Vecima Networks Inc. — Interim / Quarterly Report 2021

May 14, 2021

==> picture [390 x 69] intentionally omitted <==

Interim Condensed Consolidated Financial Statements of

VECIMA NETWORKS INC.

For the three and nine months ended March 31, 2021 and 2020

(unaudited)

==> picture [186 x 37] intentionally omitted <==

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

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

The accompanying interim condensed consolidated financial statements of Vecima Networks Inc. (the “Company”) have been prepared by and are the responsibility of the Company’s management.

The Company’s independent auditor has not performed a review of these financial statements in accordance with the standards established by the Chartered Professional Accountants of Canada for a review of the interim condensed consolidated financial statements by an entity’s auditor.

Vecima Networks Inc. 2021 Third Quarter Results Page 1

VECIMA NETWORKS INC. Interim Condensed Consolidated Statements of Financial Position (unaudited – in thousands of Canadian dollars)

As at	Note		March 31, 2021		June 30,2020
Assets
Current assets
Cash and cash equivalents		$	22,984	$	17,350
Short-term investments	18		-		17,165
Accounts receivable	5		34,235		24,908
Income tax receivable			331		333
Inventories	6		16,913		17,212
Prepaid expenses			3,336		2,051
Contract assets			425		646
Total current assets			78,224		79,665
Non-current assets
Property, plant and equipment	7		14,131		11,801
Right-of-use assets			3,711		4,010
Goodwill			14,650		15,487
Intangible assets	8		69,453		69,200
Other long-term assets			1,255		1,301
Investment tax credits			25,822		24,374
Deferred tax assets			7,453		4,460
Total assets		$	214,699	$	210,298
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities		$	19,642	$	17,105
Provisions	9		1,418		492
Income tax payable			493		130
Deferred revenue			8,947		4,960
Currentportion of long-term debt	10		1,751		1,698
Total current liabilities			32,251		24,385
Non-current liabilities
Provisions	9		392		400
Deferred revenue			2,557		602
Deferred tax liability			6		536
Long-term debt	10		4,120		4,613
Total liabilities			39,326		30,536
Shareholders’ equity
Share capital	11		8,737		3,161
Reserves			2,197		3,838
Retained earnings			165,141		170,665
Accumulated other comprehensive(loss)income			**(702) **		2,098
Total shareholders’ equity			175,373		179,762
Total liabilities and shareholders’ equity		$	214,699	$	210,298

Contractual obligation – Note 21; Subsequent event – Note 22 The accompanying notes are an integral part of these consolidated financial statements.

Vecima Networks Inc. 2021 Third Quarter Results Page 2

VECIMA NETWORKS INC.

Interim Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited – in thousands of Canadian dollars, except per share amounts)

Periods ended March 31, Note	Three months Nine months 2021 2020 2021 2020
Sales 12, 16 $ Cost of Sales	31,861 $ 24,728 $ 88,857 $ 69,168 17,535 11,953 47,187 30,401
Gross Profit	14,326 12,775 41,670 38,767
Operating expenses Research and development Sales and marketing General and administrative Share-based compensation 13 Other(income)expense 14	7,520 5,578 20,829 14,863 3,644 3,505 10,095 10,329 4,357 3,983 13,610 11,929 267 14 1,716 47 (50) 25 (50) (130)
Total operating expenses	15,738 13,105 46,200 37,038
Operating (loss) income Finance (expense) income Foreign exchange(loss) gain	(1,412) (330) (4,530) 1,729 (45) (236) 120 526 (830) 1,953 (2,269) 1,781
(Loss) income before income taxes Income tax(recovery)expense	(2,287) 1,387 (6,679) 4,036 (2,692) 555 (3,059) 666
Net income (loss) from continuing operations Net income(loss) from discontinued operations 3	405 832 (3,620) 3,370 1,784 (166) 1,854 (527)
Net income(loss) $	2,189 $ 666 $ (1,766) $ 2,843
Other comprehensive (loss) income Item that may be subsequently reclassed to net income Exchange differences on translatingforeign operations	(650) 2,416 (2,800) 2,213
Comprehensive income(loss) $	1,539 $ 3,082 $ (4,566) $ 5,056
Net income (loss) per share Continuing operations - basic $ Discontinued operations - basic	0.02 $ 0.04 $ (0.16)$ 0.15 0.08 (0.01) 0.08 (0.02)
Total basic net income(loss) per share 15 $	0.10 $ 0.03 $ (0.08) $ 0.13
Continuing operations – diluted $ Discontinued operations – diluted	0.02 $ 0.04 $ (0.16)$ 0.15 0.08 (0.01) 0.08 (0.02)
Total diluted net income(loss) per share 15 $	0.10 $ 0.03 $ (0.08) $ 0.13
Weighted average number of common shares Shares outstanding – basic 15 22,867,226 22,435,234 22,806,145 22,403,397 Shares outstanding- diluted 15 22,905,761 22,474,692 22,806,145 22,432,319

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

Vecima Networks Inc. 2021 Third Quarter Results Page 3

VECIMA NETWORKS INC. Interim Condensed Consolidated Statements of Change in Equity (unaudited – in thousands of Canadian dollars)

