Haivision Systems Inc. — Interim / Quarterly Report 2021

Jun 9, 2021

Unaudited interim condensed consolidated financial statements of Haivision Systems Inc.

The accompanying unaudited interim condensed consolidated financial statements for the three-month and six-month periods ended April 30, 2021 and 2020, have been prepared by management in accordance with International Financial Reporting Standards and approved by the Board of Directors of Haivision Systems Inc. (the “Company”). These unaudited interim condensed consolidated financial statements have not been reviewed by the Company’s independent auditor.

Unaudited interim condensed consolidated statements of financial position .... 1 Unaudited interim condensed consolidated statements of income and comprehensive income ............................................................................ 2 Unaudited interim condensed consolidated statements of changes in equity ... 3 Unaudited interim condensed consolidated statements of cash flows ............. 4 Notes to the unaudited interim condensed consolidated financial statements ........................................................................... 5‒22

Haivision Systems Inc.

Unaudited interim condensed consolidated statements of financial position As at April 30, 2021 and October 31, 2020 (Unaudited – In Canadian dollars)

Notes Assets Current assets Cash Trade and other receivables 6 Investment tax credits receivable Inventories 7 Prepaid expenses Non-current assets Property and equipment Right-of-use assets 8 Intangible assets Goodwill Non-refundable investment tax credits receivable Deferred income taxes Liabilities Current liabilities Trade and other payables 10 Income taxes payable Current portion of lease liabilities 8 Deferred revenue Current portion of term loan 11 Non-current liabilities Lease liabilities 8 Deferred revenue Term loan 11 Contingencies 19 Equity Share capital 12 Stock option reserve (Deficit) retained earnings Cumulative translation adjustment	April 30, 2021 October 31, 2020
	$ $ 47,639,257 15,715,523 14,265,894 12,763,405 2,275,000 2,275,000 4,348,782 5,987,792 1,946,672 907,686
	70,475,605 37,649,406
	877,289 897,585 3,299,644 3,183,740 2,006,955 2,283,093 13,805,141 14,745,140 2,653,988 3,861,220 1,600,233 147,148
	24,243,250 25,117,926
	94,718,855 62,767,332
	7,139,365 12,891,764 2,209,181 2,483,716 533,039 570,499 8,320,545 8,102,232 1,865,784 1,180,124
	20,067,914 25,228,335 3,204,303 3,075,194 1,704,303 1,641,292 1,758,291 2,748,688
	26,734,811 32,693,509
	71,096,268 20,933,848 1,068,275 — (5,067,224 ) 7,313,251 886,725 1,826,724
	67,984,044 30,073,823
	94,718,855 62,767,332

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

Approved by the Board

/s/ Neil Hindle, Director

/s/ Miroslav Wicha, Director

Page 1

Haivision Systems Inc. Unaudited interim condensed consolidated statements of income and comprehensive income

Three-month and six-month periods ended April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

Notes Revenue 13 Cost of sales Gross profit Expenses Sales and marketing Operations and support Research and development General and administrative Shared-based payments Operating profit (loss) Financial expenses 15 Income (loss) before income taxes Income taxes Current Deferred Net income (loss) Other comprehensive income (loss) Foreign currency translation adjustment Comprehensive income (loss) Net income per share 12 Net income (loss) per share (basic and diluted) Weighted average number of common shares outstanding Basic Diluted	Three-month period ended April 30,	Six-month period ended April 30,
	2021 2020	2021 2020
	$ $ 21,850,741 21,228,722 4,788,317 4,806,063	$ $ 44,836,216 40,641,775 10,221,266 9,442,082
	17,062,424 16,422,659	34,614,950 31,199,693
	4,840,957 4,735,144 1,169,714 1,307,065 4,359,505 4,944,120 3,514,217 2,064,275 744,929 —	9,952,016 9,926,166 2,488,445 2,645,200 9,238,744 10,386,616 6,621,263 4,628,637 15,193,516 —
	14,629,322 13,050,604	43,493,984 27,586,619
	2,433,102 3,372,055 79,066 88,977	(8,879,034 ) 3,613,074 188,302 190,214
	2,354,036 3,283,078	(9,067,336 ) 3,422,860
	1,116,579 1,184,139 — (267,301)	1,780,959 1,442,857 — (270,641)
	1,116,579 916,838	1,780,959 1,172,216
	1,237,457 2,366,240 (450,435 ) 630,609	(10,848,295 ) 2,250,644 (939,999 ) 682,477
	787,022 2,996,849	(11,788,294 ) 2,933,121
	0.05 0.15 26,632,340 15,402,688 27,344,467 15,402,688	(0.46 ) 0.15 23,809,782 15,408,613 23,809,782 15,408,613

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

Page 2

Haivision Systems Inc.

