1,038,855
Fair value of assets and liabilities acquired:
Cash	220,920
Accrued liabilities	(94,665)
Net assets acquired	126,255
Consideration in excess of net assets acquired	912,600
Transaction costs	105,059
Listing expense	$1,017,659

4. Trade and other receivables:

	September 30,	December 31,
	2021	2020
Trade receivables	$ 1,956,496	$ 1,537,653
Lease and other receivables	1,072,559	1,167,129
GST / HST Receivable	30,043	23,173
	$ 3,059,098	$ 2,727,955

9

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

5.	Inventories:
	September 30, December 31, 2021 2020
	Building materials $ 5,737,284 $ 5,080,120 Building materials in transit 466,831 366,820
	Total $ 6,204,115 $ 5,446,940

The cost of inventories recognized as cost of goods sold during the three months ended September 30, 2021 was $13,934,871 (2020 - $9,207,945) and $42,182,955 during the nine months ended September 30, 2021 (2020 - $22,958,118).

6. Property and equipment:

	Computer	Office	Office	Leasehold	Total
	equipment	furniture	equipment	improvements
		and fixtures
Cost:
Balance as at January 1, 2020	$665,544	$94,383	$286,209	$1,695,344	$2,741,480
Additions	18,241	-	-	4,174	22,415
Acquisition of FloorSource	-	4,796	17,582	479,719	502,097
Balance as January 1, 2021	683,785	99,179	303,791	2,179,237	3,265,992
Additions	45,972	-	8,758	-	54,730
Disposals	-	-	-	(1,551,447)	(1,551,447)
Balance as at September 30, 2021	$729,757	$99,179	$312,549	$627,790	$1,769,275
Accumulated amortization:
Balance as January 1, 2020	$606,100	$92,719	$275,935	$963,901	$1,938,655
Depreciation	47,226	1,303	5,043	437,844	491,416
Balance as January 1, 2021	653,326	94,022	280,978	1,401,745	2,430,071
Depreciation	14,169	3,958	17,368	310,489	345,984
Disposals	-	-	-	(1,551,447)	(1,551,447)
Balance as at September 30, 2021	$ 667,495	$ 97,980	$ 298,346	$ 160,787	$ 1,224,608
Carrying amounts:
Balance as at December 31, 2020	$ 30,459	$ 5,157	$ 22,813	$ 777,492	$ 835,921
Balance as at September 30, 2021	62,262	1,199	14,203	467,003	544,667

Management regularly assesses property and equipment for impairment indicators and has determined that no impairment is required for the nine months ended September 30, 2021 (2020 - nil).

10

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

7. Intangible assets:

	Computer	Customer List	Total
	software
Cost:
Balance as at January 1, 2020	$ 736,126	$ -	$ 736,126
Additions	83,093	-	83,093
Acquisition of FloorSource	-	11,157,419	11,157,419
Balance as January 1, 2021	819,219	11,157,419	11,976,639
Balance as atSeptember30,2021	$ 819,219	$11,157,419	$11,976,638
Accumulated amortization:
Balance as January 1, 2020	$ 612,488	$ -	$ 612,488
Amortization	38,015	-	38,015
Balance as January 1, 2021	650,503	-	650,503
Amortization	30,830	1,673,613	1,704,443
Balance as atSeptember30,2021	$ 681,333	$1,673,613	$2,354,946
Carrying amounts:
Balance as at December 31, 2020	$ 168,716	$ 11,157,419	$ 11,326,135
Balance as at September 30, 2021	137,886	9,483,806	9,621,692

Management regularly assesses intangible assets for impairment indicators and has determined that no impairment is required for the nine months ended September 30, 2021 (2020 - nil).

11

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements

(Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

8. Right-of-use assets:

Premises	Equipment Total
Cost: Balance as at January 1, 2020 $ 4,492,046 Adjustment from re-assessment of lease term (2,828,326)	$ 65,747 $ 4,557,793 - (2,828,326)
Balance as December 31, 2020 1,663,720 Additions 3,171,304	65,747 1,729,467 - 3,171,304
Balance as at September 30, 2021 $ 4,835,024	$ 65,747 $ 4,900,771
Accumulated amortization: Balance as January 1, 2020 $ 1,384,522 Amortization 532,606 Adjustment from re-assessment of lease term (1,121,332)	$ 20,264 $ 1,404,786 12,573 545,179 - (1,121,332)
Balance as December 31, 2020 795,796 Amortization 686,400	32,837 828,633 9,411 695,811
Balance as at September 30, 2021 $ 1,482,196	$ 42,248 $ 1,524,444
Carrying amounts: Balance as at December 31, 2020 $ 867,924 Balance as at September 30, 2021 3,352,828	$ 32,910 $ 900,834 23,499 3,376,327

Management regularly assesses right-of-use assets for impairment indicators and has determined that no impairment is required for the nine months ended September 30, 2021 (2020 - nil).