									Accumulated
									other
			Share				Retained		comprehensive
	Note		capital		Reserves		**earnings **		(loss) income		Total
Balance as at June 30, 2019		$	1,916	$	4,104	$	173,944	$	1,010	$	180,974
Net income			-		-		2,843		-		2,843
Other comprehensive income			-		-		-		2,213		2,213
Dividends			-		-		(3,698)		-		(3,698)
Shares issued by exercising options			761		(199)		-		-		562
Share-basedpayment expense	13		-		47		-		-		47
Balance as at March 31,2020		$	2,677	$	3,952	$	173,089	$	3,223	$	182,941
Balance as at June 30, 2020		$	3,161	$	3,838	$	170,665	$	2,098	$	179,762
Net loss			-		-		(1,766)		-		(1,766)
Other comprehensive loss			-		-		-		(2,800)		(2,800)
Dividends			-		-		(3,758)		-		(3,758)
Shares issued by exercising options			3,066		(793)		-		-		2,273
Subscription for common shares	17		713		-		-		-		713
PSUs settled in common shares			1,797		(2,564)		-		-		(767)
Share-basedpayment expense	13		-		1,716		-		-		1,716
Balance as at March 31, 2021		$	8,737	$	2,197	$	165,141	$	**(702) **	**$ **	175,373

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

Vecima Networks Inc. 2021 Third Quarter Results Page 4

VECIMA NETWORKS INC. Interim Condensed Consolidated Statements of Cash Flows (unaudited – in thousands of Canadian dollars)

(unaudited – in thousands of Canadian dollars)
			Three months				Nine	months
Periods ended March 31,	Note		2021		2020		2021	2020
OPERATING ACTIVITIES
Net income (loss) from continuing operations		$	405	$	832	$	(3,620)$	3,370
Adjustments for non-cash items:
(Gain) loss on sale of property, plant and equipment			(40)		16		(32)	(105)
Depreciation and amortization	20		3,891		4,245		11,174	10,655
Share-based compensation			267		14		1,716	47
Income tax (recovery) expense			(125)		230		(471)	204
Deferred income tax (recovery) expense			(2,567)		325		(2,588)	462
Interest expense			56		72		169	231
Interest income			(10)		(162)		(157)	(622)
Net change in working capital	20		2,111		(2,043)		1,084	(6,256)
Decrease (increase) in other long-term assets			175		(490)		(119)	(330)
Decrease in provisions			(147)		(290)		(104)	(368)
Increase in investment tax credits			(42)		(34)		(112)	(123)
Income tax received			-		-		174	173
Income tax paid			(252)		(457)		(746)	(525)
Interest received			9		162		157	622
Interest paid			(3)		(72)		(22)	(230)
Cashprovided by (used in)discontinued operations	3		482		95		651	(28)
Cashprovided byoperatingactivities			4,210		2,443		7,154	7,177
INVESTING ACTIVITIES
Capital expenditures, net	20		(979)		(567)		(2,261)	(1,492)
Purchase of short-term investments			(154)		(5,149)		(295)	(5,927)
Proceeds from sale of short-term investments			10,039		5,387		17,460	13,487
Deferred development costs			(3,845)		(3,344)		(10,916)	(8,677)
Business acquisition	4		530		-		(5,871)	-
Cashprovided by (used in)discontinued operations	3		2,533		(109)		2,323	(193)
Cashprovided by (used in)investingactivities			8,124		(3,782)		440	(2,802)
FINANCING ACTIVITIES
Proceeds from government grants			-		4		-	98
Principal repayments of lease liabilities	10		(352)		(345)		(1,177)	(993)
Repayment of long-term debt	10		(63)		(63)		(188)	(209)
Dividends paid			(1,258)		(1,234)		(3,758)	(3,698)
Proceeds from issuing shares	17		713		-		713	-
Issuance of shares through exercised options			40		3		2,273	562
Cash used in discontinued operations	3		(22)		(28)		(64)	(28)
Cash used in financingactivities			(942)		(1,663)		(2,201)	(4,268)
Net increase (decrease) in cash and cash equivalents			11,392		(3,002)		5,393	107
Effect of change in exchange rates on cash			723		(791)		241	(774)
Cash and cash equivalents,beginningofperiod			10,869		22,960		17,350	19,834
Cash and cash equivalents, end ofperiod		$	22,984	$	19,167	$	22,984 $	19,167

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

Vecima Networks Inc. 2021 Third Quarter Results Page 5

VECIMA NETWORKS INC. Notes to the Interim Condensed Consolidated Financial Statements Three and nine months ended March 31, 2021 and 2020 (in thousands of Canadian dollars except as otherwise noted)

Table of Contents

1.	NATURE OF THE BUSINESS............................................................................................... 7
2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES................................................... 7
3.	DISCONTINUED OPERATIONS........................................................................................... 8
4.	BUSINESS COMBINATION.................................................................................................. 9
5.	ACCOUNTS RECEIVABLE................................................................................................ 11
6.	INVENTORIES..................................................................................................................... 11
7.	PROPERTY, PLANT AND EQUIPMENT............................................................................ 11
8.	INTANGIBLE ASSETS........................................................................................................ 12
9.	PROVISIONS....................................................................................................................... 12
10.	LONG-TERM DEBT............................................................................................................ 13
11.	SHARE CAPITAL................................................................................................................ 14
12.	REVENUE FROM CONTRACTS WITH CUSTOMERS...................................................... 14
13.	SHARE-BASED COMPENSATION.................................................................................... 14
14.	OTHER (INCOME) EXPENSE............................................................................................. 15
15.	NET INCOME (LOSS) PER SHARE................................................................................... 15
16.	SEGMENTED FINANCIAL INFORMATION........................................................................ 16
17.	RELATED PARTY TRANSACTION.................................................................................... 18
18.	FAIR VALUE HIERARCHY................................................................................................. 18
19.	FINANCIAL INSTRUMENTS............................................................................................... 18
20.	SUPPLEMENTAL INFORMATION..................................................................................... 18
21.	CONTRACTUAL OBLIGATION.......................................................................................... 19
22.	SUBSEQUENT EVENT....................................................................................................... 19

Vecima Networks Inc. 2021 Third Quarter Results Page 6

VECIMA NETWORKS INC. Notes to the Interim Condensed Consolidated Financial Statements Three and nine months ended March 31, 2021 and 2020 (in thousands of Canadian dollars except as otherwise noted)

1. NATURE OF THE BUSINESS

Vecima Networks Inc. ("Vecima" or the "Company") is a company continued under the Canadian Business Corporations Act ("CBCA") and commenced operations in 1988. The Company's registered office is located at 771 Vanalman Avenue, Victoria, B.C., V8Z 3B8. The Company's common shares are traded on the Toronto Stock Exchange under the trading symbol "VCM".

