Exhibit 4.2


 


QYOU Media Inc.


CONSOLIDATED FINANCIAL STATEMENTS


 


For the six months ended December 31,
2021 and twelve months ended June 30, 2021 and 2020


[expressed in Canadian dollars]


 






    


    


    

 


	Independent Auditor's Report	
	 	 



 


To the Shareholders of QYOU Media Inc.:


 


Opinion


 


We have audited the
consolidated financial statements of QYOU Media Inc. and its subsidiaries (the "Company"), which comprise the consolidated
statements of financial position as at December 31, 2021 and June 30, 2021, and the consolidated statements of loss and
comprehensive loss, changes in shareholders' equity and cash flows for the six month period ended December 31, 2021 and the
years ended June 30, 2021 and June 30, 2020, and notes to the consolidated financial statements, including a summary of
significant accounting policies.


 


In our opinion, the
accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the
Company as at December 31, 2021 and June 30, 2021, and its consolidated financial performance and its consolidated cash
flows for the six month period ended December 31, 2021 and the years ended June 30, 2021 and June 30, 2020, in
accordance with International Financial Reporting Standards.


 


Basis for Opinion


 


We conducted our audits in
accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of
the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated financial statements in Canada,
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.


 


Other Information


 


Management is responsible
for the other information. The other information comprises Management’s Discussion and Analysis.


 


Our opinion on the consolidated
financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.


 


In connection with our audits
of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits or otherwise
appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s
report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.


 


	1122 International Blvd, 6th floor, Burlington ON, L7L 6Z8	Tel: (905) 333-9888   Fax: (905) 333-9583




 






    


    


    

 


Responsibilities of Management
and Those Charged with Governance for the Consolidated Financial Statements


 


Management is responsible
for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting
Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.


 


In preparing the consolidated
financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.


 


Those charged with governance are responsible for overseeing the Company’s
financial reporting process.


 


Auditor's Responsibilities for the Audit of the
Consolidated Financial Statements


 


Our objectives are to
obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis
of these consolidated financial statements.


 


As part of an audit in
accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:


 


	 	·	Identify
and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
	 	·	Obtain
an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
	 	·	Evaluate
the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
	 	·	Conclude
on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the
related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company
to cease to continue as a going concern.
	 	·	Evaluate
the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
	 	·	Obtain
sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to
express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.



 









    


    


    

 


We communicate with those
charged with governance regarding, among other matters, the planned scope and timing of the audits and significant audit findings, including
any significant deficiencies in internal control that we identify during our audits.


 


The engagement partner on the audit resulting in this independent auditor's
report is Giacomo Angelini.


 


	 	MNP llp
	Burlington, Ontario	Chartered Professional Accountants
	 	 
	April 30, 2022	Licensed Public Accountants


 









    


    


    

 


QYOU
Media Inc.








Consolidated
statements of financial position


[expressed
in Canadian dollars]




 


	 	 	December 31, 2021	 	 	June 30, 2021	 
	As at	 	$	 	 	$	 
	Assets	 	 	 	 	 	 	 	 
	Current assets	 	 	 	 	 	 	 	 
	Cash and cash equivalents	 	 	6,548,890	 	 	 	9,026,915	 
	Trade receivables	 	 	4,131,459	 	 	 	2,156,016	 
	Other receivables	 	 	1,623,131	 	 	 	332,569	 
	Prepaid expenses [note 12]	 	 	2,723,612	 	 	 	150,341	 
	 	 	 	15,027,092	 	 	 	11,665,841	 
	Non-current assets	 	 	 	 	 	 	 	 
	Property and equipment, net [note 5]	 	 	104,698	 	 	 	50,011	 
	Capitalized programming asset, net [note 6]	 	 	189,453	 	 	 	—	 
	Right-of-use assets, net [note 7]	 	 	753,267	 	 	 	351,300	 
	Security deposit	 	 	139,818	 	 	 	47,340	 
	Intangible assets, net [notes 4 & 10]	 	 	997,939	 	 	 	1,007,232	 
	Goodwill [notes 4 & 11]	 	 	3,399,639	 	 	 	3,247,096	 
	 	 	 	20,611,906	 	 	 	16,368,820	 
	 	 	 	 	 	 	 	 	 
	Liabilities	 	 	 	 	 	 	 	 
	Current liabilities	 	 	 	 	 	 	 	 
	Trade and other payables	 	 	4,700,239	 	 	 	2,400,459	 
	Contingent consideration [note 4]	 	 	861,697	 	 	 	765,498	 
	Deferred revenue	 	 	257,921	 	 	 	19,420	 
	Lease liabilities [note 8]	 	 	242,489	 	 	 	133,362	 
	Borrowings  [note 9]	 	 	7,756	 	 	 	10,872	 
	 	 	 	6,070,102	 	 	 	3,329,611	 
	Non-current liabilities	 	 	 	 	 	 	 	 
	Contingent consideration [note 4]	 	 	1,777,215	 	 	 	1,432,008	 
	Deferred tax liabilities [note 17]	 	 	227,659	 	 	 	233,473	 
	Lease liabilities [note 7]	 	 	558,344	 	 	 	257,155	 
	Borrowings  [note 9]	 	 	52,857	 	 	 	52,008	 
	 	 	 	8,686,177	 	 	 	5,304,255	 
	 	 	 	 	 	 	 	 	 
	Shareholders’ equity	 	 	 	 	 	 	 	 
	Share capital [note 12]	 	 	44,758,863	 	 	 	41,450,812	 
	Warrants [note 12]	 	 	3,700,682	 	 	 	3,763,942	 
	Share-based payment reserve [note 13]	 	 	9,907,637	 	 	 	7,701,263	 
	Foreign exchange translation reserve	 	 	120,235	 	 	 	(69,271	)
	Accumulated deficit	 	 	(46,118,245	)	 	 	(41,230,375	)
	Equity attributable to shareholders' of the Company	 	 	12,369,172	 	 	 	11,616,371	 
	Non-controlling interests [note 14]	 	 	(443,443	)	 	 	(551,806	)
	 	 	 	11,925,729	 	 	 	11,064,565	 
	 	 	 	20,611,906	 	 	 	16,368,820	 




 


	Contingencies [note 15]	 	 	 	 
	Subsequent events [note 21]	 	 	 	 
	 	 	 	 	 
	The accompanying notes are an integral part of these consolidated financial statements.	 	 



 


	On behalf of the Board:	 	 	 	 
	 	 	 	 	 
	"Signed"	 	 	"Signed"
	 


 






    - 1 -


    


    





 


QYOU Media Inc.


 


Consolidated statements of loss and comprehensive loss


[expressed in Canadian dollars, except number of shares]


 


	 	 	For the six months ended
 December 31, 2021	 	 	For the twelve months
 ended
 June 30, 2021	 	 	For the twelve months
 ended
 June 30, 2020	 
	 	 	$	 	 	$	 	 	$	 
	REVENUE [note 20]	 	 	10,311,104	 	 	 	4,182,539	 	 	 	2,802,252	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	OPERATING EXPENSES	 	 	 	 	 	 	 	 	 	 	 	 
	Content and productions costs	 	 	6,274,275	 	 	 	4,621,827	 	 	 	3,860,207	 
	Sales and marketing	 	 	2,464,748	 	 	 	1,203,702	 	 	 	1,501,674	 
	Legal and consulting	 	 	983,114	 	 	 	1,463,109	 	 	 	1,283,165	 
	Salaries and benefits	 	 	2,007,804	 	 	 	1,292,689	 	 	 	639,132	 
	Share-based compensation	 	 	2,284,236	 	 	 	2,342,425	 	 	 	862,675	 
	Impairment loss	 	 	—	 	 	 	—	 	 	 	295,254	 
	General and administrative	 	 	657,258	 	 	 	426,510	 	 	 	603,289	 
	Depreciation and amortization	 	 	132,313	 	 	 	191,755	 	 	 	269,561	 
	Gain on loan forgiveness	 	 	—	 	 	 	(211,472	)	 	 	—	 
	Loss on remeasurement of contingent consideration [note 4]	 	 	393,950	 	 	 	—	 	 	 	—	 
	Gain on remeasurement of derivatives [note 12]	 	 	(114,532	)	 	 	—	 	 	 	—	 
	Foreign exchange (gain) loss	 	 	(86,214	)	 	 	5,530	 	 	 	(10,674	)
	Interest and other expenses	 	 	47,870	 	 	 	108,676	 	 	 	45,666	 
	Total operating expenses	 	 	15,044,822	 	 	 	11,444,751	 	 	 	9,349,949	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Loss before income taxes	 	 	(4,733,718	)	 	 	(7,262,212	)	 	 	(6,547,697	)
	Income tax expense [note 17]	 	 	45,789	 	 	 	45,240	 	 	 	—	 
	NET LOSS	 	 	(4,779,507	)	 	 	(7,307,452	)	 	 	(6,547,697	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Other comprehensive gain (loss)	 	 	 	 	 	 	 	 	 	 	 	 
	Item that may be reclassified subsequently to income:	 	 	 	 	 	 	 	 	 	 	 	 
	Exchange gain (loss) on translation of foreign operations	 	 	189,506	 	 	 	24,253	 	 	 	(64,691	)
	Total other comprehensive gain (loss)	 	 	189,506	 	 	 	24,253	 	 	 	(64,691	)
	COMPREHENSIVE LOSS	 	 	(4,590,001	)	 	 	(7,283,199	)	 	 	(6,612,388	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss attributable to:	 	 	 	 	 	 	 	 	 	 	 	 
	Equity owners of the Company	 	 	(4,887,870	)	 	 	(6,965,733	)	 	 	(6,270,459	)
	Non-controlling interests [note 14]	 	 	108,363	 	 	 	(341,719	)	 	 	(277,238	)
	 	 	 	(4,779,507	)	 	 	(7,307,452	)	 	 	(6,547,697	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss per share - basic and diluted	 	 	(0.01	)	 	 	(0.02	)	 	 	(0.04	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weighted average number of shares outstanding - basic and diluted	 	 	394,204,814	 	 	 	296,277,879	 	 	 	167,264,419	 




 


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



 






    - 2 -


     


    

 


QYOU Media Inc.


 


Consolidated statements of changes in shareholders’
equity (deficiency)


For the six months ended December 31, 2021
and twelve months ended June 30, 2021 and 2020


[expressed in Canadian dollars, except number of
shares]


 


	 	 	Common shares	 	 	Share capital	 	 	Warrants	 	 	Share-based

 payment reserve	 	 	Non-controlling

 interests	 	 	Foreign exchange

 translation reserve	 	 	Accumulated deficit	 	 	Total	 
	 	 	#	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	Balance, June 30, 2019	 	136,819,060	 	 	22,312,422	 	 	1,819,172	 	 	5,825,151	 	 	(31,119	)	 	(28,833	)	 	(27,895,913	)	 	2,000,880	 
	Issuance of common shares and warrants, net of issuance costs [note 12]	 	42,000,000	 	 	1,582,330	 	 	346,531	 	 	49,573	 	 	—	 	 	—	 	 	—	 	 	1,978,434	 
	Share-based compensation [note 13]	 	4,315,832	 	 	129,475	 	 	—	 	 	733,200	 	 	—	 	 	—	 	 	—	 	 	862,675	 
	Warrants exercised	 	500,000	 	 	36,292	 	 	(6,292	)	 	—	 	 	—	 	 	—	 	 	—	 	 	30,000	 
	Change in ownership interest in subsidiaries [note 14]	 	-	 	 	0	 	 	—	 	 	—	 	 	98,270	 	 	—	 	 	(98,270	)	 	-	 
	Exchange difference on translating foreign operations	 	—	 	 	0	 	 	—	 	 	—	 	 	—	 	 	(64,691	)	 	—	 	 	(64,691	)
	Comprehensive loss	 	—	 	 	0	 	 	—	 	 	—	 	 	(277,238	)	 	—	 	 	(6,270,459	)	 	(6,547,697	)
	Balance, June 30, 2020	 	183,634,892	 	 	24,060,519	 	 	2,159,411	 	 	6,607,924	 	 	(210,087	)	 	(93,524	)	 	(34,264,642	)	 	(1,740,399	)
	Issuance of common shares and warrants, net of issuance costs [note 12]	 	101,737,959	 	 	7,986,843	 	 	2,140,394	 	 	1,083,052	 	 	—	 	 	—	 	 	—	 	 	11,210,289	 
	Share-based compensation	 	83,333	 	 	38,750	 	 	—	 	 	2,303,675	 	 	—	 	 	—	 	 	—	 	 	2,342,425	 
	Compensation options and warrants exercised [note 12]	 	79,529,929	 	 	6,986,425	 	 	(535,863	)	 	(200,284	)	 	—	 	 	—	 	 	—	 	 	6,250,278	 
	Restricted share units redeemed [note 12]	 	11,258,338	 	 	1,908,500	 	 	 	 	 	(1,908,500	)	 	—	 	 	—	 	 	—	 	 	-	 
	Options exercised [note 12]	 	5,193,268	 	 	469,775	 	 	 	 	 	(184,604	)	 	—	 	 	—	 	 	—	 	 	285,171	 
	Exchange difference on translation foreign operations	 	—	 	 	0	 	 	—	 	 	—	 	 	—	 	 	24,253	 	 	—	 	 	24,253	 
	Comprehensive loss	 	—	 	 	0	 	 	—	 	 	—	 	 	(341,719	)	 	—	 	 	(6,965,733	)	 	(7,307,452	)
	Balance, June 30, 2021	 	381,437,719	 	 	41,450,812	 	 	3,763,942	 	 	7,701,263	 	 	(551,806	)	 	(69,271	)	 	(41,230,375	)	 	11,064,565	 
	Issuance of common shares, net of issuance costs [note 12]	 	7,896,875	 	 	2,160,891	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	2,160,891	 
	Share-based compensation	 	—	 	 	0	 	 	—	 	 	2,284,236	 	 	—	 	 	—	 	 	—	 	 	2,284,236	 
	Compensation options and warrants exercised [note 12]	 	10,713,883	 	 	1,063,340	 	 	(63,260	)	 	(7,374	)	 	—	 	 	—	 	 	—	 	 	992,706	 
	Restricted share units redeemed [note 12]	 	1,216,669	 	 	60,833	 	 	—	 	 	(60,833	)	 	—	 	 	—	 	 	—	 	 	-	 
	Share options exercised [note 12]	 	129,168	 	 	22,987	 	 	—	 	 	(9,655	)	 	—	 	 	—	 	 	—	 	 	13,332	 
	Exchange difference on translation foreign operations	 	—	 	 	0	 	 	—	 	 	—	 	 	—	 	 	189,506	 	 	—	 	 	189,506	 
	Comprehensive loss	 	—	 	 	0	 	 	—	 	 	—	 	 	108,363	 	 	—	 	 	(4,887,870	)	 	(4,779,507	)
	Balance, December 31, 2021	 	401,394,314	 	 	44,758,863	 	 	3,700,682	 	 	9,907,637	 	 	(443,443	)	 	120,235	 	 	(46,118,245	)	 	11,925,729	 



 


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




 






    - 3 -


     


    

 


QYOU Media Inc.


