WildBrain Ltd. — Interim / Quarterly Report 2022

Nov 10, 2021

WildBrain Ltd.

Unaudited Interim Condensed Consolidated Financial Statements September 30, 2021 (expressed in thousands of Canadian dollars)

November 9, 2021

Management’s Responsibility for Financial Reporting

The accompanying unaudited interim condensed consolidated financial statements of WildBrain Ltd. (the “Company”) are the responsibility of management and have been approved by the Board of Directors (the “Board”). The Board is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the unaudited interim condensed consolidated financial statements. The Board carries out this responsibility through its Audit Committee. The Audit Committee reviews the Company’s unaudited interim condensed consolidated financial statements and recommends their approval by the Board.

The Audit Committee is appointed by the Board and all of its members are independent directors. It meets with Company’s management and reviews internal control and financial reporting matters to ensure that management is properly discharging its responsibilities before submitting the unaudited interim condensed consolidated financial statements to the Board for approval.

The unaudited interim condensed consolidated financial statements have been prepared by management in accordance with International Accounting Standard 34, Interim Financial Reporting as issued by the International Accounting Standards Board. When alternative methods of accounting exist, management has chosen those it deems most appropriate in the circumstances. The unaudited interim condensed consolidated financial statements include amounts based on informed judgments and estimates of the expected effects of current events and transactions with appropriate consideration to materiality. In addition, in preparing the unaudited interim condensed consolidated financial statements, management must make determinations as to the relevancy of information to be included, and make estimates and assumptions that affect reported information. Actual results in the future may differ materially from our present assessment of this information because future events and circumstances may not occur as expected.

(signed) "Eric Ellenbogen" (signed) "Aaron Ames" Chief Executive Officer Chief Financial Officer New York, New York Toronto, Ontario

WildBrain Ltd. Unaudited Interim Condensed Consolidated Balance Sheets As at September 30, 2021 and June 30, 2021

(expressed in thousands of Canadian dollars)

Assets Current assets Cash Restricted cash Amounts receivable (note 4) Prepaid expenses and other Investment in film and television programs (note 5) Long-term amounts receivable (note 4) Acquired and library content (note 6) Property and equipment Intangible assets Goodwill Liabilities Current liabilities Accounts payable and accrued liabilities Deferred revenue Interim production financing (note 7) Current portion of lease liabilities Current portion of long-term debt (note 7) Long-term debt (note 7) Long-term lease liabilities Derivative liabilities (note 13) Other long-term liabilities Deferred income taxes Shareholders’ Equity Equity attributable to shareholders of the Company Non-controlling interest	September 30, 2021 June 30, 2021 $ $ 56,861 78,431 13,712 13,626 215,860 195,240 6,596 6,184 148,936 147,783
	441,965 441,264 53,537 51,997 99,853 100,653 41,688 47,229 441,634 433,595 53,777 53,164
	1,132,454 1,127,902
	118,580 130,299 38,590 42,004 73,752 65,403 11,292 9,428 3,631 3,532
	245,845 250,666 490,733 478,862 27,345 34,407 41,180 34,158 15,479 16,568 12,403 10,328
	832,985 824,989
	55,247 68,588 244,222 234,325
	299,469 302,913
	1,132,454 1,127,902

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

WildBrain Ltd. Unaudited Interim Condensed Consolidated Statements of (Loss) Income For the three month periods ended September 30, 2021 and 2020

(expressed in thousands of Canadian dollars, except for amounts per share)

Revenues (note 17) Expenses(note 12) Direct production costs and expense of film and television produced Amortization of acquired and library content (note 6) Amortization of property and equipment and intangible assets Reversal of right-of-use asset impairment (note 12) Selling, general and administrative Share-based compensation (note 9) Finance costs, net (note 11) Change in fair value of embedded derivatives Foreign exchange loss (gain) Reorganization, development and other (income) expense (note 12) (Loss) income before income taxes Provision for (recovery of) income taxes(note 10) Current Deferred Net (loss) income for the period Net income attributable to non-controlling interests Net loss attributable to shareholders of the Company Basic loss per common share(note 14) Diluted loss per common share(note 14)	September 30, 2021 September 30, 2020 $ $ 112,596 95,455
	61,053 52,204 2,562 2,710 7,270 5,605 (719) — 23,022 18,075 2,033 2,598 9,989 9,757 5,561 3,669 13,022 (5,144) (842) 2,688
	122,951 92,162
	(10,355) 3,293
	685 590 2,315 (351)
	3,000 239
	(13,355) 3,054
	8,041 6,361
	(21,396) (3,307)
	(0.12) (0.02)
	(0.12) (0.02)

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

Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss For the three month periods ended September 30, 2021 and 2020

WildBrain Ltd.

