BMTC Group Inc. — Interim / Quarterly Report 2021

Sep 11, 2020

QUARTERLY MANAGEMENT REPORT AS AT JULY 31st, 2020

Notice related to the review of interim financial statements

The consolidated interim financial statements for the period ended July 31st, 2020 and 2019 have not been reviewed by the auditors of the Company.

YVES DES GROSEILLERS AUDITORS Chairman of the Board

MARIE-BERTHE DES GROSEILLERS CORPORATE SECRETARY President and Chief Executive Michèle Des Groseillers

ANDRÉ BÉRARD*/** LEGAL ADVISORS and Director of companies

LUCIEN BOUCHARD**/*** BANKERS Davies Ward Phillips & Vineberg

GABRIEL CASTIGLIO*/*** STOCK LISTING

Executive Vice President and Corporate Secretary number 05561N208. Fiera Capital (Investment management company) HEAD OFFICE

Senior Vice President Tel.: (514) 648-5757 Remstar Capital Inc. (Investment company)

* Member of the Audit Committee

• Corporate Governance Committee ** Member of the Human Resources and
• *** Member of the Investment Committee

BOARD OF DIRECTORS GENERAL INFORMATION

PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.

Officer of the Company m.desgroseillers@bmtc.ca

Lead Director of the Company Fasken Martineau DuMoulin LLP ("Fasken")

Partner National Bank of Canada and Desjardins

LLP (Law firm) REGISTRAR AND TRANSFER AGENT

CHARLES DES GROSEILLERS Registration System (DRS) allows your securities Vice President to be held in "book-entry" form without having a A. Bélanger (Détail) ltée physical security certificate issued as evidence of (Investment company) ownership. Instead, your securities are held in your name and registered electronically in our records, ANNE-MARIE LECLAIR** which are maintained by our transfer agent Partner and Vice President Computershare. If you are a registered holder of LG2 units and wish to convert physical securites to DRS, (Advertising agency) go to: www.computershare.com/investorcentrecanada. Computershare Investor Services Inc. The Direct

Chief Legal Officer Exchange under the symbol GBT.TO and CUSIP Common shares are listed on the Toronto Stock

8500 Place Marien TONY FIONDA*/*** Montréal-Est (Quebec) H1B 5W8

BMTC Group Inc. (the "Company"), is a company incorporated in accordance with Article 140 of the Business Corporations Act (Quebec). Its Common Shares are listed on the Toronto Stock Exchange.

Through its subsidiary, Ameublements Tanguay Inc., and its two divisions, Brault & Martineau and EconoMax, the Company manages and operates one of the largest furniture and household and electronic appliance retail sales networks in Quebec.

FINANCIAL HIGHLIGHTS

For the six month periods ended July 31st, 2020 and 2019

(Unaudited and in thousands of dollars, except per share amounts)

	July 31, 2020	July 31, 2019
	$	$
Operations
Revenue	276 418	365 377
Net earnings	7 152	10 025
Financial position
Cash, bank overdraft and investments	211 314	136 559
Total assets	445 659	398 384
Equity	218 275	246 413
Per-share information
Net earnings	0,21	0,29
Carrying amount	6,42	7,19
Stock market value
Period high	10,61	15,68
Period low	5,69	10,72
Number of shares outstanding
Common shares	34 006 000	34 291 900

Quarterly Management Report*

Caution regarding forward-looking statements

This Quarterly Management Report contains certain forward-looking statements with respect to the Company. These forward-looking statements are identified by the use of terms and phrases such as "anticipate", "believe", "estimate", expect", "intend", "may", "plan", "predict", "project", "will", "would", as well as the opposites of these terms and similar terminology, including references to assumptions.

Forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by these forward-looking statements. Results indicated in forward-looking statements may differ materially from actual results for a number of reasons, which the Company has identified in the 2020 Annual Information Form under "Narrative Description of the Business - Risk Factors", and other risks detailed from time to time in the Company's continuous disclosure documents.

The reader is cautioned that the factors we refer to above are not exhaustive of the factors that may affect any of the Company's forward-looking statements. The reader is also cautioned to consider these and other factors carefully and not to put undue reliance on forward-looking statements.

The Company made a number of assumptions in making forward-looking statements in this Quarterly Management Report. The Company considers the assumptions on which these forward-looking statements are based to be reasonable.

These statements reflect current expectations regarding future events and operating performance and speak only as of the date of release of this Quarterly Management Report, and represent the Company's expectations as of that date. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required by law.

Non-International Financial Reporting Standards (IFRS) financial measures

The Company discloses adjusted net earnings, which includes or excludes certain amounts that are not considered representative of the performance measures and financial recurrence of the Company. Management believes that this measure is useful in understanding and analyzing the operational performance of the Company and that it can provide additional information.

Adjusted net earnings as well as same store revenues are not an earnings measure recognized by IFRS and do not have a standardized meanings prescribed by IFRS. Therefore, adjusted net earnings and same store revenues as discussed in this Quarterly Management Report may not be compared to similar measures presented by other issuers. These measures of performance should not be considered as alternatives to indicators of performance calculated according to IFRS, but rather as a source of additional information.

The Company discloses in this MD&A under the section "Results" a reconciliation between net earnings and adjusted net earnings.

* The financial information is in Canadian dollars and has been prepared in accordance with the International Financial Reporting Standards (IFRS).

Results*

For the semester ended July 31, 2020, the Company's revenues decreased by $88,959,000 to $276,418,000 compared to $365,377,000 recorded in the corresponding 2019 period, a 24.3% decrease. Net earnings for the semester July 31, 2020 amounted to $7,152,000 compared to $10,025,000 recorded in the corresponding 2019 period. Basic net earnings per share amounted to $0.21 compared to $0.29 recorded in the corresponding 2019 period.

For the semesters ended July 31, 2020 and 2019, the share repurchase program had no impact on basic net earnings per share.

Excluding all these effects, the variation in adjusted net earnings would have been ($2,788,000) or ($0.08) per basic share for the semester ended July 31, 2020.

The ($2,788,000) variation in adjusted net earnings is as follows:

	(Unaudited and $ in thousands)
	July 31, 2020	July 31, 2019
Net earnings	7 152	10 025
Variation in cost of options (after-tax)	-	(85)
Adjusted net earnings	7 152	9 940
Minus: Adjusted net earnings for 2019	9 940
Variation	(2 788)

This variation in adjusted after-tax income is allocated throughout the quarters as follows:

Total	2 491	(5 279)	(2 788)
As at July 31, 2020	1 707	4 416	6 123
As at April 30, 2020	784	(9 695)	(8 911)
	earnings	earnings	operating earnings
	in retail operating	in investment	in adjusted
	Increase (decrease)	Increase (decrease)	Increase (decrease)
		(Unaudited and $ in thousands)

Despite the significant drop in sales in the first semester of 2020, the Company managed to improve its retail operating results by $2,976,000 or an after tax increase of $2,491,000.

* As of February 1, 2019, the Company has applied IFRS 16 retrospectively, without restating comparative information as permitted by the standard

Annual financial information

($ in thousands, except for per share amounts)

	January 31, 2020	January 31, 2019
	$	$
Revenue	720 169	742 474
Net earnings	36 034	45 165
Total assets	382 040	367 624
Net earnings per share
Basic	1,05	1,29
Diluted	1,05	1,29
Dividends per share	0,28	0,28

Financial position and dividends

Cash, net of the bank overdraft, and investments increased by $87,329,000 during the semester ended July 31, 2020. Investments consist of bank notes, government and corporate bonds, preferred and common shares, which at the close of the semester had a market value of $211,314,000 (including cash).

As at July 31, 2020, the working capital showed a deficit of $41,350,000, an increase of $21,883,000 compared to the year ended January 31, 2020. The Company's shareholders' equity increased from $216,624,000 as at January 31, 2020, to $218,275,000 as at July 31, 2020. As at July 31, 2020, the book value per share stood at $6.42, compared to $6.35 as at January 31, 2020.

Pursuant to the normal course issuer-bid put in place on April 15, 2019, and renewed on April 15, 2020, accordingly, 82,000 common shares were repurchased and cancelled by the Company. As a result of this change, the Company had as at July 30, 2020, 34,006,000 common shares issued and outstanding.

During the semester ended July 31, 2020, no options were granted. As at April 1st, 2020, options regarding 197,100 Common Shares expired and were cancelled as they were out of money. As at April 1st, 2020, the closing price of the Common Shares on the Toronto Stock Exchange was $5.97. The Company may still grant pursuant to the Plan a total of 5,710,864 options, representing 16.79% of the issued and outstanding shares of the Company.

