C-COM Satellite Systems Inc.

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INTERIM CONDENSED FINANCIAL STATEMENTS

SECOND QUARTER FINANCIAL REPORT FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED MAY 31, 2021 AND MAY 31, 2020

PREPARED BY MANAGEMENT (Unaudited)

Notice to Reader

Under National Instrument 51-102, Part 4, subsection 4.3(3) (a), if an auditor has not performed a review of the interim financial statements; they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

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

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INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED MAY 31, 2021 AND MAY 31, 2020 UNAUDITED

Management’s Responsibility for Financial Reporting

Management has established processes, which are in place to provide them sufficient knowledge to support management representations that they have exercised reasonable diligence that (i) the unaudited interim financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by the unaudited interim financial statements and (ii) the unaudited interim financial statements fairly present in all material respects the financial condition, results of operations and cash flows of the Corporation, as of the date of and for the periods presented by the unaudited interim financial statements.

The Board of Directors is responsible for reviewing and approving the unaudited interim financial statements together with other financial information of the Corporation and for ensuring that management fulfills its financial reporting responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the financial reporting process and the unaudited interim financial statements together with other financial information of the Corporation. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the unaudited interim financial statements together with other financial information of the Corporation for issuance to the shareholders.

Management recognizes its responsibility for conducting the Corporation’s affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.

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May 31, 2021

Financial Statements	Page
Interim Condensed Statements of Financial Position - (unaudited)	1
Interim Condensed Statements of Changes in Equity - (unaudited)	2
Interim Condensed Statements of Net Earnings and Comprehensive Income - (unaudited)	3
Interim Condensed Statements of Cash Flows - (unaudited)	4
Notes To The Unaudited Interim Condensed Financial Statements	5

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Unaudited Interim Condensed Statements of Financial Position

As at May 31, 2021 and November 30, 2020 (Canadian dollars)

		May 31, 2021	May 31, 2021	Nov. 30, 2020	Nov. 30, 2020
	Notes		(unaudited)		(audited)
ASSETS
Cash		$	8,332,718	$	6,783,758
Marketable securities			8,129,555		8,074,676
Accounts receivable			526,055		605,651
Non-refundable investment tax credits			76,250		316,698
Inventory			7,679,319		7,328,642
Prepaid expenses			75,561		41,468
Total current assets			24,819,458		23,150,893
Capital assets			68,319		80,092
Application software			6,053		9,944
Total non-current assets			74,372		90,036
TOTAL ASSETS		$	24,893,830	$	23,240,929
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	11	$	545,843	$	825,864
Income tax payable / (recoverable)			61,788		(222,201)
Deferred revenue			32,066		74,267
Total current liabilities			639,697		677,930
NON-CURRENT LIABILITIES
Deferred revenue			-		1,819
Deferred tax liability			74,582		87,722
Other non-current liabilities			125,555		125,555
Total non-current liabilities			200,137		215,096
TOTAL LIABILITIES			839,834		893,026
SHAREHOLDERS' EQUITY
Share capital	9		14,278,877		12,770,526
Contributed surplus			1,176,929		1,229,492
Retained earnings			8,598,190		8,347,885
TOTAL SHAREHOLDERS' EQUITY			24,053,996		22,347,903
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	24,893,830	$	23,240,929

See accompanying notes to the financial statements

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Unaudited Interim Condensed Statements of Changes in Equity

For the six-month period ended May 31, 2021 and May 31, 2020 (Canadian dollars)

Balance December 1, 2020 Net income and comprehensive income Dividends declared Exercised options Stock based compensation expense Reclassification of contributed surplus on exercised options Balance May 31, 2021 Balance December 1, 2019 Net income and comprehensive income Dividends declared Exercised options Stock based compensation expense Reclassification of contributed surplus on exercised options Balance May 31, 2020	Share Contributed Retained Total Capital Surplus Earnings Equity
	12,770,526 $ 1,229,492 $ 8,347,885 $ 22,347,903 $ - - 1,247,378 1,247,378 - - (997,073) (997,073) 1,273,364 - - 1,273,364 - 182,424 - 182,424 234,987 (234,987) - -
	14,278,877 $ 1,176,929 $ 8,598,190 $ 24,053,996 $
	Share Contributed Retained Total Capital Surplus Earnings Equity
	10,302,261 $ 1,640,714 $ 10,364,684 $ 22,307,659 $ - - (653,504) (653,504) - - (951,632) (951,632) 454,049 - - 454,049 - 37,444 - 37,444 117,331 (117,331) - -
	10,873,641 $ 1,560,827 $ 8,759,548 $ 21,194,016 $

