TERAGO Inc. — Interim / Quarterly Report 2021

Nov 10, 2021

TERAGO INC. Interim Condensed Consolidated Financial Statements Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)

Contents	Page(s)
Interim Condensed Consolidated Financial Statements
Statements of Financial Position	2
Statements of Comprehensive Loss	3
Statements of Cash Flows	4
Statements of Changes in Equity	5
Notes to Financial Statements	6-15

TERAGO INC. Unaudited Interim Condensed Consolidated Statements of Financial Position (In thousands of Canadian dollars)

Note Assets Cash and cash equivalents 4 $ Accounts receivable 4 Prepaid expenses and other assets Current portion of contract costs 3 Current portion of other long-term assets 9 Total current assets Network assets, property and equipment 5 Intangible assets 6 Goodwill 6 Contract costs 3 Other long-term assets 9 Total non-current assets Total Assets $ Liabilities Accounts payable and accrued liabilities $ Current portion of contract liabilities 3 Current portion of long-term debt 7 Current portion of lease liabilities 8 Total current liabilities Decommissioning and restoration obligations Contract liabilities 3 Long-term debt 7 Lease liabilities 8 Total non-current liabilities Total Liabilities Shareholders' Equity Share capital 14 Contributed surplus Warrant reserve 14 Deficit Total Shareholders' Equity $ Total Liabilities and Shareholders' Equity $	September 30 2021	December 31 2020
	6,686$ 3,023 708 520 53 10,990 54,979 16,051 19,419 501 4 90,954 101,944 $ 4,551$ 237 2,250 7,658 14,696 454 275 17,854 18,977 37,560 52,256 117,767 26,943 743 (95,765) 49,688 $ 101,944 $	5,858 2,500 804 324 79
		9,565 56,649 17,097 19,419 397 41
		93,603
		103,168
		5,403 193 3,000 7,236
		15,832 360 187 25,144 20,779
		46,470
		62,302
		103,223 27,191 - (89,548)
		40,866
		103,168

On behalf of the Board:

(signed) “Ken Campbell” (signed) “Gary Sherlock” Director Director

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

2

TERAGO INC.

Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss (In thousands of Canadian dollars, except per share amounts)

Note Revenue 3 Expenses Cost of services Salaries and related costs Other operating expenses Depreciation of network assets, property, and equipment 5 Amortization of intangible assets 6 Loss from operations Foreign exchange gain (loss) Finance costs Finance income Loss before income taxes Income taxes Income tax expense Net loss and comprehensive loss Deficit, beginning of period Deficit, end of period Basic & Diluted loss per share 11 Basic & Diluted weighted average number of shares outstanding (in 000’s)	Three months ended September 30 Nine months ended September 30 2021 2020 2021 2020
	$ 10,876 11,279 32,608 34,544 2,841 2,506 8,038 7,093 3,755 5,100 11,610 12,683 1,959 2,051 5,385 5,860 3,307 3,328 9,823 10,018 334 373 1,046 1,148
	12,196 13,358 35,902 36,802
	(1,320) (2,079) (3,294) (2,258) (19) (54) 21 (208) (929) (1,053) (2,981) (3,662) 13 7 37 90
	$ (2,255) (3,179) (6,217) (6,038)
	- - - -
	$ (2,255) (3,179) (6,217) (6,038)
	$ (93,510) (84,148) (89,548) (81,289)
	$ (95,765) (87,327) (95,765) (87,327)
	$ (0.11) (0.19) (0.34) (0.36) 19,635 16,715 18,471 16,673

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

3

TERAGO INC. Unaudited Interim Condensed Consolidated Statements of Cash Flows (In thousands of Canadian dollars)