9. Accounts payable and accrued liabilities:

	September 30,	December 31,
	2021	2020
Trade accounts payable and accruals	$ 10,274,158	$ 6,745,164
Payroll and health taxes	91,275	89,617
Other payables	23,439	199
	$10,388,872	$ 6,834,980

12

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

10. Leases:

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes. The Company’s lease obligations have effective annual discount rates ranging from 8.25% to 9%.

(a) As a lessee:

Maturity analysis contractual undiscounted cash flows	September 30,	December 31,	December 31,
	2021		2020
Less than one year	$ 1,332,827	$	607,537
One to fiveyears	3,778,604		1,641,411
Total undiscounted lease liabilitiesperiod end	$ 5,111,431	$	2,248,948
Lease liabilities included in the consolidated statement
of financial position as at period end	$ 4,361,287	$	1,934,885
Current lease liabilities	(990,640)		(458,841)
Non-current lease liabilities	$ 3,370,647	$	1,476,044

During the nine months ended September 30, 2021 the Company entered into four leases for warehouse premises located in Michigan, USA for a period of 5 years, with an option to renew the lease for a further period of 5 years after that date.

	September 30,	December 31,
	2021	2020
Beginning of period	$ 1,934,885	$ 4,604,669
Leases added in the year	3,171,304	-
Principal lease payments	(744,902)	(689,048)
Lease modifications	-	(1,980,736)
Balance end of period	$ 4,361,287	$ 1,934,885

The associated right-of-use assets for the four new leases for warehouse premises located in Michigan are initially measured at the amount of the lease liability, of $3,171,304 (note 8).

In the nine months ended September 30, 2020, the Company did not exercise the renewal option on one of its leases and exercised an early termination lease option for another lease. These actions resulted in a reduction of $978,756 to the lease liability and a derecognition of $849,608 to the right of use assets, creating a gain of $129,148 in the consolidated statement of operations.

==> picture [418 x 57] intentionally omitted <==

13

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

10. Leases (continued):

• (a) As a lessee (continued):

The following amounts relate to the leases recognized on the consolidated statement of operations:

	For the three	months ended	For the nine	months ended
	September 30		September 30
	2021	2020	2021	2020
Interest on lease liabilities	$ 99,132	$ 70,552	$ 313,075	$ 259,212
Income from subleasing right-of-use
assets	(134,938)	(125,216)	(385,244)	(626,362)
	$ (35,806)	$ (54,664)	$ (72,169)	$ (367,150)

(b) As a lessor:

The Company has two subleases for an office and warehouse. The office lease is for a term of 6 years and the warehouse lease is for a term of 1 year, both without extension options.

• (i) Finance lease:

The Company classified the office lease as a finance lease, as it transfers substantially all the risks and rewards of the head lease to the sub-lessee. During the three months ended September 30, 2021, the Company recognized interest income of $17,401 on the finance lease (2020 - $22,237) and $55,925 during the nine months ended September 30, 2021 (2020 - $70,113).

The following table sets out the maturity analysis of lease receivables to be received after the reporting date:

	September 30,	September 30,	December 31,	December 31,
		2021		2020
Less than one year	$	295,139	$	295,139
One to two years		295,139		295,139
Two to three years		270,544		295,139
Three to four years		-		196,758
Total remainingafter 4years	$	-	$	-
Total undiscounted lease receivables	$	860,822	$	1,082,175
Unearned finance income		100,526		156,450
Total net investment in the lease	$	760,296	$	925,725

• (ii) Operating lease:

The Company classified the warehouse lease as an operating lease, as the risks and rewards of the head lease do not transfer to the sub-lessee.

14

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

11. Loan payable:

	September 30,	December 31,
	2021	2020
Secured note	$ 3,810,038	$ 3,927,113

The secured note has a principal amount of USD $3,810,038 (CDN $5,000,000) and bears interest at 12% per annum and in the event of default, the interest rate will be amended to 15% per annum. Interest is payable on the first anniversary of the agreement, and subsequently every quarter. The note has a maturity date of June 30, 2022. The note is secured by all property, assets, and rights of the Company, excluding property, assets, and rights of FloorSource. Covenants include, but are not limited to, making timely payments per the agreement, allowing the note holders access to financial records, maintaining appropriate insurance and accounting records including completing the audit of the consolidated financial statements within 120 days after the end of each fiscal year, complying with all material laws and regulations, filing and paying taxes as due. Since the Company did not complete the audited financial statements within 120 day period after the end of fiscal year ended December 2019 and 2020, the covenant was breached and as such the secured loan is classified as a current liability as at December 31, 2020.

