YANGAROO : 2024 – Q1 Financial Statements

YANGAROO Inc.

Condensed Interim Financial Statements

For the Three Months Ended March 31, 2024 and 2023 (Expressed in US Dollars)

(Unaudited)

June 26, 2024

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

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

The accompanying unaudited condensed consolidated interim financial statements have been prepared by and are the responsibility of the Company's management. The Company's independent auditor has not performed a review of these condensed interim financial statements in accordance with the standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity's auditor.

Contents
Condensed Interim Statements of Financial Position (Unaudited)	3
Condensed Interim Statements of Net Loss and Comprehensive Loss (Unaudited)	4
Condensed Interim Statements of Changes in Equity (Unaudited)	5
Condensed Interim Statements of Cash Flows (Unaudited)	6
1.	Nature of Operations	7
2.	Basis of Preparation	7
3.	Significant Accounting Policies	8
4.	Risk Management	9
5.	Property and Equipment and Right of Use Assets	12
6.	Intangible Assets	13
7.	Goodwill	13
8.	Trade and Other Payables	14
9.	Lease Obligations	14
10.	Term Loan Facility and Credit Facility	14
11.	Convertible Debentures	15
12.	Contingent Consideration	17
13.	Share Capital	17
14.	Share-Based Payments	18
15.	Basic and Diluted Income (Loss) per Share	19
16.	Segmented Information	19
17.	Related Party Transactions	21
18.	Commitments and Contingencies	21

YANGAROO Inc.

Condensed Interim Statements of Financial Position (Unaudited)

(Expressed in United States dollars)

			March 31	December 31
			2024	2023
	Assets
	Current		$207,998		$150,928
	Cash
	Accounts receivable (note 4)		1,698,356		1,689,671
	Prepaid and sundry assets		261,800		196,367
	Contract assets		37,065		69,727
	Other receivable		15,357		26,121
	Non-current		2,220,576		2,132,814
		429,977		429,977
	Government assistance receivable
	Property and equipment and right of use assets (note 5)	544,395		367,291
	Intangible assets (note 6)		1,809,125		1,800,673
	Goodwill (note 7)		359,146		359,146
			$5,362,219		$5,089,901
	Liabilities
	Current		$1,035,390		$1,041,252
	Trade and other payables (note 8)
	Contract liabilities		285,881		159,501
	Revolving credit facility (note 10)		976,131		850,597
	Current portion of lease obligations (note 9)		125,901		87,797
	Current portion of term loan facility (note 10)		1,528,178		1,656,679
	Current portion of contingent consideration (note 12)	79,136		95,937
			4,030,617		3,891,763
	Non-current		359,285		205,175
	Lease obligations (note 9)
	Convertible debenture (note 11)		374,986		410,197
	Contingent consideration (note 12)		88,100		88,100
			4,852,988		4,595,235
	Equity		27,826,282		27,826,282
	Share capital (note 13)
	Share-based payments reserve		5,971,266		5,971,266
	Foreign currency translation reserve		1,157,622		1,157,622
	Deficit		(34,444,939)		(34,460,504)
			510,231		494,666
			$5,362,219		$5,089,901
Commitments and contingencies (note 18)
Approved by the Board of Directors
"Anthony Miller"	"Phil Benson"
Director	Director

See accompanying notes, which are an integral part of these condensed interim financial statements

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YANGAROO Inc.

Condensed Interim Statements of Net Loss and Comprehensive Loss (Unaudited)

Three Ended Months Ended March 31, 2024 and 2023 (Expressed in US dollars)

Three Months Ended

March 31

20242023

Revenue (note 16)	$1,922,631	$1,845,253

Expenses

Salaries and consulting (notes 14 & 17)

Marketing and promotion

General and administrative

Technology & production

Depreciation of property and equipment and right of use assets and intangible assets (notes 5 & 6)

1,185,402 1,233,466

80,715 48,419

196,328 312,842

222,604 134,383

220,213 232,500

Restructuring expense	-	138,513
	1,905,262	2,100,123
Income/(loss) from operations	17,369	(254,870)
Other income (expenses)
Interest expense (notes 9, 10 & 11)	(118,977)	(118,795)
Foreign exchange gain/(loss)	90,278	(19,445)
Revaluation of foreign exchange embedded derivatives (note 11)	28,845	28,491
	146	(109,749)
Net income/(loss) before income tax	17,515	(364,619)
Income tax expense	1,950	-
Net income/(loss) and comprehensive income/(loss)	$15,565	$(364,619)
Basic income (loss) per share (note 15)	$0.00	$(0.01)
Diluted income (loss) per share (note 15)	$0.00	$(0.01)

See accompanying notes, which are an integral part of these condensed interim financial statements

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YANGAROO Inc.

