Exhibit 99.2

 

 

 

 

 

 

 

 

 

Condensed Interim Consolidated Financial Statements of

 

Wow Unlimited Media Inc.

 

 

For the three months ended March 31, 2022 and 2021

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

   

 

 

Wow Unlimited Media Inc.

Condensed Interim Consolidated Statements of Financial Position

As at March 31, 2022 and December 31, 2021 (Unaudited)

Expressed in Canadian dollars

 

 

   Note  March 31,
2022
   December 31,
2021
 
 ASSETS             
 Current             
 Cash and cash equivalents     $3,315,776   $3,622,620 
 Trade and other accounts receivable  3   42,634,114    43,028,868 
 Prepaid expenses, deposits and other      1,443,558    1,686,476 
       47,393,448    48,337,964 
 Property, plant and equipment      13,562,816    13,764,611 
 Investment in film and television programming  4   16,991,998    17,340,134 
 Other intangible assets  5   419,533    492,117 
 Goodwill      2,504,734    2,564,734 
 Long-term accounts receivable  3   96,639    276,860 
 Deposits      106,389    106,142 
       33,682,109    34,544,598 
 TOTAL ASSETS     $81,075,557   $82,882,562 
              
 LIABILITIES             
 Current             
 Bank indebtedness  7  $1,836,993   $976,265 
 Accounts payable and accrued liabilities      7,468,691    8,586,911 
 Interim production financing  7   21,081,179    22,282,119 
 Deferred revenue  10   22,511,063    23,426,829 
 Current portion of lease obligations      2,993,580    2,948,340 
 Other current liabilities      1,057,548    1,000,505 
       56,949,054    59,220,969 
 Lease obligations      11,718,981    12,299,432 
 Convertible debentures  8   4,477,791    4,444,236 
 Other non-current liabilities      71,598    127,745 
       16,268,370    16,871,413 
 TOTAL LIABILITIES      73,217,424    76,092,382 
 SHAREHOLDERS' EQUITY             
 Share capital      84,969,758    84,969,758 
 Reserves      5,494,125    5,716,393 
 Accumulated deficit      (82,605,750)   (83,895,971)
 TOTAL SHAREHOLDERS' EQUITY      7,858,133    6,790,180 
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY     $81,075,557   $82,882,562 

Going concern (Note 2 (d)), Subsequent event (Note 17)

 

Approved by the Directors:

“Michael A. Jaffa”   “Robert L. Denton”
     
Michael A. Jaffa, Director   Robert L. Denton, Director

 

 

See accompanying notes to these unaudited condensed interim consolidated financial statements.

 

 

 

 2 

 

  

Wow Unlimited Media Inc.

Condensed Interim Consolidated Statements of Comprehensive Income (Loss)

For the three months ended March 31, 2022 and 2022 (Unaudited)

Expressed in Canadian dollars

 

 

      For the three months ended 
   Note 

March 31,

2022

  

March 31,

2021

 
            
            
 Revenue  10  $23,065,542   $14,955,130 
              
 Expenses             
 Operating  11   17,422,680    10,840,288 
 Depreciation and amortization      3,170,679    2,300,891 
 General and administration  11   649,043    612,675 
 Forgiveness of CRTC tangible benefits obligation    6       (584,538)
 Share-based compensation expense  13   35,289    55,908 
 Income (loss) before finance costs      1,787,851    1,729,906 
 Finance costs  14   497,630    397,585 
 Net income (loss)     $1,290,221   $1,332,321 
              
Other comprehensive (income) loss:             
 Item that may be reclassified subsequently to profit or loss:             
              
 Foreign currency translation adjustment      257,557    137,439 
 Total comprehensive income (loss)     $1,032,664   $1,194,882 
              
 Earnings (loss) per share             
 - basic  12  $0.04   $0.04 
 - diluted  12  $0.03   $0.04 

 

 

 

 

 

 

 

See accompanying notes to these unaudited condensed interim consolidated financial statements.

 

 

 

 3 

 

  

Wow Unlimited Media Inc.