(expressed in thousands of Canadian dollars)

Net (loss) income for the period Other comprehensive income (loss) Items that may be subsequently reclassified to the consolidated statements of (loss) income Foreign currency translation adjustment Comprehensive loss for the period	September 30, 2021 September 30, 2020 $ $ (13,355) 3,054 12,585 (7,056)
	(770) (4,002)

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

WildBrain Ltd. Unaudited Interim Condensed Consolidated Statements of Changes in Equity For the three month periods ended September 30, 2021 and 2020

(expressed in thousands of Canadian dollars)

Balance - July 1, 2020 Net income (loss) for the period Other comprehensive loss for the period Comprehensive income (loss) for the period Common shares issued, net of issuance costs and deferred taxes Common shares purchased held in trust Share-based compensation Distributions to non-controlling interests Balance - September 30, 2020 Balance - July 1, 2021 Net (loss) income for the period Other comprehensive income for the period Comprehensive income (loss) for the period Common shares issued, net of issuance costs Common shares sold held in trust, net Share-based compensation Distributions to non-controlling interests Balance - September 30, 2021	Common shares $ Contributed surplus $ Accumulated other comprehensive loss $ Deficit $ Non- controlling interest $ Total $ 366,235 36,543 (12,080) (309,347) 260,135 341,486
	— — — (3,307) 6,361 3,054 — — (1,561) — (5,495) (7,056)
	— — (1,561) (3,307) 866 (4,002) 18 (3) — — — 15 (230) (50) — — — (280) — 2,598 — — — 2,598 — — — — (4,220) (4,220)
	366,023 39,088 (13,641) (312,654) 256,781 335,597
	367,359 39,044 (21,391) (316,424) 234,325 302,913
	— — — (21,396) 8,041 (13,355) — — 5,930 — 6,655 12,585
	— — 5,930 (21,396) 14,696 (770) 27 (4) — — — 23 119 (50) — — — 69 — 2,033 — — — 2,033 — — — — (4,799) (4,799)
	367,505 41,023 (15,461) (337,820) 244,222 299,469

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

WildBrain Ltd. Unaudited Interim Condensed Consolidated Statements of Cash Flows For the three month periods ended September 30, 2021 and 2020

(expressed in thousands of Canadian dollars)

Cash provided by (used in) Operating activities Net (loss) income for the period Charges (credits) not involving cash Amortization of property and equipment Amortization of intangible assets Amortization of acquired and library content Accretion expense and amortization of deferred financing fees Unrealized foreign exchange loss (gain) Share-based compensation Change in fair value of embedded derivatives Interest income Interest expense Deferred tax recovery Reversal of right-of-use asset impairment (note 12) Net investment in film and television programs (note 16) Net change in non-cash balances related to operations (note 16) Cash (used in) provided by operating activities Financing activities Common shares issued, net of withholding taxes Common share sold (purchased) held in trust, net Distributions to non-controlling interests Repayment of bank indebtedness Repayment of long-term debt Interest paid on long-term debt Realized foreign exchange on long term debt repayment Repayment of obligations under finance leases Proceeds from (repayment of) interim production financing, net (note 16) Cash used in financing activities Investing activities Acquisition of property and equipment Acquisition of intangible assets Cash used in investing activities Effect of foreign exchange rate changes on cash Net change in cash and restricted cash during the period Cash and restricted cash - Beginning of the period Cash and restricted cash - End of the period	September 30, 2021 September 30, 2020 $ $ (13,355) 3,054 4,606 3,016 2,664 2,589 2,562 2,710 3,124 2,576 11,722 (7,647) 2,033 2,598 5,561 3,669 (466) (345) 7,331 7,526 2,315 (351) (719) — (1,002) (760) (37,726) 937
	(11,350) 19,572
	23 15 69 (280) (4,799) (4,220) — (5,000) (908) — (9,585) (9,937) (21) — (2,519) (2,305) 8,348 (5,765)
	(9,392) (27,492)
	(1,020) (1,035) (555) (451)
	(1,575) (1,486)
	833 (671)
	(21,484) (10,077) 92,057 84,526
	70,573 74,449

Supplemental information (note 16)

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

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

1 Nature of business

WildBrain Ltd. (the "Company" or "WildBrain"), was incorporated on February 12, 2004 under the laws of the Province of Nova Scotia, Canada, and continued on April 25, 2006 under the Canada Business Corporation Act. The Company is a public company whose common shares are traded on the Toronto Stock Exchange ("TSX") under the symbol 'WILD'.

The Company develops, produces and distributes films and television programs for domestic and international markets; licenses its brands in the domestic and international markets; broadcasts films and television programs in the domestic market; sells advertising on various ad-supported video-on-demand platforms; and manages copyrights, licensing and brands for third parties. The address of the Company’s head office is 5657 Spring Garden Road, Unit 505, Halifax, Nova Scotia, B3J 3R4.

2 Basis of preparation

These unaudited interim condensed consolidated financial statements were prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board, applicable to the preparation of the International Accounting Standards ("IAS") 34, Interim Financial Reporting, and follow the same accounting policies as those used in the Company's most recent audited annual consolidated financial statements. These unaudited interim condensed consolidated financial statements do not include all the disclosures included in the Company's audited annual consolidated financial statements. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements.

These unaudited interim condensed consolidated financial statements have been authorized for issuance by the Board of Directors on November 9, 2021.

3 Summary of significant accounting policies, judgments and estimation uncertainty

These unaudited interim condensed consolidated financial statements have been prepared using the same policies and methods as the annual consolidated financial statements of the Company for the year ended June 30, 2021.

Significant accounting judgments and estimation uncertainty

The preparation of unaudited interim condensed consolidated financial statements under IFRS requires the Company to make estimates and assumptions that affect the application of policies and reported amounts. Estimates and judgments are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable. Actual results may differ materially from these estimates.