 


Consolidated statements of cash flows


[expressed in Canadian dollars]


 


	 	 	For the six months ended
 December 31, 2021	 	 	For the twelve months ended
 June 30, 2021	 	 	For the twelve months ended
 June 30, 2020	 
	 	 	$	 	 	$	 	 	$	 
	Operating activities	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss	 	 	(4,779,507	)	 	 	(7,307,452	)	 	 	(6,547,697	)
	Adjustments to reconcile net loss to net cash used in operating activities:	 	 	 	 	 	 	 	 	 	 	 	 
	Impairment loss	 	 	—	 	 	 	—	 	 	 	295,254	 
	Gain on lease termination	 	 	—	 	 	 	(19,297	)	 	 	—	 
	Gain on loan forgiveness	 	 	—	 	 	 	(211,472	)	 	 	—	 
	Loss on remeasurement of contingent consideration	 	 	393,950	 	 	 	—	 	 	 	—	 
	Gain on remeasurement of derivatives	 	 	(114,532	)	 	 	—	 	 	 	 	 
	Unrealized foreign exchange loss	 	 	(106,801	)	 	 	—	 	 	 	—	 
	Depreciation and amortization	 	 	132,313	 	 	 	191,755	 	 	 	945,515	 
	Share-based compensation	 	 	2,284,236	 	 	 	2,342,425	 	 	 	862,675	 
	Government grant recognized	 	 	—	 	 	 	—	 	 	 	—	 
	Income tax expense	 	 	45,789	 	 	 	—	 	 	 	(192,903	)
	Interest expense	 	 	20,380	 	 	 	89,406	 	 	 	34,555	 
	 	 	 	(2,124,172	)	 	 	(4,914,635	)	 	 	(4,602,601	)
	Changes in non-cash working capital items	 	 	 	 	 	 	 	 	 	 	 	 
	Trade receivables	 	 	(1,802,748	)	 	 	(1,030,593	)	 	 	473,315	 
	Other receivables	 	 	(1,370,851	)	 	 	48,350	 	 	 	562,850	 
	Prepaid expenses	 	 	(2,548,572	)	 	 	(122,637	)	 	 	419,488	 
	Security deposit	 	 	(90,318	)	 	 	6,232	 	 	 	(47,498	)
	Trade and other payables	 	 	2,288,739	 	 	 	(289,452	)	 	 	708,130	 
	Deferred revenue	 	 	185,683	 	 	 	(11,802	)	 	 	(101,313	)
	Cash used in operating activities	 	 	(5,462,239	)	 	 	(6,314,537	)	 	 	(2,587,629	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Investing activities	 	 	 	 	 	 	 	 	 	 	 	 
	Acquisition of Chatterbox	 	 	(106,837	)	 	 	(1,882,560	)	 	 	—	 
	Capitalized programming asset	 	 	(211,501	)	 	 	—	 	 	 	—	 
	Purchase of property and equipment	 	 	(62,174	)	 	 	(28,470	)	 	 	(38,814	)
	Cash used in investing activities	 	 	(380,512	)	 	 	(1,911,030	)	 	 	(38,814	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financing activities	 	 	 	 	 	 	 	 	 	 	 	 
	Repayment of lease obligation [note 8]	 	 	(86,173	)	 	 	(150,208	)	 	 	(126,815	)
	Proceeds from borrowings	 	 	—	 	 	 	—	 	 	 	545,102	 
	Repayment of loan [note 9]	 	 	(2,763	)	 	 	(101,784	)	 	 	—	 
	Proceeds from exercise of options	 	 	13,333	 	 	 	285,172	 	 	 	—	 
	Proceeds from exercise of compensation options and warrants [note 12]	 	 	993,019	 	 	 	6,250,276	 	 	 	30,000	 
	Issuance of shares and warrants, net of issuance costs [note 12]	 	 	2,275,423	 	 	 	11,210,300	 	 	 	1,978,434	 
	Cash provided by financing activities	 	 	3,192,839	 	 	 	17,493,756	 	 	 	2,426,721	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net change in cash and cash equivalents	 	 	(2,649,912	)	 	 	9,268,189	 	 	 	(199,722	)
	Effect of foreign exchange on cash	 	 	171,887	 	 	 	(304,778	)	 	 	(41,869	)
	Cash and cash equivalents, beginning of period	 	 	9,026,915	 	 	 	63,504	 	 	 	305,095	 
	Cash and cash equivalents, end of period	 	 	6,548,890	 	 	 	9,026,915	 	 	 	63,504	 




 






    - 4 -


     


    





 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 


		1.	BUSINESS AND ORGANIZATION



 


QYOU Media Inc. (“QYOU” or the “Company”) was
incorporated pursuant to the Business Corporations Act (Alberta) on July 30, 1993 under the name “575161 Alberta Inc.”.
The registered and head office of the Company is 154 University Avenue, Suite 601, Toronto, ON M5H 3Y9. The Company is a global media
company that, through its subsidiaries, curate, produce and distributes content created by social media stars and digital content creators.


 


The Company has the following subsidiaries:


 


		 		 	Ownership percentage	 	 	Ownership percentage

 June 30, 2021	 	Ownership percentage

 June 30, 2020
	Entity name	 	Country	 	December 31, 2021	 	 	%	 	%
	QYOU Media Inc.	 	Canada	 	 	100	 	 	 	100	 	100
	QYOU Productions Inc.	 	Canada	 	 	100	 	 	 	100	 	100
	QYOU Limited	 	Ireland	 	 	100	 	 	 	100	 	100
	QYOUTV International Limited	 	Ireland	 	 	100	 	 	 	100	 	100
	QYOU USA Inc.	 	USA	 	 	100	 	 	 	100	 	100
	QYOU Media India Private Ltd.	 	India	 	 	88	 	 	 	88	 	88
	Chatterbox Technologies Private Ltd.	 	India	 	 	97	 	 	 	97	 	—



 


Effective July 1, 2021, the Company amalgamated
QYOU Media Inc. and a wholly-owned subsidiary QYOU Media Holdings Inc. into QYOU Media Inc.


 


Impact of COVID-19


 


During the sixth months ended December 31,
2021 and the years ended June 30, 2021 and 2020, the outbreak of the novel strain of coronavirus, specifically identified as “COVID-19,”
has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the
implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally
resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central
banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The extent to which COVID-19
and any other pandemic or public health crisis impacts the Company’s business, affairs, operations, financial condition, liquidity,
availability of credit and results of operations will depend on future developments that are highly uncertain and cannot be predicted
with any meaningful precision, including new information which may emerge concerning the severity of the COVID-19 virus and the actions
required to contain the COVID-19 virus or remedy its impact, among others.


 


Change of Fiscal Year-end


 


Effective in 2021, the Company changed its fiscal
year end from June 30 to December 31 in order to align the Company’s year-end with that of comparative media companies.
Accordingly, the consolidated financial statements present the statements of financial position as at December 31, 2021 and June 30,
2021, and the results of operations for the six months ended December 31, 2021 and twelve months ended June 30, 2021 and 2020.


 


		2.	BASIS OF PRESENTATION



 


		[a]	Statement of Compliance



 


These consolidated financial statements (“financial
statements”) have been prepared by management in accordance with generally accepted accounting principles in Canada for publicly
accountable enterprises, as set out in the CPA Canada Handbook – Accounting, which incorporates International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The policies set out below
have been consistently applied to all periods presented, unless otherwise noted.


 


These financial statements were approved and authorized
for issuance by the Board of Directors of the Company on April 29, 2022.


 






    	 	- 5 -	 



     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 


		[b]	Basis of Measurement



 


These financial statements have been prepared
on a historical cost basis. Historical costs are generally based upon the fair value of the consideration given in exchange for goods
and services.


 


Fair value is 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, regardless
of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset
or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics
into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these
financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2 Share-based
Payment (“IFRS 2”) and measurements that have some similarities to fair value, but are not fair value, such as value in
use in IAS 36 Impairment of Assets.


 


		[c]	Basis of Presentation



 


The accompanying financial statements include
the accounts of QYOU Media Inc. and its subsidiaries, QYOU Productions Inc., QYOU Media Holdings Inc. (“QYOU Media”), QYOU
Limited Ltd. (“QYOU Limited”), QYOU USA Inc. (“QYOU USA”), QYOUTV International Limited, QYOU Media India Private
Ltd (“QYOU India”) and Chatterbox Technologies Private Limited (“Chatterbox”). The financial statements incorporate
the assets and liabilities of the Company and its subsidiaries except for Chatterbox as at December 31, 2021, June 30, 2021
and 2020 and the results of these subsidiaries for the years then ended.


 


On June 14, 2021, the Company acquired 97%
of Chatterbox, a company incorporated in India. The financial statements incorporate the assets and liabilities of Chatterbox as at June 14,
2021, June 30, 2021, December 31, 2021 and the results for the period ended June 30, 2021 and December 31, 2021.


 


Subsidiaries are all those entities over which
the Company has control. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the Company. All intra-entity assets and liabilities, revenue, expenses and cash flows relating
to transactions between subsidiaries of the Company are eliminated in full on consolidation.


 


		[d]	Functional Currency and Presentation currency



 


These financial statements are presented in Canadian
dollars, which is the functional currency of QYOU Media Inc.


 


		[e]	Use of Estimates and Judgments



 


The preparation of financial statements in conformity
with IFRS requires the use of judgements and/or estimates that affect the application of accounting policies and the amounts reported
and disclosed in the consolidated financial statements and related notes. These judgements and estimates are based on management’s
best knowledge of the relevant facts and circumstances, but actual results may differ materially from the amounts included in the financial
statements. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in
the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods
if the revision affects both current and future periods.


 


The following are the critical judgments, apart
from those involving estimations, that management has made in the process of applying the Company’s accounting policies and that
have the most significant effect on the amounts recognized in the financial statements:


 


		[i]	Estimated Useful Lives, Residual Values and Depreciation of Property and Equipment



 


Depreciation of property and equipment is dependent
upon estimates of useful lives and residual values, which are determined through the exercise of judgement. The assessment of any impairment
of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions
and the useful lives of assets.


 






    	 	- 6 -	 



     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 





		[ii]	Impairment of Property and Equipment, Intangible Assets and Goodwill



 


Impairment testing requires management to make
estimates related to future cash flow projections, discount rates, contingent consideration and market trends. Impairment of property
and equipment, intangible assets and goodwill are influenced by judgment in defining a cash generating unit (“CGU”) and determining
the indicators of impairment and estimated used to measure impairment losses.


 


		[iii]	Capitalization of Internally Generated Intangible Assets, the Estimated Useful Life and Amortization of
Intangible Assets



 


The Company employs significant estimates to determine
the estimated useful lives of intangible assets, considering the nature of the assets, industry trends, contractual rights, past experience,
expected use and review of asset useful lives. The Company reviews amortization methods and useful lives annually or when circumstances
change and adjusts its amortization methods and assumptions prospectively.


 


Initial capitalization of development cost is
based on management’s judgement that economic and technological feasibility is confirmed. In determining the amounts to be capitalized,
management makes assumptions using the expected future cash generation of the assets, discount rates to be applied and the expected period
of benefit to determine the amount to be capitalized.


 


		[iv]	Valuation of Share-based Payments and Warrants



 


Management measures the costs for share-based
payments and warrants using market-based option valuation techniques. Assumptions are made and estimates are used in applying the valuation
techniques. These include estimating the future volatility of the share price, expected dividend yield, and expected risk-free interest
rate and the rate of forfeiture. Such estimates and assumptions are inherently uncertain. Changes in these assumptions affect the fair
value estimates of share-based payments and warrants.


 


		[v]	Income Taxes



 


The Company computes an income tax provision in
each of the tax jurisdictions in which it operates. Actual amounts of income tax expense only become final upon filing and acceptance
of the tax return by the relevant tax authorities, which occurs subsequent to the issuance of the financial statements. Additionally,
estimation of income taxes includes evaluating the recoverability of deferred tax assets against future taxable income based on an assessment
of the ability to use the underlying future tax deductions before they expire. To the extent that estimates of future taxable income differ
from the tax return, income would be affected in a subsequent period.


 


		[vi]	Leases



 


At inception of a contract, the Company assesses
whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of identified asset for
a period of time in exchange for consideration. The Company recognized a right-of-use asset and a lease liability at the lease commencement
date. The right-of-use asset is initially measured based on the initial amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial direct costs incurred and an estimate of the costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use
assets are depreciated to the earlier of the end of useful life of the right-of-use asset or the lease term using the straight-line method
as this most closely reflects the expected pattern of the consumption of the future economic benefits. The lease term includes periods
covered by an option to extend if the Company is reasonably certain to exercise that option which requires judgement. In addition, the
right-of-use asset can be periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, and the Company’s incremental borrowing
rate.


 





The lease liability is measured at amortized cost
using the effective interest method. It is remeasured when there is a change in future lease payments arising from the change in an index
or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or
if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability
is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, unless it has been reduced
to zero.


 






    	 	- 7 -	 



     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 


		[vii]	Business Combinations



 


In a business combination, substantially all identifiable
assets, liabilities and contingent liabilities acquired are recorded at the date of acquisition at their respective fair values. One of
the most significant areas of judgment and estimation relates to the determination of the fair value of these assets and liabilities,
including the fair value of contingent consideration, if applicable. Assets include cash, trade and other receivables, prepaid, property
and equipment and right-of-use assets; while liabilities consist of trade and other payables, lease obligations and deferred revenue.
If any intangible assets are identified, depending on the type of intangible asset and the complexity of determining its fair value, the
Company determines the fair value, using appropriate valuation techniques, which are generally based on a forecast of the total expected
future net cash flows. These valuations are linked closely to the assumptions made by management regarding the future performance of the
assets concerned and any changes in the discount rate applied.