Company pension plans

The pension expense for all plans for the three month and six month periods ended July 31st, 2020, amounted to $1,434,000 and $2,851,000 (compared to $2,334,000 and to $4,402,000 for the three month and six month periods ended July 31, 2019).

Contributions paid by the Company for all plans for the three month and six month periods ended July 31st, 2020, amounted to $1,089,000 and to $2,161,000 (compared to $2,004,000 and to $3,742,000 for the three month and six month periods ended July 31, 2019).

Related party transactions

The Company is bound by leases expiring in December 2024, for which a lease liability of $2,403,000 is recorded as at July 31, 2020.

On February 1, 2019, upon IFRS 16 implementation, a right-of-use asset and a lease liability of $3,123,000 were recorded in connection with leases entered with Gestion Maurice Tanguay. For the semester ended January 31, 2020, depreciation of $264,000 relating to the right-of-use asset and a $52,000 interest expense were recognized in earnings in connection with these leases.

Commitments

Payments due by period

	(Unaudited and $ in thousands)
	Carryingamount	Contractualcash flows	Under 1 year	2 - 5 years	After 5 years
Lease liability	17 145	19 056	4 525	12 175	2 356

Accounting policies and accounting estimates

The accounting policies used in preparing the consolidated financial statements are described in Note 3 to the consolidated financial statements.

The International Accounting Standards Board ("IASB") issued IFRS 16, Leases, which has become effective for fiscal years beginning on or after January 1, 2019, and has had an impact on BMTC's consolidated financial statements. More detailed information is presented in Note 3.1 to the interim consolidated financial statements.

The main estimates discuss allowances on inventories and supplier rebates receivable. Inventory allowances are taken for obsolete and/or damaged products as well as for slow inventory turnover items. The allowances are based on many years of historic experience. As for supplier rebates, a reasonable estimate of accrued amounts receivable is determined based on existing agreements with the Company's suppliers. Rebates for unsold merchandise are deducted from the value of the inventories at the date of the consolidated financial statements.

Financial instruments

The Company operates retail outlets in 32 locations across Quebec. A significant portion of the Company's sales are realized through the offering of financing solutions, by third-party credit providers, to the Company's customers. The cost of financing these sales is assumed by the Company, and is expensed, as the associated sales are realized. The Company assumes no credit risk in these transactions. The Company's working capital is composed primarily of accounts receivable, customer deposits, inventory and cash, while its short-term liabilities are towards suppliers of goods and services, as well as the debt relating to the stock option plan. The change in working capital reflects the associated fluctuations in all of the constituent accounts incurred during the normal course of the Company's activities. The Company has a positive cash position, which is invested in various financial instruments.

The Company records its investments at market value as indicated in Note 3 and Note 7 to the unaudited consolidated financial statements as at July 31, 2020. The Company has no hedges against its investments in US funds and assumes 100% of any fluctuations in the markets for these investments. Furthermore, the Company assumes the risks interest rate fluctuations have on its fixedincome investments, as well as the risks stock market fluctuations have on the value of investments in publicly traded companies.

The Company owns most of its stores and distribution centers, such that commitments regarding leasing contracts are relatively insignificant with regard to its overall activities as detailed in Note 9 and 10 to the unaudited consolidated financial statements as of July 31, 2020. The Company holds no hedging contracts or any other type of derivative products.

Quarterly results *

(Unaudited and $ in thousands, except for per share amounts)

		April 30,2020	April 30,2019	July 31,2020	July 31,2019
		$	$	$	$
Revenue		100 445	150 310	175 973	215 067
Net earnings		(12 427)	(3 455)	19 579	13 480
Net earnings per share
	Basic	(0,36)	(0,10)	0,57	0,39
	Diluted	(0,36)	(0,10)	0,57	0,39

		October 31,2019	October 31,2018	January 31,2020	January 31,2019
		$	$	$	$
Revenue		183 312	184 718	171 480	174 634
Net earnings		10 649	11 613	15 360	11 813
Net earnings per share
	Basic	0,31	0,34	0,45	0,34
	Diluted	0,31	0,34	0,45	0,34

*Comparative data relating to revenue have been restated following a change in presentation.

For the three-month period ended July 31, 2020, the Company's revenues decreased by $39,094,000 to $175,973,000, compared to $215,067,000 recorded for the corresponding period, a 18.2 % decrease. Net earnings for the three-month period ended July 31, 2020, amounted to $19,579,000 compared to $13,480,000 recorded for the corresponding 2019 period. Basic net earnings per share increased to $0.57 compared to $0.39 for the corresponding 2019 period.

For the three-month period ended July 31, 2020, the share repurchase program had no impact on basic net earnings per share.

Excluding all these effects, the variation to the adjusted net earnings would have been $6,123,000 or $0.18 per basic share for the quarter ended July 31, 2020.

The $6,123,000 variation in adjusted net earnings is as follows:

	(Unaudited and $ in thousands)
	July 31, 2020	July 31, 2019
Net earnings	19 579	13 480
Variation of cost of options (after-tax)	-	(24)
Adjusted net earnings	19 579	13 456
Minus: Adjusted net earnings for 2019	13 456
Variation	6 123

Operations

BMTC Inc.

The Company continues to restructure all of its websites and the first phase of the implementation of a distinct e-commerce platform for its banners Brault & Martineau and EconoMax is now completed and operational. The process of implementation will continue throughout 2020 for the following phases as well as the restructuring for all the other banners of the Company. The Company also reviewed its IT systems in to order standardize them throughout the banners, as well as to allow them to be more aligned with its e-commerce strategies. Following this review, the Company decided to invest and to modify its existing IT systems, the integration and implementation which will continue for a 3 to 5 year period.

Brault & Martineau Division

On November 6, 2019, the Company proceeded with the sale of the Kirkland store. During this same transaction, the Company purchased land along the Autoroute 40 in the city of Kirkland in order to build a new Brault & Martineau store of approximately 80,000 square feet which will replace the actual Kirkland store. On this same land, the Company is building an EconoMax store of approximately 50,000 square feet which will replace the EconoMax store on Côte-Vertu. The construction of these two stores has already begun, and their openings are scheduled for fall 2020. The transfer of operations of these two existing stores will be done following the completion of these new stores.

The Company continues the evaluation process for different sites as well as its existing stores to modify them or in certain cases proceed with the reconstruction of a new store based on its new prototype. The new Kirkland store will be the second of the banner to be modified. The Company anticipates that in the next few years it will incur costs related to the modification and improvement of it's actual network is to be considered.

Risk factors and market tendencies

The Company operates a furniture, electronic and household appliance retail business, and is therefore subject to many risk factors such as:

• Sensitivity to general economic conditions

• Reliance on key personnel

• Investment portfolio risks

• Third-party credit providers for financing solutions to clients

• Labour relations with employees, some of whom are unionized

• Maintaining profitability and managing growth

• Highly competitive nature of the retail industry

• Effectiveness of its marketing programs

• Capacity to anticipate changes in fashion trends and consumer tastes

• Retention of senior management

The Company is also dependent on its management information systems, its distribution operations, and its suppliers.

For a number of years, we have seen an increasing presence of strong competitors operating on a national and international level. Furthermore, the Company has witnessed a deflationary trend in many products that it sells, forcing it to innovate by bringing new products to market.

The majority of sales are realized using financing solutions offered by third-party credit providers. A significant increase in interest rates or a tightening of credit conditions could have a significant impact on the Company's sales. There are no guarantees the Company will be able to continue procuring such advantageous financing solutions for its customers, which in the past has permitted the Company to maintain its growth.

It is impossible to isolate and measure the importance of each individual risk to which the Company is exposed. In the past, the Company has managed to adapt to these changes and maintain its market share notably by aggressive marketing campaigns and efficient management.

Management discussion and outlook for the future of the Company

The Company's first and second quarters of 2020 delivered strong operational results, despite the negative financial impact of COVID-19. The decrease in revenues during the first semester was totally due to the temporary physical store closures. During this second quarter the Company was able to reopen all of it's 32 points of sale and in order to mitigate the loss of revenues during the closure, the Company proactively aligned its cost structure accordingly. These steps were taken throughout the first semester in order to protect the Company's viability and preserve its working capital during these highly uncertain times. Thanks to these new measures the Company was able to produce positive operating results. This new cost structure will remain effective throughout the remainder of the 2020 fiscal year.

On March 11th, 2020, the World Health Organization declared COVID-19 a global pandemic. The financial impact of COVID-19 began to manifest itself by a decrease in store traffic and consequently store revenues in the early weeks of March 2020. Following the rapid rise of COVID-19 cases in the province of Quebec, our priority during this difficult period remains at all times the health and safety of our employees and clients. In order to protect the Quebec population and to prevent the spread of COVID-19 by encouraging social distancing initiatives recommended by both levels of government, the Company decided on March 18th, 2020, to temporarily close its retail sales network, namely our Ameublements Tanguay banner in the Quebec City area and the Brault & Martineau and EconoMax banners in the Montreal area. On March 23rd, 2020, the Quebec government announced, for the same reason, the closure of all non-essential retail stores across the province.