During the third quarter of fiscal 2020, the outbreak of the coronavirus pandemic, identified as "COVID-19" and declared a global pandemic by the World Health Organization on March 11, 2020, resulted in federal and provincial governments enacting emergency measures to combat the spread of the virus. In response, many countries have required entities to limit or suspend business operations and implement travel restrictions and quarantine measures. These measures have disrupted the operating activities of many entities and have led to significant volatility in the global markets. These conditions continued to exist as at September 30, 2021. This has resulted in significant economic uncertainty, and the potential impact on the Company's future financial results is difficult to reliably measure. The Company has implemented monitoring procedures to actively manage the developing impacts from COVID-19, including but not limited to, the potential future effects on its assets, cash flow and liquidity, the impacts to the Company's operations and the value of assets and liabilities reported in these unaudited interim condensed consolidated financial statements. Additional information on the Company's credit, liquidity, and currency risks and the management of such risks can be found in note 13.

(1)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

4 Amounts receivable

Trade receivables Less: ECL allowance on trade receivables Trade receivables, net of loss allowance Sales tax receivable Federal and provincial film tax credits and other government assistance Short-term amounts receivable Long-term amounts receivable Total amounts receivable	September 30, 2021 June 30, 2021 $ $ 149,382 129,614 (9,283) (8,236)
	140,099 121,378 1,167 986 74,594 72,876
	215,860 195,240 53,537 51,997
	269,397 247,237

The aging of trade receivables is as follows:

Less than 60 days Between 60 and 90 days Over 90 days A continuity of ECL allowance on trade receivables as follows: Opening balance Loss allowance on trade receivables Receivables written off in the year Recoveries of receivables previously provided for Foreign exchange Ending balance	September 30, 2021 June 30, 2021 $ $ 125,744 106,388 1,181 2,550 22,457 20,676
	149,382 129,614
	September 30, 2021 June 30, 2021 $ $ 8,236 7,720 1,012 4,310 — (3,342) — (543) 35 91
	9,283 8,236

A continuity of ECL allowance on trade receivables as follows:

(2)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

5 Investment in film and television programs

Development costs Productions in progress Cost, net of government and third party assistance Productions completed and released Cost, net of government and third party assistance Accumulated expense Accumulated write-down of investment in film and television programs Program and film rights - broadcasting Cost Accumulated expense Accumulated write-down of program and film rights	September 30, 2021 June 30, 2021 $ $ 3,462 4,669
	27,522 33,135
	682,805 663,073 (529,041) (517,563) (52,581) (52,581)
	101,183 92,929 165,377 163,385 (142,871) (140,598) (5,737) (5,737)
	16,769 17,050
	148,936 147,783

All program and film rights - broadcasting relate to WildBrain Television.

The continuity of investment in film and television programs is as follows:

Net opening investment in film and television programs (Decrease) increase in development costs Cost of productions (completed and released and productions in progress), net of assistance Expense of investment in film and television programs Write-down of investment in film and television programs Increase of program and film rights - broadcasting Expense of program and film rights - broadcasting Foreign exchange

September 30, 2021 June 30, 2021 $ $ 147,783 140,548 (1,207) 1,908 13,967 73,165 (11,478) (55,387) — (7,453) 1,992 4,434 (2,273) (10,381) 152 949

148,936 147,783

During the period ended September 30, 2021, interest of $263 (September 30, 2020 - $319) was capitalized to investment in film and television programs.

(3)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

6 Acquired and library content

Net opening acquired and library content Additions Write-down of acquired and library content Amortization Foreign exchange Net closing acquired and library content	September 30, 2021 June 30, 2021 $ $ 100,653 109,076 — 8,918 — (379) (2,562) (11,100) 1,762 (5,862)
	99,853 100,653

7 Credit facilities

Interim production financing Term Facility, net of unamortized issue costs of $10,444 (June 30, 2021 - $10,889) Convertible debentures, net of unamortized issue costs and conversion option of $15,179 (June 30, 2021 - $16,248) Exchangeable debentures, net of unamortized issue costs and conversion option of $4,827(June 30, 2021 - $5,762) Total Amount due within 12 months Amount due beyond 12 months	September 30, 2021 June 30, 2021 $ $ 73,752 65,403 350,803 341,477 124,821 123,753 18,740 17,164
	568,116 547,797 (77,383) (68,935)
	490,733 478,862

a) Bank indebtedness ("Revolving Facility")

On March 26, 2021, the Company entered into a five-year, US$30 million Revolving Facility with an interest rate of LIBOR plus 4.00%. The Revolving Facility does not carry a financial maintenance covenant, except when amounts are drawn and outstanding. The new Revolving Facility matures on the earlier of March 26, 2026 or three months prior to the maturity of the Company's convertible debentures dated September 30, 2024, except where converted. As at September 30, 2021, $nil (June 30, 2021 -$nil) was drawn on the Revolving Facility.

b) Interim production financing

Interim production credit facilities	September 30, 2021 June 30, 2021 $ $ 73,752 65,403

The Company has interim production credit facilities with various financial institutions and other entities, bearing interest at bank prime plus 0.5% - 1.0%, LIBOR plus 2.50% or base rate of 5.75% plus 0.5%. Assignment and direction of specific production financing, licensing contracts receivable and film tax credits receivable have been pledged as security. As at September 30, 2021, the Canadian dollar bank prime rate was 2.45% (June 30, 2021 - 2.45%).

(4)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

c) Term facility

On March 26, 2021, the Company completed the refinancing of its term facility with a seven-year US$285,000 senior secured term loan facility (the "Term Loan") maturing March 26, 2028. The term facility has no financial maintenance covenant and bears interest at a rate of LIBOR plus 4.25%. Commencing on the fiscal quarter ending June 30, 2021, the Term Loan requires quarterly repayment equal to 0.25% of the initial principal amount. As at September 30, 2021, the Company's Term Loan had a principal balance of US$283,575, or CAD$361,303 (June 30, 2021 - US$284,288, or CAD$352,347)

During the fourth quarter of fiscal 2021, the Company entered into an interest rate swap agreement to secure US$165,000 of total term facility from an interest rate of LIBOR plus 4.25% to a fixed interest rate of 5.24% (note 13(b)).