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

                  Reserves         
   Note  Number of non-voting shares issued   Number of common voting shares issued (1)   Share capital   Equity component of convertible debentures   Warrant reserve   Share-based payment reserve   Foreign currency translation reserve   Accumulated deficit   Total 
                                        
 Balance as at January 1, 2021     2,581,757   29,442,557   $84,969,758   $534,235   $1,275,747   $4,716,526   $(1,052,787)   (87,072,132)  $3,371,347 
 Three months ended March 31, 2021                                              
 Net loss                                1,332,321    1,332,321 
 Other comprehensive income (loss)                            (137,439)       (137,439)
 Total comprehensive income (loss) for the period                            (137,439)   1,332,321    1,194,882 
 Equity settled share-based compensation expense  13                     55,908            55,908 
 Balance as at March 31, 2021     2,581,757   29,442,557    84,969,758    534,235    1,275,747    4,772,434    (1,190,226)   (85,739,811)   4,622,137 
 Nine months ended December 31, 2021                                              
 Net loss                                1,843,840    1,843,840 
 Other comprehensive income (loss)                            147,354        147,354 
 Total comprehensive income (loss) for the period                            147,354    1,843,840    1,991,194 
 Equity settled share-based compensation expense  13                     176,849            176,849 
 Balance as at December 31, 2021     2,581,757   29,442,557    84,969,758    534,235    1,275,747    4,949,283    (1,042,872)   (83,895,971)   6,790,180 
 Three months ended March 31, 2022                                              
 Net income (loss)                                1,290,221    1,290,221 
 Other comprehensive income (loss)                            (257,557)       (257,557)
 Total comprehensive income (loss) for the period                            (257,557)   1,290,221    1,032,664 
 Equity settled share-based compensation expense  13                     35,289            35,289 
 Balance as at March 31, 2022     2,581,757   29,442,557   $84,969,758   $534,235   $1,275,747   $4,984,572   $(1,300,429)  $(82,605,750)  $7,858,133 

 

(1) The common voting shares issued are inclusive of common voting shares, and variable voting shares.

 

 

 

See accompanying notes to these unaudited condensed interim consolidated financial statements.

 

 

 

 4 

 

  

Wow Unlimited Media Inc.

Condensed Interim Consolidated Statements of Cash Flows

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

      For the three months ended 
   Note  March 31,
2022
   March 31,
2021
 
            
 OPERATING ACTIVITIES             
 Net income (loss)     $1,290,221   $1,332,321 
 Items not involving cash:             
 Depreciation and amortization      716,748    466,579 
 Amortization of investment in film and television programming  4   2,387,660    1,635,197 
 Amortization of other intangible assets  5   66,271    199,115 
 Share-based compensation expense  13   35,289    55,908 
 Finance costs  14   497,630    397,585 
 Forgiveness of CRTC tangible benefits obligation  6       (584,538)
 Paycheck Protection Program loan forgiveness  7(e)       (791,813)
 Other non-cash losses (gains)      (85,164)   (103,254)
       4,908,655    2,607,100 
 Investment in film and television programming      (2,974,989)   (4,692,718)
 Changes in non-cash working capital and other  16   (230,294)   (268,938)
 Cash generated by (used in) operating activities      1,703,372    (2,354,556)
              
 FINANCING ACTIVITIES             
 Proceeds from interim production financing  7   4,580,054    5,145,268 
 Repayment of interim production financing  7   (5,961,887)   (2,031,275)
 Interest paid      (283,963)   (241,397)
 Repayment of lease obligations      (790,748)   (407,687)
 Cash generated by (used in) financing activities      (2,456,544)   2,464,909 
              
 INVESTING ACTIVITIES             
 Purchase of property, plant and equipment      (403,532)   (9,929)
 Purchase of other intangible assets  5       (56,390)
 Cash generated by (used in) investing activities      (403,532)   (66,319)
              
 Increase (decrease) in cash and cash equivalents for the period      (1,156,704)   44,034 
 Effect of foreign exchange on cash and cash equivalents      (10,868)   (33,470)
 Cash and cash equivalents, beginning of the period  16(b)   2,646,355    2,138,161 
 Cash and cash equivalents, end of the period  16(b)  $1,478,783   $2,148,725 

Supplemental information (Note 16)

 

 

See accompanying notes to these unaudited condensed interim consolidated financial statements.

 

 

 

 5 

 

  

Wow Unlimited Media Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

1.Nature of operations

 

Wow Unlimited Media Inc. (together with its subsidiaries, “Wow Unlimited” or the “Company”) is a publicly listed company on the TSX Venture Exchange (“TSX-V”) under the symbol “WOW” and on the OTCQX Best Market (“OTCQX”) under the symbol “WOWMF”. The Company is incorporated under the laws of the Province of British Columbia with limited liability and extra-provincially registered to conduct business in the Province of Ontario. Wow Unlimited is involved in the production and distribution of animated content for film, television, and online distribution channels. The Company’s wholly owned subsidiary, Frederator Networks Inc. (“Frederator”), is incorporated in the United States of America, in the State of Delaware and is registered to operate in the States of New York and California.

 

The Company’s head office is located at 55 Sudbury Street, Toronto, Ontario, M6J 3S7. The Company’s registered office is located at 200-2025 West Broadway, Vancouver, British Columbia, V6J 1Z6.