Note Operating Activities Net loss for the period Adjustments to reconcile net loss to net cash provided by operating activities: Severance, acquisition, and other costs Depreciation of network assets, property and equipment 5 Amortization of intangible assets 6 Stock-based compensation expense 10 Finance costs Finance income Loss on adjustments and disposal of network assets and intangible assets 5, 8 Impairment of assets and related charges 3, 5 Severance, acquisition, and other costs paid Stock-based compensation paid Government grants 13 Changes in non-cash working capital items: Accounts receivable Prepaid expenses Accounts payable and accrued liabilities Contract liabilities Contract costs Cash from Operating Activities Investing Activities Purchase of network assets, property, and equipment 5 Change in non-cash working capital related to network assets, property and equipment and intangible assets Cash used in Investing Activities Financing Activities Proceeds from issuance of warrants 14 Proceeds from equity offering 14 Proceeds from debt borrowings Interest swap settlement Interest paid, net of received Repayment of long-term debt 7 Financing costs incurred Payments of lease liabilities 8 Government grants 13 Cash from (used in) Financing Activities Net change in cash and cash equivalents, during the period Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period

Three months ended September 30 Nine months ended September 30 2021 2020 2021 2020 (2,255) (3,179) (6,217) (6,038) 513 1,323 1,032 1,472 3,307 3,328 9,823 10,018 334 373 1,046 1,148 155 475 634 1,239 929 1,053 2,981 3,662 (13) (7) (37) (90) 46 46 169 121 81 309 308 485 (225) (165) (857) (686) - - (150) - (413) - (813) - (173) (70) (236) (138) 188 31 75 (422) (22) 204 (765) 270 121 2 132 2 14 (5) (318) 14 2,587 3,718 6,807 11,057 (1,491) (1,996) (6,032) (6,114) (399) (107) (321) 210 (1,890) (2,103) (6,353) (5,904) - - 743 - - - 13,812 - - - - 3,100 - - - (629) (240) (631) (943) (916) (1,950) (750) (7,950) (2,850) - (86) (85) (267) (1,906) (1,830) (5,828) (5,590) 225 - 625 927 (3,871) (3,297) 374 (6,225) (3,174) (1,682) 828 (1,072) 9,860 9,296 5,858 8,686 6,686 7,614 6,686 7,614

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

4

TERAGO INC. Unaudited Interim Condensed Consolidated Statements of Changes in Equity (In thousands of Canadian dollars)

	Share	Capital	Capital
	Number				Contributed		Warrant
	(in 000’s)		Amount		Surplus		Reserve	**Deficit **			Total
Balance, January 1, 2021	16,762	$	103,223	$	27,191	$	-	(89,548)		$	40,866
Issuance of shares upon exercise of options	1		3		(3)		-		-		-
Stock-based compensation	-		-		420		-		-		420
Issuance of common shares from vesting of RSUs/PSUs	69		515		(515)		-		-		-
Shares deducted for payment of withholding tax	(20)		-		(150)		-		-		(150)
Issuance of shares and
warrants for equity offering (net	2,802		13,812		-		743		-		14,555
of issuance costs)
Issuance of shares for directors'	39		214		-		-		-		214
fees
Net loss and comprehensive loss	-		-		-		-	(6,217)			(6,217)
Balance, September 30, 2021	19,653	$	117,767	$	26,943	$	743	(95,765)		$	49,688
	Share	Capital
	Number				Contributed		Warrant
	(in 000’s)		Amount		Surplus		Reserve	Deficit			Total
Balance, January 1, 2020	16,628	$	101,846	$	27,548	$	-	(81,289)		$	48,105
Issuance of shares upon exercise of options	2		4		(4)		-		-		-
Issuance of common shares	159		1,084		(1,084)		-		-		-
from vesting of RSUs/PSUs
Stock-based compensation	-		-		1,030		-		-		1,030
Issuance of shares for directors' fees	34		209		-		-		-		209
Shares deducted for payment of withholding tax	(73)		-		(495)		-		-		(495)
Net loss and comprehensive loss	-		-		-		-	(6,038)			(6,038)
Balance, September 30, 2020	16,750	$	103,143	$	26,995	$	-	(87,327)		$	42,811

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

5

TERAGO INC. Notes to the Interim Condensed Consolidated Financial Statements (In thousands, except for per share amounts)

1. Reporting Entity

TeraGo Inc. (the “Company”) provides businesses across Canada with connectivity services, colocation services and enterprise infrastructure cloud services. The Company’s head office is located in Canada at Suite 800 – 55 Commerce Valley Drive West, Thornhill, Ontario. The Company was incorporated under the Canada Business Corporations Act on December 21, 2000 and owns and operates a carrier-grade, fixed wireless, fibre-based, IP communications network, as well as cloud and colocation facilities in Canada targeting enterprise customers that require cloud, colocation, and connectivity services. The Company’s common shares are listed on the Toronto Stock Exchange (“TSX”) under the symbol TGO.