Unaudited interim condensed consolidated statements of changes in equity Six-month periods ended April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

Notes Balance, October 31, 2019 Other comprehensive income Net income Repurchase of Class “A”, Class “B”, Class “C” and Class “D” shares Balance, April 30, 2020 Balance, October 31, 2020 Other comprehensive loss Net loss Issue of common shares 12 Issuance costs 12 Share-based payments 12 Exercise of stock options 12 Shareholder distribution 12 Balance, April 30, 2021	Shares outstanding Share capital Stock option reserve Cumulative translation adjustment Retained earnings (deficit) Total equity
	# $ $ $ $ $ 15,414,410 21,099,570 — 1,682,949 1,578,813 24,361,332 — — — 682,477 — 682,477 — — — — 2,250,644 2,250,644 (866 ) (227,968 ) — — — (227,968 )
	15,413,544 20,871,602 — 2,365,426 3,829,457 27,066,485
	15,340,800 20,933,848 — 1,826,724 7,313,251 30,073,823
	— — — (939,999 ) — (939,999 )
	— — — — (10,848,295 ) (10,848,295 )
	5,750,000 34,500,000 — — — 34,500,000
	— (3,315,616 ) — — — (3,315,616 )
	— — 15,193,516 — — 15,193,516
	5,521,219 18,978,036 (14,125,241 ) — — 4,852,795
	— — — — (1,532,180 ) (1,532,180 )
	26,612,019 71,096,268 1,068,275 886,725 (5,067,224 ) 67,984,044

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

Page 3

Haivision Systems Inc. Unaudited interim condensed consolidated statements of cash flows Six-month period ended April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

Notes Operating activities Net (loss) income Items not affecting cash Depreciation of property and equipment Amortization of right-of-use assets Amortization of intangible assets Share-based payments 12 Unrealized foreign exchange loss Current income tax expense Financial expenses 15 Non-refundable investment tax credits receivable Deferred income tax recovery Net changes in non-cash operating working capital items 16 Interest paid Income taxes paid Investing activities Additions to property and equipment Financing activities Payment of lease liabilities 8 Repayment of term loan Proceeds from issuance of common shares 12 Issuance costs 12 Proceeds from exercise of stock options 12 Shareholder distribution 12 Repurchase of Class “A”, Class “B”, Class “C” and Class “D” shares Effect of foreign exchange (loss) gain on cash Net increase in cash Cash, beginning of period Cash, end of period	April 30, 2021 April 30, 2020
	$ $ (10,848,295 ) 2,250,644 229,623 319,381 357,331 344,615 276,138 208,882 15,193,516 — 433,223 121,917 1,780,959 1,442,857 188,302 190,214 1,207,232 (232,312 ) — (270,641)
	8,818,029 4,375,557 (6,373,540 ) (1,064,620 ) (56,642 ) (43,541 ) (2,055,494 ) (846,174)
	332,353 2,421,222
	(209,327 ) (276,785)
	(401,798 ) (434,091 ) — (811,417 ) 34,500,000 — (4,515,616 ) — 4,852,795 — (1,532,180 ) — — (227,968)
	32,903,201 (1,473,476)
	(1,102,493 ) 112,387
	31,923,734 783,348 15,715,523 2,516,863
	47,639,257 3,300,211

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

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

1. Statutes of incorporation and nature of activities

Haivision Systems Inc. (“Haivision” or, collectively with its subsidiaries, the “Company”) was incorporated under the Canada Business Corporations Act on April 26, 2004. Its registered head office is located at 2600 Boulevard Alfred Nobel, Montréal, Québec, Canada H4S 0A9. The Company produces and provides end-to-end video streaming solutions for encoding, recording, managing, publishing and distributing secure video content.

The Board of Directors approved the unaudited interim condensed consolidated financial statements for the three-month and six-month periods ended April 30, 2021 and 2020, and authorized their publication on June 9, 2021.

The unaudited interim condensed consolidated financial statements are presented in Canadian dollars, which is the Company’s presentation currency, and are rounded to the nearest dollar.

2. Accounting policies

Statement of compliance

The unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting , effective as at and for the three-month and six-month periods ended April 30, 2021.

Certain information and disclosures have been omitted or condensed. The same accounting policies and methods of computation were followed in the preparation of these unaudited interim condensed consolidated financial statements as were followed in the preparation of the most recent annual audited consolidated financial statements. There are no other material changes to the Company’s significant accounting policies during the three-month and six-month periods ended April 30, 2021, as compared to the significant accounting policies described in the Company’s annual consolidated financial statements for the year ended October 31, 2020, except for those described in Note 4. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended October 31, 2020.

Principles governing the preparation of the unaudited interim condensed consolidated financial statements

The accounting policies set out below have been applied consistently to all periods presented in these unaudited interim condensed consolidated financial statements unless otherwise indicated.

These unaudited interim condensed consolidated financial statements include all of the assets, liabilities, equity, revenue, expenses, and cash flows of Haivision.

Basis of measurement

The unaudited interim condensed consolidated financial statements have been prepared on a historical cost basis unless otherwise noted in these unaudited interim condensed consolidated financial statements.

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

2. Accounting policies (continued)

Functional and presentation currency

The functional currency of the parent company and all its subsidiaries is the U.S. dollar, which is the primary economic environment in which the entities operate.

In preparing the unaudited interim condensed consolidated financial statements, revenue, expenses and non-monetary assets and liabilities denominated in foreign currencies, are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are retranslated at the rates prevailing at that date. The exchange differences arising on the translation are recognized in the unaudited interim condensed consolidated statements of income and comprehensive income.

Translation to presentation currency

The Company uses the Canadian dollar as its presentation currency to provide more relevant information to its users.