The Company's Video and Broadband Solutions business designs, manufactures and sells products for the cable industry that allow service providers a cost-effective "last mile" solution for both video and broadband access, especially in the business services market segment. The Company’s Content Delivery and Storage business includes solutions and software for industries and customers that focus on storing, protecting, transforming, and delivering high-value media assets. The Company's Telematics business provides fleet managers key information and analytics they require to optimally manage their business.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of compliance

These interim condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) under International Accounting Standard 34 – Interim Financial Reporting (IAS 34). These interim condensed consolidated financial statements do not include all the information required for a complete set of annual financial statements and should be read in conjunction with the consolidated financials statements of the Company for the year ended June 30, 2020.

(b) Basis of presentation

These interim condensed consolidated financial statements have been prepared using the same basis of presentation, accounting policies and methods of computation as outlined in Note 2, Summary of Significant Accounting Policies in our consolidated financial statements for the year ended June 30, 2020, except as noted below.

The interim condensed consolidated financial statements of the Company were approved by the Board of Directors and authorized for issue on May 11, 2021.

(c) Estimation uncertainty

On March 11, 2020, the World Health Organization recognized the outbreak of COVID-19 as a pandemic and the Company has been closely monitoring related developments and the impact on our business. We continue to serve customers through our available platforms. While the impact of COVID-19 is expected to be temporary, the current circumstances are dynamic and the impact on the Company’s future earnings and cash flows cannot be estimated at this time. Due to the uncertainty surrounding the duration and potential outcomes of the COVID-19 pandemic, and the unpredictable and continuously changing impacts and related government responses, there is more uncertainty associated with our assumptions, expectations, and estimates. The most significantly affected estimates relate to the Company’s determination of impairment of non-financial assets, the assessment of the carrying values of allowances for doubtful accounts and inventory obsolescence, and provisions.

(d) Adoption of new accounting standards and amendments to accounting standards

The Company adopted the following accounting standards and amendments that were effective for the interim and annual consolidated financial statements commencing July 1, 2020. These changes did not have a material impact on the Company’s consolidated financial statements and are not expected to have a material impact in the future.

Vecima Networks Inc. 2021 Third Quarter Results Page 7

VECIMA NETWORKS INC. Notes to the Interim Condensed Consolidated Financial Statements Three and nine months ended March 31, 2021 and 2020 (in thousands of Canadian dollars except as otherwise noted)

IAS 1 – Presentation of financial statements (IAS1); and IAS 8 – Accounting policies, changes in accounting estimates and errors (IAS 8)

On October 31, 2018, IAS 1 and IAS 8 were amended to clarify the definition of “material” and how it should be applied. The amendments also improve the explanation of the definition and ensure consistency across all IFRS standards. The new definition states that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements.

IFRS 3 – Business combinations (IFRS 3)

In October 2018, the IASB issued an amendment to IFRS 3. The amendment clarifies the definition of a business and assists entities to determine whether an acquisition is a business combination or an acquisition of a group of assets. The amendment emphasizes that the output of a business is to provide goods and services to customers and also to provide supplementary guidance. The amendment to IFRS 3 may affect whether acquisitions are accounted for as a business combination or asset acquisition, along with the resulting allocation of the purchase price between the identifiable assets acquired and goodwill.

Amendment to IFRS 16 – Leases (IFRS 16)

On May 28, 2020, the IASB published Covid-19-Related Rent Concessions (Amendments to IFRS 16) , amending the standard to provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification.

IFRS 9 – Financial instruments (IAS 9); IAS 39 – Financial instruments: recognition and measurement (IAS – 39); and IFRS 7 Financial instruments: disclosures (IFRS 7)

Amendments to these accounting standards provides temporary, but mandatory, relief from specific hedge accounting requirements to address potential effects of the uncertainty in the lead up to interbank offer rates reform (IBOR reform).

(e) Accounting standards issued but not yet applied

Amendments to IAS 37 – Provisions (IAS 37)

On May 14, 2020 the IASB issued Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37) , amending the standard regarding costs a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous. These amendments are effective for annual reporting periods beginning on or after January 1, 2022, with early application permitted. We are assessing the impacts, if any, the amendments will have on our consolidated financial statements.

3. DISCONTINUED OPERATIONS

On March 31, 2021, the Company completed the sale of its ContentAgent operations in an all-cash transaction for proceeds of $2,586 (US$2,100). The transaction is subject to customary closing conditions. As a result, the Company reclassified amounts related to the sale for the previous periods to discontinued operations in our consolidated statements of comprehensive income (loss) and consolidated statements of cash flows to make them consistent with the presentation for the current period.

As at March 31, 2021, the Company recorded a gain on the sale, net of income taxes, of $1,836. The capital gain related to the sale is partially offset by the recognition of previously unrecognized loss carry forwards.