 

Subsequent to quarter-end, the Company was acquired by Genius Brands International, Inc. The common voting shares and the variable voting shares of the Company were delisted from the TSX-V and OTCQX on April 8, 2022. The Company ceased to be a reporting issuer in British Columbia, Alberta, Ontario, and Quebec. See Note 17 for further details.

 

2.Basis of presentation

 

(a)Statement of compliance

 

These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”). They do not include all of the information required for annual financial statements and should be read in conjunction with the annual audited consolidated financial statements for the year ended December 31, 2021.

 

Select explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company’s financial position and performance since December 31, 2021, the date of the most recent annual audited consolidated financial statements. The accounting policies applied in these condensed interim consolidated financial statements are the same as those applied in the Company’s most recent annual audited consolidated financial statements.

 

These condensed interim consolidated financial statements were authorized for issue by the Directors on June 6, 2022.

 

(b)Basis of measurement

 

These condensed interim consolidated financial statements have been prepared on a going concern basis under the historical cost basis, except for certain financial assets and financial liabilities which are measured at fair value.

 

All subsidiaries are 100% owned by the Company except for the following entity: Frederator Books LLC (51% interest).

 

 

 

 6 

 

  

Wow Unlimited Media Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

(c) Critical accounting judgments and key sources of estimation uncertainty

 

On March 11, 2020, the World Health Organization (“WHO”) characterized COVID-19 as a global pandemic. COVID-19 did not have a material impact on the Company’s anticipated revenues and the assumptions utilized in determining the recoverable amounts of the Company’s right-of-use assets, other intangible assets, property, plant, and equipment, investment in film and television programming, goodwill, or cash-generating units in these condensed interim consolidated financial statements. The extent to which COVID-19 impacts the Company’s business will depend on future developments, which are highly uncertain and cannot be predicted at this time. These future developments affect the judgments and estimates described in the Company’s annual audited consolidated financial statements for the year ended December 31, 2021. Management continues to evaluate potential operational and financial risks to the Company as a result of the pandemic, including the impact on its judgments, estimates, accounting policies and amounts recognized in these condensed interim consolidated financial statements.

 

Depending on the severity and duration of COVID-19, the realizable value of the Company’s assets subsequent to March 31, 2022 may be materially affected.

 

(d) Going concern

 

These condensed interim consolidated financial statements have been prepared using the going concern assumption, which assumes that the Company will continue in operation for the foreseeable future and be able to realize its assets and settle its liabilities in the normal course of business. For the three months ended March 31, 2022, the Company had positive cash flows from operating activities of $1,703,372 (three months ended March 31, 2021 – negative $2,354,556), and at March 31, 2022, had net current liabilities of $9,555,606 (December 31, 2021 – net current liabilities $10,883,005).

 

The Company’s future operations are dependent upon many factors, including the ability to generate additional earnings and obtaining additional equity and/or debt financing in order to meet its planned business objectives.

 

The Company will need to raise funds through public or private equity and/or debt financings. This funding may not be available on acceptable terms, or at all, and may be dilutive to shareholder interests. If the Company is unable to generate positive cash flows or obtain adequate financing, the Company may need to curtail operations. These factors may cast significant doubt on the Company’s ability to continue as a going concern. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the carrying amounts on the condensed interim consolidated statement of financial position. Subsequent to March 31, 2022, the Company was acquired by Genius Brands International, Inc. See Note 17 for further details.

 

3.Trade and other accounts receivable

 

  

March 31,

2022

  

December 31,

2021

 
         
 Trade receivables  $12,405,133   $14,271,843 
 Tax credits receivable   29,607,710    28,091,981 
 Other receivables   717,910    941,904 
   $42,730,753   $43,305,728 
 Less long-term accounts receivable   (96,639)   (276,860)
 Current portion of accounts receivable  $42,634,114   $43,028,868 

 

 

 

 7 

 

   

Wow Unlimited Media Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

Trade receivables include $666,346 (December 31, 2021 - $nil) of unbilled accounts receivable for services rendered prior to invoicing.