The unaudited interim condensed consolidated financial statements of the Company are translated from their functional currency to the Canadian dollar, which is the presentation currency. Assets and liabilities are translated at the closing exchange rates prevailing at the financial position date, and revenue and expenses are translated using the average exchange rates. The accumulated gains or losses arising from translation of functional currencies to the presentation currency are included as a separate component of other comprehensive income (“OCI”).

Basis of consolidation

The unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Haivision Network Video Inc., Haivision Network Video GmbH and Lightflow Media Technologies S.L.

Subsidiaries are fully consolidated from the date of acquisition or formation, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases. Control of an entity occurs when the Company has power over the investee, is exposed to, or has rights to variable returns from its involvement in the entity, and has the ability to affect those returns through its power over the entity. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intracompany balances, revenue and expenses, unrealized gains and losses and dividends resulting from intracompany transactions are eliminated in full during consolidation.

Share-based payments

The Company grants equity incentives to directors, officers and employees of the Company, that are settled by the issuance of common shares. The Company establishes compensation expenses for those grants based on the fair value at the grant date. The corresponding amount is disclosed in Note 12 – Share capital.

The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates.

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

2. Accounting policies (continued)

Earnings per share

Basic earnings per share is calculated by dividing net income by the basic weighted average number of outstanding common shares.

Diluted earnings per share is computed similarly but reflects the potential dilution that would occur if dilutive options were exercised. The Company has granted stock options that are potentially dilutive securities. Diluted loss per share excludes all dilutive potential shares if their effect is anti-dilutive. All outstanding stock options could potentially dilute earnings per share in the future.

3. Critical accounting judgments, estimates and assumptions in applying the Company’s accounting policies

Preparing financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, revenue and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances. These estimates and assumptions have formed the basis for making judgments about the carrying values of assets and liabilities, where these are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are periodically reviewed. Any change to accounting estimates is recognized in the period in which the estimate is revised. In preparing these unaudited interim condensed consolidated financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of information were the same as those applied to the annual audited consolidated financial statements for the year ended October 31, 2020.

COVID-19

On March 11, 2020, the World Health Organization characterized the outbreak of a strain of the novel coronavirus (“COVID-19”) as a pandemic, which has resulted in a series of public health and emergency measures that have been put in place to combat the spread of the virus. To date, the Company has not experienced any adverse impact to its financial performance and cash flows. The duration and impact of COVID-19 are unknown at this time and it is not possible to reliably estimate the impact that the length and severity of these developments will have on the financial results and the condition of the Company in future periods.

4. Standards, interpretations and amendments adopted in the consolidated financial statements

Amendment to IFRS 16, COVID ‐ 19 ‐ Related Rent Concessions

In May 2020, the IASB issued an amendment to permit lessees, as a practical expedient, not to assess whether particular rent concessions that reduce lease payments occurring as a direct ‐ consequence of the COVID 19 pandemic are lease modifications and instead to account for those rent concessions as if they are not lease modifications. The amendment is effective for annual reporting periods beginning on or after June 1, 2020, with earlier application permitted. The Company has adopted this standard on November 1, 2020, and has determined that there will be no impact on its financial statements.

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

4. Standards, interpretations and amendments adopted in the consolidated financial statements (continued)

Amendments to IFRS 3, Definition of a Business

The amendments clarify that while businesses usually have outputs, outputs are not required for an integrated set of activities and assets to qualify as a business. To be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.

Additional guidance is provided that helps to determine whether a substantive process has been acquired.

The amendments introduce an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. Under the optional concentration test, the acquired set of activities and assets is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets.

The amendments are applied prospectively to all business combinations and asset acquisitions for which the acquisition date is on or after the first annual reporting period beginning on or after January 1, 2020, with early application permitted. The Company has adopted this standard on November 1, 2020, and has determined that there will be no impact on its financial statements.

Amendments to IAS 1 and IAS 8, Definition of Material

The amendments are intended to make the definition of material in IAS 1 easier to understand and are not intended to alter the underlying concept of materiality in IFRS standards. The concept of “obscuring” material information with immaterial information has been included as part of the new definition.

The threshold for materiality influencing users has been changed from “could influence” to “could reasonably be expected to influence”.

The definition of material in IAS 8 has been replaced by a reference to the definition of material in IAS 1. In addition, the IASB amended other standards and the Conceptual Framework that contain a definition of material or refer to the term “material” to ensure consistency.

The amendments are applied prospectively for annual periods beginning on or after January 1, 2020, with earlier application permitted. The Company has adopted this standard on November 1, 2020, and has determined that there will be no impact on its financial statements.

Amendments to References to the Conceptual Framework in IFRS Standards

Together with the revised Conceptual Framework , which became effective upon publication on March 29, 2018, the IASB has also issued Amendments to References to the Conceptual Framework in IFRS Standards . The document contains amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32.

Not all amendments, however, update those pronouncements with regard to references to and quotes from the framework so that they refer to the revised Conceptual Framework . Some pronouncements are only updated to indicate which version of the framework they are referencing (the IASC Framework adopted by the IASB in 2001, the IASB Framework of 2010, or the new revised Framework of 2018) or to indicate that definitions in the standard have not been updated with the new definitions developed in the revised Conceptual Framework .

The amendments, where they actually are updates, are effective for annual periods beginning on or after January 1, 2020, with early application permitted. The Company has adopted this standard on November 1, 2020, and has determined that there will be no impact on its financial statements.