Vecima Networks Inc. 2021 Third Quarter Results Page 8

VECIMA NETWORKS INC. Notes to the Interim Condensed Consolidated Financial Statements Three and nine months ended March 31, 2021 and 2020 (in thousands of Canadian dollars except as otherwise noted)

The following table summarizes the carrying value of the assets and liabilities sold:

		March 31,2021
Accounts receivable	$	272
Prepaid expenses and other current assets		49
Property, plant and equipment		29
Right-of-use assets		114
Goodwill		235
Intangible assets		947
Other non-current assets		82
Total assets sold	$	1,728
Accounts payable and accrued liabilities	$	267
Deferred revenue		830
Long-term debt		98
Total liabilities sold	$	1,195
Net assets sold	$	533

The following tables summarizes the statements of comprehensive income (loss) and statements of cash flows of our discontinued operations up to the point of sale:

				Three months				Nine Months
Periods ended March 31,		2021		2020		2021		2020
Sales	$	610	$	365	$	1,831	$	1,160
Cost of sales		198		116		575		422
Grossprofit		412		249		1,256		738
Operating expenses
Research and development		153		136		346		452
Sales and marketing		234		193		639		543
General and administrative		67		104		231		281
Total operating expenses		454		433		1,216		1,276
Operating (loss) income		(42)		(184)		40		(538)
Finance income		(1)		(1)		(4)		(1)
Foreign exchange(loss) gain		(5)		19		(12)		12
(Loss) income before income taxes		(48)		(166)		24		(527)
Income tax expense		4		-		6		-
Net(loss) income beforegain on sale		(52)		(166)		18		(527)
Gain on sale(net of taxes of$217)		1,836		-		1,836		-
Net income(loss)	$	1,784	$	(166)	$	1,854	$	(527)
				Three months				Nine months
Periods ended March 31,		2021		2020		2021		2020
Cash flows from operating activities	$	482	$	95	$	651	$	(28)
Cash flows from investing activities		2,533		(109)		2,323		(193)
Cash flows from financingactivities		(22)		(28)		(64)		(28)
Net increase(decrease) in cash	$	2,993	$	(42)	$	2,910	$	(249)

4. BUSINESS COMBINATION

Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value at the date of acquisition. As part of the Company's process for determining the fair value of the acquisition, third-party valuation specialists are engaged. Acquisition related transaction costs are expensed as incurred, and, depending on the nature of the expense, is recorded in either general and administration expense or sales and marketing expense in the consolidated statements of comprehensive income (loss).

Vecima Networks Inc. 2021 Third Quarter Results Page 9

VECIMA NETWORKS INC. Notes to the Interim Condensed Consolidated Financial Statements Three and nine months ended March 31, 2021 and 2020 (in thousands of Canadian dollars except as otherwise noted)

Identifiable assets and liabilities, including intangible assets, of acquired businesses are recorded at their fair values at the date of acquisition. The excess of the purchase consideration over the fair value of identifiable assets acquired is recorded as goodwill in the consolidated statements of financial position. If the fair value of identifiable net assets acquired exceeds the purchase consideration, the difference is recognized in other expense in the consolidated statements of comprehensive income (loss) as a bargain purchase gain.

On August 7, 2020, the Company completed the purchase of the DOCSIS Distributed Access Architecture and EPON/DPoE cable access technology portfolios (the “Nokia portfolio acquisition” or “portfolio”) from Nokia Corporation. The purchase included inventory, property, plant and equipment, and intangible assets.

The portfolio includes a centrally controlled DAA solution for unified support for Flexible MAC DAA nodes for Hybrid Fiber Coaxial (FHC) networks and DOCSIS Provisioning of EPON (DPoE) nodes for fiber-to-thehome and business. The portfolio also includes a DAA video engine, and a chassis based EPON/DPoE solution for non-HFC network implementations. The Nokia employees that supported these products have transitioned to the Company, but remain located in Raleigh, North Carolina; Sunnyvale, California; Qingdao, China; and Shanghai, China.

The acquisition, valued at $5,871 (US$4,390), including a post-closing net working capital adjustment, was financed through the Company’s cash and short-term investment reserves.

The following table summarizes the fair value allocations of assets acquired and liabilities assumed as part of the Nokia portfolio acquisition:

of the Nokia portfolio acquisition:
	Note		Amount
Consideration paid:
Purchase price		$	6,401
Workingcapital adjustments			(530)
		$	5,871
Net assets acquired:
Accounts receivable	5	$	232
Inventory	6		3,462
Property, plant and equipment	7		2,980
Intangible assets	8		505
Goodwill			130
Accounts payable and accrued liabilities			(246)
Deferred revenue			(78)
Provisions	9		(1,114)
		$	5,871

Accounts receivable includes goods and services tax that are fully recoverable.

The goodwill recognized is attributable to intangible assets that do not qualify for separate recognition and includes, amongst other things: expected synergies arising from the combination of the Nokia portfolio acquisition and the Company’s existing business; expected growth in the underlying markets in which the portfolio serves; and the strength of the assembled workforce. The goodwill arising from the acquisition is not deductible for tax purposes.

Transaction costs related to the Nokia portfolio acquisition was $420 and are included in operating costs in the consolidated statements of comprehensive income (loss).

Sales and net income (loss) attributable to the Nokia portfolio acquisition for the three and nine months ended March 31, 2021 are $6,030 and $2,089, respectively and $10,537 and $(153), respectively.

Vecima Networks Inc. 2021 Third Quarter Results Page 10

VECIMA NETWORKS INC. Notes to the Interim Condensed Consolidated Financial Statements Three and nine months ended March 31, 2021 and 2020 (in thousands of Canadian dollars except as otherwise noted)

5. ACCOUNTS RECEIVABLE

5. ACCOUNTS RECEIVABLE
As at		March 31, 2021		June 30,2020
Trade receivables	$	32,579	$	23,840
Less: allowance for doubtful accounts		**(37) **		(97)
		32,542		23,743
Goods and services tax		926		351
Government grants receivable		741		691
Foreign exchange contracts		-		101
Other receivables		26		22
	$	34,235	$	24,908

Included in the goods and services tax receivable is $232 from the Nokia portfolio acquisition on August 7, 2020 (see Note 4).