2. Basis of Preparation and Presentation

These unaudited interim condensed consolidated financial statements (“interim financial statements”) were prepared using the same accounting policies and methods as those used in the Company’s consolidated financial statements for the year ended December 31, 2020 (the “2020 Consolidated Financial Statements”). These interim financial statements are in compliance with International Accounting Standard 34, Interim Financial Reporting (“IAS 34”). Accordingly, certain information and footnote disclosure normally included in annual financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board ("IASB"), have been omitted or condensed.

The preparation of financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements have been set out in Note 2 of the Company’s 2020 Consolidated Financial Statements. The notes presented in these interim financial statements include only significant changes and transactions that have occurred since the last fiscal year. Accordingly, these interim financial statements should be read in conjunction with the Company’s 2020 Consolidated Financial Statements.

The Company's operating results are subject to seasonal fluctuations that may be materially impacted quarter to quarter and, thus, one quarter's operating results are not necessarily indicative of a subsequent quarter's operating results.

The policies applied in these interim financial statements are based on IFRS issued and outstanding as at September 30, 2021. The Board of Directors authorized the interim financial statements for issue on November 10, 2021.

These interim financial statements include the accounts of TeraGo Inc. and its wholly owned subsidiaries, all intercompany transactions and balances have been eliminated on consolidation.

(a) Functional and Presentation Currency

These consolidated financial statements are presented in Canadian dollars, which is the Company’s functional currency.

3. Revenue

The Company’s operations, main sources of revenue, and methods for recognition are those described in Note 3 of the 2020 Consolidated Financial Statements. The Company’s revenue is primarily derived from contracts with customers.

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

6

TERAGO INC. Notes to the Interim Condensed Consolidated Financial Statements (In thousands, except for per share amounts)

a) Disaggregation of revenue

In the following table, the Company’s disaggregates revenue into two primary categories that depict the nature of its revenue streams.

Cloud and Colocation Revenue $ Connectivity Revenue $	Three months ended September 30 Nine months ended September 30 2021 2020 2021 2020
	4,369 4,167 12,796 12,488 6,507 7,112 19,812 22,056
	10,876 11,279 32,608 34,544

The comparative numbers for the three and nine months ended September 30, 2020 have been changed to conform with the presentation of revenue stream allocations for the three and nine months ended September 30, 2021.

b) Contract Costs

The following table summarizes the changes in contract costs during the period:

Balance, June 30, 2021 $ Incremental commissions capitalized Impairment charges from contract terminations Amortization Balance, September 30, 2021 Less: current $ Balance, January 1, 2021 $ Incremental commissions capitalized Impairment charges from contract terminations Amortization Balance, September 30, 2021 Less: current $	2021
	1,045 116 (10) (130)
	1,021 (520)
	501
	2021
	721 680 (18) (362)
	1,021 (520)
	501

7

TERAGO INC. Notes to the Interim Condensed Consolidated Financial Statements (In thousands, except for per share amounts)

c) Contract Liabilities

The following is a table that summarizes the change in contract liabilities during the period:

Balance, June 30, 2021 $ Additions from provisioning Revenue recognized for services provided Write-offs from contract terminations Balance, September 30, 2021 Less: current $ Balance, January 1, 2021 $ Additions from provisioning Revenue recognized for services provided Write-offs from contract terminations Balance, September 30, 2021 Less: current $	2021
	391 224 (98) (5)
	512 (237)
	275
	2021
	380 362 (219) (11)
	512 (237)
	275

d) Unsatisfied Performance Obligations

The aggregate amount of revenue allocated to performance obligations that are unsatisfied as of September 30, 2021 was $48,604 (December 31, 2020 - $48,146). This represents contractual service obligations that the Company has yet to fulfill under its contracts with customers. The Company expects to recognize this revenue over the next 3 years which represents the average remaining contractual terms prior to renewals. This amount excludes obligations owing for month-to-month contracts as the unsatisfied term is calculated monthly.