 


		[viii]	Going Concern



 


At each reporting period, management assesses
the basis of preparation of the financial statements. These financial statements have been prepared on a going concern basis in accordance
with IFRS. The going concern basis of presentation assumes that the Company will continue its operations for the foreseeable future and
be able to realize its assets and discharge its liabilities and commitments in the normal course of business.


 


		3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



 


		[a]	Cash and Cash Equivalents



 


Cash and cash equivalents consists of cash and
cash held in trust accounts. As a result, the carrying amount of cash approximates fair value. There were $nil cash equivalents outstanding
at December 31, 2021 (June 30, 2021 - $6,668; June 30, 2020 - $nil).


 


		[b]	Trade Receivables



 


The Company’s standard terms of credit on
trade receivables are due in full in 30 days. These customers have specific contracts that detail the payments expected under their contract
terms. Trade receivables are customer obligations due under these contract terms. Management reviews trade receivables on a regular basis,
based on contracted terms and how recently payments have been received, to determine if any such amounts will potentially be uncollected.


 


		[c]	Property and Equipment



 


Property and equipment are stated at historical
cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the
assets. The costs of normal maintenance and repairs are charged to expense when incurred.


 


The estimated useful lives of the assets are as follows:


 


	Computer hardware and equipment	3 years
	Furniture and fixtures	3 years  



 


An item of property and equipment and any significant
part initially recognized are derecognized upon disposal or when no future economic benefits are expected from their use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the asset) is included in the consolidated statements of loss and comprehensive loss when the asset is derecognized. The assets’
residual values, useful lives and methods of depreciation and the depreciation charge are adjusted prospectively, if appropriate.


 






    	 	- 8 -	 



     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 


		[d]	Intangible Assets



 


Expenditures on research activities are recognized
as an expense in the period in which they are incurred. Externally and internally generated intangibles are recognized only if they meet
strict criteria, relating in particular to technical feasibility, probability that a future economic benefit associated with the asset
will flow to the entity and the cost of the asset can be measured reliably.


 


Intangible assets with finite useful lives are
stated at cost and are amortized over their useful economic lives when the asset is ready for its intended use. Upon the commencement
of amortization, the asset is carried at cost less accumulated amortization and impairment losses. Intangible assets are tested for impairment
as required (see impairment, below).


 


Intangible assets acquired are measured on initial
recognition at cost. Intangible assets acquired consist of QYOU and Chatterbox brand names with an indefinite useful life that is not
amortized, but subject to an annual impairment test. The Company intends to use the brand name indefinitely. Other intangible assets acquired
consist of customer relationships, amortized over their useful lives and subject to an annual impairment test, or when indicators of potential
impairment are identified.


 


The estimated useful lives of the acquired intangible assets are as
follows:


 


	QYOU brand	Indefinite
	Chatterbox brand	Indefinite
	Customer relationships	6 years  



 


Indefinite useful lives – The Company
does not amortize intangible assets with indefinite useful lives because there is no foreseeable limit to the period that these assets
are expected to generate net cash inflows for the Company. The Company uses judgment to determine the indefinite useful lives of these
assets, analyzing all relevant factors, including the expected usage of the asset, the typical life cycle of the asset and anticipated
changes in the market demand for the products and services that the asset helps generate.


 


Finite useful lives – The Company
amortizes intangible assets with finite useful lives into depreciation and amortization in the consolidated statements of loss and comprehensive
loss on a straight-line basis over six years. The Company reviews their useful lives, residual values and the amortization methods at
least once a year.


 


An intangible asset that was initially recognized
is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition
of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the
consolidated statements of loss and comprehensive loss when the asset is derecognized. The assets' residual values, useful lives, methods
of amortization and the amortization charge is adjusted prospectively, if appropriate.


 


		[e]	Goodwill



 


Goodwill represents the excess of consideration
over the fair value of the net identifiable assets acquired in a business combination. Goodwill is recorded at cost less accumulated impairment
losses, if any. Goodwill is not amortized. For the purpose of impairment testing, goodwill is allocated to each of the Company’s
CGUs that benefit from the acquisition, irrespective of whether other assets or liabilities acquired are assigned to those units. Goodwill
is tested annually for impairment, or more frequently when there is an indication that goodwill may be impaired. If the recoverable amount,
representing the higher of its fair value less cost to sell and its value in use, of the CGU is less than its carrying amount, any resulting
impairment loss is first allocated to goodwill and subsequently to other assets on a pro rata basis for the CGU. Any goodwill impairment
loss is recorded to the consolidated statements of loss and comprehensive loss in the period of impairment. Previously recognized impairment
losses for goodwill are not reversed in subsequent periods. The Company completes its annual impairment test as at December 31.


 


		[f]	Foreign Currency Translation



 


The Company’s financial statements are presented
in Canadian dollars, which is also the functional currency of QYOU Media Inc. Each subsidiary entity determines its own functional currency
and items included in the financial statements of each entity are measured using that functional currency.


 






    	 	- 9 -	 



     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 


The financial statements comprise the financial
statements of the Company and the following subsidiaries:


 


	Name of Subsidiary	 	Jurisdiction of incorporation	 	Functional currency
	QYOU Media Inc.	 	Canada	 	Canadian dollar
	QYOU Productions Inc.	 	Canada	 	Canadian dollar
	QYOU Limited	 	Ireland	 	Euro
	QYOUTV International Limited	 	Ireland	 	Euro
	QYOU USA Inc. 	 	USA	 	US dollar
	QYOU Media India Private Ltd. 	 	India	 	Indian rupee
	Chatterbox Technologies Private Ltd.	 	India	 	Indian rupee


 


The financial statements of entities that have
a functional currency different from that of QYOU Media Inc. (foreign operations) are translated into Canadian dollars as follows: assets
and liabilities – at the closing rate as at the dates of the consolidated statements of financial position; income and expenses
 – at the average rate of the period (as this is considered a reasonable approximation of actual rates). All resulting changes are
recognized in other comprehensive income (loss) as currency translation adjustments.


 


Transactions and balances: Foreign currency transactions
are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains
and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary
assets and liabilities denominated in currencies other than an operation’s functional currency are recognized in operating expenses
as foreign exchange loss in the consolidated statements of loss and comprehensive loss.


 


		[g]	Revenue Recognition



 


The Company recorded revenue from contracts with
customers in accordance with five steps:


 


		1.	Identify the contract with customer






		2.	Identify the performance obligations in the contract






		3.	Determine the transaction price, which is the total consideration provided by the customer






		4.	Allocate the transaction price among the performance obligations in the contract based on the relative
fair value






		5.	Recognize revenue when the revenue criteria are met for each performance obligation



 


Advertising and Influencer Marketing Revenue


 


The Company contracts with its customers for the
development and delivery of commercials or contents through fixed price agreements. Each episode of commercial or content is generally
a performance obligation. The Company has concluded that the revenue from advertising and influencer marketing should be recognized at
the point in time when control of the asset is transferred to the customer, generally on delivery of the episode.


 


Licensing revenue


 


The Company also generates subscriber revenue
from pay television distributors. The Company revenue is recognized at the point in time when the control of the asset is transferred
to the customers, generally on delivery of programming.


 


The Company disaggregated revenue recognized from contracts with customers
into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
The Company has determined that revenue by geography best depicts how the nature, amount, timing and uncertainty of revenue and cash
flows are affected by economic factors. Refer to segment note for the disclosure on disaggregated revenue by geography.


 






    	 	- 10 -	 



     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 


		[h]	Income Taxes



 


Income tax expense includes both current and deferred
taxes. The Company uses judgment to interpret tax rules and regulations to calculate the expense recorded in each period. The Company
recognizes income tax expense in net loss unless it relates to an item recognized directly in equity or other comprehensive income (loss).


 


Current tax expense is tax the Company expects
to pay or receive based on its taxable income or loss during the year. The Company calculates the current tax expense using tax rates
enacted or substantively enacted as at the reporting date, and including any adjustment to income taxes payable or recoverable related
to previous years.


 


Deferred tax is recognized on temporary differences
between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation
of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally
recognized for all deductible temporary differences to the extent it is probable taxable profits will be available against which those
deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference
arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting
profit.


 


The carrying amount of deferred tax assets is
reviewed at the end of each year and reduced to the extent it is not probable sufficient taxable profits will be available to allow all
or part of the asset to be recovered. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in
the year in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively
enacted by the end of the year.


 


The measurement of deferred tax liabilities and
assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the year, to recover
or settle the carrying amount of its assets and liabilities.


 


Current and deferred taxes are recognized in profit
or loss, except when they relate to items that are recognized in other comprehensive loss or directly in equity, in which case the current
and deferred taxes are also recognized in other comprehensive loss or directly in equity, respectively.


 


The Company relies on estimates and assumptions
when determining the amount of current and deferred taxes, and take into account the impact of uncertain tax positions and whether additional
taxes and interest may be due. If new information becomes available and changes the Company’s judgment on the adequacy of existing
tax liabilities, these changes would affect the income tax expense in the period that the Company makes this determination.


 


		[i]	Share-based Compensation



 


Share options and warrants awarded to non-employees
are accounted for using the fair value of the instrument awarded or service provided, unless it cannot be determined reliably. Share options,
restricted share units (“RSU”) and warrants awarded to employees are accounted for using the fair value method. The fair value
of such share options and warrants granted is recognized as an expense on a proportionate basis consistent with the vesting features of
each tranche of the grant. The fair value is calculated using the Black-Scholes option pricing model with assumptions applicable at the
date of grant.


 


		[j]	Net Loss Per Share



 


Net loss per share is calculated based on the
profit for the financial year and the weighted average number of common shares outstanding during the year. Diluted net loss per share
is calculated using the profit for the financial year adjusted for the effect of any dilutive instruments and the weighted average diluted
number of shares (ignoring any potential issue of common shares that would be anti-dilutive) during the year. For all periods presented,
diluted loss per share equals basic loss per share due to the anti-dilutive effects of warrants and options (note 12).


 


		[k]	Financial Instruments



 


Financial assets and financial liabilities are
recognized when the Company becomes a party to the contractual provisions of the instruments.


 






    	 	- 11 -	 



     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 


Financial assets and financial liabilities are
initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted
from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately
in profit or loss.


 


Financial Assets


 


On initial recognition, a financial asset is classified
as measured at: amortized cost; fair value through other comprehensive income (‘‘FVOCI’’); or fair value through
profit and loss (‘‘FVTPL’’). The classification of financial assets is based on the business model in which a
financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial
asset in the scope of the standard are not separated. Instead, the hybrid financial asset as a whole is assessed for classification.


 


A financial asset is measured at amortized cost
if it meets both of the following conditions and is not designated as at FVTPL:


 


		·	it is held within a business model whose objective
is to hold assets to collect contractual cash flows; and






		·	its contractual terms give rise on specified
dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.



 


A debt investment is measured at FVOCI if it meets
both of the following conditions and is not designated as at FVTPL:


 


		·	it is held within a business model whose objective
is achieved by both collecting contractual cash flows and selling financial assets; and






		·	its contractual terms give rise on specified
dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.



 


On initial recognition of an equity investment
that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in
other comprehensive income (“OCI”). This election is made on an investment-by-investment basis.


 


All financial assets not classified as measured
at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition,
the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI
as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.


 


A financial asset (unless it is a trade receivable
without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus,
for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.


 






    	 	- 12 -	 



     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 





The following accounting policies apply to the
subsequent measurement of financial assets.


 


	Financial assets at FVTPL	Subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.
	Financial assets at amortized cost	Subsequently measured at amortized cost using the effective interest method, less any impairment losses. Interest income, foreign exchange gains and losses and impairment losses are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
	Debt investments at FVOCI	Subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment losses are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
	Equity investments at FVOCI	Subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are not reclassified to profit or loss, even upon derecognition.


 


Financial Liabilities


 


The Company initially recognizes financial liabilities
at fair value on the date at which the Company becomes a party to the contractual provisions of the instrument.


 


The Company classifies its financial liabilities
as either financial liabilities at fair value through profit or loss or amortized cost.


 


Subsequent to initial recognition, other liabilities
are measured at amortized cost using the effective interest method. Financial liabilities at fair value are stated at fair value with
changes being recognized in profit or loss.


 


The Company derecognizes a financial liability
when its contractual obligations are discharged or cancelled or expire.


 


Financial Liabilities and Equity Instruments


 


Classification as debt or equity


 


Debt and equity instruments issued by the Company
are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions
of a financial liability and an equity instrument.


 


Equity Instruments


 


An equity instrument is any contract that evidences
a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a group entity are
recognized at the proceeds received, net of direct issue costs.


 






    	 	- 13 -	 



     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 





Classification of Financial Instruments


 


The Company classifies its financial assets and
liabilities as outlined below:





	 
	Cash and cash equivalents	Amortized cost
	Trade receivables	Amortized cost
	Other receivables	Amortized cost
	Security deposit	Amortized cost
	Trade and other payables	Amortized cost
	
    Contingent consideration

    Derivative instruments
	
    FVTPL

    FVTPL

	Borrowings	Amortized cost


 


Impairment of Financial Assets


 


An expected credit loss (“ECL”) model
applies to the financial assets measured at amortized cost. The Company’s financial assets measured at amortized cost and subject
to the ECL model consist primarily of trade and other receivables. The Company applies the simplified approach to the impairment for trade
and other receivables by recognizing a loss allowance based on lifetime expected losses at each reporting date taking into consideration
historical credit loss experience and financial factors specific to the debtors and general economic conditions.


 


		[l]	Government Assistance



 


Government assistance is recognized when there
is reasonable assurance it will be received and all related conditions will be complied with. When the government assistance relates to
an expense item, it is recognized as a reduction of expense over the period necessary to match the government assistance on a systematic
basis to the costs it is intended to subsidize.


 


		[m]	Business Combinations



 


Business combinations are accounted for using
the acquisition method. Under this method, the identifiable assets acquired, and liabilities assumed, including contingent liabilities,
are recognized in the consolidated statement of financial position at their respective fair values. Goodwill is recorded based on the
excess of the fair value of the consideration transferred over the fair value of the Company’s interest in the acquiree’s
net identifiable assets on the date of the acquisition.


