Information Services Corporation — M&A Activity 2020

Oct 15, 2020

Information Services Corporation

FORM 51-102F4

Business Acquisition Report

Item 1 Identity of Company

1.1 Name and Address of Company

Information Services Corporation (“ISC” or the “Company”) Suite 300, 10 Research Drive Regina, Saskatchewan S4S 7J7

1.2 Executive Officer

The following executive officer of the Company is knowledgeable about the acquisition of Paragon Inc. and 2408761 Ontario Inc. and this report:

Shawn B. Peters, CPA, CA, ICD.D Executive Vice-President and CFO Telephone: +1 (306) 798-8760

Item 2 Details of Acquisition

2.1 Nature of Business Acquired

On July 31[st] , 2020, ISC’s Services segment, through its wholly owned subsidiary ESC Corporate Services Ltd. (“ESC”), acquired substantially all of the assets used in the business of Paragon Inc. and 2408761 Ontario Inc. (collectively referred to as “Paragon” or the “Paragon Business”). The primary focus of the Paragon Business is the facilitation and coordination of asset recovery on behalf of many of Canada’s major banks.

This acquisition is consistent with ISC’s long-term strategy of acquiring companies with competencies or operations in its industry space. The Company’s Services segment is positioned to support the growing needs of financial institutions and legal firms to outsource key business processes associated with credit due diligence, protection and asset recovery solutions.

2.2 Acquisition Date

July 31[st] , 2020

2.3 Consideration

CAD$70.0 million, subject to customary purchase price adjustments, was paid in cash on closing.

2.4 Effect on Financial Position

The pro forma effect of Paragon on the financial position and operations of ISC is described in the unaudited pro forma consolidated statement of financial position of ISC as at June 30, 2020 and the unaudited consolidated statements of comprehensive income for the six-month period ended June 30, 2020 and for the year ended December 31, 2019, attached to this Business Acquisition Report.

• 1 -

There are no current proposals or plans for material changes in the business affairs of ISC or Paragon which may have a significant effect on the results of operations and financial position of ISC, other than those resulting from the contribution of the results of operations of the assets of Paragon to the consolidated financial position of ISC for the reporting periods ending after the acquisition date.

2.5 Prior Valuations

None.

2.6 Parties to Transaction

The Paragon acquisition was not a transaction with an informed person, associate or affiliate of ISC.

2.7 Date of Report

October 14, 2020.

Item 3 Financial Statements and Other Information

The following financial statements, as required by Part 8 of the National Instrument 51-102, attached as schedules as indicated are included in this Business Acquisition Report:

• The unaudited pro forma consolidated statement of financial position of ISC as at June 30, 2020. (Schedule A)

• The unaudited pro forma consolidated statements of comprehensive income of ISC for the six-month period ended June 30, 2020 and for the year ended December 31, 2019. (Schedule A)

• The unaudited condensed interim financial statements of Paragon as at June 30, 2020 and 2019, and for the threemonth periods then ended. (Schedule B)

• The audited financial statements of Paragon as at March 31, 2020 and 2019. (Schedule C)

Notice

The financial statements of Paragon have been prepared in accordance with Canadian accounting standards for private enterprises (“ASPE”), which are Canadian accounting standards for private enterprises in Part II of the Handbook. The recognition, measurement and disclosure requirements of Canadian GAAP applicable to private enterprises differ from those of Canadian GAAP applicable to publicly accountable enterprises, which are International Financial Reporting Standards (“IFRS”) incorporated into the Handbook.

The pro forma financial statements included in this Business Acquisition Report include adjustments relating to Paragon’s business and present pro forma information prepared using principles that are consistent with the accounting principles used by ISC.

All amounts referenced in this Business Acquisition Report are in Canadian dollars.

• 2 -

Forward-Looking Information

This Business Acquisition Report may contain forward-looking information within the meaning of applicable Canadian securities legislation, including statements related to the expectations regarding the acquisition, integration and growth. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those expressed or implied by such forward-looking information. Important factors that could cause actual results to differ materially from the Company's plans or expectations include risks relating to changes in economic, market and business conditions, including those arising from public health concerns, identification of viable growth opportunities, implementation of our growth strategy, integration, competition and other risks detailed from time to time in the filings made by the Company including those detailed in ISC’s Annual Information Form dated March 17, 2020 and ISC’s Unaudited Consolidated Interim Financial Statements and Notes and Management’s Discussion and Analysis for the six months ended June 30, 2020, copies of which are filed on SEDAR at www.sedar.com.

The forward-looking information in this Business Acquisition Report is made as of the date hereof and, except as required under applicable securities legislation, ISC assumes no obligation to update or revise such information to reflect new events or circumstances.

• 3 -

SCHEDULE ‘A’

Unaudited Pro Forma Consolidated Statement of Financial Position of ISC as at June 30, 2020

Unaudited Pro Forma Consolidated Statements of Comprehensive Income of ISC for the Six Months Ended June 30, 2020 and the Year Ended December 31, 2019

F-1

==> picture [173 x 85] intentionally omitted <==

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended June 30, 2020 and for the year ended December 31, 2019

F-2

Information Services Corporation

Pro Forma Consolidated Statement of Financial Position As at June 30, 2020

s at June 30, 2020
			Pro
(thousands of CAD dollars, unaudited)			Forma		Pro Forma
	ISC	Paragon	Adjustments	Note 3	Consolidated
ASSETS
Current assets
Cash	$ 24,572	$ 1,925	$ (12,125)	(a),(b),(e)	$ 14,372
Short-term investments	50	-	-		50
Trade and other receivables	14,298	466	1,804	(a),(e)	16,568
Contract assets	946	-	69	(l)	1,015
Income tax recoverable	814	-	-		814
Prepaid expenses and deposits	4,345	110	-		4,455
Total current assets	45,025	2,501	(10,252)		37,274
Non-current assets
Property, plant and equipment	2,598	21	(18)	(a),(e)	2,601
Right-of-use assets	8,310	-	10	(l)	8,320
Intangibles	37,889	-	35,380	(a),(c)	73,269
Goodwill	45,705	-	34,182	(a),(d)	79,887
Deferred tax asset	28,834	-	-		28,834
Total non-current assets	123,336	21	69,554		192,911
TOTAL ASSETS	$ 168,361	$ 2,522	$ 59,302		$ 230,185
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	$ 15,746	$ 2,689	$ 1,210	(a),(e)	$ 19,645
Contract liabilities	1,721	-	-		1,721
Lease obligations – current portion	1,894	-	10	(l)	1,904
Income tax payable	929	-	-		929
Long-term debt – current portion	2,000	-	-		2,000
Provisions	191	-	-		191
Total current liabilities	22,481	2,689	1,220		26,390
Non-current liabilities
Lease obligations	7,654	-	-		7,654
Deferred tax liability	7,008	-		(a)	7,008
Long-term debt	15,000	-	59,800	(b)	74,800
Other liabilities	419	-	-		419
Total non-current liabilities	30,081	-	59,800		89,881
SHAREHOLDERS’ EQUITY
Share capital	19,955	-	-	(f)	19,955
Equity settled employee benefit reserve	2,296	-	-		2,296
Accumulated other comprehensive income	445	-	-		445
Retained earnings	93,103	(167)	(1,718)	(g),(k)	91,218
Total shareholders’ equity	115,799	(167)	(1,718)		113,914
Total liabilities and shareholders’ equity	$ 168,361	$ 2,522	$ 59,302		$ 230,185

