Western Investment of Canada : Annual – December 31, 2023

The Western Investment Company of Canada Limited

Financial Statements

December 31, 2023 and 2022

Independent auditor's report

To the Shareholders of

The Western Investment Company of Canada Limited

Opinion

We have audited the financial statements of The Western Investment Company of Canada Limited [the "Corporation"], which comprise the statements of financial position as at December 31, 2023, and 2022, the statements of income (loss) and comprehensive income (loss), statements of changes in shareholders' equity and statements of cash flows for the years then ended, and notes to the financial statements, including material accounting policy information.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Corporation as at December 31, 2023, and 2022, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards ["IFRSs"].

Basis for opinion

We conducted our audit 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 financial statements section of our report. We are independent of the Corporation in accordance with the ethical requirements that are relevant to our audit of the 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.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements of the current period. These matters were addressed in the context of the audit of the financial statements as a whole, and in forming the auditor's opinion thereon, and we do not provide a separate opinion on these matters. For the matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report, including in relation to this matter. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matter below, provide the basis for our audit opinion on the accompanying financial statements.

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Key audit matter

How our audit addressed the key audit matter

Valuation of convertible debentures

To test the valuation of the convertible debentures, our

As more fully described in Note 9 to the financial

audit procedures included, among others:

statements, during the year, the Corporation issued $5

•

With the assistance of our valuation specialists,

million of

convertible debentures.

Note

4

to

the

we

developed

an independent

estimate of a

financial

statements

describes

the

Corporation's

range of

market interest

rates,

considering

accounting

policy

for

convertible

debentures which

relevant

benchmark

interest

rates

and

the

includes

that

for

initial

recognition,

a compound

Corporation's own credit risk, for an equivalent

financial instrument is separated into its liability and

debt instrument without the conversion feature

equity components. The

fair

value

of the

liability

and compared it to the interest rate selected by

component

is

determined

using

a

market

rate of

management.

interest

for

an

equivalent

non-convertible

•

We validated key inputs used in the calculation of

instrument.

The

determination of

an appropriate

the

fair

value of the

liability

component

to

the

market

rate

of

interest

for

an

equivalent

non-

underlying

subscription agreement

and

tested

convertible

instrument

is

subject

to

significant

the

formulas

used

and

the

computational

judgment.

accuracy of the Corporation's calculation of the

Auditing the valuation of the convertible debentures

fair value of the liability component.

•

We assessed the adequacy of the Corporation's

was complex

given

the

degree

of

judgment

and

disclosures

in

the

accompanying

financial

subjectivity

required

in evaluating the

interest

rate

statements in relation to this matter.

used by management to calculate the fair value of the

liability component and required the involvement of

professionals with specialized knowledge of debt and

capital markets. The interest rate is a significant input

to the calculation of the fair value of the liability

component.

Other information

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

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information, and in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained in the audit, 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, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the financial statements

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

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In preparing the financial statements, management is responsible for assessing the Corporation'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 Corporation or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Corporation's financial reporting process.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the 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 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 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 Corporation'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 Corporation'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 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 Corporation to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business units within the group as a basis for forming an opinion on the financial statements. We are responsible for the direction, supervision and review of the audit work performed for the purposes 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 audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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

