Network Media Group Inc - Annual Report 2020

Consolidated Financial Statements of

NETWORK MEDIA GROUP INC.

November 30, 2020 and 2019

www.networkmediagroup.ca

March 29, 2021

Management's Responsibility for Financial Reporting

The accompanying consolidated financial statements and Management's Discussion and Analysis ("MD&A") of Network Media Group Inc. (the "Company") are the responsibility of management and have been approved by the Audit Committee of the Board of Directors (the "Board"). The Board is responsible for ensuring that management fulfils its responsibilities for financial reporting, and is ultimately responsible for reviewing and approving the consolidated financial statements and MD&A. The Board carries out this responsibility through its Audit Committee. The Audit Committee reviews the Company's consolidated financial statements and MD&A and recommends their approval to the Board of Directors.

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

The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards ("IFRS"). When alternative methods of accounting exist, management has chosen those it deems most appropriate in the circumstances. The consolidated financial statements and information in the MD&A necessarily include amounts based on informed judgments and estimates of the expected effects of current events and transactions with appropriate consideration to materiality. In addition, in preparing the consolidated financial statements, management must make determinations as to the relevancy of information to be included, and make estimates and assumptions that affect reported information. The MD&A also includes information regarding the impact of current transactions and events, sources of liquidity and capital resources, operating trends, risks and uncertainties. Actual results in the future may differ materially from our present assessment of this information because future events and circumstances may not occur as expected.

Baker Tilly WM LLP, appointed as the Company's auditors by the shareholders, have audited these consolidated financial statements and their report follows.

Chief Executive Officer Chief Financial Officer Vancouver, BC Vancouver, BC

(signed) "Derik Murray" (signed) "Darren Battersby"

Baker Tilly WM LLP

900 – 400 Burrard Street Vancouver, British Columbia Canada V6C 3B7 T: +1 604.684.6212 F: +1 604.688.3497

[email protected]

www.bakertilly.ca INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Network Media Group Inc.:

Opinion

We have audited the consolidated financial statements of Network Media Group Inc. and its subsidiaries (together the "Company"), which comprise the consolidated statements of financial position as at November 30, 2020 and 2019, and the consolidated statements of net and comprehensive income, consolidated statements of changes in shareholders' equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at November 30, 2020 and 2019, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards.

Basis for Opinion

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

Material Uncertainty Related to Going Concern

We draw attention to Note 1 in the consolidated financial statements, which describes the events and conditions indicating that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

Management is responsible for the other information. The other information comprises the information included in the Management's Discussion and Analysis filed with the relevant Canadian securities commissions.

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

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. 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.

ASSURANCE • TAX • ADVISORY

Baker Tilly WM LLP is a member of Baker Tilly Canada Cooperative, which is a member of the global network of Baker Tilly International Limited. All members of Baker Tilly Canada Cooperative and Baker Tilly International Limited are separate and independent legal entities.

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

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

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

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

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

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

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

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

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities with the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.

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

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.

The engagement partner on the audit resulting in this independent auditor's report is Graeme L. Cocke.

CHARTERED PROFESSIONAL ACCOUNTANTS

Vancouver, B.C.

March 29, 2021

Consolidated Statements of Financial Position

As at November 30, 2020 and November 30, 2019

Expressed in Canadian dollars

	Note	November 30,2020	November 30,2019
ASSETS
Current
Cash		$685,731	$1,182,454
Accounts receivable	4	647,328	936,682
Tax credits receivable		1,965,238	4,998,475
Prepaid expenses and deposits		57,674	128,495
		3,355,971	7,246,106
Tax credits receivable		-	590,276
Property, equipment and right of use assets	5	562,791	488,635
Investment in film and television properties	6, 13, 17	10,196,898	11,425,431
Total Assets		$14,115,660	$19,750,448
LIABILITIES AND SHAREHOLDERS' EQUITYCurrentLine of creditAccounts payable and accrued liabilitiesInterim production financingDeferred revenueSettlement on claim	7178916	$300,0002,401,2661,135,365601,354-	$235,0002,326,8584,878,3544,473,49625,000
Current lease obligations	10	320,453	96,985
		4,758,438	12,035,693
Lease obligations	10	58,008	98,041
Deferred income tax	20	82,600	324,100
Total Liabilities		4,899,046	12,457,834
Shareholders' Equity
Share capital	11	10,542,611	10,277,612
Contributed surplus	11(d)	777,856	813,322
Deficit		(2,103,853)	(3,798,320)
Total Shareholders' Equity		9,216,614	7,292,614
Total Liabilities and Shareholders' Equity		$14,115,660	$19,750,448
Nature of operations (Note 1)Subsequent events (Note 22)

Approved by: the Board of Directors on March 29, 2021

"Paul Gertz" "Derik Murray"

Paul Gertz, Director Derik Murray, Director

Consolidated Statements of Net and Comprehensive Income

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

		Year Ended
	Note	November 30,2020		November 30,2019
Total revenue	13, 18	$9,924,236	$	16,278,621
Production costs	12(a), 13, 17	531,149		1,153,157
Amortization of film and television properties	6	5,579,362		9,357,783
Amortization of property, equipment and right of use assets	5	683,292		174,698
General and administrative	12(a), 17, 19	945,348		906,554
Impairment of investment in film and television properties	6	597,342		138,801
Selling and distribution		15,737		74,075
Share-based compensation	11(c), 17	262,711		205,499
Foreign exchange gain		(27,698)		(186,826)
Forgiveness of debt and reversal of accounts payable		(22,312)		(18,078)
		8,564,931		11,805,663
Income before other items		1,359,305		4,472,958
Financing expense, net	12(b)	84,866		118,314
Loss on disposal of property and equipment	5	-		733
Income before income taxes		1,274,439		4,353,911
Income tax expense (recovery)	20	(241,500)		324,100
Net and comprehensive income for the year		$1,515,939	$	4,029,811
Income per share
- basic		$0.02	$	0.06
- diluted		$0.02	$	0.06
Weighted average number of shares outstanding
- basic		73,609,069		72,858,796
- diluted		79,057,737		73,018,276