See accompanying Notes

F-3

Information Services Corporation Pro Forma Consolidated Statement of Comprehensive Income For the six months ended June 30, 2020

(thousands of CAD dollars, unaudited)	ISC Paragon (Note 2) Pro Forma Adjustments Note 3 Pro Forma Consolidated
Revenue Expenses Wages and salaries Cost of goods sold Depreciation and amortization Information technology services Occupancy costs Professional and consulting services Financial services Other	$ 60,589 $ 5,996 $ (187) (l) $ 66,398 19,508 1,296 - 20,804 14,273 4,006 (28) (l) 18,251 5,511 2 2,190 (h) 7,703 3,866 - - 3,866 1,332 247 (143) (l) 1,436 2,500 55 - 2,555 1,338 - - 1,338 785 295 - 1,080
Total expenses	49,113 5,901 2,019 57,033
Net income before items noted below Finance (expense) income Interest income Interest expense	11,476 95 (2,206) 9,365 90 - (83) (i) 7 (622) - (1,297) (i) (1,919)
Net finance expense	(532) - (1,380) (1,912)
Income before tax Income tax expense	10,944 95 (3,586) 7,453 (2,969) (16) 956 (j) (2,029)
Net income	7,975 79 (2,630) 5,424
Other comprehensive income
Items that may be subsequently reclassified to net income Unrealized (loss) gain on translation of financial statements of foreign operations Changes in fair value of marketable securities, net of tax	466 - - 466 (26) - - (26)
Other comprehensive (loss) income	440 - - 440
Total comprehensive income	$ 8,415 $ 79 $ (2,630) $ 5,864

See accompanying Notes

F-4

Information Services Corporation Pro Forma Consolidated Statement of Comprehensive Income For the year ended December 31, 2019

(thousands of CAD dollars, unaudited)	ISC Paragon (Note 2) Pro Forma Adjustments Note 3 Pro Forma Consolidated
Revenue Expenses Wages and salaries Cost of goods sold Depreciation and amortization Information technology services Occupancy costs Professional and consulting services Financial services Other	$ 132,968 $ 11,847 $ 405 (l) $ 145,220 41,689 2,433 - 44,122 31,171 8,519 130 (l) 39,820 11,400 3 4,439 (h) 15,842 8,796 - - 8,796 3,485 578 (423) (l) 3,640 4,281 66 - 4,347 2,138 - - 2,138 2,382 584 - 2,966
Total expenses	105,342 12,183 4,146 121,671
Net Income before items noted below Other income Finance (expense) income Interest income Interest expense	27,626 (336) (3,741) 23,549 - 33 - 33 283 - (166) (i) 117 (1,529) (2) (2,607) (i) (4,138)
Net finance expense	(1,246) (2) (2,773) (4,021)
Income before tax Income tax expense	26,380 (305) (6,514) 19,561 (6,980) (5) 1,737 (j) (5,248)
Net income	19,400 (310) (4,777) 14,313
Other comprehensive income
Items that may be subsequently reclassified to net income Unrealized (loss) gain on translation of financial statements of foreign operations Changes in fair value of marketable securities, net of tax	(538) - - (538) 29 - - 29
Other comprehensive (loss) income	(509) - - (509)
Total comprehensive income	$ 18,891 $ (310) $ (4,777) $ 13,804

See accompanying Notes

F-5

INFORMATION SERVICES CORPORATION NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the Six Months Ended June 30, 2020 and the Year Ended December 31, 2019

(unaudited)

1 ACQUISITION OF PARAGON BUSINESS

On July 31st, 2020, Information Services Corporation’s (“ ISC ” or the “ Company ”) Services segment, through its wholly owned subsidiary ESC Corporate Services Ltd. (“ ESC ”), acquired substantially all of the assets used in the business of Paragon Inc. and 2408761 Ontario Inc. (collectively referred to as “Paragon” or the “Paragon Business”). The primary focus of the Paragon Business is the facilitation and coordination of asset recovery on behalf of many of Canada's major banks. Asset recovery comprises the identification, retrieval and disposition of movable assets such as automobiles, boats, aircraft and other forms of portable physical assets used as collateral security for primarily consumer focused credit transactions. CAD$70 million, subject to customary purchase price adjustments, was paid in cash on closing.

This acquisition is consistent with ISC’s long-term strategy of acquiring companies with competencies or operations in its industry space. The Company’s Services segment is positioned to support the growing needs of financial institutions and legal firms to outsource key business processes associated with credit due diligence, protection and default solutions.

2 BASIS OF PRESENTATION

The unaudited pro forma consolidated statement of financial position as at June 30, 2020, the unaudited pro forma consolidated statement of comprehensive income for the six months ended June 30, 2020, and the unaudited pro forma consolidated statement of comprehensive income for the year ended December 31, 2019 (collectively, the “unaudited pro forma consolidated financial statements ”), have been prepared by management of ISC for illustrative purposes only and give effect to the acquisition of substantially all of the assets used in the business of Paragon. The unaudited pro forma consolidated financial statements have been prepared on the basis of the assumptions and adjustments described below and in subsequent notes.

In the opinion of management, the accounting policies used in the unaudited pro forma consolidated financial statements include all adjustments necessary for the fair presentation of the transaction in accordance with the recognition and measurement principles of International Financial Reporting Standards (" IFRS ") as issued by the International Accounting Standards Board (“ IASB ”) and incorporate the significant accounting policies expected to be used to prepare the Company’s consolidated financial statements. In addition, the pro forma financial statements includes adjustments relating to the Paragon acquisition which were prepared in accordance with Canadian accounting standards for private enterprises (“ ASPE ”), as adjusted into IFRS to conform with the principles that are consistent with the accounting principles used by ISC.

The unaudited pro forma consolidated financial statements may not be indicative of the financial position that would have prevailed and operating results that would have been obtained if the transactions had taken place on the dates indicated or of the financial position or operating results which may be obtained in the future. The unaudited pro forma consolidated financial statements are not a forecast or projection of future results. The actual financial position and results of operations of the Company for any period following the closing of the Paragon acquisition will vary from the amounts set forth in the unaudited pro forma consolidated financial statements and such variation may be material. The actual purchase price allocation will reflect the fair value, at the purchase date, of the assets acquired and liabilities assumed based on the Company’s evaluation of such assets and liabilities following the close of the transaction on the date of acquisition and, accordingly, the final purchase price allocation may differ significantly from the results herein.

F-6

INFORMATION SERVICES CORPORATION NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the Six Months Ended June 30, 2020 and the Year Ended December 31, 2019

(unaudited)

The unaudited pro forma consolidated financial statements have been derived from and should be read in conjunction with the following financial statements:

• Audited consolidated financial statements of ISC for the year ended December 31, 2019, prepared in accordance with IFRS.

• Unaudited condensed consolidated interim financial statements of ISC for the six months ended June 30, 2020, prepared in accordance with IFRS.

• Audited financial statements of Paragon for the year ended March 31, 2020, prepared in accordance with ASPE, with notes reconciling into IFRS.

• Unaudited interim financial statements of Paragon for the three-month periods ended June 30, 2020, prepared in accordance with ASPE, with notes reconciling into IFRS.

The adjustments and assumptions outlined below to give effect to pro forma events that are directly attributable to the Paragon acquisition.