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

5. Accounting policy developments and standards, interpretations and amendments to published standards that are issued but not yet effective

The following revised standards are effective for annual periods beginning on or after January 1, 2021, and have not been adopted in the current period, but may affect the accounting for future transactions or arrangements:

Amendments to IFRS 9, IAS 39 and IFRS 7, Interest Rate Benchmark Reform

In September 2019, the IASB amended some of its requirements to address the uncertainty arising from the phasing out of interest rate benchmarks such as interbank offered rates (“IBORS”). The amendments issued focused on the accounting effects of uncertainty in the period leading up to the reform. The IASB is also working on the potential consequences to financial reporting of replacing an existing benchmark with an alternative. The amendments impact IFRS 9, Financial Instruments , IAS 39, Financial Instruments: Recognition and Measurement , and IFRS 7, Financial Instruments: Disclosures . The amendments come into effect for annual periods beginning on or after January 1, 2020, subject to European Union endorsement. In August 2020, the IASB published Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) with amendments that address issues that might affect financial reporting after the reform of an interest rate benchmark, including its replacement with alternative benchmark rates. The amendments are effective for annual periods beginning on or after January 1, 2021, with earlier application permitted. The Company has evaluated the impact of this standard and determined that there will be no impact on its financial statements upon adoption.

Amendments to IFRS 3, Reference to the Conceptual Framework

The amendments update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework. They also add to IFRS 3 a requirement that, for obligations within the scope of IAS 37, an acquirer applies IAS 37 to determine whether at the acquisition date a present obligation exists as a result of past events. For a levy that would be within the scope of IFRIC 21, Levies , the acquirer applies IFRIC 21 to determine whether the obligating event that gives rise to a liability to pay the levy has occurred by the acquisition date. Finally, the amendments add an explicit statement that an acquirer does not recognize contingent assets acquired in a business combination. The amendments are effective for business combinations for which the date of acquisition is on or after the beginning of the first annual period beginning on or after January 1, 2022. Early application is permitted if an entity also applies all other updated references (published together with the updated Conceptual Framework ) at the same time or earlier. The Company has evaluated the impact of this standard and determined that there will be no impact on its financial statements upon adoption.

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

5. Accounting policy developments and standards, interpretations and amendments to published standards that are issued but not yet effective (continued)

Amendments to IAS 16, Property, Plant and Equipment—Proceeds before Intended Use

The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced before that asset is available for use, i.e., proceeds while bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Consequently, an entity recognizes such sales proceeds and related costs in profit or loss. The entity measures the cost of those items in accordance with IAS 2, Inventories . The amendments also clarify the meaning of ‘testing whether an asset is functioning properly’. IAS 16 now specifies this as assessing whether the technical and physical performance of the asset is such that it is capable of being used in the production or supply of goods or services, for rental to others, or for administrative purposes. If not presented separately in the statement of comprehensive income, the financial statements shall disclose the amounts of proceeds and cost included in profit or loss that relate to items produced that are not an output of the entity’s ordinary activities, and which line item(s) in the statement of comprehensive income include(s) such proceeds and cost. The amendments are applied retrospectively, but only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after the beginning of the earliest period presented in the financial statements in which the entity first applies the amendments. The entity shall recognize the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of that earliest period presented. The amendments are effective for annual periods beginning on or after January 1, 2022, with early application permitted. The Company has evaluated the impact of this standard and determined that there will be no impact on its financial statements upon adoption.

Amendments to IAS 37, Onerous Contracts – Cost of Fulfilling a Contract

The amendments specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract consist of both the incremental costs of fulfilling that contract (examples would be direct labour or materials) and an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).

The amendments apply to contracts for which the entity has not yet fulfilled all its obligations at the beginning of the annual reporting period in which the entity first applies the amendments. Comparatives are not restated. Instead, the entity shall recognize the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings or other component of equity, as appropriate, at the date of initial application. The amendments are effective for annual periods beginning on or after January 1, 2022, with early application permitted. The Company has evaluated the impact of this standard and determined that there will be no impact on its financial statements upon adoption.

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

6. Trade and other receivables

The components of trade and other receivables are as follows:

Current Past due less than 30 days Past due less than 60 days Past due less than 90 days Past due over 90 days Trade receivables (before allowance for expected credit losses) Allowance for expected credit losses Trade and other receivables (net of allowance for expected credit losses) Allowance for expected credit losses Balance, beginning of period Bad debt expense Balance, end of period	April 30, 2021 October 31, 2020
	$ $ 11,492,274 8,792,242 1,691,875 2,091,525 532,550 601,206 119,540 489,509 831,753 1,142,629
	14,667,992 13,117,111 402,098 353,706
	14,265,894 12,763,405
	353,706 207,920 48,392 145,786
	402,098 353,706

7. Inventories

Inventories
Finished goods Provision for obsolescence	April 30, 2021 October 31, 2020
	$ $ 7,768,782 9,227,792 (3,420,000 ) (3,240,000)
	4,348,782 5,987,792

The amount of inventory recognized in cost of sales during the six-month period ended April 30, 2021, was $7,567,430 ($7,081,207 in 2020).

The following table shows the continuity of the provision for obsolescence deducted from inventories:

Balance, beginning of period Increase in provision for obsolescence Write-down of inventories Balance, end of period	April 30, 2021 October 31, 2020
	$ $ 3,240,000 2,670,000 286,680 760,671 (106,680 ) (190,671)
	3,420,000 3,240,000

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

8. Leases

The Company’s leases consist of office spaces.