12. Convertible notes and warrants:

(a) Convertible notes:

	September 30,	September 30,	December 31,	December 31,
		2021		2020
Beginning of period	$	12,120,679	$	-
Issuance of convertible notes		-		12,120,679
Change in fair value		4,251,116		-
Accrued interest		649,515		-
Conversion to common shares	(15,126,764)			-
Conversion to warrants		(1,894,546)		-
Balance end ofperiod	$	-	$	12,120,679

Pursuant to a Note Purchase Agreement dated December 31, 2020, the Company issued secured convertible notes to investors in the aggregate principal amount of $12,601,000. The secured convertible notes bear interest at 8% compounded monthly and had a maturity date of December 2023, upon which the principal and all interest would be due. Issued together with the convertible notes were 4,064,838 warrants entitling the investors to purchase one common share per warrant at an exercise price of $0.784, with an expiry date 10 years from the date of the issuance.

15

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

12. Convertible notes and warrants (continued):

(a) Convertible notes (continued):

The December 31, 2020, fair value of $12,120,679 was determined by the Company using a lattice valuation approach with a binomial tree. Under this valuation approach, a share price lattice was constructed according to a volatility of a group of comparable companies range of 60-62%, riskfree rate range of 0.22 to 0.26%, estimated fair value of the Company’s common shares of $0.64 and a credit spread of 15% as at December 31, 2020.

The convertible notes, and accrued interest at 8% compounded monthly, were converted to common shares and warrants upon closing of the reverse takeover Transaction. Each common share and warrant was then immediately exchanged for one common share and one warrant exercisable at CDN$6.90 per share, in the newly amalgamated entity.

The change in fair value of the convertible notes for the period to the August 13, 2021 conversion resulted in a loss of $4,251,116 being recorded in the statement of operations. The fair value at the time of conversion of $17,021,310 was allocated $15,126,764 as the value attributable to the 3,563,072 common shares issued, and $1,894,546 attributable to the 3,563,072 warrants issued.

(b) Warrants:

Warrants:
	Nine	months ended		Year ended
	September 30, 2021		December 31, 2020
	Number	Amount	Number	Amount
Beginning of year	4,064,838	$ 480,321	-	$ -
Warrants issued with convertible notes	-	-	4,064,838	480,321
Change in fair value to the reverse
acquisition date	-	2,010,000	-	-
Cancellation of warrants in relation to
reverse acquisition	(4,064,838)	(2,490,321)	-	-
Replacement warrants issued	753,725	2,490,321	-	-
Issuance of warrants on conversion of
convertible notes	3,563,072	1,894,546	-	-
Issuance of warrants pursuant to the
Subscription Receipt Financing	3,487,000	1,786,895	-	-
Issuance of warrants pursuant to the
Unit Financing	90,264	46,255	-	-
Issuance of Compensation Warrants	193,710	99,266	-	-
Issuance of warrants for deemed
consideration	11,305	5,794	-	-
Change in fair value subsequent to the
reverse acquisition	-	(4,806,026)	-	-
Endingbalance	8,099,076	$1,517,051	4,064,838	$480,321

16

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

12. Convertible notes and warrants (continued):

• (b) Warrants (continued):

The following table summarizes the outstanding common share purchase warrants at September 30, 2021:

Issuance date	Exercise price	Expiry date	Outstanding	Carrying
			warrants	amount
December 30, 2020	CDN $4.23	December 2031	753,725	$ 802,175
August 13, 2021	CDN $6.90	April 2023	7,140,336	694,923
August 13, 2021	CDN $5.75	April 2023	193,710	18,853
August 13, 2021	CDN $2.65	April 2023	11,305	1,100
			8,099,076	$1,517,051

The December 30, 2020 warrants are also convertible on a cashless basis, where the holder may exchange each warrant for the difference between the market price of the shares on the exercise date and the exercise price, and this value will be distributed into common shares at the conversion price of CDN $4.2281. As the terms of the warrants can result in conversion for a variable number of shares, the warrants are accounted for as financial liabilities and are carried at ‘fair value through profit and loss’ for accounting purposes.