The Term Loan also requires repayments equal to 50% of excess cash flow (the "Excess Cash Flow Payments") (as defined in the Senior Secured Credit Agreement), commencing for the fiscal year-ended June 30, 2022, while the first lien net leverage ratio ("First Lien Leverage Ratio"), as defined in the Senior Secured Credit Agreement, is greater than 3.50 times, reducing to 25% of Excess Cash Flow while First Lien Net Leverage Ratio is at or below 3.50 times and greater than 3.00 times, with the remaining balance due on March 26, 2028. No payments were required under the Excess Cash Flow Payments calculation for the year ended June 30, 2021.

The LIBOR rate is scheduled to be discontinued at the end of calendar year 2021. As part of the refinancing of the Term Loan and Revolving Facility completed March 26, 2021, alternative replacement rates for LIBOR were included in the agreement based on the secured overnight financing rate ("SOFR"), which is a benchmark interest rate for U.S. dollar denominated loans.

d) Senior unsecured convertible debentures ("Convertible Debentures")

As at September 30, 2021, the Convertible Debentures had a principal balance of $140,000 (June 30, 2021 - $140,000), bearing interest at an annual rate of 5.875% and paid semi-annually on March 31 and September 30 of each year. The Convertible Debentures are convertible into Common Voting Shares or Variable Voting Shares of the Company at a price of $7.729 per share, subject to certain customary adjustments. The Convertible Debentures mature September 30, 2024.

The Convertible Debentures have a cash conversion option whereby the Company can elect to make a cash payment in lieu of issuing Common Voting Shares or Variable Voting Shares upon exercise of the conversion option feature by the holder of the Convertible Debentures. As a result, the Convertible Debentures were deemed to have no equity component at initial recognition and the estimated fair value of the embedded derivatives is recorded as a financial liability and included with the debt component on the Company's unaudited interim condensed consolidated balance sheet. Changes in the estimated fair value of the embedded derivatives are recorded through the Company's unaudited interim condensed consolidated statement of (loss) income. As at September 30, 2021, the estimated fair value of the embedded derivatives was $7,229 (June 30, 2021 - $6,971).

e) Exchangeable debentures

As at September 30, 2021, the Company's Exchangeable Debentures had a principal balance of US$18,497 or $23,567 (June 30, 2021 - US$18,497 or $22,925) bearing interest at an annual rate of 7.5% payable at maturity and are exchangeable for Variable Voting Shares of the Company at a conversion price of US$1.072855 per share. The Exchangeable Debentures mature June 24, 2023 and are non-recourse to the Company.

The Exchangeable Debentures were issued to certain funds managed by Fine Capital Partners, L.P., a related party of the Company. The Exchangeable Debentures were issued by a newly-formed single purpose subsidiary of the Company, which is excluded from the security granted to the lenders under the Company's Senior Secured

(5)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

Credit Agreement. As a result, it is also excluded from the calculation of the net leverage ratio covenant, where applicable. Proceeds from the Exchangeable Debentures are earmarked for investments in growth initiatives to drive the Company's content and brand strategy, and therefore have been classified as restricted cash in the unaudited interim condensed consolidated balance sheet.

On March 4, 2021, the Company issued the remaining US$6,289, or $7,795 on the Exchangeable Debenture. The conversion option represents an embedded derivative with a fixed USD conversion price for Variable Voting Shares of the Company, which are denominated in Canadian dollars. As a result, both the first and second tranche of the Exchangeable Debentures were deemed to have no equity component at initial recognition and the estimated fair value of the embedded derivatives was recorded as a derivative liability.

During the three-month period ended September 30, 2021, a change in fair value of the embedded derivative of $5,303 was recorded (June 30, 2021 - $3,317), and the estimated fair value of the embedded derivative as at September 30, 2021 was $33,331 (June 30, 2021 - $27,208).

8 Share capital

Preferred variable voting shares Opening balance Ending balance Common shares Opening balance Shares sold (purchased) held in trust, net Options exercised Employee share purchase plan RSU settled DSU settled Ending balance	September 30, 2021 June 30, 2021
	Number Amount Number Amount # $ # $ 500,000,000 — 500,000,000 — 500,000,000 — 500,000,000 —
	171,855,961 367,359 170,931,774 366,235 124,380 119 (683,433) (1,368) — — 237,500 511 10,433 27 44,240 78 — — 1,151,813 1,497 — — 174,067 406
	171,990,774 367,505 171,855,961 367,359

Preferred Variable Voting Shares ("PVVS")

500,000,000 (“PVVS”), redeemable at the option of the Company at any time at a millionth of a cent per share, no entitlement to dividends, voting Unlimited Common Voting Shares without nominal or par value Unlimited Variable Voting Shares without nominal or par value Unlimited Non-Voting Shares without nominal or par value

The votes attached to the PVVS as a class are automatically adjusted so that they, together with the votes attached to the common shares that are owned by Canadians, equal 55% of the votes attached to all shares in the capital of the Company. The votes attached to the PVVS as a class are, in aggregate, not less than 1% of the votes attached to all shares in the capital of the Company. The PVVS are not listed on any stock exchange.