The unaudited pro forma consolidated statement of financial position as at June 30, 2020 gives effect to the Paragon acquisition as if it had occurred on June 30, 2020 and has been prepared using the following:

• The unaudited interim consolidated statements of financial position of ISC as at June 30, 2020.

• The unaudited interim statement of financial position of the Paragon as at June 30, 2020.

• The adjustments and assumptions outlined below.

The unaudited pro forma consolidated statement of comprehensive income for the six months ended June 30, 2020 gives effect to the Paragon acquisition as if it had occurred on January 1, 2020 and has been prepared using the following:

• The unaudited interim consolidated statements of comprehensive income of ISC for the six months ended June 30, 2020.

• The unaudited interim statement of comprehensive income and retained earnings of Paragon for the six months ended June 30, 2020.

• The adjustments and assumptions outlined below.

The unaudited pro forma consolidated statement of comprehensive income for the year ended December 31, 2019 gives effect to the Paragon acquisition as if it had occurred on January 1, 2019 and has been prepared using the following:

• The audited consolidated statements of comprehensive income of ISC for the year ended December 31, 2019.

• The unaudited statements of comprehensive income of Paragon for the twelve months ended December 31, 2019.

• The adjustments and assumptions outlined below.

The unaudited pro forma consolidated financial statements were prepared using the acquisition method of accounting in accordance with IFRS 3, Business Combinations (“IFRS 3”). ISC is considered the legal and accounting acquirer. The unaudited pro forma consolidated financial statements were based on the historical financial statements of ISC and Paragon. Certain reclassifications have been made to the historical financial statements in preparation of the unaudited pro forma consolidated financial statements to conform to the financial statements presentation currently adopted by ISC.

There are no material transactions between ISC and Paragon during the periods presented in the unaudited pro forma consolidated financial statements that would need to be eliminated. See notes to the pro forma consolidated financial statements below.

Management has determined on a preliminary basis that no pro forma material adjustments to the financial statements of Paragon are required to comply with the accounting policies used by ISC in the preparation of its consolidated financial statements.

F-7

INFORMATION SERVICES CORPORATION NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the Six Months Ended June 30, 2020 and the Year Ended December 31, 2019

(unaudited)

The unaudited pro forma consolidated financial statements do not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the Paragon acquisition, the costs to integrate the operations of ISC and Paragon, or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements.

Under acquisition accounting, the measurement of the fair value of the consideration issued and of the assets and liabilities assumed is dependent upon certain valuations and other studies. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma consolidated financial statements. Differences between these preliminary estimates and the final acquisition accounting will occur and these differences could have a material impact on the accompanying unaudited pro forma consolidated financial statements and ISC’s future results of operations and financial position.

The assets acquired and liabilities assumed of Paragon will be recorded as of the completion of the Paragon acquisition, primarily at their respective fair values and added to those of ISC. The results of operations of Paragon will be included in the financial statements of the combined company as of the date of the completion of the Paragon acquisition, except as disclosed herein.

3 PRO FORMA ADJUSTMENTS AND ASSUMPTIONS

The unaudited pro forma consolidated financial statements include pro forma assumptions and adjustments in connection with the Paragon acquisition, to give effect to the acquisition as if it had occurred on:

• June 30, 2020, for the purposes of the unaudited pro forma consolidated statement of financial position as at June 30, 2020.

• January 1, 2020, for the purposes of the unaudited pro forma consolidated statement of comprehensive income for the six months ended June 30, 2020.

• January 1, 2019, for the purposes of the unaudited pro forma consolidated statement of comprehensive income for the year ended December 31, 2019.

The financial statements of the acquired business used to prepare the pro forma financial statements were prepared for the purpose of the pro forma financial statements and do not conform with the financial statements of the acquired business included elsewhere in the business acquisition report.

The historical financial statements of Paragon have been adjusted to reclassify line items to conform to ISC's expected presentation. Additional reclassifications may be necessary once the financial statement presentation for ISC is finalised.

F-8

INFORMATION SERVICES CORPORATION NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the Six Months Ended June 30, 2020 and the Year Ended December 31, 2019

(unaudited)

• (a) If the acquisition of Paragon had occurred on June 30, 2020, the estimated preliminary fair values of the identifiable assets and liabilities of Paragon and the purchase consideration would be as follows:

(thousands of CAD dollars)	June 30, 2020
ASSETS
Trade and other receivables	$ 357
Prepaid expenses and deposits	110
Property, Plant and Equipment	3
Intangible assets	35,380
	35,850
Trade and other payables	(1,945)
Goodwill arising on acquisition	34,182
Estimated total purchase consideration	$ 68,087

The Paragon acquisition has been accounted for using the acquisition method. The allocation of the purchase price was based on a provisional assessment of the fair value of identifiable assets, including assets acquired and liabilities assumed at the effective date of the acquisition, with the excess of the purchase price over the fair value being allocated to goodwill. The Company engaged independent valuators to determine the fair value allocated to intangible assets. However, given the timing of the acquisition, the independent valuators have not completed the valuations of certain assets, and therefore the allocation of the purchase price is based on the Company’s best estimate and is currently considered preliminary. As a result, the purchase price allocation is preliminary and is subject to change once the final valuation of the identifiable assets acquired and liabilities assumed is completed.

Goodwill arising on acquisition is attributable to the anticipated future revenue and cash flow from the Paragon services, as well as expected synergies and other benefits from the acquisition.

The Company paid cash of $70.0 million, subject to customary purchase price adjustments, on the date of acquisition as consideration for Paragon. The preliminary working capital adjustment and redundant assets of $1,913 thousand was calculated based on the estimated net working capital and redundant assets as at July 31[st] , 2020 as if the Paragon Acquisition had occurred on June 30, 2020 and has been recorded as an accounts receivable for pro forma purposes. The final working capital adjustment and purchase consideration is subject to change and will be determined upon completion of customary post-closing activities.

Other pro forma assumptions and adjustments are as follows:

• (b) The company financed the transaction by external borrowing of CAD $59.8M, with the remainder being cash on hand. The cash balance and long-term liability have been adjusted to reflect the consideration paid.

• (c) Intangible assets have been adjusted to a preliminary estimate of fair value of existing customer relationships, brand, technology, and workforce by adding the preliminary fair value of intangible assets acquired of $35.4 million.

• (d) Goodwill has been adjusted to the preliminary estimated Paragon acquisition related goodwill of $34.2 million, as described above.

F-9

INFORMATION SERVICES CORPORATION NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the Six Months Ended June 30, 2020 and the Year Ended December 31, 2019

(unaudited)

• (e) Assets and liabilities specifically excluded under the acquisition arrangement have been adjusted out of the pro forma, including but not limited to Paragon’s investments not relating to its businesses, licenses, tax refund, certain insurance policies, etc.

• (f) Share capital has been adjusted to eliminate the historical Paragon equity.

• (g) Retained earnings have been adjusted to eliminate the historical Paragon retained earnings.

• (h) Depreciation and amortization expenses have been adjusted as follows:

	Six months ended	Year ended
(thousands of CAD dollars)	June 30, 2020	December 31, 2019
Adjustment to record the impact of depreciation for Right-of-
use assets	$ 177	$ 412
Adjustment to record the preliminary estimated depreciation
calculated on a straight-line basis based on the preliminary
estimate of fair value of intangible assets	2,013	4,027
Total	$ 2,190	$ 4,439

The preliminary useful lives used for amortizing intangible assets are between 3 to 9 years.