4. Current Assets

Details of selected current asset balances are as follows:

a) Cash and cash equivalents

The Company’s cash and cash equivalents are comprised of bank balances at major Canadian financial institutions.

b) Accounts receivable

The Company’s accounts receivable is comprised of the following:

Trade receivables $ Loss allowances Other $	September 30 2021 2,752 $ (58) 329 3,023 $	December 31 2020
		2,465 (66) 101
		2,500

8

TERAGO INC. Notes to the Interim Condensed Consolidated Financial Statements (In thousands, except for per share amounts)

5. Network Assets, Property and Equipment

Cost Balance, January 1, 2021 $ Additions Disposals Reclassifications / Adjustments Impairment Balance, September 30, 2021 $ Accumulated Depreciation Balance, January 1, 2021 $ Depreciation for the period Disposals Reclassifications / Adjustments Impairment Balance, September 30, 2021 $ Net Book Value, December 31, 2020 $ Net Book Value, September 30, 2021 $	Network Assets Cloud & Datacentre Infrastructure Computer Equipment Office Furniture and Equipment Leasehold Improvements Vehicles Right-of- use Assets Total 127,403 $ 12,131 $ 5,079 $ 2,323 $ 3,070 $ 49 $ 35,954 $ 186,009 5,462 481 76 8 5 - 244 6,276 (508) (1) - - - - (116) (625) (5) 4 - - - - 2,317 2,316 (559) - - - - - - (559)
	131,793$ 12,615$ 5,155$ 2,331$ 3,075$ 49$ 38,399$ 193,417 104,002 $ 4,884 $ 4,974 $ 2,305 $ 2,452 $ 49 $ 10,694 $ 129,360 4,575 698 46 14 228 - 4,262 9,823 (354) - - - - - (112) (466) (1) 1 - - - - (10) (10) (269) - - - - - - (269)
	107,953$ 5,583$ 5,020$ 2,319$ 2,680$ 49$ 14,834$ 138,438
	23,401$ 7,247$ 105$ 18$ 618$ -$ 25,260$ 56,649
	23,840$ 7,032$ 135$ 12$ 395$ -$ 23,565$ 54,979

During the three and nine months ended September 30, 2021, the Company disposed of assets with net book value of $44 (Cost of $154 less accumulated depreciation of $110, $nil of which was recognized against lease liabilities) and $159 (Cost of $625 less accumulated depreciation of $466, $4 of which was recognized against lease liabilities) respectively, which primarily represents replaced assets and obsolete assets disposed of for negligible value. The corresponding loss on disposal of $44 and $155 for the three and nine months ended September 30, 2021 is included in other operating expenses (2020 - $46 and $121, respectively).

Impairment of Property, Plant, and Equipment

As a result of the loss of certain customers and customer locations in primarily connectivity offerings during the three and nine months ended September 30, 2021, the Company determined that certain network assets were not recoverable. As a result, the assets were written down to their recoverable amount and an impairment charge of $71 (Cost of $121 less accumulated depreciation of $50) and $290 (Cost of $559 less accumulated depreciation of $269) respectively, was recorded in other operating expenses on the statement of comprehensive loss in the period (2020 - $277 and $449, respectively).

9

TERAGO INC. Notes to the Interim Condensed Consolidated Financial Statements (In thousands, except for per share amounts)

6. Intangible Assets and Goodwill

Cost Balance, January 1, 2021 $ Additions Disposals / Adjustments Impairment Balance, September 30, 2021 $ Accumulated Depreciation Balance, January 1, 2021 $ Amortization for the period Impairment Balance, September 30, 2021 $ Net Book Value, December 31, 2020 $ Net Book Value, September 30, 2021 $	Radio spectrum licenses Computer Software Customer relationships Other Total Intangibles Goodwill Total Intangibles and Goodwill 12,649 $ 9,868 $ 18,021 $ 4,831 $ 45,369 $ 19,419 $ 64,788 - - - - - - - - - - - - - - - - - - - - -
	12,649$ 9,868$ 18,021$ 4,831$ 45,369$ 19,419$ 64,788 2,371 $ 9,800 $ 13,022 $ 3,079 $ 28,272 $ - $ 28,272 - 53 901 92 1,046 - 1,046 - - - - - - -
	2,371$ 9,853$ 13,923$ 3,171$ 29,318$ -$ 29,318
	10,278$ 68$ 4,999$ 1,752$ 17,097$ 19,419$ 28,272
	10,278$ 15$ 4,098$ 1,660$ 16,051$ 19,419$ 35,470