In order to address the devastating effects of COVID-19 and to assure its short and long-term financial health, the Company decided to maintain its operations at a strict minimum level while preserving its presence in our market and controlling its working capital position. The following actions were undertaken by the Company during these last weeks in order to support its operating and working capital objectives:

• Following the closure of our retail sales network on March 18th , 2020, the Company temporarily laid off approximately 75% of its personnel, the vast majority stemming from our retail stores.

• Our online and delivery services remained operational across Quebec to ensure the population in confinement the ability to rely on essential goods while respecting government-mandated security protocols. We modified our services to offer contactless home delivery.

• During this period, the Company introduced several measures and protocols in preparation for the reopening of our stores across our sales network to ensure and protect the health and security of our employees and our clients. These new measures and protocols will be in effect until the end of the COVID-19 pandemic.

• The Company has also made technological and operational improvements to its sales network. These modifications will allow us to reduce our fixed costs and will contribute to our initiatives of effective cost controls.

• The Company applied for the Canada Emergency Wage Subsidy given the 30% or more decrease in revenues during the prescribed period.

During the closure of our retail stores, from March 19th to May 3rd, 2020, online sales increase significantly. Despite this significant increase, the online sales only partially compensated for in-store sales for the 2019 corresponding period.

During the first quarter of 2020, the Company had all of its 32 points of sale closed for a period of 43 consecutive days, leaving only online sales operational. The lost of revenues arising from the first quarter closure produced a revenue decrease of $52,029,000. During the second quarter of 2020, the Company had a total of 15 points of sale closed for a period of 25 consecutive days while the other 17 points of sale were closed for the first 5 days of the quarter, again leaving only online sales operational. The lost of revenues arising from the second quarter closure produced a revenue decrease of $25,465,000.

On May 4th, 2020, the Quebec government authorized the reopening of non-essential businesses situated outside of the Greater Montreal Area. The Ameublements Tanguay banner was able to reopen all retail locations, except for one. The EconoMax banner was able to reopen the Drummondville, Joliette and Granby stores, while the Brault & Martineau banner reopened the Sherbrooke and Gatineau stores. As at May 4th, 2020, the Company had 16 of 32 stores operational. In the days following the reopening on May 4th, in-store sales increased between 45% and 65% compared to the same period in 2019. This increase, however, has slowed down in recent weeks to stabilize to comparable results to the 2019 period. In addition, online sales continued to increase significantly during this period compared to the corresponding period of 2019.

On May 25th, 2020, the Quebec government authorized the reopening of non-essential businesses situated in the Greater Montreal Area. This allowed the Company to reopen a total of 31 of 32 stores across the province of Quebec. Finally on June 1st, 2020 the Quebec government authorized the reopening of commercial centers, therefore Ameublements Tanguay was able to reopen its 11th store. As at June 1st, 2020, all of the 32 stores were fully operational. In-store sales in the Greater Montreal Area increased by 83% in the days following their reopening on May 25th, 2020. However, the in-store sales has slowed down in recent weeks to stabilize to comparable results to the 2019 period. During the month of May 2020, the Company's online sales continued to grow despite the gradual reopening of its stores.

The rehiring of temporarily laid-off employees is in progress and proceeding as the situation evolves. The Company has actively worked to promote a call-back of its employees as soon as possible and according to operational needs.

As a result of the increase in sales since the gradual reopening of our stores, the Company was able to call-back about 75% of it's sales staff. The Company must continue to respect social distancing as well as the maximum number of people allowed in a commercial establishment due to the regulations set by the provincial government with COVID-19, thus limiting the number of possible sales staff per store.

The new measure related to COVID-19 which the Company had to implement in its stores and distribution centers and the effects of the closures and re-openings of our stores had a significant impact on the Company's financial results in the first semester. Despite these additional costs, the Company still managed to improve its operating results by approximately $2,976,000 before tax. Finally, since mid-June, the Company has had issues with its supply logistics. Many of the Company's suppliers, who have also been affected by the consequences of COVID-19, are unable to honour and deliver placed orders. This problem seems widespread in our industry and is not unique to the Company. Therefore, it is possible that this could have a negative impact on future results, because that the Company has orders on hand it may not be able to deliver due to this short coming.

In this new economy the widespread cost restructuring as well as technological and operational improvements has produced a massive increase in unemployment rate in response to the COVID-19 pandemic. In addition, to the increase in the cost of living and the high level of Quebecers who are in debt are all factors which could inhibit consumer spending in the near future.

As at July 31, 2020, cash and investments had a market value of $211,314,000. The Company's financial position will allow it to weather through this period of uncertainty with more ease. Also, the Company owns nearly all of its stores and distribution centers, which reduces pressure on cash flow requirements.

Management is confident that the Company's operational efficiency during this crisis, its market leadership and solid financial position will allow us to emerge a stronger organization even in these difficult market conditions.

We would like to take this opportunity to thank all our fellow citizens who are relentlessly working day and night with extreme dedication to reduce spread of COVID-19 and who to caring for those who have been infected. Our thoughts are also with all those who have in any way been affected by the virus.

Disclosure controls and procedures (DCPs) and internal controls over financial reporting (ICRF)

The Company's management evaluated, as at January 31, 2020, the effectiveness of the design and operation of its DCPs and ICFR, as defined under National Instrument 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings. The evaluation was performed under the supervision of the Company's President and Chief Executive Officer (CEO) as well as the Chief Financial Officer (CFO). Based on such evaluation of ICFR, the President and CEO and CFO have concluded that the Company's DCPs and ICFR were effective as at January 31, 2020.

No changes were made in the Company's ICFR during the period beginning on May 1, 2020 and ended July 31, 2020, which have materially affected, or are reasonably likely to materially affect, the Company's ICFR.

Other information

This Quarterly Management Report ended July 31, 2020 provides an analysis of the unaudited consolidated results of operations, financial position, and cash flows of BMTC Group Inc. and its subsidiary.

Additional information relating to the Company is available on the Company's website at www.bmtc.ca as well as on SEDAR at www.sedar.com.

This Quarterly Management Report is intended to assist in the understanding and assessment of significant changes and trends, as well as risks and uncertainties, related to the results of operations and financial position of the Company.

(s) Marie-Berthe Des Groseillers

Marie-Berthe Des Groseillers President and Chief Executive Officer September 10th, 2020

BMTC Group Inc. Consolidated Statements of Earnings

For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars, except per share data)

	Notes		July 31, 2020	July 31, 2019
		3 month	6 month	3 month	6 month
		$	$	$	$
Revenue		175 973	276 418	215 067	365 377
Cost of sales		(106 294)	(170 240)	(131 361)	(227 244)
Gross profit		69 679	106 178	83 706	138 133
Other income		8	7	10	26
Selling expenses		(39 865)	(73 914)	(53 709)	(104 392)
Administrative expenses		(8 501)	(17 735)	(10 723)	(22 207)
Operating earnings		21 321	14 536	19 284	11 560
Gains (losses) on disposals of property, plantand equipment	8	1	26	-	-
Realized and unrealized change in fair valueof financial assets, at fair value	14	3 522	(5 729)	(1 571)	249
Investment income	4	797	1 465	772	1 522
Earnings before income tax expense		25 641	10 298	18 485	13 331
Income tax recuperation (expense)	5	(6 062)	(3 146)	(5 005)	(3 306)
Net earnings and comprehensive income		19 579	7 152	13 480	10 025
Net earnings per share	16
Basic		0,57	0,21	0,39	0,29

BMTC Group Inc. Consolidated Statements of Changes in Shareholders' Equity

For the six month periods ended July 31st, 2020 and 2019

(Unaudited and in thousands of Canadian dollars)

	Notes	Capital stock	Retainedearnings	Totalshareholders'equity
		$	$	$
Balance as at February 1, 2020		2 697	213 927	216 624
Share redemption	12	(6)	-	(6)
Share redemption premium	12	-	(733)	(733)
Dividends		-	(4 762)	(4 762)
Transactions with shareholders		(6)	(5 495)	(5 501)
Net earnings		-	7 152	7 152
Balance as at July 31, 2020	12	2 691	215 584	218 275

Balance as at February 1, 2019	Notes	Capital stock$2 732	Retainedearnings$242 010	Totalshareholders'equity$244 742
Share redemptionShare redemption premiumDividendsTransactions with shareholders	1212	(17)--(17)	-(3 534)(4 803)(8 337)	(17)(3 534)(4 803)(8 354)
Net earningsBalance as at July 31, 2019	12	-2 715	10 025243 698	10 025246 413