• (i) Interest income and expense has been adjusted as follows:

	Six months ended	Year ended
(thousands of CAD dollars)	June 30, 2020	December 31, 2019
Lower interest income due to cash purchase of Paragon	$ (83)	$ (166)
Interest expense related to the long-term borrowing for
acquisition of Paragon	(1,297)	(2,607)
Total	$ (1,380)	$ (2,773)

For the purposes of the unaudited pro forma consolidated statement of income for the six months ended June 30, 2020, it was assumed that cash on hand would be decreased, to give effect to the acquisition as if it had occurred on January 1, 2020.

• (j) Tax effect on the pro forma adjustments has been recorded using an estimated effective tax rate of 26.75% for adjustments relating to ISC and Paragon. The actual effective tax rate of the consolidated company could be significantly different than the estimated effective tax rate assumed for purposes of preparing these pro forma consolidated financial statements as a result of a variety of factors, including post-acquisition activities.

F-10

INFORMATION SERVICES CORPORATION NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS For the Six Months Ended June 30, 2020 and the Year Ended December 31, 2019

(unaudited)

• (k) Costs associated with the acquisition, in particular, professional fees and legal fees incurred in relation to the Paragon acquisition, are estimated at approximately $1.9 million. These costs have been included as a pro forma adjustment to retained earnings on the unaudited pro forma consolidated statement of financial position as opposed to being reflected in the unaudited proforma consolidated statement of comprehensive income on the basis that these expenses are directly incremental to the acquisition and are non-recurring in nature.

• (l) Pro forma adjustments relating to the reconciliation of ASPE to IFRS for the acquired businesses

Adjustments have been made to the historical consolidated financial statements of Paragon to convert those financial statements, prepared in accordance with ASPE, to IFRS for all material measurement and classification differences and to conform the accounting policies used to those of ISC. Such material differences include:

1. A change in revenue and cost of goods sold to reflect the difference in recognition basis between ASPE and IFRS due to recognition of revenue over time by completion of performance obligations within a revenue contract with customer.

2. An increase in right-of-use assets and corresponding lease liability under IFRS 16 for recognition of operating leases previously under ASPE, with corresponding adjustments decreasing rental expenses and increasing depreciation expense over right-of-use assets and interest expense.

4 PRO FORMA EARNINGS PER SHARE

The table below summarizes the calculation of pro forma earnings per share of ISC for the six months ended June 30, 2020 and year ended December 31, 2019.

	Six months ended	Year ended
(thousands of CAD dollars, except number of shares and earnings per share)	June 30, 2020	December 31, 2019
Basic weighted average common shares (as reported)	17,500,000	17,500,000
Basic weighted average common shares (pro forma)	17,500,000	17,500,000
Diluted weighted average common shares (as reported)	17,500,000	17,526,963
Diluted weighted average common shares(pro forma)	17,500,000	17,526,963
Pro forma net earnings	$ 5,424	$ 14,313
Pro forma net earnings per share, basic	$ 0.31	$ 0.82
Pro forma net earnings per share, diluted	$ 0.31	$ 0.82

F-11

SCHEDULE ‘B’

Unaudited Interim Combined Financial Statements of Paragon as at and for the three months ended June 30, 2020

F-12

PARAGON INC. AND 2408761 ONTARIO INC.

Combined Financial Statements Three Month Period Ended June 30, 2020

(Unaudited)

NOTICE TO READER

Paragon's independent auditor has not performed a review of these unaudited interim combined financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity's auditor.

F-13

PARAGON INC. AND 2408761 ONTARIO INC. Combined Balance Sheet

As at

(Unaudited - See Notice To Reader)

	June 30 March 31 2020 2020
ASSETS CURRENT Cash and cash equivalent Accounts receivable Prepaid expenses Future income taxes Due from related parties_(Note 4) PROPERTY, PLANT AND EQUIPMENT(Net of accumulated_ amortization) (Note 3) LIABILITIES AND SHAREHOLDERS' DEFICIENCY CURRENT Accounts payable Income taxes payable Goods and services tax payable SHAREHOLDERS' DEFICIENCY Share capital_(Note 6)_ Deficit	$ 1,925,040 $ 989,544 358,090 480,388 109,806 123,606 - 109,041 - 21,175
	2,501,977 1,614,713 20,672 20,671
	$ 2,522,649 $ 1,635,384
	$ 2,481,069 $ 2,772,383 226 226 208,096 55,868
	2,689,391 1,822,737
	2 2 (166,744) (187,355)
	(166,742) (187,353)
	$ 2,522,649 $ 1,635,384

The accompanying notes form an integral part of these financial statements.

F-14

PARAGON INC. AND 2408761 ONTARIO INC. Combined Statement of Deficit

(Unaudited - See Notice To Reader)

	Three months Three months ended ended April 1 to April 1 June 30 June 30 2020 2019
DEFICIT - BEGINNING OF PERIOD NET INCOME DEFICIT - END OF PERIOD	$ (187,355) $ (258,834) 20,611 146,766
	$ (166,744) $ (112,068)

The accompanying notes form an integral part of these financial statements.

F-15

PARAGON INC. AND 2408761 ONTARIO INC. Combined Statement of Income

(Unaudited - See Notice To Reader)

	Three months Three months ended ended April 1 to April 1 to June 30 June 30 2020 2019
REVENUES Recovery services Commission COST OF SALES Administration operating fee Direct wages Other direct cost GROSS PROFIT EXPENSES Rental Office Repairs and maintenance Insurance Professional fees Utilities Telephone Travel Sub-contracts Interest and bank charges Advertising and promotion INCOME BEFORE INCOME TAXES INCOME TAXES NET INCOME	$ 2,349,277 $ 3,014,652 124,405 144,110
	2,473,682 3,158,762
	1,280,000 1,670,000 606,245 646,176 308,821 407,435
	2,195,066 2,723,611
	278,616 435,151
	120,482 141,595 73,484 73,775 20,400 23,754 13,800 13,810 12,201 11,251 10,516 9,665 4,815 6,306 1,766 (72) 288 856 253 133 - 2,312
	258,005 283,385
	20,611 151,766 - -
	$ 20,611 $ 146,766

The accompanying notes form an integral part of these financial statements.

F-16

PARAGON INC. AND 2408761 ONTARIO INC. Combined Statement of Cash Flows

Three Month Period Ended June 30, 2020

(Unaudited - See Notice To Reader)

	Three months Three months ended ended April 1 to April 1 to June 30 June 30 2020 2019
OPERATING ACTIVITIES Net income Changes in non-cash working capital: Accounts receivable Accounts payable Prepaid expenses Goods and services tax payable Cash flow from (used by) operating activities FINANCING ACTIVITY Advances from related parties INCREASE (DECREASE) IN CASH FLOW Cash - beginning of period CASH - END OF PERIOD	$ 20,611 $ 146,766
	122,298 (429,000) 714,426 (750,289) 13,800 (54,737) 152,228 (58,253)
	1,002,752 (1,292,279)
	1,023,363 (1,145,513)
	(87,867) (114,935)
	935,496 (1,260,448) 989,544 2,680,714
	$ 1,925,040 $ 1,420,266

The accompanying notes form an integral part of these financial statements.