Right-of-use assets

April 30, 2021 October 31, 2020 $ $ Net carrying amount Balance, beginning of period 3,183,740 3,850,389 Amortization expense (357,331 ) (699,490 ) Additions 487,307 — Foreign exchange (14,072 ) 32,841 Balance, end of period 3,299,644 3,183,740 Amounts recognized in the unaudited interim condensed consolidated statements of income and comprehensive income Three-month period ended April 30, Six-month period ended April 30, 2021 2020 2021 2020 $ $ $ $ Interest accrued on lease liabilities 66,863 72,703 131,660 146,673 Expenses related to short-term leases and variable lease payments 171,051 160,879 364,669 334,257 Information on cash flows April 30, 2021 April 30, 2020 $ $ Total cash outflow for leases 766,467 768,348	April 30, 2021 October 31, 2020 $ $ Net carrying amount Balance, beginning of period 3,183,740 3,850,389 Amortization expense (357,331 ) (699,490 ) Additions 487,307 — Foreign exchange (14,072 ) 32,841 Balance, end of period 3,299,644 3,183,740 Amounts recognized in the unaudited interim condensed consolidated statements of income and comprehensive income Three-month period ended April 30, Six-month period ended April 30, 2021 2020 2021 2020 $ $ $ $ Interest accrued on lease liabilities 66,863 72,703 131,660 146,673 Expenses related to short-term leases and variable lease payments 171,051 160,879 364,669 334,257 Information on cash flows April 30, 2021 April 30, 2020 $ $ Total cash outflow for leases 766,467 768,348	April 30, 2021 October 31, 2020	April 30, 2021 October 31, 2020
		$ $ 3,183,740 3,850,389 (357,331 ) (699,490 ) 487,307 — (14,072 ) 32,841
		3,299,644 3,183,740
	2021 2020		2021 2020
	$ $ 66,863 72,703 171,051 160,879		$ $ 131,660 146,673 364,669 334,257
		$ $ 766,467 768,348

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

8. Leases (continued)

Lease liabilities

The changes to the lease liabilities during the period ended April 30, 2021 and October 31, 2020, are as follows:

Balance, beginning of period Interest accretion expense Payment of lease liabilities Additions Foreign exchange Balance, end of period Current portion	April 30, 2021 October 31, 2020
	$ $ 3,645,693 4,199,614 131,660 282,242 (401,798 ) (870,319 ) 487,307 — (125,520 ) 34,156
	3,737,342 3,645,693 533,039 570,499
	3,204,303 3,075,194

As at April 30, 2021, and as at October 31, 2020, under the terms of the operating lease contracts for premises, the Company committed to make the following payments:

Maturity schedule – contractual undiscounted cash flows Less than one year One to five years More than five years Total undiscounted liabilities	April 30, 2021 October 31, 2020
	$ $ 834,952 810,228 3,149,385 2,739,344 1,051,215 1,226,417
	5,035,552 4,775,989

9.

Credit facility

The Company has a secured operating line of credit with a financial institution, which provides for advances of up to a maximum of $12,285,000 (US$10,000,000), bearing interest at the greater of the financial institution’s prime rate plus 1.65% and 4.25% and limited to the Company’s eligible accounts receivable, tax credits receivable and inventories. Eligible accounts receivable are measured as 80.00% of receivables. Eligible tax credits receivable are measured as 80.00% of filed tax credits receivable and 50.00% of accrued tax credits receivable. Eligible inventories are measured as 50.00% of inventories up to a maximum of $3,071,250 (US$2,500,000). The facility is collateralized by a first-ranking pledge on all of the Company’s present and future tangible and intangible assets.

As at April 30, 2021, the amount outstanding under the above credit facility was nil (nil as at October 31, 2020). The remaining amount available under this credit facility as at April 30, 2021, was $12,285,000 (US$10,000,000); $12,780,000 (US$10,000,000) as at October 31, 2020. The credit facility is subject to the maintenance of the following financial covenants:

• Minimum trailing six-month EBITDA of $500,000 at the end of each fiscal quarter to April 30, 2021, and $750,000 thereafter to October 31, 2021.

• Minimum liquidity ratio of 1.30:1.00.

As at April 30, 2021, the Company was in compliance with its covenants.

The referenced prime rate as at April 30, 2021, was 3.25% (3.25% as at October 31, 2020).

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Haivision Systems Inc.

Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

10. Trade and other payables

Trade and other payables
Trade Payroll-related accruals Other accrued liabilities	April 30, 2021 October 31, 2020
	$ $ 3,959,106 5,501,397 3,098,656 7,247,662 81,603 142,705
	7,139,365 12,891,764

11. Term loan

Term loan
Term loan, bearing interest at 1.00%, principal payable by monthly instalments of $222,666 (US$181,250) commencing on October 7, 2021(1) Term loan, bearing interest at the greater of the financial institution’s prime rate plus 2.25% and 5.00%, principal payable by monthly instalments of $51,188 (US$41,667) commencing on November 30, 2021(2) Current portion	April 30, 2021 October 31, 2020
	$ $ 1,781,325 1,931,112 1,842,750 1,997,700 3,624,075 3,928,812 1,865,784 1,180,124
	1,758,291 2,748,688

• (1) The loan was made under the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) and forgiveness of the principal of the term loan is available if the proceeds of the term loan are used for the limited purposes that qualify for forgiveness under SBA requirements.