Calgary, Canada

April 29, 2024

A member firm of Ernst & Young Global Limited

The Western Investment Company of Canada Limited

Statements of Financial Position

As at December 31, 2023 and 2022

	2023	2022
	$	$
Assets
Current assets	618,673	25,715
Cash
Accounts receivable	12,687	371
Due from related parties (note 17)	-	382,558
Prepaid expenses	24,764	7,642
	656,124	416,286
Due from related parties (note 17)	740,205	861,716
Investments in associates (note 6)	18,468,149	17,337,423
Total assets	19,864,478	18,615,425
Liabilities
Current liabilities	358,441	154,512
Accounts payable and accrued liabilities
Convertible debentures (note 9)	1,122,649	-
	1,481,090	154,512
Operating loan (note 7)	-	1,200,316
Loan from related party (note 8)	1,095,000	1,200,000
Convertible debentures (note 9)	4,508,332	3,683,173
Total liabilities	7,084,422	6,238,001
Shareholders' equity
Share capital (note 10)	15,646,943	15,688,381
Contributed surplus (note 10)	2,041,586	1,477,805
Equity component of convertible debentures (note 9)	623,176	793,815
Accumulated other comprehensive income	22,978	22,978
Deficit	(5,554,627)	(5,605,555)
Total shareholders' equity	12,780,056	12,377,424
Total liabilities and shareholders' equity	19,864,478	18,615,425
Nature of operations (note 2)
Subsequent events (note 19)

Approved by the Board of Directors

"Scott Tannas"	Director	"Jennie Moushos"___Director

The accompanying notes are an integral part of these financial statements

(1)

The Western Investment Company of Canada Limited

Statements of Income (Loss) and Comprehensive Income (Loss)

For the years ended December 31, 2023 and 2022

Income

Income (loss) from equity investments (note 6) Finance income (note 18)

Gain on disposal and dilution (note 6) Loss on debt settlement (note 9) Management fees (note 18)

Expenses

Legal fees

Accounting fees

Regulatory fees

Consulting fees

Other

Salaries and benefits (note 18)

Interest on convertible debentures (note 9)

Interest on operating loan (note 7)

Interest on related party loan (note 8)

Share-based compensation (note 10)

Income (loss) before taxes

Deferred tax recovery (note 11)

Net Income (loss) and comprehensive Income (loss) for the year

Net income (loss) per common share (note 15)

Basic and diluted

Weighted average number of common shares outstanding (note 15)

Basic

Diluted

2023	2022
$	$
1,235,241	(613,687)
605,278	601,682
485	950,638
(205,594)	-
172,500	284,271
1,807,910	1,222,904
31,163	72,908
219,512	123,835
55,839	44,244
57,143	67,018
41,803	33,044
447,592	378,154
630,972	563,183
114,850	54,850
46,694	49,080
56,513	51,964
1,702,081	1,438,280
105,829	(215,376)
96,138	-
201,967	(215,376)
0.007	(0.007)
30,236,345	30,298,633
30,502,535	30,518,365

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

(2)

The Western Investment Company of Canada Limited

Statements of Changes in Shareholders' Equity

For the years ended December 31, 2023 and 2022

				Equity
				component	Accumulated		Total
	Number of		Contributed	of	other
	Share	convertible	comprehensive	Deficit	shareholders'
	shares	capital	surplus	debentures	income	equity
		$	$	$	$	$	$
Balance - December 31, 2022	30,287,756	15,688,381	1,477,805	793,815	22,978	(5,605,555)	12,377,424
Repurchase of shares (note 10)	(80,000)	(41,438)	11,712	-	-	-	(29,726)
Issuance of share-based
compensation (note 10)	-	-	56,513	-	-	-	56,513
Exchange and issuance of
debentures	-	-	495,556	(170,639)	-	-	324,917
Dividends paid (note 14)	-	-	-	-	-	(151,039)	(151,039)
Net income for the year	-	-	-	-	-	201,967	201,967
Balance - December 31, 2023	30,207,756	15,646,943	2,041,586	623,176	22,978	(5,554,627)	12,780,056

Balance - December 31, 2021	30,338,756	15,714,798	1,418,468	793,815	22,978	(5,238,665)	12,711,394
Repurchase of shares (note 10)	(51,000)	(26,417)	7,373	-	-	-	(19,044)
Issuance of share-based
compensation (note 10)	-	-	51,964	-	-	-	51,964
Dividends paid (note 14)	-	-	-	-	-	(151,514)	(151,514)
Net loss for the year	-	-	-	-	-	(215,376)	(215,376)
Balance - December 31, 2022	30,287,756	15,688,381	1,477,805	793,815	22,978	(5,605,555)	12,377,424

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

(3)