F-17

PARAGON INC. AND 2408761 ONTARIO INC. Notes to Combined Financial Statements Three Month Period Ended June 30, 2020

(Unaudited - See Notice To Reader)

1. DESCRIPTION OF OPERATIONS

Paragon Inc. and 2408761 Ontario Inc. (the "Companies") are companies domiciled in Canada and incorporated provincially under the Business Corporations Act of Ontario. Paragon Inc's principal business activity is the recovery and related services for secured loan products. 2408761 Ontario Inc.'s principal business is the sale vehicles on behalf of a 3rd party.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation

The combined financial statements were prepared in accordance with Canadian accounting standards for private enterprises (ASPE).

(b) Revenue recognition

The Companies recognize revenues from services when the services are completed and the fees are earned.

Recovery services are transaction based fees that are recognized upon performance.

Commission revenue is recognized when the vehicle has been sold, ownership has been transfered and funds were collected from the customer.

Other amounts received from customers in advance of services being provided are recorded as deferred revenue when received and reflected in income when the service has been completed.

(c) Cash and cash equivalents

Cash includes cash and cash equivalents. Cash equivalents are investments in treasury bills and are valued at cost plus accrued interest. The carrying amounts approximate fair value because they have maturities at the date of purchase of less than ninety days.

(d) Property, plant and equipment

Property, plant and equipment is stated at cost or deemed cost less accumulated amortization and is amortized over its estimated useful life on a declining balance basis at the following rates and methods:

Motor vehicles 30% declining balance method Computer equipment 55% declining balance method Furniture and fixtures 20% declining balance method

The Companies regularly review their property, plant and equipment to eliminate obsolete items. Government grants are treated as a reduction of property, plant and equipment cost.

Property, plant and equipment acquired during the year but not placed into use are not amortized until they are placed into use.

(continues)

F-18

PARAGON INC. AND 2408761 ONTARIO INC. Notes to Combined Financial Statements Three Month Period Ended June 30, 2020

(Unaudited - See Notice To Reader)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(e) Future income taxes

Income taxes are reported using the future income taxes method, as follows: current income tax expense is the estimated income taxes payable for the current year after any refunds or the use of losses incurred in previous years, and future income taxes reflect:

• the temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts used for tax purposes;

• the benefit of unutilized tax losses that will more likely than not be realized and carried forward to future years to reduce income taxes.

Future income taxes are estimated using the rates enacted by tax law and those substantively enacted for the years in which future income taxes assets are likely to be realized, or future income tax liabilities settled. The effect of a change in tax rates on future income tax assets and liabilities is included in earnings in the period when the change is substantively enacted.

(f) Leases

Leases are classified as either capital or operating leases. At the time the Companies enter into a capital lease, an asset is recorded with its related long-term obligation to reflect the acquisition and financing. Rental payments under operating leases are expensed as incurred.

(g) Financial instruments

The Companies initially measure their financial assets and liabilities at fair value, except for certain non-arm's length transactions.

The Companies subsequently measure all their financial assets and financial liabilities at amortized cost using the effective interest rate method, except for investments in equity instruments that are quoted in an active market and derivatives, which are measured at fair value. Changes in fair value are recognized in net income.

Financial assets measured at amortized cost include cash and cash equivalent, prepaid expenses and accounts receivable.

Financial liabilities measured at amortized cost include the accounts payable and accrued liabilities and government remittances payable.

Transaction costs are recognized in net earnings in the period incurred. However, financing and transaction costs associated with debt are netted against the carrying value and amortized over the term of the related debt.

(h) Measurement uncertainty

The preparation of financial statements in conformity with Canadian accounting standards for private enterprises requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Such estimates are periodically reviewed and any adjustments necessary are reported in earnings in the period in which they become known. Actual results could differ from these estimates.

F-19

PARAGON INC. AND 2408761 ONTARIO INC. Notes to Combined Financial Statements Three Month Period Ended June 30, 2020

(Unaudited - See Notice To Reader)

3. PROPERTY, PLANT AND EQUIPMENT

Cost Accumulated amortization Motor vehicles $ 18,040 $ - Computer equipment 43,979 41,347 $ 62,019 $ 41,347 4. DUE FROM RELATED PARTIES Current portion due from related party Due from Colmvest Holdings Corporation	Cost Accumulated amortization	March 31, 2020 Net book June 30, 2020 Net book value value
	$ 18,040 $ - 43,979 41,347	$ 18,040 $ 18,039 2,632 2,632
	$ 62,019 $ 41,347	$ 20,672 $ 20,671
		June 30, 2020 March 31, 2020
		$ 109,041 $ 21,175

Advances from related companies are non-interest bearing and have no set repayment terms. The companies are related by common control. The amount has been classified as current because the Companies expect to collect the funds next fiscal year.

5. RELATED PARTY TRANSACTIONS

The following is a summary of the Companies' related party transactions:

2323296 Ontario Inc Company under common control Occupancy cost paid during the year Colmvest Holdings Corporation Parent company Administration operating fee paid during the year	2020 2019
	$ 15,000 $ 15,000
	1,280,000 1,670,000
	$ 1,295,000 $ 1,685,000

These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

6. SHARE CAPITAL

Authorized: Unlimited Common voting shares Issued: Common shares	June 30, 2020 March 31, 2020
	$ 2 $ 2

F-20

PARAGON INC. AND 2408761 ONTARIO INC.

Notes to Combined Financial Statements Three Month Period Ended June 30, 2020

(Unaudited - See Notice To Reader)

7. FINANCIAL INSTRUMENTS

The Companies are exposed to various risks through their financial instruments and have a comprehensive risk management framework to monitor, evaluate and manage these risks. The following analysis provides information about the Company's risk exposure and concentration as of June 30, 2020.

Credit risk

Credit risk arises from the potential that a counter party will fail to perform its obligations. The Companies are exposed to credit risk from customers. In order to reduce its credit risk, the Companies review a new customer's credit history before extending credit and conducts regular reviews of its existing customers' credit performance. An allowance for doubtful accounts is established based upon factors surrounding the credit risk of specific accounts, historical trends and other information. The Companies have a significant number of customers which minimizes concentration of credit risk.

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Companies are exposed to this risk mainly in respect of its receipt of funds from its customers and other related sources, accounts payable and accrued liabilities and government remittances payable.

Unless otherwise noted, it is management’s opinion that the company is not exposed to market risk, currency risk, interest rate risk or significant other price risks arising from these financial instruments.

8. ECONOMIC DEPENDENCE

The Companies generate 90% of their revenue from four major financial institutions. Management is of the opinion that the Companies will be able to continue it’s operations as a going concern with only one major financial institution.

9. SUBSEQUENT EVENTS

Subsequent to the fiscal year end, the Companies' shareholder agreed to sell all of the assets of the business which is considered to be the core business. The Companies' business activities are anticipated to cease on July 31, 2020.

F-21

PARAGON INC. AND 2408761 ONTARIO INC. Notes to Combined Financial Statements Three Month Period Ended June 30, 2020

(Unaudited – See Notice to Reader)

10. ASPE TO IFRS RECONCILIATION

Substantially all of the assets used in the business of Paragon were acquired by ISC, through its whollyowned subsidiary ESC, on July 31st, 2020. As a requirement of the acquisition and applicable securities laws, Paragon’s financial statements must be included in a Business Acquisition Report (“BAR”). Paragon’s financial statements were prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) applicable to private enterprises, which are Canadian accounting standards for private enterprises (“ASPE”) in Part II of the Chartered Professional Accountants Handbook. The recognition, measurement and disclosure requirements of ASPE differ from those of Canadian GAAP applicable to publicly accountable enterprises, which are International Financial Reporting Standards (“IFRS”) incorporated into the Handbook. The pro forma financial statements included in the document include adjustments related to the acquired business and present pro forma information prepared using principles that are consistent with the accounting principles by ISC. The BAR requires an ASPE to IFRS reconciliation for the combined statements of profit and loss for each period presented. The historical financial statements of Paragon have been adjusted to reclassify line items to conform to ISC's expected presentation. Additional reclassifications may be necessary once the financial statement presentation for ISC is finalised. The period presented in this reconciliation are the three months ended June 30, 2020 and 2019.