Consolidated Statements of Changes in Shareholders' Equity

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

	Note	Number ofCommon Shares	IssuedCapital	ContributedSurplus	AccumulatedDeficit	Total
Balance as at November 30, 2018		72,655,371	$10,244,996	$622,939	$(7,528,314)	$3,339,621
Adoption of IFRS 15		-	-	-	(299,817)	(299,817)
Balance at December 1, 2018		72,655,371	10,244,996	622,939	(7,828,131)	3,039,804
Exercise of stock options	11(c)	250,000	32,616	(15,116)	-	17,500
Issuance of stock options	11(c)	-	-	205,499	-	205,499
Net and comprehensive income for the year		-	-	-	4,029,811	4,029,811
Balance as at November 30, 2019		72,905,371	$10,277,612	$813,322	$(3,798,320)	$7,292,614
Balance as at November 30, 2019		72,905,371	$10,277,612	$813,322	$(3,798,320)	$7,292,614
Exercise of stock options	11(c)	1,100,000	264,999	(119,649)	-	145,350
Issuance of stock options	11(c)	-	-	262,711	-	262,711
Reclassification of fair value of expired/cancelled	11(c)	-	-	(178,528)	178,528	-
stock options
Net and comprehensive income for the year		-	-	-	1,515,939	1,515,939
Balance as at November 30, 2020		74,005,371	$10,542,611	$777,856	$(2,103,853)	$9,216,614

Consolidated Statements of Cash Flows

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

	Year Ended






































Cash, end of year	$685,731	$1,182,454

SUPPLEMENTAL CASH FLOW INFORMATION (Note 21)

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

1. Nature of operations

Network Media Group Inc. ("Network" or the "Company") was incorporated on July 12, 2010 under the Business Corporations Act of the Province of British Columbia. Network together with its subsidiaries, develops, produces and exploits film and television properties in addition to providing production services to third parties.

The Company has a working capital deficit of $1,402,467 and a deficit of $2,103,853 which give rise to material uncertainties which may cast significant doubt about the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is dependent upon its ability to continue to generate profitable operations, manage its capital and access sufficient future capital if needed. These consolidated financial statements do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern and, therefore, be required to realize its assets and discharge its liabilities in other than the normal course of operations and at amounts different from those in these consolidated financial statements.

On March 11, 2020, the World Health Organization categorized COVID-19 as a pandemic. The economic effects within the film industry and in the global markets, including disruptions in the completion and delivery of the Company's film and television properties, and the measures that have been introduced by the government to curtail the spread of the virus (such as travel restrictions, closures of non-essential municipal and private operations, imposition of quarantines and social distancing) have had an impact on the Company's operations. To date, the Company has not had any productions cancelled due to COVID-19, but a number have had commencement of the production delayed. The Company has been able to modify and adapt to the changing business environment without a material impact to the Company's operations and access to capital. Management continues to evaluate additional potential operational and financial risks to the Company at the date these financial statements were approved, March 29, 2021.

The Company's registered office is Suite 1500, 1055 West Georgia Street, Vancouver, British Columbia, V6E 4N7.

2. Basis of presentation

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") and interpretations from the IFRS Interpretations Committee ("IFRIC") with significant accounting policies as described in Note 3.

The consolidated financial statements of the Company for the years ended November 30, 2020 and 2019 were approved for issue by the Board of Directors on March 29, 2021.

(b) Basis of measurement

The financial statements have been prepared on an accrual basis under the historical cost convention, except for financial instruments measured at fair value and cash flow information.

For the years ended November 30, 2020 and 2019 Expressed in Canadian dollars

2. Basis of presentation (continued)

(c) Functional currency

The financial statements are presented in Canadian dollars, which is the functional currency of the Company and its Canadian and US subsidiaries.

(d) Significant accounting judgments and key sources of estimate uncertainty

The preparation of the consolidated financial statements and the application of the Company's accounting policies, management is required to make judgments, estimates and assumptions that affect the carrying amounts of assets, and liabilities, and the reported amounts of income and expenses. The estimates and associated assumptions are limited by the relevance of historical data and uncertainty of future events. Actual results could differ from those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Information about assumptions and estimation uncertainties that could have a significant impact on the amounts recognized in the consolidated financial statements is included in the following notes:

Note 3(d), 3(g), 3(o), 5 Property, equipment and right of use assets
Note 3(e), 3(g), 6 Investment in film and television properties
Note 3(h), 9, 18 Revenue recognition
Note 3(j) Tax credits receivable
Note 3(k), 11(c) Share-based compensation

Information about critical judgments, apart from those involving the assumptions and estimation uncertainties discussed above, made in the process of applying the Company's key accounting policies that could have a significant impact on the amounts recognized in the consolidated financial statements is included in the following notes:

Note 1 Going concern
Note 3(m)(ii), 16 Contingent liabilities
Note 3(n), 20 Income taxes

(e) Comparative information

The comparative figures have been reclassified where applicable in order to conform to the presentation used in the current period.

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

3. Significant accounting policies

(a) Basis of consolidation

The consolidated financial statements comprise the financial statements of Network and its wholly owned subsidiaries. The active companies included within the consolidated financial statements are as follows:

Network Media Group Inc. (British Columbia Incorporated)
Network Entertainment Inc. (British Columbia Incorporated)
Network Films Fifteen Inc. (British Columbia Incorporated)
Network Films Sixteen Inc. (British Columbia Incorporated)
Network Films Seventeen Inc. (British Columbia Incorporated)
Network Films Eighteen Inc. (British Columbia Incorporated)
Network Films Twenty Inc. (British Columbia Incorporated)
Network Films Twenty-One Inc. (British Columbia Incorporated)
Network Pictures Sixteen Inc. (British Columbia Incorporated)
Network Pictures Seventeen Inc. (British Columbia Incorporated)
Network Pictures Eighteen Inc. (British Columbia Incorporated)
Network Pictures Nineteen Inc. (British Columbia Incorporated)
Network Pictures Twenty Inc. (British Columbia Incorporated)
Network Pictures Twenty-One Inc. (British Columbia Incorporated)
Network Entertainment Corp. (Delaware Incorporated)
Network Entertainment Services Corp. (Delaware Incorporated)

All intercompany balances, transactions, income and expenses are eliminated on consolidation.

(b) Foreign currency translation

Transactions in currencies other than the functional currency are translated at the rates of exchange at the date of the transaction. At each consolidated statement of financial position reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at the period end date. The income and expenses are translated at the exchange rates ruling at the dates of the transactions. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Foreign exchange gains and losses are recognized in profit or loss in the period in which they arise.

(c) Cash

Cash and cash equivalents include cash on hand, deposits held with financial institutions that are cashable and where principal is guaranteed, and other highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. The Company did not hold any cash equivalents as at November 30, 2020 and 2019.