 

4.Investment in film and television programming

 

   Distribution rights   Productions in development   Productions in progress   Completed productions   Total 
                     
Cost                         
 As at January 1, 2022  $4,458,671   $2,706,911   $4,887,216   $51,750,644   $63,803,442 
 Additions, net of government assistance and third party contributions       143,830    2,330,869        2,474,699 
 Disposals       (285,999)           (285,999)
 Transfer to completed productions           (2,488,489)   2,488,489     
 Exchange difference   (73,973)   (3,158)       (739,429)   (816,560)
Balance at March 31, 2022   4,384,698    2,561,584    4,729,596    53,499,704    65,175,582 
                          
Accumulated amortization and impairment                         
 As at January 1, 2022   $4,443,919   $1,715,451   $   $40,303,938   $46,463,308 
   Additions   14,629            2,373,031    2,387,660 
   Exchange difference   (73,850)           (593,534)   (667,384)
Balance at March 31, 2022  $4,384,698   $1,715,451   $   $42,083,435   $48,183,584 
                          
Carrying amount                         
 December 31, 2021  $14,752   $991,460   $4,887,216   $11,446,706   $17,340,134 
 March 31, 2022  $   $846,133   $4,729,596   $11,416,269   $16,991,998 

 

Additions to productions in progress include interest capitalized of $142,436 for the three months ended March 31, 2022 (three months ended March 31, 2021 – $185,616).

 

There were no impairments recorded against productions for the three months ended March 31, 2022, nor was there an indication that impairments previously recorded should be reversed (three months ended March 31, 2021 – $nil and impairment reversal of $nil).

 

 

 

 8 

 

  

Wow Unlimited Media Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

5.Other intangible assets

 

   Animation network   Brands   Software   Total 
                 
Cost                    
 Balance as at January 1, 2022  $8,103,154   $562,364   $1,206,414   $9,871,932 
 Additions                
 Disposals and retirements                
 Exchange difference   (189,566)   (13,156)       (202,722)
 Balance at March 31, 2022  $7,913,588   $549,208   $1,206,414   $9,669,210 
                     
Accumulated amortization and impairment                    
 Balance as at January 1, 2022  $8,103,154   $283,525   $993,136   $9,379,815 
 Additions       13,940    52,331    66,271 
 Disposals and retirements                
 Exchange difference   (189,566)   (6,843)       (196,409)
 Balance at March 31, 2022  $7,913,588   $290,622   $1,045,467   $9,249,677 
                     
Carrying amount                    
 December 31, 2021  $   $278,839   $213,278   $492,117 
 March 31, 2022  $   $258,586   $160,947   $419,533 

 

6.Broadcasting license

 

On February 5, 2021, the Canadian Radio-television and Telecommunications Commission (“CRTC”) announced in its ‘Broadcasting Decision 2021-51’ that it had approved the Company’s application to revoke its Broadcast License. The revocation of the Broadcasting License also nullified the Company’s requirement to invest $687,000 of tangible benefits into the Canadian broadcasting system over a seven-year period. The tangible benefits obligation was assessed in 2018, as a requirement by the CRTC, in its decision to approve the Company’s acquisition of a Broadcasting License from Bell Media Inc. The present value of the tangible benefits obligation of $558,745 was initially capitalized to the ‘Broadcast License’ intangible asset, as a directly attributable cost of bringing the asset to its working condition. In 2019, as part of its annual impairment assessment, management reviewed the carrying value of its Broadcasting License and fully impaired the asset. As a result of the CRTC’s Broadcasting Decision on February 5, 2021, the Company derecognized the tangible benefits obligation in ‘other current’ and ‘other non-current liabilities’ and recognized a recovery of $584,538 into the condensed interim consolidated statements of comprehensive income (loss) in the first quarter of 2021.

 

 

 

 9 

 

  

Wow Unlimited Media Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

7.Bank indebtedness and Interim production financing

 

         March 31, 2022   December 31, 2021 
   Currency  Date of maturity  Facility amount1 (CAD)   Carrying amount (CAD)2   Facility amount1 (CAD)   Carrying amount (CAD)2 
                       
 Interim production financing   CAD   On demand  $35,827,702   $20,032,368   $33,316,177   $20,457,170 
 Interim production financing   USD   On demand   2,190,591    1,048,811    9,451,550    1,824,949 
         $38,018,293   $21,081,179   $42,767,727   $22,282,119 
 Bank indebtedness   CAD  On demand   5,000,000    1,836,993    5,000,000    976,265 
         $43,018,293   $22,918,172   $47,767,727   $23,258,384 

   
1 Facility amount of the loans represents the maximum facility available, excluding interest reserve  
2 Carrying amount represents the amount drawn as at March 31, 2022 and December 31, 2021, including interest reserve  

 

(a) Interim production financing

 

The Company’s interim production financing facilities with a Canadian bank bear interest at rates ranging from bank prime plus 1.00% - 1.75% per annum. The interim production financing facilities are generally repayable on demand and are generally secured by a combination of federal and provincial tax credits, other government incentives, production service agreements, and license agreements.