In connection with the reverse acquisition, additional warrants were issued as follows:

• Warrants exercisable to acquire 3,577,264 common shares issued in connection with the subscription receipt financing, and the non-brokered unit financing (see note 3). Each warrant entitles the holder to purchase one common share of the Company at a price of CDN$6.90 per share at any time up to 24 months from the closing of the Transaction. If prior to the expiry date of the warrant, the daily volume- weighted average trading price of the Company exceeds CDN $8.00 per share for a period of at least 30 consecutive trading days, the Company may accelerate the expiry of the warrant to a date not earlier than the date that is 30 days following the acceleration of the warrant. the unit financing, and the warrants issued in connection with the convertible notes) at exercise of CDN $6.90 per share.

• Warrants exercisable to acquire 3,563,072 common shares issued in connection with the convertible notes. Each warrant entitles the holder to purchase one common share of the Company at a price of CDN $6.90 per share at any time up to 24 months from the closing of the Transaction. If prior to the expiry date of the warrant, the daily volume- weighted average trading price of the Company exceeds CDN $8.00 per share for a period of at least 30 consecutive trading days, the Company may accelerate the expiry of the warrant to a date not earlier than the date that is 30 days following the acceleration of the warrant. the unit financing, and the warrants issued in connection with the convertible notes) at exercise prices of CDN $6.90 per share.

• Warrants exercisable to acquire 11,305 Resulting Issuer Common Shares (in respect of the VLCTY Broker Options) at exercise price of CDN $2.6538 per share

17

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

12. Convertible notes and warrants (continued):

• (b) Warrants (continued):

• Warrants exercisable to acquire 193,710 Resulting Issuer Common Shares at an exercise price of CDN $5.75 per share (in respect of the Replacement Compensation Warrants).

Certain warrants issued by the Company have an exercise price denominated in Canadian dollars, whereas the functional currency of the Company is the U.S. dollar, and therefore these warrants are required to be accounted for as a derivative liability at fair value through profit and loss.

The fair value of the warrants, which are carried at fair value through profit and loss was determined using Black Scholes model with the following assumptions:

Replacement warrants in connection with convertible notes Warrants in connection with subscription receipt financing Warrants in connection with convertible notes Warrants in connection with VLCTY Broker Options Warrants in connection with Replacement Compensation	Replacement warrants in connection with convertible notes Warrants in connection with subscription receipt financing Warrants in connection with convertible notes Warrants in connection with VLCTY Broker Options Warrants in connection with Replacement Compensation	Replacement warrants in connection with convertible notes Warrants in connection with subscription receipt financing Warrants in connection with convertible notes Warrants in connection with VLCTY Broker Options Warrants in connection with Replacement Compensation	Replacement warrants in connection with convertible notes Warrants in connection with subscription receipt financing Warrants in connection with convertible notes Warrants in connection with VLCTY Broker Options Warrants in connection with Replacement Compensation	Replacement warrants in connection with convertible notes Warrants in connection with subscription receipt financing Warrants in connection with convertible notes Warrants in connection with VLCTY Broker Options Warrants in connection with Replacement Compensation
Exercise price (per share)	CDN $4.2281	CDN $6.90	CDN $2.6538	CDN $5.75
Time to maturity (in years)	9.25	1.58
Volatility	52-54%	61%
Risk-free rate	0.90-0.95%	0.46%
Value of common shares at September 30, 2021	2.45

13. Promissory note:

	September 30,	December 31,
	2021	2020
Secured promissory note	$ 5,912,093	$ 5,698,656

The promissory note, which has a principal amount of $6,225,000, was issued as part of the consideration for the acquisition of FloorSource. The promissory note bears interest at a rate of 5% compounded annually and is payable quarterly commencing on April 1, 2021. The Company is required to make a principal payment of $1,245,000 on December 31, 2021 and thereafter on the first day of each calendar quarter, in equal installments of $311,250. The promissory note was initially recorded at its estimated fair value using a risk adjusted effective discount rate of 12.0%. The initial discount from the principal amount of the note is being accreted over the life of the note using the effective interest method as a charge to interest expense. Interest accrued for the three months ended September 30, 2021 was $124,143 (2020: nil) and $369,284 for the nine months ended September 30, 2021 (2020: nil). Interest payments of $77,922 have been made in the three months ended and $155,848 in the nine months ended September 30, 2021 (2020: nil).