The Western Investment Company of Canada Limited

Statements of Cash Flows

For the years ended December 31, 2023 and 2022

2023	2022
$	$

Cash provided by (used in):

Operating activities

Net income (loss) for the year Adjustments for non-cash items

(Income) loss from equity investments (note 6) Gain on disposal and dilution (note 6)

Loss on debt settlement (note 9)

Interest on convertible debentures (note 9) Share-based compensation Amortization of deferred financing fee Deferred tax recovery (note 11)

Interest paid on convertible debentures (note 9) Net change in non-cash working capital (note 16)

Cash used in operating activities

Investing activities

Advances to related parties Repayments from related parties

Proceeds on sale of investment in associate (note 6) Dividends from associate (note 6)

Cash provided by investing activities

Financing activities

Proceeds from issuance of convertible debentures Debenture issuance costs

Advances (repayments) on operating loan (note 7) Financing fees paid

Repayment of loan from related party Dividends paid to shareholders (note 14) Repurchase of shares (note 10)

Cash provided by financing activities

Net increase in cash

Cash - Beginning of year

Cash - End of year

Supplemental cash flow information

Interest paid

201,967 (215,376)

(1,235,241) 613,687

1. (950,638)

205,594	-
630,972	563,183
56,513	51,964
5,500	1,375
(96,138)	-
(336,036)	(300,000)
551,547	(352,779)
(15,807)	(588,584)
(182,319)	(363,797)
303,831	267,513

• 535,175
  105,000138,000

226,512576,891

2,125,000-

(256,666)-

(1,200,316) 201,149

• (16,500)
  (105,000)-
  (151,039) (151,514)
  (29,726)(19,045)

382,25314,090

592,9582,397

25,71523,318

618,67325,715

497,581403,930

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

(4)

The Western Investment Company of Canada Limited

Notes to Financial Statements

December 31, 2023 and 2022

1. Incorporation
   The Western Investment Company of Canada Limited ("Western" or the "Corporation") was incorporated pursuant to the provisions of the Business Corporations Act (Alberta) on October 28, 2015. The Corporation's common shares began trading on December 20, 2016 and are listed on the TSX Venture Exchange under the stock symbol "WI".
2. Nature of operations
   The head office and principal address of the Corporation is 1010 24th Avenue S.E., High River, Alberta, T1V 2A7 and the address of the registered office is Suite 800, Dome Tower, 333 - 7th Avenue S.W., Calgary, Alberta, T2P 2Z1.
   The financial statements of the Corporation for the year ended December 31, 2023 were approved and authorized for issuance by the Corporation's Board of Directors on April 29, 2024.
3. 1. 
      Western's strategy is to acquire a diversified portfolio of established Western Canadian private businesses and create value through the identification, acquisition and long-term ownership of private businesses with sustained cash flows and strong potential for organic growth.
      Western's targeted industry verticals align with the industry expertise of the Board of Directors and include:
   2. financial services and insurance; (ii) retail and distribution; (iii) human services; (iv) agriculture and related services; and (v) special situations. Western's ideal acquisition enterprise value is between $10 million and $100 million and it will consider ownership between 25% and 100%. Western will prospect acquisitions from:
   1. director and executive networks; (ii) mid-market accounting and M&A advisors; and (iii) private equity and corporate divestitures.

Where an acquisition is warranted, additional funding may be required. The ability of the Corporation to fund its potential future operations and commitments is dependent on the ability of the Corporation to obtain additional financing.

Following is a summary of Western's equity investments (see note 6 for additional information):

GlassMasters ARG Autoglass Two Inc. - equity investment

In 2016, GlassMasters ARG Autoglass Two Inc. ("GlassMasters") became Western's first investment. The Corporation's total investment in GlassMasters at December 31, 2023 was 55%. GlassMasters is an automotive glass service company providing repair and replacement of automotive glass and an automotive glass warehouse that imports to sell wholesale a full line of quality aftermarket glass parts and materials. GlassMasters' principal markets are in Alberta, Saskatchewan, and British Columbia.

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