BMTC Group Inc. Consolidated Statements of Cash Flows

For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars)

	Notes		July 31, 2020	July 31, 2019
		3 month	6 month	3 month	6 month
		$	$	$	$
OPERATING ACTIVITIES
Earnings before income tax expense		25 641	10 298	18 485	13 331
Adjustments	6	(1 443)	10 797	3 878	4 016
Net changes in working capital	6	92 168	88 630	11 883	38 009
Income taxes paid		52	(991)	(2 559)	(6 923)
Cash flow from operating activities		116 418	108 734	31 687	48 433
INVESTING ACTIVITIES
Acquisition of other financial assets		(39 159)	(66 844)	(70 129)	(88 496)
Proceeds from disposal of other financial assets		(8)	44 822	54 413	72 147
Purchase of property, plant and equipment	8	(4 315)	(8 563)	(3 686)	(9 508)
Proceeds from disposal property, plant and equipment		11	36	-	-
Interest received		115	173	134	238
Dividends received		682	1 292	638	1 284
Cash flow from investing activities		(42 674)	(29 084)	(18 630)	(24 335)
FINANCING ACTIVITIES
Payments for share redemption		(90)	(739)	(1 174)	(3 551)
Interest paid		(185)	(363)	(209)	(420)
Payment of lease liabilities		(967)	(1 988)	(1 016)	(2 029)
Dividends		(4 762)	(4 762)	(4 803)	(4 803)
Cash flow from financing activities		(6 004)	(7 852)	(7 202)	(10 803)
Net change in cash
Cash, beginning of period		67 740	71 798	5 855	13 295
Cash, end of period		(3 454)	(7 512)	4 369	(3 071)
		64 286	64 286	10 224	10 224

BMTC Group Inc. Consolidated Statements of Financial Position

(Unaudited and in thousands of Canadian dollars)

	Notes	July 31, 2020	January 31, 2020
ASSETS		$	$
Current
Cash		64 286	-
Trade and other receivables		3 958	4 328
Current tax assets		-	745
Inventory		59 395	83 235
Prepaid expenses		3 326	1 422
Total current assets		130 965	89 730
Non-current
Other financial assets	7	147 028	131 497
Property, plant and equipment	3-8	154 695	148 372
Deferred tax assets	5	12 971	12 441
Total non-current assets		314 694	292 310
Total assets		445 659	382 040
LIABILITIES
Current
Bank overdraft	10	-	7 512
Trade and other payables	12	166 485	97 739
Lease liability	3-9	3 890	3 946
Current tax liability		1 940	-
Total current liabilities		172 315	109 197
Non-current
Defined benefit plan		41 814	41 124
Lease incentive		-	-
Lease liability	3-9	13 255	15 095
Total non-current liabilities		55 069	56 219
Total liabilities		227 384	165 416
SHAREHOLDERS' EQUITY
Capital stock	11	2 691	2 697
Retained earnings		215 584	213 927
Total shareholders' equity		218 275	216 624
Total liabilities and shareholders' equity		445 659	382 040

Notes to the Consolidated Financial Statements

For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars, except per share data)

1. GOVERNING STATUTES AND NATURE OF OPERATIONS

BMTC Group Inc. (hereinafter "Company") is a company governed the Business Companies Act (Quebec). Its registered office and principal place of business is located at 8500 Place Marien, Montréal East, Quebec, H1B 5W8. Its common shares are listed on the Toronto Stock Exchange. The Company, through its subsidiary Ameublements Tanguay Inc. and its two divisions Brault & Martineau and EconoMax (collectively designated as the "Company"), manages and operates a retail network of furniture, household appliances and electronic products, in Quebec.

2. GENERAL INFORMATION AND STATEMENT OF COMPLIANCE WITH IFRS

These unaudited consolidated interim financial statements of the Company have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, and do not contain all of the information that should be presented in the annual consolidated financial statements.

The unaudited consolidated interim financial statements have been prepared on the historical cost basis, except for certain financial instruments and the liability relating to share-based payments, which are established at fair value, and post-employment benefit assets or liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets, less an adjustment to reflect application of the asset limit.

3. SUMMARY OF ACCOUNTING POLICIES

The accounting policies specified below have been applied consistently throughout all periods presented in the consolidated financial statements. libellé différent pour trimestre à valider

3.1 Changes in accounting policies

IFRS 16 - Leases

IASB published IFRS 16 which replaced IAS 17 Leases , IFRIC4, Determining whether an Arrangement contains a Lease , SIC-15, Operating Leases-Incentives and SIC-27, Evaluating the Substance of Transactions Involving the Legal Form of a Lease .

As at February 1, 2019, BMTC applied the new IFRS 16 standard, retrospectively, without restating the comparative information, as permitted by the standard.

The Company recorded a lease liability, for leases previously classified as operating lease in accordance with IAS 17, to the present value of the lease payments payable immediately prior to the implementation date, at the Company's incremental borrowing rate of 4.2%. Right-of-use assets corresponds to the lease liability valued, adjusted for the derocognition of a lease-incentives and the net investment relating to a sublease.

IFRS 16 eliminates the classification as an operating lease and requires lessees to recognize a right-of-use asset and a lease liability in the statement of financial position for all lease with exemptions permitted for short-term leases and leases of low-value assets. In addition, IFRS 16 changes the definition of a lease; sets requirements on how to account for the asset and liability, including complexities such as non-lease elements, variable lease payments and option periods; changes the accounting for sale and leaseback arrangements; largely retains IAS 17's approach to lessor accounting and introduces new disclosure requirements.

Notes to the Consolidated Financial Statements

For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars, except per share data)

3. SUMMARY OF ACCOUNTING POLICIES (Continued)

A right-of-use asset and a lease liability are recognized on the date an underlying asset is available for use. Lease payments are allocated between liabilities and interest charges. The right-of-use-assets are classified with the other underlying assets and amortized over the shorter period between the useful life of the asset and the lease term.

Summary of the impact of the adoption of IFRS 16 on the consolidated statement of financial position as at February 1, 2019

	Balance as at		February 1, 2019
	January 31,	IFRS 16	Adjusted
	31 janvier 2020	Adjustment	Balance
	$	$	$
Property, plant and equipment (including right-of-use asset)	115 688	20 656	136 344
Trade and other receivables	5 546	432	5 978
Lease liability, short-term	-	4 102	4 102
Lease incentive	184	(184)	-
Lease liability, long-term	-	17 170	17 170
Reconciliation of the lease liabilities as at February 1, 2019			Balance as at
			February 1, 2019
			$
Operating lease commitments as at January 31, 2019			34 060
Less: adjustment for payments of variable costs relating to
taxes and maintenance costs			(10 711)
			23 349
Company's incremental borrowing rate as at February 1, 2019			4,2%
Discounted operating lease liability as at February 1, 2019			21 272
Of which are
Current lease liabilities			4 102
Non-current lease liabilities			17 170
			21 272

3.2 Basis of consolidation

The unaudited consolidated interim financial statements include the accounts of BMTC, the ultimate and those of the wholly-owned subsidiary Ameublements Tanguay Inc. The accounting policies of the parent company, subsidiary are consistent with those adopted by BMTC at financial year end date of January 31st.

Asset and liability balances and revenues and expenses from transactions between group companies, including unrealized gains and losses on transactions between consolidated entities, are eliminated in preparing the unaudited consolidated interim financial statements.

Notes to the Consolidated Financial Statements

For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars, except per share data)

3. SUMMARY OF ACCOUNTING POLICIES (Continued)

3.3 Foreign currency translation

The unaudited consolidated interim statement of financial position is presented in Canadian dollars, which is also the functional currency of the Company.

Foreign currency transactions are translated into the Company's functional currency, using the exchange rates prevailing at the dates of the transactions. Foreign currency monetary assets and liabilities are translated into the functional currency using the exchange rates in effect at the reporting date. Other foreign currency non-monetary financial assets that are measured at fair value are translated into the functional currency using the exchange rate in effect on the date of determination of fair value. Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items at the reporting date are recognized in earnings.

The realized and unrealized appreciation of other financial assets classified at fair value through profit or loss recognized directly in profit or loss includes the related exchange component.

Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction.

3.4 Segment reporting

In accordance with IFRS 8, Operating Segments , the Company presents and discloses information that is regularly reviewed by the President and the Board of Directors in assessing performance. The Company considers its retail activities as a single operating segment.