See accompanying notes to the financial statements

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Unaudited Interim Condensed Statements of Net Earnings and Comprehensive Income

For the three-month and six-month periods ended May 31, 2021 and May 31, 2020 (Canadian dollars)

		Three Months	Three Months	Ended:		Six Months	Ended:	Ended:
	May 31, 2021		May 31, 2020		May 31, 2021		May 31, 2020
		(unaudited)		(unaudited)		(unaudited)		(unaudited)
REVENUE	$	836,734	$	1,061,665	$	5,556,013	$	2,302,295
COST OF SALES		384,590		465,757		1,954,340		1,041,606
GROSS PROFIT		452,144		595,908		3,601,673		1,260,689
EXPENSES
General and administrative		226,884		733,239		618,936		1,111,601
Research and development		142,399		363,251		435,231		697,780
Sales and marketing		181,111		225,574		489,206		456,921
		550,394		1,322,064		1,543,373		2,266,302
INCOME/(LOSS) BEFORE OTHER INCOME AND INCOME		(98,250)		(726,156)		2,058,300		(1,005,613)
OTHER INCOME
Investment income		19,325		31,375		37,483		113,398
Foreign exchange(loss)/gain		(181,149)		76,628		(181,382)		61,581
		(161,824)		108,003		(143,899)		174,979
INCOME / (LOSS) BEFORE INCOME TAX		(260,074)		(618,153)		1,914,401		(830,634)
INCOME TAX		(40,871)		(151,223)		667,023		(177,130)
NET INCOME/(LOSS) AND COMPREHENSIVE INCOME	$	(219,203)	$	(466,930)	$	1,247,378	$	(653,504)
Basic earnings per share		-$0.01		-$0.01		$0.03		-$0.02
Basic weighted average number of common shares outstanding		40,040,449		38,150,171		40,040,449		38,150,171
Diluted earnings per share		-$0.01		-$0.01		$0.03		-$0.02
Diluted weighted average number of common shares outstanding		42,336,085		40,037,718		42,336,085		40,037,718

See accompanying notes to the financial statements

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Unaudited Interim Condensed Statements of Cash Flows

For the six-month periods ended May 31, 2021 and May 31, 2020 (Canadian dollars)

		Six Months	Ended:	Ended:
	May 31, 2021		May 31, 2020
	(unaudited)		(unaudited)
OPERATING ACTIVITIES
Net income	$	1,247,378	$	(653,504)
Items not affecting cash:
Investment income		(37,483)		(113,398)
Income tax expense		667,023		(177,130)
Scientific research and experimental development tax credit		(119,227)		(118,750)
Amortization		15,664		13,413
Unrealized foreign exchange loss (gain)		668,823		76,627
Stock-based compensation		182,424		37,444
		2,624,602		(935,298)
Changes in non-cash working capital:
Accounts receivable		(299,500)		769,362
Inventory		(350,677)		(758,472)
Prepaid expenses		(34,093)		(30,918)
Accounts payable and accrued liabilities		(801,178)		800,401
Deferred revenue		(44,020)		(36,933)
		(1,529,468)		743,440
Investment income received		8,241		38,891
Income taxpaid		-		(293,639)
Cash flow from/(used in)operatingactivities		1,103,375		(446,606)
INVESTING ACTIVITY
Acquisition of marketable securities		(3,283,340)		(8,542,412)
Disposal of marketable securities		3,228,461		10,357,946
Disposal of capital assets		-		(2,478)
Acquisition of capital assets		-		(6,116)
Cash flow from/(used in)investingactivities		(54,879)		1,806,940
FINANCING ACTIVITY
Dividends paid to owners of Company		(997,073)		(951,632)
Options exercised		1,273,364		454,049
Cash flow from/(used in)financingactivities		276,291		(497,583)
Foreign exchangegain/(loss)on cash		224,173		(55,449)
INCREASE / (DECREASE) IN CASH FLOW		1,548,960		807,302
CASH - beginning ofperiod		6,783,758		5,322,102
CASH - end ofperiod	$	8,332,718	$	6,129,404

