Route1 : Q3 2021 Quarterly Report

Interim Condensed Consolidated Financial Statements of

Route1 Inc.

September 30,2021 and 2020

NOTICE OF NO AUDITOR REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

These unaudited interim condensed consolidated financial statements, including comparatives, have been prepared in accordance with International Accounting Standards ("IAS") 34 'Interim Financial Reporting' ("IAS 34") using accounting policies consistent with the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and Interpretations of the International Financial Reporting Interpretations Committee ("IFRIC").

Under National Instrument 51-102, Part 4, subsection 4.3(3) (a), if an auditor has not performed a review of the interim condensed consolidated financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor. The accompanying unaudited interim condensed consolidated financial statements of Route1 Inc. (the "Company") have been prepared by and are the responsibility of the Company's management. The unaudited interim condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in Canada (these statements are prepared under International Financial Reporting Standards (IFRS)) and reflect management's best estimates and judgment based on information currently available. The Company's independent auditor has not performed a review of these interim condensed consolidated 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.

TABLE OF CONTENTS

Route1 Inc.

	Page
Interim Condensed Consolidated Statements of Financial Position	1
Interim Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)	2
Interim Condensed Consolidated Statements of Changes in Equity	3
Interim Condensed Consolidated Statements of Cash Flows	4
Notes to the Interim Condensed Consolidated Financial Statements	5-28

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Route1 Inc.

As at September 30, 2021 and December 31, 2020 (stated in Canadian dollars)

	Note	September 30, 2021	December 31, 2020
		Unaudited	Audited
Assets
Current assets
Cash and cash equivalents		$727,446	$1,137,474
Accounts receivable		5,329,702	3,310,701
Other receivables		205,811	657,573
Inventory	3	769,786	678,801
Prepaid expenses		424,453	476,680
Contract costs	12	81,436	-
Other current assets		4,572	146,844
Total current assets		7,543,206	6,408,073
Non-current assets
Deferred tax asset		1,484,000	1,484,000
Right-of-use assets	5	1,760,447	2,152,444
Furniture and equipment	5	1,018,539	893,259
Intangible assets	6	2,025,132	1,268,684
Goodwill	7	3,001,590	1,969,734
Total non-current assets		9,289,708	7,768,121
Total assets		$16,832,914	$14,176,194
Liabilities
Current liabilities
Bank indebtedness	11	1,593,105	777,299
Accounts payable and other liabilities		5,065,761	4,063,359
Contract liability	12	3,771,259	3,627,223
Lease liabilities	4	416,442	552,980
Notes payable	13	695,519	758,044
Total current liabilities		11,542,086	9,778,905
Non-current liabilities
Deferred tax liability		145,744	159,736
Contract liability	12	77,303	100,051
Lease liabilities	4	1,452,915	1,740,174
Notes payable	13	632,372	256,796
Total non-current liabilities		2,308,334	2,256,757
Total liabilities		13,850,420	12,035,662
Shareholders' equity
Capital and reserve
Common shares	14,15	23,700,961	23,370,074
Warrants	15	1,149,704	1,683,704
Contributed surplus - stock compensation reserve	15	15,789,754	15,311,537
Accumulated other comprehensive income (loss)		(49,156)	(78,625)
Deficit		(37,608,769)	(38,146,158)
Total shareholders' equity		2,982,494	2,140,532
Total shareholders' equity and liabilities		$16,832,914	$14,176,194
Commitments and contingencies	18

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

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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

Route1 Inc.

For the three and nine months ended September 30, 2021 and 2020 (stated in Canadian dollars)

	Note	Three months ended	Nine months ended
	September 30	September 30
			Unaudited		Unaudited
		2021	2020	2021	2020
Revenue
Subscription revenue and services	21	$2,296,633	$2,599,425	$7,724,873	$7,046,197
Devices and appliance	21	4,960,413	6,523,329	12,409,886	15,401,525
Other	21	30,587	24,737	101,925	31,753
Total revenue		7,287,633	9,147,491	20,236,684	22,479,475
Cost of revenue	3	4,696,188	6,134,052	11,786,508	14,319,512
Gross profit		2,591,444	3,013,439	8,450,176	8,159,963
Operating expenses
General administration		1,517,909	1,456,475	4,441,510	4,297,480
Research and development		247,811	188,751	652,623	563,166
Selling and marketing		671,361	916,970	2,335,335	2,605,645
Total operating expenses before stock-based compensation		2,437,081	2,562,196	7,429,468	7,466,291
Stock-based compensation		104,610	76,126	478,217	326,334
Total operating expenses		2,541,691	2,638,322	7,907,685	7,792,625
Operating profit before other income (expense)		49,753	375,117	542,491	367,338
Other income (expense)
Patent litigation	8	-	(381,162)	-	(551,774)
Interest expense		(130,688)	(30,183)	(221,991)	(110,154)
Foreign exchange gain (loss)		64,013	(43,733)	51,668	(32,951)
Gain (loss) on asset disposal		-	-	(2,877)	154
Gain on litigation settlement		-	218,391	-	218,391
Other expense	20	(11,020)	(620,392)	232,720	(620,392)
Acquisition expense	9	(39,656)	2,260	(78,617)	(13,885)
Total other income (expense)		(117,351)	(854,819)	(19,097)	(1,110,611)
Income (loss) before income taxes		(67,598)	(479,702)	523,394	(743,273)
Income tax recovery (expense)		6,288	(48,603)	13,994	(27,983)
Net income (loss) for the period		(61,310)	(528,305)	537,388	(771,256)
Other comprehensive income (loss)
Foreign currency translation		118,613	(40,449)	29,464	(10,619)
Comprehensive income (loss)		$57,303	($568,754)	$566,852	($781,875)
Basic earnings (loss) per share	17	($0.00)	($0.01)	$0.01	($0.02)
Diluted earnings per share	17	N/A	N/A	$0.01	N/A
Weighted average number of common shares outstanding		39,719,246	35,297,805	39,501,583	35,672,992
Diluted average number of shares outstanding		N/A	N/A	40,586,803	N/A

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

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