3.5 Revenue recognition

Revenue from merchandise sales is measured at the amount of the consideration for which the Company expects to receive in exchange for the merchandise and is presented in earnings net of estimated returns and rebates, and excluding sales taxes. Revenue is recognized when the control of the goods has been transferred to the customer, i.e. upon delivery. Comparative data relating to revenue have been restated following a change in presentation to better reflect the nature of the operations.

Revenue from extended service contracts is recognized at the time of the sale at the net amount of costs incurred by the Company with the service suppliers, who will provide the services required by the Company's customers.

Investment income is recognized using the accrual basis of accounting, as follows:

• Interest is recognized based on the number of days the investment was held during the year and is calculated using the effective interest method;
• established. Dividends on listed share investments are recognized when the right to receive the payment is

3.6 Income taxes

Income tax expense comprises the sum of deferred tax and current tax. Income tax is recognized in earnings except to the extent it relates to items recognized in other comprehensive income or directly in shareholders' equity.

For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars, except per share data)

3. SUMMARY OF ACCOUNTING POLICIES (Continued)

Current income tax assets or liabilities comprise those obligations to, or claims from, tax authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable income, which differs from earnings in the consolidated financial statements. The calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill or of an asset or liability unless the related transaction is a business combination or affects tax or accounting income.

Deferred tax assets and liabilities are calculated, without discounting, based on tax rates and tax laws that have been enacted or substantively enacted at the end of the reporting period, and which are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred tax assets are recognized to the extent that it is probable that they will be able to be utilized against future taxable income. Deferred tax liabilities are always provided for in full.

Deferred tax assets and liabilities are offset only when the Company has a right and intention to set off current tax assets and liabilities levied by the same taxation authority.

Changes in deferred tax assets or liabilities are recognized as a component of tax income or expense, except where they relate to items that are recognized in other comprehensive income or directly in shareholders' equity, in which case the related deferred tax is also recognized in other comprehensive income or shareholders' equity, respectively.

3.7 Inventory

Inventory, which is composed almost exclusively of finished goods for retail sale, is valued at the lower of cost and net realizable value. Cost is determined by the weighted average method.

The cost of inventories comprises all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. The net realizable value is estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

3.8 Vendor rebates

Cash considerations received from vendors are a reduction of the price of the vendors' products and are accounted for as a reduction of cost of sales and related inventory, respectively, in the Company's consolidated statement of earnings and comprehensive income and consolidated statements of financial position.

Rebates are recognized when they are considered probable and can be reasonably estimated.

Notes to the Consolidated Financial Statements

For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars, except per share data)

3. SUMMARY OF ACCOUNTING POLICIES (Continued)

3.9 Property, plant and equipment

Property, plant and equipment are carried at acquisition cost less any accumulated depreciation and any accumulated impairment losses. Items of property, plant and equipment with different useful lives are depreciated separately. Depreciation commences when an item of property, plant and equipment is available for use using the straight-line method over the following periods, in order to depreciate its cost less the residual value over its estimated useful life.

	Periods
Land	Not depreciated
Parking lots	20 years
Buildings	2 to 50 years
Signs	5 years
Leasehold improvements	2 to 5 years
Automotive equipment	7 to 15 years
Computer equipment and software	2 to 5 years
Furniture and equipment	5 years
Leased property	1 to 10 years
Leased automotive equipment	5 years

The depreciation method, useful lives and residual values are reviewed annually.

3.10 Leases, lease liability and right-of-use asset

The company records a right-of-use asset and a lease liability on the date when a leased asset becomes available.

Right-of-use asset is equal to the cost of the initial lease liability, rent payments paid on or before the commencement date, initial direct costs incurred and restoration costs, less any incentive received. The Company includes its right-of-use assets with its property, plant and equipment in Note 8.

The lease liability corresponds to the present value of lease payments discounted at the implicit interest rate in the lease or the Company incremental borrowing rate. The Company's incremental borrowing rate is based on its credit rating, allowing it to obtain an asset of a similar value with similar security.

The Company has elected to apply the exemption provision relating to short-term leases and leases of lowvalue, and associated costs, such as maintenance and insurance, are expensed as incurred.

3.11 Lease incentive

A lease incentive received from a lessor to pay for leasehold improvements is recognized, and associated costs, such as maintenance and insurance, are expensed as incurred they are amortized over the lease term and applied against the related rental expense with the unamortized balance being presented in noncurrent liabilities until January 31, 2019, date of implementation of IFRS 16.

Notes to the Consolidated Financial Statements

For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars, except per share data)

3. SUMMARY OF ACCOUNTING POLICIES (Continued)

3.12 Impairment of property, plant and equipment

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at a cash-generating-unit level.

Individual assets or assets combined into cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognized for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value-in-use.

3.13 Shareholders' equity

Capital stock is the amount received on issuance and is presented net of the initial share issue income on redeemed shares.

Retained earnings include all current and prior period retained profits, net of share redemption premiums, dividends paid and the costs of share issuances.

Dividends payable to shareholders are included in other payables when they have been declared before the reporting date.

3.14 Share-based remuneration

The Company has a share-based remuneration plan for certain directors and officers. According to the plan, an option holder can choose, at any time at the holder's sole discretion, to receive, from the Company, a cash payment equal to the number of shares for which the option is exercised, multiplied by the amount for which the market value of the share exceeds the exercise price, or to subscribe to a number of shares for which the option is exercised. The rights relating to the options are vested at the date of grant, and their maximum life is 10 years.

At the time of the award, these options are compound financial instruments; accordingly, the fair value is the total fair values of the debt and equity components. The Company first measures the fair value of the debt component and then the fair value of the equity component.

The Company recognizes the debt component, i.e. the stock appreciation rights, at fair value, determined using the Black-Scholes model, and the fair value is measured on each reporting date. A corresponding remuneration cost is recognized in net earnings under administrative expenses.

At the time of the award, the fair value of the equity component is measured at zero. Accordingly, the fair value of the compound financial instrument is the same as the fair value of the debt component.

At the date of settlement, the Company must remeasure the liability to its fair value. If the Company issues equity instruments on settlement rather than paying cash, the liability is transferred directly to equity, as consideration for the equity instruments issued. If, on settlement, the Company pays in cash rather than by issuing equity instruments, that payment is applied to settle the liability in full.

Notes to the Consolidated Financial Statements

For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars, except per share data)

3. SUMMARY OF ACCOUNTING POLICIES (Continued)

3.15 Post-employment benefits

The Company provides post-employment benefits through defined benefit pension plans as well as defined contribution pension plans.

Contributions to the defined contribution plans are recognized as an expense in the period that relevant employee services are rendered.

The Company accrues its obligations under its defined benefit pension plans and the related costs, net of plan assets, as the services are rendered. The Company has adopted the following accounting policies:

• The Company's defined benefit plan obligations are measured individually, estimating the amount of future benefits earned by employees for services provided in the current and prior periods. The actuarial valuation of defined benefit obligations uses the projected unit credit method. This determination incorporates management's best estimate of future salary levels, retirement ages of employees, mortality rates and other actuarial assumptions.
• The discount rate for defined benefit obligations is determined by reference to the market yield, at yearend, on high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability.
• Remeasurements, which include actuarial gains and losses on benefit obligations, the return on plan assets in excess of interest income, the effect of the asset ceiling, and the impact of minimum funding requirements, are recognized in other comprehensive income and retained earnings immediately without any reclassification to net earnings.
• The defined benefit plan amount presented in the consolidated statement of financial position is the difference between the present value of the defined benefit plan obligations and the fair value of the plan assets at the reporting date. The economic benefit available is calculated as the difference between the present value of the accounting value of the current service cost of the employer and the current services cost of the employer on a funded basis. This value cannot, however, be negative. When there is a defined benefit plan asset, the amount of the asset recognized cannot be greater than the present value of any future economic benefit available as a future plan reimbursement or decrease in future plan contributions. Any minimum funding requirements applicable to the Company's plans are taken into account to calculate the present value of economic benefits.
• An additional liability is recognized in the amount of the minimum funding requirement for defined benefit plans when the Company does not have an unconditional right to the surplus.

3.16 Provisions and contingent liabilities

Provisions are recognized when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Company and when amounts can be estimated reliably. The timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events, for example, product warranties granted, legal disputes or onerous contracts.

Notes to the Consolidated Financial Statements

For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars, except per share data)

3. SUMMARY OF ACCOUNTING POLICIES (Continued)

3.16 Provisions and contingent liabilities (Continued)

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation.

All provisions are reviewed at each reporting date and are adjusted to reflect the current best estimate.

In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognized.

Likely inflows of economic benefits to the Company that do not yet meet the recognition requirements criteria of assets are considered as contingent assets.

3.17 Financial instruments

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

Financial assets and financial liabilities are measured initially at fair value plus transactions costs, except for financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially at fair value.

Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or expires.

For the purpose of subsequent measurement, financial assets of the Company are classified into the following categories upon initial recognition:

• Amortized cost;
• Financial assets at fair value through profit or loss.

The following table summarizes the financial instrument classification and valuation methods.

Item	Classification method
Cash	Amortized cost
Trade and other receivables*	Amortized cost
Other financial assets	Fair value through profit or loss
Bank overdraft	Amortized cost
Trade and other payables*	Amortized cost

* Excluding taxes receivable and payable and employee benefits, which are not financial instruments.

Notes to the Consolidated Financial Statements

For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars, except per share data)

3. SUMMARY OF ACCOUNTING POLICIES (Continued)

The category determines subsequent measurement and whether any resulting income and expense is recognized in net earnings or in other comprehensive income.

All financial assets except for those at fair value through profit or loss are tested for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired.

All income and expenses relating to financial assets that are recognized in net earnings are presented within realized and unrealized gains on financial assets at fair value or finance income, except for any impairment of trade and other receivables which is presented within administrative expenses.

Financial assets at amortized cost

A financial asset must be measured at amortized cost if the two following conditions are met: the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

The Company recognizes a loss allowance for expected credit losses on financial assets measured at amortized cost. The amount of expected credit losses is updated on each reporting date to take into account changes in credit risk since the initial recognition of the respective financial instrument.

The Company recognizes lifetime expected credit losses on the financial assets measured at amortized cost. Lifetime expected credit losses correspond to expected credit losses that result from all possible default events over the expected life of a financial instrument. The measurement of expected credit losses reflects reasonable and supportable information on past events, current conditions and forecasts of events and economic conditions and takes into account factors specific to receivables, general economic conditions and an assessment of the current and forecast direction of the conditions at the reporting date, including the time value of money, as applicable.

Financial assets at fair value through profit or loss

Investments presented as other financial assets have been classified at fair value through profit or loss because they are part of a portfolio included in management reports and are measured at fair value by management. Consequently, realized and unrealized gains and losses on these assets are recognized through profit or loss. Transaction costs related to held-for-trading financial assets are expensed as incurred.

Financial liabilities

Financial liabilities are subsequently measured at amortized cost using the effective interest method.

3.18 Judgment, estimates and assumptions

When preparing the consolidated financial statements, management undertakes a number of judgments, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results are likely to differ from the judgments, estimates and assumptions made by management, and will seldom equal the estimated results. Information about the significant judgments, estimates and assumptions that have the most significant effect on the recognition and measurement of assets, liabilities, income and expenses is provided below.

Notes to the Consolidated Financial Statements

For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars, except per share data)

3. SUMMARY OF ACCOUNTING POLICIES (Continued)

Inventory valuation

The Company uses a high degree of judgment when estimating the effect of certain factors on the net realizable value of inventory, such as obsolescence and damages. The quantity, age and condition of inventory is measured and evaluated regularly during the period.

Estimated returns and vendor rebates

In determining the probability and estimation of returns and vendor rebates receivable, the Company uses actual purchases during the period, the degree of achievement of sales forecasts and contractual terms and conditions.

Useful lives of property, plant and equipment

Management reviews the useful lives of property, plant and equipment at each reporting date based on the expected utility of the assets. Actual results may, however, vary due to technical obsolescence, particularly for software and IT equipment.

Fair value of financial instruments

Management uses valuation techniques in measuring the fair value of financial instruments, where active market quotes are not available, that is for banker's acceptances and discount notes.

The carrying amounts of these instruments and a price sensitivity analysis of other financial instruments are presented in Note 15. In applying the valuation techniques, management makes maximum use of observable data, and uses estimates and assumptions that are, as far as possible, consistent with data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses the best information available. These estimates may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

Share-based payment liability

To estimate the share-based payment liability and expense, an appropriate valuation model must be selected and the necessary data for the valuation model must be obtained. The Company has used the Black-Scholes valuation model to estimate the volatility of its shares, their estimated useful life and the exercise period of the stock options awarded. Refer to Note 12 for details on the carrying amount and other information on the stock-based payment liability.

Provisions and contingent liabilities

Judgment is required to determine whether a past event has led to a liability that should be recognized in the consolidated financial statements or presented as a contingent liability. Judgment and estimates are applied to quantify such liabilities and are based on a variety of factors, such as the nature of the claim or conflict, legal proceedings, the potential amount payable, the advice of legal counsel, prior experience and the likelihood of a loss. Refer to Note 14 for details on the carrying amount and other information on provisions and contingent liabilities.

BMTC Group Inc. Notes to the Consolidated Financial Statements For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars, except per share data)

3. SUMMARY OF ACCOUNTING POLICIES (Continued)

Defined benefit pension plan cost and obligations

Management estimates the defined benefit obligations annually with the assistance of independent actuaries; however, the actual outcome may vary due to estimation uncertainties. The defined benefit obligations estimate is based on standard rates of inflation, mortality rates and the Company's specific anticipation of future salary increases. Estimation uncertainties exist particularly with regard to the assumptions, which may vary significantly in future valuations of the Company's defined benefit obligations.

4. ADDITIONAL INFORMATION ON CONSOLIDATED STATEMENTS OF EARNINGS

	July 31, 2020		July 31, 2019
	3 month	6 month	3 month	6 month
Employee benefits expense	$	$	$	$
Salaries	24 420	42 313	31 387	60 513
Defined benefit pension plan expense	1 133	2 307	1 911	3 662
Defined contribution pension plan expense	301	544	423	740
Share-based payment expense (recovery)(Note 11)	-	-	(33)	(116)
Total employee benefits expense	25 854	45 164	33 688	64 799
		July 31, 2020		July 31, 2019
	3 month	6 month	3 month	6 month
Other elements of revenues and expenses	$	$	$	$
Depreciation of property, plant and equipment	2 347	4 744	2 451	4 701
Losses (gains) on disposals of financial assets	-	(762)	(122)	(122)
		July 31, 2020		July 31, 2019
	3 month	6 month	3 month	6 month
Investment income	$	$	$	$
On financial assets at fair value throughprofit or loss
Interest	43	53	1	1
Dividends	682	1 292	638	1 284
On financial assets classified at amortized cost

Interest 72 120 133 237

797 1 465 772 1 522

For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars, except per share data)

5. INCOME TAXES

The income tax expense is detailed as follows:

	July 31, 2020		July 31, 2019
	3 month	6 month	3 month	6 month
	$	$	$	$
Total current tax expense (recovery) for the period	5 208	3 676	5 221	3 258
Total deferred tax expense (recovery)*	854	(530)	(216)	48
	6 062	3 146	5 005	3 306

* In 2020 and 2019, the deferred tax liability includes only the impact of changes in temporary differences.

The Company's effective income tax rate differs from the combined statutory income tax rate. This difference arises from the following items:

	July 31, 2020			July 31, 2019
	3 month	6 month	3 month	6 month
	$	$	$	$
Income tax expense (recovery) for the period
based on combined tax rate (federal and provincial)
(of 26.59% in 2020 and 26.69% in 2019)	6 797	2 730	4 915	3 545
Non-taxable dividends	(92)	(178)	(111)	(229)
Non-taxable capital gains	(467)	759	209	(33)
Non-deductible expenses	6	15	16	47
Other	(182)	(180)	(24)	(24)
	6 062	3 146	5 005	3 306

In 2020 and 2019, the deferred tax liability includes only the impact of changes in temporary differences. *

Notes to the Consolidated Financial Statements

For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars, except per share data)

5. INCOME TAXES (Continued)

			Recognized
	Balance as at		in other	Balance as at
	February 1,	Recognized	comprehensive	July 31,
	2020	in earnings	income	2020
	$	$	$	$
Recognized amounts
Net unrealized gain (loss) on other financial assets	(390)	917	-	527
Liability (asset) defined benefit plans	10 957	-	-	10 957
Property, plant and equipment	1 874	(387)	-	1 487
	12 441	530	-	12 971

			Recognized
	Balance as at		in other	Balance as at
	February 1,	Recognized	comprehensive	January 31,
	2019	in earnings	income	2020
	$	$	$	$
Recognized amounts
Net unrealized gain (loss) on other financial assets	171	(561)	-	(390)
Liability (asset) defined benefit plans	(6 974)	(13)	17 944	10 957
Liability relating to share-based payments	31	(31)	-	-
Property, plant and equipment	1 774	100	-	1 874
	(4 998)	(505)	17 944	12 441