Combined statements of Profit and Loss For the three month period ended June 30, 2020

(CAD dollars, unaudited)	2020 ASPE	Reconciliation to IFRS	2020 IFRS
Revenue	$ 2,473,682	$ (143,773)	$ 2,329,909
Expenses
Wages and salaries	606,245	-	606,245
Cost of goods sold	1,588,821	(15,926)	1,572,895
Depreciation and amortization	825	69,803	70,628
Information technology services	-	-	-
Occupancy costs	120,482	(37,567)	82,915
Professional and consulting services	12,201	-	12,201
Financial services	-	-	-
Other	124,244	-	124,244
Total expenses	2,452,818	16,310	2,469,128
Net Income before items noted below	20,864	(160,083)	(139,219)
Other income	-	-	-
Finance (expense) income
Interest income	-	-	-
Interest expense	(253)	(124)	(377)
Net finance expense	(253)	(124)	(377)
Income before tax	20,611	(160,207)	(139,596)
Income tax expense	-	-	-
Net income	$ 20,611	$ (160,207)	$ (139,596)

F-22

PARAGON INC. AND 2408761 ONTARIO INC. Notes to Combined Financial Statements Three Month Period Ended June 30, 2020

(Unaudited – See Notice to Reader)

Combined statements of Profit and Loss For the three month period ended June 30, 2019

(CAD dollars, unaudited)	2019 ASPE	Reconciliation to IFRS	2019 IFRS
Revenue	$ 3,158,762	$ (539)	$ 3,158,223
Expenses
Wages and salaries	646,176	-	646,176
Cost of goods sold	2,077,435	410	2,077,845
Depreciation and amortization	825	103,063	103,888
Information technology services	-	-	-
Occupancy costs	141,595	(105,817)	35,778
Professional and consulting services	11,251	-	11,251
Financial services	-	-	-
Other	129,581	-	129,581
Total expenses	3,006,863	(2,344)	3,004,519
Net Income before items noted below	151,899	1,805	153,704
Other income	-	-	-
Finance (expense) income
Interest income	-	-	-
Interest expense	(133)	(4,305)	(4,438)
Net finance expense	(133)	(4,305)	(4,438)
Income before tax	151,766	(2,500)	149,266
Income tax expense	(5,000)	-	(5,000)
Net income	$ 146,766	$ (2,500)	$ 144,266

(A) IFRS 15 revenue from contracts with customers

Under ASPE, Paragon previously recognised revenue from services when the services are completed, and fees are earned. Under IFRS, revenue from a contract with customer would be recognised as the performance obligations are being satisfied over time or at the point in time of service delivery. As such, a decrease in revenue was adjusted to reflect the differences in recognition basis between ASPE and IFRS. Moreover, amounts recognised in revenue before bills can be issued are recorded as "contract assets". Costs Paragon incurred in relation to the fulfilment of a contract but prior to reaching a performance milestone are recorded as “contract asset” on the Balance Sheet. Once the milestone is achieved, these costs are recorded in the Statement of Income.

F-23

PARAGON INC. AND 2408761 ONTARIO INC. Notes to Combined Financial Statements Three Month Period Ended June 30, 2020

(Unaudited – See Notice to Reader)

• (B) IFRS 16 Leases

Under ASPE, Paragon previously recognised operating lease expenses as incurred. Under IFRS, Paragon would recognise right-of-use assets and the corresponding lease liabilities in accordance with IFRS 16. As such, an increase in the depreciation expense for right-of-use assets and corresponding interest expense for lease liabilities were adjusted to reflect the differences in recognition basis between ASPE and IFRS. In addition, the corresponding occupancy costs were reduced.

F-24

SCHEDULE ‘C’

Audited Combined Financial Statements of Paragon as at March 31, 2020

F-25

PARAGON INC. AND 2408761 ONTARIO INC. Combined Financial Statements Year Ended March 31, 2020

F-26

PARAGON INC. AND 2408761 ONTARIO INC. Index to Combined Financial Statements

Year Ended March 31, 2020

	Page
AUDITORS' REPORT	1 - 2
COMBINED FINANCIAL STATEMENTS
Combined Balance Sheet	3
Combined Statement of Deficit	4
Combined Statement of Income	5
Combined Statement of Cash Flow	6
Notes to Combined Financial Statements	7 - 10

F-27

==> picture [533 x 59] intentionally omitted <==

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Paragon Inc. and 2408761 Ontario Inc.

Opinion

We have audited the combined financial statements of Paragon Inc. and 2408761 Ontario Inc. (the Companies), which comprise the combined balance sheets as at March 31, 2020 and 2019, and the combined statements of deficit, income and cash flow for the years then ended, and notes to the combined financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying combined financial statements present fairly, in all material respects, the financial position of the Companies as at March 31, 2020 and 2019, and its results of operations and its cash flow for the years then ended in accordance with Canadian accounting standards for private enterprises.

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Combined Financial Statements section of our report. We are independent of the Companies in accordance with the ethical requirements that are relevant to our audit of the combined financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the Combined Financial Statements

Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with Canadian accounting standards for private enterprises, and for such internal control as management determines is necessary to enable the preparation of combined financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the combined financial statements, management is responsible for assessing the Companies's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless management either intends to liquidate the Companies or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Companies's financial reporting process.

(continues)

1

F-28

Independent Auditor's Report to the Shareholders of Paragon Inc. and 2408761 Ontario Inc. (continued)

Auditor's Responsibilities for the Audit of the Combined Financial Statements

Our objectives are to obtain reasonable assurance about whether the combined financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these combined financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

•  Identify and assess the risks of material misstatement of the combined financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

•  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companies’s internal control.

•  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

•  Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Companies’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the combined financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Companies to cease to continue as a going concern.

•  Evaluate the overall presentation, structure and content of the combined financial statements, including the disclosures, and whether the combined financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Toronto, Ontario October 6, 2020

Raskin and Associates

Chartered Professional Accountants Licensed Public Accountants

2

F-29

PARAGON INC. AND 2408761 ONTARIO INC. Combined Balance Sheet March 31, 2020

	2020 2019
ASSETS CURRENT Cash and cash equivalent Accounts receivable Prepaid expenses Future income taxes Due from related parties_(Note 4) CAPITAL ASSETS(Note 3) LIABILITIES AND SHAREHOLDERS' DEFICIENCY CURRENT Accounts payable Income taxes payable Goods and services tax payable Due to related parties(Note 4) SHAREHOLDERS' DEFICIENCY Share capital(Note 6)_ Deficit	$ 989,544 $ 2,680,714 480,388 349,398 123,606 109,894 - 16,000 21,175 -
	1,614,713 3,156,006 20,671 5,932
	$ 1,635,384 $ 3,161,938
	$ 1,766,643 $ 2,772,383 226 226 55,868 21,334 - 637,136
	1,822,737 3,431,079
	2 2 (187,355) (269,143)
	(187,353) (269,141)
	$ 1,635,384 $ 3,161,938

APPROVED BY SOLE DIRECTOR

____ Director_

The accompanying notes form an integral part of these financial statements.