18

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

14. Shareholders’ equity:

• (a) Share Capital

Authorized:

Unlimited common shares, without par value

Unlimited preference shares, without nominal or par value

The following changes in share capital occurred in the current year:

The following changes in share capital	occurred in the current year:	occurred in the current year:
	Nine months ended September30,2021 Year ended December31,2020
	Number	Amount Number Amount
Series 1 AA preference shares: Beginning of year Cancelled in relation to reverse acquisition (note 3)	65,000,000 (65,000,000)	$ 50,481,532 65,000,000 $ 50,481,532 (50,481,532) - -
Endingbalance	-	$ - 65,000,000 $ 50,481,532
Series 2 AA preference shares: Beginning of year Conversion to common shares Cancelled in relation to reverse acquisition (note 3)	44,642,845 - (44,642,845)	$ 34,165,332 54,846,926 $ 41,974,552 - (10,204,081) (7,809,220) (34,165,332) - -
Endingbalance	-	$ - 44,642,845 $ 34,165,332
Common shares: Beginning of year 10,229,285 Exercise of stock options, prior to the reverse acquisition 85,722 Transferred from preference shares - Cancelled in relation to reverse acquisition (note 3) (10,315,007) Replacement shares for common shares (note 3) 1,912,666 Replacement shares for preference shares (note 3) 20,330,585 Issuance of common shares to VLCTY (note 3) 226,091 Issuance of common shares for convertible debt (note 3) 3,563,072 Issuance of common shares for subscription receipt (note 3) 3,577,264 Exercise of stock options, after the Transaction 15,611		$ 7,812,748 204 $ 28 10,168 25,000 3,500 - 10,204,081 7,809,220 (7,822,916) - - 7,822,916 - - 84,646,864 - - 1,038,855 15,126,763 - - 14,317,237 - - 7,097 - -
Endingbalance 29,625,289		$ 122,959,732 10,229,285 $ 7,812,748
Total amount of common and preference shares 29,625,289		$ 122,959,732 119,872,130 $ 92,459,612

During the year, employees exercised stock options for 85,722 common shares prior to the Transaction (note 3). On August 13, 2021, in connection with the Transaction, all preferred shares and common shares of BuildDirect were cancelled and replaced in the newly amalgamated company at a conversion of 1:5.393 (note 3). Immediately prior to the completion of the Transaction, 226,091 common shares were issued to VLCTY (note 3). In connection with the Transaction, there was an additional 3,563,072 common shares issued upon conversion of the convertible note, as well as 3,577,264 common shares issued upon conversion of the subscription receipts (note 3). After the transaction had closed, there was an additional 15,611 common shares issued to employees for exercising stock options.

19

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

14. Shareholders’ equity (continued):

• (a) Share Capital (continued)

On December 31, 2020, in accordance with the Articles of the Company, a total of 10,204,081 Class AA preferred shares were converted into 10,204,081 common shares at the option of the holder of Class AA and were approved by the Board.

(b) Share based payments:

Since July 2018, the Company has an incentive stock option plan under which up to a total 17,908,161 options can be issued. Stock options vest over a four-year period. 25% of a grant vests on the first anniversary, and the remaining 75% vests over 36 months, subsequent to the first 25% vesting.

The following summarizes stock option activity for the nine months ended September 30,2021 and the year ended December 31, 2020:

			2021			2020
		Weighted			Weighted
			average			average
			exercise			exercise
	Number		price	Number		price
Options to purchase common shares:
Outstanding, beginning of year	12,289,462	$	0.12	14,107,323	$	0.12
Granted to employees	3,133,891		0.36	2,001,552		0.10
Cancelled in connection with the
reverse acquisition(1) Replacement options granted(1)	(15,423,353) 2,859,877		0.16 0.89	(3,794,413) -		0.12 -
Exercised	(15,613)		0.60	(25,000)		0.14
Cancelled or forfeited	(9,154)		0.80	-		-
Granted to VLCTY employees	22,608		2.12	-		-
Outstanding, end ofyear	2,857,718		$0.90	12,289,462		$0.12

• (1) In connection with the reverse acquisition (note 3), all of the stock options under the original plan in BuildDirect were cancelled and replacement options were granted in the new amalgamated company on a 1:5.393 basis.

20

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

14. Shareholders’ equity (continued):

• (b) Share based payments (continued)

The following table summarizes information concerning outstanding and exercisable options at September 30, 2021 and December 31, 2020 respectively:

				Weighted
		Weighted average		average
		remaining		remaining
	Outstanding	contractual life	Options	contractual life
Exercise price (USD)	options	(years)	exercisable	(years)
$ 0.54	979,297	8.32	369,445	8.30
$ 0.76	1,214,613	6.97	966,380	6.97
$ 1.94	641,200	9.53	-	9.53
$ 2.12	22,608	0.87	-	0.87
$ 0.90	2,857,718	7.93	1,335,825	7.93
				Weighted
		Weighted average		average
		remaining		remaining
	Outstanding	contractual life	Options	contractual life
Exercise price ($USD)	options	(years)	exercisable	(years)
$ 0.10	5,550,046	9.13	1,171,561	8.62
$ 0.14	6,739,416	7.10	4,140,974	6.88
$ 0.12	12,289,462	8.02	5,312,535	7.26

The 2020 values are shown prior to the consolidation with the reverse acquisition (note 3).