6. CASH FLOW ADJUSTMENTS AND CHANGES IN WORKING CAPITAL

Adjustments are detailed as follows:	July 31, 2020			July 31, 2019
	3 month	6 month	3 month	6 month
	$	$	$	$
Depreciation of property, plant and equipment	2 347	4 744	2 451	4 701
Excess (deficit) of contributions over
defined benefit plan expense	345	690	330	660
Investment income	(797)	(1 465)	(772)	(1 522)
Unrealized depreciation (appreciation) of financial
assets at fair value	(3 522)	6 491	1 693	(127)
Losses (gains) on disposal of non-financial assets	(1)	(26)	-	-
Interest on lease liability	185	363	209	420
Difference between share-based payments and
cash consideration paid	-	-	(33)	(116)
	(1 443)	10 797	3 878	4 016

Notes to the Consolidated Financial Statements

For the three month and six month periods ended July 31, 2020 and 2019

(Unaudited and in thousands of Canadian dollars, except per share data)

6. CASH FLOW ADJUSTMENTS AND CHANGES IN WORKING CAPITAL (Continued)

The net change in working capital is detailed as follows:

	July 31, 2020			July 31, 2019
	$	$	$	$
Trade and other receivables	415	370	1 703	2 894
Inventory	26 283	23 840	15 736	11 734
Prepaid expenses	4 175	(1 904)	2 294	(668)
Trade and other payables excluding
accrued charges of construction in progress	61 295	66 324	(7 850)	24 049
	92 168	88 630	11 883	38 009

7. OTHER FINANCIAL ASSETS

	July 31, 2020
	Fair value	Cost
	$	$
At fair value through profit or loss
Banker's acceptances and discounted notes, between 0.30% and 0.50%,
maturing no later than 2020	58 092	58 092
Government and corporate bonds	21 570	20 607
Preferred shares	4 714	5 049
Shares of Canadian companies	23 624	25 904
Shares of U.S. companies	39 028	40 590
Total at fair value through profit or loss	147 028	150 242
Total other financial assets	147 028	150 242

	January 31, 2020
	Fair value	Cost
	$	$
At fair value through profit or loss
Banker's acceptances and discounted notes, between 1.30% and 1.35%,
maturing no later than 2020	9	9
Government and corporate bonds	64 949	64 235
Preferred shares	5 160	5 049
Shares of Canadian companies	25 996	24 344
Shares of U.S. companies	35 383	34 152
Total at fair value through profit or loss	131 497	127 789
Total other financial assets	131 497	127 789

(Unaudited and in thousands of Canadian dollars, except per share data)

8. PROPERTY, PLANT AND EQUIPMENT

		Parking lots		Leasehold	Automotive	Computer	Furniture and	Leased	Leased
	Land	and buildings	Signs	improvements	equipment	equipment	equipment	property (1)	automotiveequipment (1)	Total
	$	$	$	$	$	$	$	$	$	$
Gross carrying amount
Balance as at February 1, 2020	57 522	139 239	457	9 719	3 436	8 309	6 503	21 211	1 318	247 714
Additions	-	10 858	-	-	30	97	-	-	92	11 077
Disposals	-	-	-	-	(256)	-	-	-	-	(256)
Balance as at July 31, 2020	57 522	150 097	457	9 719	3 210	8 406	6 503	21 211	1 410	258 535
Depreciation and impairment
Balance as at February 1, 2020	-	69 742	410	9 537	2 442	7 563	5 358	3 989	301	99 342
Disposals	-	-	-	-	(246)	-	-	-	-	(246)
Depreciation	-	2 203	9	23	114	203	156	1 882	154	4 744
Balance as at July 31, 2020	-	71 945	419	9 560	2 310	7 766	5 514	5 871	455	103 840
Carrying amount as at
July 31, 2020	57 522	78 152	38	159	900	640	989	15 340	955	154 695
Gross carrying amount
Balance as at February 1, 2019	51 989	129 570	416	9 777	3 362	8 039	6 311	19 338	1 318	230 120
Additions	8 170	14 681	41	229	160	521	266	1 873	-	25 941
Disposals	(2 637)	(5 012)	-	(287)	(86)	(251)	(74)	-	-	(8 347)
Balance as at January 31, 2020	57 522	139 239	457	9 719	3 436	8 309	6 503	21 211	1 318	247 714
Balance as at February 1, 2019	-	69 190	380	9 777	2 267	7 147	5 015	-	-	93 776
Disposals	-	(3 749)	-	(286)	(77)	(251)	(29)	-	-	(4 392)
Depreciation	-	4 301	30	46	252	667	372	3 989	301	9 958
Balance as at January 31, 2020	-	69 742	410	9 537	2 442	7 563	5 358	3 989	301	99 342
Carrying amount as at
January 31, 2020	57 522	69 497	47	182	994	746	1 145	17 222	1 017	148 372

Carrying amount as at July 31, 2020 includes unamortized assets under construction of $16,008 of which, an amount of $4,033 is included in accrued expenses and, for which the Company has entered, as of July 31, 2020 , into commitments of $10,875. During the semester ended July 31, 2020, the Company disposed of property, plant and equipment assets for an amount of $36, which resulted in a gain of 26 $

Carrying amount as at January 31, 2020 includes unamortized assets under construction of $5,150 of which, an amount of $1,611 is included in accrued expenses and, for which the Company has entered, as of January 31, 2020 , into commitments of $21,733. During the year ended January 31, 2020, the Company disposed of property, plant and equipment assets for an amount of $4,915, including $4,695 from an exchange of land measured at fair value, which resulted in a gain of $997.

(1) Corresponds to the $20,656 right-of-use assets recognized following the implementation of IFRS 16, refer to Note 3 for additionnal information.

(Unaudited and in thousands of Canadian dollars, except per share data)

9. LEASE LIABILITY

The Company is commited under long-term leases for stores, wharehouses and leased automotive equipment, for which a lease liability is recorded. The reconciliation of the lease liability is detailed as follows:

	July 31, 2020	Jan. 31, 2020
Opening balance	19 041	-
IFRS 16 implementation (1)	-	21 272
Additions	92	1 873
Interest	363	797
Payments	(2 351)	(4 901)
Closing balance	17 145	19 041

The principal payments to be made are detailed as follows:

	Less than	From 1 to	More than
	one year	5 years	5 years	Total
	$	$	$$	$$
July 31, 2020	3 890	11 047	2 208	17 145
Jan. 31, 2020	3 946	12 396	2 699	19 041

The Company is commited under long-term leases, for which additional payments for taxes and maintenance, not taken into account in the lease liability obligation, are required. During the semester ended July 31, 2020, a rental charge of $859 was recognized in earnings compared to $939 for the corresponding period of 2019.

(1) Refer to note 3 for more information on the implementation of IFRS 16.

10. BANK BORROWINGS

The Company has an unsecured line of credit in the amount of $30,000 bearing interest at the prime rate, renewable on June 30, 2021. The company is subject to certain restrictive covenants, for the semester ended July 31, 2020, the company was not in default.

(Unaudited and in thousands of Canadian dollars, except per share data)

11. CAPITAL STOCK

Authorized

Unlimited number of shares without par value First preferred shares, issuable in series.

Second preferred shares, issuable in series.

	July 31, 2020	January 31, 2020
	$	$
Issued and fully paid
34,006,000 common shares
(34,088,000 as at January 31, 2020)	2 691	2 697
	July 31, 2020	January 31, 2020
Issued and fully paid
Beginning of period	34 088 000	34 540 000
Share redemption	(82 000)	(452 000)
Issued and fully paid, end of period	34 006 000	34 088 000
Shares authorized for the share option plan	5 710 864	5 710 864
Total shares authorized	39 716 864	39 798 864

During the semester ended July 31, 2020, the Company redeemed 82,000 common shares for a total cash consideration of $739. The redemption premium of $733 for the shares was recognized in retained earnings.

During the year ended January 31, 2020, the Company redeemed 452,000 common shares for a total cash consideration of $5,754. The redemption premium of $5,719 for the shares was recognized in retained earnings.

None of the parent's shares were held by any of the Company's subsidiaries.

Share option plan

The Company has a share option plan for certain directors and employees, which provides for the purchase of common shares under certain circumstances up to a maximum number of 10,729,106 issuable common shares. As at July 31, 2020, a total of 5,710,864 common shares (5,710,864 common shares as at January 31, 2020) remained authorized for issuance under the Company's share option plan.

(Unaudited and in thousands of Canadian dollars, except per share data)

12. TRADE AND OTHER PAYABLES

The following table analyzes trade and other payables recognized in the consolidated statements of financial position:

	July 31, 2020	January 31, 2020
	$	$
Trade accounts payable	38 910	26 803
Accrued expenses	25 786	12 002
Accrued expenses construction in progress	4 033	1 611
Employee benefits	15 206	15 928
Customer deposits	82 550	41 395
	166 485	97 739

13. PROVISIONS AND CONTINGENT LIABILITIES

The Company is party to claims and lawsuits in the normal course of business. Management believes that the resolution of these claims and lawsuits will not have a materially adverse effect on the Company's financial position.