For the years ended November 30, 2020 and 2019 Expressed in Canadian dollars

3. Significant accounting policies (continued)

(d) Property and equipment

Property and equipment are stated at cost less accumulated amortization and accumulated impairment losses. Amortization of the assets' cost less residual value is recognized over the estimated useful life of assets, based on the following annual rates, except in the year of acquisition, when half the annual rate is applied:

Computer equipment	30% declining balance
Furniture and office equipment	20% declining balance
Production equipment	30% declining balance
Leasehold improvements	Straight line over term of the lease

The estimated useful lives, residual values and amortization methods are reviewed at the end of each reporting period, with the effect of any changes in estimates accounted for on a prospective basis. The determination of appropriate useful lives and residual values are based on management's judgment; therefore the resulting amortization is subject to estimation uncertainty.

Items of property and equipment are derecognized upon disposal or when no future economic benefits are expected to arise from their continued use. Any gain or loss arising from disposal or retirement is determined as the difference between the consideration received and the carrying amount of the asset and is recognized in profit or loss.

(e) Investment in film and television properties

Investment in film and television properties represents the unamortized cost of film and television properties which are in development and in progress, purchased property rights and completed proprietary film and television properties that have been produced by the Company.

Productions completed and released are reviewed on a case by case basis and amortization rates and timelines are adjusted depending on the estimated useful life of the property. The Company's typical documentaries are amortized at rates ranging from 50% - 60% of cost at the time of initial delivery, 10% of cost in year 2, 5% of cost in year 3 and the remaining balance is amortized on a straight-line basis over 7 years (or the estimated remaining useful life of the property). Another significant production is being amortized, by episode, 75% in year 1 and the balance on a straight-line basis over the next 3 years.

The carrying amount of investment in film and television properties is reviewed quarterly and any portion of the unamortized amount that appears not to be recoverable from future net revenues is recognized as accelerated amortization during the period the loss becomes evident.

For film and television properties produced by the Company, capitalized costs include all direct production costs and, an allocation of directly attributable overhead incurred during production that are expected to benefit future periods. Financing costs are capitalized to the costs of a film or television property until the film or television program is complete. See note 3(i).

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

3. Significant accounting policies (continued)

(e) Investment in film and television properties (continued)

Properties under development

Properties under development represent the accumulated costs of properties that have not been completed or delivered by the Company, and include properties in development and properties in progress. Development costs begin to be capitalized when the Company believes the idea is formulated to a point where future economic benefits are expected. Development costs include the costs of acquiring film rights and the third party costs required to develop the property's concept and materials to finance the property. Development costs are incurred prior to the production process and are capitalized. Upon commencement of production, development costs are transferred to production costs. Development costs are written off when the property has been held for three years from initial investment if there have been no activities with respect to the property within the year or earlier when it has been determined that such costs cannot be recovered.

Impairment

The valuation of investment in film and television properties is reviewed on a property by property basis. Properties in development and properties in progress are tested for impairment at the end of each reporting period. Investments in film and television properties are assessed at each reporting period for indicators of impairment and, if present, the property is tested for impairment when circumstances indicated that the recoverable amount of a property may be less than its carrying value. The recoverable amount of the property is determined using management's estimate of the fair value less costs to sell based on future revenues and costs. A write-down is recorded equivalent to the amount by which the carrying value exceeds the recoverable amount of the property. Refer to Note 3(g)(i) for more information on assessing and testing non-financial assets for impairment, including investment in film and television properties.

(f) Financial instruments

i. Recognition

The Company recognizes a financial asset or financial liability on the consolidated statement of financial position when it becomes party to the contractual provisions of the financial instrument. Financial assets are initially measured at fair value.

ii. Classification and measurement

The Company determines the classification of its financial instruments at initial recognition. Financial assets and financial liabilities are classified according to the following measurement categories:

i) those to be measured subsequently at fair value, either through profit or loss ("FVTPL") or through other comprehensive income ("FVTOCI"); and,
ii) those to be measured subsequently at amortized cost.

For the years ended November 30, 2020 and 2019 Expressed in Canadian dollars

3. Significant accounting policies (continued)

(f) Financial instruments (continued)

iii. Classification and measurement (continued)

After initial recognition at fair value, financial instruments are classified and measured at either:

i) amortized cost;
ii) FVTPL, if the Company has made an irrevocable election at the time of recognition, or when required (for items such as instruments held for trading or derivatives); or
iii) FVTOCI, when the change in fair value is attributable to changes in the Company's credit risk.

The classification and measurement of financial assets after initial recognition at fair value depends on the business model for managing the financial asset and the contractual terms of the cash flows. Financial assets that are held within a business model whose objective is to collect the contractual cash flows are generally measured at amortized cost at each subsequent reporting period. All other financial assets are measured at their fair values at each subsequent reporting period, with any changes recorded through profit or loss or through other comprehensive income.

The Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities are not reclassified.

Transaction costs that are directly attributable to the acquisition or issuance of a financial asset or financial liability classified as subsequently measured at amortized cost or FVTOCI are included in the fair value of the instrument on initial recognition. Transaction costs for financial assets and financial liabilities classified at FVTPL are expensed in profit or loss.

iv. Derecognition

Financial assets are derecognized either when the Company has transferred substantially all the risks and rewards of ownership of the financial asset, or when cash flows expire.

Financial liabilities are derecognized when, and only when, the Company's obligations are discharged, cancelled or they expire.

(g) Impairment

i) Non-financial assets

The Company's property and equipment are reviewed for indicators of potential impairment at least annually. The Company's investments in film and television properties are reviewed for indicators of potential impairment as described in Note 3(e) above. Such indicators may include an adverse change in business climate, technology, or regulations that impact the industry. The determination of whether such indicators exist requires significant judgment.

For the years ended November 30, 2020 and 2019 Expressed in Canadian dollars

3. Significant accounting policies (continued)

(h) Impairment (continued)

ii) Non-financial assets (continued)

If indication of impairment exists, the asset's recoverable amount is estimated to determine the extent of an impairment loss, if any. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit ("CGU") to which the asset belongs. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Each film and television property is considered to be a CGU.

The recoverable amount of an asset or CGU is the greater of fair value less costs to sell and value in use. The determination of the recoverable amount in the impairment assessment requires estimates based on present value or other valuation techniques or a combination thereof, requiring management to make subjective judgments and assumptions. When calculating an asset's value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the cash flows have not been adjusted.