6. INVENTORIES

As at		March 31, 2021		June 30,2020
Raw materials	$	6,189	$	7,047
Work-in-progress		1,810		3,802
Finishedgoods		8,914		6,363
	$	16,913	$	17,212

The Nokia portfolio acquisition (see Note 4) on August 7, 2020 resulted in $567 and $2,895 added to raw materials and finished goods, respectively.

7. PROPERTY, PLANT AND EQUIPMENT

						Lab,
				Land		operating &
				improvements		production		Other
	Note	Land		& building		equipment		equipment(1)		Total
At cost
At July 1, 2020	$	336	$	9,108	$	19,340	$	12,201	$	40,985
Additions		1		32		1,228		463		1,724
Disposals		-		(6)		(284)		(50)		(340)
Business acquisition	4	-		-		2,980		-		2,980
Effect of foreign exchange		-		(66)		(494)		(141)		(701)
At March 31, 2021	$	337	$	9,068	$	22,770	$	12,473	$	44,648
Accumulated depreciation	and amortization
At July 1, 2020	$	-	$	3,329	$	15,262	$	10,593	$	29,184
Depreciation		-		230		1,146		388		1,764
Disposals		-		(6)		(175)		(28)		(209)
Effect of foreign exchange		-		(22)		(152)		(48)		(222)
At March 31, 2021	$	-	$	3,531	$	16,081	$	10,905	$	30,517
Net book value
At June 30,2020	$	336	$	5,779	$	4,078	$	1,608	$	11,801
At March 31, 2021	$	337	$	5,537	$	6,689	$	1,568	$	14,131

(1) Other equipment includes furniture, computer hardware, and automotive equipment.

Included in the depreciation of property, plant and equipment is $10 from discontinued operations.

Vecima Networks Inc. 2021 Third Quarter Results Page 11

VECIMA NETWORKS INC. Notes to the Interim Condensed Consolidated Financial Statements Three and nine months ended March 31, 2021 and 2020 (in thousands of Canadian dollars except as otherwise noted)

8. INTANGIBLE ASSETS

Note	Indefinite- life intangible assets Finite-life intangible assets Spectrum and other licenses Customer Contracts Patents Intellectual property Deferred development costs Total
At cost
July 1, 2020 Additions Disposals Investment tax credits Business acquisition 4 Writedown, fully amortized Effect of foreign exchange	$ 107 $ 21,529 $ 736 $ 10,600 $ 61,125 $ 94,097 - - 108 493 11,249 11,850 - (368) - (307) (614) (1,289) - - - - (1,029) (1,029) - - - 505 - 505 - (20) - - (2,451) (2,471) (4) (1,287) (104) (579) (726) (2,700)
At March 31, 2021	$ 103 $ 19,854 $ 740 $ 10,712 $ 67,554 $ 98,963
Accumulated amortization
At July 1, 2020 Amortization Writedown, fully amortized Effect of foreign exchange	$ - $ 6,939 $ 448 $ 4,479 $ 13,031 $ 24,897 - 1,679 59 912 5,853 8,503 - (20) - - (2,451) (2,471) - (521) (88) (331) (479) (1,419)
At March 31, 2021	$ - $ 8,077 $ 419 $ 5,060 $ 15,954 $ 29,510
Net book value At June 30,2020	$ 107 $ 14,590 $ 288 $ 6,121 $ 48,094 $ 69,200
At March 31, 2021	$ 103 $ 11,777 $ 321 $ 5,652 $ 51,600 $ 69,453

Included in the deferred development costs additions is $333 from discontinued operations.

Included in the amortization of finite-life intangible assets and deferred development costs is $86 and $112, respectively, from discontinued operations.

9. PROVISIONS

									Obsolete
					Restructuring				Inventory
	Note		Warranty		Costs		Other		Obligation		Total
At July 1, 2020		$	312	$	37	$	543	$	-	$	892
Additions during the year			250		-		135		-		385
Amounts utilized			(296)		(37)		(143)		-		(476)
Business acquisition	4		103		-				1,011		1,114
Effect of foreign exchange			(17)		-		(44)		(44)		(105)
At March 31, 2021		$	352	$	-	$	491	$	967	$	1,810
Less: current portion		$	352	$	-	$	99	$	967	$	1,418
Long-termportion		$	-	$	-	$	392	$	-	$	392

Vecima Networks Inc. 2021 Third Quarter Results Page 12

VECIMA NETWORKS INC. Notes to the Interim Condensed Consolidated Financial Statements Three and nine months ended March 31, 2021 and 2020 (in thousands of Canadian dollars except as otherwise noted)

10. LONG-TERM DEBT

10. LONG-TERM DEBT
As at		March 31, 2021		June 30,2020
Term credit facility	$	1,521	$	1,708
Lease liabilities		4,350		4,603
	$	5,871	$	6,311
Comprised of:
Current portion of term credit facility and lease liabilities	$	1,751	$	1,698
Long-termportion of term credit facilityand lease liabilities		4,120		4,613
	$	5,871	$	6,311

Term credit facility

The term credit facility is with a Canadian chartered bank. As at March 31, 2021, the facility is repayable in monthly instalments of $21 principal and interest at prime of 2.45% (June 30, 2020 - $21, and 2.45%, respectively), expires in October 2021 and is collateralized by a general security agreement. The Company has an authorized loan amount of $3,792 and annually renews this facility with the bank.

Long-term debt is recorded at amortized cost. The Company’s long-term debt is at an interest rate that floats based on prime and the carrying value of the principal is considered to be fair value.

Assuming that the existing payment terms are the same at the renewal date, the following are the future principal repayments for the term credit facility as at March 31, 2021:

principal repayments for the term credit facility as	at March 31, 2021:
2021	$	63
2022		250
2023		250
2024		250
2025		250
Thereafter		458
	$	1,521

Lease liabilities

The following is a reconciliation of the Company’s lease liabilities as at March 31, 2021:

Lease liabilities, beginning of period	$	4,603
Net additions during the period		1,172
Interest on lease liabilities		141
Principal repayments of lease liabilities		(1,241)
Disposals		(97)
Effect of foreign exchange		(228)
Lease liabilities, end ofperiod	$	4,350
Less: currentportion		1,501
Long-termportion	$	2,849

Included in the principal repayments of lease liabilities was $64 from discontinued operations.