14. FINANCIAL INSTRUMENTS

The carrying amounts presented in the consolidated statement of financial position relate to the following categories of financial assets and liabilities:

	July 31, 2020	Jan. 31, 2020
	$	$
Financial assets
Financial assets at fair value through profit and loss
Other financial assets	147 028	131 497
Financial assets at amortized cost
Trade and other receivables	3 958	4 328
	68 244	4 328
Financial liabilities
Financial liabilities at amortized cost
Bank overdraft	-	7 512
Trade (excluding employee benefits) and other payables	151 279	81 811
	151 279	89 323

(in thousands of Canadian dollars, except per share data)

14. FINANCIAL INSTRUMENTS (Continued)

The following table presents financial assets and financial liabilities measured at fair value in the consolidated statement of financial position in accordance with the fair value hierarchy. This hierarchy groups financial assets and financial liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and financial liabilities.

The fair value hierarchy has the following levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level within which the financial asset or financial liability is classified is determined based on the lowest level of significant input to the fair value measurement. The financial assets and financial liabilities measured at fair value in the consolidated statements of financial position and financial instruments measured at amortized cost for which fair value is presented are grouped according to the fair value hierarchy is as follows:

			July 31, 2020
	Level 1	Level 2	Level 3
	$	$	$
Financial assets at fair value
Banker's acceptances and discounted notes		58 092
Government and corporate bonds	21 570
Preferred shares	4 714
Shares of Canadian companies	23 624
Shares of U.S. companies	39 028
			January 31, 2020
	Level 1	Level 2	Level 3
	$	$	$
Financial assets at fair value
Banker's acceptances and discounted notes		9
Government and corporate bonds	64 949
Preferred shares	5 160
Shares of Canadian companies	25 996
Shares of U.S. companies	35 383

(in thousands of Canadian dollars, except per share data)

14. FINANCIAL INSTRUMENTS (Continued)

Fair value measurement

The methods and valuation techniques used for the purpose of measuring fair value are unchanged compared to the previous reporting period.

The fair value of a financial instrument is generally the consideration for with the instrument would be exchanged in an arm's length transaction, between knowledgeable, willing parties who are under no compulsion to act.

The existence of published price quotations in an active market is the best evidence of fair value. The fair value of shares and bonds is established based on the most recent closing date market price, based on the bid price at the period-end. If a security is not actively traded, the fair value is determined by a valuation technique using observable market date to the extent possible.

July 31, 2020		July 31, 2019
3 month	6 month	3 month	6 month
$	$	$	$
3 522	(6 491)	(1 693)	127
-	762	122	122
3 522	(5 729)	(1 571)	249

Financial instrument risks

The Company's manages the risks arising from financial instruments, in close cooperation with the Board of Directors. The objectives are to ensure the availability of sufficient amounts of cash flow in the short and medium term of the company by reducing the exposure to financial markets. Long-term financial instruments are managed to generate lasting returns.

The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options.

Market risk

Market risk encompasses many types of risk. The variation of the types of risk, such as interest rate risk and other factors impacting all similar publicly traded financial instruments, has an impact on the fair value of the financial assets classified at fair value through profit or loss. To minimize market risk, the Company ensures that the type of investments and individual investments in its investment portfolio are diversified. Additionally, a significant portion of its investments is in financial instruments with short maturity dates, in particular banker's acceptances and discount notes.

(in thousands of Canadian dollars, except per share data)

14. FINANCIAL INSTRUMENTS (Continued)

Price risk sensitivity

The following table illustrates the sensitivity of income and equity in regards to changes in the market price all other things being equal. It assumes a ± 5 % change of the market price for the periods ended July 31, 2020 and 2019.

	July 31, 2020	July 31, 2019
	$	$
Variation
Income for the period and equity	3 857	4 433

Exchange risk and foreign currency sensitivity

The Company is exposed to exchange risk, because a part of its purchases of inventory is made in currencies other than Canadian dollars. The Company also owns U.S. dollar equity investments in U.S. companies.

The Company does not enter into foreign exchange forward contracts to mitigate the exposure to foreign currency risk.

Foreign currency denominated financial assets and financial liabilities which expose the Company to currency risk are disclosed below. The amounts shown are those reported to key management translated into Canadian dollars at the closing rate:

	July 31, 2020	July 31, 2019
	$	$
Shares of U.S. companies	39 028	29 083
Trade and other payables in U.S. dollars	(3 018)	(4 203)
Total exposure	36 010	24 880

The following table illustrates the sensitivity of income and equity in regards to the Company's financial assets and financial liabilities and the U.S. dollar/Canadian dollar exchange rate all other things being equal. It assumes a ± 5% change of the Canadian dollar exchange rate for the periods ended July 31, 2020 and 2019.

	July 31, 2020	July 31, 2019
Variation	$	$
Income for the period and equity	1 582	1 107

(in thousands of Canadian dollars, except per share data)

14. FINANCIAL INSTRUMENTS (Continued)

Credit risk

Credit risk is the risk that a party to a financial instrument will fail to discharge an obligation towards the Company. The Company is exposed to this risk as a result of various financial instruments, for example, its deposits, investments in bonds, etc. The Company's maximum credit risk exposure is limited to the carrying amount of certain financial assets recognized on the reporting date, as summarized in the following table:

	July 31, 2020	January 31, 2020
Financial asset categories – carrying amounts	$	$
Cash	64 286	-
Trade and other receivables	3 958	4 328
Other financial assets
Banker's acceptances and discount notes	58 092	9
Government and corporate bonds	21 570	64 949
	147 906	69 286

The Company's management considers that the credit quality of the above financial assets that are not impaired or in default at the reporting date is good. No significant unimpaired trade and other receivables are in default at the reporting date.

Credit risk in respect of cash, banker's acceptances and discount notes, amounts receivable on credit and debit cards is considered negligible because the counterparties are reputable banks with quality external credit ratings.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations. The Company manages its liquidities by monitoring forecasted cash receipts and disbursements in the course of daily activities. Net cash requirements are compared with available cash, investments and credit facility to ascertain if they are sufficient for the period in question. The Company also considers expected cash resources from sales and its financial assets in managing the liquidity risk.

(Unaudited and in thousands of Canadian dollars, except per share data)

14. FINANCIAL INSTRUMENTS (Continued)

Future payments to be made under its contractual obligations are allocated as follows:

	Carryingamount		July 31, 2020
		Contractualcash flows	Under 1 year	2 - 5 ans	More than5 years
	$	$	$	$	$
Trade and otherpayables excluding
customer deposits	83 935	83 935	83 935	-	-
Lease liability	17 145	19 056	4 525	12 175	2 356
	101 080	102 991	88 460	12 175	2 356

				January 31, 2020
	Valeurcomptable	Contractualcash flows	Under 1 year	2 - 5 ans	More than5 years
	$	$	$	$	$
Trade and otherpayables excluding
customer deposits	56 344	56 344	56 344	-	-
Lease liability	19 041	21 282	4 639	13 746	2 897
	75 385	77 626	60 983	13 746	2 897

Capital management

The Company's capital management objectives are to safeguard its assets, while maximizing the Company's growth and providing an adequate return to its shareholders. In addition to a conservative approach with respect to safeguarding the financial position, the Company achieves its objective through sound management of internally generated capital and through using capital when necessary to finance its growth initiatives. The Company's capital corresponds to equity.

(Unaudited and in thousands of Canadian dollars, except per share data)

15. EARNINGS PER SHARE AND DIVIDENDS

The following table presents the calculation of basic net earnings per share:

	July 31, 2020		July 31, 2019
	3 month	6 month	3 month	6 month
	$	$	$	$
Net earnings	19 579	7 152	13 480	10 025
Weighted average number of shares tocalculate basic net earnings per share		34 107 678		34 595 212
Net earnings per share
Basic	0,57	0,21	0,39	0,29
Diluted	0,57	0,21	0,39	0,29

As of July 31, 2019, the 197,100 options were not considered in order to calculate the earnings per share as at January 31, 2020, since they were anti-dilutive.

16. SUBSEQUENT EVENT

On March 11, 2020, the World Health Organization confirmed that COVID-19 was a pandemic. The company continues to actively monitor the status of COVID-19. At the moment, it is too early to predict when the company's economic conditions will improve, but it is certain that the company's financial results for the first and second quarter of 2021 will feel the impact of COVID-19. However, the company is not in a position to estimate the potential impact on its operations at the time of the completion of these financial statements.