An impairment loss is recognized when the carrying amount of an asset, or CGU, exceeds its recoverable amount. Impairment losses are recognized in profit or loss for the period. An impairment loss recognized in respect of a CGU is allocated first to reduce the carrying amount of any goodwill allocated to the CGU, if any, and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis. The Company has no goodwill balance for any of the reporting periods presented.

An impairment loss is reversed if there is an indication that there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. The reversal of an impairment loss is recognized immediately in profit or loss.

iii) Financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been negatively affected. The determination of whether such indicators exist requires significant judgment.

For the years ended November 30, 2020 and 2019 Expressed in Canadian dollars

3. Significant accounting policies (continued)

(g) Impairment (continued)

iv) Financial assets (continued)

Objective evidence of impairment could include the following:

significant financial difficulty of the issuer or counterparty;
default or delinquency in interest or principal payments;
it has become probable that the borrower will enter bankruptcy or financial reorganization;
the disappearance of an active market for the security;
significant or prolonged decline in the fair value of an equity instrument below its cost.

For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of the estimated future cash flows, discounted at the financial asset's original effective interest rate. The carrying amount of the asset is directly reduced by the impairment loss with the exception of trade receivables from broadcasters. The carrying amount of trade receivables is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off to the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.

(h) Revenue recognition

Revenue is earned primarily from the production and distribution of film and television properties.

Revenue from the sale of film and television property rights and license arrangements ("Production revenue") and Distribution revenue are recognized when management considers it probable that the economic benefits will flow to the Company, and that the revenue to be received is reliably measurable. The above conditions are considered met when persuasive evidence of a sale or arrangement with a customer exists, the film or series episode is complete and the contractual delivery arrangements have been satisfied, the arrangement fee is fixed or determinable, collection of the arrangement fee is reasonably assured, and other conditions as specified in the respective agreements have been met. Distribution revenue is revenue earned upon the expiry of the initial license term or is revenue in excess of the Production revenue.

Revenue from contract film and television production services for third parties is recognized using the percentage-of-completion method when the following criteria are met: there is a written arrangement with a customer detailing the amount of total contract revenue so that the revenue can be measured reliably, the stage of completion can be measured reliably, the receipt of payment is probable, and costs incurred and to be incurred can be measured reliably. The percentage-ofcompletion is calculated based upon the proportion of costs incurred up to the current period to the property's total expected costs. When it is expected that total costs will exceed revenue the expected loss is recognized immediately in profit or loss.

The estimate of revenue depends on management's judgment and assumptions regarding expected total costs and revenue and recoverability of expenses. Management also uses judgment in assessing the assurance of collectability.

Cash payments received or receivable are recorded as deferred revenue until all conditions of revenue recognition have been met.

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

3. Significant accounting policies (continued)

(i) Borrowing costs

Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds for the financing of properties in progress. Borrowing costs directly attributable to the acquisition or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

(j) Government financing and assistance - Tax credits

The Company claims federal and provincial film or video production refundable tax credits in Canada related to specific production expenditures. Tax credits are recorded on a net basis as a reduction in production costs for associated productions developed by the Company. Federal and provincial refundable income tax credits are considered receivable when conditions for eligibility of production assistance have been met, the qualified expenditures have been incurred and there is reasonable assurance that the credits will be realized. Tax credits are calculated using management's estimates of the amount of labour that qualifies for the refundable tax at the end of each reporting period. The federal and provincial governments' review of these calculations may ultimately adjust these estimates.

The Company also accrues for general government assistance programs, providing there is reasonable assurance that the Company has complied and will continue to comply with all conditions of the government funding. Nonrepayable government assistance relating to current expenses is included in the determination of net income and is included as a decrease to the related line item in the consolidated statements of net and comprehensive income. Repayable government assistance and unspent government assistance is reported in liabilities.

(k) Share-based compensation

Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to profit or loss over the vesting period. Performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether these market vesting conditions are satisfied.

The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period.

Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received in profit or loss, unless they are related to the issuance of shares. Amounts related to the issuance of shares are recorded as a reduction of share capital.

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

3. Significant accounting policies (continued)

(k) Share-based compensation (continued)

When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model. The expected life used in the model is adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

All equity-settled share-based payments are reflected in contributed surplus, until exercised. Upon exercise, shares are issued from treasury and the amount reflected in contributed surplus is credited to share capital, adjusted for any consideration paid. Where a grant of options is cancelled or settled during the vesting period, excluding forfeitures when vesting conditions are not satisfied, the Company immediately accounts for the cancellation as an acceleration of vesting and recognizes the amount that otherwise would have been recognized for services received over the remainder of the vesting period. Any payment made to the employee on the cancellation is accounted for as the repurchase of an equity interest except to the extent the payment exceeds the fair value of the equity instrument.

For cash-settled plans, the fair value of the amount payable is recognized as an expense, with a corresponding increase in liabilities, over the period that the rights holder becomes entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any change in the fair value of the liability is recognized as an expense for the period.

The fair value of expired and cancelled options is reclassified from contributed surplus to deficit.

(l) Earnings per share

Basic earnings per share are calculated using the weighted average number of common shares outstanding during the year. The computation of diluted earnings per share assumes the basic weighted average number of common shares outstanding during the year is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. These include the Company's options outstanding as at year end. The dilutive effect of stock options is determined using the treasury stock method.

As at November 30, 2020 the Company had 7,602,000 (2019 – 5,972,000) outstanding stock options which were dilutive.

(m) Provisions and contingencies

(i) Provisions - Measurement

Provisions are recorded when a present legal or constructive obligation exists as a result of past events where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received if the entity settles the obligation.

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

3. Significant accounting policies (continued)

(m) Provisions and contingencies (continued)
- (ii) Contingencies Disclosure

A contingent liability is disclosed where the existence of an obligation will only be confirmed by future events, not within the control of the Company, or where the amount of a present obligation cannot be measured reliably or it is not probable that an economic outflow will be required. Contingent assets are only disclosed when the inflow of economic benefits is probable. As contingencies will only be resolved when one or more future events occur or fail to occur, the assessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events.

(n) Income taxes

Income tax expense comprises current and deferred tax.

Current tax is the expected tax payable or recoverable on the taxable profit or loss for the year using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable from previous years.

Deferred tax assets and liabilities are recognized for deferred tax consequences attributable to unused tax loss carry forwards, unused tax credits and differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in profit or loss in the period that substantive enactment occurs.