 


The consideration transferred by the Company to
acquire control of an entity is calculated as the sum of the acquisition-date fair values of the assets transferred, liabilities incurred,
and equity interests issued by the Company, including the fair value of all the assets and liabilities resulting from a deferred contingent
payment arrangement. Acquisition-related costs are expensed as incurred.


 


		[n]	Leases



 





At inception of a contract, the Company assesses
whether a contract is, or contains, a lease based on whether the contract conveys the right of control the use of identified asset for
a period of time in exchange for consideration. The Company recognized a right-of-use asset and a lease liability at the lease commencement
date. The right-of-use asset is initially measured based on the initial amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial direct costs incurred and an estimate of the costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The assets
are depreciated to the earlier of the end of useful life of the right-of-use asset or the lease term using the straight-line method as
this most closely reflects the expected pattern of the consumption of the future economic benefits. The lease term includes periods covered
by an option to extend if the Company is reasonably certain to exercise that option. In addition, the right-of-use asset can be periodically
reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially
measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit
in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses
its incremental borrowing rate as the discount rate. The Company used an incremental borrowing rate to measure the lease liabilities.


 






    	 	- 14 -	 



     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 


The lease liability is measured at the amortized
cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from change in an index
or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or
if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability
is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use, unless it has been reduced to
zero. The Company has elected to apply the practical expedient not to recognize right-of-use assets and lease liabilities for short-term
leases that have a lease term of 12 months or less or to leases of low value assets when applicable. The lease payments associated with
those leases is recognized as an expense on a straight-line basis over the lease term.


 


		[o]	Capitalized Programming Asset



 


Capitalized Programming Asset represent the costs
of projects in development, projects in process, the unamortized costs of proprietary programming assets that have been produced by the
Company or for which the Company has acquired distribution rights, and third-party-produced equity film investments. Such costs include
development and production expenditures and attributed studio and other costs that are expected to benefit future periods. Costs are capitalized
upon the commencement of the project. Capitalized Programming Asset is amortized over three years with 50% at the time of initial episodic
delivery and thereafter 25% annually. The amortization period and the amortization method for film investments are reviewed at least at
the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits
embodied in the assets are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in
accounting estimates.


 


Recently adopted provisions of
IFRS


 


IFRS 9, Financial Instruments, IAS 39, Financial
Instruments: Recognition and Measurement and IFRS 7, Financial Instruments: Disclosures, Interest Rate Benchmark Reform


 


On August 27, 2020, the IASB issued Interest
Rate Benchmark Reform - Phase 2 which includes amendments to IFRS 9, Financial Instruments, IAS 39, Financial Instruments: Recognition
and Measurement, IFRS 7, Financial Instruments: Disclosures, IFRS 4, Insurance Contracts, and IFRS 16, Leases, and concludes
phase two of its work to respond to the effects of IBOR reform on financial reporting. The amendments address the issues that affect financial
reporting at the time that an existing interest rate benchmark is replaced with a risk-free rate ("RFR"). The amendments are
effective for annual periods beginning on or after January 1, 2021, and must be applied retrospectively, with early adoption permitted.
The Company has adopted the amendments to IFRS 9, IAS 39 and IFRS 7, which had no impact on the Financial Statements.


 


Interpretations Committee Agenda Decision,
Costs Necessary to Sell Inventories


 


In June 2021, the IASB issued Interpretations
Committee agenda decision - Costs Necessary to Sell Inventories to address the necessary costs to sell when determining the net realizable
value of inventories that affects the application of IAS 2, Inventories. It was concluded that, when determining the net realizable
value of inventories, an entity estimates the costs necessary to make the sale in the ordinary course of business. An entity uses its
judgement to determine which costs are necessary to make the sale considering its specific facts and circumstances, including the nature
of the inventories. The Company has adopted the agenda decision relate to IAS 2, which had no impact on the Financial Statements


 


IAS 37, Provisions, Contingent Liabilities and Contingent Assets


 


In May 2020, the IASB issued amendments to
IAS 37, Provisions, Contingent Liabilities and Contingent Assets to specify which costs an entity needs to include when assessing whether
a contract is onerous or loss-making. The amendments apply a 'direct related cost approach'. The costs that relate directly to a contract
to provide goods or services include both incremental costs (e.g., the costs of direct labour and materials) and an allocation of costs
directly related to contract activities (e.g., depreciation of equipment used to fulfill the contract as well as costs of contract management
and supervision). General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable
to the counterparty under the contract. The amendments are effective for annual periods beginning on or after January 1, 2022, and
must be applied prospectively to contracts for which an entity has not yet fulfilled all of its obligations at the beginning of the annual
reporting period in which it first applies the amendments (the date of initial application). Earlier application is permitted and must
be disclosed. The Company has adopted the amendments to IAS 37, which had no impact on the Financial Statements.


 






    	 	- 15 -	 



     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 


New standards, amendments and interpretations
not yet adopted by the Company:


 


The following new accounting standards have been
issued but not yet adopted by the Company as at December 31, 2021:


 


IAS 1, Presentation of Financial Statements
(“IAS 1”)


 


In January 2020, the IASB issued Classification
of Liabilities as Current or Non-current (Amendments to IAS 1). The amendments aim to promote consistency in applying the requirements
by helping companies determine whether, in the consolidated statements of financial position, debt and other liabilities with an uncertain
settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments
include clarifying the classification requirements for debt a company might settle by converting it into equity.


 


The amendments are effective for annual reporting
periods beginning on or after January 1, 2022, with earlier application permitted. In July 2020, the effective date was deferred
to January 1, 2023. The Company is still assessing the impact of adopting these amendments on its financial statements.


 


IAS 1, Presentation of Financial Statements


 


In February 2021, the IASB issued amendments
to IAS 1 and IFRS Practice Statements 2, Making Materiality Judgements, to help entities provide accounting policy disclosures that are
more useful by replacing the requirement to disclose "significant" accounting policies with a requirement to disclose "material"
accounting policies. The amendments are effective for annual periods beginning on or after January 1, 2023, with earlier application
permitted. The Company is currently evaluating the impact of these amendments on its Financial Statements and will apply the amendments
from the effective date.


 


IAS 8, Accounting Policies, Changes in Accounting
Estimates and Errors (“IAS 8”)


 


In February 2021, the IASB issued Definition
of Accounting Estimates, which amends IAS 8. The amendment replaces the definition of a change in accounting estimates with a definition
of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject
to measurement uncertainty”. The amendment provides clarification to help entities to distinguish between accounting policies and
accounting estimates.


 


The amendments are effective for annual periods
beginning on or after January 1, 2023. The Company is still assessing the impact of adopting these amendments on its financial statements.


 


IAS 12, Income Taxes (“IAS 12”)


 


In May 2021, the IASB issued Deferred Tax
related to Assets and Liabilities arising from a single transaction (Amendments to IAS 12). The amendment narrows the scope of the initial
recognition exemption so that it does not apply to transactions that give rise to equal and offset temporary differences. As a result,
companies will need to recognize a deferred tax asset and deferred tax liability for temporary differences arising on initial recognition
of transactions such as leases and decommissioning obligations.


 





The amendments are effective for annual reporting
periods beginning on or after January 1, 2023 and are to be applied retrospectively. The Company is still assessing the impact of
adopting these amendments on its financial statements.


 






    	 	- 16 -	 



     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[expressed in Canadian dollars,
unless otherwise noted]



 


IFRS 9, Financial Instruments (“IFRS
9”)


 


As part of its 2018-2020 annual improvements to
IFRS standards process, the IASB issued an amendment to IFRS 9. The amendment clarifies the fees that an entity includes when assessing
whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability.
These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower
or lender on the other’s behalf. An entity applies the amendment to financial liabilities that are modified or exchanged on or after
the beginning of the annual reporting period in which the entity first applies the amendment.


 


The amendment is effective for annual reporting
periods beginning on or after January 1, 2022 with earlier adoption permitted. The Company is still assessing the impact of adopting
these amendments on its financial statements.


 


		4.	BUSINESS COMBINATION



 


Chatterbox


 


On June 14, 2021, the Company acquired 97%
of the outstanding common shares of Chatterbox, an influencer marketing company based in India for total consideration of $4,711,063,
as part of the Company’s international distribution and strategic partnerships growth strategy. The purchase consideration consisted
of cash consideration of $2,630,345, working capital adjustment of $106,837, 2021 earnings before income tax, depreciation and amortization
(“EBITDA”) adjustments of ($68,103) and $2,638,912 of contingent consideration.


 


The share acquisition of Chatterbox qualified
as a business combination and was accounted for using the acquisition method of accounting. Accordingly, the results of Chatterbox have
been included in the consolidated financial statements of the Company from the date of acquisition, which is the date the Company obtained
control.


 


Due to the complexity associated with the valuation
process, the identification and measurement of the assets acquired, and liabilities assumed, as well as the measurement contingent consideration
is provisional and subject to adjustment on completion of the valuation process and analysis of resulting tax effects. Management will
finalize the accounting for the acquisition, specifically the intangible assets, contingent consideration, and the related tax effects,
no later than one year from the date of the acquisition and will reflect these adjustments retrospectively as required under IFRS 3. Differences
between these provisional estimates and the final acquisition accounting may occur and these differences could have a material impact
on the Company’s future financial position and results of operations.


 


The allocation of the total consideration to the
fair value of the identifiable assets acquired and liabilities assumed as at the date of the acquisition was as follows:


 


	 	 	$	 
	Cash and cash equivalents	 	 	747,785	 
	Trade receivables	 	 	256,259	 
	Other receivables	 	 	50,718	 
	Customer relationships	 	 	298,438	 
	Brand name	 	 	619,802	 
	Goodwill	 	 	3,231,125	 
	Trade and other payables	 	 	(260,919	)
	Deferred tax liabilities	 	 	(232,145	)
	 	 	 	4,711,063	 



 


Goodwill arising from the acquisition reflects
the benefits attributable to synergies, revenue growth and future market development. These benefits were not recognized separately from
goodwill because they did not meet the recognition criteria for identifiable intangible assets. Goodwill is not deductible for income
tax purposes.


 


All transaction costs associated with the acquisition
are included within legal and consulting on the statement of loss and comprehensive loss, in the amount of $187,148 in the year ended
June 30, 2021.


 



    - 17 -


     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 


During the fiscal period ending December 31,
2021, the Company paid additional consideration related to working capital adjustments of $106,837, with net post acquisition measurement
adjustments of $37,352. Management is continuing to review the acquisition and its accounting and finalizing the accounting for the acquisition
no later than one year from the date of the acquisition.


 


The contingent consideration is classified as
Level 3 in the fair value hierarchy. The contingent consideration fair value is based on the present value of the estimated likely obligation.
During the fiscal period ended December 31, 2021, the Company recorded a loss on the remeasurement of contingent consideration of
$393,950 and as at December 31, 2021, the fair value of the contingent consideration was $2,638,912 (June 30, 2021 of $2,197,506).
The Company uses a scenario-based model to independently assess individual earnouts and calculate the fair value of the earnout based
on probabilities of success attributable to each individual scenario. The significant assumptions used in making the estimates are revenue
growth rate and discount rate. A 10% change in the discount rate used in the valuation of the contingent consideration as at December 31,
2021 would change the valuation of the liability by approximately $270,000 (June 30, 2021 – approximately $200,000).


 


The Non-Controlling Interest (“NCI”)
on the transaction meets the definition of a liability as the Company is obligated to purchase the remaining 3% of common shares. The
amount payable is included in contingent consideration and is measured at fair valued through profit or loss.


 


The contingent consideration as at December 31,
2021:


 


	 	 	 	 
	 	 	Earnout	 
	 	 	$	 
	As at June 30, 2020	 	 	—	 
	Acquisition - Chatterbox	 	 	2,186,960	 
	Effects of foreign exchange	 	 	10,546	 
	Balance – June 30, 2021	 	 	2,197,506	 
	Loss on remeasurement of contingent consideration	 	 	393,950	 
	Effects of foreign exchange	 	 	47,456	 
	Balance – December 31, 2021	 	 	2,638,912	 
	Current	 	 	861,697	 
	Non-current	 	 	1,777,215	 




 



    - 18 -


     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 


		5.	PROPERTY AND EQUIPMENT



 


The Company’s property and equipment are
as follows:


 


	Cost	 	Computer hardware and

 equipment

 $	 	 	Furniture and fixtures

 $	 	 	Total 

$	 
	As at June 30, 2019	 	 	204,940	 	 	 	236,686	 	 	 	441,626	 
	Additions	 	 	—	 	 	 	38,814	 	 	 	38,814	 
	Foreign exchange	 	 	11,777	 	 	 	990	 	 	 	12,767	 
	As at June 30, 2020	 	 	216,717	 	 	 	276,490	 	 	 	493,207	 
	Additions	 	 	28,470	 	 	 	—	 	 	 	28,470	 
	Foreign exchange	 	 	(17,549	)	 	 	(4,477	)	 	 	(22,026	)
	As at June 30, 2021	 	 	227,638	 	 	 	272,013	 	 	 	499,651	 
	Additions	 	 	30,699	 	 	 	31,475	 	 	 	62,174	 
	Foreign exchange	 	 	5,635	 	 	 	13,101	 	 	 	18,736	 
	As at December 31, 2021	 	 	263,972	 	 	 	316,589	 	 	 	580,561	 




 




	 	 	Computer hardware
 and equipment
	 	 	Furniture and fixtures	 	 	Total	 
	Accumulated depreciation	 	$	 	 	$	 	 	$	 
	As at June 30, 2019	 	 	124,586	 	 	 	116,310	 	 	 	240,896	 
	Depreciation	 	 	56,232	 	 	 	82,063	 	 	 	138,295	 
	Impairment loss	 	 	2,160	 	 	 	36,529	 	 	 	38,689	 
	Foreign exchange	 	 	4,599	 	 	 	194	 	 	 	4,793	 
	As at June 30, 2020	 	 	187,577	 	 	 	235,096	 	 	 	422,673	 
	Depreciation	 	 	31,068	 	 	 	13,410	 	 	 	44,478	 
	Foreign exchange	 	 	(17,068	)	 	 	(443	)	 	 	(17,511	)
	As at June 30, 2021	 	 	201,577	 	 	 	248,063	 	 	 	449,640	 
	Depreciation	 	 	6,454	 	 	 	2,949	 	 	 	9,403	 
	Foreign exchange	 	 	5,076	 	 	 	11,744	 	 	 	16,820	 
	As at December 31, 2021	 	 	213,107	 	 	 	262,756	 	 	 	475,863	 




 



	 	 	Computer hardware
 and equipment
	 	 	Furniture and fixtures	 	 	Total	 
	Net book value	 	$	 	 	$	 	 	$	 
	As at June 30, 2020	 	 	29,140	 	 	 	41,394	 	 	 	70,534	 
	As at June 30, 2021	 	 	26,061	 	 	 	23,950	 	 	 	50,011	 
	As at December 31, 2021	 	 	50,865	 	 	 	53,833	 	 	 	104,698	 




 



    - 19 -


     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 


		6.	CAPITALIZED PROGRAMMING ASSET



 


The Company’s capitalized programming asset
are as follows:


 


	 	 	Programming Asset	 
	Cost	 	$	 
	As at June 30, 2021 and 2020	 	 	—	 
	Additions	 	 	211,501	 
	Effects of foreign exchange	 	 	2,665	 
	As at December 31, 2021	 	 	214,166	 



 


	 	 	Programming Asset	 
	Accumulated amortization	 	$	 
	As at June 30, 2021 and 2020	 	 	—	 
	Amortization	 	 	24,406	 
	Effects of foreign exchange	 	 	307	 
	As at December 31, 2021	 	 	24,713	 



 


	 	 	Programming Asset	 
	Net book value	 	$	 
	As at June 30, 2021 and 2020	 	 	—	 
	As at December 31, 2021	 	 	189,453	 



 





		7.	RIGHT-OF-USE ASSETS



 


The Company has three office leases with maturities
ranging between 2 to 5 years.