7. Long-term Debt

Term debt facility $ less: financing fees less: current portion $	September 30 2021 20,331 $ (227) 20,104 (2,250) 17,854 $	December 31 2020
		28,405 (261)
		28,144 (3,000)
		25,144

Term Debt Facility

In June 2014, the Company entered into an agreement with a syndicate led by the National Bank of Canada (“NBC”) to provide a $50,000 credit facility that is principally secured by a general security agreement over the Company’s assets.

In March 2015, the Company entered into an amended agreement with the syndicate led by NBC that increased the credit facility by $35,000 ($30,000 increase to the term debt facility and $5,000 increase to the revolving facility) and extended the term from June 6, 2017 to June 30, 2018. Other terms were substantially consistent with the existing credit facilities.

In June 2017, the Company entered into a second amended agreement with the syndicate led by NBC that reduced the term debt facility from $50,000 to $40,000 (as a result of principal previously repaid), reduced the quarterly principal installment from $1,250 to $1,000 and extended the term from June 30, 2018 to June 14, 2021. Other terms were substantially consistent with the existing credit facilities.

In March 2019, the Company entered into a third amended agreement with the syndicate led by NBC which had the effect of excluding the impact of IFRS 16 on certain covenant calculations, and thereby maintaining accounting definitions in effect when the credit agreement was first entered into in June 2014.

In June 2020, the Company entered into an amended and restated credit agreement with a syndicate led by Royal Bank of Canada (“RBC”) to replace the Company’s existing credit facilities which reduced the credit facility to $35,000 (from $75,000) and extended the term from June 14, 2021 to June 30, 2022. Effective June 30, 2020, NBC ceased to be an administrative agent and a lender to the Company and assigned its right and obligations to RBC, in its capacity as

10

TERAGO INC. Notes to the Interim Condensed Consolidated Financial Statements (In thousands, except for per share amounts)

administrative agent.

In June 2021, the Company entered into an amending agreement with the syndicate led by RBC to extend the term of the Company’s credit facility to June 30, 2023.

The total $35,000 facility that matures June 30, 2023 is made up of the following:

• $5,000 revolving facility which bears interest at prime plus a margin percent. At September 30, 2021, $nil was drawn and outstanding on the revolving facility (December 31, 2020 - $nil). Letters of credit issued under the facility totaled $625 as of September 30, 2021 (December 31, 2020 - $625).

• $30,000 term facility which bears interest at prime or Banker’s Acceptance (at the Company’s option) plus a margin percent and is repayable in quarterly principal installments of $563. This facility was fully drawn upon signing the amended and restated credit agreement. At September 30, 2021, $20,500 of the term facility principal balance outstanding was in a banker’s acceptance bearing interest at prime plus a margin percent (December 31, 2020 - $28,400) and the remaining $50 was in a prime rate loan (December 31, 2020 - $100). The effective interest rate on the Company’s long-term debt on September 30, 2021 was 4.19%.

During the three and nine months ended September 30, 2021, the Company incurred $nil and $85, respectively, in finance costs to amend and extend the credit facility. Financing fees incurred as part of the Company’s debt origination and modifications have been recorded as a reduction in the carrying amount of the debt and deferred and amortized using the effective interest method over the remaining term of the facility.

The amended and restated RBC facility is subject to certain financial and non-financial covenants which were substantially carried over from the previous credit agreement and the Company is in compliance as at September 30, 2021. Under this facility, the Company is subject to a cash flow sweep that could accelerate a certain amount of principal repayment based on a calculation outlined by the credit agreement not later than 120 days after the end of each fiscal year.

