Converge Technology : March 31, 2021 Interim Financial Report

Condensed interim consolidated financial statements

Converge Technology Solutions Corp.

For the three months ended March 31, 2021 and 2020 (Unaudited)

Converge Technology Solutions Corp.

Condensed Interim Consolidated Statements of Financial Position (expressed in thousands of Canadian dollars, except share amounts) (unaudited)

	Note	March 31, 2021	December 31, 2020
Assets
Current assets
Cash		$	68,432	$	64,767
Restricted cash	13		49,671		-
Trade and other receivables			345,239		364,308
Inventories			51,710		37,868
Prepaid expenses and other assets			10,397		10,376
			525,449		477,319
Long-term assets
Property, equipment, and right-of-use assets, net			25,509		23,558
Intangible assets, net			113,066		108,926
Goodwill			121,447		110,068
Other non-current assets			2,023		749
		$	787,494	$	720,620
Liabilities and shareholders' equity
Current liabilities
Trade and other payables	12	$	370,030	$	398,003
Borrowings	5		141,316		133,281
Other financial liabilities	7		19,952		22,125
Deferred revenue and other liabilities			20,885		17,376
Income taxes payable			1,461		764
			553,644		571,549
Long-term liabilities
Other financial liabilities	7		30,403		28,858
Borrowings	5		895		5,882
Deferred tax liability			14,527		12,584
		$	599,469	$	618,873
Shareholders' equity
Common shares	6		217,907		135,354
Exchange rights			5,115		4,853
Foreign exchange translation reserve			614		817
Deficit			(35,611)		(39,277)
			188,025		101,747
		$	787,494	$	720,620

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

On behalf of the Board:
"Signed"	"Signed"
Director - Shaun Maine	Director - Brian Phillips

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Converge Technology Solutions Corp.

Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (expressed in thousands of Canadian dollars, except share amounts)

(unaudited)

For the three months ended March 31,	Notes	2021		2020
Revenues
Product	$	252,507	$	190,383
Service		57,695		51,142
Total revenue	9	310,202		241,525
Cost of sales		242,405		186,690
Gross profit		67,797		54,835
Selling, general and administrative expenses		49,643		45,204
Income before the following		18,154		9,631
Depreciation and amortization		6,488		5,401
Finance expense, net	5,7	2,420		5,499
Special charges	11	3,051		1,939
Other expenses (income)		1,093		(1,619)
Income (loss) before income taxes		5,102		(1,589)
Income tax expense (recovery)		1,436		(173)
Net Income (loss)	$	3,666	$	(1,416)
Other comprehensive income (loss)
Item that may be reclassified subsequently to income:
Exchange loss on translation of foreign operations		203		1,699
		203		1,699
Comprehensive income (loss)	$	3,463	$	(3,115)
Net income (loss) per share - basic	$	0.02	$	(0.02)
Net income (loss) per share - diluted	$	0.02	$	(0.02)
Weighted average number of shares outstanding - basic		159,794		87,409
Weighted average number of shares outstanding - diluted		164,290		87,409

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

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Converge Technology Solutions Corp.

Condensed Interim Consolidated Statements of Changes in Shareholders' Equity (Deficiency) (expressed in thousands of Canadian dollars, except share amounts)

(unaudited)

								Foreign
								exchange
					Warrants	Contributed	Exchange	transaction
		Common shares		surplus	rights	reserve	Deficit	Total
	Notes	#	$	#	$	$	$	$	$	$
Balance, December 31, 2019		81,257,474	20,612	4,040,925	243	307	6,773	69	(37,881)	(9,877)
Warrants exercised		3,991,030	2,563	(3,948,055)	(237)	-	-	-	-	2,326
Exercise of exchange rights		1,500,000	960	-	-	-	(960)	-	-	-
Shares issued from treasury for public offering		6,361,315	7,294	-	-	-	-	-	-	7,294
Share repurchase commitment under normal
course issuer bid		(964,500)	-	-	-	-	-	-	-	-
Net loss and comprehensive loss		-	-	-	-	-	-	(1,699)	(1,416)	(3,115)
Balance, March 31, 2020		92,145,319	31,429	92,870	6	307	5,813	(1,630)	(39,297)	(3,372)
Balance, December 31, 2020		143,580,081	135,354	-	-	-	4,853	817	(39,277)	101,747
Issuance of exchange rights		-	-	-	-	-	1,875	-	-	1,875
Exercise of exchange rights		2,217,850	1,613	-	-	-	(1,613)	-	-	-
Shares issued from treasury for public offering	6	17,825,000	80,940	-	-	-	-	-	-	80,940
Net income and comprehensive income		-	-	-	-	-	-	(203)	3,666	3,463
Balance, March 31, 2021		163,622,931	217,907	-	-	-	5,115	614	(35,611)	188,025

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

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Converge Technology Solutions Corp.

Condensed Interim Consolidated Statements of Cash Flows (expressed in thousands of Canadian dollars, except share amounts) (unaudited)

For the three months ended March 31,Notes20212020

Cash flows from operating activities

Net income (loss)	$	3,666	$	(1,416)
Adjustments to reconcile net income (loss) to net cash
from operating activities
Depreciation and amortization		7,240		6,779
Finance expense, net	5,7	2,420		5,499
Change in fair value of contingent consideration	7	597		-
Income tax expense (recovery)		1,436		(173)
		15,359		10,689
Changes in non-cash working capital items
Trade and other receivables		22,796		(7,403)
Inventories		(12,167)		(19,735)
Prepaid expenses and other assets		(565)		3,115
Trade and other payables		(35,139)		38,926
Income taxes payable		496		(794)
Other financial liabilities		-		246
Deferred revenue and customer deposits		3,680		4,234
Cash from (used in) operating activities		(5,540)		29,278

Cash flows from investing activities

Purchase of property and equipment		(1,765)	(356)
Proceeds on disposal of property and equipment		89	-
Repayment of contingent consideration	7	(3,420)	-
Repayment of deferred consideration	7	(3,205)	(4,117)
Business combinations, net of cash acquired	4	(10,194)	(6,699)
Cash used in investing activities		(18,495)	(11,172)

Cash flows from financing activities

Transfers to restricted cash		(49,671)		(250)
Interest paid		(2,460)		(4,432)
Payments of lease liabilities		(2,285)		(2,527)
Proceeds from issuance of common shares and
warrants	6	80,940		9,653
Repurchase of common shares		-		(1,246)
Repayment of notes payable	7	(2,691)		-
Net proceeds from (repayment of) borrowings	5	4,242		(12,392)
Cash from (used in) financing activities		28,075		(11,194)
Net change in cash during the period		4,040		6,912
Effect of foreign exchange on cash		(375)		(753)
Cash, beginning of period		64,767		20,590
Cash, end of period	$	68,432	$	26,749

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

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