3

F-30

PARAGON INC. AND 2408761 ONTARIO INC. Combined Statement of Deficit Year Ended March 31, 2020

	2020 2019
DEFICIT - BEGINNING OF YEAR NET INCOME (LOSS) FOR THE YEAR DEFICIT - END OF YEAR	$ (269,143) $ (258,834) 81,788 (10,309)
	$ (187,355) $ (269,143)

The accompanying notes form an integral part of these financial statements.

4

F-31

PARAGON INC. AND 2408761 ONTARIO INC. Combined Statement of Income Year Ended March 31, 2020

Total value of amounts recovered REVENUES Recovery services Commission DIRECT COSTS Administration operating fee Direct wages Other direct cost GROSS PROFIT EXPENSES Rent Office Salaries and wages Repairs and maintenance Insurance Professional fees Utilities Telephone Advertising and promotion Sub-contracts Amortization Interest and bank charges Travel Bad debts Vehicle INCOME (LOSS) FROM OPERATIONS OTHER INCOME INCOME (LOSS) BEFORE INCOME TAXES INCOME TAXES NET INCOME (LOSS)	2020 2019 $ 141,624,577 $ 121,809,853 12,319,376 10,517,848 589,483 417,578
	12,908,859 10,935,426
	7,655,000 6,560,000 2,331,834 2,140,131 1,491,422 1,559,281
	11,478,256 10,259,412
	1,430,603 676,014
	481,585 517,018 248,748 198,951 240,000 207,017 136,121 145,845 104,936 85,343 72,709 69,102 37,186 30,487 23,306 21,331 11,739 17,675 4,794 5,363 3,300 3,000 849 6,185 280 8,656 62 24 - 326
	1,365,615 1,316,323
	64,988 (640,309) 32,800 635,000
	97,788 (5,309) 16,000 5,000
	$ 81,788 $ (10,309)

The accompanying notes form an integral part of these financial statements.

5

F-32

PARAGON INC. AND 2408761 ONTARIO INC. Combined Statement of Cash Flow Year Ended March 31, 2020

	2020 2019
OPERATING ACTIVITIES Net income (loss) Items not affecting cash: Amortization of property, plant and equipment Future income taxes Changes in non-cash working capital: Accounts receivable Accounts payable Prepaid expenses Government remittances payable Cash flow from (used by) operating activities INVESTING ACTIVITY Purchase of short term investments FINANCING ACTIVITY Advances to related parties DECREASE IN CASH FLOW Cash - beginning of year CASH - END OF YEAR CASH CONSISTS OF: Cash	$ 81,788 $ (10,309) 3,300 3,000 16,000 5,000
	101,088 (2,309)
	(130,990) (203,309) (1,005,739) 1,195,014 (13,712) (73,309) 34,534 (44,717)
	(1,115,907) 873,679
	(1,014,819) 871,370
	- 155,678
	(676,351) (1,597,176)
	(1,691,170) (570,128) 2,680,714 3,200,695
	$ 989,544 $ 2,630,567
	$ 989,544 $ 2,680,714

The accompanying notes form an integral part of these financial statements.

6

F-33

PARAGON INC. AND 2408761 ONTARIO INC. Notes to Combined Financial Statements Year Ended March 31, 2020

1. DESCRIPTION OF OPERATIONS

Paragon Inc. and 2408761 Ontario Inc. (the "Company") are a companies domiciled in Canada and incorporated provincially under the Business Corporations Act of Ontario. Paragon Inc's principal business activity is the recovery and related services for secured loan products. 2408761 Ontario Inc's principal business is the sale vehicles on behalf of a 3rd party.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation

The combined financial statements were prepared in accordance with Canadian accounting standards for private enterprises (ASPE).

(b) Revenue recognition

The Companies recognizes revenues from services when the services are completed and the fees are earned.

Recovery services are transaction based fees that are recognized upon performance.

Commission revenue is recognized when the vehicle has been sold, ownership has been transfered and funds were collected from the customer.

Other amounts received from customers in advance of services being provided are recorded as deferred revenue when received and reflected in income when the service has been completed.

(c) Cash and cash equivalents

Cash includes cash and cash equivalents. Cash equivalents are investments in treasury bills and are valued at cost plus accrued interest. The carrying amounts approximate fair value because they have maturities at the date of purchase of less than ninety days.

(d) Property, plant and equipment

Property, plant and equipment is stated at cost or deemed cost less accumulated amortization. Property, plant and equipment is amortized over its estimated useful life on a declining balance basis at the following rates and methods:

Motor vehicles	30%	declining balance method
Computer equipment	55%	declining balance method
Furniture and fixtures	20%	declining balance method

The Companies regularly reviews its property, plant and equipment to eliminate obsolete items. Government grants are treated as a reduction of property, plant and equipment cost.

Property, plant and equipment acquired during the year but not placed into use are not amortized until they are placed into use.

(continues)

7

F-34

PARAGON INC. AND 2408761 ONTARIO INC. Notes to Combined Financial Statements Year Ended March 31, 2020

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(e) Future income taxes

Income taxes are reported using the future income taxes method, as follows: current income tax expense is the estimated income taxes payable for the current year after any refunds or the use of losses incurred in previous years, and future income taxes reflect:

•  the temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts used for tax purposes;

•  the benefit of unutilized tax losses that will more likely than not be realized and carried forward to future years to reduce income taxes.

Future income taxes are estimated using the rates enacted by tax law and those substantively enacted for the years in which future income taxes assets are likely to be realized, or future income tax liabilities settled. The effect of a change in tax rates on future income tax assets and liabilities is included in earnings in the period when the change is substantively enacted.

(f) Leases

Leases are classified as either capital or operating leases. At the time the Companies enters into a capital lease, an asset is recorded with its related long-term obligation to reflect the acquisition and financing. Rental payments under operating leases are expensed as incurred.

(g) Financial instruments policy

The Companies initially measures its financial assets and liabilities at fair value, except for certain non-arm's length transactions.

The Companies subsequently measures all its financial assets and financial liabilities at amortized cost using the effective interest rate method, except for investments in equity instruments that are quoted in an active market and derivatives, which are measured at fair value. Changes in fair value are recognized in net income.

Financial assets measured at amortized cost include cash and cash equivelent, prepaid expenses and accounts receivable.

Financial liabilities measured at amortized cost include the accounts payable and accrued liabilities and government remittances payable.

Transaction costs are recognized in net earnings in the period incurred. However, financing and transaction costs associated with debt are netted against the carrying value and amortized over the term of the related debt.

(h) Measurement uncertainty

The preparation of financial statements in conformity with Canadian accounting standards for private enterprises requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Such estimates are periodically reviewed and any adjustments necessary are reported in earnings in the period in which they become known. Actual results could differ from these estimates.

8

F-35

PARAGON INC. AND 2408761 ONTARIO INC. Notes to Combined Financial Statements Year Ended March 31, 2020

3. PROPERTY, PLANT AND EQUIPMENT

Motor vehicles Computer equipment	2020 2019 Accumulated Net book Net book Cost amortization value value
	$ 18,039 $ - $ 18,039 $ - 43,979 41,347 2,632 5,932
	$ 62,018 $ 41,347 $ 20,671 $ 5,932

4. DUE TO RELATED PARTIES

Current portion due from related party Due from Colmvest Holdings Corporation Current portion due to related party Due to Colmvest Holdings Corporation	2020 2019
	$ 21,175 $ -
	$ - $ 637,136

Advances to related companies are non-interest bearing and have no set repayment terms. The companies are related by common control. The amount has been classified as current because the Company is expected to collect the funds next fiscal year.