 


The Company’s right-of-use assets are as
follows:


 


	 	 	$	 
	Balance – July 1, 2019	 	 	49,263	 
	Additions	 	 	640,375	 
	Depreciation	 	 	(123,806	)
	Effects of foreign exchange	 	 	26,525	 
	Balance – June 30, 2020	 	 	592,357	 
	Lease modification	 	 	8,067	 
	Lease termination	 	 	(276,106	)
	Additions	 	 	213,062	 
	Depreciation	 	 	(144,848	)
	Effects of foreign exchange	 	 	(41,232	)
	Balance – June 30, 2021	 	 	351,300	 
	Additions	 	 	467,462	 
	Depreciation	 	 	(73,178	)
	Effects of foreign exchange	 	 	7,683	 
	Balance – December 31, 2021	 	 	753,267	 




 



    - 20 -


     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 


		8.	LEASE LIABILITIES



 


The Company’s lease liabilities are as follows:


 


	 	 	$	 
	Balance – July 1, 2019	 	 	49,263	 
	Additions	 	 	640,375	 
	Add: Interest expense	 	 	28,277	 
	Less: Lease payments	 	 	(126,815	)
	Effects of foreign exchange	 	 	24,576	 
	Balance – June 30, 2020	 	 	615,676	 
	Lease modification	 	 	8,067	 
	Lease termination	 	 	(295,403	)
	Additions	 	 	213,062	 
	Add: Interest expense	 	 	44,874	 
	Less: Lease payments	 	 	(150,208	)
	Effects of foreign exchange	 	 	(45,551	)
	Balance – June 30, 2021	 	 	390,517	 
	Additions	 	 	467,462	 
	Add: Interest expense	 	 	20,380	 
	Less: Lease payments	 	 	(86,173	)
	Effects of foreign exchange	 	 	8,647	 
	Balance – December 31, 2021	 	 	800,833	 
	 	 	 	 	 
	Current	 	 	242,489	 
	Non-current	 	 	558,344	 




 


For the six months ended December 31, 2021,
the Company made lease payments of $135,353 related to short-term leases (June 30, 2021 - $11,430; 2020 – $111,510).


 


During the six months ended December 31,
2021, the Company entered into a new lease agreement for office space for the Chatterbox subsidiary. During the year ended June 30,
2021, the Company modified the QYOU USA office lease to reduce office space, resulting in lower lease payments and terminated the QYOU
India office lease and entered into a new lease agreement for office space.


 


The Company has calculated the lease liability
utilizing an estimated incremental borrowing rate of 10%.


 



    - 21 -


     


    





 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS


[expressed in Canadian dollars,
unless otherwise noted]


 


December 31, 2021, June 30, 2021 and 2020


 


		9.	BORROWINGS



 


	 	 	December 31, 2021	 	 	June 30, 2021	 
	 	 	$	 	 	$	 
	Current	 	 	 	 	 	 	 	 
	US Small Business Administration Loan	 	 	7,756	 	 	 	10,872	 
	 	 	 	7,756	 	 	 	10,872	 
	Non-current	 	 	 	 	 	 	 	 
	US Small Business Administration Loan	 	 	52,857	 	 	 	52,008	 
	 	 	 	52,857	 	 	 	52,008	 
	Total	 	 	60,613	 	 	 	62,880	 



 


On May 20, 2020 (“date of advance”),
the Company received a loan for gross proceeds of $206,700 (USD $150,000) from the U.S. Small Business Administration under the Economic
Injury Disaster Loan program. The loan bears annual interest at a rate of 3.75%. Monthly repayments of $996 (USD $731) will commence 12
months from the date of advance and the loan matures 30 years from the date of advance.


 


The benefit of the government loan received at
below market rate of interest is treated as a government grant. The loan was recognized at fair value using the Company’s incremental
borrowing rate of 17%, $58,955. The difference between the initial carrying amount and proceeds received is the value of the grant of
$147,745. The Company recognized in income the value of the grant as it incurred the related expenses for which the grant was intended
to compensate. The full value of the grant had been recognized in income during the year ended June 30, 2020 as a deduction of the
related operating expenses.


 


The balance outstanding at December 31, 2021
is as follows:


 


	 	 	$	 
	Principal balance	 	 	206,700	 
	 	 	 	 	 
	Grant adjustment to fair value	 	 	(147,745	)
	Interest and accretion expense	 	 	846	 
	Effects of foreign exchange	 	 	(1,361	)
	Balance - June 30, 2020	 	 	58,440	 
	Interest and accretion expense	 	 	10,334	 
	Payments	 	 	(937	)
	Effects of foreign exchange	 	 	(4,957	)
	Balance - June 30, 2021	 	 	62,880	 
	Interest and accretion expense	 	 	5,498	 
	Payments	 	 	(5,528	)
	Effects of foreign exchange	 	 	(2,237	)
	Balance - December 31, 2021	 	 	60,613	 
	Current	 	 	7,756	 
	Non-current	 	 	52,857	 



 






    - 22 -


     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS


[expressed in Canadian dollars,
unless otherwise noted]


 


December 31, 2021, June 30, 2021 and 2020



 


		10.	INTANGIBLE ASSETS



 


A summary of the Company’s intangible assets
are as follows:


 


	 	 	Brand QYOU 

    $	 	 	Capitalized 

    development
 $	 	 	Brand 
 Chatterbox

    $	 	 	Customer
 relationships

    $	 	 	Total

    $	 
	As at June 30, 2020	 	 	90,474	 	 	 	993,870	 	 	 	—	 	 	 	—	 	 	 	1,084,344	 
	Acquisition - Chatterbox	 	 	—	 	 	 	—	 	 	 	619,802	 	 	 	298,438	 	 	 	918,240	 
	Effects of foreign exchange	 	 	(3,583	)	 	 	—	 	 	 	2,989	 	 	 	1,439	 	 	 	845	 
	As at June 30, 2021	 	 	86,891	 	 	 	993,870	 	 	 	622,791	 	 	 	299,877	 	 	 	2,003,429	 
	Effects of foreign exchange	 	 	(1,820	)	 	 	—	 	 	 	13,450	 	 	 	6,476	 	 	 	18,106	 
	As at December 31, 2021	 	 	85,071	 	 	 	993,870	 	 	 	636,241	 	 	 	306,353	 	 	 	2,021,535	 




 



	Accumulated amortization	 	Brand QYOU 

    $	 	 	Capitalized 

    development
 $	 	 	Brand 
 Chatterbox

    $	 	 	Customer
 relationships

    $	 	 	Total

    $	 
	As at June 30, 2020	 	 	—	 	 	 	993,870	 	 	 	—	 	 	 	—	 	 	 	993,870	 
	Amortization	 	 	—	 	 	 	—	 	 	 	—	 	 	 	2,429	 	 	 	2,429	 
	Effects of foreign exchange	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(102	)	 	 	(102	)
	As at June 30, 2021	 	 	—	 	 	 	993,870	 	 	 	—	 	 	 	2,327	 	 	 	996,197	 
	Amortization	 	 	—	 	 	 	—	 	 	 	—	 	 	 	25,326	 	 	 	25,326	 
	Effects of foreign exchange	 	 	—	 	 	 	—	 	 	 	—	 	 	 	2,073	 	 	 	2,073	 
	As at December 31, 2021	 	 	—	 	 	 	993,870	 	 	 	—	 	 	 	29,726	 	 	 	1,023,596	 




 


	Net book value	 	Brand QYOU 

    $	 	 	Capitalized 

    development
 $	 	 	Brand 
 Chatterbox

    $	 	 	Customer
 relationships

    $	 	 	Total

    $	 
	As at June 30, 2020	 	 	90,474	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	90,474	 
	As at June 30, 2021	 	 	86,891	 	 	 	—	 	 	 	622,791	 	 	 	297,550	 	 	 	1,007,232	 
	As at December 31, 2021	 	 	85,071	 	 	 	—	 	 	 	636,241	 	 	 	276,627	 	 	 	997,939	 






 


		11.	GOODWILL



 


A summary of the Company’s goodwill is as
follows:


 





	 	 	$	 
	As at June 30, 2020	 	 	—	 
	Acquisition - Chatterbox	 	 	3,231,125	 
	Effects of foreign exchange	 	 	15,971	 
	Balance – June 30, 2021	 	 	3,247,096	 
	Chatterbox - Working capital adjustments	 	 	37,352	 
	Effects of foreign exchange	 	 	115,191	 
	Balance – December 31, 2021	 	 	3,399,639	 



 


Annual impairment testing involves determining
the recoverable amount of the CGU group to which goodwill is allocated and comparing this to the carrying value of the CGU. The Chatterbox
Brand, customer relationships and all of the goodwill has been allocated to the Chatterbox CGU for purposes of assessing for potential
impairment. The measurement of the recoverable amount of the CGU was calculated based on value in use using level 3 inputs in a discounted
cash flow model. The value in use was determined to be in greater than the fair value less cost of disposal of the CGUs. The key
assumptions used in the estimates of the recoverable amounts are described below:


 


		●	Cash flows were projected based on the Company's
long-term business plan. The business plan contains forecasts based on actual operating results in conjunction with anticipated future
growth opportunities, as well as industry and market trends. The forecasts were extended to a total of five years (with a terminal
year thereafter). Revenue compound annual growth rate was 28%.



 






    - 23 -


     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS


[expressed in Canadian dollars,
unless otherwise noted]


 


December 31, 2021, June 30, 2021 and 2020



 


		●	The terminal growth rate of 4% was based on historical
and projected industry and relevant Indian market data. If all other assumptions were held constant and the terminal growth rate
were to decrease by 1% this would translate into a decrease of the recoverable amount of approximately $50,000.



 


		●	The post tax discount rate applied in determining
the recoverable amount of the CGU groups was 39.3%. The discount rates were estimated based on past experience and the weighted average
cost of capital of the CGU, other competitors in the industry and adjusted for risks in the cash flow. If all other assumption were
held constant and the discount rates were to increase by 1% this would translate into a decrease of the recoverable amount of approximately
$140,000.



 


		12.	SHARE CAPITAL



 


	 	 	Common shares	 	 	Share capital	 	 	Warrants	 	 	Warrants	 	 	Compensation

    options	 	 	Compensation

    options amount

    within share-based

    payment reserve	 
	 	 	#	 	 	$	 	 	#	 	 	$	 	 	#	 	 	$	 
	Balance, June 30, 2019	 	 	136,819,060	 	 	 	22,312,422	 	 	 	54,868,300	 	 	 	1,819,172	 	 	 	6,156,220	 	 	 	519,330	 
	Issuance of common shares and
    warrants, net of issuance costs [a][b]	 	 	42,000,000	 	 	 	1,582,330	 	 	 	42,000,000	 	 	 	346,531	 	 	 	2,686,000	 	 	 	49,573	 
	Warrants expired [c]	 	 	—	 	 	 	—	 	 	 	(26,938,175	)	 	 	—	 	 	 	(2,046,753	)	 	 	—	 
	Share-based compensation [d]	 	 	4,315,832	 	 	 	129,475	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Warrants exercised [e]	 	 	500,000	 	 	 	36,292	 	 	 	(500,000	)	 	 	(6,292	)	 	 	—	 	 	 	—	 
	Balance, June 30, 2020	 	 	183,634,892	 	 	 	24,060,519	 	 	 	69,430,125	 	 	 	2,159,411	 	 	 	6,795,467	 	 	 	568,903	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issuance of common shares and
    warrants, net of issuance costs [f] [g]	 	 	101,737,959	 	 	 	7,986,843	 	 	 	50,868,980	 	 	 	2,140,394	 	 	 	8,835,697	 	 	 	1,083,052	 
	Compensation options and warrants
    exercised [h]	 	 	79,529,929	 	 	 	6,986,425	 	 	 	(65,816,471	)	 	 	(535,863	)	 	 	(8,992,975	)	 	 	(192,884	)
	RSU Redeemed [i]	 	 	11,258,338	 	 	 	1,908,500	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Share options exercised [j]	 	 	5,193,268	 	 	 	469,775	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Share-based compensation [k]	 	 	83,333	 	 	 	38,750	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Compensation options and warrants
    expired	 	 	—	 	 	 	—	 	 	 	(9,451,000	)	 	 	—	 	 	 	(1,615,907	)	 	 	—	 
	Balance, June 30, 2021	 	 	381,437,719	 	 	 	41,450,812	 	 	 	45,031,634	 	 	 	3,763,942	 	 	 	5,022,282	 	 	 	1,459,071	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Issuance of common shares, net
    of issuance costs [l]	 	 	7,896,875	 	 	 	2,160,891	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Compensation options and warrants
    exercised [m]	 	 	10,713,883	 	 	 	1,063,340	 	 	 	(9,356,809	)	 	 	(63,260	)	 	 	(881,383	)	 	 	(15,994	)
	RSUs
    redeemed [n]	 	 	1,216,669	 	 	 	60,833	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Share options exercised [o]	 	 	129,168	 	 	 	22,987	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 
	Compensation options and warrants
    expired	 	 	—	 	 	 	—	 	 	 	(14,250	)	 	 	—	 	 	 	—	 	 	 	—	 
	Balance, December 31, 2021	 	 	401,394,314	 	 	 	44,758,863	 	 	 	35,660,575	 	 	 	3,700,682	 	 	 	4,140,899	 	 	 	1,443,077	 



 


		[a]	During the six months ended December 31, 2019, the Company completed the issuance of 36,000,000 units
as part of a private placement at a price of $0.05 per unit. The total gross proceeds from the issuance was $1,800,000. Each unit is comprised
of one common share of the Company, one-half of a purchase warrant exercisable at a price of $0.06 (a “6 Cent Warrant”) and
one-half of a purchase warrant exercisable at a price of $0.10 (a “10 Cent Warrant”).