Common shares

The common shares of the Company are inclusive of Common Voting Shares, Variable Voting Shares and NonVoting Shares. As at September 30, 2021, the Company had 34,528,453 Common Voting Shares and

(6)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

137,462,321 Variable Voting Shares issued and outstanding (June 30, 2021 - 27,748,502 and 144,107,459, respectively).

Share trust

In the fourth quarter of 2020, the Company established an employee share trust to purchase and hold common shares of the Company to satisfy certain employee and director share-based compensation awards, including restricted share units and deferred share units. During the quarter ended September 30, 2021, the Company purchased 50,710 common shares of the Company in the open market at an average price per common share of $3.16 or $160 in total and sold 175,000 common shares of the Company in the open market at an average price per common share of $2.31 or $404 in total, which has been recorded as a reduction of shareholders' equity in the unaudited interim condensed consolidated balance sheet (June 30, 2021 - 683,433 common shares at $2.00 per share, or $1,368 in total).

9 Share-based compensation

Omnibus equity incentive plan ("Omnibus Plan")

On December 17, 2019, the shareholders of the Company approved the adoption of the Omnibus Plan, a single umbrella plan that provides flexibility to the Company to grant equity-based incentive awards in the form of stock options, restricted share units and performance share units. The Omnibus Plan provides the aggregate maximum number of equity-awards issuable not to exceed 8.5% of the Company's total issued and outstanding Common and Variable Voting Shares. As at September 30, 2021, the total amount reserved for issuance under the Omnibus Plan was 14,619,215 (June 30, 2021 - 14,607,757).

Options

As at September 30, 2021 and 2020, the Company had the following stock options outstanding:

Outstanding at June 30, 2020 Expired Outstanding at September 30, 2020 Outstanding at June 30, 2021 Forfeited Expired Outstanding at September 30, 2021 Exercisable at September 30, 2021	Weighted average Number of exercise price options per stock option # $ 5,858,800 4.02 (25,000) 8.40
	5,833,800 4.01
	4,993,800 3.86 (25,000) 1.51 (25,000) 8.40
	4,943,800 3.85
	3,531,550 4.62

During the year period ended September 30, 2021, the Company recognized a share-based compensation expense of $37 for the vesting of options (September 30, 2020 - $196), with a corresponding adjustment to contributed surplus.

(7)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

The range of exercise prices for options outstanding at September 30, 2021 is presented below.

Range of exercise prices $1.50 - $3.49 $3.50 - $5.49 $5.50 - $7.49 $7.50 - $9.49 Total	Weighted Weighted Weighted Number average average Number average outstanding at remaining exercise outstanding at exercise p 2021 contractual life price p 2020 price # years $ # $ 2,789,500 4.36 1.66 3,089,500 1.64 100,000 3.25 5.47 300,000 5.47 1,586,800 2.60 6.28 1,901,800 6.36 467,500 1.26 8.38 542,500 8.38
	4,943,800 3.48 3.85 5,833,800 4.01

Performance share unit plan ("PSUs")

The following table illustrates the movements in the number of PSUs during the period.

Outstanding, beginning of period Forfeited Outstanding, end of period	September 30, 2021 September 30, 2020 PSU PSU # # 2,775,000 2,825,000 (50,000) —
	2,725,000 2,825,000

During the period ended September 30, 2021, the Company recognized share-based compensation expense on the current period awards of $37 (September 30, 2020 - $32) with a corresponding adjustment to contributed surplus.

Restricted share unit plan ("RSUs")

The RSUs is a long-term employee retention program issued to certain eligible employees as part of the Omnibus Plan, which are settled through treasury and generally cliff-vest in 3 years.

(8)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

The following table illustrates the movements in the number of RSUs during the period.

Outstanding, beginning of period Granted Forfeited Expired Outstanding, end of period	September 30, 2021 September 30, 2020 RSU RSU # # 3,311,548 4,333,054 2,456,603 404,552 (70,000) — (29,042) —
	5,669,109 4,737,606

During the period ended September 30, 2021, the Company recognized share-based compensation expense of $699 (September 30, 2020 - $1,114) with a corresponding adjustment to contributed surplus.

Deferred share unit plan ("DSUs")

DSUs are an incentive program for Board members of the Company, where Board members may elect to receive director fees in the form of cash or DSUs. The DSU is settled in shares purchased in the open market and cannot be issued from treasury. The DSUs vest immediately upon grant, but they cannot be exercised until the Board member departs the Company.

The following table illustrates the movements in the number of DSUs during the period.

Outstanding, beginning of period Granted Outstanding, end of period	September 30, 2021 September 30, 2020 DSU DSU # # 2,111,008 1,470,754 368,917 836,407
	2,479,925 2,307,161

During the period ended September 30, 2021, the Company recognized share-based compensation expense of $1,102 (September 30, 2020 - $1,198) with a corresponding adjustment to contributed surplus, and included $130 for services rendered but DSUs not yet granted.

Long-term incentives plan ("LTIP")

The LTIP is a long-term employee retention program whereby common shares of the Company are issued to certain eligible employees. These common shares are purchased in the open market and cannot be issued from treasury.

During the period ended September 30, 2021, the Company recognized share-based compensation expense of $28 (September 30, 2020 - $55) with a corresponding adjustment to contributed surplus.

(9)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

Employee stock purchase plan

During the period ended September 30, 2021, the Company recognized share-based compensation expense of $4 (September 30, 2020 - $3) with a corresponding adjustment to contributed surplus.