• (2) Under the terms and conditions of the term loan, the Company must maintain certain financial covenants, which are the same as the covenants for the credit facility described in Note 9. As at April 30, 2021, the Company was in compliance with its covenants. The referenced prime rate as at April 30, 2021, was 3.25% (3.25% as at October 31, 2020).

Principal payments required in each of the forthcoming years are as follows:

2021 2022 2023 2024	CAN$ US$
	222,666 181,250 2,172,909 1,768,750 614,250 500,000 614,250 500,000

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

12. Share capital

April 30, 2021 – Authorized, unlimited number

Common shares, voting and participating Preferred shares, non-voting and participating

October 31, 2020 – Authorized, unlimited number

Class “A” common shares, voting and participating

Class “B” common shares, non-voting and participating Class “C” common shares, voting and participating

Class “D” common shares, non-voting and participating Class “E” common shares, voting and participating

Issued

Nil Class “A” shares (3,740,680 as at October 31, 2020) Nil Class “B” shares (1,486,480 as at October 31, 2020) Nil Class “C” shares (2,422,330 as at October 31, 2020) Nil Class “D” shares (4,316,470 as at October 31, 2020) Nil Class “E” shares (3,374,840 as at October 31, 2020) 26,612,019 common shares (nil as at October 31, 2020) Share issuance costs, net of deferred income taxes of $1,200,000

April 30,	April 30,	October 31,
2021		2020
$		$
—		2,955,593
—		2,140,219
—		5,477,109
—		9,680,783
—		680,144
74,411,884		—
(3,315,616	)	—
71,096,268		20,933,848

All comparative numbers of shares have been adjusted on the basis of the 85:1 share split described below.

In April 2020, the Company repurchased for cancellation 307 Class “C” shares and 559 Class “D” shares for a total cash consideration of $227,968. The stated capital of the Class “C” shares has been reduced by $59,100, the Class “D” shares by $106,622 being the carrying amount of the shares, and the excess of $62,246 has been charged to deficit.

On December 4, 2020, the Board of Directors approved the filing of a prospectus with the securities regulatory authorities in each of the provinces of Canada in connection with an IPO of common shares in the capital of the Company (the Offering). On December 16, 2020, the Company completed the Offering, which consisted of an offering of 5,000,000 common shares issued from the treasury by the Company, for aggregate proceeds of $30,000,000. On December 18, 2020, the underwriters exercised their over-allotment in full, which consisted of an offering of 750,000 common shares issued from the treasury by the Company, for aggregate proceeds of $4,500,000. Immediately prior to the completion of the Offering, the Company completed the following transactions:

• The holders of Class “A” shares and Class “B” shares received a distribution from the Company of $1,532,180 as described below;

• All outstanding Class “A” shares, Class “B” shares, Class “C” shares, Class “D” shares and Class “E” shares were split on the basis of 85 post-split shares for each pre-split share;

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

12. Share capital (continued)

Issued (continued)

• The authorized share capital was amended such that it is comprised of an unlimited number of common shares and an unlimited number of preferred shares, issuable in series;

• All Class “A” shares, Class “B” shares, Class “C” shares, Class “D” shares and Class “E” shares were exchanged for one common share, which resulted in the issuance of 20,862,019 common shares; and

• Class “A” shares, Class “B” shares, Class “C” shares, Class “D” shares and Class “E” shares included in authorized share capital were deleted from the articles of incorporation.

As a condition of a previous equity issuance, the Company entered into an agreement with certain shareholders. Under this agreement, upon a change of control or an initial public offering (the “Qualified Transaction”), these shareholders were entitled to a distribution in the amount of $1,532,180.

Share-based compensation plan

Immediately prior to the completion of the Offering, options to acquire Class “B” shares or Class “D” shares were exercised on a cash or cashless basis, which resulted in the issuance of an aggregate of 5,521,219 post-split common shares for aggregate proceeds of $4,852,795. The share-based compensation plan then ceased to exist and was replaced by a new equity incentive plan on December 16, 2020.

No share-based payments expense was recorded in prior years as the options only became exercisable upon the occurrence of a liquidity event such as an initial public offering or a change of control. As a result of the completion of the Offering, during the six-month period ended April 30, 2021, the cumulative fair values of the options to acquire Class “B” and Class “D” shares in the amount of $14,125,241 were recorded as a share-based payments expense.

A summary of the changes in the old plan’s position for the six-month period ended April 30, 2021 and the year ended October 31, 2020, is presented below:

Outstanding, beginning of period Granted Forfeited Exercised Outstanding, end of period		April 30, 2021	October 31,2020
	Class “B”	Class “D”	Class “B” Class “D”
	Number of options Weighted average exercise price per share	Number of options Weighted average exercise price per share	Number of options Weighted average exercise price per share Number of options Weighted average exercise price per share
	# $	# $	# $ # $ 30,180 147.28 58,767 223.69 4,050 236.00 400 263.00 (982 ) 137.91 (650 ) 171.60 — — — —
	33,248 161.65	58,517 224.54
	— —	— —
	— —	— —
	(33,248 ) 161.65	(58,517 ) 224.54
	— —	— —	33,248 161.65 58,517 224.54

On December 16, 2020, the Company established a new Equity Incentive Plan (the “Plan”) for purposes of advancing the interests of Haivision Systems Inc. and its shareholders by incentivizing the Company’s executive officers, directors, employees and consultants to strive for continued and improved services and reward excellent performance. The aggregate number of share-based awards reserved for issuance under the Plan shall be 15% of the issued and outstanding common shares at any time.