15. Income tax:

The Company and its subsidiaries, with the exception of FloorSource, are loss making entities and have no income tax payable. In addition, no deferred tax assets have been recognized by the Company, because it is not probable that future taxable profits will allow the deferred tax asset to be recovered. FloorSource, which was acquired by the Company on December 31, 2020, operates as a separate legal entity in the state of Michigan in the United States. As such, FloorSource is a separate taxable legal entity with no ability to utilize tax losses from other subsidiaries of the Company. The tax amount of $474,031 reflects the effective tax rate of 27% for the operations of FloorSource in the three months period ended September 30, 2021. The tax amount for the nine months ended September 30, 2021 is $1,283,537.

21

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

16. Revenue:

Revenues from external customers are split into five main streams. The first is Product revenue where customers can purchase goods in store and online through the Company’s website. Service revenue is made up of four streams of revenue, MarketPlace, Freight, Warehouse and Installation revenue. MarketPlace revenue is commission earned on products sold by third parties on the Company’s website. Freight revenue is the amount collected for the freight shipping and handling of products, either ones sold on the Company’s website, or for third parties requiring the logistics services. Warehouse revenue is earned for the storage of third-party inventory. Installation revenue is the amount charged to customers for installation services. All five streams of revenue are recognized, when customer obtains control of the good or service.

The Company recognizes the Product, Freight, Warehouse and Installation revenue on a gross basis, whereas the MarketPlace Revenue commission is recorded net of the cash received and remitted to the third-party seller.

As all payments for items purchased through the Product, Freight and MarketPlace streams are paid for at the time of order, deferred revenue is recorded for the period of time between when the order is placed and when the order has been delivered at the customer's chosen destination.

	For the three months ended	September 30	For the nine months ended	September 30
	2021	2020	2021	2020
Product revenue	$ 20,901,578	$ 13,283,640	$ 62,152,562	$ 33,225,833
Service revenue:
MarketPlace	-	35,527	-	88,880
Freight	560,741	1,203,442	2,061,982	2,958,592
Warehouse	71,321	297,013	391,398	785,706
Installation	822,018	-	2,043,781	-
	$ 22,355,658	$ 14,819,622	$ 66,649,723	$ 37,059,011

22

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

17. Segment information:

The Company’s Chief Operating Decision-Maker (CODM), which consists of the Executive Leadership Team (“ELT”), regularly assesses the performance of, and makes resource allocation decisions based on, the Company as a whole. Consequent to the acquisition of FloorSource on December 31, 2020, the CODM reviews FloorSource as a separate operating business distinct from the operations of BuildDirect. As a result, the Company has determined that it comprises two operating segments, BuildDirect and FloorSource, and therefore both reportable segments are broken out below. In presenting the following information, segment revenue has been based on the geographic location of customers and non-current assets have been based on the geographic location of the assets.

(a) Revenue:

Please see a breakdown of the revenue by geographical region:

	For the three months	For the three months	ended	For the nine months	For the nine months	ended
	September	30		September	30
	2021		2020	2021		2020
BuildDirect:
United States	$ 12,508,407	$	14,776,048	$ 38,862,270	$	36,936,020
Canada	75,233		43,574	309,122		107,797
Other	-		-	44,422		15,194
FloorSource:
United States	9,772,018		-	27,433,909		-
	$ 22,355,658	$	14,819,622	$ 66,649,723	$	37,059,011

(b) Non-current assets:

Please see the breakdown of non-current assets by geographical region:

	September 30,	December 31,
	2021	2021
BuildDirect:
Canada	$ 962,153	$ 1,473,042
United States	497,616	497,616
FloorSource:
United States	12,650,196	11,659,516
	$ 14,109,965	$ 13,630,174

23

BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

18. Commitments and contingencies:

• (a) Claims are made against the Company in the ordinary course of operations. The Company has made provisions for such claims, when necessary.

• (b) The Company issues letters of guarantee through its financial institution to provide guarantees for duty on cross-border shipments. Outstanding letters of guarantee amount to $318,000 (2020 - $200,000).

19. Financial risk management:

The Company’s operations expose it to a variety of financial risks including liquidity risk, market risk and credit risk.