 

(b) Bank indebtedness

 

The Company has a $5,000,000 revolving demand facility with a Canadian bank. The Company can make draws under the revolving demand facility utilizing Canadian dollar bank overdrafts. Canadian dollar bank overdrafts bear interest at a rate equal to bank prime plus 2.00% per annum and can be prepaid at any time without penalty and without notice.

 

Draws under the revolving demand facility can be made in Canadian or US dollars at the option of the Company by way of bank prime rate loans, Canadian Bankers’ Acceptances, US Libor, or letters of credit and the aggregate of principal amounts outstanding shall not exceed the facility limit at any time. Canadian or US dollar bank prime borrowings bear interest at a rate equal to bank prime plus 2.00% per annum. For other draws under the revolving facility, the respective loans bear interest at a rate equal to Canadian Bankers’ Acceptances or US Libor plus 3.75% per annum.

 

As at March 31, 2022 and December 31, 2021, the Company was in compliance with all covenants.

 

 

 

 10 

 

 

Wow Unlimited Media Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

(c) Equipment lease line

 

As at March 31, 2022, the Company had drawn down $7,914,903 of equipment under the Facility’s $8,000,000 equipment lease line (December 31, 2021 - $7,914,903). Each transaction will have specific financing terms in respect of the leased equipment such as term, finance amount, rate, and payment terms. The Company has recorded right-of-use assets and lease obligations for the leased equipment acquired in respect of these draws.

 

(d) Treasury risk management facility

 

As at March 31, 2022, there were no outstanding amounts drawn under the Facility’s treasury risk management facility (December 31, 2021 - $nil). The treasury risk management facility has a limit of $500,000.

 

The maximum term for foreign exchange forward contracts and interest rate swaps is up to one year.

 

(e) Paycheck protection program loan

 

On April 28, 2020, Frederator received an unsecured advance of $625,000 USD ($854,313 CAD) under the Paycheck Protection Program (“PPP”), which was guaranteed by the US Small Business Administration (“US SBA”), pursuant to the Coronavirus Aid, Relief and Economic Security Act. After satisfying certain conditions, a loan forgiveness application was filed in November 2020 and on February 6, 2021, the Company was informed that it had been granted full loan forgiveness by the US SBA. In accordance with IAS 20 – Accounting for Government Grants and Disclosure of Government Assistance, the Company recognized loan forgiveness of $791,813 ($625,000 USD) in operating expenses in the condensed interim consolidated statement of income (loss) and comprehensive income (loss) in the first quarter of 2021 (Note 11).

 

8.Convertible debentures

 

The Company issued unsecured subordinated convertible debentures (“Debentures”) in the amount of $4,700,000 on the closing of a non-brokered private placement offering that was completed in two tranches. The first tranche was completed on November 17, 2020, for gross proceeds of $2,639,000 and the second tranche was completed on December 14, 2020, for gross proceeds of $2,061,000. The Debentures accrue interest at a rate of 9.5% per annum payable quarterly in arrears and are convertible into common shares of the Company at a price of $0.55 per share. The Debentures mature on November 17, 2023 and are governed by the terms of an indenture between the Company and Computershare Trust Company of Canada.

 

A continuity of the amounts recorded for convertible debentures and the equity component during the three months ended March 31, 2022, is as follows:

 

   Convertible debentures   Equity component of convertible debentures   Total 
Balance at January 1, 2022  $4,444,236   $534,235   $4,978,471 
Interest accretion expense   143,651        143,651 
Interest payable recorded in accounts payable and accrued liabilities   (110,096)       (110,096)
Balance at March 31, 2022  $4,477,791   $534,235   $5,012,026 

 

 

 

 11 

 

 

Wow Unlimited Media Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

Subsequent to the end of the quarter, the Debentures were settled as part of the acquisition by Genius Brands International, Inc. See Note 17 for further details.

 

9.Segmented information

 

The Company operates and evaluates its business based on its products and services, and the mediums in which they are brought to market. The Company has two reportable segments: (i) Animation Production, and (ii) Networks and Platforms.

 

The Company measures segment performance based on revenues reported in accordance with IFRS and segment profit and loss. The following tables summarize the operating performance and assets of the reporting segments:

 

  For the three months ended 
March 31, 2022  Animation Production   Networks and Platforms   Total 
Segment and external revenues  $16,235,803   $6,829,739   $23,065,542 
Operating expenses   10,706,386    6,716,294    17,422,680 
Amortization of investment in film and television programming   2,387,660        2,387,660 
Depreciation and amortization   768,431    648    769,079 
Finance costs   497,630        497,630 
Segment profit (loss)  $1,875,696   $112,797    1,988,493 
Amortization of acquisition-related intangibles             13,940 
General and administration             649,043 
Share-based compensation expense             35,289 
Income (loss) before taxes            $1,290,221 
Capital expenditures               
Investment in film and television programming  $2,474,699   $   $2,474,699 
Property, plant & equipment  $656,037   $3,032   $659,069 