10 Income taxes

For the three-month period ended September 30, 2021, income tax expense was $3,000 (September 30, 2020 - expense of $239) The income tax expense in each period reflects the mix of taxing jurisdictions in which pre-tax income and losses were recognized. The income attributable to non-controlling interests is taxed outside the Company. Further items impacting the effective tax rate include the different statutory tax rates in the taxing jurisdictions, non-deductible items and the continued nonrecognition of certain deferred tax assets in Canada.

11 Finance costs, net

Net finance costs comprise the following:

Finance costs Interest income Interest expense on bank indebtedness Interest on long-term debt Interest on completed and released productions Amortization of deferred financing fees Accretion on Convertible Debentures, exchangeable debentures, lease liabilities and other	September 30, 2021 September 30, 2020 $ $ (466) (345) 96 125 7,064 7,156 171 245 652 597 2,472 1,979
	9,989 9,757

Interest income consists of accretion on long-term amounts receivable and cash interest earned on bank deposits and tax credit receivables.

(10)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

12 Expenses by nature and employee benefit expense

The following sets out the expenses by nature and employee benefits expense:

Direct production and new media costs Expense of film and television programs Expense of film and broadcast rights for broadcasting Amortization of property and equipment and intangible assets Amortization of acquired and library content Reversal of right-of-use asset impairment Office and administrative Investor relations and marketing Professional and regulatory Reorganization, development and other (income) expenses, excluding employee benefits Finance costs, net Change in fair value of embedded derivatives Foreign exchange loss (gain) Employee benefits expense: Salaries and employee benefits Share-based compensation (note 9) Termination and other benefits	September 30, 2021 September 30, 2020 $ $ 47,302 35,343 11,478 13,811 2,273 3,050 7,270 5,605 2,562 2,710 (719) — 4,371 5,088 655 562 1,951 1,644 (2,411) 1,605 9,989 9,757 5,561 3,669 13,022 (5,144)
	103,304 77,700
	16,045 10,781 2,033 2,598 1,569 1,083
	19,647 14,462
	122,951 92,162

During the three-month period ended September 30, 2021, included in reorganization, development and other (income) expenses were corporate rebranding charges of $128, recovery of $(4,093) in legal fees related to the litigation settlement with former employees (among others), relocation costs 0f $934 (includes net lease termination costs of $599 and $335 of moving costs), and other costs of $620 (September 30, 2020 - legal fees associated with a dispute with former employees of $759, systems upgrade and process enhancement initiatives of $183, and other fees of $663).

During the three-month period ended September 30, 2021, included in salaries and employee benefits expenses were various government wage subsidies of $nil (September 30, 2020 - $1,179).

During the three-month period ended September 30, 2021, there was a reversal of a right-of-use asset impairment of $719.

(11)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

13 Management of financial risks and financial instruments

The financial risks arising from the Company’s operations include credit, interest rate, liquidity, currency and market risk. These risks arise from the normal course of operations. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. Management monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

a) Credit risk

Credit risk is the risk of an unexpected loss if a customer or counterparty to a financial asset or liability fails to meet its contractual obligations, and arises primarily from the Company's cash (including restricted cash) and credit exposure to customers through its outstanding trade receivables.

The maximum exposure to credit risk for cash (including restricted cash) and trade receivables (excluding government and film tax credit receivables) approximates the amounts recorded on the unaudited interim condensed consolidated balance sheets of $273,492 (June 30, 2021 - $273,668). The Company manages credit risk on cash and cash equivalents by ensuring that the counterparties are banks, governments and government agencies with high credit ratings.

The balance of trade amounts receivable is mainly with Canadian broadcasters and large international distribution companies. Management manages credit risk by performing a credit assessment on new customers and regularly reviewing aged accounts receivable. To determine the loss allowance for trade receivables, management assessed the lifetime ECL of customers by categorizing these customers into different risk profile groups and applying provision percentages based on historical loss rates and management's experience and judgment. The loss allowance for trade receivables represents approximately 6.2% of current trade receivables, which management believes is adequate. Further, long-term receivable arrangements are only granted to large international linear and digital broadcasting companies with good payment history.

COVID-19 has increased the credit risk in the Company's trade receivables. To manage this risk, the Company has increased its collection efforts with customers, risk-adjusted certain customers when determining a loss allowance, and in some limited cases provided customers with payment plans on past due amounts. Certain customers of the consumer-products segment, in particular Peanuts, are licensees who have been impacted by the closure of retailers during the pandemic and the Company is closely monitoring these receivables. Given that the majority of the Company's customers are large Canadian and international broadcasters, or large international distribution companies, there has not been evidence of significant deterioration in the credit quality of our customers and trade receivables to date.

The Company is unable to predict or anticipate the full extent or duration of impact due to COVID-19 at this time. Based on collections subsequent to the current quarter, and discussions with customers, the Company believes that the loss provision is adequate as at September 30, 2021.

(12)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

b) Interest rate risk

The Company's interest rate risk primarily relates to its interim production financing, Revolving Facility, Term Facility, and cash which are subject to interest rate benchmarks that fluctuate such as prime rate, LIBOR rate, bankers' acceptance rates and other applicable interest rate benchmarks.

During the fourth quarter of fiscal 2021, the Company entered into a 3-year term interest rate swap maturing on June 28, 2024, which secures US$165,000 of Term Facility from an interest rate of LIBOR plus 4.25% to a fixed interest rate of 5.24%. Management will continue to monitor the interest rate risk closely and ensure appropriate measures are implemented.

c) 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 manages liquidity by maintaining sufficient unused capacity within its term facility, regularly preparing cash flow forecasts, continuously monitoring actual and projected cash flows, and matching the maturity profile of financial assets and liabilities.