(a) Liquidity risk:

Liquidity risk is the risk that the Company will be unable to fulfill its obligations on a timely basis or at a reasonable cost. The Company manages its liquidity risk by monitoring its operating requirements and through ongoing review of working capital balances and management of cash. The Company prepares budget and cash forecasts to ensure it has sufficient funds to fulfill its obligations. The ability to fund operating requirements depends on future operating performance and cash flows, which are subject to economic, financial, competitive, and other factors, some of which are beyond our control, such as the potential impact of COVID-19. For the three months ended September 30, 2021 there is net income of $673,240 generated, however for the nine months ended September 30, 2021 there is a net loss of $12,927,217 (2020 – net loss of $196,386 and $2,427,433, respectively). There is negative cash flow from operations of $1,377,710 and $281,752 for the three and nine months ended September 30, 2021, respectively (2020 –$31,069 and positive cash flow of $1,531,856, respectively). Due to the increase in working capital from $594,083 at December 31, 2020 to $9,616,206 at September 30, 2021, and current cash balance of $17,874,738 at September 30, 2021, the Company believes there are adequate resources available to fund operations and obligations.

The following table summarizes the amount of contractual undiscounted future cash flows for the Company’s financial liabilities, including interest as at September 30, 2021:

	2021		2022		2023		2024		2025	Total
Accounts payable and
accrued liabilities	$ 10,388,873	$	-	$	-	$	-	$	-	$ 10,388,873
Income tax payable-	1,283,537		-		-		-		-	1,283,537
Promissory note	1,323,782		1,475,402		1,414,225	1,352,060			1,289,249	6,854,718
Loan payable	115,322		4,039,614							4,154,936
Deferred consideration
payable	675,000		675,000		675,000		-		-	2,025,000
Lease liabilities	1,332,827		1,332,119		1,305,806		944,656		196,023	5,111,431
	$15,119,341		$7,522,135	$	3,395,031	$2,296,716		$	1,485,272	$29,818,495

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BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

19. Financial risk management (continued):

• (b) Market risk:

• (i) Currency risk:

Currency risk reflects the risk that the Company’s earnings will decline due to fluctuations in exchange rates.

The Company has cash and cash equivalents denominated in Canadian dollars. As at September 30, 2021, the amount totaled $7,948,867 (2020 - $262,742).

The Company has accounts payable and accrued liabilities denominated in Canadian dollars. As at September 30, 2021, the amount totaled $1,836,692 (2020 - $2,017,433).

The Company holds a loan payable in Canadian dollars. As at September 30, 2021, the amount totaled $3,810,038 (2020 – $3,927,113).

If the period-end foreign exchange rate of Canadian dollar has been 10% higher, or 10% lower, with all other variables held constant, the effect on the Company’s foreign exchange for the nine months ended September 30, 2021 would have been $209,285 (2020 - $516,528) higher or lower.

• (ii) Interest risk:

Interest Risk is the risk that the fair value or cash flows from a financial instrument will fluctuate due to a change in market interest rates. The Company does not hold any variable rate long-term debt thus is not subject to significant changes in the future cash flows due to interest rate risk. The interest rate risk on cash and short-term investments is considered insignificant due to the low interest rates in the current economic environment and shortterm nature of its holdings and as such the Company does not take any actions to manage interest rate risk.

• (c) Credit risk:

Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a financial loss. The Company, in its normal course of business, evaluates the financial condition of its customers on a regular basis, in addition to assessing the loss allowance under the ECL model. In addition, the Company requires a majority of its customers to prepay for orders before shipment can be made. Therefore, the Company has determined there is no significant exposure to customer credit risk.

• (d) Capital management:

The Company’s objective when managing its capital structure is to maintain a strong financial position and to provide returns with sufficient liquidity to undertake further growth for the benefit of its shareholders. The Company’s capital is comprised of long-term obligations and equity as outlines below:

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BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

19. Financial risk management (continued):

	September 30,	September 30,	December 31,	December 31,
		2021		2020
External debt	$	9,722,131	$	23,848,005
Less cash		(17,874,738)		(5,416,511)
Net external debt		(8,152,607)		18,431,494
Total shareholders’ deficiency		(13,399,005)		(5,424,012)
Total capitalization	$	5,246,398	$	13,007,482

There were no changes to the Company’s approach to capital management during the period. The Company is subject to certain covenants (none of which are financial covenants) on its debt obligations. The Company’s strategy is to ensure it remains in compliance with all its existing covenants so as to ensure continuous access to required debt to fund growth. Management reviews results and forecasts to monitor the Company’s compliance.

(e) Fair value hierarchy:

• Level 1: The fair value of financial instruments traded in active markets and based on quoted market prices at the end of the reporting period.