See accompanying notes to the financial statements

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NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS For the three-month period ended May 31, 2021 and 2020 (expressed in Canadian dollars)

1. DESCRIPTION OF INCORPORATION AND OPERATIONS

C-COM Satellite Systems Inc. (the “Company”) was federally incorporated under the Canadian Business Corporations Act on December 9, 1997. On July 24, 2000, the Company's stock began trading on TSX Venture Exchange. The Company is engaged in the development of high quality, cost effective, satellite - based technology that allows the delivery of high-speed internet access for fixed, transportable and mobile end-users. The address of its registered office and principal place of business is 2574 Sheffield Road, Ottawa, Ontario K1B 3V7.

These unaudited interim condensed financial statements for the three-month period ended May 31, 2021 were authorized for issuance by the Board of Directors on July 19, 2021.

2. BASIS OF PRESENTATION

These unaudited interim condensed financial statements are expressed in Canadian dollars, which is the Company’s functional currency, and have been prepared in accordance with International Accounting Standard (“IAS”) IAS34 – Interim financial reporting, as issued by the International Accounting Standard Board (“IASB”). These unaudited interim condensed financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (“IFRS”) and in accordance with the accounting policies the Company adopted in its annual financial statements for the year ended November 30, 2020 and should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report for the year ended November 30, 2020. These unaudited interim condensed financial statements do not include all of the information required in annual financial statements.

These unaudited interim condensed financial statements have been prepared on a going concern basis using historical cost conventions.

3. CHANGES IN ACCOUNTING POLICIES

IFRS 16 Leases

In January 2016, the IASB released IFRS 16 Leases which replaced IAS 17 Leases. IFRS 16 set out a single lessee accounting model that requires a lessee to recognize assets and liabilities for all lease agreements unless the underlying asset has a low value or the lease term is twelve months or less. A lessee is required to recognize a right-of-use asset for the underlying leased asset and a lease liability representing the present value of payment obligations for the lease term. IFRS 16 is effective for the Company’s annual periods beginning on December 1, 2019, and then presented on a modified retroactive basis.

The Company assessed the new standard and reviewed its portfolio of lease contracts in order to identify leases under the scope of IFRS 16. The Company’s lease on its premises was renewed for a one-year period. Accordingly, the Company opted for using the standard’s practical expedient method of reporting and does not recognize right-of-use assets that have a lease term of 12 months or less.

The Company has not adopted any new accounting policies during its fiscal year 2021.

There are no other required or contemplated future changes in the Company’s accounting policies.

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NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS For the three-month period ended May 31, 2021 and 2020 (expressed in Canadian dollars)

4. CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES

The preparation of financial statements in conformity with IFRS requires the Company’s management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods presented. Actual results could differ from those estimates.

There were no significant changes in estimates or approaches to determining estimates in the periods presented when compared to the estimates or approaches used in the annual financial statements for the year ended November 30, 2020.

5. IMPACT OF THE COVID-19 PANDEMIC

On March 11, 2020, the World Health Organization declared the Coronavirus COVID-19 outbreak a pandemic. This has resulted in significant financial, market and societal impacts in Canada and around the world.

COVID-19 has caused heightened uncertainty and volatility in the global economy. If economic growth slows further or if a recession develops, customers may not have the financial means to purchase the Company’s products, thereby potentially having a negative impact on the Company’s financial performance. Since the impact of COVID-19 is ongoing, the effect of the COVID19 outbreak and the related impact on the global economy may not be fully reflected in the Company’s financial statements until future periods. Further, volatility in the capital markets may continue, which may cause declines in the price of the Company’s shares and may also affect its ability to raise working capital through equity or debt transactions.