8. Leases

The Company has many leases of which it is a lessee. The major categories of leases are building leases for the Company’s fixed wireless services, datacentre leases for colocation and cloud service offerings, network equipment, corporate offices, and warehouses. Lease terms vary by category and range from 1 to 15 years.

a) Right-of-use Asset

Changes in the right-of-use asset are summarized in Note 5 of these Interim Condensed Consolidated Financial Statements.

b) Lease Liability

The following table is a summary of the changes in the lease liability during the period:

Lease liabilities, June 30, 2021 $ Additions Terminations Interest on lease liabilities Modifications Lease payments Lease liabilities, September 30, 2021 less: current portion $	2021 27,431 - (2) 618 494 (1,906) 26,635 (7,658) 18,977

11

TERAGO INC. Notes to the Interim Condensed Consolidated Financial Statements (In thousands, except for per share amounts)

Lease liabilities, January 1, 2021 $ Additions Terminations Interest on lease liabilities Modifications Lease payments Lease liabilities, September 30, 2021 less: current portion $	2021
	28,015 244 (10) 1,897 2,317 (5,828)
	26,635 (7,658)
	18,977

9. Other Long-Term Assets/Liabilities

(a) Other long-term assets

Contract asset less: current portion

$ $	September 30 2021 57 57 (53) 4 $	December 31 2020
		120
		120 (79)
		41

10. Stock-Based Compensation

(a) Stock Options

For the three and nine months ended September 30, 2021, the Company granted 16 and 155 stock options, respectively, to certain key executives (2020 – 59 and 194, respectively).

For the three and nine months ended September 30, 2021, the Company recorded stock-based compensation related to stock options of $60 and $286, respectively (2020 - $254 and $524, respectively).

A summary of the change in the Company’s stock option plan as at September 30, 2021 is presented below.

Outstanding, January 1, 2021 Granted Exercised Forfeited / Expired Outstanding, September 30, 2021 Exercisable	2021
	Number of Options Weighted Average Exercise Price
	389 $7.73 155 $6.47 (6) $4.40 (56) $7.94
	482 $7.34
	128 $7.45

12

TERAGO INC. Notes to the Interim Condensed Consolidated Financial Statements (In thousands, except for per share amounts)

(b) Restricted Share Units (RSUs)

For the three and nine months ended September 30, 2021, the Company granted 27 and 73 RSUs, respectively, to certain key executives (2020 – nil and 46, respectively).

For the three and nine months ended September 30, 2021, the Company recorded compensation expense of $17 and $126, respectively, related to the RSUs granted (2020 - $134 and $499, respectively). The Company issued 5 and net 49 common shares, respectively, to the holders of RSUs that vested in the period after a deduction of 20 common shares in lieu of payment of required taxes (2020 – 36 and net 86 after deduction of 73 common shares, respectively).

The following table is a summary of the number of outstanding RSUs as at:

Opening Balance, January 1, 2021 Granted Forfeited Vested Ending Balance, September 30, 2021	2021
	110 73 (9) (69)
	105

(c) Performance Based Share Units (PSUs)

For the three and nine months ended September 30, 2021, the Company granted nil and 61 PSUs, respectively, to certain key executives (2020 – nil and 46, respectively).

For the three and nine months ended September 30, 2021, the Company recorded compensation expense of $2 and $8, respectively, related to the PSUs granted (2020 – nil and $7, respectively).

The following table is a summary of the number of outstanding PSUs as at:

Opening Balance, January 1, 2021 Granted Vested Forfeited / Expired Ending Balance, September 30, 2021	2021
	28 61 (25) (13)
	51

(d) Stock-Based Compensation Summary

The following table is a summary of the stock-based compensation expense:

Restricted share units $ Performance-based share units Stock options Directors' fees $	Three months ended September 30 2021 2020 17 134 $ 2 - 60 254 76 87 155 475 $	Nine months ended September 30 2021 2020
		126 499 8 7 286 524 214 209
		634 1,239

13

TERAGO INC. Notes to the Interim Condensed Consolidated Financial Statements (In thousands, except for per share amounts)

11. Loss Per Share

The following table sets forth the calculation of basic and diluted loss per share.