 


Each whole 6 Cent Warrant is exercisable
to purchase one common share in the capital of the Company at a price of $0.06 for a period of one year following the closing date. Each
whole 10 Cent Warrant is exercisable to purchase one common share in the capital of the Company at a price of $0.10 for a period of two
years following the closing date. The fair value of each 6 Cent Warrant is $0.013 per warrant and $0.01 per 10 Cent Warrant; based on
the relative fair value of the shares issued and the warrants, calculated using the Black-Scholes options pricing model with a market
price per common share of $0.055 on the date of grant, a risk-free interest rate of 1.58%, an expected annualized volatility of 65% and
expected dividend yield of 0%. The fair value of all the warrants is $279,821 as calculated using the Black-Scholes options pricing model.


 






    - 24 -


     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS


[expressed in Canadian dollars,
unless otherwise noted]


 


December 31, 2021, June 30, 2021 and 2020



 


Transaction costs consisted of $140,468
in cash and issuance of 2,266,000 compensation options. Each compensation option is exercisable into one unit until September 30,
2021 at a price of $0.05. Total fair value of the compensation options was determined to be $41,283. The fair value of the compensation
units was determined using the Black-Scholes options pricing model with a market price per compensation unit of $0.05, a risk-free interest
rate of 1.58%, an expected annualized volatility of 65% and expected dividend yield of 0%.


 


		[b]	On February 11, 2020, the Company completed the issuance of 6,000,000 units as part of a private
placement at a price of $0.06 per unit. The total gross proceeds from the issuance was $360,000. Each unit is comprised of one common
share of the Company and one purchase warrant exercisable at a price of $0.08 (a “8 Cent Warrant”).



 


Each 8 Cent Warrant is exercisable
to purchase one common share in the capital of the Company at a price of $0.08 for a period of two year following the closing date. The
fair value of each 8 Cent Warrant is $0.015 per warrant; based on the relative fair value of the shares issued and the warrants, calculated
using the Black-Scholes options pricing model with a market price per common share of $0.055 on the date of grant, a risk-free interest
rate of 1.51%, an expected annualized volatility of 68% and expected dividend yield of 0%. The fair value of the warrants is $66,710 as
calculated using the Black-Scholes options pricing model.


 


Transaction costs consisted of $41,098
in cash and issuance of 420,000 compensation options to the agents in connection with the transaction. Each compensation option is exercisable
into one unit until February 11, 2022 at a price of $0.06. Total fair value of the compensation options was determined to be $8,290.
The fair value of the compensation units was determined using the Black-Scholes options pricing model with a market price per compensation
unit of $0.06, a risk-free interest rate of 1.51%, an expected annualized volatility of 68% and expected dividend yield of 0%.


 


		[c]	During the period ending June 30, 2020, 26,938,175 warrants and 2,046,753 compensation options expired
in accordance with their terms.



 


		[d]	On March 23, 2020, the Company issued 4,315,832 common shares to certain directors and their holding
corporations as compensation for services provided to the Company valued at $129,475.



 


		[e]	On January 14, 2020, 500,000 warrants were exercised at $0.06 per warrant into 500,000 common shares.



 


		[f]	During the three months ended September 30, 2020, the Company completed the issuance of 60,666,399
units of the Company as part of a private placement at a price of $0.03 per unit. The total gross proceeds from the issuance was $1,820,002.
Each unit is comprised of one common share of the Company and one-half of one common share purchase warrant exercisable to purchase one
common share at a price of $0.05 (a “5 Cent Warrant”).



 


Each 5 Cent Warrant is exercisable
to purchase one common share in the capital of the Company at a price of $0.05 per 5 Cent Warrant Share until June 30, 2022. The
fair value of each 5 Cent Warrant is $0.01 per warrant, calculated using the Black-Scholes option pricing model with a market price per
common share of $0.035 on the date of grant, a risk-free interest rate of 0.24%, an expected annualized volatility of 76% and expected
dividend yield of 0%.


 


Total transaction costs consisted of
$161,145 in cash and issuance of 5,549,973 compensation options to the agents in connection with the transaction. Each compensation option
is exercisable into one unit until June 30, 2022 at a price of $0.05. Total fair value of the compensation options was determined
to be $89,386. The fair value of the compensation units was determined using the Black-Scholes options pricing model with a market price
per compensation unit of $0.035, a risk-free interest rate of 0.24%, an expected annualized volatility of 76% and expected dividend yield
of 0%.


 


		[g]	During the three months ended March 31, 2021, the Company completed the issuance of 41,071,560 units
of the Company as part of a private placement at a price of $0.28 per unit. The total gross proceeds from the issuance was $11,500,037.
Each unit is comprised of one common share of the Company and one-half of one common share purchase warrant exercisable to purchase one
common share at a price of $0.45 (a “45 Cent Warrant”).



 






    - 25 -


     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS


[expressed in Canadian dollars,
unless otherwise noted]


 


December 31, 2021, June 30, 2021 and 2020



 


Each 45 Cent Warrant is exercisable
to purchase one common share in the capital of the Company at a price of $0.45 per 45 Cent Warrant Share until February 25, 2023.
The fair value of each 45 Cent Warrant is $0.1837 per warrant; calculated using the Black-Scholes options pricing model with a market
price per common share of $0.315 on the date of grant, a risk-free interest rate of 0.32%, an expected annualized volatility of 131% and
expected dividend yield of 0%.


 


Total transaction costs consisted of
$2,942,270 in cash and issuance of 3,285,724 compensation options to the agents in connection with the transaction. Each compensation
option is exercisable into one unit until February 25, 2023 at a price of $0.28. Total fair value of the compensation options was
determined to be $993,666. The fair value of the compensation units was determined using the Black-Scholes options pricing model with
a market price per common share of $0.315, a risk-free interest rate of 0.32%, an expected annualized volatility of 131% and expected
dividend yield of 0%.


 


		[h]	During the year ended June 30, 2021, 8,992,975 compensation options were exercised for proceeds of
$489,638. Upon exercise of the compensation options the Company issued 8,992,975 common shares, 2,279,401 5 Cent Warrants, 57,750 6 Cent
Warrants, 332,500 8 Cent Warrants, 767,600 10 Cent Warrants, 1,258,232 12 Cent Warrants and 25,000 45 Cent Warrants.



 


During the year ended June 30,
2021, 18,903,088 5 Cent Warrants, 16,869,250 6 Cent Warrants, 4,082,510 8 Cent Warrants, 10,256,250 10 Cent Warrants and 20,425,856 12
Cent Warrants were exercised for proceeds of $5,760,937. Upon the exercise of the warrants the Company issued 70,536,954 common shares.


 


		[i]	During the year ended June 30, 2021, 11,258,338 restricted share units were redeemed for 11,258,338
common shares.



 


		[j]	During the year ended June 30, 2021, 5,193,268 share options were exercised for proceeds of $285,172.
Upon the exercise of the share options 5,193,268 common shares were issued.



 


		[k]	During the year ended June 30, 2021, the Company issued 83,333 common shares to a non-related party
resulting in a recognition of $34,583 share-based compensation expense.



 


		[l]	On August 16, 2021 the Company completed the
issuance of 7,896,875 common shares as part of a non-brokered private placement at a price of $0.32 per share. Total gross proceeds
from the issuance was $2,527,000.  In addition to the issuance of common shares, the Company also granted the investor a right to
subscribe for an additional US $2,000,000 worth of common shares between January 1, 2022 and March 31, 2022 at the greater of
$0.42 per share and a discounted price based on the volume weighted-average price of the common shares on the TSXV.  The
option meets the definition of a derivative liability, and as such was initially recognized at its fair value of $114,532. 
The fair value of the liability was estimated by utilizing a Monte Carlo simulation.  As at December 31, 2021, the Company
revalued the liability relating to the derivative, and determined that the fair value was $nil, due to decreases in the trading price
of the Company’s common shares on the TSXV.  As such, the Company has recognized a gain on revaluation of derivative liability
in the consolidated statements of loss and comprehensive loss of $114,532. 
Total transaction costs consisted of $251,577 in cash. On the date of the investment, the Company purchased media credits in the amount
of $2,000,000 USD from the investor. Of this amount, $1,673,771 CAD remains in the prepaid expenses as of December 31, 2021 to be
utilized over the next fiscal year.



 


		[m]	During the six months ended December 31, 2021, 881,383 compensation options were exercised from proceeds
of $15,994. Upon exercise of the compensation options the Company issued 881,383 common shares and 475,691 10 cent warrants.



 


During the six months ended December 31,
2021, 8,862,500 10 cent warrants, 70,000 8 cent warrants and 900,000 5 cent warrants were exercised for proceeds of $69,355. Upon the
exercise of the warrants the Company issued 9,832,500 common shares.


 


		[n]	During the six months ended December 31, 2021, 1,216,669 restricted share unit were redeemed for
1,216,669 common shares.



 


		[o]	During the six months ended December 31, 2021, 129,168 share options were exercised for proceeds
of $13,333 by related parties. Upon the exercise of the share options 129,168 commons shares were issued.



 






    - 26 -


     


    




 



QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[expressed in Canadian dollars, unless otherwise
noted]



 


December 31, 2021, June 30, 2021 and 2020


 


The following is a summary of the Company’s warrants outstanding
as at December 31, 2021:


 


		 	Exercise price	 	 	Number Outstanding	 
	Expiry date	 	$	 	 	#	 
	Friday, February 11, 2022	 	0.08	 	 	2,249,990	 
	Thursday, June 30, 2022	 	0.05	 	 	12,849,805	 
	Saturday, February 25, 2023	 	0.45	 	 	20,560,780	 
	 	 	0.28	 	 	35,660,575	 



 


The following is a summary of the Company’s warrants outstanding
as at June 30, 2021:


 


	
		 	Warrants Outstanding

Exercise price	 	 	Number Outstanding	 
	Expiry date	 	$	 	 	#	 
	September 30, 2021	 	0.10	 	 	8,511,350	 
	February 11, 2022	 	0.08	 	 	2,249,990	 
	June 30, 2022	 	0.05	 	 	13,709,514	 
	February 25, 2023	 	0.45	 	 	20,560,780	 
	 	 	0.24	 	 	45,031,634	 



 


The following is a summary of the Company’s warrants outstanding
as at June 30, 2020:


 


		 	Exercise price	 	 	Number Outstanding	 
	Expiry date	 	$	 	 	#	 
	July 19, 2020	 	0.37	 	 	8,762,500	 
	September 30, 2020	 	0.06	 	 	17,500,000	 
	April 30, 2021	 	0.12	 	 	19,167,625	 
	September 30, 2021	 	0.10	 	 	18,000,000	 
	February 11, 2022	 	0.08	 	 	6,000,000	 
	 	 	0.13	 	 	69,430,125	 



 






    - 27 -


     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[expressed in Canadian dollars, unless otherwise
noted]



 


December 31, 2021, June 30, 2021 and 2020


 


		13.	SHARE-BASED COMPENSATION



 


The Company has established a share option plan
and restricted share unit (“RSU”) plan for directors, officers, employees and consultants of the Company. The Company’s
Board of Directors determines, among other things, the eligibility of individuals to participate in these plans and the term, vesting
periods, and the exercise price of share options granted to individuals under the share option plan.


 


Each share option converts into one common share
of the Company on exercise and on receipt of exercise price. Each RSU converts into one common share of the Company on the date of vesting
at $nil exercise price. Share options may be exercised at any time from the date of vesting to the date of their expiry.


 


		[i]	Share options



 


Changes in the number of share options during
the six months ended December 31, 2021, and twelve months ended June 30, 2021 and 2020 were as follows:


 


	 	 	 	 	 	Weighted average	 
	 	 	Number of options	 	 	exercise price	 
	 	 	#	 	 	$	 
	Outstanding as at June 30, 2019	 	11,379,062	 	 	0.27	 
	Granted	 	1,000,000	 	 	0.05	 
	Forfeited	 	(57,812	)	 	0.08	 
	Expired	 	(747,291	)	 	0.46	 
	Outstanding as at June 30, 2020	 	11,573,959	 	 	0.24	 
	Granted	 	26,800,000	 	 	0.18	 
	Forfeited	 	(184,356	)	 	0.08	 
	Expired	 	(112,513	)	 	0.35	 
	Cancelled	 	(150,000	)	 	0.30	 
	Exercised	 	(5,193,268	)	 	0.05	 
	Outstanding as at June 30, 2021	 	32,733,822	 	 	0.22	 
	Granted	 	3,425,000	 	 	0.28	 
	Forfeited	 	(250,000	)	 	0.36	 
	Exercised	 	(129,168	)	 	0.17	 
	Outstanding as at December 31, 2021	 	35,779,654	 	 	0.23	 
	Exercisable as at December 31, 2021	 	15,271,171	 	 	0.23	 




 


The fair value of share options granted during
the twelve months ended June 30, 2021 and 2020 determined at the date of grant using the Black Scholes option pricing model using
the following inputs:


 


	 	 	December
    31, 2021	 	 	June 30,
    2021	 	 	June 30,
    2020	 
	Grant date share price	 	$0.275	 	 	$0.05 - $0.38	 	 	$0.045	 
	Exercise price	 	$0.275	 	 	$0.05 - $0.37	 	 	$0.050	 
	Expected dividend yield	 	--	 	 	--	 	 	--	 
	Risk free interest rate	 	1.56%	 	 	0.35% - 0.92%	 	 	0.74%	 
	Expected life	 	5 years	 	 	5 years	 	 	5 years	 
	Expected volatility	 	115%	 	 	63% - 115%	 	 	70%	 


 


Expected volatility was estimated by using the
historical volatility of the Company. The expected option life represents the period of time that options granted are expected to be
outstanding. The risk-free interest rate is based on government bonds with a remaining term equal to the expected life of the options.