 

 

 

 12 

 

 

Wow Unlimited Media Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

  For the three months ended 
March 31, 2021  Animation Production   Networks and Platforms   Total 
Segment and external revenues  $8,693,356   $6,261,774   $14,955,130 
Operating expenses   5,344,623    5,495,665    10,840,288 
Amortization of investment in film and television programming   1,566,689    68,508    1,635,197 
Depreciation and amortization   528,695    139    528,834 
Finance costs   394,479    3,106    397,585 
Segment profit (loss)  $858,870   $694,356    1,553,226 
Amortization of acquisition-related intangibles             136,860 
Forgiveness of CRTC tangible benefits obligation              (584,538)
General and administration             612,675 
Share-based compensation expense             55,908 
Income (loss) before taxes            $1,332,321 
Capital expenditures               
Investment in film and television programming  $3,141,548   $   $3,141,548 
Other intangible assets  $56,390   $   $56,390 
Property, plant & equipment  $112,087   $   $112,087 

 

The tangible benefits obligation is related to the Company’s former Broadcasting license that was an inactive stand-alone asset not grouped with assets or groups of CGUs comprising the Company’s operating segments. Forgiveness of the CRTC tangible benefits obligation associated with the Broadcasting License has been excluded from segment profit as it does not impact operating decisions taken by the Company’s management and is based upon the way the performance of the Company’s business is evaluated in the Company’s internal management reports.

 

10.Revenue

 

(a) Disaggregation of revenue from contracts with customers

 

The Company’s primary sources of revenue are as follows:

 

  For the three months ended     
March 31, 2022  Animation Production   Networks and Platform   Total 
Point in time  $3,658,192   $6,829,739   $10,487,931 
Over time   12,577,611        12,577,611 
   $16,235,803   $6,829,739   $23,065,542 

 

 

 

 13 

 

 

Wow Unlimited Media Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

  For the three months ended     
March 31, 2021  Animation Production   Networks and Platform   Total 
Point in time  $2,110,002   $6,261,774   $8,371,776 
Over time   6,583,354        6,583,354 
   $8,693,356   $6,261,774   $14,955,130 

 

The approximate revenue based on geographic location of customers is as follows:

 

   For the three months ended 
   March 31, 2022   March 31, 2021 
United States  $16,155,926   $12,990,713 
Canada   5,379,892    530,682 
United Kingdom1   1,529,724    1,433,735 
   $23,065,542   $14,955,130 

 

1 United Kingdom revenues relate to contracts with a customer that were denominated in USD.

 

(b) Contract balances

 

Trade receivables and unbilled accounts receivable are disclosed in Note 3.

 

The Company’s only contract related liabilities are deferred revenue, which reflects the timing difference between the receipt of cash and the recognition of revenue. The following table reflects the movement in deferred revenue as a result of cash received and revenue recognized in the three months ended March 31, 2022:

 

Deferred revenue

 

Balance as at January 1, 2022  $23,426,830 
Revenue recognized that was included in the deferred revenue balance at the beginning of the period   (13,161,053)
Increases due to cash received, excluding amounts recognized as revenue during the period   12,253,257 
Exchange difference   (7,971)
Balance as at March 31, 2022  $22,511,063 

 

 

 

 14 

 

 

Wow Unlimited Media Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

11.Nature of expenses

 

  For the three months ended 
Operating expenses  March 31, 2022   March 31, 2021 
 Employee costs  $12,432,244   $8,358,316 
 Refundable tax credits   (4,905,292)   (3,614,371)
 Contractors and other third party expenses   8,436,402    5,970,774 
 Rent and occupancy   261,805    163,836 
 IT support and maintenance   767,678    491,054 
 Paycheck Protection Progam loan forgiveness (Note 7(e))       (791,813)
 Other   429,843    262,492 
   $17,422,680    10,840,288 

 

 

  For the three months ended 
General and administration expenses  March 31, 2022   March 31, 2021 
 Employee costs  $256,613   $301,220 
 Legal and accounting   278,559    143,668 
 Contractors and other third party expenses       40,560 
 Other   113,871    127,227 
   $649,043   $612,675 

 

 

  For the three months ended 
Employee costs and benefits  March 31, 2022   March 31, 2021 
 Employee costs  $12,688,857   $8,659,536 
 Share-based compensation expense   35,289    55,908 
   $12,724,146   $8,715,444 

  

 

 

 15 

 

 

Wow Unlimited Media Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

12.Earnings (loss) per share

 

Basic earnings (loss) per share is calculated by dividing the net income (loss) attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period.