The contractual lease payments related to the lease liabilities are as follows:

		March 31, 2021		June 30,2020
Within one year	$	1,787	$	1,713
After one year but not more than five years		3,461		3,304
More than fiveyears		15		-
Total contractual leasepayments	$	5,263	$	5,017

Vecima Networks Inc. 2021 Third Quarter Results Page 13

VECIMA NETWORKS INC. Notes to the Interim Condensed Consolidated Financial Statements Three and nine months ended March 31, 2021 and 2020 (in thousands of Canadian dollars except as otherwise noted)

11. SHARE CAPITAL

Changes in the number of shares and carrying value of the Company’s share capital, for the nine months ended March 31, 2021, are as follows:

ended March 31, 2021, are as follows:
	Note	Number of shares		Carrying value
Balance, July 1, 2020		22,462,082	$	3,161
Shares issued by exercising options		262,313		3,066
Subscription for common shares	17	50,000		713
Performance Share Units settled in common shares	13	139,972		1,797
Balance, March 31, 2021		22,914,367	$	8,737

12. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregated revenue

In the following table, gross revenue from contracts with customers is disaggregated by reporting segment and type. Refer to Note 16 for additional segmented financial information.

		Three	Three	months ended March 31, 2021	months ended March 31, 2021	months ended March 31, 2021
		Video and		Content
		Broadband		Delivery and
		Solutions		**Storage **		Telematics		Total
Product sales	$	19,469	$	4,543	$	114	$	24,126
Provision of services		2,283		4,214		1,238		7,735
	$	21,752	$	8,757	$	1,352	$	31,861
			Three months ended March			31,2020
		Video and		Content
		Broadband		Delivery and
		Solutions		Storage		Telematics		Total
Product sales	$	7,911	$	9,381	$	145	$	17,437
Provision of services		1,650		4,473		1,168		7,291
	$	9,561	$	13,854	$	1,313	$	24,728
			Nine months ended March			31, 2021
		Video and		Content
		Broadband		Delivery and
		Solutions		**Storage **		Telematics		Total
Product sales	$	46,210	$	19,586	$	378	$	66,174
Provision of services		5,605		13,405		3,673		22,683
	$	51,815	$	32,991	$	4,051	$	88,857
			Nine	months ended March 31,2020
		Video and		Content
		Broadband		Delivery and
		Solutions		Storage		Telematics		Total
Product sales	$	19,660	$	27,111	$	478	$	47,249
Provision of services		5,733		12,628		3,558		21,919
	$	25,393	$	39,739	$	4,036	$	69,168

13. SHARE-BASED COMPENSATION

The following table summarizes the share-based compensation expense included in the consolidated statements of comprehensive income (loss):

			Three	months			Nine	months
Periods ended March 31,		2021		2020		2021		2020
Stock options	$	6	$	14	$	15	$	47
Performance share units		261		-		1,701		-
	$	267	$	14	$	1,716	$	47

Vecima Networks Inc. 2021 Third Quarter Results Page 14

VECIMA NETWORKS INC. Notes to the Interim Condensed Consolidated Financial Statements Three and nine months ended March 31, 2021 and 2020 (in thousands of Canadian dollars except as otherwise noted)

Stock options

For all stock options granted, the Company determined compensation expense based on the estimated fair values at the grant date of the stock options using the Black-Scholes and binomial option-pricing models. The estimated fair value of the stock options is amortized to share-based compensation over the vesting period of the options.

Changes in the stock option plan for the nine months ended March 31, 2021 are as follows:

			Weighted average
(in number of units,exceptprices)	Number of options		exerciseprice
Outstanding, July 1, 2020	393,125	$	9.01
Granted	9,000		13.18
Cancelled	(6,937)		9.80
Exercised	(262,313)		8.67
Outstanding, March 31, 2021	132,875	$	9.93
Vested and exercisable, March 31, 2021	98,440	$	9.87

Performance share units (“PSUs”)

The Company’s Performance Share Unit Plan (“PSU Plan”) set the maximum number of PSUs at 4% of the outstanding common shares. At the time of the PSU Plan’s resolution approval by the shareholders on July 28, 2020, the maximum number of shares issuable under the PSU Plan was set at 897,275. The approval of the PSU Plan resolution does not require further approval by the shareholders for any unallocated PSUs.

For the nine months ended March 31, 2021, there were 390,015 PSUs granted and outstanding to eligible persons. As at March 31, 2021, 139,972 PSUs vested with a total fair value of $1,797. The PSUs were settled in common shares of the Company. There were 86,750 PSUs forfeited and cancelled as at March 31, 2021.

The unrecognized share-based compensation expense related to the granted and outstanding PSUs was $1,016 as at March 31, 2021 and will be recognized in net income over the next three years.