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is reduced. Assessing the recoverability of deferred tax assets requires the Company to make significant judgments related to expectations of future taxable income.

Temporary differences do not result in deferred tax assets or liabilities if they relate to:

an initial recognition of assets or liabilities, that does not arise from a business combination, and that does not affect accounting or taxable profit;
goodwill;
investments in subsidiaries, associates and jointly controlled entities where the timing of reversal of the temporary differences can be controlled by the Company and reversal in the foreseeable future is not probable.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

3. Significant accounting policies (continued)

(o) Standards applied during the year

The Company has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS 17 and IFRIC 4. The details of accounting policies under IAS 17 and IFRIC 4 are disclosed separately.

On initial application, for leases previously classified as operating leases under IAS 17, the Company has elected to record right of use assets based on the corresponding calculated lease liability at December 1, 2019 of $641,816. When measuring lease liabilities for those leases previously classified as operating leases under IAS 17, the Company discounted future lease payments using its incremental borrowing rate ("IBR" Note 10) as at December 1, 2019.

The Company's accounting policy under IFRS 16 is as follows:

At inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. This policy is applied to contracts entered into, or changed, on or after December 1, 2019.

Right of use asset

The Company recognizes a right of use asset and a lease liability at the lease commencement date. The right of use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date.

The right of use assets are subsequently amortized from the commencement date to the earlier of the end of the useful life of the right of use asset or the end of the lease term using the straight-line method.

Lease liability

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's IBR. Generally, the Company uses its IBR as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following payments during the lease term: fixed payments (including in-substance fixed payments), and the exercise price under a purchase option that the Company is reasonably certain to exercise.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising mainly if the Company changes its assessment of whether it will exercise a purchase, renewal or termination option, or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right of use asset, or is recorded in profit or loss if the carrying amount of the right of use asset has been reduced to zero.

For the years ended November 30, 2020 and 2019 Expressed in Canadian dollars

3. Significant accounting policies (continued)

(o) Standards applied during the year (continued)

Under IAS 17, the Company's accounting policy was as follows:

Leases were classified as finance leases whenever the terms of the lease transferred substantially all the risks and rewards of ownership to the lessee. All other leases were classified as operating leases.

Operating lease payments were recognized as an expense on a straight-line basis over the lease term.

4. Accounts receivable

	November 30,	November 30,
	2020	2019
Receivables from broadcastersInput tax credits and other receivables	$612,09835,230	$871,70064,982
	$647,328	$936,682

5. Property, equipment and right of use assets

		Furniture
	Computer	and Office	Production	Leasehold	Right of Use
	Equipment	Equipment	Equipment	Improvements	Assets	Total
Cost
Balance at November 30, 2018	$1,087,950	$75,614	$47,258	$38,253	$-	$1,249,075
Additions	166,071	5,981	13,890	-	-	185,942
Disposals	(1,759)	-	-	-	-	(1,759)
Balance at November 30, 2019	1,252,262	81,595	61,148	38,253	-	1,433,258
Adoption of IFRS 16	(363,087)	-	-	(38,253)	429,999	28,659
Additions	15,213	7,915	-	-	734,321	757,449
Balance at November 30, 2020	$904,388	$89,510	$61,148	$-	$1,164,320	$ 2,219,366
Accumulated amortization
Balance at November 30, 2018	$674,558	$67,699	$12,743	$15,951	$-	$770,951
Amortization expense	148,928	2,181	12,438	11,151	-	174,698
Disposals	(1,026)	-	-	-	-	(1,026)
Balance at November 30, 2019	822,460	69,880	25,181	27,102	-	944,623
Adoption of IFRS 16	(143,730)	-	-	(27,102)	199,492	28,660
Amortization expense	65,415	3,135	10,790	-	603,952	683,292
Balance at November 30, 2020	$744,145	$73,015	$35,971	$-	$803,444	$ 1,656,575
Carrying amount
November 30, 2019	$429,802	$11,715	$35,967	$11,151	$-	$488,635
November 30, 2020	$160,243	$16,495	$25,177	$-	$360,876	$562,791

There were no impairment write-downs or any reversals of previous write-downs during the years presented.

During the year ended November 30, 2020, the Company had no disposals of property and equipment.

During the year ended November 30, 2019, the Company disposed of computer equipment with a carrying amount of $733 for proceeds of $nil. The sale resulted in the recognition of a loss on disposal of property and equipment of $733.

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

5. Property, equipment and right of use assets (continued)

The continuity of right of use assets is as follows:

	Leasehold
	Improvements	Office	Vehicle	Equipment	Total
Cost
Balance at November 30, 2019	$-	$-	$-	$-	$-
Adoption of IFRS 16	66,912	689,358	34,186	373,864	1,164,320
Balance at November 30, 2020	$66,912	$689,358	$34,186	$373,864	$ 1,164,320
Accumulated amortizationBalance at November 30, 2019	$-	$-	$-	$-	-
Adoption of IFRS 16	55,761	-	-	143,731	199,492
Amortization expense	11,151	493,531	7,111	92,159	603,952
Balance at November 30, 2020	$66,912	$493,531	$7,111	$235,890	$803,444
Carrying amount
November 30, 2019	$-	$-	$-	$-	$-
November 30, 2020	$-	$195,827	$27,075	$137,974	$360,876

6. Investment in film and television properties

			Properties
	Properties in	Properties in	completed and
	development	progress	released	Total

Balance, November 30, 2018	$1,013,533	$4,680,500	$3,826,263	$9,520,296
Additions	262,707	10,545,724	3,802,760	14,611,191
Tax credits accrued	-	(1,841,420)	(1,397,185)	(3,238,605)
Funding taken into income	29,133	-	-	29,133
Transferred to projects in progress	(50,837)	50,837	-	-
Transferred to properties completed and released	-	(10,141,881)	10,141,881	-
Amounts written off and impaired	(138,801)	-	-	(138,801)
Amortization	-	-	(9,357,783)	(9,357,783)
Balance, November 30, 2019	1,115,735	3,293,760	7,015,936	11,425,431
Additions	257,515	2,797,686	3,394,412	6,449,613
Tax credits accrued	-	(764,331)	(653,031)	(1,417,362)
Transferred to properties in progress	(41,852)	41,852	-	-
Allocated to direct production costs	(84,080)	-	-	(84,080)
Transferred to properties completed and released	-	(3,171,511)	3,171,511	-
Amounts written off and impaired	(53,738)	(543,604)	-	(597,342)
Amortization	-	-	(5,579,362)	(5,579,362)
Balance, November 30, 2020	$1,193,580	$1,653,852	$7,349,466	$10,196,898
As at November 30, 2020
Cost	$1,193,580	$1,653,852	$29,383,652	$32,231,084
Accumulated amortization	-	-	(22,034,186)	(22,034,186)
Carrying amount	$1,193,580	$1,653,852	$7,349,466	$10,196,898
As at November 30, 2019
Cost	$1,115,735	$3,293,760	$23,470,760	$27,880,255
Accumulated amortization	-	-	(16,454,824)	(16,454,824)
Carrying amount	$1,115,735	$3,293,760	$7,015,936	$11,425,431