Condensed Interim Statements of Changes in Equity (Unaudited)

Three months ended March 31, 2024 and 2023 (Expressed in US dollars)

			Share-Based	Foreign
	Number	Share	Currency	Deficit	Total
	Payments
	Of Shares	Capital	Translation
	Reserve
			Reserve
Balance at December 31, 2022	62,437,140	$27,826,282	$5,971,266	$1,157,622	$(30,323,779)	$4,631,391
Net loss for the period	-	-	-	-	(364,619)	(364,619)
Balance at March 31, 2023	62,437,140	$27,826,282	$5,971,266	$ 1,157,622	$(30,688,398)	$4,266,772
Balance at December 31, 2023	62,437,140	$27,826,282	$5,971,266	$1,157,622	$(34,460,504)	$494,666
Net income for the period	-	-	-	-	15,565	15,565
Balance at March 31, 2024	62,437,140	$27,826,282	$5,971,266	$ 1,157,622	$(34,444,939)	$510,231

See accompanying notes, which are an integral part of these condensed interim financial statements

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YANGAROO Inc.

Condensed Interim Statements of Cash Flows (Unaudited)

Three months ended March 31, 2024 and 2023 (Expressed in US dollars)

Three Months Ended

March 31

20242023

Cash flow from (used in) operating activities

Net income/(loss) for the period Items not affecting cash:

Depreciation of property and equipment and amortization of d intangible assets (note 5 and 6)

$15,565 $(364,619)

220,213 232,500

Amortization of deferred financing costs	26,179	23,426
Interest expense on convertible debentures	(7,354)	2,664
Estimated credit losses/(recovery) (note 4)	(11,948)	91,773
Revaluation of foreign exchange embedded derivatives (note 11)	(28,845)	(28,491)
Changes in non-cash operating working capital:	3,263	(81,473)
Accounts receivable
Prepaid and sundry assets	(65,433)	141,062
Other account receivable	10,765	-
Contract assets	32,662	39,118
Trade and other payables	(5,861)	168,198
Contract liabilities	126,380	42,091
Net cash from (used in) operating activities	315,586	266,249
Cash flow used in investing activities	(1,079)	(12,693)
Acquisition of property and equipment (note 5)
Additions to product development assets (note 6)	(170,041)	(153,623)
Net cash used in investing activities	(171,120)	(166,316)
Cash flow from (used in) financing activities	(42,436)	(66,966)
Payment of lease obligations (note 9)
Repayment of term loan	(153,693)	-
Payment of contingent liabilities	(16,801)	-
Proceeds/(payment) to line of credit (note 10)	125,534	(128,621)
Net cash from (used in) financing activities	(87,396)	(195,587)
Net (decrease) in cash	57,070	(95,654)
Effect of foreign exchange on cash	-	3,510
Cash and cash equivalents, beginning of period	150,928	296,748
Cash and cash equivalents, end of period	$207,998	$204,604
Cash interest paid	$104,979	$118,795

See accompanying notes, which are an integral part of these condensed interim financial statements

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YANGAROO Inc.

Notes to the Condensed Interim Financial Statements (Unaudited) For the three months ended March 31, 2024 and 2023 (Expressed in US dollars, unless otherwise noted)

1. Nature of Operations

YANGAROO Inc. ("YANGAROO" or "the Company") is a software company that is the provider of workflow management solutions within the media and entertainment ecosystem. The Company's Digital Media Distribution System (DMDS) platform is a patented cloud-based technology that provides customers with a fully integrated workflow and broadcaster connected managed network for digital content delivery and related data management across the advertising, music, and entertainment award show markets.

YANGAROO Inc. is a publicly listed company incorporated on July 28, 1999 under the laws of Ontario as Musicrypt.com Inc. and changed to its present name on July 17, 2007. YANGAROO trades on the TSX Venture Exchange (TSX-V) under the symbol YOO and in the U.S. under OTCPK: YOOIF.

The address of the Company's corporate office and principal place of business is 360 Dufferin Street, Suite 203, Toronto, Ontario, M6K 3G1.

2. Basis of Preparation

1. Basis of compliance

These condensed interim financial statements are in compliance with International Accounting Standard (IAS) 34, Interim Financial Reporting. Accordingly, certain information and footnote disclosure normally included in annual financial statements prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), have been omitted. The preparation of these unaudited condensed interim financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies.