 

   For the three months ended 
   March 31, 2022   March 31, 2021 
         
Net income (loss)  $1,290,221   $1,332,321 
Weighted average number of common shares outstanding   32,024,314    32,024,314 
           
Earnings (loss) per share - basic  $0.04   $0.04 

 

Diluted earnings (loss) per share is calculated by adjusting basic earnings (loss) per share, as described above, for the effects of all potentially dilutive instruments during the period.

 

   For the three months ended 
   March 31, 2022   March 31, 2021 
         
 Net income (loss)  $1,290,221   $1,332,321 
 Interest expense on convertible debentures, net of tax (Note 8, 14)   104,865    104,865 
 Net income (loss) - diluted  $1,395,086   $1,437,186 
           
 Weighted average number of common shares outstanding   32,024,314    32,024,314 
 Effect of potentially dilutive convertible debentures (Note 8)   8,545,455    8,545,455 
 Effect of potentially dilutive stock options (Note 13)   581,701    34,091 
 Weighted average number of common shares outstanding - diluted   41,151,470    40,603,860 
           
Earnings (loss) per share - diluted  $0.03   $0.04 

 

For the three months ended March 31, 2022, 1,869,300 stock options were excluded from the diluted weighted average number of common shares outstanding calculation because their effect would have been anti-dilutive (March 31, 2021 – 2,802,672 stock options and 900,000 warrants).

 

 

 

 16 

 

 

Wow Unlimited Media Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

13.Share-based compensation

 

Total share-based compensation expense from all forms of share-based payment awards for the three months ended March 31, 2022 was $35,289 (three months ended March 31, 2021 – $55,908).

 

14.Finance costs

 

   For the three months ended 
   March 31,
2022
   March 31,
2021
 
         
 Interest expense on interim production financing  $233,110   $193,557 
 Interest expense on bank indebtedness   15,263    21,638 
 Interest and accretion on convertible debentures (Note 8)   143,651    143,651 
 Interest accretion on lease obligations   248,042    221,249 
 Interest accretion on tangible benefits obligation (Note 6)       3,106 
 Interest capitalized to investments in film and television (Note 4)   (142,436)   (185,616)
   $497,630   $397,585 

 

15.Financial instruments

 

(a) Fair value measurement of financial instruments

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

The Company categorizes its fair value measurements according to a three-level hierarchy. A level is assigned to each fair value measurement based on the lowest level input significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined as follows:

 

·Level 1 - Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.

 

·Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

·Level 3 – Inputs that are based on unobservable inputs which are supported by little or no market activity.

 

 

 

 17 

 

 

Wow Unlimited Media Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

At December 31, 2021, the Company had 17 outstanding USD forward contracts with a total notional value of USD $4,022,730, with expiry dates ranging from February 28, 2022 to September 1, 2022, at an average rate of 1.2679. During the three months ended March 31, 2022, the Company entered into two new USD forward contracts with a total notional value of USD $500,000 (March 31, 2021 – USD $5,180,966), and exercised nine contracts of the existing USD forward contracts at an average exchange rate of 1.2682. As at March 31, 2022, the remaining outstanding USD forward contracts have a total notional value of USD $2,216,764. These contracts have an expiry date ranging from May 2, 2022, to September 1, 2022, at an average rate of 1.2577. For the three months ended March 31, 2022, the Company realized a loss of $6,149 and an unrealized gain of $22,550 in the condensed interim consolidated statements of comprehensive income (loss) (March 31, 2021 – realized gain $29,560 and unrealized gain $54,437).

 

The Company has designated its financial instruments as follows:

 

       March 31, 2022   December 31, 2021 
   Fair Value Hierarchy  

Carrying

Value

   Estimated Fair Value  

Carrying

Value

   Estimated Fair Value 
 Financial assets:                         
 Amortized cost                         
Cash and cash equivalents   Level 1   $3,315,776   $3,315,776   $3,622,620   $3,622,620 
Trade receivables   Level 2    12,405,133    12,405,133    14,271,843    14,271,843 
Long-term accounts receivable   Level 2    96,639    96,639    276,860    276,860 
Deposits   Level 2    106,389    106,389    106,142    106,142 
                          
 Financial liabilities:                         
 Amortized cost                         
Bank indebtedness   Level 2    1,836,993    1,836,993    976,265    976,265 
Accounts payable and accrued liabilities   Level 2    7,468,691    7,468,691    8,586,911    8,586,911 
Interim production financing   Level 2    21,081,179    21,081,179    22,282,119    22,282,119 
Convertible debentures   Level 2    4,477,791    4,982,840    4,444,236    4,982,840 
Lease obligations   Level 2    14,712,561    14,712,561    15,247,772    15,247,772 
Other liabilities   Level 2    1,085,719    1,085,719    1,085,719    1,085,719 
 Fair value through profit or loss                         
Other financial liabilities   Level 2    60,176    60,176    82,726    82,726 

 

 

 

 18 

 

 

Wow Unlimited Media Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

(b) Risks arising from financial instruments

 

Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.