5. RELATED PARTY TRANSACTIONS

The following is a summary of the Companies's related party transactions:

2323296 Ontario Inc Company under common control Occupancy cost paid during the year Colmvest Holdings Corporation Parent company Administration operating fee paid during the year	2020 2019
	$ 60,000 $ 150,000 $ 7,655,000 $ 6,590,000

These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

9

F-36

PARAGON INC. AND 2408761 ONTARIO INC. Notes to Combined Financial Statements Year Ended March 31, 2020

6. SHARE CAPITAL

Authorized:

Unlimited Common voting shares

Issued: Common shares Class #1

	2020			2019
$		2	$		2

7. FINANCIAL INSTRUMENTS

The Companies is exposed to various risks through its financial instruments and has a comprehensive risk management framework to monitor, evaluate and manage these risks. The following analysis provides information about the Companies's risk exposure and concentration as of March 31, 2020.

(a) Credit risk

Credit risk arises from the potential that a counter party will fail to perform its obligations. The Companies is exposed to credit risk from customers. In order to reduce its credit risk, the Companies reviews a new customer's credit history before extending credit and conducts regular reviews of its existing customers' credit performance. An allowance for doubtful accounts is established based upon factors surrounding the credit risk of specific accounts, historical trends and other information. The Companies has a significant number of customers which minimizes concentration of credit risk.

(b) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Companies is exposed to this risk mainly in respect of its receipt of funds from its customers and other related sources, accounts payable and accrued liabilities and government remittances payable.

Unless otherwise noted, it is management’s opinion that the company is not exposed to market risk, currency risk, interest rate risk or significant other price risks arising from these financial instruments.

8. ECONOMIC DEPENDENCE

The Companies generates 90% of its revenue from four major financial institutions. Management is of the opinion that the Company will be able to continue it’s operations as a going concern with only one major financial intuition.

9. SUBSEQUENT EVENTS

Subsequent to the fiscal year end, the Company's shareholder agreed to sell all of the assets of the business which is considered to be the core business. The Company's business activities are anticpiated to cease on July 31, 2020

10

F-37

PARAGON INC. AND 2408761 ONTARIO INC. Notes to Combined Financial Statements Year Ended March 31, 2020

10. ASPE TO IFRS RECONCILIATION

Substantially all of the assets used in the business of Paragon were acquired by ISC, through its wholly owned subsidiary ESC, on July 31st, 2020. As a requirement of the acquisition and applicable securities laws, Paragon’s financial statements must be included in a Business Acquisition Report (“BAR”). Paragon’s financial statements were prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) applicable to private enterprises, which are Canadian accounting standards for private enterprises (“ASPE”) in Part II of the Chartered Professional Accountants Handbook. The recognition, measurement and disclosure requirements of ASPE differ from those of Canadian GAAP applicable to publicly accountable enterprises, which are International Financial Reporting Standards (“IFRS”) incorporated into the Handbook. The pro forma financial statements included in the document include adjustments related to the acquired business and present pro forma information prepared using principles that are consistent with the accounting principles by ISC. The BAR requires an ASPE to IFRS reconciliation for the combined statements of profit and loss for each period presented. The historical financial statements of Paragon have been adjusted to reclassify line items to conform to ISC's expected presentation. Additional reclassifications may be necessary once the financial statement presentation for ISC is finalised. The period presented in this reconciliation are the year ended March 31, 2020 and 2019.

Combined statements of Profit and Loss For the year ended March 31, 2020

Combined statements of Profit and Loss For the year ended March 31, 2020
	2020	Reconciliation	2020
(CAD dollars)	ASPE	to IFRS	IFRS
	(audited)	(unaudited)	(unaudited)
Revenue	$ 12,908,859	$ 185,417	$ 13,094,276
Expenses
Wages and salaries	2,571,834	-	2,571,834
Cost of goods sold	9,146,422	272,176	9,418,598
Depreciation and amortization	3,300	412,252	415,552
Information technology services	-	-	-
Occupancy costs	481,585	(423,268)	58,317
Professional and consulting services	72,709	-	72,709
Financial services	-	-	-
Other	567,172	-	567,172
Total expenses	12,843,022	261,160	13,104,182
Net Income before items noted below	65,837	(75,743)	(9,906)
Other income	32,800	-	32,800
Finance (expense) income
Interest income	-	-	-
Interest expense	(849)	(10,448)	(11,297)
Net finance expense	(849)	(10,448)	(11,297)
Income before tax	97,788	(86,191)	11,597
Income tax expense	(16,000)	-	(16,000)
Net income	$ 81,788	$ (86,191)	$ (4,403)

F-38

PARAGON INC. AND 2408761 ONTARIO INC. Notes to Combined Financial Statements Year Ended March 31, 2020

Combined statements of Profit and Loss For the year ended March 31, 2019

	2019	Reconciliation	2019
(CAD dollars)	ASPE	to IFRS	IFRS
	(audited)	(unaudited)	(unaudited)
Revenue	$ 10,935,426	$ 239,223	$ 11,174,649
Expenses
Wages and salaries	2,347,148	-	2,347,148
Cost of goods sold	8,119,281	247,316	8,366,597
Depreciation and amortization	3,300	103,063	106,363
Information technology services	-	-	-
Occupancy costs	517,018	(105,817)	411,201
Professional and consulting services	69,102	-	69,102
Financial services	-	-	-
Other	513,701	-	513,701
Total expenses	11,569,550	244,562	11,814,112
Net Income before items noted below	(634,124)	(5,339)	(639,463)
Other income	635,000	-	635,000
Finance (expense) income
Interest income	-	-	-
Interest expense	(6,185)	(5,414)	(11,599)
Net finance expense	(6,185)	(5,414)	(11,599)
Income before tax	(5,309)	(10,753)	(16,062)
Income tax expense	(5,000)	-	(5,000)
Net income	$ (10,309)	$ (10,753)	$ (21,062)

(A) IFRS 15 revenue from contracts with customers

Under ASPE, Paragon previously recognised revenue from services when the services are completed, and fees are earned. Under IFRS, revenue from a contract with customer would be recognised as the performance obligations are being satisfied over time or at the point in time of service delivery. As such, a decrease in revenue was adjusted to reflect the differences in recognition basis between ASPE and IFRS. Moreover, amounts recognised in revenue before bills can be issued are recorded as "contract assets". Costs Paragon incurred in relation to the fulfilment of a contract but prior to reaching a performance milestone are recorded as “contract asset” on the Balance Sheet. Once the milestone is achieved, these costs are recorded in the Statement of Income.

F-39

PARAGON INC. AND 2408761 ONTARIO INC. Notes to Combined Financial Statements Year Ended March 31, 2020

(B) IFRS 16 Leases

Under ASPE, Paragon previously recognised operating lease expenses as incurred. Under IFRS, Paragon would recognise right-of-use assets and the corresponding lease liabilities in accordance with IFRS 16. As such, an increase in the depreciation expense for right-of-use assets and corresponding interest expense for lease liabilities were adjusted to reflect the differences in recognition basis between ASPE and IFRS. In addition, the corresponding occupancy costs were reduced.

F-40