The ultimate duration and magnitude of the COVID-19 pandemic’s impact on the Company’s operations and financial position is not known at this time. An estimate of the financial effect of the pandemic on the Company is not practicable at this time.

6. GOVERNMENT GRANTS

During 2020, the Company commenced a contribution agreement with the National Research Council Canada (NRC) – Industrial Research Assistance Program (IRAP) to reduce the cost of a specific research and development project undertaken in 2020. The Contribution agreement started July 1, 2020 and is to be completed June 30, 2023. NRC-IRAP has agreed to contribute up to a maximum of $423,597 over the period of the agreement with specific maximum contribution amounts allocated to each fiscal year. In Q2, 2021 the Company received $36,185 from NRC (Q2, 2020 – Nil), which was credited to research and development expense. NRC – IRAP reserves the right to claim back all or part of the grant plus interest from the Company under certain circumstances. No repayment has been requested for and no contingent liability has been accrued at year end.

The Company also commenced a non-repayable contribution agreement with the Canadian Space Agency (CSA) in fiscal 2020 to help fund the cost of a specific research and development project. The Contribution agreement started July 10, 2020 and is to be completed by December 31, 2022. The CSA has agreed to contribute up to a maximum of $1,000,000 over the period of the agreement with specific maximum contribution amounts allocated to each fiscal year. The Company applied for $123,833 from the CSA during Q2, 2021, which was credited to research and development expense. No payments were received from the CSA in Q2, 2021 or Q2, 2020.

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NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS For the three-month period ended May 31, 2021 and 2020 (expressed in Canadian dollars)

6. GOVERNMENT GRANTS (CONTINUED)

In addition, the Company applied for the following financial support from the Canadian Government related to COVID-19 relief:

i) The Canadian Emergency Wage Subsidy (“CEWS”) program: during Q2 2021, the Company received and accrued a total of $124,525 ($205,663 in Q2, 2020) in CEWS funding – all of which has been applied to the Company’s General & Administrative and R&D expense categories.
ii) The Canadian Emergency Rent Subsidy (“CERS”) program: during Q2, 2021, the Company received and accrued a total of $32,188 in CERS funding – all of which has been credited to general and administration expenses. No CERS payment amounts were booked in Q2, 2020.

7. SEASONALITY

The results of operations for the interim periods are not necessarily indicative of the results of operations for the full year. The Company’s revenues and earnings have historically been subject to some quarterly seasonality due to the timing of vacation periods and statutory holidays.

8. OPERATING SEGMENT INFORMATION

IFRS 8 “Operating Segments” defines an operating segment as (a) a component of an entity that engages in business activities from it which may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), (b) whose operating results are regularly reviewed by the entity’s chief decision maker to make decisions about resources to be allocated to the segment and to assess its performance and (c) for which discrete financial information is available.

For managements purposes the Company’s activities are attributable to a single operating segment, engaged in the design and manufacture of auto-deploying mobile satellite antennas. Consequently, the group does not present any operating segment information.

Revenue by Geographic area

The location of the customer determines the geographic areas for revenue.

	3 months ended	3 months ended
	May 31, 2021	May 31, 2020
	$	$
Canada	12,463	195,481
United States	203,296	163,290
Australia	118,073	58,193
Russian Federation	116,665	278,124
Europe	106,218	6,193
Saudi Arabia	98,926	113,416
Rest of the World	181,093	246,968
	836,734	1,061,665

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NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS For the three-month period ended May 31, 2021 and 2020 (expressed in Canadian dollars)

8. OPERATING SEGMENT INFORMATION (CONTINUED)

Capital assets

The location of capital assets determines the geographic areas. All capital assets are located in Canada.

Major Customers

For the quarter ended May 31, 2021, the Company had five customers who accounted for more than 10% of revenues, contributing a total of $467,629, or 79% of total revenues (for the quarter ending May 31, 2020 – the Company had four customers who generated more than 10% of revenues with a total of $522,092, or 49.2% of revenues).