These condensed interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2023.

These condensed interim financial statements were authorized for issue by the Board of Directors on June 24, 2024.

(b) Basis of measurement

The condensed interim financial statements have been prepared on the historical cost basis except certain financial instruments measured at fair value.

The condensed interim financial statements are presented in US dollars, which is also the Company's functional currency.

The preparation of these condensed interim financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts and the valuation of assets and liabilities and the disclosure of contingent assets and liabilities at the date of these condensed interim financial statements and the reported amounts of revenues and expenditures during the periods reported.

The most significant judgements and estimates made by management in preparing the Company's condensed interim financial statements are described as follows:

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YANGAROO Inc.

Notes to the Condensed Interim Financial Statements (Unaudited) For the three months ended March 31, 2024 and 2023 (Expressed in US dollars, unless otherwise noted)

1. Share-basedpayments
   Share-based payments which include stock options and RSUs granted to employees, officers and directors and warrants granted to agents and debenture holders, to the extent that they are not measured at the fair value of the services received, are based on the fair value at the date of the award. These share-based payments are valued using the Black-Scholes option pricing model, which includes inputs that require management's estimates and assumptions.
2. Revenue recognition
   To the extent a contract includes multiple performance obligations, the Company applies judgement to determine whether these performance obligations are capable of being distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation. Additionally, recognition of revenue requires significant judgement to determine if revenue is recognized at a point in time or over time.
3. Investment tax credits
   The Company uses judgement to determine the reasonable assurance of collection and estimates the valuation of investment tax credits to be accrued.
4. Collectability of accounts receivable
   The Company applies the simplified method to measure loss allowance on accounts receivable at an amount equal to the lifetime expected credit loss ("ECL"). The Company applies judgement to evaluate each receivable at year end using factors such as age of receivable, payment history and credit risk.
5. Capitalized development costs
   The Company uses judgement to determine when internally generated development costs are available for intended use and assess if expenditures meet the criteria for capitalization under IAS 38.
6. Contingent consideration
   The Company measures the contingent consideration payable in a business combination at the estimated fair value at each reporting date. The fair value is estimated using a Black-Scholes probability weighted approach, which includes inputs that require management's estimates and assumptions. The Company applies judgement at every reporting period to revalue the contingent consideration based on the revenue history of the related DMS customers.

3. Significant Accounting Policies

These condensed interim financial statements follow the same accounting policies and methods of their application as the Company's December 31, 2023 annual audited financial statements.

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YANGAROO Inc.

Notes to the Condensed Interim Financial Statements (Unaudited) For the three months ended March 31, 2024 and 2023 (Expressed in US dollars, unless otherwise noted)

4. Risk Management

Capital Risk Management

The Company includes equity comprised of share capital, share-based payments reserve, foreign currency translation reserve and deficit, in the definition of capital. As at March 31, 2024, the amount of equity was $510,231 (December 31, 2023 - $494,666). The Company's primary objective with respect to its capital management is to ensure that it has sufficient cash resources to further develop and market platform services, and to maintain its ongoing operations. To secure the additional capital necessary to pursue these plans, the Company may attempt to raise additional funds through the issuance of equity and warrants, debt or by securing strategic partners.

The Company has covenants in relation to the Term Loan facility (see note 10) during the three months ended March 31, 2024.

Financial Instruments and Risk Management

The Company is exposed to a variety of financial risks by virtue of its activities: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial performance.

Risk management is carried out by management under policies approved by the Board of Directors. Management is charged with the responsibility of establishing controls and procedures to ensure that financial risks are mitigated in accordance with the approved policies.

(a) Market risk:

Market risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate because of changes in the market prices. Market risk is comprised of three types of risk such as foreign currency risk, interest rate risk and commodity risk. Two types of risk are applicable to the Company:

1. Currency risk:
   The Company operates internationally, and the US dollar ("USD") is the presentation currency. The Company, however, does have revenues, expenses, assets, and liabilities denominated in currencies other than USD, primarily Canadian dollar ("CAD"). The principal foreign currency risk as at March 31, 2024 is the CAD at $0.7367 USD: $1 CAD. A 5% change in exchange rates would result in a $167,706 impact on profit or loss. Balances in foreign currencies at March 31, 2024 are as follows:

	USD
Cash	$39,680
Accounts receivable	173,840
Trade and other payables	448,797
Line of credit	976,131
Convertible debentures	374,986
Term loan	1,528,178
Capital lease obligation	239,545

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