 






    - 28 -


     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[expressed in Canadian dollars, unless otherwise
noted]



 


December 31, 2021, June 30, 2021 and 2020


 


The following table is a summary of the Company’s
share options outstanding as at December 31, 2021:


 


	Options outstanding	 	 	Options exercisable	 
	Exercise price	 	 	Number outstanding	 	 	Weighted average remaining 

    contractual life [years]	 	 	Exercise price	 	 	Number exercisable	 
	$	 	 	#	 	 	#	 	 	$	 	 	#	 
	0.050	 	 	 	7,622,903	 	 	 	3.51	 	 	 	0.050	 	 	 	3,338,622	 
	0.060	 	 	 	2,000,000	 	 	 	2.45	 	 	 	0.060	 	 	 	2,000,000	 
	0.075	 	 	 	2,899,979	 	 	 	2.16	 	 	 	0.075	 	 	 	2,242,516	 
	0.180	 	 	 	4,350,000	 	 	 	4.07	 	 	 	0.180	 	 	 	996,908	 
	0.275	 	 	 	3,425,000	 	 	 	4.90	 	 	 	0.275	 	 	 	65,634	 
	0.300	 	 	 	8,600,001	 	 	 	4.17	 	 	 	0.300	 	 	 	1,751,962	 
	0.360	 	 	 	2,000,000	 	 	 	4.45	 	 	 	0.360	 	 	 	250,008	 
	0.370	 	 	 	300,000	 	 	 	4.41	 	 	 	0.370	 	 	 	43,750	 
	0.500	 	 	 	4,581,771	 	 	 	0.29	 	 	 	0.500	 	 	 	4,581,771	 
	0.228	 	 	 	35,779,654	 	 	 	3.35	 	 	 	0.234	 	 	 	15,271,171	 



 


The following table is a summary of the Company’s
share options outstanding as at June 30, 2021:


 





	Options outstanding	 	 	Options exercisable	 
	Exercise price	 	 	Number outstanding	 	 	Weighted average remaining 

    contractual life [years]	 	 	Exercise price	 	 	Number exercisable	 
	$	 	 	#	 	 	#	 	 	$	 	 	#	 
	0.050	 	 	 	7 ,702,071	 	 	 	4.02	 	 	 	0.050	 	 	 	2 ,523,945	 
	0.060	 	 	 	2,000,000	 	 	 	2.96	 	 	 	0.060	 	 	 	2,000,000	 
	0.075	 	 	 	2,924,979	 	 	 	2.66	 	 	 	0.075	 	 	 	1 ,991,646	 
	0.180	 	 	 	4,350,000	 	 	 	4.58	 	 	 	0.180	 	 	 	4 83,333	 
	0.300	 	 	 	8,625,001	 	 	 	4.67	 	 	 	0.300	 	 	 	7 41,668	 
	0.360	 	 	 	2,250,000	 	 	 	4.96	 	 	 	0.360	 	 	 	5 0,000	 
	0.370	 	 	 	300,000	 	 	 	4.91	 	 	 	0.370	 	 	 	6 ,667	 
	0.500	 	 	 	4,581,771	 	 	 	0.79	 	 	 	0.500	 	 	 	4 ,744,017	 
	0.223	 	 	 	32,733,822	 	 	 	3.70	 	 	 	0.247	 	 	 	1 2,541,276	 


 


The following table is a summary of the Company’s
share options outstanding as at June 30, 2020:


 





	Options outstanding	 	 	Options exercisable	 
	Exercise price	 	 	Number outstanding	 	 	Weighted average remaining 

    contractual life [years]	 	 	Exercise price	 	 	Number exercisable	 
	$	 	 	#	 	 	#	 	 	$	 	 	#	 
	0.050	 	 	 	1,000,000	 	 	 	4.68	 	 	 	0.050	 	 	 	83,333	 
	0.060	 	 	 	2,000,000	 	 	 	3.96	 	 	 	0.060	 	 	 	2,000,000	 
	0.075	 	 	 	3 ,917,188	 	 	 	3.65	 	 	 	0.075	 	 	 	2 ,007,188	 
	0.500	 	 	 	4 ,656,771	 	 	 	1.79	 	 	 	0.500	 	 	 	4 ,015,085	 
	0.241	 	 	 	11,573,959	 	 	 	3.05	 	 	 	0.282	 	 	 	8,105,606	 


 


During the six months ended December 31,
2021, the Company recognized $1,170,434 of share-based compensation expense associated with options issued under the share option plan.
During the year ended June 30, 2021, the Company recognized $1,225,129 (2020 – $201,247) of share-based compensation expense
associated with options issued under the share option plan.


 






    - 29 -


     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[expressed in Canadian dollars, unless otherwise
noted]



 


December 31, 2021, June 30, 2021 and 2020


 


		[ii]	RSUs



 


Changes in the number of RSUs during the years
ended June 30, 2021 and 2020 were as follows:


 


	 	 	Number of RSUs	 	 	Number exercisable	 
	 	 	#	 	 	#	 
	Outstanding as at June 30, 2020	 	 	11,825,000	 	 	 	7,475,000	 
	Vested	 	 	—	 	 	 	2,683,338	 
	Granted	 	 	15,950,000	 	 	 	1,350,000	 
	Forfeited	 	 	(500,000	)	 	 	(250,000	)
	Redeemed	 	 	(11,258,338	)	 	 	(11,258,338	)
	Outstanding as at June 30, 2021	 	 	16,016,662	 	 	 	—	 
	Vested	 	 	—	 	 	 	—	 
	Granted	 	 	3,150,000	 	 	 	—	 
	Forfeited	 	 	—	 	 	 	—	 
	Redeemed	 	 	(1,216,669	)	 	 	—	 
	Outstanding as at December 31, 2021	 	 	17,949,993	 	 	 	—	 



 


The fair value of RSUs granted during the six
months ended December 31, 2021 was $0.22 (2021 - $0.05 – $0.38; 2020 – $0.045) per unit, determined by reference to
the Company’s share price on the date of grant.


 


During the six months ended December 31,
2021, the Company recognized $1,113,802 of share-based compensation expense associated with RSUs issued under the RSU plan. During the
year ended June 30, 2021, the Company recognized $1,078,547 (2020 – $531,953) of share-based compensation expense associated
with RSUs issued under the RSU plan.


 





 


		14.	NON-CONTROLLING INTEREST



 


The Company has an 88% (June 30, 2021 –
88%) ownership interest in QYOU India.


 


Reconciliation of non-controlling interest is as follows:


 





	 	 	$	 
	Balance — June 30, 2019	 	 	(31,119	)
	Share of net loss for the period	 	 	(277,238	)
	Adjustment for increased ownership	 	 	98,270	 
	Balance — June 30, 2020	 	 	(210,087	)
	Share of net loss for the period	 	 	(341,719	)
	Balance — June 30, 2021	 	 	(551,806	)
	Share of net income for the period	 	 	108,363	 
	Balance — December 31, 2021	 	 	(443,443	)



 






    - 30 -


     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 


The following is a summary of QYOU India’s stand-alone financial
results:


 


	 	 	As at and six months ended
 December 31,
    2021	 	 	As at and year ended

    June 30, 2021	 	 	As at and year ended

    June 30, 2020	 
	 	 	$	 	 	$	 	 	$	 
	Current assets	 	 	4,638,638	 	 	 	2,297,607	 	 	 	34,500	 
	Non-current assets	 	 	380,458	 	 	 	47,397	 	 	 	10,064	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Current liabilities	 	 	1,179,431	 	 	 	340,500	 	 	 	357,133	 
	Non-Current liabilities	 	 	447,079	 	 	 	161,916	 	 	 	35,102	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Revenue	 	 	5,310,415	 	 	 	940,782	 	 	 	66,153	 
	Net income (loss)	 	 	167,631	 	 	 	(2,847,656	)	 	 	(1,630,363	)



 


		15.	CONTINGENCIES



 


In the ordinary course of business, from time
to time the Company is involved in various claims related to operations, rights, commercial, employment or other claims. Although such
matters cannot be predicted with certainty, management does not consider the Company’s exposure to these claims to be material
to these financial statements.


 


		16.	RELATED PARTY TRANSACTIONS



 


Key management personnel and directors include
the Company’s CEO, CFO, executives and members of the Board of Directors. The compensation paid or payable to key management and
directors comprised of the following:


 


On June 5, 2017, the Company agreed to loan
Curt Marvis, the Chief Executive Officer of the Company, an aggregate principal amount of USD$150,000, as evidenced by a promissory note
issued by Mr. Marvis to the Company, which bears interest at a rate of 3% per annum (the “Officer Loan”) and was originally
intended to become due on June 5, 2019. The Company extended the term of the promissory note to January 31, 2021. During the
year ended June 30, 2021, the loan was forgiven by the Company and the carrying amount of $214,420 including interest was recorded
as an expense in the statements of loss and comprehensive loss under legal and consulting expenses.


 


Compensation expense for the Company’s
key management personnel for the six months ended December 31, 2021, the years ended June 30, 2021 and 2020 is as follows:


 


	 	 	Six months ended

 December 31, 2021	 	 	Year ended
 June 30, 2021	 	 	Year ended
 June 30, 2020	 
	 	 	$	 	 	$	 	 	$	 
	Salaries, benefits and consulting fees	 	 	1,098,156	 	 	 	1,263,607	 	 	 	1,260,913	 
	Share-based payments	 	 	1,374,329	 	 	 	1,508,966	 	 	 	592,157	 
	 	 	 	2,472,485	 	 	 	2,772,573	 	 	 	1,853,070	 



 


Included in trade and other payables is $167,125 (2021 - $34,052;
2020 – $27,089) owing to executives for expense reimbursement and sales commissions.


 






    - 31 -


     


    





 





QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[expressed in Canadian dollars,
unless otherwise noted]



 


December 31, 2021, June 30, 2021 and 2020


 


		17.	INCOME TAXES



 


The reconciliation of income tax expense for
the periods ended December 31, 2021, June 30, 2021 and 2020 consists of the following:


   


	 	 	December 31, 2021	 	 	June 30, 2021	 	 	June 30, 2020	 
	 	 	$	 	 	$	 	 	$	 
	Loss before income taxes	 	 	(4,733,718	)	 	 	(7,262,212	)	 	 	(6,547,697	)
	Statutory Rate	 	 	26.50	%	 	 	26.50	%	 	 	26.50	%
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Expected income tax recovery at combined basis federal and
    provincial tax rates	 	 	(1,254,435	)	 	 	(1,924,486	)	 	 	(1,735,140	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Effect on income taxes of:	 	 	 	 	 	 	 	 	 	 	 	 
	Non-deductible expenses	 	 	14,242	 	 	 	604,971	 	 	 	246,460	 
	Losses not recognized	 	 	1,406,256	 	 	 	1,455,742	 	 	 	1,411,090	 
	Change in temporary differences not
    recognized	 	 	(16,841	)	 	 	(202,118	)	 	 	81,365	 
	Rate differential between jurisdictions	 	 	(54,541	)	 	 	79,364	 	 	 	(3,353	)
	Other	 	 	(48,892	)	 	 	31,767	 	 	 	(422	)
	Income Tax Expense	 	 	45,789	 	 	 	45,240	 	 	 	-	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Current	 	 	100,908	 	 	 	45,240	 	 	 	-	 
	Deferred	 	 	(55,119	)	 	 	-	 	 	 	-	 
	 	 	 	45,789	 	 	 	45,240	 	 	 	-	 




 


Deferred income taxes reflect the impact of loss
carry forwards and of temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts
as measured by tax laws. The following deferred tax assets and liabilities have been recognized for accounting purposes:


 


	 	 	December 31,
    2021

$	 	 	June 30,
    2021

$	 
	Deferred tax asset	 		238,048	 	 		116,966	 
	Deferred tax liability	 	 	(465,707	)	 	 	(350,439	)
	Net deferred tax liability	 		(227,659	)	 		(233,473	)



 


The tax effects of temporary differences and
loss carry forwards that give rise to significant portions of the deferred tax asset, which have not been recognized, are approximately
as follows:


  


	 	 	July 1,
    2021

    $	 	 	Recognized
    in Other
 Comprehensive Income	 	 	Recognized
    in profit and

    loss

    $	 	 	December 31,
    2021

    $	 
	Deferred tax asset	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Loss carry forwards	 	 	23,349	 	 	 	-	 	 	 	7,253	 	 	 	30,602	 
	Fixed assets	 	 	3,731	 	 	 	798	 	 	 	(2,636	)	 	 	1,893	 
	Financial statement reserves	 	 	2,006	 	 	 	429	 	 	 	(2,436	)	 	 	-	 
	Right of use assets	 	 	87,880	 	 	 	-	 	 	 	117,673	 	 	 	205,553	 
	 	 	 	116,966	 	 	 	1,227	 	 	 	119,854	 	 	 	238,048	 
	Deferred tax liability	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Fixed assets	 	 	-	 	 	 	 	 	 	 	(7,073	)	 	 	(7,073	)
	Intangible assets	 	 	(236,432	)	 	 	(50,531	)	 	 	57,194	 	 	 	(229,769	)
	Right of use assets	 	 	(81,074	)	 	 	-	 	 	 	(112,575	)	 	 	(193,649	)
	Debt financing	 	 	(31,605	)	 	 	-	 	 	 	(3,611	)	 	 	(35,216	)
	 	 	 	(349,111	)	 	 	(50,531	) 	 	 	(66,065	)	 	 	(465,707	)
	Revaluation
    of deferred tax liability	 	 	(1,328	)	 	 	- 	 	 	 	1,328	 	 	 	-	 
	Net
    deferred tax liability	 	 	(233,473	)	 		(49,304	) 	 		55,117	 	 	 	(227,659	)



 






    	 	- 32 -	 



     


    




  





QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[expressed in Canadian dollars,
unless otherwise noted]



 


December 31, 2021, June 30, 2021 and 2020



 


	 	 	July 1, 2020	 	 	Recognized in Goodwill	 	 	Recognized in profit and

 loss	 	 	June 30, 2021	 
	 	 	$	 	 	$	 	 	$	 	 	$	 
	Deferred tax asset	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Loss carry forwards	 	 	37,113	 	 	 	-	 	 	 	(13,764	)	 	 	23,349	 
	Fixed assets	 	 	-	 	 	 	3,758	 	 	 	(27	)	 	 	3,731	 
	Financial statement reserves	 	 	-	 	 	 	-	 	 	 	2,006	 	 	 	2,006	 
	Right of use assets	 	 	130,528	 	 	 	-	 	 	 	(42,648	)	 	 	87,880	 
	 	 	 	167,641	 	 	 	3,758	 	 	 	(54,433	)	 	 	116,966	 
	Deferred tax liability	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Fixed assets	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	Intangible assets	 	 	-	 	 	 	(235,903	)	 	 	(529	)	 	 	(236,432	)
	Right of use assets	 	 	(125,709	)	 	 	-	 	 	 	44,635	 	 	 	(81,074	)
	Debt financing	 	 	(41,932	)	 	 	-	 	 	 	10,327	 	 	 	(31,605	)
	 	 	 	(167,641	)	 	 	(235,903	)	 	 	54,433	 	 	 	(349,111	)
	Revaluation of deferred tax liability	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(1,328	)
	Net deferred tax liability	 	 	-	 	 	 	(232,145	)	 	 	-	 	 	 	(233,473	)



  


Gross temporary differences and loss carry forwards
that give rise to significant portions of the deferred tax asset, which have not been recognized, are approximately as follows:


  


	 	 	December 31, 2021	 	 	June 30, 2021	 
	 	 	$	 	 	$	 
	Property, plant and equipment and intangible assets	 	 	2,333,800	 	 	 	1,708,981	 
	Right of use sssets/lease liabilities	 	 	-	 	 	 	6,809	 
	Intangible assets	 	 	885,129	 	 	 	1,635,292	 
	Share issue costs	 	 	3,005,300	 	 	 	4,147,076	 
	Non-capital losses	 	 	36,954,305	 	 	 	35,767,794	 
	Financial statement reserves	 	 	1,172,461	 	 	 	503,908	 
	Total	 	 	44,350,995	 	 	 	43,769,860	 



  


The Company has the following non-capital losses
available to reduce future years' federal and provincial taxable income, which expire as follows:


 


	 	 	 	Canada	 	 	India	 	 	Ireland	 	 	United States	 	 	Total	 
	 	 	 	$
    	 	 	$
    	 	 	$
    	 	 	$
    	 	 	$
    	 
	2038
    and prior	 	 	 	10,497,663	 	 	 	591,960	 	 	 	-	 	 	 	6,532,225	 	 	 	17,621,848	 
	2039	 	 	 	2,831,036	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	2,831,036	 
	2040	 	 	 	2,593,254	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	2,593,254	 
	2041	 	 	 	2,214,002	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	2,214,002	 
	Indefinite	 	 	 	-	 	 	 	-	 	 	 	8,258,860	 	 	 	4,371,519	 	 	 	12,630,379	 
	 	 	 	 	18,135,955	 	 	 	591,960	 	 	 	8,258,860	 	 	 	10,903,744	 	 	 	37,890,519	 



 


		18.	FINANCIAL INSTRUMENTS



 


Credit risk


 


Credit risk is the risk of financial loss to
the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally
from deposits with banks and outstanding receivables. The Company trades only with recognized, creditworthy third parties. The Company
performs credit checks for all customers who wish to trade on credit terms. As at December 31, 2021, two customers represented 37%
(2021 - 34.9%; 2020 – 76.5%) of the outstanding trade receivable balance. As at December 31, 2021, the Company recorded a
provision of $32,238 for expected credit loss (2021 - $120,456; 2020 – $nil).


 


The Company does not hold any collateral as security
but mitigates this risk by dealing only with what management believes to be financially sound counterparties and, accordingly, does not
anticipate significant loss for non-performance.


 






    	 	- 33 -	 



     


    

 








QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[expressed in Canadian dollars,
unless otherwise noted]



 


December 31, 2021, June 30, 2021 and 2020



  


The aging of trade receivables is as follows:


 





	 	 	December 31, 2021	 	 	June 30, 2021	 
	 	 	$	 	 	$	 
	Current	 	 	2,336,188	 	 	 	1,450,307	 
	1 to 30 days	 	 	571,824	 	 	 	574,589	 
	31 to 60 days	 	 	929,652	 	 	 	77,737	 
	> 60 days	 	 	326,033	 	 	 	173,839	 
	 	 	 	4,163,697	 	 	 	2,276,472	 
	Less: credit loss impairment	 	 	32,238	 	 	 	120,456	 
	Total trade receivables	 	 	4,131,459	 	 	 	2,156,016	 



 


Liquidity risk


 


Liquidity risk is the risk
that the Company will not be able to meet its financial obligations as they become due. The Company’s exposure to liquidity risk
is dependent on the Company’s ability to raise additional financing to meet its commitments and sustain operations. The Company
mitigates liquidity risk by management of working capital, cash flows and the issuance of share capital.


 


The Company is obligated to the following contractual
maturities of undiscounted cash flows:


   


	 	 	 	 	 	Total contractual	 	 	Contractual
    cash flows	 
	 	 	Carrying
    amount	 	 	cash flows	 	 	Year
    1	 	 	Year
    2	 	 	Year
    3	 	 	Year
    4	 	 	Year
    5 and beyond	 
	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 	 	$	 
	Trade and other payables	 	4,700,239	 	 	4,700,239	 	 	4,700,239	 	 	—	 	 	—	 	 	—	 	 	—	 
	Lease liabilities	 	 	800,833	 	 	 	462,966	 	 	 	151,922	 	 	 	162,943	 	 	 	85,730	 	 	 	57,556	 	 	 	4,815	 
	Contingent consideration	 	 	2,638,912	 	 	 	2,514,370	 	 	 	815,157	 	 	 	835,522	 	 	 	863,691	 	 	 	—	 	 	 	—	 
	Borrowings	 	 	60,613	 	 	 	312,006	 	 	 	11,176	 	 	 	11,176	 	 	 	11,176	 	 	 	11,176	 	 	 	267,302	 




 


Market risk


 


Market risk is the risk that the fair value or
future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of
risk: foreign currency risk, interest rate risk and other price risk.


 


Foreign Currency risk


 


Foreign currency risk arises on financial instruments
that are denominated in a currency other than the functional currency in which they are measured. The Company’s primary exposure
with respect to foreign currencies is from USD and Indian Rupee denominated cash and other payables. A 1% change in the foreign exchange
rates would not result in any significant impact to the financial statements.


 


Interest rate risk


 


Interest rate risk is the risk that the fair
value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed
to cash flow interest rate risk as at December 31, 2021.


 


Other price risk


 


Other price risk is the risk that the fair value
or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest
rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer,
or factors affecting all similar financial instruments traded in the market. The Company is not exposed to other price risks as at December 31,
2021.


 






    	 	- 34 -	 



     


    

 











QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[expressed in Canadian dollars,
unless otherwise noted]



 


December 31, 2021, June 30, 2021 and 2020


 


Fair values


 


The carrying values of cash and cash equivalents,
trade receivables, other receivables, borrowings and trade and other payables approximate the fair values due to the short-term nature
of these items. The risk of material change in fair value is not considered to be significant due to a relatively short-term nature.
The carrying value of borrowings approximate the fair value and change risk of material change in fair value is not considered to be
significant. The Company does not use derivative financial instruments to manage this risk.


 


Financial instruments recorded at fair value
on the consolidated statements of financial position are classified using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The Company categorizes its fair value measurements according to a three-level hierarchy. The
hierarchy prioritizes the inputs used by the Company’s valuation techniques. 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 as 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 – Significant unobservable inputs, which are supported by little or no market activity.
                                            The fair value hierarchy also requires an entity to maximize the use of observable inputs
                                            and minimize the use of unobservable inputs when measuring fair value.



 


The fair value hierarchy requires the use of
observable market inputs whenever such inputs exist. A financial instrument is classified to the lowest level of the hierarchy for which
a significant input has been considered in measuring fair value.


 


The contingent consideration is recognized as
Level 3 (Note 4) and recorded at fair value through profit and loss.


 


		19.	CAPITAL MANAGEMENT



 


The Company defines its capital as shareholders’
equity. The Company’s objectives when managing capital are to build liquidity and shareholders’ equity to ensure that strategic
objectives are met. The Company makes every attempt to manage its liquidity to minimize shareholder dilution when possible.


 


The Company policy on dividends is to retain
cash to keep funds available to finance operations and growth.


 


Capital structure is managed within guidelines
approved by the Board of Directors. The Company makes adjustments to its capital structure based on changes in economic conditions and
planned requirements. The Company has the ability to adjust its capital structure by issuing new equity or debt.


 


		20.	SEGMENT INFORMATION



 


Reportable segments are reported in a manner
consistent with the internal reporting provided to the chief operating decision maker, with appropriate aggregation. The chief operating
decision maker is the CEO who is responsible for allocating resources, assessing performance of the reportable segment and making key
strategic decisions. The Company operates in a single segment, being the distribution of curated media content. Segment performance is
evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements.


 






    	 	- 35 -	 



     


    

 


QYOU Media Inc.


 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


[expressed in Canadian dollars, unless otherwise
noted]


 


December 31, 2021, June 30, 2021 and 2020


 


The Company operates in four geographical areas,
being Canada, United States of America, Ireland and India. Revenue and assets by geography are presented below:


 


As at and for the six months ended December 31,
2021


 


	 	 	Canada	 	 	USA	 	 	Ireland	 	 	India	 	 	Intercompany	 	 	Total	 
	 	 	 	 	 	 	 	 	 	 	 	Q
    India	 	 	Chatterbox	 	 	Intercompany	 	 	Total	 
	Revenue	 	 	164,199	 	 	 	3,192,700	 	 	 	4,801	 	 	 	5,310,415	 	 	 	2,873,841	 	 	 	(1,234,852	)	 	 	10,311,104	 
	Current assets	 	 	37,514,317	 	 	 	7,348,445	 	 	 	17,519,073	 	 	 	4,638,638	 	 	 	3,047,632	 	 	 	(55,041,013	)	 	 	15,027,092	 
	Non-current assets	 	 	789,309	 	 	 	42,406	 	 	 	85,071	 	 	 	380,458	 	 	 	4,287,570	 	 	 	—	 	 	 	5,584,814	 


 


As at and for the year ended June 30,
2021


 


	 	 	Canada	 	 	USA	 	 	Ireland	 	 	Q
    India	 	 	Chatterbox	 	 	Intercompany	 	 	Total	 
	Revenue	 	 	—	 	 	 	2,642,785	 	 	 	212,923	 	 	 	940,782	 	 	 	386,049	 	 	 	—	 	 	 	4,182,539	 
	Current assets	 	 	35,364,692	 	 	 	8,595,997	 	 	 	17,918,125	 	 	 	2,297,607	 	 	 	1,508,967	 	 	 	(54,019,547	)	 	 	11,665,841	 
	Non-current assets	 	 	349,529	 	 	 	43,185	 	 	 	87,700	 	 	 	47,397	 	 	 	4,175,168	 	 	 	—	 	 	 	4,702,979	 


 


As at and for the year ended June 30,
2020


 


	 	 	Canada	 	 	USA	 	 	Ireland	 	 	Q
    India	 	 	Chatterbox	 	 	Intercompany	 	 	Total	 
	Revenue	 	 	6,594	 	 	 	2,185,284	 	 	 	544,221	 	 	 	66,153	 	 	 	—	 	 	 	—	 	 	 	2,802,252	 
	Current assets	 	 	21,509,404	 	 	 	7,535,339	 	 	 	19,020,683	 	 	 	34,500	 	 	 	—	 	 	 	(47,235,112	)	 	 	864,814	 
	Non-current assets	 	 	592,523	 	 	 	108,297	 	 	 	94,505	 	 	 	10,064	 	 	 	—	 	 	 	—	 	 	 	805,389	 






 


As at December 31, 2021, three customers
(June 30, 2021 and 2020 – three and three) customers represented 10% or more of total revenue.


 








	 	 	December 31, 2021	 	 	June 30, 2021	 	 	June 30, 2021	 
	 	 	%	 	 	%	 	 	%	 
	Customer 1	 	 	19	 	 	 	15	 	 	 	19	 
	Customer 2	 	 	11	 	 	 	14	 	 	 	17	 
	Customer 3	 	 	10	 	 	 	12	 	 	 	14	 
	Percentage of total 	 	 	40	 	 	 	41	 	 	 	50	 



   


		21.	SUBSEQUENT EVENTS



 


From January 1, 2022 to April 28, 2022,
16,664 share options were exercised for total proceeds of $1,250, resulting in the issuance of 16,664 common shares to related parties.


 


From January 1, 2022 to April 28, 2022,
2,561,990 warrants were exercised for total proceeds of $196,949, resulting in the issuance of 2,561,990 common shares. Of the total,
2,294,990 8 Cent Warrants were exercised for total proceeds of $183,599, and there is no expired warrant. 267,000 5 Cent Warrants were
exercised for total proceeds of $13,350.


 


On March 30, 2022, 4,316,673 RSUs were redeemed
for 4,316,673 common shares. Of the total, 3,316,670 RSUs were redeemed by related parties.


  


On March 31, 2022, Brand Capital International
(“BCI”), the strategic investment arm of Bennett, Coleman & Co. Ltd. d/b/a The Times of India Group, selected not
to exercise an additional purchase right under the current terms, which is under negotiation.


 


On April 8, 2022, 2,185,000 share options
were granted to certain employees, officers and consultants of the Company pursuant to the Company’s share option plan. The share
options are exercisable at a price $0.21 per share option, vest on a monthly basis for a period of 4 years and expire 5 years from the
grant date. Of the total share options granted, 850,000 were issued to related parties. 550,000 RSUs were granted to certain employees,
officers and consultants of the Company. One third of RSUs granted vest on each of the first three anniversaries of the date of grant.
Of the total RSUs, 100,000 were issued to related parties.


 






    	 	- 36 -