The following table summarizes the Company's financial liabilities and their contractual maturities:

Accounts payable and accrued liabilities Interim production financing Other long-term liabilities Convertible Debentures Exchangeable debentures Term facility Finance lease obligations	Less than 1 to 3 3 to 5 After 5 Total 1 year years years years $ $ $ $ $ 118,580 118,580 — — — 73,752 73,752 — — — 15,479 — 14,318 1,161 — 165,351 8,901 8,225 148,225 — 26,660 — 26,660 — — 455,742 18,928 35,666 35,973 365,175 44,918 13,142 18,776 9,957 3,043
	900,482 233,303 103,645 195,316 368,218

Contractual payments in the table above include fixed rate interest payments but exclude variable rate interest payments and are not discounted.

The Company operates a diverse range of business lines, including production studio services, linear and digital content distribution, consumer products licensing, consumer products representation and television broadcasting. While the operating results may experience variability from period to period, operating cash flows are generally predictable based on the Company's production and content pipeline, contract renewals, royalty agreements, minimum guarantees and television subscriber fees.

As at September 30, 2021, the Company had an unrestricted cash balance of $56,861 and amounts receivable of $269,397. Based on the Company's cash balances and available credit facilities, expected collection of trade and other receivables and forecast operating results, management believes it will be able to fulfill its financial obligations as they become due. The extent to which COVID-19 impacts the Company's liquidity and availability of credit will depend on future developments that are uncertain, and the Company will continue to monitor this closely.

(13)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

d) Currency risk

The Company has global operations which require holding cash and working capital balances, generating revenue and incurring costs in foreign currencies. These activities result in exposure to fluctuations in foreign currency exchange rates. The Company periodically enters into foreign exchange forward contracts to manage its foreign exchange risk across its portfolio of currencies, which are primarily denominated in Canadian dollars, US dollars and GBP.

Fair value of financial instruments

Financial instruments recorded at fair value on the unaudited interim condensed consolidated balance sheet are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

• Level 1 Valuation based on quoted prices observed in active markets for identical assets and liabilities.

• Level 2 Valuation techniques based on inputs that are quoted prices of similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a valuation model that are observable for that instrument and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3 Valuation techniques with significant unobservable market inputs.

A financial instrument is classified to the lowest of the hierarchy for which a significant input has been considered in measuring fair value.

Fair value estimates are made at a specific point in time based on relevant market information. These are estimates and involve uncertainties, and matters of significant judgment and cannot be determined with precision. Changes in assumptions and estimates could significantly affect fair values.

Financial assets and liabilities measured at fair value

Embedded derivatives(2) Foreign currency forwards(3) Interest rate swap(4)	As at	As at
	September 30, 2021 Fair value hierarchy Fair value(1) $ Level 2 (40,560) Level 2 (384) Level 2 (236)	June 30, 2021
	Fair value hierarchy Level 2 Level 2 Level 2	Fair value hierarchy Fair value(1) $ Level 2 (34,179) Level 2 262 Level 2 (241)

(1) Derivative financial instruments are initially measured at fair value on the trade date. Subsequent valuations are based on observable inputs to the valuation model.

(2) Includes embedded derivatives for Convertible Debentures and exchangeable debenture, measured using valuation models.

(3) The fair value of foreign currency contracts is determined using prevailing exchange rates.

(4) Includes a 3-year term interest rate swap agreement, maturing on June 28, 2024, entered to secure US$165,000 of total Term Facility at an interest rate of 5.24%. The fair value is determined using the prevailing interest rates.

(14)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

As at September 30, 2021, the Company held forward contract options with the following notional value and average contractual exchange rates:

US dollars exchange for CAD

Less than one year US$22,000 to $33,000 Weighted average rate 1.2663

The Company does not apply hedge accounting and the forward contract options are measured at fair value at each reporting date. The estimated fair value as at September 30, 2021, was a liability of $384 (June 30, 2021 - asset of $262), which has been included in derivative liabilities in the unaudited interim condensed consolidated balance sheet.

Financial assets and liabilities not measured at fair value

The carrying amount of all financial instruments presented in the unaudited interim condensed consolidated financial statements approximate their fair values, except for the Convertible Debentures as follows:

Convertible Debentures(1)	As at
	September 30, 2021 June 30, 2021 Fair value hierarchy Fair value liability Carrying value Fair value hierarchy Fair value liability Carrying value $ $ $ $ Level 1 139,300 124,821 Level 1 138,600 123,753

(1) The fair value of the Convertible Debentures is based on market quotes as these are actively traded on the open exchange.

14 Earnings or loss per common share

a) Basic

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

period.
Net loss attributable to shareholders of the Company Weighted average number of common shares outstanding (in 000's) Basic loss per common share	September 30, 2021 September 30, 2020 $ $ (21,396) (3,307) 171,969 170,776
	(0.12) (0.02)

b) Diluted

During the three-month periods ended September 30, 2021 and 2020, the diluted weighted average number of common shares outstanding is the same as the basic weighted average number of common shares outstanding, as the Company had a net loss and the exercise of any potentially dilutive instruments would be anti-dilutive.