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

6. Investment in film and television properties (continued)

During the year ended November 30, 2020, interest of $70,366 (2019 – $79,831) has been capitalized within the properties in progress and productions completed and released balances.

7. Line of credit

The Company has available a line of credit agreement with a Canadian chartered bank which provides that the Company may borrow up to $300,000. Borrowing under the line of credit bears interest, payable monthly, at the bank's prime rate plus 1.8% and is secured by a general security agreement over the property of the Company. The balances payable under this agreement are due on demand. As of November 30, 2020, outstanding borrowings were $300,000 (November 30, 2019 – $235,000). Subsequent to November 30, 2020, the Company secured an additional $1,200,000 of credit. See subsequent events Note 22.

The Company was approved for three $60,000 loans totalling $180,000 of COVID relief funding through the Canada Emergency Business Account ("CEBA") of which $nil was drawn as of November 30, 2020. The loans are unsecured and interest free with no payments required until December 31, 2022 at which time, if the loans are repaid, $60,000 of the loan will be forgiven. If the loans are not fully repaid by December 31, 2022, the balance will be converted into a term loan at an interest rate to be negotiated at that time. See subsequent events Note 22.

8. Interim production financing

Certain subsidiaries of the Company have secured interim bank loans to finance the cost of producing their respective productions. These loans bear interest at the bank's prime rate plus 1.50% per annum and are repayable on demand. Each loan is secured by the tax credits receivable of the respective subsidiary and a general security agreement over the assets of the Company.

9. Deferred revenue

Deferred revenue represents distribution and development advances as well as contracted fees received or receivable prior to the contracted work being completed.

Distribution advances will be taken into income upon completion of properties in progress. Development advances are from unrelated third parties for development of current and future properties. Repayment of the advances is contingent upon commencement of principal photography. In the event that the properties are not produced, the development advances are typically forgiven by the third party.

As at November 30, 2020, the Company had a deferred revenue balance of $601,354 (November 30, 2019 – $4,473,496).

10. Lease obligations

The Company leased certain operating equipment under four equipment financing leases (November 30, 2019 – two financing leases). The Company's obligations under the finance leases are secured by the lessor's title to the leased assets. The weighted average interest rate is 4.86% per annum (November 30, 2019 – 4.86%) and have a lease term of three years (November 30, 2019 – three years). At the end of the lease term, the Company has an option to purchase the equipment for $1.

At the date of initial adoption of IFRS 16, the Company discounted the remaining office, vehicle & equipment lease payments using the IBR as of December 1, 2019: office leases – 5.45%; and vehicle leases – 4.99%.

Notes to the Consolidated Financial Statements

For the years ended November 30, 2020 and 2019 Expressed in Canadian dollars

10. Lease obligations (continued)

The Company's leases are comprised of the following:

	Office	Equipment	Vehicle
	Leases	Leases		Leases	Total
Lease obligations recognized at November 30, 2019	$-	$195,026	$	-	$195,026
Adoption of IFRS 16	407,506	5,098		34,186	446,790
Lease obligations recognized at December 1, 2019	407,506	200,124		34,186	641,816
Leases entered into during the year	281,852	5,679		-	287,531
Interest expense	36,540	5,418		1,514	43,472
Lease payments	(521,678)	(64,699)		(7,981)	(594,358)
Lease obligations balance at November 30, 2020	204,220	146,522		27,719	378,461
Less: non-current portion	-	(35,219)		(22,789)	(58,008)
Current portion of lease liabilities	$204,220	$111,303	$	4,930	$320,453

The carrying amount of the leased computer equipment as of November 30, 2020 is $131,679 (November 30, 2019 – $219,357) which is included in the balance in Note 5.

11. Share capital and reserves

(a) Authorized

The Company has an unlimited number of authorized common shares and preferred shares with no par value.

(b) Issued share capital

During the year ended November 30, 2020, the Company issued 1,100,000 common shares on the exercise of stock options for proceeds of $145,350, as follows:

a. 300,000 options on December 3, 2019 when stock price was $0.18
b. 300,000 options on February 12, 2020 when stock price was $0.21
c. 500,000 options on June 29, 2020 when stock price was $0.17

During the year ended November 30, 2019, the Company issued 250,000 common shares on the exercise of stock options for proceeds of $17,500 when the Company's stock price was $0.165.

(c) Share-based payment reserve

Pursuant to the Company's equity-settled stock option plan, Directors may, from time to time, authorize the granting of options to Directors, employees and consultants of the Company to a maximum of 20% of the outstanding shares of the Company which is limited to a maximum of 14,500,000 options as approved by the shareholders of the Company. Options granted under the plan have contractual option terms not exceeding 10 years and vesting periods as determined by the Company's Board of Directors.

During the year ended November 30, 2020, 1,235,000 stock options were cancelled or expired (2019 – 40,000), resulting in a reclassification of amounts totalling $178,528 (2019 – $nil) from contributed surplus to accumulated deficit.