 

The Company’s liquidity needs can be met through a variety of sources including generating cash from operations, borrowing against license contracts, production service contracts, refundable tax credits receivable, entering into leases, the issuance of debentures, the issuance of shares, or the issuance of share purchase warrants. The Company manages liquidity risk by continuously monitoring actual and forecasted cash flows, using lease financing and by maintaining revolving credit facilities (Note 2 (d)).

 

The following table provides a contractual maturity analysis for financial liabilities:

 

As at March 31, 2022  < 1 year   1 to 5 years   Greater than 5 years   Total   Carrying Amount 
Accounts payable and accrued liabilities  $7,468,691   $   $   $7,468,691   $7,468,691 
Bank indebtedness   1,836,993            1,836,993    1,836,993 
Lease obligations 1   3,878,400    7,608,837    7,477,964    18,965,201    14,712,561 
Interim production financing   21,081,179            21,081,179    21,081,179 
Convertible debentures 1   446,500    4,982,579        5,429,079    4,477,791 
Other liabilities1   1,057,548    57,041        1,114,589    1,085,719 
   $35,769,311   $12,648,457   $7,477,964   $55,895,732   $50,662,934 

1 Includes estimated interest that will be paid to the end of their respective terms.

 

16.Consolidated statement of cash flows - supplemental information

 

(a) Changes in non-cash working capital

 

The net change in non-cash working capital related to operations for the three months ended March 31, 2022 and 2021, are as follows:

 

   For the three months ended 
   March 31,
2022
   March 31,
2021
 
         
 Trade and other accounts receivable  $1,647,671   $(888,448)
 Prepaid expenses, deposits and other   265,468    44,543 
 Deposits   (247)   433 
 Accounts payable and accrued liabilities   (1,228,316)   (1,013,325)
 Deferred revenue   (915,766)   1,625,051 
 Other current and non-current liabilities   896    (37,192)
 Net change in non-cash working capital  $(230,294)  $(268,938)

 

 

 

 19 

 

 

Wow Unlimited Media Inc.

Notes to the Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2022 and 2021 (Unaudited)

Expressed in Canadian dollars

 

 

(b) Cash and cash equivalents on the consolidated statements of cash flows are comprised of the following:

 

   March 31,
2022
   December 31,
2021
   March 31,
2021
 
             
 Cash and cash equivalents  $3,315,776   $3,622,620   $4,484,881 
 Bank indebtedness   (1,836,993)   (976,265)   (2,336,156)
   $1,478,783   $2,646,355   $2,148,725 

 

17.Subsequent event

 

Genius Brands International, Inc. acquisition

 

On October 27, 2021, the Company announced it had entered into a definitive arrangement agreement with Genius Brands International, Inc. ("Genius Brands") (NASDAQ: GNUS) whereby Genius Brands would acquire all of the issued and outstanding shares of the Company for consideration comprised of cash and stock (the “Transaction”). In connection with the Transaction, the outstanding convertible debentures of the Company would convert into WOW Unlimited shares and would participate on the same basis as shares of WOW Unlimited. On April 6, 2022, Genius Brands, together with WOW Unlimited, announced completion of the Transaction of WOW Unlimited by Genius Brands through Wow Exchange Co. Inc. (the “Purchaser”), a wholly owned subsidiary of Genius Brands.

 

Under the terms of the Transaction, the Purchaser acquired each of the issued and outstanding WOW Unlimited Shares, for $1.169 (less applicable withholdings) and either 0.271 of a Genius Brands share (the “Genius Shares”) or, if validly elected, 0.271 of an Exchangeable Share, in the capital of the Purchaser (the “Exchangeable Shares”). The aggregate consideration delivered pursuant to the Transaction for WOW Unlimited shares was $47,696,640 of cash, 10,365,823 Genius Shares and 691,262 Exchangeable Shares. Each whole Exchangeable Share is exchangeable for one whole Genius Share, subject to adjustment, in accordance with the terms thereof.

 

The common voting shares and the variable voting shares of the Company were delisted from the TSX-V and OTCQX on April 8, 2022. The Company ceased to be a reporting issuer in British Columbia, Alberta, Ontario, and Quebec.

 

 

 

 20