14. OTHER (INCOME) EXPENSE

14. OTHER (INCOME) EXPENSE
			Three	months			Nine	months
Periods ended March 31,		2021		2020		2021		2020
(Gain) loss on sale of property, plant and equipment	$	(40)	$	16	$	(32)	$	(105)
Lease revenue		(6)		(8)		(19)		(44)
Other		(4)		17		1		19
	$	(50)	$	25	$	**(50) **	$	(130)

15. NET INCOME (LOSS) PER SHARE

The following table sets forth the calculation of basic and diluted net income (loss) per share:

			Three months	Three months			Nine months	Nine months
Periods ended March 31,		2021		2020		2021		2020
Net income (loss): basic and diluted (in thousands of dollars)	$	2,189	$	666	$	(1,766)	$	2,843
Weighed average number of shares outstanding:
Basic		22,867,226		22,435,234		22,806,145		22,403,397
Dilution adjustment for stock options		38,535		39,458		-		28,922
Diluted		22,905,761		22,474,692		22,806,145		22,432,319
Net income (loss) per share: basic	$	0.10	$	0.03	$	(0.08)	$	0.13
Net income(loss) per share: diluted	$	0.10	$	0.03	$	(0.08)	$	0.13

Vecima Networks Inc. 2021 Third Quarter Results Page 15

VECIMA NETWORKS INC. Notes to the Interim Condensed Consolidated Financial Statements Three and nine months ended March 31, 2021 and 2020 (in thousands of Canadian dollars except as otherwise noted)

Stock options could potentially dilute basic net income (loss) per share in the future. Options to purchase 98,440 common shares were vested and outstanding as at March 31, 2021 (March 31, 2020 – 372,641). Dilutive stock options are calculated using the treasury stock method. For the nine months ended March 31, 2021, any conversion effect of stock options was anti-dilutive and have been excluded from the calculation of diluted net loss per share.

16. SEGMENTED FINANCIAL INFORMATION

The Company’s operations are organized into business units based on how the business is managed and has three reportable segments. The Video and Broadband Solutions segment designs, develops and distributes electronic communications products to cable and telecommunications markets. The Content Delivery and Storage segment develops advanced applications focused on storing, protecting, and transforming and delivering visual media. The Telematics segment designs, develops and distributes fleet management products. The majority of the Company’s operations, employees and assets reside in Canada and the United States. The following tables highlight key financial information by segment and geographical region:

Segments

Segments
		Three months ended			March 31, 2021
		Video and		Content
		Broadband		Delivery and
		Solutions		**Storage **		Telematics		Total
Sales	$	21,752	$	8,757	$	1,352	$	31,861
Cost of sales		12,447		4,625		463		17,535
Gross profit		9,305		4,132		889		14,326
Operating expenses		7,389		4,073		440		11,902
Depreciation and amortization		2,184		1,450		202		3,836
Operating (loss) income		(268)		(1,391)		247		(1,412)
Finance expense		(20)		(25)		-		(45)
Foreign exchange loss		(479)		(345)		(6)		(830)
(Loss) income before taxes		(767)		(1,761)		241		(2,287)
Income tax(recovery)expense		(1,383)		(1,370)		61		(2,692)
Net income (loss) from continuing operations		616		(391)		180		405
Net income from discontinued operations		-		1,784		-		1,784
Net income	$	616	$	1,393	$	180	$	2,189
		Three months ended			March 31,2020
		Video and		Content
		Broadband		Delivery and
		Solutions		Storage		Telematics		Total
Sales	$	9,561	$	13,854	$	1,313	$	24,728
Cost of sales		5,082		6,479		392		11,953
Gross profit		4,479		7,375		921		12,775
Operating expenses		4,085		4,237		583		8,905
Depreciation and amortization		2,253		1,738		209		4,200
Operating (loss) income		(1,859)		1,400		129		(330)
Finance expense		(215)		(21)		-		(236)
Foreign exchangegain(loss)		1,973		(55)		35		1,953
(Loss) income before taxes		(101)		1,324		164		1,387
Income tax(recovery)expense		(16)		530		41		555
Net (loss) income from continuing operations		(85)		794		123		832
Net loss from discontinued operations		-		(166)		-		(166)
Net(loss)income	$	(85)	$	628	$	123	$	666

Vecima Networks Inc. 2021 Third Quarter Results Page 16

VECIMA NETWORKS INC. Notes to the Interim Condensed Consolidated Financial Statements Three and nine months ended March 31, 2021 and 2020

(in thousands of Canadian dollars except as otherwise noted)

			Nine	months ended	March 31, 2021	March 31, 2021
		Video and		Content
		Broadband		Delivery and
		Solutions		**Storage **		Telematics		Total
Sales	$	51,815	$	32,991	$	4,051	$	88,857
Cost of sales		29,479		16,367		1,341		47,187
Gross profit		22,336		16,624		2,710		41,670
Operating expenses		20,918		12,894		1,381		35,193
Depreciation and amortization		5,608		4,803		596		11,007
Operating (loss) income		(4,190)		(1,073)		733		(4,530)
Finance income (expense)		202		(81)		(1)		120
Foreign exchange loss		(2,144)		(90)		(35)		(2,269)
(Loss) income before taxes		(6,132)		(1,244)		697		(6,679)
Income tax(recovery)expense		(1,802)		(1,434)		177		(3,059)
Net (loss) income from continuing operations		(4,330)		190		520		(3,620)
Net income from discontinued operations		-		1,854		-		1,854
Net(loss) income	$	(4,330) $		2,044	$	520	$	(1,766)
			Nine	months ended March		31,2020
		Video and		Content
		Broadband		Delivery and
		Solutions		Storage		Telematics		Total
Sales	$	25,393	$	39,739	$	4,036	$	69,168
Cost of sales		12,539		16,584		1,278		30,401
Gross profit		12,854		23,155		2,758		38,767
Operating expenses		11,590		13,209		1,734		26,533
Depreciation and amortization		5,022		4,854		629		10,505
Operating (loss) income		(3,758)		5,092		395		1,729
Finance income (expense)		603		(77)		-		526
Foreign exchangegain(loss)		1,806		(60)		35		1,781
(Loss) income before taxes		(1,349)		4,955		430		4,036
Income tax(recovery)expense		(308)		865		109		666
Net (loss) income from continuing operations		(1,041)		4,090		321		3,370
Net loss from discontinued operations		-		(527)		-		(527)
Net(loss)income	$	(1,041) $		3,563	$	321	$	2,843