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

12. Share capital (continued)

Stock Option Plan

As part of the Plan introduced on December 16, 2020, a Stock Option Plan (the “Option Plan”) was introduced. Under this Option Plan, which is administered by the Company’s Board of Directors, the recipients are awarded stock options to acquire common shares.

Unless otherwise determined by the Board at the time of the grant, each stock option shall be exercisable until the tenth anniversary of the date on which it was granted. One third of the options granted shall vest on the first anniversary of the date of grant and the remaining two thirds shall vest annually over two years, totalling a three-year vesting period.

During the six-month period ended April 30, 2021, the Company granted a total of 1,311,000 stock options to employees, executive officers and eligible participants at a weighted average exercise price of $6.93 per share and expiring ten years after the grant date, of which 348,500 were granted to executive officers.

A summary of the Option Plan’s position for the six-month period ended April 30, 2021, is presented below:

Outstanding, beginning of period Granted Forfeited Exercised Outstanding, end of period	Options
	Number of options Weighted average exercise price per share
	# $
	— —
	1,311,000 6.93
	— —
	— —
	1,311,000 6.93

The Company applies the fair value method of accounting for share-based compensation awards granted. Fair value is calculated based on a Black-Scholes option pricing model. The principal components of the pricing model for the six-month period ended April 30, 2021, are as follows:

Weighted average risk-free interest rate Weighted average expected life of options Expected dividend yield Expected volatility Expected forfeiture rate	April 30, 2021
	0.88%
	5 years
	—
	38.00%
	2.72%

The share-based payments expense recorded for the options granted during the six-month period ended April 30, 2021, amounted to $572,415 (nil in 2020).

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

12. Share capital (continued)

Restricted Share Units Plan

As part of the Plan introduced on December 16, 2020, a Restricted Share Units Plan (the “RSU Plan”) was introduced. Under the RSU Plan, which is administered by the Company’s Board of Directors, the recipients are awarded restricted share units (“RSU”) to acquire common shares.

RSUs granted to a participant will entitle the participant, subject to the satisfaction of any conditions attached to the grant, to receive a payment in fully paid common shares.

During the six-month period ended April 30, 2021, the Company granted a total of 350,042 RSUs to executive officers and senior management. The Company applies the fair value method of accounting for share-based compensation awards granted. Fair value is determined at the grant date and is valued at the share price on that date.

The share-based payments expense recorded for the RSUs granted during the six-month period ended April 30, 2021, amounted to $432,797 (nil in 2020).

A summary of the RSU Plan’s position for the six-month period ended April 30, 2021, is presented below:

Outstanding, beginning of period Granted Forfeited Exercised Outstanding, end of period	April 30, 2021
	Number of RSUs
	—
	350,042
	—
	—
	350,042

Deferred Share Units Plan

As part of the Plan introduced on December 16, 2020, a Deferred Share Unit Plan (the “DSU Plan”) was introduced. Under the DSU Plan, which is administered by the Company’s Board of Directors, the recipients are awarded deferred share units (“DSU”) to acquire common shares. A DSU is a notional unit credited by the Company to an eligible director, to be exchanged for a fully paid common share six months after the eligible director ceases to be a director of the Company.

During the six-month period ended April 30, 2021, the Company granted a total of 22,863 DSUs to its directors, all of which vested immediately. The Company applies the fair value method of accounting for share-based compensation awards granted. Fair value is determined at the grant date and is valued at the share price on that date.

The share-based payments expense recorded for the DSUs granted during the six-month period ended April 30, 2021, amounted to $63,063 (nil in 2020).

A summary of the DSU Plan’s position for the six-month period ended April 30, 2021, is presented below:

Outstanding, beginning of period Granted Forfeited Exercised Outstanding, end of period	April 30, 2021 Number of DSUs — 22,863 — — 22,863

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

12. Share capital (continued)

Net (loss) income per share

A net loss was reported for the six-month period ended April 30, 2021, and therefore, the denominator for the loss per share calculation was equal to the weighted average number of common stock outstanding with no consideration for outstanding stock options, DSUs and RSUs to acquire shares of the Company's common shares because to do so would have been anti-dilutive.

For the three and six-month periods ended April 30, 2020, the denominator for the diluted earnings per share calculation was equal to the weighted average number of common shares outstanding without consideration for outstanding stock options because the stock options only become exercisable upon the occurrence of a specific event, as described previously.