9. ISSUED CAPITAL

Stock options

The Company has an established stock option plan, which provides that the Board of Directors may grant stock options to eligible directors, officers and employees. Under the plan, eligible directors, officers and employees are granted the right to purchase shares of common stock at a price established by the Board of Directors on the date the options are granted but in no circumstances below fair market value of the shares at the date of grant. On May 1, 2020, the Company reset the option pool to 20% of the issued and outstanding common shares on that date. Formal approval for the reset was received from the TSXV on May 20, 2020. A total of 7,618,320 common shares were authorized for issuance under the plan, of which 885,870 are available to be granted as at May 31, 2021. No consideration is payable on the grant of an option with options generally vesting after one year from the date of grant.

As at May 31, 2021 there were 4,409,900 options outstanding, of which 3,295,400 were exercisable.

Outstanding share capital

At May 31, 2021 there were 40,394,150 common shares of the Company outstanding. (May 31, 2020 – 38,282,200)

10. NET EARNINGS PER SHARE

The diluted weighted average number of shares has been calculated as follows:

	3 months ended	3 months ended
	May 31, 2021	May 31, 2020
Weighted average number of shares – basic	40,040,449	38,150,171
Addition to reflect the dilutive effect of employee stock options	2,285,636	1,887,547
Weighted average number of shares – diluted	42,326,085	40,037,718

Options that are anti-dilutive because the exercise price was greater than the average market price of the common shares are not included in the computation of diluted earnings per share. For the three-month period ending May 31, 2020, no options were excluded from the above calculation (May 31, 2019 – 737,000 anti-dilutive options were excluded from the above calculation).

Net income represents the measure of profit and loss used to calculated earnings per share.

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NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS For the three-month period ended May 31, 2021 and 2020 (expressed in Canadian dollars)

11. RELATED PARTY TRANSACTIONS AND BALANCES

The Company regards the members of the Board of Directors, the partners of LaBarge Weinstein LLP, and the senior managers and their immediate families of the following entities as related parties: C-COM Satellite Systems Inc., Triton Inc., 718133 Ontario Inc., Rampart International Corp. and Art Slaughter, CPA Professional Corporation.

The Company had the following transactions and balances with related parties during the period:

		3 months ended	3 months ended
		May 31, 2021	May 31, 2020
		$	$
Board of Directors:
Board of Director fees	(i)	24,000	24,000
Transactions with Rampart International Corp.:
Reimbursement of office and other expenses	(ii)	Nil	Nil
Transactions with 718133 Ontario Inc.:
Rental of office and warehouse space	(iii)	93,300	89,947
Transactions with Art Slaughter CPA Pro. Corp.:
Purchase of consulting services	(iv)	16,400	15,556
Transactions with LaBarge Weinstein LLP:
Legal fees and expenses	(v)	14,053	15,643
		As At	As At
		May 31, 2021	May 31, 2020
		$	$
Balances with related parties
Amounts due from Rampart International Corp.		Nil	Nil
Amounts due to 718133 Ontario Inc.		3,204	3,656
Amounts due to Art Slaughter CPA Pro. Corp.		Nil	3,842
Amounts due to LaBarge Weinstein LLP		1,600	1,808

Balances with related parties are due upon demand and included with accounts payable and accrued liabilities.

i. The Board of Directors instituted a Board of Directors fee of $24,000 per annum per board member commencing December 2, 2012 and is paid quarterly.

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NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS For the three-month period ended May 31, 2021 and 2020 (expressed in Canadian dollars)

ii. The Company occupies the same building as Rampart International Corp. From time to time they invoice each other for incidental costs. The sole shareholder of Rampart International Corp. is related to the Chief Executive Officer of C-COM Satellite Systems Inc.
iii. The Company has a 1-year lease commitment with 718133 Ontario Ltd. which ends July 31[st] , 2021 for office and warehouse space. The Company and 718133 Ontario Ltd. have common ownership.
iv. The Company purchases financial consulting services from Art Slaughter CPA Professional Corporation. The Company’s Chief Financial Officer is a director of this company.
v. The Company retains a business law firm in Ottawa, Canada to provide legal services and advice. The Company’s secretary is a partner of this firm.

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C-COM Satellite Systems Inc. — Interim / Quarterly Report 2021

44993_rns_2021-07-20_b04faf60-c470-4d0a-bddd-235de2c85eeb.pdf