• Level 2 The fair value of financial instruments that are not traded in an active market and determined using valuation techniques using observable market data and rely little on entity-specific estimates If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

• Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3 (i.e. unlisted equity securities).

The Company’s cash, trade and other receivables, short-term investments, accounts payable and accrued liabilities, and lease liabilities are classified as measured at amortized cost. The carrying amounts of these instruments approximate fair value as at September 30, 2021 and September 30, 2020. The fair value of the secured convertible notes, warrants, promissory note and deferred consideration are described below and the basis of their valuation are explained in the respective notes There have been no transfers between levels in the current year. There have been no transfers between levels in the current period.

	Level 1	Level 2	Level 3
Warrants (note 11)	-	-	(1,517,051)
Promissory note (note 12)	-	(5,912,093)	-
Deferred consideration payable	-	-	(1,765,619)

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BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

20. Breakdown of expenses by nature:

	For the three months ended	For the three months ended		For the nine months ended	For the nine months ended
	September 30			September 30
	2021	2020		2021	2020
Building materials and consumables	$ 16,591,607	$ 11,732,720	$ 49,227,416		$ 29,222,760
Employee costs	2,873,791	1,451,040		8,564,445	4,376,321
Marketing and promotion	1,939,222	1,282,644		5,175,316	3,566,213
Professional services	1,153,636	453,502		3,012,450	1,449,543
Depreciation and amortization	794,995	168,970		2,746,238	614,420
Share-based compensation expense	196,284	57,520		1,250,114	172,560
Rent and other	886,735	71,228		2,806,380	454,929
	$ 24,436,260	$ 15,217,624	$	72,782,359	$ 39,856,746

21. Earnings (loss) per Share:

Earnings (loss) per share represents income (loss) from the period divided by the weighted average number of common and preference shares outstanding during the period. The weighted average number of shares is as follows:

number of shares is as follows:
	September 30,	September 30,
	2021	2020
Beginning balance, shares outstanding	119,940,415	119,847,130
Effect of share issuances	7,399,475	-
Effect of reverse acquisition	(97,714,601)	(97,624,410)
Weighted average number of shares	29,625,289	22,222,720

Diluted earnings (loss) per share is calculated by dividing the applicable income (loss) by the sum of the weighted average number of shares outstanding and all additional common shares that would have been outstanding if potentially dilutive shares had been issued during the period. The diluted weighted average number of shares are as follows:

	September 30,	September 30,
	2021	2020
Weighted average number of shares (basic)	29,625,289	22,222,720
Dilutive effect of convertible notes	-	-
Dilutive effect of warrants	-	-
Dilutive effect of stock options	2,835,110	-
Weighted average number of shares (diluted)	32,460,399	22,222,720

Earnings (loss) per share and diluted earnings (loss) per share are as follows:

	For the three	months ended	For the nine months ended
	September 30		September 30
	2021	2020	2021 2020
Income/(Loss) for the period	$ 673,240	$ (196,386)	$ (12,927,217) $ (2,427,433)
Basic weighted average number of shares	29,625,289	22,222,720	29,625,289 22,222,720
Basic earnings (loss) per share	0.02	(0.01)	(0.44) (0.11)
Diluted weighted average number of shares	32,460,399	22,222,720	29,625,289 22,222,720
Diluted earnings (loss) per share	0.02	(0.01)	(0.44) (0.11)

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BUILDDIRECT.COM TECHNOLOGIES INC.

Notes to Condensed Consolidated Interim Financial Statements (Unaudited) (Expressed in United States dollars)

For the three and nine months ended September 30, 2021 and 2020

22. Subsequent events:

Acquisitions

O n November 17, 2021, the Company announced the closing of an agreement to acquire 100% of the fully diluted outstanding capital stock of Superb Flooring & Design LLC (“Superb” or the “Acquisition”), an established brand name serving Pro builder customers (home builders, condominium developers, commercial and residential contractors, interior designers, architects, and multi-family property managers) across the U.S. mid-West. Pursuant to the Purchase Agreement, BuildDirect paid Superb an aggregate purchase price of USD $10 million, comprising

• An initial payment in cash on closing of the Acquisition;

• Certain deferred payments following the closing date of the Acquisition, a portion of which is subject to Superb’s achievement of certain performance metrics.

The purchase price is also subject to customary post-closing working capital adjustments.

Departure of CEO

On October 15, the Company announced that due to personal reasons, Chief Executive Officer ("CEO"), Dan Park, will transition to Chair of the Board effective December 31, 2021 and that seasoned executives Peg Hunter and Henry Lees-Buckley have been appointed to its Board of Directors, effective immediately.

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