Geographical region

Geographical region
Periods ended March 31,	Three months Nine months 2021 2020 2021 2020
Sales to external customers: United States Canada Europe Japan Other	$ 23,935 $ 19,543 $ 67,423 $ 52,942 3,486 2,184 10,040 6,240 1,351 1,459 2,747 4,037 1,126 971 5,213 2,619 1,963 571 3,434 3,330
	$ 31,861 $ 24,728 $ 88,857 $ 69,168

Sales to major customers

Sales to major customers accounting for more than 10% of total sales are as follows:

			Three	months			Nine	months
Periods ended March 31,		2021		2020		2021		2020
Customer A	$	3,045	$	759	$	11,693	$	12,851
Customer B		5,199		3,344		15,257		10,048
Customer C		6,348		2,620		14,224		8,754
	$	14,592	$	6,723	$	41,174	$	31,653

Sales to these customers are from the Video and Broadband Solutions and Content Delivery and Storage segments.

Vecima Networks Inc. 2021 Third Quarter Results Page 17

VECIMA NETWORKS INC. Notes to the Interim Condensed Consolidated Financial Statements Three and nine months ended March 31, 2021 and 2020 (in thousands of Canadian dollars except as otherwise noted)

17. RELATED PARTY TRANSACTION

On March 31, 2021, Mr. Derek Elder, a member of the Board of Directors purchased 50,000 common shares of the Company at a subscription price of $14.25 per common share (the TSX closing price as at March 16, 2021), for a total aggregate subscription price of $713.

18. FAIR VALUE HIERARCHY

Assets and liabilities measured at fair value in the condensed consolidated statements of financial position, or where fair value disclosures are required, are classified based on a three-level hierarchy as follows:

Level 1: determined by reference to quoted prices in active markets for identical assets and liabilities;

Level 2: determined by using inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

Level 3: determined using inputs that are not based on observable market data.

The following table classifies assets and liabilities measured at fair value according to the three-level hierarchy:

The following table classifies hierarchy:	assets and liabilities measured at fair value according to the three-level
	March 31, 2021 June 30,2020
	Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Short-term investments	$ -$ - $ - $ 17,165 $ - $ -

During the nine months ended March 31, 2021, there were no transfers between the hierarchy levels.

19. FINANCIAL INSTRUMENTS

Currency exposures

Approximately 95% (June 30, 2020 - 97%) of the Company's sales are denominated in U.S. dollars (“USD”). The Company periodically enters into forward foreign exchange contracts to manage foreign currency exchange risk related to exposures to the exchange rates for the Canadian dollar. These contracts are recognized in the consolidated statements of financial position at their fair value, with changes in fair value recorded in the consolidated statements of comprehensive income (loss) in foreign exchange (loss) gain. The Company entered into three US$1,000 forward foreign exchange contracts for the year ended June 30, 2020. The forward foreign exchange contracts matured on July 31, 2020, August 31, 2020, and September 30, 2020, respectively, upon which the Company settled the contracts in USD. As at March 31, 2021, the Company realized a net exchange gain of $214 (June 30, 2020 – unrealized gain of $101) on the settled forward purchase contracts.

20. SUPPLEMENTAL INFORMATION

The following tables provide details of the Company’s supplemental cash flow information for continuing operations:

– Depreciation and amortization operating activities

Depreciation and amortization–operating activities
			Three	months			Nine	months
Periods ended March 31,		2021		2020		2021		2020
Depreciation of property, plant and equipment	$	561	$	538	$	1,754	$	1,581
Depreciation of right-of-use assets		410		343		1,115		1,027
Amortization of deferred development costs		2,157		2,409		5,741		5,196
Amortization of finite-life intangible assets		763		955		2,564		2,851
Total depreciation and amortization – operating activities	$	3,891	$	4,245	$	11,174	$	10,655

Vecima Networks Inc. 2021 Third Quarter Results Page 18

VECIMA NETWORKS INC.

Notes to the Interim Condensed Consolidated Financial Statements Three and nine months ended March 31, 2021 and 2020 (in thousands of Canadian dollars except as otherwise noted)

– Net change in working capital operating activities

		Three	Three	months		Nine	months
Periods ended March 31,		2021		2020	2021		2020
Accounts receivable	$	(7,567)	$	(8,187)$	(10,324)	$	(10,413)
Inventories		2,787		197	3,165		(1,414)
Prepaid expenses		(1,882)		(144)	(1,814)		1,171
Contract assets		303		(212)	176		(186)
Current tax assets		(10)		4	(13)		5
Accounts payable and accrued liabilities		3,214		5,120	3,128		3,588
Deferred revenue		5,266		1,179	6,766		993
Total change in net working capital	$	2,111	$	(2,043) $	1,084	$	(6,256)

– Capital expenditures, net investing activities

Capital expenditures, net–investing activities
		Three	months	Nine	months
Periods ended March 31,		2021	2020	2021	2020
Capital expenditures before proceeds of disposition:
Property, plant and equipment	$	(549)$	(562)$	(1,724)$	(1,696)
Intangible assets		(494)	(6)	(601)	(54)
Proceeds of disposition:
Property, plant and equipment		64	1	64	258
Total capital expenditures, net	$	(979) $	(567) $	(2,261) $	(1,492)

21. CONTRACTUAL OBLIGATION

The Nokia portfolio acquisition includes the assumption of a financial liability with a third-party supplier contract. As at March 31, 2021, the total contractual obligation is estimated to be $3,048.

22. SUBSEQUENT EVENT

On May 11, 2021, the Board of Directors declared a dividend of $0.055 per common share, payable on June 14, 2021 to shareholders of record as at May 21, 2021 consistent with its previously announced dividend policy.

Vecima Networks Inc. 2021 Third Quarter Results Page 19