(15)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

15 Capital disclosures

The Company’s objectives when managing capital are to provide an adequate return to shareholders, safeguard its assets, maintain a competitive cost structure and continue as a going concern in order to pursue the development, production, distribution and licensing of its film and television properties and broadcast operations. The balance of the Company’s cash is being used to maximize ongoing development and reduce leverage.

The Company’s capital as at September 30, 2021 and June 30, 2021 is summarized in the table below:

Total bank indebtedness and long-term debt, excluding interim production financing Less: Cash and restricted cash Net debt Total shareholders’ equity	September 30, 2021 June 30, 2021 $ $ 494,364 482,394 (70,573) (92,057)
	423,791 390,337 299,469 302,913
	723,260 693,250

To facilitate the management of its capital structure, the Company prepares annual expenditure operating budgets that are updated as necessary depending on various factors including industry conditions and operating cash flows. These budgets are regularly reviewed by the Board of Directors.

(16)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

16 Unaudited interim condensed consolidated statement of cash flows - supplementary information

Net change in non-cash balances related to operations

Amounts receivable Prepaid expenses and other Long-term amounts receivable Accounts payable and accrued liabilities Deferred revenue Tangible benefit obligation payments	September 30, September 30, 2021 2020 $ $ (20,621) (327) (412) 1,232 (1,540) 1,338 (8,768) 4,710 (3,414) (5,216) (2,971) (800)
	(37,726) 937

Net change in film and television programs

Development Productions in progress Productions completed and released Film and television programs Program and film rights - broadcasting Film and broadcast rights - broadcasting	September 30, September 30, 2021 2020 $ $ 1,207 (236) 5,612 42 (19,580) (15,923) 11,478 13,811 (1,992) (1,504) 2,273 3,050 (1,002) (760)

Net change in interim production financing

Proceeds from interim production financing Repayment of interim production financing	September 30, September 30, 2021 2020 $ $ 19,822 13,472 (11,474) (19,237)
	8,348 (5,765)

Supplemental cash flow information

Taxes paid Taxes refunded	September 30, September 30, 2021 2020 $ $ 273 1,060 — (2,075)
	273 (1,015)

(17)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

Reconciliation between the opening and closing balances on the unaudited interim condensed consolidated balance sheet arising from financing activities:

Balance - June 30, 2021 Repayments Total financing cash flow activities Amortization of deferred financing costs Lease liabilities disposal/additions (net) Interest paid on lease liabilities Accretion expense Foreign exchange Total other activities Balance - September 30, 2021 Balance - June 30, 2020 Repayments Total financing cash flow activities Amortization of deferred financing costs Lease liabilities additions Interest portion paid on lease liabilities Accretion expense Foreign exchange Total financing non-cash activities Balance - September 30, 2020		Senior unsecured Term convertible Lease Exchangeable facility debentures liabilities debentures Total $ $ $ $ $ 341,477 123,753 43,835 17,164 526,229
		(908) — (2,519) — (3,427)
		(908) — (2,519) — (3,427)
		371 222 — 59 652 — — (2,820) — (2,820) — — (601) — (601) (25) 846 601 1,025 2,447 9,888 — 141 492 10,521
		10,234 1,068 (2,679) 1,576 10,199
		350,803 124,821 38,637 18,740 533,001
		Senior unsecured Term convertible Lease Exchangeable facility debentures liabilities debentures Total $ $ $ $ $ 372,280 119,731 50,826 9,995 552,832
		— — (2,305) — (2,305)
		— — (2,305) — (2,305)
		321 223 — 53 597 — — 1,197 — 1,197 — — (681) — (681) — 744 681 554 1,979 (7,992) — 89 (259) (8,162)
		(7,671) 967 1,286 348 (5,070)
		364,609 120,698 49,807 10,343 545,457

(18)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

17 Revenues and segmented information

The Company operates production entities and offices throughout Canada, the United States and Europe.

Revenues Direct production costs and expense of film and television produced, stock-based compensation and selling, general and administrative Segment profit Corporate selling, general and administrative Amortization of property and equipment and intangible assets Amortization of acquired and library content Reversal of right-of-use asset impairment Finance costs, net Change in fair value of embedded derivatives Foreign exchange loss (gain) Reorganization, development and other (income) expenses Loss before income taxes Revenues Direct production costs and expense of film and television produced, stock-based compensation and selling, general and administrative Segment profit Corporate selling, general and administrative Amortization of property and equipment and intangible assets Amortization of acquired and library content Finance costs, net Change in fair value of embedded derivatives Foreign exchange loss (gain) Reorganization, development and other (income) expenses Income before income taxes	Three months ended September 30, 2021 Content Television Consolidated	Three months ended September 30, 2021 Content Television Consolidated
	$ $ 101,445 11,151 74,408 5,034	$ 112,596 79,442
	27,037 6,117	33,154 6,666 7,270 2,562 (719) 9,989 5,561 13,022 (842)
		(10,355)
	$ $ 84,052 11,403 62,114 5,916	$ 95,455 68,030
	21,938 5,487	27,425 4,847 5,605 2,710 9,757 3,669 (5,144) 2,688
		3,293

(19)

WildBrain Ltd. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the period ended September 30, 2021

(expressed in thousands of Canadian dollars unless otherwise noted, except for amounts per share)

The following table presents the Company's disaggregated revenues recognized from contracts with customers:

Content Content production and distribution WildBrain Spark Consumer Products Television Canadian Television Broadcasting	September 30, 2021 September 30, 2020 $ $ 37,568 36,340 15,406 8,882 48,471 38,830
	101,445 84,052
	11,151 11,403
	112,596 95,455

(20)