Numerator for basic and diluted loss per share: Net loss for the period $ Denominator for basic and diluted loss per share: Basic weighted average number of shares outstanding Effect of stock options, RSUs and PSUs Diluted weighted average number of shares outstanding Loss per share: Basic $ Diluted $	Three months ended September 30 2021 2020 (2,255) (3,179) $ 19,635 16,715 - -	Nine months ended September 30 2021 2020
		(6,217) (6,038) 18,471 16,673 - -
	19,635 16,715 (0.11) (0.19) $ (0.11) (0.19) $	18,471 16,673 (0.34) (0.36) (0.34) (0.36)

Due to the loss for the three and nine months ended September 30, 2021, the impact of all the options, RSUs, and PSUs totaling 668 and 639, respectively (2020 – 570 and 572), were excluded in the calculation of diluted loss per share because they were antidilutive.

12. Fair value of financial instruments

The following table outlines the carrying amounts and fair value of its financial assets and financial liabilities including their level in the fair value hierarchy. Cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities are not shown below as the carrying value of these financial instruments approximates their fair value due to their short-term maturities.

a) Classification and fair values

Financial Liabilities Long-term debt (Note 7)	Carrying Amount September 30 December 31 2021 2020 20,104 28,144	Fair Value (Level 2)	Fair Value (Level 2)
	September 30 2021 20,104	September 30 2021 20,104	December 31 2020
			28,144

14

TERAGO INC. Notes to the Interim Condensed Consolidated Financial Statements (In thousands, except for per share amounts)

b) Credit risk

As a result of the recent major changes in market conditions as a result of COVID-19, the Company re-evaluated its credit risk and concluded that no major changes to existing strategies were necessary in addition to those already disclosed in the 2020 Consolidated Financial Statements. The Company will continue to monitor and re-evaluate this risk for the COVID-19 pandemic and its associated impacts on an ongoing basis. During the nine months ended September 30, 2021, the movement in the credit loss allowance in respect of trade receivables was as follows:

Opening Balance, January 1, 2021 Amounts written off Remeasurement of loss allowance Ending Balance, September 30, 2021	2021
	66 (83) 75
	58

c) Liquidity Risk

As a result of the recent major changes in market conditions as a result of COVID-19, the Company re-evaluated its liquidity risk and concluded that no major changes to existing strategies were necessary in addition to those already disclosed in the 2019 Consolidated Financial Statements. The Company will continue to monitor and re-evaluate this risk for the COVID-19 pandemic and its associated impacts on an ongoing basis.

As of September 30, 2021, the Company had cash and cash equivalents of $6,686. The Company also has access to $4,375 undrawn portion of its $35,000 credit facilities after consideration of outstanding letters of credit and current drawings.

d) Interest Rate Risk

As a result of the recent modification of the Company’s credit facility (see Note 7), the Company no longer has a fixed interest rate on its long-term debt. As such, the Company is more exposed to fluctuations in interest rates. A 1% change in interest rate would have increased (decreased) quarterly interest by $51.

13. Government Grants

The Company determined it was eligible for both the Canadian Emergency Wage Subsidy (“CEWS”) and the Canada Emergency Rent Subsidy (“CERS”) based on criteria prescribed by the Government of Canada. During the three and nine months ended September 30, 2021, the Company recorded $225 and $552 related to the CEWS program, respectively (2020 - $162 and $1,089, respectively). During the three and nine months ended September 30, 2021, the Company recorded $187 and $260 related to the CERS program, respectively (2020 - $nil and $nil, respectively). Amounts received related to the CEWS have been recorded as a reduction in salaries and related costs and amounts received under the CERS program have been recorded as a reduction in other operating expenses.

14. Share Capital

On April 21, 2021, the Company completed a private placement with certain institutional investors, including Cymbria Corporation. The Company issued and sold an aggregate of 934 Series A Units, 934 Series B Units and 934 Series C Units of the Company at a subscription price of $5.25 per Unit, for gross proceeds of $14,711. Each Unit is comprised of one common share and one-half (½) of a Series A, B or C Warrant (each a “Warrant”). Each whole series A, B, C Warrant entitles the holder to purchase one common share at prices of $7.00, $7.50, and $8.00, respectively. In total, the Company issued 2,802 Common Shares, 467 Series A Warrants, 467 Series B Warrants, and 467 Series C Warrants.

On April 21, 2021, the fair value of the warrants was determined using the Black Scholes method. On the date of issuance, the warrants have a fair value of $743, the common shares are valued $13,812 and the total is $14,555. These amounts are disclosed in the Interim Condensed Consolidated Statements of Changes in Equity.

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