13. Revenue

Product Cloud solutions Maintenance and support	Three-month period ended April 30,	Three-month period ended April 30,	Six-month period ended April 30,
	2021	2020	2021 2020
	$	$ 15,734,594 2,098,515 3,395,613	$ $ 34,363,924 30,222,622 4,106,518 3,967,994 6,365,774 6,451,159
	16,602,848
	2,131,918
	3,115,975
	21,850,741	21,228,722	44,836,216 40,641,775

14. Operating costs

Salaries, commissions and benefits Rent Bad debt expense Depreciation of property and equipment Amortization of intangible assets	Three-month period ended April 30,	Six-month period ended April 30,
	2021 2020	2021 2020
	$ $ 8,861,505 8,938,410 171,051 175,715 34,661 37,579 114,161 160,561 138,070 104,440	$ $ 18,581,264 17,970,734 364,669 349,092 71,177 73,278 229,623 319,381 276,138 208,882

Depreciation included in cost of sales during the six-month period ended April 30, 2021, was $9,721 ($8,660 in 2020).

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

15. Financial expenses

Financial expenses
Interest on term loan Interest on credit facility Interest on lease liabilities Interest income	Three-month period ended April 30,	Six-month period ended April 30,
	2021 2020	2021 2020
	$ $ 30,019 8,012 11,091 8,262 66,863 72,703 (28,907 ) —	$ $ 71,057 23,268 21,863 20,273 131,660 146,673 (36,278 ) —
	79,066 88,977	188,302 190,214

16. Additional information relating to the unaudited interim condensed consolidated statements of cash flows

consolidated statements of cash flows
Net changes in non-cash operating working capital items Trade and other receivables Investment tax credits receivable Inventories Prepaid expenses Trade and other payables Deferred revenue	April 30, 2021 April 30, 2020
	$ $ (1,502,489 ) 417,050 — (175,000 ) 1,639,010 (103,588 ) (1,038,986 ) (387,692 ) (5,752,399 ) (784,766 ) 281,324 (30,624)
	(6,373,540 ) (1,064,620)

17. Financial instruments

Fair value hierarchy

The fair value is the amount at which a financial instrument could be exchanged between willing parties based on current markets for instruments with the same risk, principal and remaining maturity. Fair value estimates are based on present value and other valuation techniques using rates that reflect those that the Company could currently obtain, on the market, for loans with similar terms, conditions and maturities. The entity’s own credit risk and the credit risk of the counterparty were taken into account when determining the fair value of financial assets and financial liabilities, including derivative instruments.

The fair value of cash, trade and other receivables, and trade and other payables is approximately equal to their carrying value due to their short-term maturity.

Fair value of debt is determined based on market rates prevailing at the unaudited interim condensed consolidated statement of financial position date and compared to those provided by financial institutions for similar financial instruments.

These estimates are significantly affected by assumptions, including the amount and timing of estimated future cash flows and discount rates, all of which reflect varying degrees of risk.

Determination of fair value and the resulting hierarchy require the use of observable market data whenever available. The classification of a financial instrument in the hierarchy is based upon the lowest level of input that is significant to the measurement of fair value.

No financial instruments existed as at April 30, 2021 and October 31, 2020, that were measured at fair value in the unaudited interim condensed consolidated statement of financial position.

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

17. Financial instruments (continued)

Fair value of financial instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these unaudited interim condensed consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that have similarities to fair value but are not fair value, such as net realizable value in IAS 2.

In addition, for financial reporting purposes, fair value measurements are categorized into Levels 1, 2 or 3 based on the degree to which the inputs to the fair value measurement are observable and the significance of the inputs to the fair value measurement in their entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

18. Related party disclosures

Compensation of four (four in 2020) key management personnel:

Salaries, bonuses and benefits	April 30, 2021 April 30, 2020
	$ $ 1,490,461 1,636,756

Compensation of non-employee directors

For the six-month periods ended April 30, 2021, and April 30, 2020, independent directors were entitled to cash compensation totalling $61,858 (nil in 2020), which has been accrued for within trade and other payables. The Company reimburses reasonable costs to attend board and committee meetings.

19. Contingencies

On March 9, 2017, an entity filed proceedings against the Company alleging that the Company was not entitled to terminate the supply agreement entered into between the parties and breached an exclusivity undertaking. The entity is claiming an amount of $33,021,941 in damages, plus interest and indemnity. The Company believes the likelihood of an unfavourable outcome in this dispute is not probable. Accordingly, no provision has been recorded.

Other than the legal proceedings disclosed above, the Company is not aware of any proceedings outstanding or threatened as of the date hereof by or against it or relating to its business, which may have, or have had in the recent past, significant effects on the Company’s financial position, profitability or cash flows. Accordingly, no provision has been recorded.

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Haivision Systems Inc. Notes to the unaudited interim condensed consolidated financial statements April 30, 2021 and 2020 (Unaudited – In Canadian dollars)

20. Operating segments

The Company has one reportable segment, the provision of end-to-end video streaming solutions in the North American and international markets.

Geographical information

The Company operates in three principal geographical areas: Canada (country of domicile), the United States of America and international.

Revenue by geographical area, based on the location of customers, is as follows:

Canada International United States	Three-month period ended April 30,	Six-month period ended April 30,
	2021 2020	2021 2020
	$ $ 845,809 630,132 5,451,842 3,081,720 15,553,090 17,516,870	$ $ 1,346,239 845,892 11,486,602 8,032,348 32,003,375 31,763,535
	21,850,741 21,228,722	44,836,216 40,641,775

Non-current assets by geographical area are as follows:

Canada International United States	April 30, 2021 October 31, 2020
	$ $ 22,171,971 23,321,842 531,648 133,826 1,439,631 1,662,258
	24,143,250 25,117,926

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