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

11. Share capital and reserves (continued)

(c) Share based payment reserve (continued)

			As at

	Weighted			Weighted
Number of		Number of		Ave. Exercise
Options	Price	Options		Price
10,307,920	$0.15	8,487,920	$	0.15
1,000,000	$0.20	2,110,000	$	0.13
	0.19			0.15
	0.13			0.07
8,972,920	$0.15	10,307,920	$	0.15
	As at(1,235,000) $(1,100,000) $	November 30, 2020Ave. Exercise		November 30, 2019(40,000) $(250,000) $

As at November 30, 2020, the following stock options are outstanding and exercisable:

Number of optionsoutstanding	Number of optionsexercisable	Exercise price		Remaining life (yrs)	Expiry

370,920	370,920	$	0.20	0.66	July 28, 2021
2,842,000	2,842,000	$	0.14	1.65	July 27, 2022
2,110,000	1,590,001	$	0.15	2.38	April 19, 2023
400,000	266,667	$	0.12	2.70	August 13, 2023
250,000	166,667	$	0.12	2.98	November 23, 2023
1,600,000	533,333	$	0.13	3.62	July 15, 2024
400,000	133,333	$	0.15	3.91	October 28, 2024
1,000,000	-	$	0.20	4.25	March 2, 2025
8,972,920	5,902,921	$	0.14	2.61

Vesting terms for the 1,000,000 options granted March 2, 2020 are one third vesting one, two and three years from the grant date.

The Company uses the Black-Scholes option-pricing model to determine the estimated fair value, at the grant date, of the options issued. In all the calculations the annual dividend yield was assumed to be $nil, and expected volatility was based on historical volatility. All other assumptions are summarized below:

				Annual	Risk Free	Fair Value
	Options	Exercise		Volatility	Interest	at Grant	Expected
Grant Date	Granted	Price	Share Price	Rate	Rate	Date	Life
Year ended 2019	2,110,000$	0.13	$0.15	109%	1.46%	$0.12	5.0
Year ended 2020	1,000,000$	0.20	$0.20	113%	0.78%	$0.16	5.0

For the years ended November 30, 2020 and 2019 Expressed in Canadian dollars

11. Share capital and reserves (continued)

(c) Share based payment reserve (continued)

For the year ended November 30, 2020, the Company recognized compensation expense in relation to these options of $262,711 (2019 – $205,499), which is included in profit or loss.

(d) Contributed surplus

Contributed surplus consists of the following amounts:

	November 30,		November 30,
		2020	2019
Outstanding options	$	946,181	$981,647
Convertible debt		134,326	134,326
Share exchange for Network Entertainment Inc.		(302,651)	(302,651)
	$	777,856	$813,322

12. Supplemental statement of net and comprehensive income disclosure

(a) Employee benefit expenses

Total salaries and wages recognized in profit or loss is $621,683 (2019 – $578,240) of which $194,816 was recorded as direct production costs (2019 – $284,222) and $426,867 was recorded as general and administration (2019 – $294,018).

(b) Financing expenses

Financing expenses are comprised of the following:

		November 30,		November 30,
	Note		2020		2019
Interest income		$	(54,114)	$	(2,879)
Interest expense on interim production financing	8		75,962		103,163
Interest expense on line of credit	7		16,563		15,870
Interest expense on lease obligations	10		46,455		2,160
Net financing expense		$	84,866	$	118,314

13. Government assistance

Refundable tax credits relating to production activities of the Company are claimed from the federal and provincial governments in Canada. The refundable tax credits for the year ended November 30, 2020 were recorded as follows:

Reduction to direct production costs of $nil (2019 $318,212), and;
Reduction to investment in film and television properties of $1,420,225 (2019 $3,238,605).

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

13. Government assistance (continued)

During the year ended November 30, 2020, the Company received:

$735,236 from the Canada Emergency Wage Subsidy ("CEWS") and was recorded as a reduction of salaries and wages within production costs,
$51,536 from the Canada Emergency Rent Subsidy ("CERS") and was recorded as other revenue and;
$183,990 from the Canada Emergency Commercial Rent Assistance ("CECRA") and was recorded as other revenue.

14. Financial instruments

The fair values of the Company's financial instruments approximate the carrying values, due to their short terms to maturity or attached market rates of interest. The Company is exposed to various risks related to its financial instruments as follows:

Risks arising from financial instruments

(i) Foreign exchange risk

Foreign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Company has not entered into foreign exchange purchase contracts to manage its foreign exchange risk, because, in management's view, the cost of setting up the contracts is in excess of the risks associated with a sudden change in the exchange rates. Management continually monitors the exchange rates and will enter into risk prevention measures when warranted.

A five percent fluctuation in the US dollar rate impacting US dollar revenues during the year ended November 30, 2020 would result in a $471,256 (2019 – $805,567) impact to profit or loss.

The Company is also exposed to foreign exchange risk on its cash, accounts receivable and accounts payable balances that are denominated in US dollars, being, respectively, $646,322 (2019 – $670,389), $329,857 (2019 – $738,450) and $871,404 (2019 – $709,014).

A five percent fluctuation in the US dollar closing rate at November 30, 2020 would result in a net change to profit or loss of $5,239 (2019 – $34,991).

(ii) Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company is subject to credit risk with respect to cash and accounts receivable. The Company's maximum exposure to credit risk at the end of the reporting period is the carrying value of these assets. Substantially all of the Company's customers are in the entertainment industry and are subject to normal industry credit risks. Credit risk is managed through a credit approval process and monitoring procedures.

All cash balances are held at a major Canadian banking institution.

At November 30, 2020, there are $130,006 of accounts receivable past due, over 30 days, but not considered impaired (2019 – $139,458).

For the years ended November 30, 2020 and 2019 Expressed in Canadian dollars

14. Financial instruments (continued)

(iii) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Interest rate risk arises on interest-bearing financial instruments recognized in the consolidated statement of financial position such as interim production financing.

If the market interest rates had changed 100 basis points, the Company's cost of capital would have fluctuated by $66,955 (2019 – $54,680).

(iv) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Company's liquidity needs can be met through a variety of sources. The Company generates cash from operations, by borrowing against earned tax credits through interim production financing, and by issuances of common shares. The Company manages liquidity risk by continuously monitoring actual and forecast cash flows.

The Company will require additional capital in order to meet the payment expectations related to its debts. Accounts payable and accrued liabilities are due on standard commercial terms.

15. Capital management

The Company's objectives when managing capital are to safeguard its assets, maintain a competitive cost structure, continue as a going concern in order to pursue the development of its film and television properties, and provide a return to its shareholders in the form of capital appreciation. The Company defines capital as the aggregate of its shareholders' equity and long-term debt less cash.

In order to facilitate management of capital, the Company continues to prepare annual expenditure budgets that are updated as necessary and dependent on various factors, including successful deployment of capital and industry conditions. The annual and updated budgets are approved by the Board of Directors.

16. Contingent liabilities

The Company and its subsidiaries may from time to time, be a party to certain legal disputes and claims arising from employment or commercial issues in the normal course of business.

The Company was involved in a business dispute with a former customer regarding services provided by the Company. The Company had also entered into legal action against the former customer. A mediation session was held between the Company and the former customer in an effort to settle the matter. During the year ended November 30, 2019, the claim was settled and the Company was required to pay the former customer $100,000, of which $nil was owing as of November 30, 2020 (November 30, 2019 – $25,000).

The Company and its subsidiaries may, from time to time, enter into royalty or rights agreements for the use of images, stock footage, names and similar items. The Company is liable to pay for the use of these rights contingent on achieving particular production milestones. As these milestones are achieved, the Company accrues the related royalties and rights payable which are no longer contingent.

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

17. Related parties

Key management personnel are those persons having the authority and responsibility for planning, directing, and controlling activities of the entity, directly or indirectly. Related parties are defined as key management personnel as well as any companies that are controlled by Officers or Directors of the Company. During the year ended November 30, 2020, the Company. Paid or accrued wages and recognized share-based compensation to key management personnel in the following manner:

	November 30,2020	November 30,2019
Short-term employee benefits	$658,600	$699,039
Share-based compensation	166,193	83,839
	$824,793	$782,878
Recorded as:
General and administrative expenses	$18,200	$52,956
Share-based compensation	166,193	83,839
Direct production costs	75,000	29,000
Investment in film and television properties	565,400	617,083
	$824,793	$782,878
Options issued	1,000,000	1,110,000

Accounts payable and accrued liabilities at November 30, 2020 includes, $13,650 (2019 – $13,650) owed to a company controlled by an Officer of the Company. Amounts due to related parties are unsecured, noninterest bearing and due on demand.

18. Revenue

	Note	November 30,2020	November 30,2019

Production revenue		$8,675,637	$	14,725,440
Contract production services revenue		388,398		1,347,406
Distribution revenue		616,941		176,642
Other revenue	13	243,260		29,133
		$9,924,236	$	16,278,621

Of the Company's $9,924,236 (2019 – $16,278,621) in revenues for the year ended November 30, 2020, $499,107 (2019 – $167,281) was attributable to external customers located in Canada, $8,988,093 (2019 – $15,441,915) was attributable to external customers located in the U.S., and $437,036 (2019 – $669,425) was attributable to other external customers.

Notes to the Consolidated Financial Statements

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

19. General and administrative expenses

	Note	Year endedNovember 30,2020	Year endedNovember 30,2019
Insurance		$23,025$	30,342
Interest and bank charges		73,564	33,326
Office and general		93,051	121,745
Professional fees		118,169	200,054
Rent and utilities		3,933	-
Salaries and wages	12(a), 17	426,867	294,018
Technology and licenses		102,821	86,502
Telecomunications		20,015	20,764
Transfer agent and filing fees		23,148	30,749
Travel		60,755	89,054
		$945,348$	906,554

20. Income Taxes

A reconciliation of income taxes for the years ended November 30, 2020 and 2019 at the statutory rates with the reported income taxes follows:

	November 30,2020	November 30,2019
Income before income tax expense	$1,274,439	$4,353,911
Combined federal and provincial income taxrate	27%	27%
Expected income tax expense	$344,100	$1,175,600
Effect on income tax of:
Items not deductible for tax purposes	(66,000)	74,000
Changes in estimates related to prior years	-	203,900
Change in tax rate and other	(89,200)	(2,300)
Share issue costs	(3,300)	(3,300)
Change in unrecognized deductible
temporary differences	(427,100)	(1,123,800)
Income tax expense (recovery)	$(241,500)	$324,100-

For the years ended November 30, 2020 and 2019

Expressed in Canadian dollars

20. Income Taxes (continued)

The tax effects of temporary differences that give rise to the Company's deferred income tax assets (liability) are as follows:

	2020	2019
Deferred income tax assets
Property and equipment	$64,000	$327,000
Share issue costs	1,000	2,600
Lease obligations	102,000	-
Non-capital losses carried forward	1,760,400	79,800
	1,927,400	409,400
Deferred tax assets utilized to offset deferred taxliability	(1,927,400)	(409,400)
	$-	$-
	2020	2019
Deferred income tax liability
Right of use assets	$(62,000)	$-
Completedproductions	(1,948,000)	(733,500)
Deferred tax assets utilized to offset deferred taxliability	1,927,400	409,400
	$(82,600)	$(324,100)

The Company has non-capital loss carry-forwards that expire on November 30 of each respective year, as follows:

Year of expiry	Amount

2039	$898,000
2038	208,000
2037	715,000
2036	260,000
2035	186,000
2034	227,000
2033	729,000
2032	1,255,000
2031	1,095,000
2030	747,000
	$6,320,000

Notes to the Consolidated Financial Statements

For the years ended November 30, 2020 and 2019 Expressed in Canadian dollars

21. Supplemental cash flow information

i. Non-cash investing and financing activities

	November 30,2020	November 30,2019
Amount included in prior year projectsin progress transferred to productionscompleted and released	$3,249,861	$	10,141,881
Tax credits receivable included inproduction costs	$1,950,314	$	5,282,372
Accounts payable included inproduction costs	$742,347	$	753,971
Fair value of options exercised	$119,649	$	32,616
Fair value of options cancelled	$178,528	$	-
IFRS 16 adoption of right of use assets	$360,876	$	-

ii. Interest paid

Interest paid during the year ended November 30, 2020 was $371,800 (2019 – $108,676).

22. Subsequent events

Subsequent to November 30, 2020 the Company:

i. Repaid $650,288 of interim production loans;
ii. Received $180,000 of COVID relief funding from the CEBA program;
iii. Received an additional $251,770 from the CEWS program;
iv. Received an additional $77,705 from the CERS program;
v. Issued 461,500 common shares upon the exercise of stock options for gross proceeds of $69,225;
vi. Issued 2,585,000 options on December 14, 2020, exercisable at $0.16 per share for a five year term, and vesting one third every one, two and three years from the grant date,
vii. Cancelled 88,500 stock options, and;
viii. Was approved for $1,200,000 of additional line of credit from RBC through the Export Development Canada ("EDC") secured COVID relief funding program and received draws totalling $457,000. The line of credit is secured by a general charge over the assets of the Company and accrues interest payable monthly, at the bank's prime rate plus 0.25% on a term of 5 years from initial drawdown.

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Network Media Group Inc — Annual Report 2020

46673_rns_2021-03-30_0f9eb00f-d2d4-4440-970c-446a64872177.pdf